CSR India Inc Outlook - An overview

Corporate Social Responsibility –Outlook of India Inc.

Report presenting an analysis of Indian corporate outlook towards CSR and social organizations

November 2014

A Z R e s e a r c h P a r t n e r s P v t L t d

Introduction

AZ Research Partners has worked extensively with both social sector and corporate sector. We have audited both social & corporate projects over the last 10 years

This report explores the outlook of India Inc. to CSR in the aftermath of Section 135, as per which, listed companies may need to report CSR spends with declaration of social organizations they work with

Activities challenging following issues have been considered as CSR:

Eradication of hunger and poverty Promotion of education and gender equality, empowerment of women Reduction in child mortality and improvement in maternal health Combat of HIV and other diseases Environmental sustainability Vocational training Contribution to the Prime Minister’s National Relief Fund or any other fund set up

by the Central or state governments Welfare of SC/STs and OBCs

CSR – Outlook of India Inc.

The study context:

Corporates that invest heavily into CSR that AZ Research has studied


Lions Krakens Sharks

Multiple SBUs under same corporate umbrella - uniformethos, varied systems

Multiple SBUs under different corporate umbrellas – varied ethos & systems

Single large corporate unit with uniform corporate ethos & systems

Abbott India Bajaj Eveready Godrej Jaypee Group Larsen & Toubro Reliance Group RPG Group TATA Group

Arvind Mills Bharti Group Britannia Cholayil Hindustan Unilever ITC Group Mahindra & Mahindra MTR Schneider Electric P&G Wipro

Acer Asian Paints Aventis Pharma AVT Axis Bank Gokaldas HDFC Bank Hyundai ICICI Bank Maruti Suzuki India

We studied 3 categories of listed companies:

Note: We have considered only those corporates who are listed and have annual turnover > INR 1,000 Cr – as these corporates will eventually define benchmarks w.r.t CSR practices

CSR initiatives undertaken by these corporates


Following are the various CSR activities undertaken

Lions Krakens Sharks

Holistic projects involving transformative change –expanded projects

Wide ranging projects requiring infrastructure development –enabling incremental change

Issue based projects involving“issue understanding” & “making a difference” – focused projects

Adult literacy & education Animal conservation

projects Agricultural productivity

increase & increase in farmers’ standard of living

Community-based health care services in rural areas

Composite Human Development Index audit in rural areas

Skill development Women’s empowerment

Clean drinking water Education for underprivileged

girls Environment Free surgery initiatives Grants, scholarships & prizes Hospitals & healthcare Livelihood training Slum upgradation Sports and culture Up-gradation of municipal

schools Urban infrastructure Women’s empowerment

Balwadis for children in slums Quiz programmes on disease

awareness for underprivileged children

Skill development programmes for youth in backward districts

Support & scholarships for rural schools

Rural healthcare Women’s empowerment

Corporate mind-sets w.r.t CSR

Key differentiating factor is whether the corporate has a separate CSR department (or foundation), if not, then how open is the corporate to set up a separate CSR department

In general, companies for whom CSR has been well-integrated have a dedicated CSR department

Companies for whom CSR is yet to make a real positive difference, in general do not have one yet – however, some companies are relatively more open to set up one than others

Second key factor is what types of CSR projects the corporate is running –how many, and how long-running are these projects


Companies have varying CSR systems. The types of projects they undertake also vary:

Corporate mind-sets w.r.t CSR


There are 5 different mind-sets that operate amongst corporates w.r.t CSR:

Closed / no defined time frame to set up separate CSR department

Uniform systems with separate CSR department (even before section 135)

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View CSR as a Growth channelMost Lions fall in this category

View CSR as an obligationMost Krakens fall in this category

View CSR as Positive PRA mix of all 3 corporate

groups

View CSR as regulation –open to explore benefits

Most Sharks fall in this category

View CSR as regulation, do not have a viewpoint

Mostly Sharks & few Krakens

Open to set up CSR department, with defined time frame

Note: These mind-sets are not mutually exclusive – the same corporate can hold multiple mind-sets w.r.t CSR. The descriptors above represent the dominant mind-sets

Mind-set 1: View CSR as a growth channel


Companies with this mind-set are largely the Lions:

• A company can grow only by positively influencing the environment in which it operates Through inclusive growth

Driving attitude

• Win-win for corporate & community – both grow together

• Long-term community entrenchment

• Recruitment from community – larger scale, lower costs

Motivations

• Selection of social organization

• Auditing of projects

• Ensuring complete transparency

• Achieving long-term transformation

Key challenges

Nature of CSR Activity – Transformative change (not boxed in by issues)

Mind-set 1: View CSR as a growth channel (Contd.)


