Does CSR really build BRANDS?

Jitesh Patel, Sria Majumdar, IIM S

Does CSR really build BRANDS?

“We do not claim to be more unselfish, more generous or more philanthropic than other people. But we think we started on sound and straightforward business principles, considering the interests of the shareholders our own, and the health and welfare of the employees, the sure foundation of our success.” -Jamshetji Tata

Coming from the founder of Tata Group, the most socially responsible corporate entity in the country as per Times Foundation survey, this quote helps us put CSR in perspective. In a world where CSR is no longer a choice but a necessity for business; companies seem to forget that the foundations of CSR can be strong only when it is built into the fabric of the organization. Neither is CSR altruism, nor is it a fad- a survey of business leaders in the US found that 8 out of 10 CEOs believe that CSR helps their bottom line and 75% say that people have a right to expect CSR from firms. Even the Economist editors recently admitted that CSR has moved from the domain of ‘do-gooders’ to mainstream. It is accepted today that CSR cannot sustain when it is treated as charity, it requires modifying business models to achieve the triple bottom line of people, planet and profit.

While Corporate Social Responsibility is the need of the hour for sustainable development of the environment and societies across the globe, it is even more relevant in our country given the gross inequalities and the fact that development is still in the initial stages. CSR in India is marred by scepticism from intelligentsia and implementation challenges at the grass roots. To top it, there is no authentic data available on the kinds of CSR activities, coverage, policy etc. While evaluating the success of the CSR activities itself could be a whole article, we try to evaluate how CSR is helping organizations in building their corporate brands. The consumer empowerment movement across the globe has made cynics of all customers, and many fear that CSR is just window dressing. Through this article, we have tried to understand what makes CSR a successful brand campaign.

When we started writing this cover story, the lines between ethical consumerism, sustainable marketing, green marketing, CSR, Business Ethics & Corporate Citizenship seemed to blur. We were forced to rise above the jargons and focus on what CSR really means to companies and to the stakeholders. We explore definitions of CSR in our next section, but for the purpose of our article we have considered all activities of the company which help society and environment, and in turn affect the company’s image and the corporate brand.

Defining CSR

The term “social responsibility” was proposed in the U.S. by Frank Abrams, Chairman of the Board of Standard Oil of New Jersey in 1951, in a statement about the duties of executives to society. It gained a following with the publication two years later of the “Social Responsibilities of the Businessman” by economist Howard Bowen who, having surveyed the consequences of laissez-faire economics in the 1920s through to the Great Depression, concluded that business had obligations to society over and above creating jobs, paying taxes, and obeying the law.

Corporate Social Responsibility started off as charity with roots in ethics. Organizations had surplus profits, and some leaders, who were philanthropists, chose to distribute their wealth among the not so privileged. Then globalization happened, and the world became a smaller place with sourcing, production, consumption of the same product spread across multiple continents. Businesses realized that the only way to grow was to help the consumers grow with them, and a more collaborative development model was employed. On the other hand, rapid environmental degradation led to concerns about sustainability of our planet- leading to greater customer consciousness. Also, various Enrons of the world forced companies to focus on ethics. Suddenly, it was not uncommon to see capitalists invest in social and environmental upliftment and abide to ethical standards, even build business models which led to betterment of society and environment. While CSR started off as some leaders looking at the triple bottom line, today it has become a qualifier.

The World Business Council for Sustainable Development in its publication ‘Making Good Business Sense’ by Lord Holme and Richard Watts, said ‘Corporate Social Responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large.’ While there is no universally accepted definition, the key issues in CSR are accepted by all - environmental management, responsible sourcing, stakeholder engagement, labour welfare, community relations, gender equality, good governance and anti-corruption measures.

We see companies engaging in Corporate Citizenship for multiple reasons- reputation and brand building, competitiveness, risk management, enhanced access to capital and markets, increased sales and profits, operational cost savings, improved productivity and quality, efficient human resource base and enhanced customer loyalty. Undoubtedly the greatest motivator for a company to go in for CSR is reputation and brand building, and surveys corroborate this conclusion.

In the context of measurement of CSR, the ISO 26000 by the International Organization for Standardization is interesting. This standard offers guidance on socially responsible behaviour and possible actions. However, in contrast to ISO management system standards, is not certifiable. CSR rating agencies have sprung up across the globe, and demand for non-financial measures of value creation has increased. Social accounting, auditing and reporting have emerged as disciplines of study. Yet, it would be a mistake to believe that CSR is only about compliance to standards, laws and indices.

