What is the importance of CSR?

Let us look at the 6 important factors which highlight the importance of Corporate Social Responsibility
in India.
1. Brand Value
A quick look at the top 10 brands in the world would suggest that responsibility is at the core of their
operations. A well-managed CSR program can help increase brand equity, awareness and resonate with
strong values.

Tata Group is India’s most valuable brand at $19.5 billion dollars. People appreciate the company not
only for its high-quality products but also for the activities that they do for the greater good of the people .
The company has exceptional goodwill and the name exudes trust.

2. Increased Sales – Customer Matters

Companies that lead with a purpose are perceived positively by the customers. According to a
study, 88% of the people surveyed would buy products from a responsible company. 85% of the
people said that they would support the company in their community.

Millennials and Generation Z connect with companies having a positive impact on the communities. This
engagement translates into greater sales in today’s highly connected world. This further highlights
the importance of Corporate Social Responsibility projects.

3. Employee Retention and Engagement

There was a time when people looked at their jobs from the bread and butter perspective alone.
Today, employees look for a higher purpose other than their monthly salary.

Employees enjoy working for companies that have a positive public image. CSR initiatives
incorporate volunteering programs which foster values such as empathy and loyalty. This leads to
better team-work and camaraderie among employees. It is a well-known fact that happy employees
lead to low attrition.
Godrej Group CSR projects include a volunteering program that helps NGO’s to create sustainable
models. They are also known to run several programs that help protect the environment. This has led
to higher employee satisfaction and a positive image for the company. No wonder it is one of the
most sought after companies to work for in India.

4. Cost Savings
In the past, operating sustainably came at a huge cost to the company. Cost savings as one of the
factors in the importance of CSR would be surprising a few years ago. Responsible companies have
found new technologies that have reduced the operating costs.

Cochin Airport in India is a very good example of sustainable operations leading to cost savings. It is
the first Airport in the world to operate completely on solar power. It has become a pioneer and is
inspiring other airports to go solar and make this world a better place to live in.
5. Poverty Alleviation
India is home to almost 1.4 billion people and the top 1% of its population owns 73% of the
wealth. In spite of the plethora of welfare programs, the gap between the haves and have-nots is one of
the steepest in the world.
The corporate sector’s core competency is the execution of projects. They have the talent and know-
how to ensure maximum impact at minimum cost. CSR programs bring out change at the grassroots
level by harnessing this operational efficiency.

Mahindra and Mahindra’s Nanhi Kali is one of the pioneers when it comes to CSR projects in
India. The World Bank’s 2018 report states that limited educational opportunities for girls and barriers
to complete 12 years of education, cost countries between $15 trillion and $30 trillion in lost lifetime
productivity and earnings. Project Nanhi Kali educates girls which not only empowers them but also
helps their families come out of poverty.

6. Risk Management

It is no longer a debate that social and environmental risk affect businesses in a big way. In the long
term, these factors affect the growth strategies and are completely out of its control .

Mumbai incurred a loss of Rs 14,000 crore due to floods from 2005 to 2015 according to a study
conducted by the United States Trade and Development Agency (USTDA) and leading accounting
company KPMG. Environmental and Social factors damage the infrastructure or lead to the loss of
business hours due to absenteeism.

Depleting mangrove cover is one of the biggest reasons for flooding in Mumbai. Bajaj Electricals’
CSR arm planted 10,000 mangroves by partnering with NGO, United Way Mumbai (UWM) to create
awareness on the importance of mangroves among the youth.

ARCHIE B CARROLL CSR PYRAMID:

The pyramid of corporate social responsibility is a framework depicting the importance of four
key CSR dimensions: economic, legal, ethical, and philanthropic. This model was created
by Professor Archie Carroll in 1991 as a way to visualize his four-part definition of CSR. The pyramid
reveals the building blocks that businesses can use to become responsible in all four areas, rather
than prioritizing profits alone.

Economic responsibility in Carroll’s CSR pyramid

The economic responsibility of companies is about producing goods and services that society
needs and to make a profit on them.

Companies have shareholders who expect and demand a reasonable return on their
investments, they have employees who want to do their jobs safely and fairly, and have
customers that want quality products for fair prices. That’s the foundation of the pyramid upon
which all the other layers rest.
Economic responsibility in CSR is:

 The responsibility to be profitable

 The only way for a business to survive and support society in the long term

Legal responsibility in Carroll’s CSR pyramid

The legal responsibility of companies is about complying with the minimum rules that have been
set. Organisations are expected to operate and function within those rules. The basic rules
consist of laws and regulations that represent society’s views of codified ethics.

They determine how organisations can conduct their business practices in a fair manner, as
defined by legislators on national, regional, and local level. Legal responsibility in CSR is:

 Operating in a consistent way in accordance with government requirements and the law
 Complying with different national and local regulations
 Behaving as loyal state and company citizens
 Meeting legal obligations
 Supplying goods and services that meet the minimum legal requirements

Ethical responsibility in Carroll’s CSR pyramid

The ethical responsibility of businesses goes beyond society’s normative expectations – laws
and regulations. In addition, society expects organisations to conduct and manage their business
in an ethical manner.

Taking ethical responsibility means that organisations embrace activities, standards, and
practices that haven’t necessarily been written down, but are still expected.

The difference between legal and ethical expectations can be difficult to determine. Obviously,
laws are based on ethical premises, but ethics goes beyond that.

Ethical responsibility in CSR includes:

 Performing in a way that’s consistent with society’s expectations

 Recognising and respecting new or evolving ethical and moral standards that have been
adopted by society
 Preventing ethical standards from being infringed upon to achieve objectives
 Being proper business citizens by doing what’s ethically or morally expected
 Acknowledging that business integrity and ethical behaviour go beyond compliance with laws
and regulations

Philanthropic responsibility or discretionary responsibility in

Carroll’s CSR pyramid
The philanthropic responsibility of businesses includes the voluntary or discretionary activities
and practices of businesses.

Philanthropy isn’t a literal responsibility, but nowadays business are expected by society to take
part in such activities. The nature and quantity of these activities are voluntary and are guided by
companies’ desire to take part in social activities that are generally not expected from
organisations in an ethical sense.

Businesses developing philanthropic or discretionary activities give the public the impression that
the company wants to give something back to the community.

In order to do so, businesses adopt different types of philanthropy, such as gifts, donations,
volunteer work, community development, and all other discretionary contributions to the
community or groups of stakeholders that make up that community.