Vajiram and Ravi Student Portal

Mains Daily Question
Nov. 20, 2023

Q2. CSR is a vehicle on which the companies can race past the profit highway towards sustainable growth. Elaborate. (10M/150W)

Model Answer

Approach:

Introduction

We can introduce the answer by defining CSR and its status in India. We can also introduce by highlighting some important CSR activities undertaken by some renowned companies alongside their social impact.

Body

Here, we can start by listing arguments on how CSR helps companies achieve sustainable growth and then follow it up by stating what more needs to be done?

Conclusion

Here we can conclude either by summarizing the arguments of the body section or by stating the importance of CSR activities in wider aspect i.e., community, society, nation or corporate perspective.

Answer:

Corporate Social Responsibility (CSR) entails that a company should play a positive role in the community. In India, CSR was made mandatory in 2014 whereby companies are required to spend a minimum of 2% of their net profit over the preceding three years as CSR.

Corporate Social Responsibility (CSR) in Realizing Sustainable Growth:

Improves Company’s Brand and Public Trust: Customers are more likely to spend money on goods or services provided by a company with a strong social reputation in the community.

For example, TATA group in India has better customer trust as most of its CSR spending targets community improvement and poverty alleviation programs.

Attracts and Retains Employees: Being a part of a workforce that cares about society may provide employees of these firms a sense of pride and fulfilment.

For instance, working in Larsen and Turbo is considered prestigious.

Encourages Investors: They are more likely to invest in a company or body that has supported its community and environmental development.

For instance, better brand recognition and social standing helps a company perform better in the equity market.

Fosters a Sustainable Environment: Using renewable energy, creating climate change awareness and reducing carbon emissions are examples of how companies can contribute to environmental sustainability.

For instance, ITC group carries out social and farm forestry program which assists farmers in converting wasteland to pulpwood plantations.

Improves Welfare: Companies' social responsibility also involves human rights protection, livelihood training and ensure commitment to education for young people.

For instance, Mahindra & Mahindra (M&M) company primarily focuses on education programs to assist economically and socially disadvantaged communities.

Limitations of CSR:

Rising Costs of Operations: Investing in CSR, at any scale, can lead to high costs and expenses.
Public Image: Once a corporate is in the public eye, they more likely to be scrutinized for everything they do.
- Relevant Actions: Most of the CSR is spend on limited activities like promoting education, creating awareness, capacity building activities etc. However, other important activities like agriculture, renewable energy, supporting MSMEs etc. takes a back seat.
Additional Actions Needed:
- Ethical Governance: A company practicing ethical governance helps in better performance and thereby ensures sustainable growth. For instance, Incentives for environmentally-beneficial behaviours help in ensuring sustainable growth.
- Social Goal: Apart from monetary targets, a company must have a social goal or vision which differentiates it from its competitors. This would help achieve sustainable growth. Social goals could be to protect the environment by taking reasonable steps to limit corporate carbon footprint or to serve community via schools, charities etc.
- Transparency in Functioning: Sustainable growth can be ensured by being transparent in one’s functioning. For instance, routine internal audits with external oversight helps in sustainable growth in long term.
Though, CSR is mandated in India, but companies must look beyond the monetary expense involved. Their contribution helps in making society a better place and in the process ensures sustainable growth for the company.