India's Best Companies for CSR 2014: CSR is an opportunity for India Inc to usher change
By V Kasturi Rangan
Having written over a dozen Harvard Business School CSR case studies, and interviewing over a 100 companies on their CSR practices, including many in India, my research shows that the best companies' CSR programming span three theatres.
Theatre 1 programmes focus on philanthropy, support for local civic organizations, and engagement with community initiatives. Theatre 2 programmes deliver social or environmental benefits in ways that support a company's operations across the business value chain, and theatre 3 programmes create new forms of business to address social or environmental challenges with expectation of business results in the long run.
It is clear from Clause 135 of the Companies Bill that theatre 2 and theatre 3 CSR programmes will not count towards the 2 per cent Profit Before Tax (PBT) requirement, as those activities have the intention and potential to improve a company's business results.
Of course, nothing precludes businesses from developing and executing a comprehensive CSR portfolio across the three theatres, but for purposes of accounting, the CSR focus of businesses in India has to be on theatre 1.
The biggest trap in theatre 1 is the potential fragmentation of social and community initiatives over the dozen or more programme areas identified by the government notification (ranging from contributing to the Prime Minister's relief fund to cleaning the Ganges).
Companies that view the CSR bill as an obligation and simply allocate money to reach the required reporting hurdle will be short-changing themselves, and more importantly be doing a disservice to their community and society by ducking the opportunity to make a real difference.
The initiatives identified under Clause 135 are broad enough to accommodate a variety of programming, and if executed well can make an important difference to the communities and society affected by the business. But a company must be careful to only choose those that best fit with the values and purpose of its business.
It should ask itself the question: Are my employees and direct stakeholders (such as supply chain partners and customers) likely to be passionate about the cause? Will we as a company feel good about what we are doing? Does it represent our values and way of doing business? While the choice of the initiative should anchor on the values of the company, it should at the same time be so structured that it can make a real difference to the chosen social or environmental cause.
It cannot be a case of paying lip service. Consider this statistic: Roughly Rs 20,000 cr is estimated to be the likely CSR spend in 2015. This is almost half the size of the entire Indian NGO sector spend, of about Rs 40,000 cr, in 2013.
Realistically speaking, the Indian NGO sector simply does not have the capacity to effectively channel the big money coming their way, bar the top fifty to hundred NGOs. This means that when a company chooses an initiative that fits its values and purpose, it should commit managerial talent to the chosen problem, and address it just as it would do in a business situation.
It should construct Key Performance Indicators (KPI), select appropriate partners, and if partners do not have the capability, actively work to build their strength for the long term, and measure results along the way. This also means that a company should carefully choose the activities where it can bring its resources and competence to play.
An engineering company is likely to have better skills at addressing problems of lack of sanitation; a software company might have better skills at addressing education, and a consumer goods company better at addressing public health and hygiene issues.
Every company should attempt to move the needle on the social or environmental problem it undertakes. Big companies, by bringing their technical and organizational skills to bear, not just money, should attempt to uplift the capability of their social value chain partners (this often will be the local government), and make a real dent on the problem.
Most of the nearly 10,000 companies that are likely to come under the ambit of the bill are not big enough to have independent impact. These are the companies that are most likely to waste away their CSR spend because they may not have the discretionary capacity to allocate administrative talent to the chosen social problem, nor are they likely to have enough clout to influence their social value chain partners.
Their expenditures are ripe for abuses by vested interests, including political forces. Here is where industry consortiums, special purpose foundations, and other such collaborative associations can play a big part in serving to pool their efforts towards focused causes. It would be unreasonable to expect the thousands of small companies to take the lead in this matter; their primary attention should be towards their business undertaking.
Development of new civil society organizations with a social purpose is called for. Such organizations will be dependent primarily on corporate rather than donor money, and be focused on particular issues, such as sanitation, clean water, child & maternal health and so on. Law makers have a responsibility to create the enabling conditions for such organizations to form and thrive, which takes me to my last point.
Creating the law and its many different amendments is only the start. If the many cobwebs that impede the work of the better performing companies and NGOs are not cleared, then we will see the mushrooming of self-interest seeking intermediaries that will quickly drain the huge sums of money that are meant to serve society's social needs.
