Monday, December 14, 2009

CSR makes good 'business case' by Asish K Bhattacharyya

Hence, firms need no fiscal incentives. While speaking at a conference on Companies Bill 2009, the Union Minister for Corporate Affairs Salman Khurshid had asked the industry to propose a corporate social responsibility (CSR) system that rewards the industry. He said the ministry’s attempt was to see that the industry takes up CSR activities in such a manner that it turned out to be a next-generation affirmative action that went beyond reservations for weaker sections of the society. Khurshid's comments lead to a few questions. Whether the government should provide fiscal incentives to companies for CSR activities? Whether the government should make it mandatory for companies to spend a specified percentage of profit in CSR activities? Whether the government should intervene in deciding the target groups which should receive benefits from CSR activities? We need to examine the nature of CSR to answer these questions.

Corporate governance and CSR

The central theme of corporate governance is to develop a governance system that ensures that management takes decisions in the interest of shareholders. The stakeholder theory of corporate governance, which says that while taking decisions, management should balance interests of all stakeholders, has not found wide acceptance. However, the stakeholder theory could create the awareness that the interests of stakeholders (e.g. employees, customers, vendors and local community) cannot be ignored for long in company's pursuit to create shareholder value. This awareness is one of the major drivers of CSR movement. Other drivers include media pressure, campaign by voluntary organizations to create awareness about human rights and environment protection, social awareness about 'sustainable development' and government interventions.

CSR campaign started with environment protection initiatives by those companies which cause severe damage to the environment such as large oil companies, mining companies and companies that extensively use underground water. But now CSR initiatives are not limited to environment protection initiatives. CSR initiatives cover education, health, women empowerment, livelihood promotion, sanitation, agriculture and many others.

Nature of CSR

Compliance with laws, rules and regulations is not a part of CSR initiative. CSR is doing something voluntarily for social development. For, example, compliance with environmental laws or safety norms is not a CSR initiative. But to do something more than what is required by law for environment protection is a CSR initiative. There is a time lag between when the society expresses a need for government regulation and when the law is promulgated. Therefore, what starts as voluntary initiatives by some companies turns into legal compliance when government through regulations makes it mandatory for all the companies to take such initiatives. An example is the laws related to environment protection. Therefore, what should be labeled as a CSR initiative depends on the extant legal environment in which the company operates.
Business case

CSR is a good 'business case'. Companies invest in CSR activities because it makes business sense. It is neither a pure philanthropic activity which aims to 'do good to the community' nor an activity that aims to 'pay back to the society'. Some experts observe that the role of nation-state is diminishing and large multinational corporations, which have command on huge financial, human and technical resources play the dominant role in influencing government policy (through lobbing and other means) and also in bringing social changes.

Therefore, often the nation-state fails to protect the interest of local those groups of the society who have no linkage with companies. In this situation, the society expects the corporate sector to take voluntary action to protect the interest of the local community and the society in general. The local community also expects companies to play an important role in social development. Social expectations are expressed through mass agitations, campaign by voluntary organisations and media campaign. The CSR initiative is the response of the corporate sector to societal expectations.

Companies invest in CSR activities because they derive significant benefits from those activities. CSR activities help companies to build reputation, make environment less vindictive, reduce litigation, and attract talent. In addition to those benefits, companies that invest in CSR activities develop good understanding of social culture and dynamics and identify social changes much in advance of those companies which are not involved in CSR activities. Visionary companies identify social undercurrents and latent social needs and often convert them in business opportunities. CSR is a very potent tool for managing reputational risks.
It is unfortunate that many companies try to present CSR activities as purely philanthropic. This might be a public posture, but this set a wrong tone in the organisation and employees fail to see the ‘business case’ and act with the perception that CSR activities are discretionary in nature. This is detrimental to the long term interest of the company.

Selection of CSR projects
Companies align CSR projects with business strategy. Therefore, companies select those projects which support the company's business strategy directly or indirectly. Companies often select projects which will augment the market for inputs or outputs. For example, a steel company may develop villages surrounding its plant for the welfare of its employees and to ensure that future employees, who are inhabitants of the village, will be healthy and educated. Similarly, a company engaged in software business invests in spreading computer education to create markets for inputs (e.g. skilled employees) and output (e.g. software). In selecting projects companies also consider the level of satisfaction that employees will derive from each project.
The research report issued by the Times Foundation reports that most CSR activities are carried out in urban areas and covers people near the organisation or industry. The-refore, rural poor are largely untouched by corporate CSR initiatives. Companies do not necessarily target projects to weaker sections of the society because their objective is to maximise benefits from those initiatives.

CSR initiatives make good 'business case' and therefore there is no need to provide fiscal incentives from tax payers' money. It is also incorrect to expect that CSR initiatives will benefit the most deserving groups (e.g. weaker sections) in the society. They cannot replace government initiatives for social development. Government intervention to strengthen the CSR movement may not bring the desired result.

CSR movement will strengthen only if we as a customer make our choice for products based on relative performance of companies in the area of CSR and if as investors we take into consideration performance in CSR activities along with economic performance of companies in taking investment decisions. Government and voluntary organisations should create awareness about the importance of CSR. Companies who believe in CSR should educate capital market players that CSR makes a 'good business case'.

Companies should select projects that are of national importance or which are important to the local community. They should involve employees in selecting the project. This practice enhances employee satisfaction. Companies should collaborate with voluntary organisations to implement CSR projects in order to improve the quality of delivery and achieve economy of scale. It is observed that often companies selects similar projects in the same region and compete with each other. This results in waste of resources. It may be good idea that companies pool their resources to maximize benefits to target beneficiaries.

Govt plans to quantify cos' CSR initiatives

The government is working on a framework for quantifying the corporate social responsibility (CSR) initiatives of companies to permit

trading in them. Backed with some tax incentives, the government expects such a framework to encourage companies to take up CSR initiatives more seriously.

“I think there must be a way of quantifying it (CSR) and there must ultimately be available a trader or an exchange to deal in CSR credits,” said corporate affairs minister Salman Khurshid in an exclusive interaction with ET.

There is no precedent of CSR credits being traded anywhere else in the world and the minister has asked his officials to look at a framework that is akin to the carbon credits trading mechanism.

