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Corporate Social Responsibility- Indian practices

Authors:
M.BALASUBRAMANIAN, PROF. DEPT. OF MANAGEMENT STUDIES,JJ COLLEGE OF ENGG &
TECH, TRICHY-09
&
MRS. P.Na.KANCHANA, ASST.PROF. DEPT. OF MANAGEMENT STUDIES, JJ COLLEGE OF
ENGG & TECH, TRICHY-09

INTRODUCTION:
India is one of the fastest growing and most high potential economies
in the world today. CSR has been basic to business philosophy. It has been an
intense but deliberately low profile activity based on the belief that social
responsibility is a privilege and not a portal for publicity. Today India’s
increasing prosperity is throwing up further social challenges that need to be
tackled, and we believe that businesses can and must play a role in
addressing these. Businesses are a part of wider social fabric. They cannot
possibly thrive as isolated islands of prosperity against a backdrop of
deprivation where large section of society are denied even basic amenities
such as water, housing , health care and education. This is an unacceptable
situation to every Indian. It is our conviction that India’s spectacular growth
provides companies, not only with a business opportunity but also with a
social opportunity to redress some of the weaknesses that exist in our social
fabric and human development infrastructure. The focus on CSR is
particularly on education. Employment and Environment. CSR cannot begin
and end with the allocation of funds. It depends how the projects are
identified and structured, employees are encouraged to make those
initiatives work. Through CSR every organization hope to have the privilege
of contributing, in a small way not to the Gross National Product but to the
Gross National Happiness as well.

This paper also focuses Prime Minister’s Ten-point social charter for
companies and how CSR is implemented by Mahindra & Mahindra and Tata
Tea.

Meaning of CSR:

CSR broadly represents the relationship between a company and the wider
community within which the company operates. It is recognition on the part
of the business that ‘for profit’ entities do not exist in a vacuum, and that a
large part of any success they enjoy is as much due to the context in which
they operate as factors internal to the company alone.
The entirety of CSR can be discerned from the three words contained within
its title phrase:

‘corporate’, ‘social’ and ‘responsibility’. Therefore, in broad terms, CSR


covers the responsibilities corporations (or other for-profit organizations)
have to the societies within which they are based and operate. More
specifically, CSR involves a business identifying its stakeholder groups and
incorporating their needs and values within the strategic and day-to-day
decision-making process. Therefore, a business ‘society’ within which it
operates, which defines the number of stakeholders to which the
organization has ‘responsibility’ , may be broad or narrow depending on the
industry in which the firm operates and its perspective.

Other definitions of CSR:

The social responsibility of business encompasses the economic, legal,


ethical and discretionary expectations that society has of organizations at a
given point in time.

Archie B. Carroll, 1979

CSR is about businesses and other organizations going beyond the legal
obligations to manage the impact they have on the environment and society.
In particular, this could include how organizations interact with their
employees, suppliers, customers and the communities in which they operate,
as well as the extent they attempt to protect the environment.

The Institute of Directors, UK


, 2002.

CSR is a means of analyzing the inter-dependent relationships that exist


between businesses and economic systems, and the communities within
which they are based. CSR is a means of discussing the extent of any
obligations a business has to its immediate society: a way of proposing policy
ideas on how those obligations can be met; as well as a tool by which the
benefits to a business for meeting those obligations can be identified.

CSR is an argument of economic self-interest for a business. In today’s


brand-driven markets, CSR is a means of matching corporate operations with
stakeholder values and demands, at a time when these parameters can
change rapidly. One example is a company’s customers: CSR adds value
because it allows companies to better reflect the values of this important
constituent base that the company aims to serve.

CSR covers all aspects of a business day-to-day operations. Everything an


organization does in some way interacts with one or more of its stakeholder
groups, and companies today need to build a watertight brand with respect
to all stakeholders. Whether as an employer , producer, buyer, supplier, or
investment, the attractiveness and success of a company today is directly
linked to the strength of its brand.

EXAMPLE OF CSR ISSUES:

Examples of issues within the economic sphere that contain a CSR


component range from ‘corporate governance’ to ‘patriotism’, from the issue
of ‘fair trade’ to ‘diversity’ in the workplace.

• Corporate governance

Transparency is the key to encouraging trust in the managers selected to run


a company on behalf of the shareholders. It is also vital to maintaining
confidence within other stakeholder groups and the general public. The
issues of accurate financial statements, executive compensation, and
independent oversight, have become particularly sensitive and important for
companies to get right.

