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Karmayog Corporate Social Responsibility Ratings
December 24, 2007
Below are our recommendations based on insights and learnings gained during the making of the Karmayog Corporate Social Responsibility Ratings of India’s 500 largest companies.
Every stakeholder (including every citizen) has a role to play to make CSR effective and sustaining. We therefore request you to give your comments on these recommendations and suggest others also.
(60+ diverse responses have been received to “Should CSR be voluntary or compulsory?” Do read these at www.karmayog.org/csr and email us your view also.)
Below are Karmayog’s recommendations. Which of these should be made mandatory?
a) Begin adopting industry guidelines
The first step is to begin adopting international guidelines, as these are comprehensive and well researched. Two types of international guidelines and norms exist:
· Common guidelines that are applicable to most industries. e.g. Minimum Environment, Health and Safety (EHS) Guidelines for companies
· Industry-specific guidelines that are linked to the processes of that sector. e.g.: sector-specific guidelines that include technical reference documents for different sectors such as forestry, manufacturing, power, etc. (available at www.karmayog.org/internationalguidelinesforcsr/)
Both kinds of guidelines identify methods that companies can adopt to minimise environmental damage caused by products and processes.
It is imperative that companies state in their Annual Report where they are on this path, and also for government, in consultation with industry associations and experts, to set timelines for the adoption and implementation of these guidelines.
b) Sustainability reporting
It is recommended that every company should publish a separate Corporate Sustainability Report (as per the Global Reporting Initiative (GRI) framework) along with their Annual Report.
At the very least, every company must include a Corporate Sustainability section in its Annual Report (similar to the mandatory section on Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo).
c) CSR philosophy to be defined and articulated
Every company must clearly define it’s own CSR philosophy and objectives, stating which issues it intends working on or contributing to. It is recommended that a company first takes up areas that directly concern it’s business processes, and thereafter any other related or unrelated issues. These can also yield strategic benefits to the company.
d) Minimum annual CSR expenditure
Every company must spend a minimum of 0.2% of its annual income on CSR activities. The CSR spending of a company should not be linked to the profit made by the company because this would vary from year to year and the CSR activities would thus not be consistently maintained.
The scale of operations of a company and its impact is connected with its sales, and not with its profits. The larger the company, the greater is the damage it is doing to the environment. Conversely, the greater is the company’s ability to do good.
e) Protection and restoration of the environment
Every company must be engaged in CSR activities that minimise its harm to the environment, and which help restore damage done to the environment because of the company. For example, all companies should use energy-efficient technologies for their factories and offices, and adopt rainwater harvesting irrespective of the production process they are engaged in.
f) Employment for marginalised groups
Every company should provide inclusive employment opportunities and include the physically-challenged and marginalised groups in their workforce. The number of employment opportunities offered to such groups should be stated in the Annual Reports as is done by Public Sector Undertakings.
g) Local community development
It is recommended that a company first undertakes projects in the places where it functions, and helps those local communities and environments that are affected by its work.
h) Use of core competence
Every company should use its core competence to benefit its stakeholders and society. For instance, banks can use their expertise to identify and counsel debtors who are likely to run into financial trouble
i) Extending profile and area of businesses
A company should attempt to stretch its business beyond its existing profile and into areas where it does not normally work so as to reach out to under-served groups and populations. While this may sometimes mean smaller profit margins or marginal losses for the company, it will invariably result in valuable business learnings as well as effective CSR for the company.
j) Developing internal CSR implementation systems
A company may choose to develop an in-house CSR team or division that undertakes the CSR activities for the company. This is desirable as it leads to greater sensitisation and awareness within the company about it’s processes, responsibilities, role, etc., and leads to the internalisation of the company’s CSR philosophy.
Instead of contributing to the trust of the CEO or the promoter family, a company should set up its own trust/foundation as a matter of proper business ethics.
The company may also choose to partner with one or two Non-Governmental Organisations (NGOs) or other organisations for its CSR activities.
It is recommended that a company set up a committee that includes an external Director, an NGO and local stakeholders for selecting, monitoring and evaluating its CSR activities.
k) Focused CSR activities for greater impact
It is recommended that a company identifies a few issues for it’s CSR activities and works on these areas for a sustained period of time so that measurable results and improvements can be achieved, rather than undertaking or supporting several small initiatives across several areas thereby reducing effective impact.