Importance of CSR

Importance of CSR

Corporate Social Responsibility can be defined as s about how companies manage the business processes to produce an overall positive impact on society.

   

    It plays a major role in the development of a favourable image of any company in this highly sensitive environment. Companies with high CSR standards are able to demonstrate their responsibilities to the stock holders, employees, customers, and the general public. The first point to note is that CSR isn’t just good for the environment and communities – it’s likely to significantly influence business success.

     

    Companies both local and global have realised the importance of CSR and going to great lengths to incorporate in their mission.

Sustainable Marketing - a brand new CSR approach

What is Sustainable Marketing?

Sustainable marketing is the adoption of sustainable business practices that create better businesses, better relationships and a better world.

Sustainable marketing (also referred to as Green Marketing) is the process of placing traditional marketing strategy and tactics behind services and products that fall into the environmental category. More and more companies are now working towards being categorized as a green or sustainable company.

Following are examples of an Indian and global company who have adopted sustainable marketing as a way of CSR:

How Indian companies have recognized the need of CSR

Reliance Industries Limited

RIL is India’s largest private sector conglomerate and amongst Fortune Global 500 companies.  They enjoy global leadership and are the largest producer of polyester fibre and yarn, having the largest refining capacity at any single locations and also have fully integrated operations spanning exploration and production of oil and gas, petroleum refining and marketing, retail and telecommunication.

Corporate social responsibility initiatives by Reliance Industries (Source: Reliance Industries Limited – Sustainability report 2011-12)

Reliance Industries limited is involved in various initiatives and programmes in the domains of corporate social responsibility and environmental sustainability. The following are some of the initiatives by the brand in various areas of focus.

Energy security

RIL recognizes the impact of the energy sector on the environment and strive to mitigate their impacts

·        Manufacturing divisions and upstream gas handling terminal have instituted ISO-14001 EMS

·        The manufacturing divisions have been audited for their environment management systems by the British Safety Council

·        A group standard and second party audit protocol for electronic waste management was developed

·        A programme was also initiated to make the HIV DOTS centre at Mora Village, Hazira, a “Model Renewable Village Centre” through power generation from renewable sources

Product Responsibility and waste minimisation

RIL is a major consumer of packaging materials for its Polyester & Polymer business.  Major raw materials for these packaging materials are paper and plastic. To mitigate its impact on the environment, the company deliberated on the 3 R’s (Reduce, Reuse, Recycle) for packaging procurement.

·        Consumption was reduced by optimizing specification and alternate product development

·        Packaging material was reused. Paper tubes used for POY packing were recovered from RIL-Silvassa for reuse at Hazira. Further, a returnable plastic unit was developed for POY packing

·        Waste was recycled and used as packaging material. Recycled plastic was used for manufacturing plastic locators/cups used for POY packing

·        Treat the effluent generated from manufacturing processes to meet statutory norms and strive to minimize the amount of effluent discharged

·        At Naroda manufacturing unit, the entire industrial waste was converted into manure through vermi composting, significantly reducing the waste discharged from the plant

·        Developing Local Vendors in order to ensure a positive impact of raw materials and products. RIL supports and encourages and develop local vendors

·        Sustainable purchasing practices by developing a long term relationship with vendors by providing technical and R&D support to vendors and sharing best practices with them

·        Ensuring Safe Transport and usage  -  ‘Suraksha Certificates’ mandatory for MEG transportation  by tank body inspection, top mountings and  fittings inspection, road worthiness of the vehicle and presence of all the required documents

·        Making Responsible Products

·        Pet Bottle Recycling

Water Conservation

·        Through different policy measures RIL has ensured that none of the operations consume more than 5% of the annual average volume of the water source by volume.

·        Tapping rainwater at most of the manufacturing operations. More than 52,000 Litre rainwater was used.

·        54.52% of water recycled at manufacturing divisions.

Environment and bio Diversity Preservation

·        Through a partnership with Ministry of Environment and Forests, Government of India and Gujarat Ecological Commission, RIL is setting up the National Centre for Marine Biodiversity (NCMB) - India’s first Centre of Excellence for the study of India’s coastal Biodiversity at Jamnagar.

