Co-authored with Mohammed Gulrez, Technical Director ESG, Indira Basu, Assistant Manager, ESG-Social (Advisory) and Sidhi Baweja, Manager, ESG-Social (Advisory)
Introduction: CSR – the ‘what’ and the ‘why’
Corporate social responsibility (CSR) has been a key part of business strategy for most prominent organisations across sectors globally for over the past couple of decades. Despite not having a universally accepted definition, the notion of CSR is generally considered to embody the ethos of responsible business ethics and a duty towards society at large. While the term CSR has traditionally lent itself to the philanthropic work of corporations, its scope and definition have evolved to include concepts like triple bottom line, corporate citizenship, shared value, corporate sustainability, business responsibility, etc.
The Indian context
Ten years ago – in 2014 – India became the first country to mandate a statutory CSR obligation1 for companies meeting certain parameters. The mandate for corporations to engage in social welfare endeavours was codified into law with the passage of the 2014 and 2021 amendments to the Companies Act of 2013. Section 135 of the Companies Act, 2013 mandates every company having a net worth of INR500 crore or more, or turnover of INR1,000 crore or more, or net profit of INR5 crore or more—during the immediately preceding financial year—to spend at least two percent of the average net profits over the immediately preceding three financial years towards CSR, as per the CSR policy of the company.
Looking back at India’s CSR journey in terms of funding, Indian companies spent about USD1.43 billion on CSR in 2014, and by 2019 their spending had grown 85 per cent to USD2.67 billion.2
Convergence of CSR and ESG
Much like its ‘successor’ ESG (Environmental, Social, Governance), CSR strategies underscore the need for businesses to achieve self-reliance and have a sturdy backbone of suitable structures and risk management frameworks that will stand the test of time. This approach ensures that companies can mitigate business headwinds and ascertain the seamless continuity of both their primary business activities, as well as CSR endeavours.
Over the past decade, the concepts of CSR and ESG have converged, as the scope of CSR initiatives and expenditure has broadened across large firms to include more environmental initiatives (which have been front and centre of ESG activities, given the scale of the global climate crisis). 23 per cent of Indian corporates prioritised environmental projects in their CSR fund allocation during in the financial year 2022-23, according to the India CSR Outlook Report 2023.3
This convergence and ‘complementarity’ of the two concepts – of CSR and ESG (often interchangeable with the term sustainability) – was acknowledged in the Guidelines on Corporate Social Responsibility and Sustainability for Central Public Sector Enterprises4 issued by the Government of India’s Department of Public Enterprise (DPE) in December 2012 (and which came into effect in April 2013). The new guidelines, which have replaced two existing separate guidelines on CSR and sustainable development – issued in 2010 and 2011 respectively – mention the following: “Since corporate social responsibility and sustainability are so closely entwined, it can be said that corporate social responsibility and sustainability is a company’s commitment to its stakeholders to conduct business in an economically, socially, and environmentally sustainable manner that is transparent and ethical.” Moreover, “the present guidelines of DPE are also intended to reinforce the complementarity of CSR and sustainability and to advise the CPSEs not to overlook the larger objective of sustainable development in the conduct of business and in pursuit of CSR agenda.”
Thus, ESG embeds the traditional notion of CSR into the business operations of an organisation in an all-pervasive manner, and with greater chances of profitability. For companies to align their CSR endeavours with their core business goals, leaders must identify key focus areas, partner with suitable stakeholders, and accurately measure and report the impact of their CSR activities.
How strategic communication can propel successful CSR outcomes
Today, what has assumed centerstage in CSR impact is strategic communications. At the crux of this approach is the alignment of CSR goals, strategies, and activities with a business’s (broader) ESG framework. This is because CSR activities overlap primarily with the ‘S’ – the (S)ocial aspect of ESG. Among the initiatives that CSR encompasses are activities related to access to primary healthcare, education for all, skills training, capacity-building, etc. – all of which fall under the social banner of ESG.