The CSR clause in the Indian Companies Bill is unique, and the first for a big economy. Critics might see it as a 2 per cent tax, but that will be the case only if we miss this golden opportunity to set a new model for how businesses can make a real contribution to society's critical problems.
CSR shouldn't be used as a tool to sell more to people: Venkatesh Kini, President, Coca-Cola India.
Until last year, K Geetha Rani's sprawling 30-acre mango orchard in Andhra Pradesh's Chittoor district largely wore a deserted look. As a mango farmer, she could cultivate only six acres as water was scarce. "I heard there was a new technique of mango farming and visited a model farm created by Project Unnati to see it," she says.
Project Unnati is a collaborative effort of Coca-Cola with Jain Irrigation to build a sustainable supply chain for .n for Coke's mango beverage, Maaza. The program offers financial support and imparts training on Ultra High Density Plantation, a modern farming technique.
Rani eventually took training on drip irrigation and learnt about rainwater harvesting from the Project Unnati team, and is now expecting to double the number of mangoes produced per acre. "Earlier, I used to use fertilisers very randomly but now I use my drip to give the right fertilisers... with their support, we planted 6 acres under Project Unnati and after learning and seeing the results, we were so confident that we planted 9 acres on our own," she elaborates.
Cut to the 25-year-old Vivek Singhla from a town near Gurgaon. Despite a hearing impairment, Singhla pursued a course in welding from an ITI in the hope of finding employment but was unsuccessful. Subsequently, he got to know about the VEER campaign and enrolled in its program, which taught him packaging apart from spoken English, financial literacy, personality development and life skills
The 'Thums Up-Being Human VEER' campaign shares its core philosophy with Coke's Thums Up which has a tagline: Toofan sabke andar hota hai, sirf dhakkan hatane ki der hai (Everyone has potential, we just need to unleash it). "Through this campaign, we want to give the differently-abled people across India a voice and an opportunity to fulfill their own ambition to the best of their ability," says Venkatesh Kini, President, Coca-Cola India. As for Singhla, he's thrilled to bits about his first job as an associate in Henkel's packaging department
Many of the causes Coca-Cola picks up in India as part of its corporate social responsibility have a backward linkage to a slew of its brands. "CSR should not be used as a tool to sell more to people," says Kini, who believes that because a brand stands for certain values it has a philosophy about its role in the lives of people. The activities of the brand strengthen the perception in consumer's mind. "That is a more sustainable, long-term way of integrating CSR into a brand."
Coca-Cola's CSR programmes are focused around three Ws: water, women's empowerment and well-being. Water usage reduction is a key thrust and today the company uses two liters of water to produce a liter of beverage, a 40% reduction over the last seven years.
In addition, 130% water is being replenished either through rainwater harvesting or water conservation. Through its Anandana Foundation, Coca-Cola has so far set up about 60 check dams in arid zones countrywide.
Second, the company chose women's empowerment as a focus area in line with its global CSR credo of '5by20', or empowering 5 million women by 2020 worldwide. "A lot of our products get consumed at home where women are the decision-makers," says Kini. For instance, the company has deployed 1,500 solar coolers in retail outlets run by women, thereby empowering them to earn a livelihood. Simultaneously, two ongoing programs— 'Parivartan' and 'Pragati'—train retailers, including women, on the basics of retailing, such as cash management, energy management, display, negotiation and customer relations.
On the well-being front, Coke promotes sport at the grassroots, mainly football. Apart from sponsoring the Under-15 football tournament in India, it is now working with the AIFF to the build-up of the Under-17 World Cup that is scheduled to be held in the country in 2017. Coke has also come up with its 'Support My School' initiative, which also very neatly ties up the three Ws. Apart from providing drinking water and sanitation in schools, Coke curates playgrounds and provides toilets for girls . so that they stay in schools. The company has set up an advisory board on sustainability apart from a separate board for the Anandana Foundation, which it fully funds. The seven-member advisory committee is entrusted with the work of keeping tabs on water, environment, women's empowerment and community programs, and every quarterly board meeting ends with recommendations. Before the board meets, all data on environmental practices are shared by the company at least 15 days in advance so that members can take informed decisions.
The company says it will continue to focus on its core areas. "By focusing, we're able to make a bigger impact in a few areas than a smaller impact in many areas," sums up Kini.
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