·        Preventing erosion through PP Geobags: RIL envisaged the use of PP Geobags as embankments for protection of the coast. They provide awareness about the benefits of PP Geobags to Navsari irrigation department and supervise the implementation of the project.

·        Participated in Paryavaran Rath Yatra,a rally organized at Dahej to spread the message of environment protection and preservation.

·        Undertake large plantation drives where more than 2800 saplings in villages in Vadodara, 500 saplings in two tree plantation drives in Patalganga, 250 medicinal plants

·        Reliance Corporate Park (RCP) plants sapling every year.

·        More than 2 million saplings planted.

Education

·        Network of 11 schools.

·        Encouraging retention rates.

·        Support institutes by developing infrastructure and providing school kits.

·        Reliance Dhirubhai Ambani Protsaham Scheme – To encourage poor students

Mumbai Indians’ Education for All Initiative:

·        Raised over INR 1 million for each of the 5 partnering NGOs of Mumbai Indian’s Education for All initiative. In addition to the funds raised

·        Awareness was spread by Mumbai Indians about the work of these partner NGOs through sale of Mumbai Indians’ Education for All wristbands, official Mumbai Indians videos, TV commercials,

Health Care

·        Mobile Health care vans: Mobile medical services benefited around villagers in Hazira.

·        Awareness camps and vaccination drives, educate about sanitation and health.

·        Healthcare for the Differently Abled

·        Healthcare for HIV/AIDS & TB

Reliance Drishti

·        Initiative launched in partnership with the National Association for the Blind (NAB) in 2003

·        Initiated Cornea grafting and transplant drives

·        Reliance Drishti launched India’s first registered national Hindi newspaper in Braille on 19thMarch, 2012 which will be widely circulated through institutional partners to over 25,000 visually impaired persons across the country and will help bring to them the vast knowledge about the world including news coverage

The following are Reliance Industries Limited’s instituted registered trusts and foundations that work on various issues concerning the society and communities:

·        Reliance Rural Development Trust (RRDT) - set up to develop in Jamnagar, Gujarat

·        Dhirubhai Ambani Foundation) DAF) - focuses on Education, “Dhirubhai Ambani SSC Merit Reward Scheme”

·        Reliance Foundation (RF) - Rural Transformation, Education, Health, Urban Renewal and Arts, Culture & Heritage. ‘Bharat India Jodo’, aims to bridge the gap between the rural and the urban parts of the country

Critical Analysis of RIL’s CSR and sustainability initiatives

Reliance Industries as a brand has always been known for its huge size of operation and massive undertakings. It has strong presence in areas as varied as manufacturing, oil and gas infrastructure and retail. One of India’s post-independence success stories, Reliance Industries has significant ties with the Indian economy’s growth and development.

Reliance claims their growth and success are based on the ten core values; Care, Citizenship, Fairness, Honesty, Integrity, Purposefulness, Respect, Responsibility, Safety and Trust. However popular perceptions have never been so generous to the brand. There have been several allegations and accusations on the practices and actions followed by the brand and its leaders. Lobbying, political bullying, money laundering/ black money accounts, exorbitant personal spending, price manipulation of oil, violation of insider trading regulations being some of them. Media and social activists have played a major role in creating these perceptions. The open and silent feud between the Ambani brothers, a topic of great interest to the Indian media, has also not been helpful to the brand’s image.

Reliance Industries limited, as stated in the report have been involved in several CSR and sustainability initiatives. They have focussed heavily on the areas of product responsibility and sustainable practices in waste and energy management. As a true manufacturing and operations firm, it also seems to be the right approach to corporate citizenship and CSR. RIL is also invested in areas of social welfare like healthcare, community development, environment preservation and education.

However, this diversity itself seems to be also the weakness of the brand’s CSR and sustainability initiatives.

