Champions of Financial Inclusion

Thursday, December 2, 2010

Corporate Social Engagement: A Strategical Move or a Need?

The clear definition of CSR is that, the Community is not just another stakeholder in our business but the very purpose of our existence.’
 Jamshedji Tata
Businesses are constantly growing conscious of their presence in the societal and environmental spaces. Effort to reduce their footprint on the environment and increase the same on society is visible throughout the globe by their small and big efforts. Here we’re talking about the hottest trend in industry- the ‘corporate social engagement’. Simply put, Corporate Social Engagement is a business entity’s engagement in its society, environment and community for achieving results that are beyond its scope of profit. According to Wikipedia, Corporate Social Responsibility/Engagement policy functions as a built-in, self-regulating mechanism whereby business would monitor and ensure its support to law, ethical standards, and international norms.

As the world is increasingly getting conscious about the energy and environment sustainability, corporate houses are getting more focused on their efforts to mainstream CSE.  Business entities are taking responsibility for the impact of their activities on environment as well as the customers, suppliers, employees, shareholders, communities and other stakeholders. These responsible acts have many methods and approaches. Among them, three main approaches which are commonly adopted by companies are discussed here. These approaches are:

Community-based development approach: In this approach, corporations work with local communities to better themselves. For example, the Shell Foundation's involvement in the Flower Valley, South Africa by setting up an Early Learning Centre to help educate the community's children as well as develop new skills for the adults has achieved a stupendous result.

Second is philanthropy. This includes monetary donations and aid given to local organizations and impoverished communities in developing countries.

The third approach is to incorporate the CSE strategy directly into the business strategy of an organization. For instance, procurement of Fair Trade tea and coffee has been adopted by various businesses including KPMG.

A Strategy or a Need

In recent times, to achieve a more integrated approach to Corporate Social Engagement, business houses have started incorporating social missions.  For example, social mission of Bharti Airtel is to get cell phones into the hands of the hundreds of millions of people in India who otherwise have no way to communicate with each other. Tata Motors has a similar goal with respect to providing low-cost transportation in the form of the Nano. The social mission of the pharmaceutical and healthcare company, Dr. Reddy’s, is to address the unmet medical needs of the poor in India as well as around the world. Hindustan Unilever’s “Project Shakti” uses microfinance principles to create a sales force in the poorest regions of the country.

While corporates are realizing that CSE is more than a mere voluntary act, some countries have turned it to a legislative requirement. The formal origin of social responsibility goes back to the era of industrialization where businesses were ‘expected’ to be active not only in alleviating societal problems but also in providing solutions to them. Since then, the form of social engagement has come to include many more things in its scope. But there has always been a divided opinion on existence of CSE. While one school of thought supports that the rise of industrialization is the root of many societal problems, the other believes that solving societal and moral issues is not the responsibility of corporate.

For some industries, it may look like a need to get involved in a corporate social act. It is said that the companies in these industries have a low threshold for CSR and that’s why have to abide by these kinds of social responsibilities. For others, its just a mere strategy to achieve the intended. But what makes companies strategize for CSE??

In the annual general meeting of CII in 2007, Prime Minister Manmohan Singh had addressed in his speech about the CSR as “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.”

Amidst all these hustle-bustle, there are various underlying reasons for companies to engage in such action. The main reasons of corporate social engagement could be:
·         Commercial Benefit: Increased visibility among consumers and employees
·         Green Washing: Focusing the attention of consumers on certain actions only. To reposition the company’s image in the market.
·         Political-social relationships: To enjoy certain social and political benefits.
The motives for CSR actions are often mixed, it is impossible to claim either one motive or another. There are no particular motives that can be authorized to have an advantage over another (Haugland & Nystad, 2006).

The long Term Achievement

To think of it, what differentiates these companies from others?? Well, companies with motives to really help the society, gain more than just mere good marketing. They gain a long term reputation and trust of people at large which seeps into their employees too. CSR first starts at home with ones’ own employees. These companies often have level 5 leaders heading the organizations. These are the companies that have modeled themselves in ways different from the norm; quite often, particular practices that work well enough in business terms to be genuinely embraced; charitable endeavors that happen to be doing real good, and on a meaningful scale. For them CSR is much more than a cosmetic treatment. 

-Chitra Nayak

No comments:

Post a Comment