CORPORATE SOCIAL RESPONSIBILITY SPECIAL .................The Difficulty of Doing Good

The Difficulty of Doing Good



Corporate social responsibility programs need to be strategic says, Harvard's V Kasturi Rangan 

When Harvard Business School's VKasturi Rangan conducted a seminar on managing corporate social responsibility in Mumbai two years ago, all of the city's top industrialists were in attendance. For though he is on the faculty of marketing, it is in his role as the co-chairman of the Harvard's Social Enterprise Initiative that Kasturi Rangan is best known. In this interview with CD he talks about why it is important for companies to have a corporate social responsibility (CSR) strategy and how can they go about creating it.
Does every company need a CSR strategy?
Absolutely. Any business in the world operates in the context of a community. Not all members of the community are investors in the company or its customers. But they are impacted by what the company does.
Businesses operate in a social, cultural and regulatory context, a lot of which is not directly in the value chain. If that is the context in which a business operates it is absolutely important for business to have a CSR strategy.

Big companies have CSR programmes, but that is different from having a CSR strategy.
A textile mill sets up a programme that feeds ten schools by providing them a mid day meal. Someone else says that I am going to provide education. Or I am going to provide free food in the canteen for all my workers.
But having these programmes is not equal to having a CSR strategy. The CSR strategy requires the company to think very carefully about its business purpose.
How should companies create CSR strategies that match their purpose?
There is a terrific water utility in Philippines called the Manila Water Company. They have got the concession to run the water utility in Eastern Manila, which has six million people. Other than providing water, the company needed to ensure that within ten years they provide connections to 95% of the households. Of the five million, around 2.5 million people did not have a water connection. These were people who lived in the slums. The company looked at them as an opportunity because ultimately they got water from somewhere, which was typically poor quality, stolen from the main pipe. So they came up with a brilliant idea making sure that they gave a connection to everybody, but the water bill was collected through a community leader. If they went to collect the water bill from every hut it would be very expensive. So the community leader collected the bill. This lowered their cost. But the community leader also ensured that when the water mafia came to steal water illegally, the community acted as a self policing force. It's worked like a self help group. If one member of the community could not pay the water bill, other people pitched in. Also, it was an incremental revenue for the company because water pipes are a fixed cost. Any examples from the developed world?
There is a bank called the Pittsburgh National Bank(PNC), which operates in the mid-west, in places like Pittsburgh, Cleveland.
The parts that they operate in used to be an industrial area, where the factories have left and so there is a lot of unemployment. The area also has families with a lot of single mothers. They decided to put all their effort into early childhood education.

Earlier they were doing philanthropy.
Some sections were giving to art and culture organizations. Some other directors were supporting their local sports team. They said, let's aggregate and put it behind one initiative -early childhood education. They got $100 million in early childhood education. So when a company puts in $100 million, then the CEO of the company sits on the national board of education.

This $100 million leverages the state budget.
They can move the needle. What I am saying is that if you do CSR and if you can focus only one or two things which can move the needle, then it has an impact. The point about CSR is that just like you measure business impact you also have to measure social impact.
What is the current state of CSR?
If you go in and take a helicopter view of some of the better companies, you will find that they have their CSR programmes which falls into three theatres. Theatre one is by and large like philanthropy. Theatre two CSR is more like shared value. I am going to be environmentally responsible by using alternate fuels rather than fossil fuels. That sort of thing. The third theatre is transforming the business. It is like Manila Water. It is like saying I am going to do a completely different business formula. The company will have all the three theatres operating at the same time.
How can they improve their CSR strategies?
You have to first look at each of these silos, whatever programme is in the silo has got some kind of a connection to the business purpose. The second thing which is the biggest drawback of companies whether international or Indian, the philanthropic CSR programmes are usually run by their community affairs director or the CSR manager or the foundation head. The operation stuff is usually run by the line managers, the factory head, the functional manager etc. And “change the business“ is run by the executive committee of the CEO. These three rarely talk to each other on CSR. When the three talk to each other, a CSR strategy emerges.

That is what Ambuja Cement has done.
They have a foundation that does very good community development work. The mining managers work with local managers. They think in terms of water usage because they produce cement which needs water. They are thinking in terms of how they can give water back to the farms. The CEO is thinking in terms of how they can sustain the mining activity. They put together a process where the CEO, the operational manager and the foundation started talking to each other. The CSR strategy emerged from that. Now the company has a CSR strategy where they are saying that we have to be a sustainable business where we should put in more into the environment than we take from it. They are now 3x water positive, in that they put three times the water back than the water they consume.

by Vivek Kaul ..Vivek Paul is the author of the Easy Money trilogy, which is about the evolution of money and the financial system and how it led to the current financial crisis ETCD140620