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Monday, August 11, 2008

CORPORATE SOCIAL RESPONSIBILITY: MYTH AND REALITY


A lot of debate has been heating up on this topic. It has now become a favorite of the corporates and is finding prominent places in the marketing strategies of most reputed business giants ever since these astute planners have discovered this dormant ‘bhramastra’ with a wide usability like
Ø To outsmart other very smart competitors
Ø To gain customers trust
Ø To market the product and/or service
Ø And most importantly, for satisfying the most basic Indian urge: flaunting


This hot flavor of the corporates is none other than the CSR or the Corporate Social Responsibility. Also, it has now found a prominent place as an entire chapter in the B-school textbooks and in some cases an entire textbook itself so that the future czars of the corporates can market the products and/or services more ‘ethically’ and within the boundaries of ethical business practices set by their weaker and less astute, may be less luckier cousins.

CSR basically is a set of (no benchmarks yet available) duties and responsibilities a business entity should fulfill toward the society. It may come in the form of a school or of a self-service group or in any other mode through which it helps the poor and underprivileged to make them achieve a level of self sufficiency and /or helps the environment (ideally!)

There are but, different school of thoughts on CSR. Some view it as a mere selfless disposal of duties towards the society the business entity is flourishing in and some perceive it as a long term brand building and marketing investment with impeccable positive brand equity and gains it provides to the business entity. There are different views of different honchos and different modes of dispersing.

The Lever brothers including the William Hesketh Lever, way back in 1925 (having 282 operating companies, over 5 continents and employing 60,000 people) did something much ahead of their times and contemporary thinking: they made 18,000 employees the profit sharers of the company and also developed a state-of-the-art housing colony for the employees in 1905. This can also be tagged as a CSR by the then prevailing standards of employee care and most importantly, the vision for the same.

But as usual, Indian scenario is slow to adapt positive changes. Recently what the chairman of a famous Indian automobile giant remarked was depressing not because of its content but more because it was coming from a man holding such a revered position and authority. This corporate czar puts CSR to be the “Functions necessary to prevent a firm’s bankruptcy and all the strategies for long term branding building” The more perturbing fact is that most of his contemporaries today seem to think alike.

But that is only one aspect. Ultimately in such a CSR philosophy, most of the benefits and gains get steered towards the company itself and the society receives only a miniscule part of them. When the core ideology of dispersing the CSR is business, pressure from the environment and markets, it (CSR) is reduced merely to just another strategy implemented for company’s own sake only. But on the other hand when CSR is done keeping in view the gains and benefits of the society at the front and it is followed as the core aim then it (CSR) comes out and acquires a full fledged form that in itself encompasses the benefits of the society as well as its positive ripple effects on the brand(s) too. Companies, like individuals, are each a separate entity. Their survival in a society gives out a ripple effect. They effect and are affected by their direct and indirect environments. Though the companies are the epicenter of business activities that move with the core aim of making money and raising the bar of the bottom line continuously year after year, they owe a part to the society too. The environment they derive their resources from as well as the society they get the ever rising bottom line from now demand a sizable amount of company’s time and resources.

Another major Indian automobile giant has done CSR in its right spirit: opening schools, educational institutions and hospitals for the upliftment of the rural areas and helping the poor and the backward to become self sufficient. Though all these activities do not directly contribute to the balance sheet of the company, they do contribute a lot in the long term brand building. Also, the employees feel an innate urge to try and perform their part of CSR and to become an asset for the society and the environment. This is the right spirit of the CSR wherein the social aspect is the core aim, not the firm’s profits. Also, unlike what most companies are doing, the funds for the CSR activities should come from firm’s profit and this cost must not be passed to the customer, for it would simply mean a sort of covert diversification by the company into the “welfare business”. For example if a firm makes a profit of INR 80 crores, the funds should come from this only rather than increasing the price of the product to fund CSR and passing the entire cost to the customer.

Thus a good CSR policy is one that is helping the people and the environment primarily and brand building is just one of the by-products, rather than vice-versa which is now prevalent. Also, CSR operates at 2 levels, an individual level and the societal level and both compliment each other.






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