The idea has found support in YC Deveshwar, chairman ITC, a company that has very strong CSR credentials, and former head of industry body CII.

“Today, for charity, you get tax exemptions and for CSR you get nothing.” Mr Khurshid said. “Mr Deveshwar has supported the idea (to link CSR with incentives),” the minister added.

“The idea of quantifying CSR and linking it with incentives is a workable idea. The incentives could be tax-linked as also non-tax linked. You need to define the parameters well,” said Vikas Vasal, partner, Ernst & Young.

But Mr Khurshid said the idea had not cut ice with Planning Commission member Arun Maira, who was of the view that it could be prone to misuse. Mr Maira had instead argued that companies need to internalise good governance.

The ministry will unveil a draft on corporate governance code by the end of the month, which will also suggest a structure that will quantify what a private company stands to gain for CSR activities beyond a certain level.

Asked on the type of incentives that may be considered, Mr Khurshid said “one simple incentive is tax sops”. Mr Vasal has another suggestion. “If a company runs a school, the government may say that it will bear 25% of the cost burden, something which is a direct incentive.”

CSR framework was not a part of the Companies Bill 2009, but it will be part of the voluntary corporate governance code. The draft code, which will be voluntary, will be kept open for suggestions from all stakeholders for at least a year.

Friday, December 11, 2009

CSR Initiatives of Indian Companies - A Study

CSR Initiatives of Indian Companies - A Study

Corporate social responsibility (CSR) also called corporate responsibility, corporate citizenship, responsible business and corporate social opportunity is a concept whereby organizations consider the interests of society by taking responsibility for the impact of their activities on customers, suppliers, employees, shareholders, communities and other stakeholders, as well as the environment. This obligation is seen to extend beyond the statutory obligation to comply with legislation and sees organizations voluntarily taking further steps to improve the quality of life for employees and their families as well as for the local community and society at large.

The practice of CSR is subject to much debate and criticism. Proponents argue that there is a strong business case for CSR, in that corporations benefit in multiple ways by operating with a perspective broader and longer than their own immediate, short-term profits. Critics argue that CSR distracts from the fundamental economic role of businesses; others argue that it is nothing more than superficial window-dressing; still others argue that it is an attempt to preempt the role of governments as a watchdog over powerful multinational corporations.


The objective of this paper is to examine the nature and extent of corporate social responsibility (CSR) initiatives under taken by Indian companies and to study its relevance in business.


Corporate social responsibility is necessarily an evolving term that does not have a standard definition or a fully recognized set of specific criteria. With the understanding that businesses play a key role on job and wealth creation in society, CSR is generally understood to be the way a company achieves a balance or integration of economic, environmental ,and social imperatives while at the same time addressing shareholder and stakeholder expectations. CSR is generally accepted as applying to firms wherever they operate in the domestic and global economy. The way businesses engage/involve the shareholders, employees, customers, suppliers, governments, non-governmental organizations, international organizations, and other stakeholders is usually a key feature of the concept. While business compliance with laws and regulations on social, environmental and economic objectives set the official level of CSR performance, CSR is often understood as involving the private sector commitments and activities that extend beyond this foundation of compliance with laws.

From a progressive business perspective, CSR usually involves focusing on new opportunities as a way to respond to interrelated economic, societal and environmental demands in the marketplace. Many firms believe that this focus provides a clear competitive advantage and stimulates corporate innovation.

CSR is generally seen as the business contribution to sustainable development which has been defined as "development that meets the needs of the present without compromising the ability of future generations to meet their own needs", and is generally understood as focusing on how to achieve the integration of economic, environmental, and social imperatives. CSR also overlaps and often is synonymous with many features of other related concepts such as corporate sustainability, corporate accountability, corporate responsibility, corporate citizenship, corporate stewardship, etc..

CSR commitments and activities typically address aspects of a firm's behaviour (including its policies and practices) with respect to such key elements as; health and safety, environmental protection, human rights, human resource management practices, corporate governance, community development, and consumer protection, labour protection, supplier relations, business ethics, and stakeholder rights.

Corporations are motivated to involve stakeholders in their decision-making and to address societal challenges because today's stakeholders are increasingly aware of the importance and impact of corporate decisions upon society and the environment. The stakeholders can reward or punish corporations. Corporations can be motivated to change their corporate behaviour in response to the business case which a CSR approach potentially promises. This includes:

1. stronger financial performance and profitability (e.g. through eco-efficiency),

2. improved accountability to and assessments from the investment community,

3. enhanced employee commitment,

4. decreased vulnerability through stronger relationships with communities, and

5. improved reputation and branding.

Criticisms and concerns

Critics of CSR as well as proponents debate a number of concerns related to it. These include CSR's relationship to the fundamental purpose and nature of business and questionable motives for engaging in CSR, including concerns about insincerity and hypocrisy.

Critics concerned with corporate hypocrisy and insincerity generally suggest that better governmental and international regulation and enforcement, rather than voluntary measures, are necessary to ensure that companies behave in a socially responsible manner. CSR could prove to be a valuable asset in an age of Mergers & Acquisitions, as it helps firms spread their brand name


Even much before the issue became a global concern, India was aware of corporate social responsibility (CSR), due to the efforts of organisations such as the Tata Group. (Around 66 per cent of Tata Sons, the holding group of the Tata Group, is today owned by a trust).

Corporate companies like ITC have made farmer development a vital part of its business strategy, and made major efforts to improve the livelihood standards of rural communities. Unilever is using micro enterprises to strategically augment the penetration of consumer products in rural markets. IT companies like TCS and Wipro have developed software to help teachers and children in schools across India to further the cause of education. The adult literacy software has been a significant factor in reducing illiteracy in remote communities. Banks and insurance companies are targeting migrant labourers and street vendors to help them through micro-credits and related schemes.

In June 2008, a survey was carried out by TNS India (a research organization) and the Times Foundation with the aim of providing an understanding of the role of corporations in CSR. The findings revealed that over 90 per cent of all major Indian organizations surveyed were involved in CSR initiatives. In fact, the private sector was more involved in CSR activities than the public and government sectors. The leading areas that corporations were involved in were livelihood promotion, education, health, environment, and women's empowerment. Most of CSR ventures were done as internal projects while a small proportion were as direct financial support to voluntary organizations or communities.

