The businesses operate for the benefit of the society and the society is the reason they are able to sustain and succeed. This is the known fact behind any business that is up and running successfully. The corporate citizenship, sustainable business, corporate social performance are the competing labels covering the territory of CSR. The literature references provide numerous definitions, but to put it simply, “giving back to the society and creating values” is the core principle behind of term.
‘We make a LIVING by what we GET, but we make a LIFE by what we GIVE – Winston Churchill’
Andreas Scherer and Guido Palazzo, in their research paper, share their view of CSR as ‘the companies, as the responsible actors of the society, must position business next to government bodies and NGOs to govern the activities and its impact on society, beyond their core business’.
Let us study in depth to understand more about how CSR and the organizations help each other for better transformation.
The journey started long back in the 1850s where the merchants and traders helped the society during natural disasters, drought, and other calamities by giving away food, basic needs, and shelter. In India, the industrial families or those running family businesses such as Tata, Birla, Godrej, and Bajaj have stepped up and further expanding the societal activities by helping the poor on education, healthcare and aiding in decent livelihood.
The companies started building ‘Trust’ through which the socio-economic status of the society started getting special attention. Even though, there are no written policies specifically for corporate social responsibility, the companies, and the trusts started making their own rules, governance, policies and focus on improving the specific sectors.
There are basically two categories being addressed under this responsibility.
The companies manage their corporate social responsibility by allocating the required resources, funding under different labels.
As the American Congressman John B Larson puts it, “Globalization is not a monolithic force but an evolving set of consequences - some good, some bad and some unintended. It is a new reality.” The globalization has its own impact on CSR activities run by the organizations.
It is reported in ‘The Oxford Handbook of Corporate Social Responsibility’ that 90% of the largest European companies publish reports on their contribution to the societal enhancements. Not only the European organizations, almost 50% of the leaders in the multinational and global organizations, under one label or another, publish their ‘non-profit’ contributions to the society, yes, beyond their core business-related activities.
In the lines of first category given in the Journey of CSR, the greater impact of globalisation is the reason behind the organisations recognising the minimum wage issues, labour exploitation or the unsustainable practices being followed where the focus is given only to the business profits, etc., The minute the focus is set on the negative consequences of the business from a global perspective, the organizations started taking corrective actions through CSR activities. Such change took a key place when the important decisions were taken by the management. The socio-economic, environmental sustainability projects started taking a major place in organizational strategies.
To win over competitors, the organizations started taking up responsible roles that improved the value of all the stakeholders. This, in turn, encouraged the stakeholders to get involved in the societal related initiatives and environmentally friendly projects that attracted better consumers and investors. Based on these facts, the more companies began contributing towards benefitting the society and implementing activities to safeguard the overall global environment.
Planning a CSR project is one thing, whereas executing is totally different and complex. Unlike the business projects where the stakeholders and the behavior can be assessed and the risks can be forecasted to some extent, many CSR projects lay a greater challenging while executing. However, the leadership community overall has taken this as a challenge to strengthen their organizations and at the same time give back to the society.
There are also smarter ways identified in the process of creating additional values through the businesses. For example, smart partnering is the way being following in a lot of big corporates. Hindustan Unilever has adopted this partnering mode beautifully to accomplish one of their key initiatives. The ‘project Shakthi’ to empower the women in rural areas of India, HUL has partnered with self-house women groups. There are three chosen partners appointed as ‘Shakthi entrepreneurs’ in the selected villages. These women entrepreneurs encourage the other women in those villages to develop self-esteem and financial independence.
By doing this, the execution of corporate activity becomes systematic as the governance, controlling and monitoring the processes and assessing the results are well recorded. It started in three villages initially, the value creation is expanded to more than 3 million households in 2008 where the ‘Shakthi Ammas’ sell HUL products. The ‘shakthimaans’, the husbands or the menfolk of those ladies as well were included to sell HUL products by bicycle. Overall, with this single project, as per data shared in 2016, HUL has over 72,000 micro entrepreneurs and 48,000 shakthimaans. The value created here positively improved the society and strengthen their product sales too.
We all are aware that the management of risk, be it assessing, forecasting or making mitigation plans, is quite cumbersome and complicated. At the same time, managing risks effectively is crucial to any organizational success. Let us look at how CSR can be the important tool in risk management.
Supply Chain & Product Risk Management - When the companies work in the sustainability mode, they tend to look at the supply chain from a different perspective. Such initiatives have helped companies like Nike, McDonald's, and Adidas to keep a keen eye on supply chain and product-related risks. The exploitation of cheap labor from the underdeveloped countries is identified as a part of sustainability wing of responsible activities. If not identified in time, it could have created a huge negative impact on their supply chain and products.
Operational & Financial Risk Management - The operational risk map has a direct link to CSR. For example, many chocolate manufacturing industries have started being watchful on deploying child labor to pick cocoa. Cocoa picking is, in fact, the key to procurement for the smooth running of operations. Any risk here would greatly impact the financials of the company. Such operational and financial risks can be identified earlier, mitigated and handled well through corporate responsibility initiatives.
As mentioned earlier, executing a well thought out CSR plans can be highly challenging. There are three key strategies you can adapt to break through many barriers.
The right way of partnering in order to assess the CSR requirements, mapping with your core vision, planning & executing the activities will definitely aid in successfully contributing to the society. It is important to choose the right partners.
The partner should be able to:
The partner should mainly be able to build the momentum by sharing the knowledge base, design the portfolios, bring in a paradigm shift in the thought processes for the betterment of the overall society where the value creation occurs within the organization as well.