Thursday, April 5, 2012

To have or not to have a CSR policy?

The above question is raised almost every time there is a mention or reference to the very popular term– CSR or Corporate Social Responsibility, amongst corporate honchos. Now before we make an attempt to analyze and discuss the relevant issue, it’s important to preempt and get some valid responses on a couple of other questions -

  • What do we exactly mean by CSR?
  • And why has it suddenly become important for a corporate to have a CSR policy?

CSR or Corporate Social Responsibility – is nothing but being a good citizen of a community albeit a corporate citizen. There is no denying the fact that a healthy business requires a strong and happy society. And similarly for a society to grow and develop we need healthy businesses. Both are interdependent. And both have responsibilities towards each other. So if a company has been provided with a good environment and necessary tools to function in and make profits, it becomes important for the company as well to formulate laws, regulations, policies that would have a healthy impact on its immediate environment and the community in which it operates. Any lax approach towards its overall environment will directly or indirectly affect the business in the longer term and the Society at large might suffer.

One example is UK business Gallaher, the world's fifth-largest cigarette-maker -
Its CSR policy means it will not buy tobacco from any developing world producers that use child labour and has firm policies on the prevention of sales to minors.
"It's about doing the right thing, it's not complicated," says Gallaher's group corporate manager, Michelle McKeown.

Importance of CSR Policy – For all those who think that CSR is just a philanthropic activity…that has nothing to do with their business…think again. There are multi faceted benefits of having a CSR policy that is directly integrated into the company’s overall strategy. It takes care of several vital issues that have direct impact on the overall growth of the company.

Increases Credibility – Any product or idea has a perceived value. Companies spend millions in developing trust of the customer for their product or idea. Having a strong CSR goal that is communicated to the stakeholders at every touch point goes a long way in enhancing the company’s image as being a good company to do business with. For example – Maruti Suzuki stresses on Safety. And so under its CSR policy it runs a driving School that not only helps train the marginalized men and women become good drivers and improves their chances of livelihood but also ensures compliance to the basic Road safety rules.

Ensures Sustainability – CSR is all about how do companies treat their employees? How do they do their daily work? How do they produce their goods and sell them? It’s not so much about how much profit they make but how they make their profit? For example – For any enterprise, the first thing that is important is to attract, motivate and retain good employees. And in this highly competitive world if companies can retain talent and have lower employee turnover, it greatly helps in sustaining a business.

Brand building- Brand is the perceived image of a product or an idea. And branding exercises ensures that the product/idea is imprinted in the customers mind. CSR is a great tool to achieve that objective. Let me illustrate this again with the help of an example. As per a study carried out by CRY (Child relief and you), for an insurance company that was making inroads into the Indian market, the research revealed clearly that when its customers were informed about the company’s policy of giving back a percentage of its earnings for the welfare of disadvantaged children it increased their brand image. And in fact the company’s profit showed remarkable growth in a relatively shorter span then they expected.

Improves skills – Here again let’s take the example of Maruti Suzuki. It’s a car manufacturing company. But it values safety. Also, it understands the fact that the Indian roads are unsafe simply because people who drive cars don’t know/understand the basic driving rules properly. By providing them the necessary knowledge and skill they are ensuring three things. 1) They improve the skills thus ensuring greater safety on the road, 2) Their image as a ‘car company that cares’ improves their brand value, 3) with more and more people learning to drive directly from them, the possibility of their own sales figures going up, increases.

Builds relationships – companies are made by the people, for the people and do business with the people. An enterprise that cares for its environment, follows fair trade practices, generates an integrated report that takes into account its social, environmental, economic and financial performance which it then openly shares with its stakeholders ensures not only the continuance of a strong relationship with its past customers but also increases the chance of attracting newer clients and building lasting relationships.

Having a well integrated CSR policy that is in alignment with the company’s overall goal ensures a sustainable business that positively impacts its environment through its responsible actions.  

I leave you all now to discuss and decide for yourself whether ‘to have or not to have a CSR policy’ for your company.

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