In a survey carried out by the Asian Governance Association, which ranks the top 10 Asian countries on corporate governance parameters, India has consistently ranked among the top three along with Singapore and Hong Kong, for the last eight years.

In another study undertaken by automotive research company, TNS Automotive, India has been ranked second in global corporate social responsibility. State-owned Bharat Petroleum and Maruti Udyog were ranked as the best companies in India. Bharat Petroleum and Maruti Udyog came on top with 134 points each, followed by Tata Motors (133) and Hero Honda (131). The study was based on a public goodwill index and India received 119 points in the index against a global average of 100. Thailand was at the top slot with 124 points.

Several foundations run by corporate houses plan to devise a common strategy to ensure transparency in their social and community development operations, such as tracking spending in and progress of such projects in their annual reports.

The effort is significant because it brings together a wide range of Indian companies to share ideas on innovating sustainable programmes. Among them are Multi Commodity Exchange of India Ltd, Anil Dhirubhai Ambani Group and media company Bennett, Coleman and Co. Ltd,

Audit firm KPMG will partner with them to offer guidance on evaluating corporate social responsibility or CSR programmes—a trend companies are slowly embracing as India's expanding economy contrasts sharply with growing local protests over land for future industrial projects.

The network alliance stems from the first sustainability summit that was organized in January by the Associated Chambers of Commerce and Industry of India.

CSR could prove to be a valuable asset in an age of mergers and acquisitions, especially as it helps companies spread their brand name, The new network will also serve as a common ground to lobby with the government for tax exemptions and safeguard other interests in the future.

Indian companies have made little progress in reporting development projects. And only 48 companies have so far given their commitment to support the United Nations Global Compact, a charter for improving the global business environment through standards, such as labour rights and fighting corruption.

Addressing business leaders in May last year, Prime Minister Manmohan Singh said "Corporate social responsibility must not be defined by tax planning strategies alone. Rather, it should be defined within the framework of a corporate philosophy, which factors the needs of the community and the regions in which a corporate entity functions."

Some say companies have an inherent "mental block" in reporting development programmes. A recent KPMG study among 27 Indian companies showed that a mere 8% mentioned their social expenditures in their annual reports, and only 25% filed CSR reports at all. But a quarter of them are also signatories of the Global Reporting Initiative, a 10-year-old movement started by an NGO called Coalition for Environmentally Responsible Economies (CERES) and the United Nations Environment Programme. This encourages companies to make voluntary disclosures and lays down framework on improving reporting principles.

"Most companies tend to give to charities than make long-term development commitments. When a company voluntarily opens up for self-evaluation, it creates value for shareholders when competing with other companies," said Parul Soni, associate director of KPMG's Aid and Development Services.

An estimated 100 corporate foundations and 25 foreign firms are involved in CSR activities in India, but statistics on input and output are elusive.

According to Times' Pandey, the Indian corporate sector spent Rs30,000 crore on social expenditure during the last financial year, up from Rs17,500 crore the previous year. Quoting from a government report, he said, companies drew a total exemptions of Rs5,500 crore under income-tax laws last year. These figures, an analyst said, sound improbable as Indian companies still do not distinguish between philanthropy and internal practices to benefit stakeholders such as employees and community.

Companies, too, continue to rely on different models to earmark its social expenditure, making it difficult to measure the overall impact.

For instance, the Steel Authority of India Ltd (SAIL), the country's largest steel company, spent Rs100 crore on CSR last year; this was 2% of its profit after tax, exclusive of dividend tax, according to SAIL spokesperson N.K. Singhal. Yet others, such as Tata Steel Ltd, which runs a 850-bed hospital and rural projects in 800 villages around Jamshedpur, spends an average of Rs150 crore as part of its annual revenue expenditure.

What eventually makes up for CSR of a company ultimately depends on leadership; as part of company decision, about 66% of Tata Sons, the holding group of the Tata group, is today owned by a trust.

Pharmaceuticals company Jubilant Organosys Ltd, already runs an anti-tuberculosis programme with the government of Uttar Pradesh. Apart from schools and hospitals that are run by trusts and societies, the government, too, is exploring to widen the scope of public-private partnerships to build and maintain schools and hospitals in return for a fixed annuity payment.


The concept of corporate social responsibility has gained prominence from all avenues. Organizations must realize that government alone will not be able to get success in its endeavor to uplift the downtrodden of society. The present societal marketing concept of companies is constantly evolving and has given rise to a new concept-Corporate Social Responsibility. Many of the leading corporations across the world had realized the importance of being associated with socially relevant causes as a means of promoting their brands. It stems from the desire to do good and get self satisfaction in return as well as societal obligation of business.

The Indian corporate sector spent US$ 6.31 billion on social expenditure during 2007-08, up from US$ 3.68 billion spent during the previous fiscal. The Steel Authority of India Ltd (SAIL), the country's largest steel company, spent US$ 21.05 million on CSR last year; Tata Steel Ltd, (which runs a 850-bed hospital and rural projects in 800 villages around Jamshedpur), spends about US$ 31.58 million as part of its annual revenue expenditure. Now there are plans to also introduce CSR in the small and medium enterprises (SME) sector to increase its reach in remote areas.

CSR in South Asia

CSR in South Asia: A short issues paper and research ideas for engaging the private sector in development

Corporate Social Responsibility (CSR) in South Asia

Accounts and surveys of CSR in South Asia suggest that this is not a new phenomenon in the region. CSR or variants of it have existed for some time, differing in the nature of the actions and the agenda, and responding to different drivers at different points in time. Drivers of CSR in South Asia have ranged from religious traditions, notions of trusteeship, family philanthropy, role models within the country, to more recently, company responses to regulation, NGO and civil society pressure, and requirements of national and international business partners in a more global world. The most common form of CSR has been the setting up of family foundations and Trusts. In South Asia, among the more famous and the oldest being those of the Tata Group.

