The relevance and importance of corporate social responsibility (CSR) is highly significant today in this capitalist economy, to ensure the sustainability of life and business in the future. Mallen Baker defines CSR as, “It is about how companies manage the business processes to produce an overall positive impact on society.”
According to the United Nations, “Corporate Social Responsibility is a management concept whereby companies integrate social and environmental concerns in their business operations and interactions with their stakeholders.”
A lot of Indian companies have been engaged in CSR way before it was made mandatory by the Companies Act 2013. And yet, 43% of the funds earmarked for CSR by PSU’s are unspent. Companies see CSR as a cost centre but there are a lot of intangible benefits of Corporate Social Responsibility.
What is the importance of CSR?
Let us look at the 6 important factors which highlight the importance of Corporate Social Responsibility in India.
1. Brand Value
A quick look at the top 10 brands in the world would suggest that responsibility is at the core of their operations. A well-managed CSR program can help increase brand equity, awareness and resonate with strong values.
Tata Group is India’s most valuable brand at $19.5 billion dollars. People appreciate the company not only for its high-quality products but also for the activities that they do for the greater good of the people. The company has exceptional goodwill and the name exudes trust.
2. Increased Sales – Customer Matters
Companies that lead with a purpose are perceived positively by the customers. According to a study, 88% of the people surveyed would buy products from a responsible company. 85% of the people said that they would support the company in their community.
Millennials and Generation Z connect with companies having a positive impact on the communities. This engagement translates into greater sales in today’s highly connected world. This further highlights the importance of Corporate Social Responsibility projects.
3. Employee Retention and Engagement
There was a time when people looked at their jobs from the bread and butter perspective alone. Today, employees look for a higher purpose other than their monthly salary.
Employees enjoy working for companies that have a positive public image. CSR initiatives incorporate volunteering programs which foster values such as empathy and loyalty. This leads to better team-work and camaraderie among employees. It is a well-known fact that happy employees lead to low attrition.
Godrej Group CSR projects include a volunteering program that helps NGO’s to create sustainable models. They are also known to run several programs that help protect the environment. This has led to higher employee satisfaction and a positive image for the company. No wonder it is one of the most sought after companies to work for in India.
4. Cost Savings
In the past, operating sustainably came at a huge cost to the company. Cost savings as one of the factors in the importance of CSR would be surprising a few years ago. Responsible companies have found new technologies that have reduced the operating costs.
Cochin Airport in India is a very good example of sustainable operations leading to cost savings. It is the first Airport in the world to operate completely on solar power. It has become a pioneer and is inspiring other airports to go solar and make this world a better place to live in.
5. Poverty Alleviation
India is home to almost 1.4 billion people and the top 1% of its population owns 73% of the wealth. In spite of the plethora of welfare programs, the gap between the haves and have-nots is one of the steepest in the world.
The corporate sector’s core competency is the execution of projects. They have the talent and know-how to ensure maximum impact at minimum cost. CSR programs bring out change at the grassroots level by harnessing this operational efficiency.
Mahindra and Mahindra’s Nanhi Kali is one of the pioneers when it comes to CSR projects in India. The World Bank’s 2018 report states that limited educational opportunities for girls and barriers to complete 12 years of education, cost countries between $15 trillion and $30 trillion in lost lifetime productivity and earnings. Project Nanhi Kali educates girls which not only empowers them but also helps their families come out of poverty.
6. Risk Management
It is no longer a debate that social and environmental risk affect businesses in a big way. In the long term, these factors affect the growth strategies and are completely out of its control.
Mumbai incurred a loss of Rs 14,000 crore due to floods from 2005 to 2015 according to a study conducted by the United States Trade and Development Agency (USTDA) and leading accounting company KPMG. Environmental and Social factors damage the infrastructure or lead to the loss of business hours due to absenteeism.
Depleting mangrove cover is one of the biggest reasons for flooding in Mumbai. Bajaj Electricals’ CSR arm planted 10,000 mangroves by partnering with NGO, United Way Mumbai (UWM) to create awareness on the importance of mangroves among the youth.