CSR- Indian Perspectives SUSBIZ India 1

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1 CSR- Indian Perspectives 2007 SUSBIZ India 1

2 CSR in India CSR approaches and strategies are based on the ethical beliefs of the founding fathers, business areas in which the companies operate, the socio-economic environment, opportunities emerging over long periods of their existence. visibility(global) perception of customer oversight Tied up with philanthropy and community development. Community influence and paternalism among traders-turnedentrepreneurs. Foundations within companies that follow the Gandhian ideology of giving back to society SUSBIZ India 2

3 Companies & CSR Three kinds of Indian companies when it comes to corporate responsibility: big Indian multinational corporations that have proper corporate responsibility mechanisms in place; large national companies that appreciate the value of corporate responsibility but have no inherent structures to show for it; and the many small and medium-sized enterprises that are doing only piecemeal work at best SUSBIZ India 3

4 What is CSR Maximize company s overall impact on the society and stakeholders. More than a collection of discrete practices or occasional gestures, or initiatives motivated by marketing, public relations or other business benefits. approaches and attitudes differ largely due to social and economic systems legal and regulatory frameworks, cultural practices, local societal and public needs and expectations. CSR: In a developed country: governance, Business ethics, human rights and Environment In a developing country( India): Focus on nation building Socio-economic development Rural development Employment Education Health care Community support 2007 SUSBIZ India 4

5 Definition The Prince of Wales International Business Leaders Forum defines CSR on basis of four issues: corporate governance to include reputation, transparency, accountability, and anti corruption; safety and environment which comprises product/service safety, worker health and safety, local environment quality ; access/development that includes initiatives in education, health- HIV/AIDS, digital divide, enterprise development, and; Human Rights that includes labour standards, security and indigenous people SUSBIZ India 5

6 CSR philosophies India Model Ethical Statist Liberal Stakeholder Focus Voluntary commitment by companies to public welfare State ownership & legal requirements determine corporate responsibilities Corporate responsibilities limited to private owners (shareholders) Companies respond to the needs of stakeholders customers, employees, communities, etc. Champions M K Gandhi Jawaharlal Nehru Milton Friedman R Edward Freeman 2007 SUSBIZ India 6

7 CSR Paradigm in India Sustainable business Corporate community investment Community Affairs Integrated into Business functions Goals, strategy Strategic partnerships Initiated by company Strategic giving Linked to business interests Corporate social responsibility [102]/33% Corporate responsibility [80]/26% Corporate citizenship [19]/6 % Philanthropy Profit Focus Passive donations To charities when requested Focus is on Shareholder profit It doesn't matter, it's all the same thing [57]/18% 2007 SUSBIZ India 7

8 Front runners in India Birlas & Tatas- Led by philosophies of nation building & trusteeship Hero Honda, Hindustan Unilever, ITC, Maruti Udyog etc- Fuse local business standards with the Partner/Parent company s thrust BHEL, ONGC, NTPC- Public sector-true to the reasons of being set up IT, IT ES, Pharma, Life science etc- emerging companies/sector- Spread the positive spill over of their growth and success SUSBIZ India 8

9 Some examples Issue Community development Corporate giving Health Gender equality Labour standards Human capital Environmental management Energy conservation Water conservation Disclosure Company Hindalco Indian Oil Corporation Larsen and Toubro NTPC ITC Infosys BHEL Reliance Hindustan Sanitaryware Tata Iron and Steel Action Asian CSR Award for its Integrated Rural Poverty Alleviation Programme Dedicating 0.75% of net profit to community development initiatives One of first corporates to launch an HIV/AIDS programme One of the few organizations to have a policy for the grant of patrenity leave First company in India to be certified to the SA8000 social accountability standard for its Chirala facility Pioneering evaluation of human capital using an education index for its employees All BHEL units are certified to the ISO environmental management system Energy conservation measures are saving the company 1150 million rupees per annum Reduced flushing WCs is estimated to save 2 billion litres of water First Indian company to publish a sustainability report in line with Global Reporting Initiative guidelines 2007 SUSBIZ India 9

10 Examples Boosting profits Gujarat Ambuja, one of the country s leading cement manufacturers, reports that our efforts to achieve world standards in environment protection have had the happy outcome of substantially improving efficiency and profitability. Cutting costs Reliance Industries energy conservation measures have saved the company 1150 million rupees per annum. Increasing revenues HLL s Project Shakti creates income-generating opportunities for the under-privileged rural women, while giving the company an enhanced access to hitherto unexplored rural areas. Strengthening brand value In February 2004, Infosys was among seven international companies to be chosen in the first annual list of Top Brands with a Conscience. Enhancing reputation The Oil and Natural Gas Corporation has found that its community development programme has generated tremendous goodwill and earned the company the reputation of being a company that cares. Improving morale Tata Steel believes that helping the community also provides a new perspective to its employees, thereby strengthening employee morale SUSBIZ India 10

11 The Drivers Ethically aware consumer groups, NGO s. Moving beyond compliance. Right to Information Act. "last mile connectivity" to reach the benefits to the deserving people. Public- Private partnership SUSBIZ India 11