Some companies have managed to do CSR and build brands. Some have done CSR only to be labelled as window dressers and green washers. And for some, CSR has had no impact on brands. In the next section, we examine some global as well as Indian firms which have managed to walk the talk.

Success Stories

Reputation Institute, an International Organization, has tracked how CSR ratings affect the company’s reputation and brand. In the ’08 and ’09 studies, they discovered that the CSR index predicted 40% of overall reputation. In the Indian context, the Times Foundation survey found that TATA Group (67 per cent) was the numero uno company with active CSR initiatives, distantly followed by Infosys (13 per cent), ITC (12 per cent), NTPC (11 percent), Anil Dhirubhai Ambani Reliance Group (10 per cent), Ambuja Cement (9 per cent), Microsoft (7 per cent), Wipro, BILT and L&T (6 per cent each). The findings of the survey place education, health and environment as three of the most popular areas of intervention for companies as part of their CSR initiatives. Globally however, environmental issues including climate change are the most popular investment areas for CSR.

Organizations like Body Shop, Ben and Jerry’s, Patagonia have been cases studies in Business Schools, highlighting the corporate citizenship initiatives of these firms. These efforts have led to their success, and finally their take over (in many cases) by mainstream companies. The top firms in CSR in US context today include Walt Disney, Microsoft, Google, Honda, Johnson & Johnson and Pepsi. However, in this section we focus more on Indian success stories, as we believe the Indian socio-cultural context is quite different.

No discussion on CSR in the Indian scenario can be complete without the Tata Group. A group which has become synonymous with trust and ethics, and doing good for the community- the company has achieved what many firms would kill to get. Consumers trust the brand and anything which has a ‘TATA’ to its name, must be honest and true. In this context, it is noteworthy that even the Tata Group which traditionally never advertised its CSR, is now doing the same. The ‘Values Stronger than Steel’ campaign, highlights how Tata Steel, a Tata Group company has always focussed on ethical practices and employee and society development. Then there are brands like Mahindra Group, which have only recently started with massive CSR initiatives globally such as the RISE campaign. This initiative not only aims to tie together all the Mahindra entities, it also shows that the brand is becoming more socially conscious.

Overall, the FMCG sector seems to lead CSR initiatives with ITC’s E-Choupal and HUL’s Project Shakti. From being a cigarette mogul, ITC is now known for building public private partnerships, social and farm forestry, reviving Indian Classical music and the e-Choupal initiative. Needless to say, consumers admire the company for its sustainability efforts. ITC is also one of the few Indian firms to come up with a dedicated Sustainability Report year on year, and they are GRI - G3 Compliant Application Level A+. On the environmental front, the firm is carbon positive for five years in a row, water positive for 8 consecutive years and waste recycling positive for last three years. ITC, unlike the Tata Group has never shied away from broadcasting its CSR initiatives. Be it PR or advertising campaigns such as ‘Responsible Luxury’ for ITC Hotels, the claims are always in your face. In the long run however, we feel that the authenticity of Tata’s CSR cannot be matched by aggressive advertising.

HUL’s success in reaching out to women self-help groups across the country, and giving them a sustainable livelihood source has been so successful that the model has been taken to Srilanka and Bangladesh. It’s not surprising then that HUL’s ‘Small Actions, Big Difference’ has been translated to 3 of the top 10 brands in India being HUL brands. Coca Cola (another brand which has a dedicated sustainability report for India) focuses on water stewardship, sustainable packaging, energy management, climate protection, solid waste management etc. and this had led to greater brand recognition and increased brand equity. Coca Cola India has won the Golden Peacock Global CSR Award for 2009 for two consecutive years in recognition of the company’s water conservation/management practices and community development initiatives. The fact that such awards have come to exist, again prove the point that brands are being built by CSR.

These are some brands that have gained in their mainstream business due to their CSR focus. Brands continue to shift towards CSR and CSR spends have increased. More importantly, CSR discussions are now imperative in the board room. CSR helps build brands, but only when brands live up to their promise. Green washing and window dressing is severely punished in this connected world, and there are other brands which haven’t really been able to cash in on the CSR hype despite having done good work in this field. We explore some of these organisations in our next section.

CSR: Not always building brands!

Today, CSR has become the mantra for every organisation in the world. It is next to impossible to find a company which doesn’t do CSR as part of their activities. Everyone has a Sustainability & CSR tab on their website, everyone talks about it yet there are companies which are unable to connect with the consumers based on their CSR work. These are companies which have done quite a bit of CSR but it hasn’t contributed in building their brand. These are companies which customers don’t associate with CSR, but are yet strong and powerful brands in themselves.

