CSR at work!

The last one week has seen an unusual amount of public debate, involving leading CEOs and others, about the kind of corporate social responsibility that makes sense for them.

While reporting on the Leadership Summit 2007, HT covered the views of Infosys’ Nandan Nilekani, and Unilever’s Harish Manwani. Nilekani, a leading philanthropist in his personal capacity, believes that corporates have limited ability to spend on CSR given the need to protect shareholder interests. Hence, he asserts that promoters and corporate honchos must do more in their personal capacity. An interesting viewpoint, but one that begs an argument. First, companies will build a foundation for future revenue growth by investing in the economic development, and thereby increasing the purchasing power of a large section of the Indian population. High revenue growths cannot be sustained by focusing on urban and middle-class markets alone. Next, companies need to build bridges with all sections of the Indian population in order to ensure that they don’t face a backlash, as corporate retailers currently are. It is, therefore, in the shareholders’ interests to support CSR investments. If presented correctly, they are likely to reward companies for CSR, as they have done for corporate governance, in the past. And, yes, of course, company promoters( who have a lot of money) and corporate honchos( who may not have as much) must also do their bit.

Harish Manwani’s view is that CSR, to be sustainable, must have a related business benefit also. For instance, Hindustan Unilever’s Project Shakti has enabled over 30,000 underprivileged women to earn Rs 1000/-+ p.m, by becoming sales entrepreneurs. So, while people get livelihoods, HUL expands its rural distribution and sales. Similarly, through its ‘Hand-wash Awareness’ campaign, HUL promotes hygiene, but there is an indirect benefit for brand Lifebuoy. (Similarly, I know that L&T offers vocational training to rural youth, and in the process, ensures that it has a ready workforce for its booming construction business, where talent is in short supply).

This point-of-view is perfectly logical, but it throws up several intriguing issues. For one, where do you draw a line? For instance, should one support a sales promotion where a company promises Rs ‘x’, per unit sold, to a social cause? Or, what about Posco’s sudden espousal of CSR when it faces a huge backlash on land acquisition? So, while companies like HUL may commit to CSR with all sincerity, there may be a nagging suspicion in some quarters, on account of the perceived business benefits. For instance, during my recent visit to Jharkand, an NGO told me that they had turned down an offer to be an alliance partner for Project Shakti, for precisely these reasons.

Unfortunately, there are no easy answers.

While we are groping for answers, there comes along an interesting newsitem in today’s Economic Times, about Nachiket Mor moving from ICICI Bank, to ICICI Foundation. The important part of the story was the likely commitment from ICICI Bank, to spend 1% of net profits on issues relating to inclusive growth. Now, that is an interesting development!

I have been debating the “right amount of spend” issue with several people, including at a corporate panel discussion that I was part of, yesterday. I think 1% is absolutely perfect: it is a figure that shareholders will support, and will make an impact. The important thing about this spend is the multiplier effect it has, on actual economic activity. During my recent trip to Jharkand, with Pradan, I was astounded to find that a Rs 1/- spend enables villagers to raise Rs 10/- from government grants or loans; and each rupee they raise generates economic activity worth Rs 10/-. So, the overall multiplier effect is 1:100 !

A final observation on how corporates execute CSR. Some, like Dr Reddy’s Foundation and Bharti Foundation, have set up their own, large teams, whereas others work with existing NGOs.  The former is not scaleable, and will raise questions about overheads, headcount, etc. Whereas, working with existing NGOs represents a long-term, low-cost option. There are literally a million NGOS in India, and many of them are extremely sincere, but desperately need financial support. This could be a win-win relationship for both. ( See an interesting article ‘The Silent Army’ in Economics Times)

This entry was posted on Wednesday, October 17th, 2007 at 9:36 am and is filed under NGO, Inclusive Growth, Corporate Social Responsibility, CSR That Works. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.