The nature of CSR in South Asia varies greatly. There have been companies that are far more advanced in this agenda as compared to others. The Tata Group, for example, has always been in the forefront of CSR in India, and have always interpreted social responsibility in a larger sense of the word. This is evident in this quote:

“ I do believe that we in the group have held a view and held a sense of purpose that our
companies are not in existence just to run our business and to make profit and that we are
responsible and good corporate citizens over and above our normal operations. By that, I mean,
that we play a part in the community and we shoulder community responsibility as part of social
responsibility of our nation. And these responsibilities are not to be confused with employee
welfare, but they go beyond our own employees and in fact concentrate on the contribution to
the community and to the nation”
Ratan N Tata (1996)

There is a growing body of evidence of experiments with tri sector partnerships in a number of developing countries. The use of multi-stakeholder partnerships arrangements in India and other countries of south Asia to deal with issues that involve multiple interests and sensitivities and the need for lasting solutions is also growing. Examples of experiments in the Indian context are those of ITC Ltd., and EID Parry in the agricultural sector, Joint Forest Management in various states, and those in the minerals sector supported by DFID, of the Sarshatali coal mine project in West Bengal and in the Goa iron ore mine project.

Despite the existence of various forms and levels of advancement of CSR, conferences and surveys on stakeholder expectations in the region suggest that South Asian societies feel that business is still tinkering at the edges and they want much more from it. Stakeholder expectations of CSR in South Asia move beyond traditional notions of CSR to an expectation that business will be more engaged with addressing conditions typical in South Asian Societies, such as low levels of human development, lack of social safety nets, skewed power structures, slow legal systems, poverty, weak infrastructures, etc.) Different stakeholder groups want business to ``add value to society``. A poll of perceptions on Corporate Social Responsibility in India in 2001 indicated that people expect that business should be actively engaged in societal matters and social change, but are willing to give it time to get there. Expectations of CSR are related to bridging the gap between the rich and the poor, reducing human rights abuses, solving societal problems and increasing economic stability.

Market focus seems to be an important influence in the form and agenda of CSR in the region. Thus, in export oriented firms, the CSR agenda is defined and oriented to addressing international standards and certification. In more domestically oriented firms, it tends to be more attentive to local environmental and social problems and to NGO and civil society pressure. Thus the CSR agenda is linked to the market rather than to just what is internationally fashionable. This linkage of the CSR agenda to the market focus of companies provides a good entry point to making the private sector a responsible development agent. If the private sector can be made to see a market opportunity in the ``bottom of the pyramid``, (Prahlad, 2005) then this provides a good bridge to link stakeholder expectations about business having a responsibility to address societal conditions in South Asia and developing a CSR agenda linked to this market focus, but tweaking it to address a more broad based development agenda.

Investment in `intangibles`

Many companies in South Asia do pay considerable attention to what we term here as `tangibles’ of good business practice: Quality products & services, Innovation, Quality management and Market leadership. Investment in these tangibles has in many ways increased and improved financial performance. Less understood in terms of its relevance to future earnings is the potential for another tangible, `environmental stewardship’ which can also increase profits through reducing costs. Even less clear to business is the potential for `intangibles’ to enhance corporate value through enhancing reputation, which refers to the perceptions that the public has of an organization’s CSR, and is fast becoming an important determinant of how a company is judged by society. Active engagement of the private sector in addressing societal problems in developing countries would be one such intangible which could enhance corporate reputation and, therefore, value. But the first point of entry would be the need for the private sector to invest in the preconditions of such engagement, which are three fold: the building of trust with different segments of society, enhancing stakeholder relations, and transparency.

Trust is about developing an attitude, which factors in the interests of the other, not just for opportunistic, prudential or strategic reasons but also for reasons of promoting common well-being. Trust is about recognizing mutuality. The goal of a culture of trust is to move from `thin’ to `thick’ relationships, to generate multiple points of contact. The idea of `trust’ is increasingly being fore grounded as a consideration for good governance, both corporate and political. Investing in trust can be seen as an investment in the future, as part of the building and management of good reputation for the company.

An insufficiently recognized benefit to business is that which relates to transparency, and consequent savings in transaction costs. Transparency in the context of business can refer to the dissemination of information relating to a project, to the environmental and social programmes planned, to the handling of stakeholders in an open, easily understood manner. On other hand, transactions costs relate to costs of doing business, and include negotiating, fulfilling and enforcing contracts, gathering information, managing agents engaged in transactions, and resolving disputes relating to the transaction. Transparency reduces the input of management in terms of time involved in conflict resolution and future disaffection. It is a key ingredient in the reputation of business, and is insufficiently understood as an important aspect of CSR.

Enhancing stakeholder relations is an essential ingredient of good business as it not only creates customer, supply chain and worker loyalty, but it also provides crucial knowledge and feedback at various points in the production and consumption process that the company can use to improve its functioning and its bottom line. Surveys of business leaders in the South Asia region suggest that they see employees as the most important stakeholder followed by the customer, investor, local community and the government. Surveys also suggest that customers are the best source of changing stakeholder expectations.

To engage with the poor will, however, require a much deeper engagement by business in unpacking stakeholder groups within society, and seeing them as more than homogenous groups of customers, employees, and local community, but go beyond to understand their diverse needs and capacities in order to engage effectively in the market and development process. This requires an understanding of the social, economic, political, and ecological context in which the poor live and carry out their livelihoods and in which business may hope to operate, both from the supply and the demand side. This context will vary across countries in the region, but in general will reflect the following:
On the supply side:
o No or little education and skills to provide a vibrant worker base
o High entrepreneurial spirit, but no formal training
o Lack of information and not knowing where to look for the information needed for engagement in industry, small or large
o Skewed power structures and ill defined rights to resources
o Strong traditional intermediaries who raise costs of doing business with the poor
o Inefficient and inequitable distribution of basic goods and services
o Poor local government accountability
o Poor environments and indifferent health
o Weak or non existent infrastructure

On the demand side:
o Low unit purchasing power, but large potential volumes
o Uncertain income streams
o Difficult access to credit
o Strong traditional intermediaries who create high cost economies
o High aspirations for improved living
o High willingness to consume
o Access to information about products, via TV, radio, etc.
o Inadequate access to and availability of the type of goods that are desired

This context suggests that the CSR agenda and the private sector engagement needs to focus on the creation and activation of a market among the poor through social inclusion created through training and skill building for entrepreneurial development on the supply side, and access to credit, to information, to low cost and quality products on the demand side.