• Patriotism

An issue such as ‘patriotism’ is by definition subjective, but has risen in


importance in the U.S. following the September 11, 2001 terrorist attacks. A
good example of an issue that falls into this category is the trend today of
companies attempting to avoid paying corporation tax, some even going to
the lengths of incorporating off-shore ,even though company headquarters
and the majority of workers are based in the U.S:

• Fair trade

Companies in particular industries have felt pressured to pay a ‘fair’ price for
the goods they purchase, over and above the market-driven price, directly to
the producer. This is particularly the case in many food industries, where the
world market prices may well have decreased over while costs have either
remained the same or increased.
• Diversity

The 2000 Census data has revealed that the ethnic make-up is changing
rapidly. Organizations need to adapt their traditional structures and mind-
sets, which prevent companies from marketing products effectively to
significant segments within the market.

Literally, CSR can creep into every decision that a company makes.
One sub-area of the issue of ‘diversity’ involves the equal treatment of men
and women. There are plenty of examples of both good and bad practice.

IMPORTANCE OF CSR:

CSR is an important business strategy because, wherever possible,


consumers want to buy products from companies they trust; suppliers want
to from business partnerships with companies they can rely on; employees
want to work for companies they respect; and NGOs, increasingly, want to
work together with companies seeking feasible solutions and innovations in
areas of common concern. Satisfying each of these stakeholder groups
allows companies to maximize their commitment to another important
stakeholder group-their investors, who benefit most when the needs of these
ofther stakeholder groups are being met: The importance of CSR is best
quoted by Carly Fiorina, Chairman and Chief Executive Officer, Hewlett
Packard Company

“ I honestly believe that the winning companies of this century will be those
who prove with their actions that they can be profitable and increase social
value- companies that both do well and do good….Increasingly, shareowners,
customers, partners and employees are going to vote with their feet—
rewarding those companies that fuel social change through business. This is
simply the new reality of business- one that we should and must embrace”.

The business most likely to succeed in the globalizing world will be those
best able to combine the often conflicting interests of its multiple
stakeholders, and incorporate a wider spectrum of opinions and values within
the decision-making process and objectives of the organization. Lifestyle
brand firms, in particular, need to live the ideals they convey to their
consumers.

CSR is increasingly crucial to maintaining success in business- by providing a


corporate strategy around which the company can rally, but also by giving
meaning and direction to day-to-day operations.
WHY CSR IS RELEVANT TODAY?

CSR as a strategy is becoming increasingly important for businesses today


because of three identifiable trends:

• Changing social expectations

Consumers and society in general expect more from the companies whose
products they buy. This sense has increased in the light of recent corporate
scandals, which reduced public confidence in the ability of regulatory bodies
and organizations to control corporate excess.

• Increasing affluence

This is true within developed nations, but also in comparison to developing


nations. Affluent consumers can afford to pick and choose the products they
buy. A society in need of work and inward investment is less likely to enforce
strict regulations and penalize organizations that might take their business
and money elsewhere.

• Globalization

The growing influence of the media sees any ‘mistakes’ by companies


brought immediately to the attention of the public. In addition, the Internet
fuels communication among like-minded groups and consumers-empowering
them to spread their message, while giving them the means to co-ordinate
collective action (i.e. a product boycott).

The result of this mix is that consumers today are better informed and feel
more empowered to put their beliefs into action. From the corporate point of
view, the market parameters within which companies must operate are
increasingly being shaped by bottom-up, grass-roots campaigns. NGOs and
consumer activities are feeding, and often driving, this changing relationship
between consumer and company.

CSR is particularly important within a globalizing world because of the way


brands are built-on perceptions, ideals and concepts that usually appeal to
higher values. CSR is a means of matching corporate operations with
stakeholder values and demands, at a time when these values and demands
are constantly evolving.
CSR can therefore best be described as a total approach to business. CSR
creeps into all aspects of operations. Like quality, it is something that you
know when you see it. It is something that businesses today should be
genuinely and wholeheartedly committed to. The dangers of ignoring CSR
are too dangerous when it is remembered how important brands are to
overall company value; how difficult it is to build brand strength; yet how
easy it can be to lose brand dominance.

CSR is therefore also something that a company should try and get right in
implementation.

IMPLEMENTING CSR; KEY STEPS

CSR is good business sense, and a total approach to doing business, in a


globalizing world where companies are increasingly relying on brand strength
to add value and product differentiation, and where NGO – driven consumer
activism is increasing. Many believe the issue of how corporations integrate
CSR into everyday operations and long-term strategic planning will define
the business marketplace in the near future. It will become a key point of
brand differentiation, both in terms of corporate entities and the products
that carry their brands.