·        Even thought the brand has been invested on such large projects and initiatives in this domain, it’s not been highlighted to bring to the attention of key stakeholders like the potential employees, media and publication and the business community.

·        Another key observation is of lack of brand architecture in the area of CSR initiatives. The brand names or key brand elements are not present in the (Except Reliance Drishti and Mumbai Indian’s education for all) names or imagery.

·        However, on a positive note Neeta Ambani has been able to build her image as the face of social responsibility for the Reliance industries brand. This can be further leveraged and used to engineer favourable perceptions.

·        The brand’s focus on sustainable manufacturing and production processes, even though core to the brand, is an area which has received very low public attention. This can be a genuine area of brand differentiation and a key element in using CSR as a brand building tool

·        The brand’s high involvement and investment in the social responsibly and sustainability needs to be leveraged to the advantage of favourable perceptions using structured and professional branding practices

Reliance Industries limited is and, for a foreseeable future, will be also one of the largest industrial groups in the Indian scenario. As India moves ahead in the global economic environment and as Reliance Industries as a brand explores various avenues of business, it becomes essential to be seen as a socially responsible and committed brand. 

GLOBAL COMPANY: HEWLETT- PACKARD (HP)

HP has a genuine commitment towards environmental and social responsibility. This has helped it to grow as a leader in key markets. HP has translated its green credentials into profitable new businesses and better-performing existing ones, all while advancing its long-term position as a model corporate citizen in the global arena.

Need for sustainable marketing for HP:

·        Meeting Customer and Market Expectations—As customers become more aware of global environmental conditions, they are demanding more environmentally responsible products and services. HP's survey of 20 major customers in 1998 highlighted the expectations of its business and consumer customers.

·        Improving Market Access—The Government Affairs function at HP recently identified market access as one of the top three public policy issues. The linkage between market access and environmental performance is becoming increasingly clear with the surge of regulatory and legal requirements.

·        Increasing Cost Savings—If the goal is to create value for shareholders and customers, it is critical to reduce the money spent on waste in order to enable greater profits from products. Waste costs money. By implementing waste and energy reduction projects, companies have saved millions of dollars.

·        Creating Market Opportunities—As noted, changing environmental conditions create new market opportunities. A key characteristic of a successful company is one that is continuously adapting to change.

·        Enhancing Brand Image—Numerous marketing studies illustrate that people prefer to buy products associated with responsible business practices, given similar products and prices.

·        Leveraging competitive advantage- While HP traditionally enjoyed a leadership role in the early 1990s; other competitors are now meeting these environmental expectations, thereby raising the bar. To maintain a competitive advantage and market share, HP needs to take the leap toward sustainability.

Critical Analysis of HP’s CSR and sustainability initiatives

Hewlett-Packard (HP) proves that sustainability efforts can be a win-win proposition that is good for the environment and also good for the bottom line. HP has a long history of ‘doing the right thing’ that dates back to 1957. The company is the largest technology company in the world and it wholly integrates environmental considerations into its business strategy. The company sees sustainability as an integral part of the way business is conducted.

How it has achieved sustainability:

1. Building a team of internal champions

The challenge for HP was to spread the word and educate people within the company about its new objectives and policies. There needed to be more champions throughout HP helping to communicate these messages so that people from the research labs to the executive council would begin to think about sustainability as a business driver.

2. Building Support and Commitment

The next step involved rolling out this new strategy to the global network of product stewards. A second on-site workshop was scheduled with over 70 product stewards in attendance. The objective was to share the new strategy with the field staff; get their feedback, comments, and concerns; and then begin developing strategies to implement these changes within the various business units. The event generated a significant amount of energy and excitement as the ideas were translated into actionable steps. This proved to be an important step in building the momentum and commitment of staff at different levels of the company.

The table above shows how HP has integrated each of its stakeholders and its business processes in order to make a sustainable business model.

