SOCIAL RESPONSIBILITY OR CORPORATE FAD

CSR BALANCE SHEET

Most Indian companies have a confused approach to CSR, dubbing it as philanthropy and veiling the underlying motive

Lisa Mary Thomson & Neha Dewan NEW DELHI

    IT’S SOMETHING they can’t do without anymore. Not when it could tarnish brand value, hurt chances of taking their business global or hit their image among potential overseas clients. With this spectre looming over them, it isn’t surprising why Indian companies have begun relying on the one aspect that could bail them out: Being socially responsible.

    Defining the term (corporate social responsibility or CSR) has perhaps been the trickiest part of this solution. As Gerard Hastings, professor of social marketing at the University of Stirling, puts it: The key word in the phrase corporate social responsibility is corporate because the aim is to benefit the standing and success of the corporate sponsor. If a cola major is working on conservation of water, it’s because they have been found using up our water resources. If a cigarette maker is worried about the poor man’s health, he simply wants to be allowed to continue selling more cigarettes.

    Most Indian companies, however, have a confused approach to CSR, interpreting it as philanthropy and veiling the underlying motives under the blanket of social good. Combined with ad-hocism, personal interests and the lack of professionals specialising in CSR and the waters get murkier.

    Fundamentally, most observers feel companies see CSR as a way to create a safe and secure environment for themselves, to be able to sustain operations in their area of interest but don’t want to admit it. Says Parul Soni, executive director, development advisory services at global consultancy Ernst & Young, It is more an attempt at saving themselves and doing risk management simultaneously instead of dealing ethically with the different stakeholders in their chain, which is one definition of CSR.

    To a great extent, companies see CSR as an addon function, not core to the business and this impacts the scale and the nature of their operations. After all, how many people can you keep to fulfil a support role? asks Mr Soni. Going by the common practice across large business houses in India, CSR has taken the form of a family activity with family members, often spouses of the businessmen themselves, taking charge of this responsibility. Adi Godrej, chairman of the Godrej group, for instance, says that his daughter Nisaba heads the board of professionals that looks after CSR activity in their company, so that the activities are clearly directed where the family would like them to be.

    Experts however claim that having a family member in charge often leads to a situation where the initiatives are driven by their own areas of interest or the passion they have or feel for and hence short-term and not aligned with the business objectives of the company. Then there are also companies where CSR is handed over as an extra responsibility to an existing professional, generally the person responsible for environment health and safety or even the human resources head in some cases. Many contrast this with multinationals, where CSR is ingrained into the operations of the business and where dedicated professionals are recruited to execute the long-term strategy. Take the case of Hindustan Unilever where the chief executive officer and the management committee of the company lead corporate responsibility. The management committee governs the CR strategy with a view of key strategic approaches and seeking reports on impacts and efforts against clear targets.

    At HUL, corporate responsibility is integrated into our business through brands, people and processes, says the company’s corporate responsibility head, Meeta Singh.

    Dr Peter Cappelli, professor of management and director of the centre for human resources at the Wharton School, University of Pennsylvania, has co-authored a book The India Way: How Indian Companies are Revolutionising Management. He says that that with a professional system in place, there is a greater likelihood of accountability, standards and measures of achievement in contrast to when a family member is in-charge and where the person may just be following his interests.

    Some also see a distinctly cultural and historical angle to the approach to CSR in India largely associated with the fact that many of the founders of large Indian companies were known for their philanthropic activities. Hence, CSR, when it arrived in India, became for many merely an extension of this legacy and often took the form of charity. Professor Sushil Kumar, professor at IIM-Lucknow however points out the chinks in the system. There is a certain limit to the amount that you can donate as charity. Also, it creates a dependence syndrome amongst its recipients rather than developing the long-term capabilities of their target group.

    Dhananjay Bansod, chief people officer at Deloitte Touche Tohmatsu India, says that the distribution mechanism of money devoted to CSR is amiss.

    He says that how money gets utilised is an issue that needs to be checked at various levels. To him, the solution lies in having a sustainable relationship and take charging of the initiative as a company rather than relying on other mechanisms to achieve goals.

