1. AIMA-Bosch Limited 36th NATIONAL COMPETITION FOR
YOUNG MANAGERS
THEME: “Managing Organizational & Management Challenges in India”
Team : 1) RAMA MISHRA
2) SRI SATHYA NARAYANAN G
3) YOGESHKUMAR TRIPATHI
Organization: ESSAR STEEL (INDIA) LIMITED
Address: 27 Kms, Surat Hazira Road
SURAT
Tel No: 09909902513
09909902207
09879102546
E-mail: rama.mishra@essar.com
GSri.SathyaNarayanan@essar.com
Yogesh.Tripathi@essar.com
Date of Submission: June 29, 2010
Signature of the Team Leader or a Member
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3. SR NO CONTENTS PAGE NO
1 Abstract 4
2 Introduction 5
3 Challenges of present day Indian corporations 6
4 CSR –Definition and approach 8
5 Levels of CSR 9
6 Types of CSR 11
7 How to go about CSR 12
8 Solutions 12
9 Case Studies 14
10 Benefits 17
11 Conclusion 18
12 References 19
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4. ABSTRACT:
This report aims to provide a better understanding of the sustainable
challenges faced by corporates and how they can be overcome through ‘Corporate
Social Responsibility’ (CSR). Since CSR is a very broad concept, companies and to
an extent, the general public, have different perceptions as to what it really is. This
subjective understanding coupled with inadequate understanding of the wants of the
local community, has clogged the real benefits that societies could enjoy. The
growing concerns about our environment have only strengthened the need for
companies to achieve profits in a sustainable way.
This paper intends to unclog the potential hurdles that companies face while
adopting CSR, by providing a framework on which they can build upon.
Understanding the approach to CSR, creation of a CSR philosophy and giving a
roadmap on how to implement CSR are key features of this report. Also, this paper
recommends a few simple but effective solutions which, if implemented, can go a
long way in making CSR ‘an absolute must’ in a large number of Indian
corporations. The results and solutions are formed based on the 2 case studies which
are about people’s perception on various CSR issues pertaining to their organization
and, how local community involvement can benefit companies immensely.
Key words: Corporate Social Responsibility (CSR), Sustainability, local
community, and CSR framework.
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5. INTRODUCTION:
The first decade of the new millennium witnessed a period of high growth for
the Indian corporate sector and the emergence of a strong India Inc. having a
significant global footprint. Although the financial crisis certainly shook Indian and
global markets, the corporate has recovered strongly from the jolt and the future is
definitely looking very bright. However, the corporate sector is also standing in the
midst of a sustainability crisis that poses a threat to the very existence of business.
Increased competition and commercial pressure are combining with rising regulatory
standards and stringent calls for responsible practices, to create a whole new playing
field for business. What we have before us is a cross-road where one path leads us to
an inclusive growth and the other may lead us into an unsustainable future. It is in
this context that the integration of economic, social, ethical and environmental
responsibilities of a company becomes indispensable. The saying that ‘Profits are
about what you do, CSR is about who you are’ is gaining more and more
importance especially for MNCs and the big public sector companies. Though there
is a little doubt in whether companies should involve in CSR or not, the reality that so
many corporations do not have a structured framework to go about CSR raises some
significant questions that are to be answered.
India has one of the world’s richest traditions of CSR. The concept of ‘ethical
giving’ is something that has been rooted into our country’s historic traditions since
time immemorial. Although CSR activities in India picked up greatly after the
liberalization of the 90’s, it has been shown that companies like Tatas were into CSR
as early as the 1900’s. The challenge now is not to seek whether companies are
involved in CSR or not; they already are. The challenge is to ‘channelize their
efforts properly so that society and environment benefits in an optimum way’.
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6. This paper deals with how companies approach CSR and how it should be
done. Secondly, it forms the foundation of a CSR philosophy by explaining about the
different levels of CSR that companies have to implement. Thirdly, with a
philosophy in place, the paper gives insights into the two different but parallel types
of CSR. The paper then recommends how CSR should be implemented and what are
the benefits of a carefully designed sustainable CSR practice. Finally, we give some
solutions which will help integrate CSR into the daily business practices of the
company. These solutions, if implemented properly could result in wide-ranging
benefits starting from cost cutting, brand enhancement to public goodwill and
government support. Probably it’s high time that organizations realized CSR as not
only a tactical response to potential crises but also as an acknowledgement of the fact
that businesses cannot thrive in a sick society and poor environment.