Key steps on the road to integrating CSR within all aspects of


operations include:

• Ensure the commitment of top management, and particularly the CEO,


is communicated throughout the organization.

• Appoint a CSR position at the strategic decision-making level to


manage the development of policy and its implementation.

• Develop relationships with all stakeholder groups and interests.

• Incorporate a social or CSR Audit within the company’s annual report.

• Ensure the compensation system within the organization reinforces the


CSR policies that have been created, rather than merely the bottom-
line.

• Any anonymous feedback whistle-blowing process, ideally overseen by


an external ombudsperson, will allow the CSR Officer to operate more
effectively.
Corporations today are best positioned when they reflect the values of the
constantly shifting and sensitive market environment in which they operate.
It is vital that they are capable of meeting the needs of an increasingly
demanding and socially-aware consumer market, especially as brands move
front and center of a firm’s with global lifestyle brands have the most to lose
if the public perception of the brand fails to live up to the image portrayed.
Integrating a complete “social perspective’ into all aspects of operations will
maximize true value and benefit for an organization, while protecting the
huge investments companies make in corporate brands.

Prime Minister Manmohan Singh issued a ten-point social charter for the
corporate sector last may, “In a modern society , business must realize its
social responsibility….. The time has come to ask wat can we give back to
India.” Complimenting credible CSR work, Singh appealed to companies to
engage extensively in activities that benefit society. He demanded current
efforts to make the youth employable be multiplied by 1000. “Corporates
can play a supportive role with more efficient government delivering systems
to the millions anxious to move out of Poverty,” Concurs Mitra.

A Seminal 2006 article in the Harvard Business Review outlined


four justifications for CSR: moral obligation, sustainability, license to-
operate and the quest for enhanced reputation. The survey by partners In
change, however , found philanthropy, reputation and market positioning to
be the prime drivers in India. The Karamyog rating too found overwhelming
use of CSR as a marketing tool with campaigns promising donations of token
sums on purchases by consumers. Unless it gets its act together, India Inc.
could well find state impositions on, amongst other imperatives, job
reservations for the underprivileged-as the British 2006 Companies Act
mandates public companies to report on social matters.

TEN-POINT SOCIAL CHARTER FOR COMPANIES

• Invest in worker welfare and health, their children’s education.


Give pension and provident fund benefits.

• Factor in community needs around operations; don’t define CSR


by tax planning alone.

• Pro-actively employ the less privileged at all levels. Deliver


credible results at an early date. Make work places conducive to
the employment of physically less-abled.
• Resist excessive remuneration to promoters and senior
executives and discourage conspicuous consumption.

• Invest in skill-building and education to make the youth


employable. Current efforts need to be multiplied a thousand
times and companies need to allocate resources for this vital
work.

• Desist from non-competitive and restrain cartel-type behavior.

• Invest in environment-friendly technologies,conserve national


resources and ecoloy, and avoid wasteful consumption.

• Promote enterprise and innovation within firms and outside.

• Develop codes of conduct for business practices and for fighting


corruption.

• Promote socially relevant messages and causes in the media.

CSR PRACTICES ADOPTED BY MAHINDRA &MAHINDRA

It is the Mumbai based auto major M&M’s managing director, Anand


Mahindra gave new name-The Green Warrior. The company which says has
the largest green foot print in terms of environment-friendly offerings in the
South Asia auto market, will hit the showrooms with its mild hybrid vehicles
.An auto maker pursuing green products that pollute less and reduce our
dependence on hydrocarbons is an iunspiring example of the integration of
social responsibility into business .

The focus of CSR has been on appropriate education, vocational education


and livelihood training with an emphasis on education for the girl child.

KEY CSR PROJECT AND ITS ACHIEVEMENTS:

M&M CSR MANTRA IS EDUCATING THE


UNDERPRIVILEDGED

MAINSTREAMING:

ESOPs at Mahindra’s means employee social options, where an employee


gets to chose a social responsibility and takes some time from his weekend’s
to serve society. M&M is the winner of the BW FICCI-SEDF CSR AWARD
2007,is mainstreaming its corporate social responsibility. The company has
given a whole new meaning to ESOPs. Through ESOPs , every employee in
the Mahindra group chooses a social cause, and then dedicates a certain
number of man hours to help the needy.

NANHI KALI INITIATIVE:

EDUCATING THE GIRL CHILD IN REMOTE VILLAGES

M&M’s Project Nanhi Kali supports the education of girls in the poorest and
most remote parts of the country, including tribal belts in Rajasthan, Madhya
Pradesh, Chhattisgarh and Andhra Pradesh.

