Why companies must prioritise CSR initiatives

CORPORATE Social Responsibility (CSR) is a company’s requirement to act in a manner that benefits society. This comprises promoting ecological sustainability, caring for personnel and supporting local communities. CSR is not just a moral commitment but also a legal one. Many countries, including India, have laws that require corporate and commercial establishments to participate in CSR initiatives. For instance, in India, Section 135 of the Companies Act, 2013 makes it mandatory for companies to comply with the CSR provisions in India. Herein, companies must spend a minimum of 2% of their net profit over the preceding three years on CSR initiatives. In the United States, the Sarbanes-Oxley Act requires companies to divulge any CSR initiatives they engage in.

Customers are interested in what businesses care about

In today’s commercial landscape, customers are more conscious of the influence of business organisations on society and the environment. They increasingly and progressively choose to support companies that engage in CSR initiatives. A survey conducted by Cone Communications, USA in 2017 found that 87% of consumers would purchase a product because a company advocated for an issue they cared about. From this, it can be understood that not only do consumers care about CSR, but so do employees. ‘India’s CSR reporting survey 2019’ by KPMG India suggested that several large firms in India were involved in initiatives to address the critical development concerns faced by the nation (including 17 Public Sector Undertakings and eight companies of non-Indian origin in 2019). 

A survey conducted by Deloitte found in its ‘The Deloitte Global 2021 Millennial and Gen Z Survey’ that 73% of millennials believe businesses should focus on societal or environmental issues. This means that companies that engage in CSR initiatives are more likely to attract and retain talented employees. Additionally, a virtual qualitative assessment was conducted in April 2022 with 15 Gen Zs and millennials from Australia, India, Japan, the UK and the US. The participants shared their thoughts on questions related to their societal concerns, finances, the future of work, climate change and mental health, which were included throughout the report.

Benefits of CSR initiatives for employees

CSR initiatives can have a noteworthy impact on employees and the working class. For example, corporations that participate in fair labour practices can improve the lives of employees and their families. This, however, becomes a part of the CSR initiative by any organisation as Section 135 of the Companies Act, 2013 in India says that the CSR projects or programs or activities that benefit only the employees of the company and their Families are not to be considered as CSR activities. 

The social responsibility of a business towards its employees can be an important aspect related to CSR. Companies that prioritise the well-being of their employees can improve morale, increase productivity and efficiency, and reduce turnover rates. This can have a positive impact on existing and potential employees.

Companies can prioritise the social responsibility of business to employees by providing fair wages and statutory benefits. Opportunities for education and training, and development can be provided to help employees develop new skills and advance in their careers. Companies can also promote a healthy work-life balance and foster a positive working environment. 

Benefits of CSR initiatives for the environment

In addition, CSR initiatives can constructively impact the environment. For example, companies that prioritize environmental obligations can help diminish greenhouse gas emissions and protect natural resources. This can benefit not only the working classes but also future generations. Many companies have successfully employed such environment-related CSR initiatives. 

Indian companies investing in CSR

One of the best examples of Indian companies investing in CSR is Infosys. Among the major CSR activities in the fiscal year 2019-20 included the establishment of a 100-bed quarantine area in Bengaluru in collaboration with Narayana Health City and another with 182 beds for COVID-19 patients of Bowring and Lady Curzon Medical College & Research Institute. 

Tata Chemicals Ltd is yet another company in India dedicated to making an impact among people in their area of business. As one of India’s major companies that undertake CSR initiatives, Tata Chemicals Ltd invests INR 12 crores in CSR each year, with wildlife conservation accounting for 30% of Tata Chemicals Society For Rural Development’s budget. 

Another example in this regard is Godrej, one of India’s largest conglomerates. Godrej Consumer Products Limited, the well-known Indian consumer goods company, has spent a sum of INR 34.09 crore on various CSR initiatives in the financial year 2020-21..

Companies worldwide investing in CSR

Patagonia is an outdoor clothing company that is committed to environmental responsibility. Patagonia donates 1% of their sales to environmental organisations and encourages customers to repair their clothing rather than buy new items. Another example is Ben & Jerry’s, an ice cream company that is committed to social justice. Ben & Jerry’s supports fair trade, uses only non-GMO ingredients and advocates for marriage equality. 

Integrating CSR into corporate culture

Integrating CSR into corporate culture is essential for companies that want to prioritise CSR initiatives. This includes making CSR a part of the company’s mission and values. Companies can do this by envisioning a CSR strategy, setting goals and targets, and collaborating and communicating on CSR initiatives to stakeholders. In addition, companies can inspire and encourage employee involvement in CSR initiatives. This can build a sense of community and engagement among employees. Companies can also partner with non-profit organisations and community groups to maximise the impact of their CSR initiatives. 

There are several global initiatives that are successfully operating in this regard. Give Grants (GiveIndia) is a prestigious organisation that was created to bridge the gap between the people or business organisations that want to make a difference through giving back and those who are doing phenomenal work but need more support, including building a network for their cause. 

People and organisations can provide technical assistance for such initiatives. Through their technology solutions and services, Give Grants enables individuals and organizations to raise funds for, and contribute to, any cause they care about.

Challenges of integrating CSR into corporate culture

Implementing CSR initiatives can be challenging for companies. One of the biggest challenges is measuring its impact. Companies need to be able to determine that their CSR initiatives are positively impacting society and the environment. This cannot be easy to do, specifically for projects with long-term goals. 

Another challenge is integrating CSR into the company’s operational activities. This can require changes to the company’s processes and culture, which can be difficult to implement. In addition, some CSR initiatives can be costly, which can be challenging for companies that may be struggling financially. 

Assessing the impact of CSR initiatives

Measuring the impact of CSR initiatives is vital for companies that want to be sure of the effectiveness of their initiatives. There are several approaches that business organisations can use to quantify the impact of their CSR initiatives, including social impact assessments, financial valuations, stakeholder engagement and sustainability reporting. 

1. Social impact assessments 

Social impact assessments are conducted beforehand to measure the impact of CSR initiatives on society and the environment. These assessments can help companies categorise areas where they can improve their CSR initiatives and demonstrate the effectiveness of these initiatives to stakeholders. 

2. Stakeholder engagement

Stakeholder engagement is another important method for measuring the impact of CSR initiatives. By engaging with stakeholders, corporations can gain valuable feedback and insight into the effectiveness of their initiatives. 

3. Sustainability reporting 

Sustainability reporting is another important method to measure the impact of CSR projects. This includes reporting on the company’s environmental and social performance and progress towards CSR goals and targets. 

CSR is essential and indispensable for companies that want to positively impact society and the environment. By prioritising CSR, companies can improve the lives of the working classes, attract and retain talented employees, and demonstrate their commitment to positively impacting society and the environment. While there are challenges in implementing CSR initiatives, the benefits are obvious. As an active part of the corporate community, it is essential to prioritise CSR initiatives to benefit those who need it most.