Why Corporate Social Responsibility is the future for brands

John Elkington, noted sustainability expert, describes India’s new Companies Act mandating Corporate Social Responsibility (CSR) as ‘bold’.

‘CSR is the future’ - this was the emphatic view of Elkington and Indian brand expert Santosh Desai - both of whom held master classes on CSR at a conclave organised by Child Rights and You (CRY) in Mumbai last week.

When Desai said that “CSR is the future for brands” he was not referring to companies donating money to good causes. More and more CSR is being defined by how a company runs its operations and makes its profits.

Various studies have shown that the majority of CEOs of large global corporations now claim to be committed towards a triple bottom line approach.

They strive not just for the old single bottom line of money profits - they also produce reports on two other bottom lines, that is, the social and environmental good to which they have contributed.

The implications of this emerging trend are further reinforced by a study on the Indian Mining sector released by Deloitte on 17th December.

Increased pressure from local communities adversely affected by mining companies is a key element that will affect the whole sector in years to come, according to this report titled ‘Tracking the Trends 2014’.

Local communities have become more and more sophisticated in assessing the impacts of mining operations and mobilising against them.

Social media has enabled activists to reach sympathisers across the world for more widely and rapidly than ever before.

Thus corporate reputations, access rights to new discoveries and market valuations are now much more at risk before.

Consequently, says the Deloitte report: “…many mining companies are raising the bar on what it means to be model corporate citizens. Winning a social licence to operate now means more than simply following national and industry regulations; in many emerging markets, local community engagement has come to the fore as one of the most pressing issues facing operators, with particular emphasis on water and land access rights, environmental protection, local economic development and jobs.”

India is not alone is seeing a rise in assertion of people’s power. In Greece, attempts to expand local gold mines have led to community protests and general strikes.

In Peru a $5 billion gold and copper project has been halted by violent protests and blockades by local communities whose water supplies might be polluted by the mining.

Similar developments have been reported in Guatemala, Colombia, Ecuador, Bolivia, Sweden, Romania and Tibet.

In South Africa the country’s Black Economic Empowerment Policy and the Mineral and Petroleum Resources Act (2002) has granted more rights to local people.

By 2014 companies holding mining rights will be expected to use local suppliers to procure 40% of their capital goods, 30 per cent of their services and a full 50 per cent of their consumable goods.

While it may not be possible to eliminate community protests, says Deloitte report, “mining companies may be able to forestall more serious clashes by taking a more proactive and strategic approach to stakeholder relations. To create win-win platforms, companies need to map their stakeholder and constituent relationships extensively to understand their positions.”

Among possible strategies is the establishment of a community advisory board and developing a prioritised stakeholder management plan to better identify the wide range of local and national groups able to impact their operations and work to align project imperatives with community interests.

Companies might then gain a local base of economic and political support for their projects “ultimately enabling them to bring projects on line more quickly, lower government penalties, reduce costs and mitigate political and sovereign risk.

The key is for companies to demonstrate the contributions their longer-term resource development strategies can make to help grow the local job base, the industrial base and the education sector.

This will allow companies to differentiate themselves as partners and move beyond zero-sum discussions regarding local and national content rules.”

So far the dominant definition of CSR has been to give away money to social causes - run schools and hospitals in the vicinity of a company’s operations. This will remain relevant but it can no longer be the primary focus of CSR.

As both Elkington and Desai pointed out at the CRY CSR Summit last week the time for equating CSR with a Public Relations spin is over. Only those forms of CSR will be meaningful and impactful which are based on a company seriously reconfiguring its operations to conform with both social and environmental good.

The most reliable touch stone for a company to judge the quality of its CSR strategy, said Desai, would be the child rights agenda. Check to see how a company’s operations are impacting children of all classes, not just in the vicinity of its operations but anywhere its products reach - and you will have a fairly precise assessment of how socially responsible a company that is.

Disclosure: The author serves on the Board of Trustees of CRY.