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CSR - A WIN - WIN BUSINESS MODEL Col. Prakash Tewari (Retd) CSR and R & R Tata Power Company Prelude • Impacts of Business • Integrating Business and Society • Emergence of CSR • Mapping Social Impacts • Responsive CSR vs Strategic CSR • Moral Purpose of Business 1 “Human Beings are animals, We are sometimes monsters, sometimes magnificent, But always animals. We may prefer to think of ourselves as fallen angels, But in reality, we are risen apes.” - Desmond Morris 3 Business and Society Business can impact society in three ways • Economic • Environmental Business • Social Impact of Business on Society Impact on business on society can be positive as well as negative. Pollution Deforestation Climate change Economic growth Raising standard of living Business Impact on Human Development • Business impacts poverty, literacy, education and life expectancy. • Economic growth is only a means, though an important one, for human development. • Human development is both an outcome and a process of enlarging people’s choices to lead lives they value. Business and Environment In today’s world, environment is an increasingly sensitive issue. This means that any failure to follow environmental norms could promptly result in a public litigation being slapped on the corporate. Economy Vs Ecology Economy and Ecology Impact of Business on Communities • Change in livelihood patterns on account of natural resources being impacted • Change in land use / leading to socio-politicaleconomic impact (loss of identity, culture change) • Land owners become landless, or marginalised farmers • Socio-psychological impact thru contrast in living standards • Stress on local environment quality (air emissions, effluent, etc) Impact of Business on Communities • Stress on local ecology (flora and fauna) • Stress on local resources – water, land, rural energy sources • Increased dependence on the industry by the community • Influx of migrant labour • Opportunities for Business to secure goods and services • Opportunities for community to improve their quality of life Scope of Collaboration Environmental Reducing carbon emissions and hence decreasing the chance of environmental irregularities. Social If people do not have the resources to deal with today’s stresses, then they are unlikely to be able to deal with the additional stresses associated with climate change Adaptability Gap Economic Protect , enhance and diversify asset base through economic activities 3 Integrating Business & Society • CSR understand interrelationship between business & society • Corporate need healthy society • Society needs successful corporate • Focus on intersection than friction • Mutual dependence implying principle of shared value Emergence of CSR • Issues that shook corporate • Corporate response Justification • Moral Obligation Good citizens – ‘Do the right things’ • Sustainability ‘Meeting needs of present without compromising future generation’ • License to Operate Permission from Govt, communities & stakeholders • Reputation Justify CSR initiatives – Brand, image, morale & values of stock School of Thought • • • • • • • Focus on tension than interdependence Non strategically aligned Fail to identify/prioritize/make impact Uncoordinated & philanthropic Not linked to internal/external activities Lost opportunity Social benefits dissipated Identifying Points of Intersection • Interdependence takes 2 forms Company impinges through its operations External social conditions influence corporations Mapping the Social Impact of Value Chain •Air pollution •Warm water discharge •Ash disposal •Impact on livelihoods •Energy & water usage •Worker safety & labour relations •Displacement •Loss of livelihoods •Loss of infrastructure •Irreversible loss to natural resources LAND ACQUISITION technically feasible location identification, purchase of land LOGISTICS incoming material, storage, data collection, service •Transportation Impacts (e.g., emission, congestion, logging roads, safety) •Pollution •Dust (SPM) •Health •HIV/AIDS OPERATIONS Generation (emission measurement), transmission (decentralised), distribution (smart grid) •Conservation •DSM •Efficiency TRADING advocacy, open axis regulation, short term transactions, REC, website •Pricing practices (e.g., price discrimination among customers, anticompetitive pricing practices, pricing policy to the poor) •Consumer protection •Global partnership for development CUSTOMER MANAGEMENT customer support, complaint resolution, repair Support Activities •Financial Reporting practices •Corporate Governance Practices •Transparency •Procurement & •Supply Chain practices •Education & Job Training •Labour Standards •*Gender equality CORPORATE INFRASTRUCTURE financing, planning, investor relations HUMAN RESOURCE MANAGEMENT recruiting, training, supervision system PROCUREMENT components, machinery, advertising and services TECHNOLOGY DEVELOPMENT product design, testing, process design, material design, market research *R&D *Relationships with Universities *Ethical Research practices *Product Safety External Social Conditions •Fair and open local competition •Intellectual property rights •Transparency •Availability of human resources •Availability of scientific and technological infrastructure •Sustainable natural resources Input Conditions Presence of high quality, specialized inputs available to firms •Availability of local suppliers •Access to firms in related field Context for Firm Strategy The rules and incentives that govern competition Related and Supporting Industries The local availability of supporting industries Local Demand Conditions The nature and complexity of local customer needs •Peculiarity of local demand (e.g., cultural and society specific needs) •Demanding regulatory standards Choosing Social Issues • Social issues that are not significantly affected by a company’s operations nor materially affect its long-term competitiveness Generic Social Impacts Good Citizenship RESPONSIVE CSR • Social issues that are significantly affected by a company’s activities in the normal course of business Value Chain Social Impacts Mitigate harm from value chain activities Transform value-chain activities to benefit society while reinforcing strategy • Social issues in the external environment that significantly affect the underlying drivers of a company’s competitiveness in the location where it operates Social Dimensions of Competitive Context STRATEGIC CSR Strategic philanthropy that leverages capabilities to improve salient areas of competitive context The Moral Purpose of Business • Contribution to economic prosperity • Corporate social integration towards building shared value • Leading to self sustaining solutions