India's Mandatory CSR Law Inspires Innovation

By Carol L. Cone

I just returned from my first business trip to India. The country recently instituted the world’s first mandated CSR law, requiring all companies doing business there, with at least $830,000 in profits, to allocate 2 percent of the average net profit over three years against key social and environmental programs.

While the issues are diverse – education, water and sanitation, financial inclusion, hunger, poverty and malnutrition amongst others – the intent of the Act is clear: to achieve significant impact at the grassroots level.

Couple that with a new Prime Minister at the helm asking for bolder and more innovative social action from the corporate sector, a large millennial population that’s increasingly vocalizing its preference for brands that do good, and mobile phone penetration nearing 80 percent, the time is ripe for action. Coming from a poor background, Narendra Modi, the new prime minister is a passionate advocate for India’s poor and is focusing on two key areas - access to banking and sanitation. In his recent Independence Day speech he challenged the country to “walk together, we move together, we think together, we resolve together and together we take this country forward.”

With these historic milestones framing the context of my visit, my speech – titled The Power of Possible – was poised to provoke the audience to think about the opportunity this presented for them to act strategically and embrace cross sector innovation.

And it was fitting that my speech at Praxis 2014 was held in Agra, home of the Taj Mahal. Constructed in the 17^th century by over 20,000 workers, this breathtaking monument is the physical manifestation of possibility. (Imagine transporting thousands of tons of white marble from Rajasthan, hundreds of miles away by 1,000 elephants with no roads, let alone crafting the magnificent building!)

Edelman, now India’s largest PR firm with 400 staffers in 11 offices, represents some of India’s largest companies as well as multinationals. Our meetings were fascinating. Our clients are taking the new law seriously. Some discussed new programs while others mentioned expanding previously made commitments.

I see the new law as a “gift” to India.

A comment that was shocking to many in the audience at Praxis 2014. But it is. Because the law thoughtfully sets out key infrastructure requirements that have taken decades to develop as critical elements in the creation of strategic and impactful public-private partnerships for social good. It also formally introduces CSR to the Boards of thousands of companies who may not have understood nor practiced the concept.

Among the key actions the law requires is the establishment of a governing CSR committee of three senior members (one independent from the company) with responsibilities to oversee CSR policy setting, its framework, implementation, measurement and reporting.

For those who want to understand the depth of the CSR mandate, PwC has created an excellent handbook.

The new law holds the potential for what is estimated to involve 8,000 companies, investing more than $2 billion in social programs. Yet, I see even more potential.

In my speech I challenged the audience to align their CSR commitments with business strategy, adding more resources from their companies, including key products, services, human resources and communications to programs. Incorporating these resources could expand the impact two or three fold.

For example, a business coalition in India, led by Dr. Mukund Rajan of Tata Sons (disclosure: Edelman client), has started a movement to have skilled volunteerism hours counted as part of the 2 percent requirement.

India already has leading companies taking innovative actions toward social issues.

Hindustan Unilever, following Unilever’s global Sustainable Living Plan (disclosure: Edelman client) has multiple campaigns underway in India. One of the most notable is the Lifebouy hand washing initiative. This program aims to change the behavior of children, especially under the age of five, by showing them how to wash their hands properly. This small behavior change has the potential to prevent life threatening diseases that often lead to tens of thousands of early childhood deaths. A fascinating innovation, the color green, had been added to the soap. It “magically” appears when a child washes for the correct amount of time. A terrific idea to impact behavior change.

Another campaign, from middle market jeweler Tanishq, celebrates a taboo Indian subject: remarriage. Described by Adweek as a “bold and revolutionary campaign,” Tanishq’s ads immediately sparked social media conversation and found honor among one of the world’s top women’s empowerment ad campaigns.

But Innovative products are also coming to market, specifically focusing on health issues. The Shell Foundation focuses on products and systems that support inclusive economic development. They fund concepts that support job creation, access to energy, urban mobility and sustainable supply chains. Its Envirofit cook stove, for example, utilizes more healthful power sources than kerosene. With sales over $300,000, this innovation provides health and environmental benefits and is now the No. 1 cookstove in India.

The Mahindra Group stimulates social innovation through its “Spark the Rise Fund,” a digital platform for individuals or groups to submit concepts to develop innovations. Project ideas are considered in technology, energy, agriculture and rural development, infrastructure, transportation and social entrepreneurship. Those selected for funding are aptly called “sparks.”

Companies are also recognizing the power of volunteerism, with the Times of India hosting multiyear campaigns to encourage citizens and employees to engage in literacy training for children and most recently English training.

With a population of 1.2 billion and more than 700 million living on $1 per day, the CSR mandate under the Companies Act should stimulate strategic engagement with social issues. Corporations can comply at the very basic level of the law or use this historic moment to innovate for the betterment of India, its people and economy.

The choice is there.

I trust the communication profession will help guide its clients to long-term, strategic and impactful programming not as just the right thing to do but also as key investments in India’s future.

Image credit: Dennis Jarvis, Flickr, cc

Carol L. Cone is global chair of business and social purpose for Edelman.