#RESPONSIBLEBIZ

By Oxfam India

7 Reasons Why 2% CSR Is Not Enough

Namit

2017-01-04T00:00

Data

Policy

2% CSR is not enough, even though top companies in India spend millions of rupees

2% CSR is not enough, even though top companies in India spend millions of rupees on CSR projects annually. This post features interview excerpts from the video ‘Even It Up’ (directed by Paranjoy Guha Thakurta) in which experts discuss the reasons why conventional CSR is insufficient and how is it different from responsible business. Here are the top 7 reasons why:

1. It does not ensure accountability

1. It does not ensure accountability

Another major reason why CSR is not enough is because it fails to make organisations accountable. Despite the establishment of the National Voluntary Guidelines (NVGs) by the Indian government, many of the top companies have failed to provide disclosures and have received warnings for non-compliance.

“First of all, we have to ensure that these corporations are legitimate, legal, ethical citizens before we can talk about the larger social responsibility”, says Amita Joseph, Director, Business & Community Foundation. She pointed out that we need to focus on responsible business practices instead of money spent on CSR by companies.

2. It does not address all the stakeholders of a company

2. It does not address all the stakeholders of a company

A company’s CSR policies are often targeted at only is main stakeholders and not the entire community it impacts.

Namit Agarwal, Private Sector Advisor, Oxfam India says, “Companies need to look at all the stakeholders the business is responsible for and to go beyond its immediate customers, shareholders and investors. Allocating 2% of a company’s net profit to CSR is not enough.”

Businesses all over the world are realising the importance of caring about their communities. Dr Mukund Rajan, Brand Custodian & Chief Ethics Officer (former), Tata Sons says, “Without the community, you would not have customers, you would not have investors, and you would not have shareholders. So, without the community business cannot survive”.

3. It does not focus on long-trem

3. It does not focus on long-trem

Businesses all over the world are realising that simply spending money on CSR is not enough for their success in the long run. A responsible business needs to envision a future where it balances profits, people and the planet.

“One thing that is very different when we look forward to the next 15 years compared to the last 15 years is the recognition of the role that the private sector is going to play. Inequality worldwide has become as troubling for the private sector today as it is for civil society, as it is for government”, says Nisha Agrawal, CEO, Oxfam India.

4. It does not focus on sustainability

4. It does not focus on sustainability

Traditionally CSR has not prioritised the concept of sustainability. Implementing CSR projects is one thing but preserving resources and protecting the interests of communities is another thing. CSR is incomplete without long-term future strategies to do business sustainably.

“We’re encouraging corporate entities to enter the realm of sustainability in a very serious fashion. This involves not only just the ethical conduct of business but also across the board to the supply chain, to their own employees, their commitment to foster gender equality in the corporate environment”, says Dr. Bhaskar Chatterjee, former Director General & CEO, Indian Institute of Corporate Affairs.

5. CSR policies are top-down and lack inclusion

5. CSR policies are top-down and lack inclusion

Firms often hire consultants who create CSR plans for them. Often these policies tend to be top-down and do not take into account the real needs of their stakeholders. There is little or no in-depth research on how these communities perceive these initiatives. This goes on to prove that just launching projects for the sake of following CSR is not enough.

Asim Hussain, a potato farmer from Moradabad, UP says, “If the big companies want to help us, they should build hospitals. In the village where I live, there are no big hospitals. We have to go a long way to private hospitals where we are charged a lot of money. Are the companies aware of our lives when they give us 2% commission? The companies don’t realize how difficult it is for us to earn our livelihood.”

6. CSR is not integrated into a company's business strategy

6. CSR is not integrated into a company's business strategy

Most companies have a small CSR department or they place their CSR professionals in their communications or PR wing. CSR staff needs to be in all the departments of the company, right from supply chain to innovation.

“What is in the DNA of a company…It’s not how much you spend – 2% of your net profit, its how you plan your business”, said Prof. Sri Ram Khanna, Managing Editor, Consumer Voice.

A number of voices over the past few years have insisted that only CSR is not enough. Businesses need to be more committed to transparency, inclusivity and sustainability.

7. Limited understanding of responsible business among CSR professionals

7. Limited understanding of responsible business among CSR professionals

Top companies hire management graduates and executives who are skilled at driving profits and not necessarily creating social impact.

Tanya Sharma, a homemaker says, “Companies need to be serious about who they hire in their CSR department. It is a very responsible role that a CSR head or a CSR manager has. He’s handling funds, which can do good to the society, communities and environment. Companies are just picking up employees from other functions and putting them into CSR.”

2% CSR cannot be seen as the only indicator of a company’s responsibility. It sits within the larger business responsibility context. If a company spends 2% but performs poorly on other responsible business indicators, it is unlikely to have any positive impact on society.

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