Locating the Private sector in the development agenda

That the private sector has a role in development is not in question. The issue before us is how to engage them in a manner that is not just about developing profitable markets among the poor, but ensuring a more broad based, non corporate dominated development and discourse. A clear development role could be in the building of human capacity and skills of more disadvantaged groups. In the context of South Asia, this affirmative action by the private sector will greatly increase the skill base and therefore the options available for improved functioning and increased quality of life . In the Indian context, the private sector became attentive to this form of affirmative action in early 2004, when there was serious discussion and a national debate on the need for reservation of jobs in the private sector as a way of democratizing the distribution of opportunities to those from discriminated castes, as the government becomes a less important provider of jobs in the more liberalized Indian economy. The response from industry was that quotas were not acceptable, but they were open to investment in training and human skill upgradation. It is not entirely clear, if the signing of the pact by the Confederation of Indian Industry (CII) for example, in mid 2004, with the City and Guilds Institute for a massive skill upgradation program to provide vocational training to rural youth in various sectors like horticulture, handicraft and handloom was a direct response to this demand by Indian society for the private sector to be more involved in addressing societal needs or as a way of deflecting the attention from the reservations debate or both.

Another role for the private sector is in upgrading the markets in the agricultural sector. One example of this is in linking producers to consumers in organic food chains. While organic farming has become a buzz word among those wanting more sustainable production and consumption, it is evident that there is need to organize farmers to upscale their activities; to organize the delivery of products to markets; need for more information channels, internet kiosks and improved extension services to link producers to consumers. Some examples of this already exist, but they need to be strengthened and upscaled.

More recently, one can envisage a role for the private sector in the rebuilding process in Tsunami affected areas, going beyond philanthropy to community investment. The private sector can play a key role here to develop partnerships with local communities and other key local stakeholders to develop tourism, fisheries, salt tolerant agriculture, and alternative livelihoods in ways that counter the impacts and address the environmental, health and livelihood risks, current and futuristic, to anticipate, prevent and mitigate coastal vulnerability. An innovative and strategic approach to designing a role for the private sector in this rebuilding process should focus not so much just on opportunities to do business, but having an opportunity to invest in people and communities in ways that are good for people and for business.

The private sector has a special role to play in addressing urban renewal and poverty issues. As the number of urban poor rise due to migration from rural areas, or due to a falling into poverty of those already in urban areas either due to inability to secure employment or due to poor health arising from stressed urban living, a need arises for creative and innovative solutions that are inter-sectoral. This role can be defined, for example, around an engagement of the private sector in multi-sector partnerships to uplift quality of life in slums either through the creation of jobs or through meeting unserved environmental and social needs. The Ecohealth PI is taking this up as an important initiative in its new programming, working towards an engagement with the private sector in the development of informal sector activities to improve livelihoods of slum dwellers as part of larger initiatives for improved human health and well-being.

Small and medium enterprises (SMEs), including micro enterprises, are seen as agents of development in many Asian countries, but especially so in India and China because of their employment and income generating activities. However, SMEs, while addressing some of the social conditions, do have pollution and health risk implications to communities around them. Although their individual contribution to pollution and health impacts may be low, the combined pollution load of activity from them can be significant with consequent risks to occupational and community health and sustainable local development . Hence the need for encouraging socially responsible behaviour by SMEs, by addressing their economic and knowledge constraints.

Research ideas

In this section, three broad sets of instruments are suggested through which IDRC can help develop an enabling environment (in terms of evidence and information) for socially responsible private sector engagement in non traditional markets, while ensuring a more broad based, non corporate dominated development. This set comprises: (i) support for research on issues that require further enquiry and understanding in order to ensure that proposed interventions are context sensitive and nuanced, and also on case studies on good practice that are transferable to other regions (ii) support of networks in order to upscale actions and help build relations beyond just research projects and teams (iii) support special actions where need for interventions are already known and there is need for immediate implementation.
o Support research:
 On rights of marginal citizens and effective access to basic goods and services required to enable a greater engagement with the economy and a decent quality of life.
 On the role of intermediaries in labour supply and in the provisioning of goods in markets accessed by the poor.
 On local government initiatives elsewhere in the world to include non government actors in the provisioning of public goods
 On how economic and market power is wielded within supply chains that involve SMEs and the informal sector
 On industry rating systems which explicitly include recognition of initiatives to build capacity amongst disadvantaged people
 On the role that information technology plays in providing a level playing field and in reducing asymmetry of knowledge, choices and power
 On developing multi-sector partnerships, involving local community, business, civil society and local government to address issues relating to quality of lives in slums.
 On policy issues that reduce constraints to private sector engagement in development
 On changes needed to link financial markets more closely to the sustainable development agenda: Measurement and information; risk assessment/portfolio; Transparency/ Information?/Disclosure
 On ways to improve law and order situations in urban areas, through community policing, etc.
o Support networks
 To create platforms and provide opportunities for stakeholder engagement on issues of mutual interest
 Of SME associations, community groups, researchers to help the development of socially responsible SMEs
 To facilitate information and resources, identifying and publishing good practices
 Of learning on how cities, in the developed and developing world, have dealt with problems of modernizing cities while accommodating humanely the housing needs of the urban poor.
 Of students on CSR
o Support special actions
 Training programs on CSR for SMEs and the informal sector, building meaningful partnerships across sectors
 Education, training and skills for youth in local communities for effective engagement in the tourism industry
 On increasing the ability of the poor to carry out transactions and accessing the market, for example, through greater support of Self Help Groups and e governance initiatives to increase “ transparency, access, and speed of transactions for the BOP entrepreneurs, as well as others in the private sector….”
 Support the use of different planning, assessment monitoring and decision tools for rebuilding processes in Tsunami affected coastal South Asia

Ligia Noronha

NGO Corporate Partnership in Development - Bharath Venkatesh.K

Businesses have always been approached for philanthropy. In recent years, there have been more organized efforts to persuade corporate to get involved in social development. The push for more responsible business practices has caused some corporations to seek out NGOs as partners to help them implement solutions to development problems. Since NGOs are usually more trusted by the public, which sees them as more reliable than businesses on issues concerning the environment and social responsibility, a company associated with an NGO can have a more positive public image.

