The concept of ‘responsible business’ has its roots in ancient history. About 5,000 years ago in Mesopotamia, King Hammurabi decided to hold builders, innkeepers or farmers responsible if their negligence caused major inconvenience to local citizens.
For centuries, many socially conscientious businesses have contributed to social good for philanthropic ventures. The need for businesses to be socially responsible saw a spike with the industrial revolution. And then in 1950, American Economist Howard Bowen coined the term ‘Corporate Social Responsibility’ (CSR). Now in the 21st Century, CSR has become vital, not just for the environment, society, and the world at large, but for company’s societal brand building and reputation.
In the new business landscape, companies are moving far ahead from the age old domain of philanthropy and charity and has now reached a new hallmark of corporate social responsiveness. Companies must voluntarily do business in an economically, socially and environmentally responsible manner to be sustainable over the long term. CSR refers to business practices involving initiatives that benefit society and the environment. In the wake of COVID-19 pandemic, as lives and livelihoods are facing unprecedented challenges, strategizing CSR for ‘social good’ has gained much importance. Also equal focus is given on Employee safety and well-being by promoting social distancing, sanitization drive at workplace on frequent intervals, promoting a culture of Work From Home and only attend office for emergency purposes
A commendable CSR strategy can improve consumer trust, better value chain integration and brand sentiment. Most businesses forge partnerships with NGOs to carry out their CSR activities. However, it is important for the NGOs to be credible. CRISIL’s CSR Yearbook 2019 suggests that given the quantum of finances involved in the CSR, it is important to carry out robust due diligence before appointing an NGO or a voluntary organisation. Project governance and impact reporting are emerging as two major areas to be assessed. Also independent third-party evaluations such as NGO/VO grading should be considered to gauge a potential partner’s ability to drive the desired social impact.
India is the only country that makes CSR mandatory for profit making companies. All firms with net worth above ₹500 crore, turnover over ₹1,000 crore, or net profit over ₹5 crore are required under Section 135 to spend at least 2 percent of their annual profits (averaged over 3 years) and establish a CSR committee to oversee the spending. CSR spends crossed the ₹50,000 crore mark in just four years since the legislative mandate was implemented in 2014.
A commitment to corporate social responsibility is no longer optional. Companies need to understand that CSR affects their internal (employee engagement, productivity, turnover rate) and external (increased sales, customer loyalty, brand awareness) growth.
By creating and participating in CSR initiatives, companies have the opportunity to showcase their core values and create trust among employees and buyers. Secondary research reveals that organizations who promote corporate social responsibility (CSR) are reaping the benefits of their good deeds: –
Charities Aid Foundation (CAF) India is a registered not-for-profit organization established in New Delhi, India in 1998 nurturing the culture of giving with impact. The imbibing of this culture emboldens our approach of creating a positive change in the community by reaching to the last mile person.