‘Mandatory CSR gives corporates an opportunity to serve larger stakeholders’

 Prof V Kasturi Rangan is the Malcolm P. McNair Professor of Marketing and the co-chairman of Social Enterprise Initiative at the Harvard Business School. Rangan was recently at the Indian Institute of Management - Ahmedabad (IIM-A) to conduct a workshop on Corporate Social Responsibility (CSR). Rangan, an alumnus of IIM-A, has authored several books and working papers on CSR and its strategic importance for the companies and believes that Indian corporates have an opportunity to serve the broader stakeholders under the compulsory 2 per cent CSR spend as mandated in the new Companies Act, than keeping a narrower motive of serving the shareholders with profit numbers. Edited excerpts from the interview:

How difficult is it going to be for the business entities in India to comply with the mandated 2 per cent spend on CSR? Can they deliver what is expected from them?

Companies are very good at understanding what customers want and what they don't want. So, working with the community is almost similar, they can understand what rural India wants. Lot of Indian companies do good work but there are even more Indian companies that don't pay attention to it; it is not because their profit motive clashes. But it is more likely that these companies have not taken the service to the community seriously. They look upon themselves as serving their shareholders' interest first. But they have to broaden their understanding to also serve the stakeholder and the community. For this, you don't have to compromise on your profit. Its a more complex business model and this understanding a lot of Indian companies don't have. This is an opportunity for these companies to take up the job under the 2 per cent mandate.

Looking at the Indian set-up where the government has a lot of schemes on social areas, which model do corporates need to adopt for their CSR spend?

Corporations may not know much about issues of sanitation, primary healthcare. But corporations know a lot about processes. They can do six-sigma. They can bring the efficiency by cutting costs and maximizing effectiveness. They know how to communicate, and influence behaviour change. They know all this because they do marketing. Corporates can go to communities and teach them health and hygiene practices through communication methods. Business and managerial methods, these corporations are very good at. They know how to get efficiency, effectiveness so they can bring the same discipline to address these issues. And they can use the government and the NGO sector, and act as a catalyst for change.

Looking at the Indian scenario, which are the sectors where corporates can contribute through their CSR spend?

The government has defined CSR in such a way that it has to be in areas where businesses do not benefit. If business is not going to benefit from the CSR, then it is purely on the philanthropic side. This will include basic needs of quality primary education, healthcare, clean drinking water, primary healthcare, adult literacy, sanitation, these are very important areas where there is a big need. Government is active in these areas but CSR can come and spark what the government does. CSR is just a small part of what the government is spending. CSR by corporates can bring efficiency to make it effective.

On CSR, what has been the global trend especially, when there are social issues faced across the globe?

There are no regulations (for CSR) overseas. But better companies spend more than 2 per cent of their profit. Some of the better companies in the world are at four-five per cent of their profits and some of them are big corporations and they do it year after year. But not all companies do like that. In India, the best companies spend about 2 per cent. There are some good companies in India and they create shared value (for community and company). But the current Act for CSR does not allow those things to be considered as part of the CSR. If you are doing things to enhance your business, this CSR Act does not allow that. But just by taking what the CSR Act allows, there is a lot that can be done.

Can the mandatory CSR bring the required change in the thinking of corporates about social contributions?

The CSR spend has to be designed in such a way that it doesn't remain a mere compliance part and companies dump their money and walk away out of CSR compliance. The research that institutes like IIMs can do is that CSR spend should actually make the social impact. This is necessary to ensure because 2 per cent is going to be a lot of money - around Rs 25,000 crore. And keeping an approach like a laundry checklist, then this spend will be a complete waste. We need to look at it in a different way as to how we can use this money and address the issues of health, water etc. And how can we do it in such a way that we actually make a difference to the community.

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