CSR More Relevant Today Than Ever !

CSR (Corporate Social Responsibility) is fast becoming one of the most important tools employed by corporates for sending a consistent message to the outside world that they ‘CARE’. Geyatee Deshpande explores the current trends in CSR while also highlighting the need for it.

CSR and ethical investing go hand in hand. Ethical investing, also at times referrd to as socially responsible investing, is in vogue- more today than ever! It always has been important, and it will continue to be going forward. Investors who have tracked stock market performance in CY2019 YTD would realize the importance of investing in ethical companies and those companies that prioritise corporate governance. We observed that those companies with loose corporate governance practices were the biggest wealth destructors in 2019.

In 2019 YTD, the importance of investing in companies with good corporate governance and the ones following ethical standards has been clearly evident.

Corporate social responsibility, on lines of ethical investing, too is gaining prominence. Interestingly, CSR is gaining increasing importance for companies, not only to meet mandatory requirements, but also to increase sales. Corporates are increasingly focusing on targetting more and more millennial generation customers. In other words, millennials are dominating the consumer market. Globally, these so-called millennials are said to be laying due emphasis upon companies' CSR policies and other socially responsible activities while making purchase decisions. As per a study on millennials by ConeComm, 9 out of 10 millennials are motivated to switch to those brands that are associated with a cause if they had an option .Tom’s is one brand that is gaining popularity and most millennials think it is a cool brand as Tom’s would give a pair of shoes to a child in need every time someone buys a pair of their shoes. H&M does something similar where it attempts to provide clothes to the needy. By doing so, companies are able to generate brand loyalty and it is obvious that consumers want to associate with brands that behold values. We are slowly but surely moving into an era where for companies a CSR policy is not ‘nice to have’ but is a ‘must have’.

There is growing demand for CSR, no doubt, but most importantly corporates, to increase the impact of CSR, are focusing on :-

☛ Employee engagement,
☛ Top management and CEO involvement,
☛ Authenticity and sustainability
☛ Reaching out to the stakeholders on CSR activity
☛ It is utterly important to analyse the impact of CSR activities, especially because close to 40 per cent of consumers dismissed CSR initiatives as merely a PR exercise, as suggested by a poll.

CSR trends:-

CSR is expected to gain increasing importance going forward. The usage of Artificial intelligence in on the rise to increase efficiency and sustainability and for corporate reporting efforts.

Increasingly, companies are seen incorporating Sustainable Development Goals (SDGs) into their responsible business actions. Gradually, more and more companies are mapping their goals to SDGs.

Renewable energy use is seen to be on the rise with solar and biofuels usage gaining preference.

Most corporates are duly focusing and prioritizing on adequate water management practices as a part of CSR activity. Along with water management initiatives, managing e-waste, municipal waste and plastic reuse and recycling are also being emphasized upon.

Broadly speaking. manufacturing companies are faring better than services companies in adopting CSR activities and are actually spending more than the latter as well towards the purpose. The overall trend of companies allocating spending on education and health continues in FY2019, with the number of companies spending more than 2 per cent of their incomes on CSR seems to be growing consistently. Tata Chemicals is among the most impactful CSR spenders along with Ambuja Cement and Infosys.

What are "Sustainable Development Goals"?

Sustainable Development Goals (SDGs) have been adopted by all United Nations Member States in 2015; these are also referred to as Global Goals. Sustainable Development Goals (SDGs) are essentially a collection of 17 global goals aimed at reducing poverty, hunger, AIDS and discrimination against women.

The Sustainable Development Goals are:

☛ No Poverty
☛ Zero Hunger
☛ Good Health and Well-being
☛ Quality Education
☛ Gender Equality
☛ Clean Water and Sanitation
☛ Affordable and Clean Energy
☛ Decent Work and Economic Growth
☛ Industry, Innovation, and Infrastructure
☛ Reducing Inequality
☛ Sustainable Cities and Communities
☛ Responsible Consumption and Production
☛ Climate Action
☛ Life Below Water
☛ Life On Land
☛ Peace, Justice, and Strong Institutions
☛ Partnerships for Goals

CSR Tools

There are several CSR tools that are globally implemented by various corporates. With CSR tools like GRI,SASB and LEED, not only the activities of a company, but also that of its suppliers and sub-contractors could be monitored for sustainability. With sustainable products there is ample evidence of sales improvement.

Few of the popular CSR tools are

GRI standards : Sustainable reporting is the need of the hour. GRI Standards are the first global standards conceived and implemented for sustainability reporting. GRI standards represent the global best practice for reporting the economic, environmental and social impact of corporate functioning.

LEED : LEED stands for "Leadership in Energy and Environmental Design". It is a certification program that majorly focuses on new commercial building projects and is based on a points system. It is the most popular green building rating system in the world and aims to provide a framework to create healthy, highly efficient and cost-saving green buildings. LEED certification is recognised globally and is a symbol of sustainability achievement.

SASB : Sustainability Accounting Standard Board (SASB) connects business and investors on the financial impacts of sustainability. SASB’s objective is to help businesses around the world identify, manage and report on sustainability that may be of interest to investors. It has been developed based on extensive feedback from companies, investors, and other business participants. SASB standards differ from industry to industry, which enables in analysing the performance of companies within an industry. SASB’s materiality map helps market participants and investors understand their portfolio’s exposure to specific sustainability risks and opportunities.

"CSR is not philanthropy suggesting contributing gifts from profits, but it's social responsibility in how profits are made"

Doreen McBarnet
(Professor of Socio-Legal Studies, University of Oxford) 

"The emphasis placed by more and more companies on corporate social responsibility, symbolises the recognition that prosperity is best achieved in an inclusive society"

Tony Blair 

"Corporate social responsibility (CSR) is a hard-edged business decision. Not because it is a nice thing to do or because people are forcing us to do it... because it is good for our business"

Niall Fitzerald
Former CEO, Unilever 

"Businesses need to go beyond the interests of their companies to the communities they serve"

Ratan Tata
Former chairman of the Tata Group

Conclusion

CSR is becoming more and more relevant as businesses get more disruptive to attain their commercial interests. A CSR strategy is important for any company and can act as a brand enhancer which may in turn lead to higher sales. It is a known fact that consumers buy brands they trust but today this has been extended to the values a brand embodies. Millennials give more importance to the set of values the brand communicates and prefer to go with the brands that are inclined to make this world a better place to live in.

More and more companies are seen adopting SDGs in India. It should be noted that a focus on simple aspects such as sustainable packaging and sustainable products is leading to improvement in sales for several companies. This reflects the changing mindsets of consumers. As preference for such sustainable products is depicting a rising trend, more and more ecorporates are likely to follow such practices and incorporate sustainability in their CSR strategy. A CSR strategy thus can be used not only to impact the society positively but also assist companies grow by helping improve the brand image and in turn sales.