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15 Why CSR? Because of visibility Feel good factor( retention of talent) Business partner requirements Voluntary Pressure from stakeholders Need to maintain good relationship with external entities Founders attitudes Pressure from investors, lenders and insurers Threat of regulatory action or emerging legislation Risk to company brand or reputation (and hence shareholder value) as a result of consumer pressure or NGO campaigns Desire to enhance or sustain competitiveness Barriers to competition 2007 SUSBIZ India 15

16 CSR Focus by Whom? 2007 SUSBIZ India 16

17 Expectation. CSR begin at home- do the right thing towards internal stakeholders- esp employees. Comply with all legal requirements Look at rigorously focusing on priorities, treating CSR as an investment and monitor ROI reporting performance in an open and transparent real CSR leadership is not just putting one s own house in order, but advocating the right conditions to reward responsible practice SUSBIZ India 17

18 Way forward Indian companies need to stop looking at local communities through the prism of charity and see them as allies in the development process. CSR is critical in the context of enlightened self-interest for survival in the ever-growing fierce corporate competitive battle, for protecting reputations, defending attacks, improving bottom line and building business competitive edge SUSBIZ India 18

19 Barriers Absence of clear linkage between CSR and financial success Low voluntary adoption of CSR- Leads to green washing Lack of mechanisms to measure, monitor evaluate and report impacts Two myths Smaller companies think it the responsibility of the bigger ones and It is mainly a philanthropic exercise High overheads of implementing and sustaining CSR efforts. No universally accepted frameworks SUSBIZ India 19

20 The CSR business case What is good for the community, the environment and the workforce is also good for the financial performance of the company Companies cannot be seen to exist in islands of prosperity in sea of poverty Go beyond compliance Hard commercial factor directly linked to profits and brand value. Manage risk( supply chain, business partners) Increasingly becoming a non-tariff trade barrier. Cost of not considering social, environmental issues could be crippling 2007 SUSBIZ India 20

21 Linkages CSR dimension Activities Business Benefit Environmental improvements, eco-efficiency measures using less energy and materials, lower pollution costs and fines, reorganizing production processes, material flows and supplier relationships Cost savings Effective Human resource management Provision of training, health, and education benefits for workers; a clean and safe working environment; fair wages Increased labour productivity Reduced costs Poverty reduction Building strong linkages with the local community and employment of locals Business growth Stake holder engagement Engage in a dialogue with employees, suppliers, local community, NGO's, Politicians and other business partners Risk reduction 2007 SUSBIZ India 21

22 Linkages Capital stocks Internal objectives E.g.) External objectives E.g. Economic Profitability Per Capita income growth Human Worker productivity Employee well-being Social Reputation Welfare Environmental Resource efficiency Sustainability 2007 SUSBIZ India 22

23 CSR & Standards Broadly relate to outcome i.e. Product and process Types 1. Quality (for example, appearance, cleanliness, taste, and facilities) 2. Safety (for example, pesticide or artificial hormone residue, microbial presence, and use of safety features in hotels) 3. Authenticity ( for example, guarantee of geographic origin or use of traditional process) 4. Goodness of the production process (for example, worker health and safety, environmental contamination, resource conservation, or ethical trade) 2007 SUSBIZ India 23

24 Some global standards on CSR AccountAbility 1000 Business in the Community Corporate Responsibility Index Business in the Environment's Index Caux Principles for Business Coalition for Environmentally Responsible Economies - Principles Dow Jones Sustainability Group Index Ethical Trading Institute FTSE 4 Good Index Series Global Reporting Initiative Global Sullivan Principles Global e-sustainability Initiative International Chamber of Commerce Guidelines London Benchmarking Group MHC International Principles for Global Corporate Responsibility Organisation for Economic Cooperation and Development Guidelines for Multinationals Social Accountability 8000 World Business Council for Sustainable Development 2007 SUSBIZ India 24

25 Comparison of standards Origin Sector coverage Example Industry initiatives Shoes, Toys, Textiles, Retail Buyers COC's Business associations Multiple WRAP, Kenya Flower Council code BGMEA code Third party initiatives Multiple FTA, Organic labelling, fair trade Independent/ Multi stakeholder All/Voluntary ISO, SA 8000, GRI AA 1000 Joing Govt-Business Industry Specific ETI, OECD Guidelines ILO Principles,m UN Global compact 2007 SUSBIZ India 25

26 Salient point about standards All standards/models focus On ensuring basic human rights Protecting children, women and ensuring fair treatment to all stakeholders Some have requirements on disclosure and transparency Require stakeholder involvement Require adherence to local law at a minimum SUSBIZ India 26

27 The Indian challenge Three generations of challenges first generation : conflicts between companies and communities over the control of natural resources is widespread second generation : relating to hazards of industrial activity affecting Air, Water, Land and humans third generation : issues related to products and services, Public expectation: In addition to providing good quality products at reasonable prices, companies should strive to make their operations environmentally sound, adhere to high labour standards, reduce human rights abuses and mitigate poverty SUSBIZ India 27

28 Leader Speak Corporate Social Responsibility is more than philanthropy and must not mean 'giving and receiving'. An effective CSR initiative must engage the less privileged on a partnership basis. "CSR means sustainable development of the community by being partners in their progress." The industry's focus should be about becoming efficient, competitive but also inclusive. Mr Venu Srinivasan, Chairman - CII National Summit on CSR 2007, and Managing Director, Sundaram Clayton Limited said that New Delhi 14 June, SUSBIZ India 28