An example of company that views CSR as an opportunity for inclusive growth:



Examples of a few projects undertaken towards this end:




RPG Group’s stand on CSR “Corporate Social Responsibility can never be just an added function to the business. It should be ingrained in core

business operations”

RPG Group’s CSR cover 3Es – Education, Employability, Environment

Fun & Learn pedagogy that enables the child to learn English without any stress and with a lot of joy

Flagship technical education programme to transform students into technically qualified and skilled adults with an overall grooming and confidence to work in the manufacturing sector

RPG is converting all its plants into green facilities & also, celebrated World Environment Day to create awareness about recycling wastes, by planting 3,500 saplings with the support of the forestry department at Palej and Mundra

Mind-set 2: View CSR as an obligation


Companies with this mind-set are largely the Krakens:

• A company needs to give back an equivalent of what it takes from the society/ community for continuing its operations

Driving attitude

• To obtain societal sanction Community sanctions growth of the corporate

Motivations

• Making visible change within short time period

• Achieving time-defined results

Key challenges

Nature of CSR Activity – Incremental change through enabling activities

Mind-set 2: View CSR as an obligation (Contd.)



Initiatives by manufacturing companies – this pharmaceutical company and this manufacturing company decided to do CSR activities closely related to their primary business activities –

CSR thus sprung up as a leaf-shoot out of the primary business bark, giving back to the communities & families from where their workers originated

Enabling reach of medicines in rural India

Building life-skills of women in rural Rajasthan



Examples of a few projects undertaken towards this end (Contd.)

Quiz programmes for underprivileged children

Initiative by another international pharmaceutical company in India – linking CSR with disease related education



Examples of a few projects undertaken towards this end (Contd.)

Mind-set 3: View CSR as PR activity


Companies with this mind-set are a mix:

• Relationship between corporate & community is in delicate balance – a corporate must work proactively to strengthen it

Driving attitude

• To build positive public image and goodwill for the corporate

• In turn build positive associations, thus strengthen the equity of the corporate

Motivations

• Selection of social organizations with positive rub-off on the corporate – value sync

• Transparency

• Media management for both corporate & social organization

Key challenges

Nature of CSR Activity – Focus on current socially relevant issues that the larger public relates to, and wants addressed

Mind-set 3: View CSR as PR activity (Contd.)



• Sahara Group’s Pulse Polio programme initiative was completely unrelated to their primary business

• However, it was heavily publicized and impacted Sahara’s public image positively




• Lifebuoy’s much famed “Help a child reach 5” campaign was very heavily publicized

• This campaign completely redefined the brand image in Indian public mind space

• Hyundai’s green campaign & Britannia’s nutrition foundation are on similar lines




• Dettol followed suit with Surakshit Parivarprogramme which received considerable appraise and publicity

• This impacted not only the brand image but also had a strong rub-off on the corporate good will of Reckitt Benckiser

Mind-set 4: View CSR as regulation & open to explore benefits


Companies with this mind-set are largely the Sharks:

Nature of CSR Activity – Focus on any & all activity that qualifies as CSR ...

• CSR is a pre-requisite to manage corporate taxation

• Additionally, CSR will soon become a legal imperative

Driving attitude

• CSR spend is a mandate by Govt. and any mandate by Govt. is in the best interests of the nation

• Tax deductibility

• Growth of capital assets of company *

Motivations

• Lack of full clarity on what constitutes CSR & what does not

• What if the CSR indirectly ends up benefiting business

• Selection of social organizations

Key challenges

* E.g. Construction of a hospital or a school or a testing lab will result in increase in capital assets of the company

Mind-set 4: View CSR as regulation & open to explore benefits



• Despite not being an Indian enterprise, Acer India is exploring CSR in India with a positive & fresh outlook

• Acer India established a CSR Club by raising social and environmental awareness among its local employees

• 35 Acer employees across India are on board promoting many initiatives• “Acer's Green” inspires power and electricity

conservation in the workplace, the donation of second-hand/ renewable resources

• “Share Your Space” program is aimed at encouraging employees living in the same region, or along the same route, to begin car pooling to cut back on gas consumption

• “Adopt a Plant” was held in keeping with the World Environment Day; about 50 saplings were distributed to employees interested in caring for a tree

• Many creative power-saving measures and community outreach services have been successfully organized

Mind-set 5: View CSR as regulation, but non-committal


Companies with this mind-set are largely the Sharks & few Krakens:

Nature of CSR Activity – Focus on any & all activity that qualifies as CSR ... Most corporates with this mind-set opt for work in rural or underprivileged areas

• CSR is a Govt. mandate with the added benefit tax deductibility

Driving attitude

• Tax deductibility

• Govt. mandate –cannot be questioned

Motivations

• Belief that corporate is not an individual & is difficult to mandate in terms of quantum of CSR, choice of CSR and choice of social organization – on a longstanding basis

Key challenges

Mind-set 5: View CSR as regulation, but non-committal


Unlike the top listed companies with turnover > 1000 Cr, bulk of India Inc. currently looks at CSR as regulation and is non-committal

Therefore, it is the responsibility of Social organizations to build relevance and commitment amongst India Inc.

