Corporate Social Responsibility (CSR) has become the new buzzword and a key differentiator with research indicating a positive and statistically significant relationship between CSR and profitability, corporate heads said.
"Corporate Social Responsibility is no longer just an addition, it is a key differentiator," Prasad Chandra, CMD, BASF South Asia, said at the launch of an Indo-UK project on CSR curriculum development in Bangalore today.
CSR has now to go beyond the realm of purchasing greeting cards from an NGO or donating to a charitable cause to entering long term commitments towards developing the society.
Sharing his view, Keki Mistry, MD, HDFC, said that the corporates had increasingly begun to ponder over whether there is more to business than just financial numbers, leading to the emergence of concept of the "triple bottom line impact". Here a company basically tries to balance three critical aspects economic returns, social benefits and environmental sustainability.
"Socially responsible investors now aim to make companies accountable not only to shareholders and employees but also to all those affected by their operations," said Mistry.
Companies are now required to discharge their stakeholder obligations and societal responsibilities, without compromising the shareholder wealth maximisation goal.
A recent survey shows that 52% of the Fortune 500 companies and 33% of the top 100 companies published separate CSR report. The percentage gets higher (64 and 41%) respectively if one takes into account companies, which publish CSR report as part of the annual report. A study published by University of California, Berkley in 2004 showed a positive and statistically significant relationship between CSR and profitability.
CSR is now not merely about charity. It is also about companies being able to take up role of corporate citizenship and ensuring that business values and behaviours are positioned in such a manner that they strike a perfect balance between improving and developing the wealth of businesses, while simultaneously bringing a positive change in society.
Listing out the various sectors including energy and environment, where corporates have begun to take an active CSR, Mistry said in product quality, customers were now expecting companies to show more initiatives in including stringent and effective systems of quality control.
Customers are hesitant to invest in or buy from companies that come across as unethical and irresponsible, he said.
A good CSR policy ensures that sales go up and customer loyalty is created. "It enhances the corporate's brand image and reputation in turn leading to better financial performance," he clarified, apart from increasing a firm's ability to both attract and retain qualified employees.
So far, apart from SEBI's initiatives to crystallize corporate governance, the chief drivers of change in corporate governance standards in India have been from foreign institutional investors.
According to a survey of the Asian Governance Association, which ranks the top 10 Asian countries on corporate governance parameters, over the last eight years, India has consistently ranked among the top three along with Singapore and Hong Kong.
"I believe pressure from society will force corporates to increase their CSR activities in a big way and companies in India have already understood this aspect", Mistry said.
The Indian Institute of Management Bangalore (IIMB) today launched a website dedicated to teaching of CSR. The `Teach CSR website', part of the India-UK CSR Education and Research project, offers a free online basic course, "responsible business". This provides guidance to key issues, teaching methodologies, suggested readings and links to other relevant online education in CSR resources.
The website supplies short sets of lecture slides, which business school teachers can use as a basic teaching tool and supplement and adapt for their own teaching needs. Links are also provided to other CSR teaching resources such as films, practitioner sites and relevant case studies and research papers.
The IIMB also rolled out a model CSR curriculum that could be "adopted and adapted" by business schools.