Passing sustainability test

Passing sustainability test

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If industry can come up with innovative ways to deal with social challenges, CSR can become sustainable.

A lot has already been said about the new regulations on corporate social responsibility under the Companies Act 2013. Under the new rules, in addition to the stipulated areas, companies now can consider making their obligatory CSR spends on other legitimate causes as well.

This is a welcome opportunity for profit-making companies to play a pivotal role in social transformation projects, which seem to have languished due to governance, scale and sustainability issues.

The world over, the responsibility of safeguarding the interest of the society has traditionally vested with the government. For many reasons, delivering on these obligations has not been up to the mark. The visibility on social problems is now possibly at levels much higher than ever before, and may well be attributed to the widespread economic development, especially in the erstwhile underdeveloped regions of the world.

Thanks to this growing awareness, several acute societal problems that were hidden are now surfacing. The magnitude of these problems is quite large and demand solutions that are not only sustainable but scalable too.

The inability of governments, and even non governmental organisations (NGOs) to deliver solutions that demand scalability becomes an important discussion point well prophesised by Michael Porter’s maxim of ‘shared value’.

Business as a solution

Business has been plagued with a negative image, courtesy environment and public health issues, and consequently ends up having to persistently balance the adverse forces of profit and the interests of society.

The short-sighted approach of the general business community over the years in exploiting society has misplaced the understanding on objectives of business.

This, however, appears to be changing now in a fast globalising and digitising world. Businesses are becoming more conscious and responsible, and can better appreciate the role of a healthy society in sustaining sales and profitability.

Society is the fundamental pillar around which business is based, and more companies are now coming around to accept that reality. Besides helping the cause of the general community, solving social issues may well be the next big opportunity for business.

When business creates sustainable solutions, it makes profits, generates resources and, hence, is best equipped to deliver highly scalable solutions.

The new CSR regulation opens an interesting window for companies to reflect on their social responsibility in an objective light. There has to be a way for business to work socially and for CSR to work commercially for it to be sustainable.

The biggest challenge that traditional CSR forms of philanthropy grapple with is that it delivers short-term benefits and fails on relevance and sustainability.

If one were to identify some relevant social challenges and innovate ways for the industry to address them in the normal course of business, there is a larger likelihood of CSR becoming sustainable. A benefit to society may actually save costs for the donor company and improve profitability.

Higher benefits could convert into higher margins and larger resources for the business to scale up solutions across a wider societal coverage.

The Schedule VII to the Companies Act 2013 lists out activities that may eligible for CSR contributions. The biggest challenge, however, will be to identify and prioritise the most relevant issues impacting the society at large.

Viable and sustainable

While the Centre may have the responsibility of data collection on social indicators at district levels, States are likely to have a much clearer picture of the ground reality across the 600-plus districts in India.

The State machinery and local NGOs can adequately complement this by identifying relevant problems. Once clear on the type and magnitude of such problems, these may be prioritised and listed out publicly so that companies can develop solutions that not only help address the challenge but may also be commercially viable.

For instance, the village community in remote areas without access to medical care can benefit from the platform of telemedicine for a real-time diagnosis of medical problems to help the patient decide on the urgency of a visit to the doctor in the closest town.

A pharmaceutical company could use its’ CSR corpus to create a telemedicine platform in distant villages without access to primary healthcare.

Not only will it help patients get immediate help, it could help the donor company digitally keep a real-time tab on the regional incidence of disease and cut the primary data collection costs.

Similarly, a bank can tie-up with a mobile operator to combine the CSR corpus and create a platform to promote retail banking and microfinance among unbanked communities.

Besides helping deliver on the social objective of making banking inclusive, it affords a good opportunity for the bank and the telco to develop a prospective retail base of end-customers that can be commercially tapped as loyal customers over the long term.

An interesting example would be the state of Gujarat that has a large number of profit-making companies with substantial share in Corporate India’s CSR obligation. It will help the State government to identify some pressing social challenges and encourage local firms to develop innovative business solutions to address them.

The author is Partner, KPMG in India.