In the present competitive world, the success of the business doesn’t depend solely on financial planning & management. However, the non-financial performance of the Company is gaining more importance. In the era of digital marketing and social media, stakeholders are becoming more aware and have started considering aspects like social accountability and ethical governance before investing their money in any brand. Thus, around the globe businesses have started recognizing the importance of non-financial parameters by incorporating them into business planning. It’s a huge paradigm shift or a radical transformation in the business approach.
Corporate Social Responsibility (CSR) is considered to be one such tool contributing in the positioning of business. CSR is not new to India, it has a long history from charity to philanthropy by big business houses like TATA, Birla, Godrej, Bajaj, etc. who were spending a substantial amount on charitable activities much before the Act came into existence with the sole motive to ‘Give back to society’. However, after 2013, CSR became mandatory for certain Companies in India through the incorporation of Section 135 in the Companies Act. The step has been a breakthrough to take CSR from a mere voluntarism-based approach to an important agenda point in the Board meetings of the Corporates.
However, CSR is still in the evolving phase. Though it’s been more than 7 years since the Act came into existence, still all stakeholders including Government are under constant learning and accordingly making amendments in the Act. However, there are different dichotomies in understanding CSR like philanthropy versus strategic CSR; global framework versus Indian framework; shared values versus mitigating risk; internal versus external stakeholder; Sustainability versus CSR; ESG versus CSR and so on. The reason behind these differences are based on the different interpretation of CSR in India and other parts of the world. Globally CSR is defined by ISO26000 and is aligned with the Sustainability framework that talks about the triple bottom line.
In India, the Companies Act allows CSR to work for external stakeholders’ only i.e. community outside the business, with a philanthropy-based approach where the main intent is to leverage the strength of the Private sector to address the developmental challenges of the country. Though the strategy is appropriate in terms of accelerating the efforts of the Welfare State to bring positive change at the grass-root level. However, with this strategy the other aspects of the Corporate get neglected. Aspects like the negative implication of the business on the environment and society, marginalized stakeholders in the value chain, ethical governance of business, etc. In the present form, CSR is just about spending 2% of the business profit outside the business on any of the social causes. This approach has limited the scope of CSR and has diluted the social and ethical responsibility of corporates. Furthermore, the increasing reporting requirements are posing extra pressure and a reason behind disinterest in CSR among Corporates.
Today, the world is facing huge social and environmental challenges which are a great threat to humanity. It requires everyone to be more aware, sensitive and ready to contribute in their capacity to mitigate these challenges. Collective efforts are required to achieve the Sustainable Development Goals (SDGs) by 2030. Corporate social responsibility shall be seen holistically as ‘S’ of the ESG or a part of the triple bottom line that shall broaden the purview of social responsibility and cover every social component of the business positioned at the bottom of the pyramid whether it’s within the business or outside the business. For instance, the labour working at minimum wages in the manufacturing unit, diversity & inclusion of everyone in the business, ensuring social compliance, use of natural resources, waste disposal, energy consumption etc. CSR should be in consideration with the materiality aspect of the business in terms of risks and opportunities, through identification, analysis, and developing mitigation strategies. It’s important to ensure that the business has earned the profit and how the social aspects are getting addressed by the business.
Holistic approach towards CSR is crucial for the sustainability of business and society at large. This requires greater awareness and sensitization among decision-makers to recognize the true spirit of CSR, to think beyond meeting compliance, and to see a higher purpose by aligning CSR with the business. Then only CSR would be able to transform business along with uplifting the society.