College: MBA(IB), Dept. of Commerce, Delhi School of Economics
Team Mate: Jasmine Kaur
Team Name: The Sun Snatchers
Article I am Refuting: http://insideiim.com/csr-from-a-need-to-do-to-a-must-do-trend/
8:10 am, 15th August 2014, "Sangachchhdhvam Samvadadhvam sam wo manansi jaanataam.",( We walk together, we move together, we think together, we resolve together and together we take this country forward).
These words said by our inspiring Prime Minister Shri Narendra Modi from the ramparts of the Red Fort, penetrated deep into the air. I hope the corporate houses/businesses interpret this sentence in the same way as I do.
We have witnessed extensive emphasis given to ‘the need for CSR in India’ in recent years. In the hope to make it widely accepted, we also saw, The Ministry of Corporate Affairs notifying Section 135 and Schedule VII of the Companies Act 2013 as well as the provisions of the Companies (Corporate Social Responsibility Policy) Rules, 2014.This notification mandates spending at least 2% of average net profits for CSR activities. CSR is largely seen as a phenomenon that deals with the motivation and encouragement to take up socially responsible activities that will improve social and economic standards. It probably means giving back to society.
Human Resources department of an organization is seen as enabler of CSR. If HR is capable to engage workforce into CSR, does that mean every decision regarding CSR policy should be at the discretion of HR? Wouldn't that create a chasm and disintegrate CSR from core business? Let’s evaluate can ‘the greater good to the society’ be done just by CSR.
It’s time when we must proceed to find ‘solutions’ that are more than addressing weaknesses at the expense of business. The solution lies in the principle of ‘Creating Shared Value’(CSV). The concept of shared value can be defined as policies and operating practices that enhance the competitiveness of a company while simultaneously advancing the economic and social conditions in the communities in which they operate. Unlike CSR, CSV is not social responsibility or philanthropy but a way to achieve economic success. No doubt, CSR drive, to some extent, has helped society rise socially but our field of vision has simply been too narrow as CSR has emerged largely to improve firm’s reputation and it is treated as a necessary expense. The concept of shared value in contrast recognizes the need to expand the connection between societal and economic progress. A good example to clear the difference would be fair trade movement in purchasing. Fair trade aims to increase the proportion of revenue that farmers get by paying them higher price for the same crop and eliminating middle men. On the other hand, shared value perspective focuses on improving growing techniques and strengthening local clusters of farmers to improve the yield and productivity quality. The increase in income in second case (200-300%) would be much higher than the first one (20-30%). ITC’s e-choupal initiative is an example of this shared value concept.
Nestle cashed on CSV in Africa. Most coffee for Nestle is grown in impoverished nations of Africa, farmers are trapped in vicious cycle of low productivity, poor quality and environmental degradation. Nestle helped farmers by providing training, advice, bank loans, fertilizers etc. It established quality check mechanism locally and provided premium price to high quality growers. Greater yield per hectare and higher quality increased farmers’ income. Also, Nestle’s reliable supply of good coffee increased significantly. Shared value was created.
Many big honchos like Google, ITC,IBM, Intel, Johnson and Johnson, Nestle, Unilever and Wall-Mart have begun to embark on shared value initiatives.
Also I feel the need for organizations to have a strategic body to look after the holistic CSV operations. The body may seek help from HR for employee engagement. It should study all divisions/ departments of the organization to devise plans for CSV so that it can create scope of benefit for the organization as well as society. CSV will not be a liability (necessary expense) but a tool to increase profits. This strategic body must pour in recommendations to realign the entire company budget for CSV and focus on long term gains and sustainability.