Challenges of present day Indian corporations:
As corporations pursue growth through globalization, they encounter new
challenges that impose limits to their growths and potential profits. Government
regulations, tariffs, environmental restrictions and human rights violations are
problems that can cost organizations millions of rupees. It is in a context like this that
the ‘Triple Bottom Line’ (TBL) approach comes into being. Simply put, TBL
approach focuses from 3 angles viz. Economic, societal and an environmental
perspective. To understand more about the TBL approach, let’s first look into the
contemporary sustainability challenges that organizations face.
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7. Economic Challenges
o Cost cutting
o Employee motivation/retention
o Brand enhancement
o Access to new markets/products
Societal Challenges
o Child labor/ Human rights issues
o Transparent and Responsible practices
o Stakeholder Treatment
o Poverty, Unemployment, Illiteracy etc…
Environmental Challenges
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8. o Global Warming
o Depletion of fossil fuels/Pollution
o Waste disposal
o Land degradation/Water scarcity
The benefits of an integrated corporates-community-government partnership can be
awesome and it is towards this realization that the authors of this paper have worked
on. Before moving on to the types and levels of CSR it is important to understand
the CSR approach, both historically and contemporarily.
CSR – Definition and Approach
The totality of CSR can be best understood by 3 words: ‘corporate’ ‘social’
‘responsibility’. CSR relates to the responsibilities that corporations have towards
the societies and environments within which they are based and operate. A bookish
definition of CSR reads like ‘"Corporate Social Responsibility is the continuing
commitment by business to behave ethically and contribute to economic development
while improving the quality of life of the workforce and their families as well as of
the local community and society at large". Since CSR is such a broad concept and
involves different levels of work to different levels of the society, it is important to
get a detailed look into what constitutes CSR and how it should be approached.
CSR approach – Traditional vs. Modern:
The CSR approach in India can be divided into traditional and modern
approach. The traditional approach can be very easily understood by one word –
‘philanthropy’. Traditionally, CSR practices of a company remained within the
control of top management viz. the owners’ wives or their family members. On a
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9. brighter note, companies also recognized the importance of their workers and
maintenance of a safe workplace. But the times of traditional CSR are outdated.
Modern practices have overtaken the former and it’s essential that companies shift to
the modern approach if they haven’t already done so. Now what is this modern CSR
approach?
The modern approach to CSR focuses on inclusive growth. Apart from the
monetary help, companies involve the local communities in their CSR operations as
the local people best know their requirements. Forming a CSR wing and assigning
some of their large capital of human capital for this purpose is also a very good way
of approaching this problem. But since this cannot be done by smaller organizations,
a better method is to integrate the CSR practices into the daily business operations of
the companies. Now there are 2 big questions for the corporates:
How to make the shift towards modern approach and
How to scale their operations in the modern approach.
To address these two issues, it is critical to have a common CSR philosophy. A step-
by-step procedure on what are the levels of CSR can go a long way in getting
companies take the first big step towards successful modern CSR.
Levels of CSR:
Though there is no textbook procedure in explaining the CSR levels, the
authors have tried to classify the different levels based on case studies and research.
They are:
1. Manage risks and meet stakeholder expectations for responsible behavior:
Like ‘charity begins at home’, the CSR practices of a company start from its
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10. workplace. Maintaining a safe workplace, taking proper care of workers’ needs
and, in a larger level – meeting the expectations of customers by giving good
quality products at reasonable prices is the most basic form of CSR.
2. Process Improvement:
This level of CSR deals with improving the ‘operational processes’
thereby leading to reduced costs and better usage of resources. Almost all present
day companies focus on process improvement at one stage or another in their
operations. Some companies do it for their own good and others for the good of
the society. Proper treatment of effluents, minimizing emissions and waste are
some of the areas where companies could focus their LEVEL 2 CSR energies on.