What is the outlook of corporates towards social organizations?


Expectations are a function of how corporates view social organizations – this lies on a continuum of low to high integration with the corporate:

Like an extension

of the corporate

Like a corporate investment

++

I sponsor, they execute what I can’t

++++

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Low

Hig

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Many corporate Lions view the social organization this way

• Want to work closely on long-running projects with the social organization

• Expect complete accountability • Want to conduct audits themselves to

revalidate NGO’s reports

• Want social organizations with strong positive equity so that corporate can benefit from the association

• Expect VISIBLE change in short time spans & diligent reporting

Few corporate Lions & many krakens view the social organization this way

Almost all corporates

• Want complete transparency from the social organization

• Should not get constant funding requests

How to engage India Inc.


Corporates that view CSR as regulation, non-committal

Key engagement points –

1) Optimized funds

2) Complete transparency

3) Short-term results

4) Assurance on tax deductibility

Corporates that view CSR as regulation, open to explore


1) Assurance on dedication to cause & relevance of cause

2) Involvement of employees – make it an enjoyable activity

3) Assurance on tax deductibility

Corporates that view CSR as PR activity


1) Assurance on dedication to cause and SOCIAL RELEVANCE of the cause

2) Assurance on VISIBLE change

3) Media presence or resources to engage/ manage media (can be a deal-maker)

How to engage India Inc.


Corporates that view CSR as obligation


1) Assurance on dedication to cause and SOCIAL RELEVANCE of the cause

2) Credibility assurance by the NGO


Corporates that view CSR as growth channel


1) On-ground network of the NGO

2) Credibility assurance by the NGO – by way of longstanding presence or Govt. certification or association with other large corporates with positive reviews


4) Neutral third-party audits of all projects, with allowance of corporate involvement in project audits for evaluation


With this understanding, let us study the key associations, perceptions and imagery of Rotary Club amongst corporates in India …

Eminent

+++Premium

++++

Prestigious

++++

Influential members

+++Tough intake

standards

++

Club services

++++

Blood donations

+++

Cricket tourneys

++

Associations with Rotary Club


Corporates associate the following with Rotary Club spontaneously:

Lions

•Gold standard when it comes to philanthropic clubs•Very strong equity in India and internationally•However, very little in common between “how they

operate & how we operate”•Key gap Unaware of the on-ground volunteer

network of Rotary club, as “most of the press is about influential members of the club”

Krakens

•Expression of “nostalgia” w.r.t Rotary Club•Very strong “during our parents’ times” – but

“philanthropic clubs in general are losing relevance due to mushrooming of NGOs” “They do not submit reports for the business community to consume”

Sharks

•Traditional, old school, quite strict in memberships•There is no “ONE” Rotary club in India – “every city has a

club & every club is different & works differently”

Sentiments expressed about Rotary Club:

Rotary club activities that most corporates are aware of …


Very high awareness about Rotary club’s:

• Pulse Polio programme interventions• Blood donation camps• Cricket tourneys

These activities emerge as the most salient, relevant and defining activities of the Rotary club

Rotary club activities that most corporates are not well aware of …


Most corporates at large are not yet aware of the activity Rotary club does with the elderly at old age homes …

… nor are they well aware of educational or livelihood projects undertaken by the Rotary club with rural youth …

Corporates that are aware of these have a more entrenched positive outlook towards Rotary Club …

Rotary Club get-togethers and parties – very prominent on press!!


Most party photographs make it to the media photo galleries which hit public eye:

The resultant imagery of typical Rotary club member

High-end

Socialite

Exclusive

Influential

Celebrity

Media savvy

Way forward

Key areas that Rotary clubs needs to address in order to engage India Inc. better are:

Establish the central base of Rotary Club clearly – as there seems to be a perception that Rotary Club operates differently in different cities and there is no “one Rotary Club”

Communicate the complete range and scope of Rotary Club activities

Focus more on press about the on-ground network as corporates feel there is little information about this

Tackle the high-end socialite imagery of Rotary Club – as this conflicts with philanthropic image that corporates desire to see in the social organization that partners them

Reconsider use of the word “club” as it connotes socializing … most media focuses on the socializing


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CSR India Inc Outlook - An overview

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