It plans to reach out over 6,000 Nanhi Kali schools, which would benefit girls
from Class I to X supported over 38,000 disadvantaged girls since 1996. The
trust work with 25 NGOs, providing essentials, such as uniforms , books and
school bags, Mahindra employees are sent out there to be mentors of
students in such schools. This project helps to arrested the drop out rate
among girls in schools to 5 percent from an average of 40 percent.

The Mahindra Pride School, near Chinchwad outside Pune, provides livelihood
training to 600 young men every year from schedule castes, scheduled tribes
and other backward castes.

LIFELINE EXPRESS

Taking health care to remote areas in North India

Life Line Express, a central government aided hospital on rails, which travels
to Indian hinterland every month for performing cleft lip and cataract
surgeries, has become another popular volunteering option for Mahindra
group employees in Rudrapur. Impact India Foundation manages this train, a
UN-funded project.

Assisting doctors from the King George Medical College (KGMC) , Lucknow,
Mahindra engineers helped 647 patients benefit from surgery on board the
train in 2007

OTHER CSR INITIATIVES

Other CSR initiatives include the Mahindra All India Talent scholarships are
awarded to deserving, economically disadvantaged students every year,
chosen through an exam.
3750 students have benefited from this scholarship since it began in ten
years ago.

It provides Rs25,000 to each student over a three years for pursuing job-
oriented diploma courses at recognized government polytechnic institutes.

The Mahindra United World College, on the outskirts of Pune, supported the
enrolment of three children from a near by village into American universities.

Then, M&M has also entered into a public-private partnership with the
Government of Rajasthan to set up a mid-day meal kitchen at a cost of Rs 1
crore to feed 25,000 children in Jaipur District’s Govindgarh.

The intent behind all these initiatives is also to enable Mahindra employees
to work with local communities.

M&M is taking up polio vaccination and AIDS awareness as a priority even in


districts where the group does not have a plant, sales outlet, or other
operation.

PERCENTAGE OF MONEY SPENT ON CSR:

Two years ago when M&M celebrated its 60th anniversary, its financial
commitment to CSR was raised to 1 percent of profit after tax. Last year,
M&M spent about 8 crore on its CSR initiatives; this year , the amount is
expected to be in the region of Rs 11 crore-12 crore. The enhanced funding
will enable the group to expand its CSR activities to states it could not cover
previously.

TATA TEA CSR PRACTICES AT MUNNAR:

The Rs 1,070 crore Tata Tea now the world’s second largest branded tea
company. Many initiatives were taken by the 140 year old Tata Group. The
rehabilitation centres at Munnar- Shrishti, Aranya and Athu;ya have made
some headway.

MAINSTREAMING:

TATA TEA HAS CHANGED THE WORLD FOR MANY DISABLED MEN AND
WOMEN.

The company is integrating its mainstream business with CSR projects


involving product distribution via economically weaker sections.

KEY CSR PROJECT AND ITS ACHIEVEMENTS:


Tata Tea’s Srishti project in Munnar aims to bring out the best in differently –
abled children

ENVIRONMENT FOOTPRINT:

The company’s stationery unit recycles tea waste to make paper. The entire
stationery requirement of KDHP is met by the handmade paper unit.

It supplies 150,000 paper bags every year to Tata tea for use in selling tea.

COMMUNITY DEVELOPMENT:

The company runs the Dare School to provide education based on kid’s
capabilities. It is a school which offers education to differently-abled children
below 18 years, after which they are trained in several vocations at the
centres.

CORPORATE GOVERNANCE:

Each year the highest productivity plucker gets a chance to represent


workers among the board of directors.

OTHER CSR INITIATIVES

Tata Tea conducts month-long cleaning programmes and soil conservation


projects to keep the area plastic free.

The produce of these centres accrue to KDHP, the company that now owns
and runs the Munnar plantations of Tata Tea.

It is the biggest employee participatory management companies in the


world.

ICICI securities had extended debt acquisition.

Tea plantations such as those in Munnar and the ones along the Brahmaputra
Valley – where too rehabilitation centres and other CSR initiatives specific to
the region are running form a negligible part of Tata Tea’s overall business.
Tata Tea fully funds and run them.

8% profit is spent on CSR.

Conclusion:
At its best, CSR can be a strategic management tool that can lead
organisations through the current economic downturn and help them to
come out the other side better and more robust businesses, where many
traditional business tools will fail. At its heart, it is about risk minimisation,
and opportunity provision: key ingredients for successful business, and
ideally central to core organisational values.