Communicating their CSR motivation and goals effectively can be challenging for companies. How can companies talk about these in a way that resonates with stakeholders?
Ever since the CSR-related provisions of the Companies Act 2013 came into effect in April this year, companies have been trying to understand what their implications are for business. In essence, the new rules require every public or private company – with a net worth of Rs 500 crores, a turnover of Rs 1,000 crores or a net profit of Rs 5 crores over the three preceding financial years – to spend at least 2% of its average net profit on corporate social responsibility. There are other stipulations that govern the types of activities that qualify as CSR under this regulation.
Even if they are modified over the next few years as many expect they will be, the rules have managed to stir up a debate on the status of CSR in the current business scenario.
Historically, corporate houses in India have equated CSR with charity, grants or donations. The hope is that this regulation will change this mindset and move companies to think of long term and scalable impact through strategies that are aligned to their business goals.
There is plenty of evidence to support the value of CSR in boosting corporate reputation.
Last year, the Reputation Institute, a private global consulting firm based in New York, conducted a study that threw important light on the main factors that influence corporate reputation. The survey probed 55,000 consumers across 15 markets to see how some of the most prominent multinational companies in the world ranked on a set of key dimensions. As might be expected, many of these dimensions – such as financial performance and product and service quality – pertained to increasing shareholder value. However, three of the seven dimensions tracked – citizenship, governance and workplace – had their roots in corporate social responsibility.
Companies that emerged at the top in the survey were those that have invested time and resources into enhancing the working environment for their employees and the communities they operate in. Over time, these activities have resulted in an increase in public trust, esteem and admiration. A similar pattern can be seen in a 2013 Fortune India study conducted in conjunction with consulting firm, the Hay Group. Again, the firms that made it to the top of the list were companies whose credentials in governance and social responsibility were well established.
These examples show that reputation is not something that can be built overnight. It is developed over time as a result of a sustained commitment to certain non-negotiable operating values and principles. In crafting a strategy in this area, an organization must weigh its overall social and environmental impact during the course of doing business. Such a holistic outlook is not possible when CSR is viewed as the detached domain of a single department. Companies have to look more closely at what it means to integrate CSR values into policies, products, operations and more. Only then will they be in a position to effectively communicate their positions to stakeholders.
It is this last aspect that can prove to be problematic for companies. If they talk about their CSR motivation too much or in vague, general terms, their initiatives could be termed ‘greenwashing’, or an attempt at boosting image by exaggerating their social contribution. On the other hand, if they fail to talk about this aspect, they may be perceived as being socially indifferent or irresponsible.
Companies are therefore trapped between a genuine commitment in this area and the challenge of communicating it to a skeptical audience. Still, as the Reputation Institute study illustrates, there are companies that handle this well and that have been able convey the goals and impact of their CSR initiatives in a way that resonates with stakeholders.
There are no better champions for an organization’s CSR programs than its employees. Involving teams in CSR initiatives has other side benefits, including improved morale and retention. However, in order for the ideas to stick, they have to come from the core and be built into the DNA of the business. It requires buy-in from all quarters – and especially from top management – in order to align CSR goals with the larger mission of the organization.
Some initiatives are easier to discuss because they are closely integrated with the activities and processes of the business. For example, a real estate development company that has a green building program or a computer maker that donates refurbished computers and runs a computer literacy program for the less privileged, can more easily incorporate CSR communication into their regular talking points.
Regardless of the level of integration, there is a need for managing CSR with the same focus that is applied to core business initiatives. A client demonstrated this recently with its clear articulation of a well-aligned CSR strategy. Its strategy hinged on utilizing its domain expertise and business success levers in order to tackle community challenges tied to energy and sustainability. It also brought in influential stakeholders – including an educational institution and a citizens’ rights group – in order to better highlight these issues and build support for its initiatives.
Social entrepreneurs are worth examining in this context, given that their work is strongly rooted in community development. One such organization that is striving to enable financial inclusion has also developed accessible digital platforms for educating people in communities with low income and literacy levels. The program uses peer-to-peer communication and easily identifiable role models in order to establish an emotional connection with its target audience.
Ultimately, openness and authenticity are key – in communicating with employees, the media, or other stakeholders. It is important to be honest about what has been achieved so far and the long road still ahead.
When it comes to discussing their achievements, companies do not always make the most of their opportunities. Many bury important facts and statistics about the impact of their programs in weighty CSR reports that may not be read. Instead, companies could look for ways to publish these facts across more widespread media and platforms – through a blog, a newsletter, social media, and more.
An article in the MIT Sloan Management Review sums up one of the biggest issues in communicating about CSR: “…most stakeholders cannot directly witness a corporation’s CSR policies or initiatives and to a great extent must rely on the corporation’s own reporting.” If such reporting is open, relevant and timely, it can help a company build a strong and unshakable reputation in the eyes of its stakeholders.