Corporate Social Responsibility refers to a corporation’s activities aimed at creating a positive impact on society. It originated from philanthropy and the notion of trusteeship expounded by Gandhi. Earlier, this concept was meant to create an equitable society. However, today, CSR has somewhat ceased to be a voluntary scheme; rather, it is regulated by the government.
CSR programs address the issues of poor education, healthcare, and rural development. In the subsequent section, we will delve into their significance for Indian companies.
Why Is CSR Important for Indian Organizations?
We can better understand the importance of CSR in Indian companies through the following dimensions:
Mandated by Law
Under section 135 of the Companies Act 2013, CSR is mandatory for Indian companies that meet one of the following parameters:
- Net worth is over Rs. 500 crore or US$71 million
- Turnover is more than Rs. 1000 crore or US$142 million
- Net profit exceeded Rs. 5 crore or US$714,000 in the last financial year
Any Indian company that fulfils the criteria above should spend at least 2% of its average net profit achieved in the last three financial years on CSR activities. The company can do this itself or with the help of an implementing agency.
Boosts Brand Image
In India, poverty, illiteracy, lack of healthcare are ubiquitous problems. The government has little resources to address these issues. CSR policies, practices, and programs are strategically designed to aid in these critical causes. That, in turn, improves the company’s image in the customers’ minds.
For instance, Ford India did a Happy Schools social initiative that resulted in a transformation of government schools in various states. Improvements were made to the school’s infrastructure, providing educational support for special children. The program of Ford India enhanced its image by showing such committedness towards social responsibility.
Builds Stakeholder Trust
Stakeholder trust helps attract investors and enhances the company’s image. It manifests as higher sales over time. Companies that infuse their goals with social welfare and conduct regular consultations with stakeholders about the same encourage their trust.
When organizations fully disclose the reports of their CSR programs, it stimulates a renewed commitment from stakeholders toward supporting ethical practices. This further enhances the firm’s image and fosters a greater growth rate.
Many Indian companies have built stakeholder trust and engaged them in their CSR initiatives successfully. These include Godrej Consumer Products Ltd., Tata Chemicals, and ITC Ltd.
Attract Investors’ Interest
A company’s social initiatives reflect its sustainability and growth. Studies demonstrate that there is a positive link between CSR and investors’ preference to invest, especially in the context of a strong company image.
For example, Samsung creates good relationships with investors through social responsibility and other means. Since it behaves responsibly, investors feel more positive about the company, which in turn influences their decision to invest.
Greater Employee Engagement and Retention
An organization’s responsibility extends to employees as well apart from stakeholders and shareholders. Employees are a brand’s intellectual equity. They invest their ideas and skills in building the company. CSR activities promote a sense of purpose, thus creating a positive work environment.
Did you know that 89% of Millennials feel happier in purpose-driven jobs? They develop an affinity toward their organization, which takes the lead in setting up impactful activities. Thus, employees are more likely to stay in their current workplace.
Conclusion
CSR has wide-ranging benefits. It helps resolve complicated social issues and strengthens a firm’s growth potential. By contributing key social concerns, a company effectively builds and preserves its foundation for long-lasting success in a competitive landscape.