DefinitionsNGO – Non Governmental Organization.
“An NGO can be regarded as third – party serving, non profit – based legally constituted non-state organizations, directly or indirectly reliant on the system of international aid”
Edwards - 2005

A non-governmental organization (NGO) is an organization that is not part of a government and was not founded by states. NGOs are therefore typically independent of governments. Although the definition can technically include for-profit corporations, the term is generally restricted to social, cultural, legal, and environmental advocacy groups having goals that are primarily non-commercial. NGOs are usually non-profit organizations that gain at least a portion of their funding from private sources.
Lindblom - 2003

PartnershipPartnership means a formal agreement between two or more parties that have agreed to work together in the pursuit of common goals.
Brinkerhoff - 2006

Social DevelopmentThe term social development usually refers to the development of the poor and weaker sections (including children and women) of the society in terms of basic minimum needs of health, education, nutrition, shelter, income, etc. as well as larger societal issues of equity, justice, and human rights. Anil Bhatt - 2007

Role of NGOsThe term NGOs is commonly used for non-governmental voluntary organizations involved in socio-economic development of the poor and weaker sections as well as those working for environment and development of natural resources and human development issues of equity, justice, and rights. They are to be distinguished from non-governmental and voluntary organizations involved in cultural, sports, and religious activities or professional and political organizations
E- Journal - 2006

NGOs have begun to transform themselves from traditional organizations that provide charitable contributions and services to the poor into organizations that directly involve themselves in addressing issues in developing countries, such as rural development, poverty alleviation, nutrition and health and education, and global issues such as environmental preservation, human rights, refugees, and the population crisis.
Lalitha - 2005

Rationale for NGO - Corporate partnership
In the last 25 years, the NGO sector has taken great strides in the field of development and social justice. NGOs are spreading in all corners of the country including the remotest areas. They have gathered tremendous insights, skills, and capabilities and have understood the critical differences between charity, relief, welfare, and development. They understand the social, economic, and power relationships within the communities and, therefore, they have developed innovative and effective approaches, technologies, and pedagogies for reaching and mobilizing the poorest of the poor.
Anil Bhatt - 2007

NGOs are attacking business to adopt eco-friendly corporate social responsibility policies. The NGOs demands more for the society from the corporate. Corporations should strike a deal with activists if they can gain a competitive advantage.
For Example:
• A non-government organisation on August,5th ,2003, claimed that the bottled soft drinks owned by two multi national companies -- PepsiCo and Coke -- failed the health standards. Centre for science and environment said those companies are using pesticides.
• Nike – the famous shoe brand was attacked by NGO for employing children
John Kew - 2006

Companies may find it more convenient to undertake development programmes through NGOs rather than directly by themselves. For instance, they may find it uncomfortable to launch a programme exclusively for the poor keeping out the non-poor in the same community if they did it directly. But they may be able to do it through NGOs.

Thus, NGO-corporate partnerships will bring together a lot of resources and a variety of skills for social development.

The emerging trend of corporate – NGO partnerships In the last 15 years, the trend of NGOs working in cooperation with business has developed considerably. Business has the potential, capital, and efficiency to impact various stakeholders in a positive way. But despite this capacity, there is a concern that business is not always in tune with the needs of corporate social responsibility (CSR).

Companies desiring to be more responsible do not necessarily have the knowledge, training, or dedication to carry out development programs. NGOs, on the other hand, have become instrumental in development work internationally, but they generally do not have the means and resources to carry out their projects efficiently in a sustainable manner. This is why engaging business with the public and non-profit sectors to find common solutions to problems has been an increasing trend globally.
John Kew - 2006

Benefits of Corporate - NGO partnership

Benefits to the private sectorIt is often thought that NGOs would benefit more from such partnerships, but there are positive incentives that could or should concern the private sector as well, especially when focusing on the long-term benefits partnerships may afford.

(a) Image and credibilityCompany reputation is becoming more and more important to both investors and consumers. “A company’s impact on its stakeholders is an emerging benchmark of corporate performance since stakeholders are beginning to ask what companies can do for society, not what society can do for companies.” Trust has become a driver for partnerships between NGOs and business, because the public trusts NGOs more than it does companies NGOs are more trustworthy than corporations in terms of benefiting society. A company that partners with an NGO can hope to be seen as trustworthy and be more credible in its attempts at CSR through this association. Maintaining trust between the public and NGOs is the reason.
For example: ITC Limited joins with NGOs like Exnora International, Sewa Bharat, and Action for Social Advancement (ASA) to develop community. There by it creates good image among the society.

(b) Entering new markets and increasing long-term profitsLong-term profitability requires foreseeing the needs and demands of consumers in the future and working to create environments conducive to the continuation of business activities toward this goal. NGOs are in a better position to understand the operation of the specific informal relationships that hold them together.
Thus, NGOs can play a bridging role in the transfer of institutional knowledge to international or foreign corporations they possess the advantage of having a dual voice with both market and institutional value, and they are able to work on specific localized issues while retaining a sense of the international context in which economic development may take place.
For example:
• Unilever is integrating social innovation strategies in its business operations. In India, it teamed up with NGOs to create Shakti, a rural network that sells products adapted to rural customers in more than 100,000 villages, employing 31,000 women. So from this Shakti movement Unilever reaches the rural areas too.
• The Global Environmental Management Initiative (GEMI) is a non-profit organization of leading companies dedicated to fostering environmental, health and safety excellence and corporate citizenship worldwide. So new companies join with this NGO and gets good image from the society.

(c) Better CSR policy as part of a corporate strategyPartnerships can play a role in enhancing the quality of a company’s CSR policies. Corporations have been switching their CSR focus from charitable donations to actually becoming involved in community activities. Many companies have found that such involvement is best undertaken through working with local NGOs. Environmental issues are an area where partnerships have been very successful.

In many instances, corporate managers find NGOs have the capacity to propose innovative ways to solves social problems that are useful to their company. Because of their experience working with community organizations and villages, NGOs are better trusted among local populations, so that they may serve as a bridge between business partners and the communities in which corporations wish to be active.

For example: Companies give monetary fund to NGOs and show the CSR expenditure in their balance sheet. From this companies can concentrate only in production.