    To a great extent, the approach to CSR in India has largely been parental, and generally chequebook oriented and directed at conventional areas like education and healthcare. But everything that is socially oriented doesn’t need to be philanthropic. If it is treated as a business, then it can be taken to a scale unlike philanthropy, says Rita Soni, country head for responsible banking at YES Bank. CSR should cover workplace, community and environment

SHE claims that her bank, for instance, has gone beyond the triple bottom-line approach of People, Planet and Profits to mainstream CSR into their business, and has about 100 people across divisions engaged in different activities.

    Alka Talwar, head of community and development at Tata Chemicals too, suggests the needs to go beyond the existing paradigm and to work with all stakeholders, understanding the concerns and needs working in partnership with all concerned inclusive of the government and other civil society organisations.

    Some experts blames the current approach to CSR in India on the skewed motivations for CSR. Given the size of their operations, the huge workforce and the spiralling profits, companies stand a risk of coming across as greedy if they don’t engage in CSR, which is why they cannot avoid CSR. The case is most acute in high impact industries which often face flak for the environmental issues and hence see CSR as a defence mechanism, says Vinay Somani, trustee of Karmayog, a non-profit organisation, which has been rating the top companies in India on their CSR practices for the last three years. Most seem to be unwilling to admit what Niall Fitzerald, former CEO of Unilever, did years ago: Corporate social responsibility is a hard-edged business decision. [We do it] not because it is a nice thing to do or because people are forcing us to do it [but] because it is good for our business.

    Incidentally, a study by non-government organisation, Partners in Change which works around creating CSR awareness shows that employee retention, brand reputation and realisation of company values were the top three drivers for companies engaging in CSR.

    In a survey of more than 500 companies, we spoke to the CSR departments of companies and found that companies felt that CSR worked best at attracting and retaining employees and enhanced brand value. Realisation of company values occupied the third position, Khurram Naayaab, programme manager at Partners in Change. He says that CSR activities of businesses should address four different realms: Workplace, community, environment and marketplace.

    Take the case of the Mahindra Group, which in addition to donating one percent of its profits after tax, demands the commitment of time from their employees. For us, giving time is as important as donating money. We feel that doing community work allows our employees to develop better inter-personal and HR skills, says Rajeev Dubey, president (HR, after-market & corporate services) and member of the group executive board at Mahindra & Mahindra.

    Some companies have engaged in CSR to be eligible to operate in certain countries. Textile manufacturers who export to Europe, for instance, are said to fulfill certain social regulations in terms of the work environment provided to their employees. Overseas investors, particularly pension funds, are also known to prefer investments in companies, which have strong CSR practices. It has been generally seen that CSR has direct connection to stock market returns and brand value. Its non-compliance can easily dent image of a company in the market. US has, in fact, become more aggressive in their pursuit of companies strictly adhering to the Foreign Corrupt Practices Act (FCPA), says James D Pajakowski, executive VP, global risk and advisory services, at consultancy Protiviti. Most public sector units, on the other hand, are under pressure to do CSR particularly those involved in high impact activities such as mining. Most of them do not have a professional focussed on this, says Professor Kumar of IIM-Lucknow.

    It is however unfair to compare the Indian approach to CSR with that of the Scandinavian countries, which are known to have very high standards of CSR and ethical practices enshrined into their business values. Many of them are welfare-centric societies devoted to common good capitalism and this is reflected in their business strategy too, adds Prof Kumar.

    Support for the CSR practices comes from an interesting quarter. According to Dr Cappelli, when Western companies think of CSR, they see it as an opportunity to go good in addition to making money.

    When we look at the great Indian companies, they typically begin with the goal of doing goodsometimes for poor consumers, sometimes for greater India and then making money flows from that. So going good is baked into their business strategy, he claims.

    The saving grace however is that many experts see lip service to CSR as a passing phase in its evolution. A spokesperson of GMR admits that both companies and the government are in the process of brainstorming on the role of CSR in the country’s development. With most companies slowly moving beyond philanthropy, the hope is that sustainability and business alignment will have to become a priority, sooner or later. Hopefully, for the right reasons.

    (With inputs from Aman Dhall)

ALL IN THE FAMILY The approach to CSR has largely been parental, and generally chequebook-oriented, directed at areas like education and healthcare

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