2013 was a watershed year for CSR in India. It put to rest all the debate about mandatory vs voluntary CSR when the Indian parliament passed the Companies Act 2012 that made it mandatory for companies (meeting certain criteria) to spend 2% of their net profits on CSR.
Bringing about 8000 companies under the ambit of mandatory CSR the bill shook up the corporate world. Our view was and continues to be that the two percent requirement is merely a nudge from the government to corporate India to do good and then report these actions. For Indian brands, this is an opportunity to begin switching gears on their business strategy in favor of the long term and integrating sustainability and CSR into their brand promise.
Considering the large scale social impact of this bill the Responsible Future team discussed many ideas, concepts and issues relevant to Indian and Global businesses.
If done strategically, rather than as a standalone activity, CSR can yield strong results. We believe that Four Strategic approaches could be looked at. ( more )
– Collective Funds for Greater Impact: Rather than simple charity, can corporate India collectively fund efforts to solve common problems?
– Financial Instruments such as Social Impact Bonds (SIBs): The funds that this Bill makes available for social good will be significant. To make sure that this is money spent well, innovative financial products such as social impact bonds (read here) will be critical.
– Sustainable Innovation: Indian companies’ unique culture, skills and intrinsic ability to innovate can establish unique ways to support society and build their brands.
– CSR and Sustainability Education: Harnessing the funds released because of the new Bill will require educated and motivated individuals to provide leadership across all sectors of the economy, making management education and retraining mandatory to march toward more inclusive, profitable and sustainable businesses
The Role of the CSR Manager in this scenario became centre stage and we suggested that she ask some tough questions. (more )
WHO – is your core audience, for which CSR initiatives need to be designed? WHAT – is your value proposition and is this in synch with your core business?
WHEN – did your competition launch their CSR initiatives, do you want to be distinct from them?
WHERE – is the sweet spot, through which you can benefit both the community and the company?
WHY – are you investing in CSR?
Can you deliver what you are promising?
Then look at HOW you are going to implement
Our study of companies in automotive industry indicated that most CSR activities are focused on employees and communities (more).
– The CSR performance of Indian automotive companies is still at the primary stage as compared to global advanced standards. Indian automotive companies need to address the CSR issues by increasing the degree of awareness, attention and participation.
– Road safety, a critical consumer concern gets short shrift. (more). This was amplified by several buses catching fire, causing leading critics to question as to where do automotive companies stand vis-à-vis customer/road safety?
– Simple innovative solutions plus strategic thinking about the consumers is the need from automotive companies (read here).
We also looked at the steel industry– a major consumer of water. Water scarcity for the industry becomes a significant risk. Business future is about incorporating water wisdom at a strategic level and the readiness to pay the full and true ecological and other cost of water (more).
We suggested the a risk mitigation approach by using corporate water assessment to better understand
– How the company uses water;
– How the company’s water practices affects communities, ecosystems, and watersheds; and
– How watershed conditions exacerbate and create business risks.
Looking at the future, we exhort that corporations should:
TRAIN managers for organizations that operate with 21st-century logic.
Create RESPONSIBLE LEADERS who lead with a manifesto of Responsible Growth rooted in a systems thinking approach.
REDEFINE VALUE to be not just the product but the lives we impact positively.
LEAD WITH VALUEs through positive environmental value, positive social value and positive economic value in every aspect of business and its related supply chains.
Start looking at SOLVING GENUINE PROBLEMS and not those created by the irrelevant and artificially created scarcity model. Hunger, livelihoods, education and healthcare are universal needs that must be addressed.
Play an important role in DRIVING INNOVATION in not just products but processes and new management thinking.
We look forward to sharing more thoughts and ideas with you and wish you a happy, successful and prosperous new year!
Article coauthored with Utkarsh Majmudar and originally published in Economic Times.