The Value of Indian CSR

By Peter Cappelli, Harbir Singh, Jitendra Singh and Michael Useem AFP/Getty Images School children perform during a program to initiate environmental awareness by ITC paperboards and the Ramky group, July 2010. At one level Corporate Social Responsibility, or CSR, is just another piece of jargon. Too often its more symbolic than real in contributing to society. In the US, there is even considerable debate about the value of CSR. Some think firms can serve society best by maximizing risk-adjusted financial returns to shareholders and leaving societal contributions beyond job creation to the government. On the other hand, Indian leaders whom we interviewed in our study published in The India Way placed a lot of stock in CSR. Why such a stark difference? It is not difficult to find the social missions that have become part of the culture of Indian businesses. The social mission for Bharti Airtel, for example, was to get cell phones into the hands of the hundreds of millions of people in India who otherwise had no way to communicate with each other. Tata Motors had a similar goal with respect to providing low-cost transportation in the form of the Nano. The social mission of the pharmaceutical and healthcare company, Dr. Reddys, is to address the unmet medical needs of the poor in India as well as around the world. Hindustan Unilevers Project Shakti uses microfinance principles to create a sales force in the poorest regions of the country. ITC, a leading conglomerate, made the following statement in describing the companys purpose. Envisioning a larger societal purpose has always been a hallmark of ITC. The company sees no conflict between the twin goals of shareholder-value enhancement and societal-value creation. These companies put their money where their mouths are with respect to mission. A large proportion of the profits of the Tata Group companies, for example, go to its charitable foundations and back into Indian society. The Godrej Group has constructed schools, medical clinics, and living facilities for employees on a scale unknown in American companies. In America, directors and executives are far more likely to see employee welfare as a drag on shareholder value than an asset for company growth. The list goes on. Dr. Reddys guaranteed to meet the healthcare needs of 40,000 children. Infosys has built and staffed entire hospitals, rolled out a nationwide curriculum for

school-age students (in part to improve its future applicant pool) and engaged in hundreds of other social projects, all in the same year. ITC developed a rural initiative called Mission Sunehra Kal that has reached five million people using knowledge portals to help farmers to band together to negotiate with suppliers, to find job opportunities for women and expand education. Virtually every major Indian company has similar efforts under way. The focus on mission cuts across all types of companies, those that are family-controlled, those that operate in international markets and every other dimension examined. For B. Muthuraman, the managing director of Tata Steel, efforts to aid the broader community work wonders for Tatas reputation. Our history in corporate social responsibility, he acknowledged, has enhanced the group brand. This brand building through community work has proven invaluable for recruiting and retaining employees at Tata Steel and elsewhere. A recent study of employee turnover in India found, for example, that the perception of a companys social responsibility is one of the main factors in retaining talent. Acting responsibly may also pay off when dealing with regulators: Obtaining industrial licenses and environmental clearance in India can depend on being known for public responsibility. Mission as a business goal also affects relationships with customers. Individuals have long memories and doing good things for people when they have no money can work to a companys advantage when those individuals do have money and are in the market for your products. We also know that consumers care about the values of the companies with which they do business witness the current rush of companies touting their green environmental practices. At least some substantial share of customers would rather do business with companies that do good things for the community. R. Gopalakrishnan, executive director of Tata Sons, said that he believed the Tata Group was loved by the people in India, not just by their employees, for the contributions their companies have made to Indian society. How many companies anywhere could make that claim? While it is true that the social needs are greater in India than in most other countries, the efforts of these companies to address them are nevertheless there for all to see. Earlier this week newsrooms received a joint press release from seven multinational food corporations in India announcing a common commitment to responsible marketing to children. The corporations concerned were the Indian operations of Coca-Cola, General Mills, Kelloggs India, Nestle, Mars, PepsiCo and Unilever. Their India Pledge, as it is called, vowed not to advertise food and beverage products to children under 12 on television, print or the Internet or in primary schools. The pledge said they would advertise products

that fulfill scientifically proven nutrition-based criteria, meet accepted national and international guidelines or were specifically requested by the schools or institutions concerned. The seven corporations said they will also commission an independent compliance monitoring study starting next year. A sense of social mission and purpose is one of many characteristics of the India way that has resulted in the incredible success of Indian businesses throughout the years. Companies such as Tata, Hindustan Unilever and ITC have proved that community involvement does not have to be relegated to a side project, but rather can be the primary focus for a firm and lead to not only a better community, but loyal customers and a reliable well of future talent. Peter Cappelli, Harbir Singh, Jitendra Singh and Mike Useem are professors of management at the Wharton School of the University of Pennsylvania and are the coauthors of The India Way: How Indias Top Business Leaders Are Revolutionizing Management (Harvard Business Press, 2010).