Benefits to the NGO sector(a) Financial sustainability and funding diversification for projects
NGOs are under increasing pressure to diversify their sources of funding. Partnerships provide a source of funding independent of government funding. One of the major problems for NGOs in acquiring private funding is that they
usually lack direct contacts in the corporate world that would be a basis for potential donations. A partnership based on personal relations between NGO staff and corporate executives could help solve this problem.

(b) Access to free marketingSuch partnerships also present an opportunity for NGOs to make their voices heard and to publicize their activities through the marketing of a collaborating company. Since corporations invest heavily in publicizing their involvement in social causes, NGOs in essence get “free” advertisement, through what they call “social marketing” on the part of corporations that simultaneously enhance NGOs’ brand image.
For example: Times now India’s “Teach India” is famous campaign to teach young children. Teach India brings the opportunity to teach young children with the guidance of a multitude of NGOs across India. From this Times group many NGOs are getting free advertisements.

Difficulties in partnerships.Partnerships between an NGO and a corporation are usually complicated and delicate.

• Some of the difficulties in creations of partnerships were finding qualified managers and ineffective institutional infrastructure.

• They come with their specific set of problems that must be addressed from the beginning of the relationship. Partnering with corporations can lead to many sorts of issues for NGOs. Some partnerships can create problems of coordination and policy making between different departments.

• One of the obstacles encountered by companies in communicating with NGOs is the staff’s relative inexperience in dealing with the corporate world and their lack of “professional expertise.” One solution is to turn to intermediary NGOs that facilitate communication between the two sectors.

• Although NGOs have several credible assets (advocacy, legitimacy, information, vision and expertise) they need to be better organized and more certain about the goals they want to achieve by partnering with a corporation.

• Another problem is that business must be genuinely dedicated to the goals of partnership. Beyond mission statements, partnerships require commitment of business leaders to achieving the goals set forth in their company’s mission statement.
E- Journal - 2006
For Example: NGO vision differs from organization’s vision. So while partnering there will be lots of misunderstandings and expectations. In many cases these misunderstandings will lead to an end in their partnership.
Requirements for implementation

The fact that partnerships are most successful when they are established with both parties thinking about the long-term benefits to be rendered of their cooperation

• Effective communication between partners plays an essential role in the successful cooperation toward a common goal.

• Acquiring a unity of vision and purpose, with an emphasis on goals defined by consensus and agree to mutually acceptable and explicit time frames.

• Finally, partnerships between NGOs and corporations must take place within the context of a positive relation with local authorities and the public sector in general.
For example: In 2000, Environmental Defense teamed up with FedEx Express, the world's largest express transportation company, to develop a cleaner, more fuel-efficient delivery truck. These trucks go up to 50% farther on a gallon of fuel than a conventional truck, reducing greenhouse gas emissions by approximately 30%. They emit 65% less smog-causing pollution and 90% less soot.

Conclusion Assessing the success of corporate-NGO partnerships
Measuring the success of corporate-NGO partnerships in general is very difficult. As mentioned previously, there are many different forms of partnerships that take place at various levels ranging from small and medium businesses working with local community organizations, to large non-profits or big international NGOs. Furthermore, it is also difficult to assess the success of specific individual projects. Companies spend a lot of money on marketing themselves in a positive light, and therefore control the content of their CSR reports to reflect their achievements without mentioning their failures.

As we have seen, one of the reasons corporate-NGO partnerships can be successful is because they are more focused, and target development on a much smaller scale than larger aid-driven projects. They have the capacity to impact fewer people but to do so in a more significant way.

Although partnerships may not lead to large scale improvements in sustainable development and poverty reduction, they do have the ability to significantly improve the livelihood of the individuals they specifically target.

Ten point gist about the topic:1. NGO can be regarded as third – party serving, non profit – based legally constituted non-state organizations, directly or indirectly reliant on the system of international aid.
2. Partnership means a formal agreement between two or more parties that have agreed to work together in the pursuit of common goals.
3. Role of NGOs is to help society and also check the corporate activity.
4. Reason behind the Corporate - NGO partnership is to bring together lots of resources and a variety of skills for social development.
5. It benefits corporate by creating brand image, long term profit and better CSR.
6. It benefits NGOs in financial stability and free marketing.
7. Difficulties in partnership like
• Finding qualified staffs is difficult
• Lack of coordination among Corporate and NGOs
• Improper communication among the partners
• Unclear vision of partnership
8. Requirements for implementation like clear vision, good communication, etc.

9. Complexity in measuring the success of partnership.
10. Rather spending the money on advertisements, companies can also concentrate on community development.

References:Books Referred
• “Anna-Karin Lindblom”, “Non Governmental Organisation in International Law”, Edition - 2003
• “Bhatt, Anil”, “Development and Social Justice”, Edition - 2007 New Delhi: Sage.
• “Brinkerhoff .M. Jennifer”, “Partnership for International Development: Rhetoric or Results”, Edition – 2002
• “Edwards Michael”, “NGO Management”, Edition: 2005.
• “N. Lalitha”, “Emerging Partnership in Rural Development”, Edition – 2005.

E – Journal referred
• Corinne Damlamian, “Corporate-NGO Partnerships for Sustainable Development”, Electronic Journal, University of Pennsylvania. Edition– 2006 website - []

Website accessed•

Thursday, December 10, 2009

Key elements of Corporate Social Responsibility (CSR) in an organisation

In the last 10 years the Corporate Social Responsibility (CSR) movement stood for topics such as Corporate Governance, Environmental management and community engagement only to name three. CSR is being seen as the new business models for companies that want to be seen as more responsible organizations. So why is that?

Well it is not just acceptable anymore to do a little bit of environmental management here and some community involvement there. Companies are expected to construct a sounds framework of activities that all enhance their responsible business practice. This article will outline a broad overview of the important elements for successful CSR practice within an organization. To give this overview more structure, these elements are all subdivided into the internal and external aspects of CSR practice.

This differentiation is necessary as CSR has two sides to it:

1) The internal and
2) external perspective in order to be successful.

The following main elements are important for successful CSR practice

CSR Strategy
The CSR Strategy should be the starting point of the organizational CSR practice. This strategy needs to be defined as clear as possible with a future goal in mind.

