Weaving Social Responsibility with Business Strategy: A Case Study of South India Paper Mills
Any company in any country can be a responsible leader, if it chooses to
be so. South India Paper Mills (SIPM), a medium-sized family business
manufacturing recycled paper integrated corporate social responsibility (CSR)
activities early in its business strategy; activities such as providing free
treated water for agriculture to the local farmers while fi nding a way of
disposing of wastewater. The company voluntarily increased compensation and
guaranteed employment to the children of retired employees, which ensured
better living and educational standards, provided employment opportunities, and
reversed the migration trend to the city. The acute power shortage led the
management to generate its own power with the locally available biomass to
ensure a steady supply of power and income, by supplying excess power to the
State, and a regular source of income to the villagers.
Introduction
SIR ADRIAN CADBURY IN HIS SPEECH AT THE GLOBAL CORPORATE GOVERNANCE
FORUM, WORLD BANK 2000 SAID:
‘Corporate governance is concerned with holding the balances between
economic and social goals and between individual and communal goals. The
governance framework is there to encourage the efficient use of resources and
equally to require accountability for the stewardship of these resources. The
aim is to align as nearly as possible the interests of individual, corporation
and society.’ (http://www.corpgov.net/library/defi
nitions.html)
Companies need to make profits, and that is a foregone conclusion. But
what is new is at what cost can it make profits? To what extent can a company
go on making profits? And is profit the only motive? Corporate social responsibility
(CSR) is about how an organization can use its core competency to achieve its
financial and nonfinancial goals.
The former UN Secretary-General Kofi Annan, a strong advocate of CSR,
terms it ‘the human face of corporations’ and calls it ‘a license to operate as
a business in the short term, a necessary condition for sustainability and competitiveness
in the long term’.
CSR is a term which has undergone a sea change and has evolved from
mercantile charity to corporate citizenship. The term is new but the concept is
not. In India it has its roots in religion along with a tradition set by
royalty. It was natural that business houses should follow this for a variety
of reasons like education or religious activities through foundations or
trusts. The difference between then and now is that the donations, monetary or
otherwise, were from the personal wealth of the promoters and did not belong to
the shareholders as the capital does now.
Over time, philanthropy took the shape of the adoption of a village,
providing basic infrastructure or education, but such activities were kept at
arm’s length and did not constitute an integral part of the business. Many
activities in the guise of CSR have had absolutely no connection with the core
business operations and were mostly done with the selfish motive of buying
peace with the surrounding community. They did not have a strategy or a well laid
out plan for long-term implementation, and were, and still are, dependent on annual
budget allocations. The responsibility of the corporation ended with the
disbursement of the budgeted funds and no measure was taken to check the
success of the program. What most companies failed to understand is that CSR is
not an unrelated activity, but is one which leads to a win-win situation, both
for the organization and the beneficiary. When this is not the attitude, the first
to feel the axe during a downturn or recession is CSR.
The changing business philosophy is the result of businesses being more
competitive. Liberalization has opened doors to new competition, and business
houses are feeling the need for innovation. Contrary to the perception of most
people and organizations, CSR now is not only restricted to larger
organizations or cash rich multinational corporations (MNCs) but is adopted by
medium concerns, too. There exists a difference between the ‘do good’ activities’
which are often passed off as CSR and reported in the glossy annual reports and
those which have been integrated into the business strategy. Those
organizations that did walk the talk of CSR did so because their
promoter family believed in it. Where the Board of Directors is silent or
indifferent in this matter, it is the CEO or the top management which shapes
the CSR policy. True cases of the conviction of the leaders both in India and the
rest of the world have been witnessed.
India in the old economic system was no better than any other developing
nation. In a country of a teeming billion population and unequal wealth
distribution, the shareholders of a company, being widely scattered, were recognized
as the only stakeholders even to the extent of the receipt of dividend only.
But in the present market economy, with competition from every quarter,
companies are judged not only by their financial performance but also by the
level of their corporate citizenship. We find different models of CSR which
have become the central theme in business strategies. One such case of a pure
business model is that of South India Paper Mills (SIPM). This study is based
on an interview with Mr Manish Patel, Chairman and Managing Director, SIPM,
Nanjangud, Karnataka, India in November, 2008.
Source- M. Kanchan published in Corporate Social Responsibility and Environmental
Management Corp. Soc. Responsib. Environ. Mgmt. 17, 169–172 (2010)
If you want Dissertations on CSR Contact Mahasagar Publications.