3. Product Improvement
Product improvement refers to ‘design improvements and product
innovations’. Companies doing improvements at these levels are driven primarily
by stakeholders’ expectations and feedbacks. The transition from INTERNAL
CSR to EXTERNAL CSR happens here. Companies start to develop products
with the society and environment in mind. Higher profits, brand enhancement,
customer retention are some of the benefits that companies can gain in CSR
LEVEL 3. Most popular examples are Google’s blackle and cocodle products.
4. Community Context Level
Businesses never exist in isolation. A company is a sum total of its
products, workers, community and its environment. Because companies depend
upon the local communities and environments for their resources and human
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11. capital, it is only fair that companies give a share of the profits back to the
society. This stage focuses on the welfare activities that are carried out for people
who are directly affected by the companies’ operations.
5. Embedding CSR into business operations
Once companies start focusing on the community context level, the next
big step is towards inculcating the CSR practices into their mainstream business
operations. Having CSR oriented mission and vision goals in their targeted work
plan is one such example.
6. Business Context Level
This stage involves changing the ‘rules of the game’ so that companies
develop sustainable strategies that are both feasible and competitive.
Collaboration with NGOs, developing innovative products that benefit the
society, manufacturing eco-friendly products are some of the milestones in
achieving this level.
Types of CSR:
SL.No. Strategic CSR Operational CSR
1 Long term; leadership Medium term; management
2
Work to address monumental
industry/societal challenges;
partner with industry, customers,
suppliers, governments, NGO’s,
communities, competitors
Engage with and manage range
of stakeholders and issues to
ensure investments and
operations meet both shareholder
and stakeholder expectations
3
Requires new relationship with
analysts and the quarterly
earnings game
Requires integration of
environmental, social and
operational expertise
4
Result – competitive advantage
Result – higher profitability,
license to operate
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12. How to go about CSR:
Ways to embed CSR into the daily business operations:
1. National Carbon Credit Rating System:
Carbon credits have been a huge factor in reducing the emissions in
developing countries. Indian companies are expected to make 600 million
CERs (Certified Emission Ratings) this year. With rates expected to go up to
€20 / tonne of CER, companies stand to gain a lot of money. Our
recommendation is that the credit rating system should be extended
domestically as well so that more and more companies will adopt
environment friendly business practices. The success of CFLs (Compact
SL.No. Disciplines Key Attributes
1
Understand your
current value position
Understand where and how the company is creating or
destroying shareholder and stakeholder value
2
Anticipate stakeholder
expectations
Track key trends, identify emerging issues, and
anticipate new stakeholder expectations
3
Set sustainable value
goals
Establish vision and goals regarding how to create
additional value for shareholders while reducing
negative impacts and/or creating value for stakeholders
4
Design value creation
initiatives
Identify sources of value and design initiatives to
capture shareholder and stakeholder value
5
Develop compelling
business case
Build a business case and obtain the resources needed
to capture shareholder and stakeholder value
6 Capture the value
Undertake activities and implement initiatives to capture
shareholder and stakeholder value
7
Validate results and
capture learning
Measure progress, track and validate results in
capturing shareholder and stakeholder value
8 Build capacity
Develop the mindset, capabilities and skills needed
to capture shareholder and stakeholder value
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13. Fluorescent Lamps) proves the fact that - with great support, great products
can be innovated.
2. CSR Credits
The success story of the carbon credit system provides a compelling case to
create something on the lines of CERs for CSR. Having a CSR credit system
for organizations is one such wonderful idea. Suggested by our union minister
for corporate affairs Shri Salman Khursheed, this process could wake up the
entire corporate lot that are loathe to practice CSR practices. Of course, it is
bound to have pitfalls along the way, but the success stories of carbon credits
gives hope that anything, if properly implemented, can be successful.
3. SA 26001
Having a clear set of guidelines on ‘how to go’ about any programme
certainly works, especially so if it is from a reputed institution like the ISO.
