The Recent CSR Buzz

Let us know about CSR, rules pertaining to it and how it has been working as marketing tool for companies.

The Buzz :

The new Companies Act 2013, Section 135 that was formulated with wide public consultation declared specific guidelines for CSR activities and they get applied to companies as rule by April 2014.

In simple terms,  criteria declared is , ‘Companies having net worth of at least Rs 500 crore or having minimum turnover of Rs 1,000 crore or those with at least net profit of Rs 5 crore, have to make CSR spend with minimum amount being 2% of three year average PAT (Profit After Tax) every year on CSR activity’.

It is estimated that the 16,245 registered companies in India alone will spend Rs 20,000 crore on CSR activities in 2014 and 2015. This means that there will also be a need for whole lot of CSR professionals and consultants and other specialists. With more and more NGOs and other social institutions eligible to receive aid surfacing quickly to play in this relatively new area, CSR term is spreading in leaps and bounds.

The CSR Concept:

In earlier times social, environmental and legal aspects had very less importance. Earlier companies use to focus only on economic objective but this had very harsh impacts on interests of stakeholders, nation, environment as companies just ran behind profits. But now companies have become aware that profits will grow only if they focus on building a sustainable ecosystem, i.e. development of nation and society with which it interacts along with going Green … and this brought idea of CORPORTE SOCIAL RESPONSIBILITY

In very simple words, it means operating business in a way that it accounts for social as well as environmental impact created by business.

However it isn’t new, It was common for companies to take up welfare program in the region it operates or work in it’s core area. Take for instance, a coal company helping the people in rehabitalation or tobacco selling company setting up cancer hospitals. However, in recent times companies have started acting in fields away from core. Say for eg. A mobile operator company planting trees

Many people confuse CSR with philanthropy by a company. But CSR is a wide aspect including social initiatives, helping Academia in research,making products GREEN, decreasing carbon footprint or simply decreasing the use of resources. For example, CocaCola is using more of plant based matter instead of oil-based matter for it’s plastic requirement.

CSR as Marketing Tool :

Looking from the other perspective, CSR is all about reputation building, brand making among the people.  Simple this increases the sales, and hence CSR can be considered a marketing tool. You might have come across it as you flip your ‘Classmate’ copy and there’s ITC’s appeal that it contributes Re.1 for your purchase.

 When asked why corporates take up CSR as part of The Hindu Survey,

Ø  65 % of the respondents felt that the main motivation was to build their reputation.

Ø  22 % stated that CSR was undertaken to help corporates market their products better,

Ø  Only 13% believed that CSR was done because corporates believe in the cause .

" The finding that consumers consider it acceptable for brands to use social initiatives for marketing gives marketers the license to do CSR to promote their brands, thereby making it a win-win for business and society”  -  Mr. Kartikeya , VP, Lowes Lintas India Ltd.

Also a study by Reputation Institue, consultancy firm based in Newyork found that ‘42% of how people feel about company is based on their perception of the firm’s CSR activities’ based on study conducted across 15 countries.

Thus, if the corporate firms take up CSR activities in a targeted proper manner it is a win -win situation for both business and the society.