Internal Aspects: You will need to build solid support for the strategy before you go about defining what you want to achieve with this strategy. It is key to this strategy to get the support and participation from as many high profile executives in the organization and to identify and engage these people that are passionate about CSR within the business. Once you have this support in place it will be easier for you to define the CSR Strategy for your business.

External Aspects: The CSR Strategy will act as the positioning document for the responsible business practice of your company. Your stakeholders and the public will expect a visionary document that shows ambition and goals.

CSR Management System
After defining the strategy your next task will be to set up the CSR Management system. The management system of CSR within your business will outline what you actually need to do to make your strategy happen and to produce results.

Internal Aspects: This is where you need to engage even more individuals in your business. Try to gather information on how the CSR Strategy has been received and then build on that to engage the most positive people. Once you have gathered a good team that supports your cause you can pool their knowledge and build a sound management plan on how to deliver the different elements of the strategy.
The CSR management system is the customized tool to successful CSR. You can go around and look at the management systems of other companies but this management system really needs to be so customized to your organizational context that you nearly need to build it from scratch.

External Aspects: This will be the CSR tool you will be asked about a lot once you have it set up. The CSR management system is your vehicle to get more external recognition of your activities. Never give away to much information but be helpful when other organizations what to have some tips. You never know how they are doing managing their CSR aspects; you might learn something for your management system.

CSR Reporting
The next step after the successful set up of the management system is the reporting of the first results of your companies CSR activities. This is called CSR reporting. Companies usually report on an annual basis. This CSR reporting is really the first test whether you and your team have created something interesting and worth reporting for your stakeholders.

Internal Aspects: Internally this CSR reporting is really a tough task. It will test your CSR management and coordination skills. The goal is to produce a meaning full publication that will be of interest to your stakeholders. The challenge you will face inside of the company is that it will be very hard to get all the numbers and the signed of text in time to be still up to date and relevant. Remember this qualitative and quantitative data has not been gathered before so make sure everyone understands what he or she are supposed to report.

External Aspects: CSR Reporting is a very important tool once you start out with CSR as an organization. Externally this CSR Report together with the CSR management system will be your CSR face of the organization. So the more professional you can make it the better.

Stakeholder Engagement & Communication
Stakeholder Engagement and Communication is the area, which keeps all of these areas together and connected. Without engaging your stakeholder on a continuous basis there is no real long term value in building a CSR Strategy, a report or communicating what you as an organization have been doing. So what do you need to take into account to practice successful stakeholder engagement?

Internal Aspects: Key to Stakeholder Engagement is to be as transparent within your company about what you and your team do as the CSR team. This will be the first question colleagues will ask you: “But what do you actually do?” Effective stakeholder engagement starts in our own backyard first. Once you have that running your can turn to the external perspective of stakeholder engagement.

External Aspects: Once you have the internal stakeholder engagement and communication running smoothly you can turn your focus to the external aspects. Here you should look to include interest groups such as NGO’s, the local community around your sites and other stakeholder groups that you have identified as being important to your organization. External Stakeholder Engagement is very likely the hardest area of all of them outlined here. Why?
Because you will take on the whole world and each and everyone can be your stakeholder depending what size of company you are working for. Research in stakeholder engagement is really still in its beginning and the future will see a lot of innovation is this external stakeholder engagement area. These innovations can be modern communication tools or effective ways to identify the particular stakeholder opinion. Exciting times ahead.

To sum up let me stress one last point which I feel is central to CSR within an organization. Do not listen to the so-called CSR gurus and experts out there too much. Try to find your own way of making CSR happen within your business.

CSR is really only the sum of its individual approaches and best practice so why not start today to add your approach and best practice to it? It will be a journey you will never forget. :)
Anybody who has come into close contact with the subject of “sustainability” or “sustainable development” knows that there is the ever-present issue of how to define sustainability. What is sustainable? Something that can go on and on. But this doesn’t really encompass what we want. We want a world that can go on and on, but with quality. So, for instance, take the well-known definition of sustainable development by the Brundtland Commission in Our Common Future (1987).

It is the most common definition and, unfortunately, it provides a very vague foundation, indeed. "Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.” There seem to be two very problematic words in this definition. Development and Needs. These are both very subjective terms.

Development can be based on any combination of thousands and thousands of indicators. GDP has traditionally been the main indicator of development, which says a lot about why the world finds itself in such an unsustainable position right now. But having seen the error of our single-faceted vision of development, researchers and others are now coming up with alternative indicator systems such as the Well-Being Index, which include indices of happiness, health and fulfillment.

But just as important is the subjectivity that the word “need” entails. I’m not sure there are many words that are more subjective, or more sensitive, than the word “need” has become. Some people think they need three pairs of shoes, some think they need twelve and some might say that shoes aren’t a need for them. There are, of course, our basic necessities, typically referred to as food, water and shelter. However, the complexity of human psychological needs, as Maslow pointed out, goes well beyond these basic necessities.

What about the need to belong or the need for respect? In many mainstream trends, we are given signals that maybe we do need twelve pairs of shoes to belong or feel respected. Now it is well known that often clothes are made by means of child labor in developing countries and the processing of the clothes has a negative impact on the environment. Yet, despite this information many people do not take that into account when shopping. It doesn’t have a direct impact on us, so maybe it’s easy to forget. After the idea of need has been filtered through so many societal strains, personal perceptions and facts that feel so far away, what are our needs? It is fair to say that we perceive our needs differently in the developed world and, thus, over-consume, most often at the expense (directly or indirectly) of those who are malnourished and mistreated. So, what is the potential impact of our present perception of needs on the future generations’ perceptions of needs?

Is it fair to conclude that our expansive, complex perception of material needs in today’s society will impose fewer and simpler perceived needs in the future, due to a larger population with fewer resources? Or will societies in the developed world naturally change their perceptions of “need” out of a desire to simplify? Or will technology be the key that expands nature’s ability to provide in order to match our perceived needs? Or might we not balance our needs with what the natural environment can provide us, leading to a meltdown of the Earth’s systems?

Depending on writers perspective, We could make a logical argument for any of these scenarios, because right now we are at a tipping point.

The choice is up to us. How do we define your needs?