“Strategic direction is more important today. It's about providing a framework for managers to navigate through the fog of complex chokes. No company can avoid this."

– C.K. Prahalad –

PoS Sep 2015 | Can CSR strengthen competitive advantage?

India’s Companies Act now mandates thousands of Indian firms to spend 2% of their profits on corporate social responsibility activities. Many firms will see it as a liability, some as the chance to do charitable work. Only a very few will effectively use their CSR work to strengthen competitive position.

A rough and quick study of a few companies revaled firms that engage in responsible CSR activities approach it in two ways: philanthropy, andshared value creation. Here are a few short case studies.

Caring hearts
Deepak Fertiliser & Petrochemicals is a INR 4000 crore company in fertilisers and industrial chemicals. They run a number of philanthropic programmes for economically vulnerable people.

They help lower income group women supplement household income by stitching cloth bags and handmade products. They support NGOs engaged in income generation activities for low income artisans and entrepreneurs. Their charitable foundation supports the Diabetic Centre in Jehangir Hospital in Pune.

Mindtree, the Rs. 3500 crore software services company based in Bangalore, focuses on people with disabilities. They promote their education and create sustainable livelihood opportunities.

The Company’s ‘Bal Roshini’ project identifies, assesses, and provides education and/or corrective surgeries to rural children with disabilities. In partnership with the Spastic Society of Tamil Nadu, they provide early intervention to children affected by cerebral palsy. They conduct other educational programmes for school children.

Hearts and minds at work
Hindustan Unilever Ltd. (HUL), the INR 33,000 crore Indian subsidiary of Unilever plc undertakes CSR initiatives that connect their businesses with stakeholders and contiguous communities.

The ‘Lifebuoy Handwashing Programme’ reached 63 million people since 2010. Sustainable tea estates now total 222 of which 111 were added in 2014 alone.

‘Project Shakti’ network has trained and empowered over 70,000 village women to earn an independent income by stocking and selling HUL’s products in their villages. The Network has been expanded to include over 48,000 male members of their households who distribute products to neighbouring villages on bicycles.

Patagonia, a privately held US company, makes outdoor and work garments. They support initiatives to extend the life of their products customers already own. In 2013 they launched the ‘WORN WEAR’ programme that offered tools and tips for people to fix their own gear. The Company also buys back gently used clothes and sells them through an innovative trade-in program.

In partnership with Yerdle, a California based NGO, they make it easy to give away things people don’t need, and get something useful in return. When their products reach the end of their useful lives, they offer easy ways to recycle them.

CSR as philanthropy
Deepak Fertiliser, Mindtree, and many others like them carry out caring work that alleviates suffering and improves lives of the poor or disadvantaged. Their hearts are in the right place.

Their ethos springs from the desire to give back. They hope a positive image will help win customers, prospective suppliers, or employees. There is little research evidence however, that philanthropic CSR helps the firm’s business in any way.

CSR as shared value
The CSR work of HUL and Patagonia directly and indirectly impact their value chains. HUL has extended its distribution through the Shakti project. Patagonia, by acting responsibly towards the environment, raises entry barrier for competitors and protects its customer base.

These firms create shared value for multiple stakeholders. Their examples strongly indicate the opportunity for doing well by doing good is limited only by our imagination.