CSR: An Organizational Integrity Tool or Just a PR Stunt?

In May 2006, Blake Mycoskie, an entrepreneur from Arlington, Texas initiated what he called the One for One? business model within his company, TOMS shoes. Essentially, for every pair of shoes sold, the company started donating one pair of shoes to the underprivileged. Today, around 1/3rd of the company’s profits go towards grassroots good, supporting education, health, and community development programs through their strategic partners. Since its inception, this simple idea has inspired millions of social entrepreneurs, creating a global movement for sustainable business models that give back to the world. In fact, the meteoric rise of TOMS shoes became the reference point of CSR’s positive impact on the business, as well as on employees, customers, and shareholders.

Evolution of CSR around the world: Although philanthropy has been part of certain businesses since the late 1800s, the term Corporate Social Responsibility was first coined in 1953 when American economist Howard Bowen’s book, “Social Responsibilities of the Businessman“ advocated for business ethics and responsiveness to societal stakeholders. What started as businesses giving to charity and impacting labor rights or pollution eventually became an integral part of doing business and increasingly drove consumer choice. In 2009, Mauritius was the first country to mandate CSR for a certain category of companies through its Finance Act. In 2013, India followed suit. Soon, other countries, such as Nepal, South Africa, Indonesia, and China introduced CSR as part of the corporate statute. In the UK, CSR is a part of corporate governance and the fiduciary duty of directors, while in the US, CSR is a soft law since it is seen as obligatory by most corporations due to internal norms and consumer expectations.

CSR in India: While the mandatory minimum requirement for CSR contributions for eligible companies in India is 2% of net profits over the preceding three years, some companies go above and beyond in contributing towards social causes that include primary education, healthcare, environmental conservation, rural development, and more. From 2015 to 2022, the value of CSR spending by leading Indian corporations has increased from INR 55.6 billion to INR 121.2 billion, with Reliance Industries Limited, Tata Consultancy Services, HDFC Bank, ICICI Bank, Infosys, Hindustan Unilever Ltd being amongst the top spenders in 2022.?

Is CSR a PR Stunt? Despite the mandatory requirements, many would question whether CSR is just another one of the corporate buzzwords that take on the spotlight for a few months/ years, before being replaced with something else. Is it simply about contributing the bare minimum as prescribed, or is it about building a CSR culture, mindset, and model that is sustainable, impactful, and measurable, in turn becoming an integrity tool for the organization?

Various CSR studies have proven that companies with a comprehensive CSR strategy and a CSR culture that is well-integrated into their business models enjoy a number of business benefits:

·??Increased customer acquisition, retention, and loyalty: A recent global study reveals that consumers are 4 to 6 times more likely to purchase, protect, and champion purpose-driven brands and companies. It is a known fact that Millennials and Gen Zs prioritize environmental activism and seek out eco-friendly products. They also have the collective social media-driven strength to boycott irresponsible businesses or amplify the CSR activities of any organization. Research shows that 87% of surveyed consumers will repeat purchases because if the company advocated for an issue they cared about, while 76% will refuse to purchase a company’s products or services if they support an issue contrary to their beliefs.

·??Talent attraction and Retention: CSR is a powerful and important criterion in attracting and retaining talent, as employees look for companies that uphold strong values and own purpose-driven brands. A study about employee perspectives indicated that 69% will not work for a company that does not have a strong purpose, while 60% will take a pay cut to work for a strong purpose-driven brand. In the same study, 88% feel it is no longer acceptable for companies to just make money without positively impacting society, and 95% believe that business should benefit all stakeholders (including customers, employees, suppliers, and communities) and not just the shareholders.

·??Higher Employee Engagement: This comes from strong organizational commitment, trust in top management, and increased well-being. Engaged employees also mean better workplace attitudes, eventually translating into increased productivity, profitability, and innovation.

·??Better Return on Investment: Companies delivering a social impact have a 6% higher market value and generate 20% more revenue than those that don’t.

·???Improved Investment Opportunities: Investors and governments across the globe are leading the shift towards sustainable investing, putting it on par with financial returns. For example, BlackRock has announced a conscious change in investment patterns by looking at climate change as a defining factor in the long-term prospects of companies. Another example is a global investment firm, Marshall Wace targeted $1 billion for a new green hedge fund built on ecological and moral trading.

I believe the scope and impact of CSR are wider than ever before. Far from being a fad or passing trend, CSR has become a critical and founding pillar of businesses that commit to sustainability goals. However, it is imperative to build and embed a CSR culture and model within the business strategies and goals in order to ensure measurability, accountability, and organizational integrity. Over time, the CSR frameworks and performance will continue to evolve and become stronger, especially because of technological advancements that will increase transparency and scrutiny, and provide businesses a greater impetus towards organizational integrity and social responsibility.