The ISO standards of 9001-Quality, 14001- Environment and 18001-Safe
Operational Practices have drastically changed the commitment levels that
organizations earlier had towards the above practices. If SA 26001 becomes a
standard rather than the voluntary process (as has been proposed by ISO),
companies commitment levels towards CSR will shoot up.
4. Formation of CSR Concepts
The ‘Pareto Principle’, ‘Six Sigma Principle’, the ‘5s of housekeeping’ -
concepts that revolutionized workplace productivity. What we have to infer
here is that these things happened because businesses placed so much effort
on productivity that something had to spurt out from someone somewhere.
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14. When corporates start being under that kind of pressure to pursue CSR,
specific CSR concepts will arise giving a boost to society and environment.
5. Collaboration of Companies with common interest
Corporates are supposed to have the cream of the intellectual lot and as such
it is only obvious that these people are expected to take the society and
country forward. If companies from the same community start forging
partnerships, it would significantly reduce research, time and wastage of
human capital thereby leading to increased benefits for societies in much
shorter time. This idea can be an effective groundwork for the triple alliance
of corporates-governments-local community that can produce deadly benefits
for the society in an overnight period.
Case Studies:
We carried out a small survey in and around our company with people at
different managerial levels, age, gender etc. The questionnaire included the
following:
1) What do you look for while buying a product from the options given below?
a) Price
b) Quality
c) Brand
d) Quantity
2) Do you buy a product even if it is priced slightly higher because it is environment friendly?
a) Yes
b) No
3) Do you stop buying a product if you come to know about its harmful effects
on environment & society even if you are a long term user of that product?
a) Yes
b) No
4) Do you believe that businesses exist only to make profits?
a) Yes
b) No
5) In a scale of 10 with 1 being lowest & 10 being highest rate
your general knowledge about companies involved in helping out local communities?
6) Would you prefer a company
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15. a) that pays you better but does not contribute to the welfare of society
b) that pays you a little less but does contribute to the welfare of society
7) Are you aware of the activities that are being done by your company
towards society and environment?
a) Yes
b) No
8) Whom do you think has the most obligation to help society and environment?
a) Government
b) Individuals/NGO
c) Corporates
d) All of the above
9) Do you think it should be made mandatory for companies to carry out
Social welfare activities once they 'break even' (i.e. once they recover the initial
setting up costs and start making profits).
a) Yes
b) No
10) In a few words give your views on 'corporates' responsibility towards
society and environment.
The outcome of the survey is as follows:
We have also studied the different activities initiated and performed by corporates in
order to bring CSR into their curriculum.
Following are the names of few companies in India belonging to different sectors
illustrating its CSR activities:
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16. Sr.
No.
Sector Company
CSR ACTIVITIES
1 Automobiles Ashok Leyland Ltd.
1. Manufactures fuel efficient trucks.
2. Launched a dedicated mobile emission clinic
operating on highways.
3. Drivers training centers, awareness sessions for
sexually transmitted disease.
4. Green supply chain management and research
efforts at conserving resources.
2 Banking Union Bank Ltd.
1. Working on 100% financial inclusion of villages
and creating financial awareness by providing
financial education services and debt counseling to all
strata of the society especially the rural population
3 Cement ACC Ltd
1. Developing community living around its factories.
2. Separate environment performance report
measuring the impact of its process and products.
4 Chemicals
Kansai Nerolac Paints
Ltd.
1. Linked to reducing the negative impact of
company's products and process.
2. Reduced the usage of hazardous pollutants like
heavy metal based pigments and dyes every year.
5 Construction GMR Infrastructure Ltd.
1. Focuses on developing social infrastructure and
enhance the quality of life of communities
2. Operates through its foundation GMRVF.
6 Electronics Siemens Ltd
1. Worked on wild life preservation by creating
awareness on protection of the Oliver Ridley turtles,
2. Work towards providing equal opportunity for the
disabled, home for street children and children of
single parents.
7 Heavy Engineering Larsen and Toubro Ltd.
1. Built projects thereby enriching lives of many. For
e.g.: involved in constructing the pipeline network for
reservoirs and dams in drought prone districts of
Andhra Pradesh.
2. Use clean fuel technology.
3. Welfare activities for child health, primary
education, HIV/AIDS awareness, health centers etc...