               

                                                                                    

The above figure is the high performance business model adopted by HP containing the following main elements:

1.     Growth:

Growth is measured according to the revenue expansion. HP is using its sustainability strategy to drive real revenue growth through four approaches by:

·        Winning new business while retaining existing business:

Recent requests for proposals (RFPs) have requested details about HP’s internal IT energy-savings plan and HP’s own energy usage, broken down by nuclear, coal and renewable sources. The customers that are asking about sustainability represent some of the larger contracts, creating the potential for significant sales.

·         Expanding the company’s distribution in Europe:

HP’s sustainability strategy has helped the company gain new distribution. A European customer proposing to resell retail HP products conducted a very thorough evaluation of HP’s sustainability program.

·        Charging a premium price for energy-efficient products

HP’s line of energy-efficient PCs and notebooks command a price premium of $10 to $20 compared with non-Energy Star–rated products. However, the energy savings they offer provide an attractive 24-month payback.

·        Entering new markets

HP has entered into a solar-technology licensing agreement for a revolutionary transparent transistor technology with Xtreme Energetics (XE), a developer of solar energy systems. Together, the companies are creating an energy system designed to generate electricity at twice the efficiency and half the cost of traditional solar panels.

2.     Profitability:

Profitability is measured by the spread between the return on capital and the cost of capital. HP is leveraging its sustainability strategy to drive profitability through a wide range of efforts as follows:

·        Making adjustments to shipping and logistics and reducing the need for virgin materials in manufacturing:

HP is reducing its air freight as well, in favor of ocean freight, and moving many truck shipments to rail—changes that are both saving money and reducing environmental impact.

·        Realizing cost savings through new efficiencies within data centers:

HP recently completed a three-year program to consolidate 85 of its data centers into just six high-efficiency locations in the US which is netting yearly energy savings from of up to 350 million kilowatt hours and annual energy cost savings of up to $30 million. The project has also served to eliminate many older technologies while reducing HP’s overall data center footprint by about 35%.

·        Reducing carbon footprints by substituting business travel with telepresence:

The evolution of videoconferencing as an alternative to corporate travel helps reducing environmental impact. HP’s state-of-the-art telepresence solution, called Halo studios, is now being rolled out as a distinct product for innovative customers.

3.     Positioning of the future:

HP’s sustainability strategy has already established the company as a clear thought leader in the industry—an advantage that leads to first-mover opportunities and first pick of top suppliers, employees and partners. As HP retools its infrastructure and distribution strategies, it further aligns its operations with emerging best practices,

giving it a competitive edge and opening new growth horizons.

·        Leading the way in the low-carbon economy:

The “dematerialization” of data centers, including the implementation of a photonic interconnects to eliminate the need for heat-producing, resource intensive copper cabling while improving processing speed and lowering bandwidth costs;

Low-carbon IT solutions to increase resource efficiency across the enterprise; An aggressive materials recovery program that goes well beyond traditional recycling; the program will create a profit center from both refurbishment and materials/ component sales into secondary markets.

4.     Consistency:

To ensure that its sustainability and corporate social responsibility (CSR) efforts stay true to their aims and are providing the kind of measurable returns this high- performing company insists on. HP has several processes in place to regularly assess and revise the company’s strategy. Some of the most effective processes have been the result of a radical move towards transparency, which has helped to co-opt the services of “watchdogs” and leveraged them to HP’s long-term advantage.

·        Building alliances and inviting dialogue with key groups

HP’s leadership in CSR and sustainability has provided a powerful platform to work with industry peers, NGOs and government agencies to influence the shape of future industry and national regulations.

5.     Longevity:

·        Achieving long-term gains by investing in suppliers and partnerships

·        Staying ahead of the sustainability curve

HP is using a threefold approach as part of its sustainability strategy: It ensures that its suppliers adhere to a stringent code of conduct keeps its finger on the pulse of trends in the enterprise business and individual consumer markets; and educates employees on expected behaviors that both drive performance and are consistent with HP’s sustainability objectives.

·        Building on a culture of responsibility

HP is ensuring its ability to sustain itself long-term by maintaining a corporate culture built on CSR values, by investing in suppliers and partners for the long-term, and by encouraging ideas about sustainability to bubble up from employees at all levels.