Would companies carry out CSR if not mandated? Isn't it the responsibility enough of corporates to maximize profits? But don't companies have to compensate or make good for their impact on the environment? Well, whether CSR is required or not has been debated endlessly.
India is the first country in the world to have mandated CSR under the Companies Act, 2013. However, companies around the world have long realised their responsibilities as corporates and have given back in evolving forms - from religious and community philanthropy by the founders, to diluting capitalism to mixed economies till current times where CSR is integrated into the business strategy.
The significance of CSR is and will always be beyond the mandate or a mere compliance. Today, companies are becoming more sensitive towards their social responsibility, considering the fact that our planet needs attention, people deserve inclusion and profits ought to be responsible, Corporate Social Responsibility, based on Triple Bottom Line approach is the need of the hour. Sustainability has now started becoming the core of business strategies, considering the value that it has created over time not just for the environment or communities, but for the companies themselves. Following are a few broad reasons why CSR should be done -
- Shared Value – CSR today is an integrated business strategy carried out in line with and to forward the business goals. CSR can be designed to be a strategic function which in turn creates value for business and shared value with the stakeholders.
- Risk Mitigation - CSR can be used as a very effective risk mitigation tool, especially for manufacturing companies.
- Shareholders - Shareholders, like never before, are paying attention to the company’s CSR activities. This is reflected through questions asked at AGMs by shareholders, on Sustainability, CSR, compliance to mandate and others.
- Customers - According to a Neilson study of 2014, 55% of global online consumers across 60 countries said they were willing to pay more for products and services provided by companies that are committed to positive social and environmental impact with the propensity to buy socially responsible brands being strongest in Asia-Pacific at 64%. Thus, CSR can be used as an effective brand-building exercise which in turn reduces a company’s direct marketing costs. Conglomerates like TATA, Mahindra, Thermax, Maruti Suzuki have long seen customer and stakeholder loyalty and confidence as these companies have been actively involved in Corporate Social Responsibility and good Corporate Governance
- Mandate - India is the first country in the world to make CSR mandatory under the Companies Act, 2013 making CSR spending mandatory for companies falling under its scope. The mandate has quite a few regulatory implications and compliances.
- Non-compliance – Non-compliance to the mandate attracts severe consequences of penalty and imprisonment for all the concerned officers of the company. Since the mandate has been made effective on April 1st, 2014, the Government is very serious regarding the compliance to sec 135.
Corporate Social Responsibility has been and is bringing about a significant change in the communities and environment. As much as the debate continues on whether CSR is truly a responsibility of the industry, the people, planet and profits too have been impacted positively through Corporate Social Responsibility.