8 Financial Services HDFC Ltd.
1. Maintained its focus on enabling the lower and
middle income groups to access affordable housing.
2. Uses its core competence in the housing sector for
projects in micro-finance and low-income housing.
9 Software and ITES
Infosys Technologies
Ltd
1. Focuses on education activity through academic
research, rural reach of basic computer education,
student fellowships and teacher training.
10 Iron and Steel Tata Steel Ltd.
1. Created cities like Jamshedpur around its industrial
facility and has taken care of roads, sanitation, water,
electricity supply, healthcare and street lights.
2. Separate environment management section that
includes reduction of emissions, energy use,
regeneration of forests, and recycling of wastes.
11 Metal
Tinplate Co. of India
Ltd.
1. Reuse, recycle of water and waste acid, waste oil,
reduction in noise level, energy conservation etc.
2. Adopted CII-Codes for Affirmative action for
ecologically sustainable business growth.
12 Oil and Gas BPCL 1. Adopted 37 villages.
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17. 2. Providing them fresh drinking water, sanitation
facilities, medical facilities, enhancing their income
standards by imparting vocational training and
agricultural innovations, healthcare, empowerment of
women etc.
3. Towards environment the company confirms to
stringent ECO friendly EURO- III norms, reduce the
level of pollutants in the air, rain water harvesting,
Project Boon to save water
13 Paper Ballarpur Industries Ltd
1. Site specific community initiatives.
2. Farm forestry, reduction of water consumption,
reduction of effluent discharge, natural resource
management.
14 Pharmaceuticals Jubilant Organosys Ltd.
1. Environment report measuring the impact of their
products and process thereby reducing the
environment load through process improvement.
2. Working for the communities around their
manufacturing sites.
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FMCG and Consumer
Durables
Dabur India Ltd.
1. Dabur has initiated some significant programmes
for ecological regeneration and protection of
endangered plant species The company is also
involved in reforestation in the Himalayan ranges.
BENEFITS OF CSR:
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18. CONCLUSION
Traditional expectations of businesses are changing. It is no longer enough to
simply employ people, make a profit and pay taxes. With customers and society
spoilt for choice, it becomes a necessity that companies invest back the cash from
where they get it. In spite of being a century or so old, Jamshedji Tata’s words are
still so relevant, “The clear definition of CSR is that- the community is not just
another stakeholder in our business but the very purpose of our existence”. Creation
of a CSR philosophy, Understanding how to integrate them into our company’s
mainstream business and forming a triple alliance of corporates-governments-
local communities can work wonders for all the ills of our society and
environment. The final question is whether “CSR is an exercise of business
judgment, or compliance with a legal mandate? The answer is both, judgment
and mandate.
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19. References:
1. Strengthening the Link between CSR and Shareholder Value – Dave
Sherman; Presented at the IQPC Conference, 2003.
2. The business case for CSR – Arthur D Little; World Economic Forum's
annual Meeting, January 2002.
3. Company Stakeholder Responsibility: A New Approach to CSR - R. Edward
Freeman, S. Ramakrishna Velamuri, Brian Moriarty : business roundtable
institute for corporate ethics,2006
4. Corporate Social Responsibility and Environmental Ethics: The Indian
Context; Vikramaditya Singh Malik, and Roshan Santhalia, Students, B.A.
LL.B. (Hons.) Second Year, NALSAR University of Law, Hyderabad,
India.
5. http://karmayog.org/int-csr/ as last visited on 29th
June 2010.
6. Corporate Social Responsibility Voluntary Guidelines; India Corporate Week,
Dec 14-21, 2009.
7. Corporate Social Responsibility in the Globalization era: Goran Milovanović,
Nada Barac, Aleksandra Andjelković; University of Niš, 18000 Niš, Serbia,
2009.
8. CSR - Its place in business and the world’: Corporate Social Responsibility
Seminar jointly organized by the Institute of Southeast Asian Studies & the
EU delegation to Singapore.
9. The State of CSR in India 2004: Ritu Kumar, Director TERI-Europe, London,
UK. Presented for the national seminar on Corporate Social Responsibility.
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