Is CSR greenwashing?
10th December 2021
Author: Sapna A Narula, Professor & Dean, School of Management Studies, Nalanda University, India
The mandatory CSR approach has given a lot of momentum to strategic CSR in India. What measures would enable companies to reap the maximum benefit? Also, how can CSR research inform policy and practice to achieve these objectives? When is CSR meaningful and when is it actually just greenwashing or SDG washing?
After the CSR was made mandatory in India through amendments in Companies Act, 2013, Indian companies started looking at it from a strategic perspective rather than the voluntary approach previously adopted by them. As more companies came under the ambit of law, CSR investments and other resources pooled in as per legal requirements and thousands of projects in different geographic areas were floated. Some of the other internal changes that were adopted by firms were having a CSR policy in place, involvement and engagement of the board in CSR planning and implementation, employee engagement in CSR activities and enhanced CSR networking
As per the CSR obligations, the companies crossing the prescribed threshold are required to spend at least 2% of their average net profit for the immediately preceding three financial years on CSR activities. It is estimated that the prescribed CSR budget of these 510 companies are INR 13706.01 Cr for 2021-22 with the leading Indian companies such as TCS, Reliance, HDFC, ONGC, Indian Oil, Infosys, SBI, NTPC at the centre. This seems to be huge fund in terms of efforts the stakeholders demand of Indian companies. It is hence required that a paradigm shift takes place in implementation of CSR goals in terms of direction, policy and implementation. Research shows that CSR action by Indian companies is most drawn towards a few of the UN SDGs, that is, health and education, well aligned with national and global priorities but we find that there are a few SDGs where there were no major projects/investments, for example, climate action, biodiversity and partnerships. The funds are also more diverted towards a few geographic regions leaving away the north-east and other regions which require maximum support (Poddar et al, 20191).
Having taken note of these, the government came up with latest amendments in July 2021 such as penal measures for non-implementation etc. and investments related to COVID-19. It is now becoming very clear to the companies that CSR is not merely a legal requirement but a management tool that can enhance financial performance and image of companies amongst customers, employees, investors, policymakers. The extent to which CSR is being employed for financial or other benefits to companies, without really being used as a genuine way to address a range of UN SDGs – including reducing organisations’ effects on the environment – is still unknown and requires further investigation. As a researcher, I feel there are shortcomings that should be addressed before firms can be judged as having meaningful CSR policies in place. Moving forward, I recommend:
- The companies must embrace strategic CSR in terms of short term and long term goals and what it wants to achieve of them. Both quantitative and qualitative targets must be set in terms of CSR and these targets must be communicated within the organisations
- There must be clear cut alignment of CSR activities with the national priorities and the global SDG agenda. In fact, the companies rather than focusing on one or two SDGs must widen the ambit of CSR with relevance to other SDGs most importantly water, waste, circular economy, climate action, biodiversity, partnerships
- Communication plays an important role in order to reap maximum benefits of CSR – for example, customer communication, employee engagement
- CSR must be fully communicated and understood by all the departments within the organisation and these departments must be oriented toward responsible management and its benefits.
- There must be a board level engagement in promoting CSR agenda in terms of timely formulation and review of CSR policy, actions and its implementation
- The impact assessment of CSR programmes by companies must be measured in terms of pre-defined indicators (both quantitative and qualitative).
- There must be collaboration amongst the firms to work on joint projects in responsible management. Respective industries must also float their responsible management agenda in terms of materiality and stakeholder demands
- Knowledge management in CSR is the need of the hour. The national CSR portal and database can play an important role. Such a system can work towards jointly implementing CSR goals contributing to national and global priorities
Based on the above, it is extremely important to back these initiatives through novel research directed at emerging countries like India, Brazil, which exemplifies best practices, and explores:
- What benefits are companies deriving from their CSR initiatives?
- How have companies been able to create impact on various communities through their CSR activities?
- Are companies merely doing greenwashing or UN SDG washing and how do we recognise it?
- How do we recognise meaningful outcomes from a company’s CSR?
- Is the CSR direction clear in terms of policy, investment and engagement?
The same is not true for India but also many other developing and emerging economies where CSR is still not legal. By answering these questions, CSR can inform policy makers at national and global level to make informed policy decisions; at the same time engaging with for practitioners.
Poddar, A, Narula, SA, Zutshi, A. A study of corporate social responsibility practices of the top Bombay Stock Exchange 500 companies in India and their alignment with the Sustainable Development Goals. Corp Soc Resp Env Ma. 2019; 26: 1184– 1205.
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