5 reasons why your company should invest in CSR

As per Nielsen, the market research firm, 68% of consumers in Australia are willing to pay more for products from companies who support worthy causes concerned with the environment.

India has been at the forefront of the corporate social responsibility (CSR) paradigm, much before the introduction of Section 135 of the Companies Act 2013, which made CSR mandatory. However, the term is often misinterpreted and misunderstood amongst companies – merely complying with laws and regulations and doing an ethical business does not suffice. CSR comprises of social activities undertaken by responsible corporates who recognize that its activities have a far-reaching impact on the society and economy where it operates. It considers the social, cultural, economic and health impacts on all stakeholders. CSR has benefits for both the society and the company as a whole and has a multitude of benefits.

In India, as per the data filed by companies on the Ministry of Corporate Affairs portal, around 20,000 companies had reported spending on CSR, with total spending amounting to 13,465 INR Cr in 16-17. Total public expenditure in 16-17 on agriculture and farmers’ welfare, rural sector and social sector (including education, healthcare, skills) was estimated at Rs 9,84,000 crores. The CSR spend that year was 13,465 Cr. INR – 1.36% of public spending.

Currently, CSR’s monetary contribution according to this data is less than a fraction of what the government is earmarking for the nation’s growth. In fact, as per the latest CSR law, CSR violations may now attract fines ranging between 50,000 INR and 25 lakh INR, and even imprisonment up to three years for defaulting executives. Such laws are indicative of the dire efforts that the companies need to put in to catalyze innovation and creativity to maximize scalable impact, stretch CSR budget further and move the needle. Companies need to start viewing CSR from the long-term perspective where regular investments are directly proportional to the company’s growth. 

 Let’s see the top 4 reasons why your company should invest in CSR at all!!

 Boosting employee morale The inclusion of “good cause” can decrease employee attrition by up to 50 per cent, increase productivity by 13 per cent and employee engagement by up to 7.5 per cent. This is even truer in the case of millennials who are now attracted by “good-causes” to join companies. CSR enables companies to attract the best up-and-coming talent to their organisations. According to an Ipsos Mori survey, 80% (81% in the USA) of respondents across 15 developed nations would prefer working for a company that has a good reputation for environmental responsibility.

 Improving the operations’ base – Often companies prefer to undertake CSR activities in areas where their operations are based. As a result, the wellbeing of marginalized communities and the infrastructure is improved. This is a virtuous sign for improving the operations, profits and user-base in the long term.  

Innovation – Using the lens of sustainability, CSR activities help companies to invent new products which are sustainable and hence more appealing to the masses. Thus, providing avenues to explore new markets, products and services. A recent study by Bain & Co shows 70% of under-35s polled were willing to pay more for sustainable products, while 65% wanted to preserve the environment and 55% worried about climate change. Such studies demarcate that users do not mind paying more for goods and services that will not harm their future generations in the long run. CSR activities also help the employees to get over the “holiday brain” with non-work activity.

Cost Savings – One of the most convincing reasons for companies to initiate a sustainable approach is that considerably expands the cost savings. According to the 2011 CSR report of General Mills, after installing energy monitoring meters on several pieces of equipment at its Covington, Ga. Plant, the company saved $600,000. 

Brand-Building – The study “The value of Green: The Effect of Environmental Rankings on Market Cap” by N Blumenshine of Middlebury College concluded that “companies with high environmental rankings have higher market cap values than comparable companies with lower rankings”. A win-win for all – the CSR initiatives build a robust system of cultivating innate respect for those companies across the nation through generations.