Pepsico India is one such company. Their emphasis on sustainability is evident from the vast amount of work they have done in India ranging from community development, water replenishment, waste management and partnering with farmers. Pepsico India has spent over $11 Mn in the years 2008-10 for their CSR activities in India. Despite this, the Pepsi brand in India is not viewed as one which is socially responsible. There are instances where Pepsico has suffered because of being depicted as a Multi-National Corporation which is exploiting the resources in India – especially water. Pepsico has come with labels on their packaging to dispel the myth but to no avail. It also has an exclusive website which details out the various steps Pepsico has taken for water conservation and how it has emerged a water positive organisation. The Pepsi brand is seen as a youth oriented one signifying freedom and a slight streak of rebellion among the younger generation. Over the years, its communications have been consistent to this theme and it has therefore emerged as one of the strongest brands for the 18-25 segment. This could be one reason that the social responsibility aspect is never really connected with Pepsi. Their positioning for the brand doesn’t gel with initiatives like water conservation and it is in cases like these that CSR fails to propel the brand’s success. There is one more way of looking at this, it might turn out that is the “true CSR” which the company continues to do despite gaining no obvious brand benefits out of it.

The case of Reliance Industries as an organisation is something similar. Their websites lists out a myriad number of programs through which it has contributed to different spheres of health, infrastructure, education development and also environment protection. The public perception of Reliance though is that of a ruthless corporate entity which doesn’t give back enough to the society. The question then becomes, is Reliance not doing enough CSR? Or is it not marketing its CSR as well as other companies are? This is a pretty dicey question and the answer probably lies somewhere in between. The judging of CSR as already been discussed before has become a matter of great debate. Reliance Industries has won a lot of awards at the corporate level for their social work but the general public is more or less unaware of these developmental actions. Reliance Industries major operates in the Oil and Gas segment which is itself viewed as a great threat to the environment and ecosystems. The CSR reports and work take more prominence in this industry because companies are desperate to break the mould of being called a ‘polluting organisation’ and want to be seen as a green, socially conscious entity. British Petroleum was ranked in top 3 in the Sustainability index on Dow before the oil spill happened and all its work came to nought. These are problems companies have to deal with because they work in an inherently risky industry which makes humungous amounts of money.

Challenges

CSR has evolved to become more of a necessity than an option. We’ve seen how it is being used to build the brand value for an organisation. There are still many challenges to overcome before it becomes a two way process. The two way process; actual CSR work being done rather than just reports and window dressing and this work benefitting the organisation’s image in the long run.

Government Policy : The Government Policy in India with regards to CSR is pretty lax. The policy could empower private organisations to work more closely in conjunction with public ones to reach the grassroots of the rural communities. For this , the policy first has to address the working of the public bodies. The Government’s policies have to move away from the myopic view of CSR being a donation driven activity and use it more as a participative tool. The encouraging point to note is that the policy has ensured that there are enough number of Public Sector organisations which have come up trumps in implementing CSR initiatives.

CSR in Small and Medium enterprises : SMEs have typically not been involved in CSR activities. This has been seen as the responsibility of the big corporate houses. The Government can try and incentivise CSR for the SMEs to set the ball rolling and this in turn will have a major impact on India’s development since the number of SMEs and their potential impact would be significantly high in India.

CSR Metrics: The fact that CSR is part of every company’s corporate agenda has made skeptics out of the normal consumer. When all companies come out with Sustainability reports which look more and more similar each year, it is difficult to pinpoint the ones which are doing the actual work and other who are just talking about it. The need to identify metrics which make it easier to pick out the genuine work is essential but remains an unsolved issue

Disparate Brand Identitites: In some cases, though the companies indulge in CSR , their brand is such that it is disparate with the whole concept. The whole idea of socially conscious might not fit in with how strongly the brand conveys its other personality traits and CSR doesn’t become a significant contributor. This is more of a marketing problem, for the company to figure out which acitivity will fit in with the brand image and bank on this to propel the CSR to prominence.

The examples conclusively establish the fact that CSR does have a significant impact on brand value of the organisation in most of the cases. The dilemma is that, whether it was success of the CSR activities themselves or the marketing of these CSR activities. It won’t be long before the consumer realises the difference between CSR and window dressing, and that will be when the true impact of CSR on brands will be realised.