Since ESG is the mainstay today for businesses vis-à-vis CSR – in that ESG is a measurable outcome for investors and other stakeholders to gauge the health and viability of a business – ESG metrics and outcomes of a business must therefore be published as a separate report by a business/company. To briefly illustrate one of the tangible impacts of embedding ESG goals in business, Harvard Business School professor George Serafeim writes in a Harvard Business Review article published in 2020: “an ESG focus can help management reduce capital costs and improve the firm’s valuation … as more investors look to put money into companies with stronger ESG performance, larger pools of capital will be available to those companies.” In the same article, Serafeim also notes: “positive action and transparency on ESG matters can help companies protect their valuations as more global regulators and governments mandate ESG disclosures.”5
Thus, given the importance of businesses to have an ESG focus, it is imperative for a company’s CSR activities to be incorporated into the messaging of the company’s overall ESG framework, strategy, and its published report. This is to ensure that the business’s CSR activities find recognition. Even if an organisation is doing exceptional work in CSR, its impact – particularly in the eyes of key stakeholders – may remain negligible if not communicated suitably. In this vein, the Ministry of Corporate Affairs (MCA), in its May 2023 newsletter,6 flagged the limited impact of CSR activities despite a boost in such spending in recent years, and urged India Inc to adopt a long-term strategy “to yield productive results”. As per the MCA, while CSR spending stood at INR26,210 crore in FY21, having grown 80 per cent from FY16, the impact of the CSR funds ‘was not widely felt’; there was a need to ‘enhance the visibility as well as impact’ of these invested funds.7
Against this backdrop, one of the aims of CSR communications is for companies to gain the buy-in of various stakeholders while building brand equity through reputation-enhancement, which is also the very crux of ESG. But first, let us look at three broad communications strategies that shape CSR outcomes:
- Differentiation: Effective CSR communications ensure companies stand out from competitors by highlighting their ESG commitments and activities in a unique manner. This approach enhances brand image and builds the perception of the company as responsible and ethical.
- Stakeholder engagement: For meaningful and long-term CSR impact, organisations must engage and build relationships with all key stakeholders: customers, employees, investors, and the community at large. Ultimately, relationship-building lies at the core of any meaningful long-term engagement.
- Reputation management and customer loyalty: Transparency and honesty in communicating CSR initiatives is essential to a favourable reputation and brand image, as it builds trust which leads to higher employee retention and stronger stakeholder partnerships. This leads to customer loyalty thanks to positive reviews through word of mouth.
In a nutshell, for a company to suitably showcase its CSR initiatives, deploying appropriate communication channels – tailored to target audiences – is necessary. Social media, websites, and annual reports are various means through which companies can effectively reach stakeholders. It is also important to understand specific CSR concerns of various stakeholders, for a company’s initiatives to resonate with each target group. This will further aid trust and fortify brand equity. In this context, it is crucial to note the role and value of a robust CSR strategy for a company’s brand value and sustainability outcomes.
To realise their CSR goals, it is critical for companies to forge partnerships across stakeholder groups such as the government, private organisations with an interest in the target region/identified social cause, etc. Then, the company spokesperson / designated CSR team should adopt communication tools that will resonate with the various stakeholders across levels, such as by communicating in their language, ensuring transparency in intent and information-sharing, regular reporting of the impact, etc.
All these methods help build a strong case for strategic communications in CSR and works two ways – internally and externally.
- Internal communication includes collaterals such as quarterly presentations to the CSR committee/management; development of knowledge products for communication (CSR Annual report); development of internal communications and training materials among others. Other examples of internal communications include monthly reporting on district-wise and partner-wise metrics from the MIS to monitor project progress and support the development of knowledge products along with their dissemination to the various stakeholder groups.
- External communication through collaterals catered to the stakeholders/audience – such as policy briefs for government, partnership notes for multi-laterals, etc. – can help amplify the impact of a cause by the respective organisation and position the firm as a thought leader in a particular domain. Not only do effective external communications strategies enhance partnerships, but they also enable cross-learning across development organisations, which ensures a win-win situation for all stakeholders. This results in replication and scalability of successful interventions across geographies. In external communications, it becomes critical to identify and prioritise different categories of stakeholders, establishing their varied communication needs, and accordingly tailoring the messaging/narratives.
These strategic methods and tools pave the way for successful CSR outcomes that:
a) transcend mandated strategies.
b) are aligned with defined business goals.
c) account for a holistic approach to community/local needs (where the business has a presence) and help in identifying the best suited external partners on-ground for implementation purposes.
Thus, CSR is not a feel-good exercise any longer, but this shift in mind-set is yet to become ubiquitous. The writing on the wall is clear: effective CSR is a marathon, not a sprint — a long-term commitment that needs to be communicated effectively.
