On April 1, 2014, India became the first country in the world to legally mandate corporate responsibility. The new rules in section 135 of India’s Companies Act make it mandatory for companies having net worth of rupees 500 crores or more, or turnover of rupees one thousand crores or more or a net profit of rupees five crores or more shall constitute a Corporate Social Responsibility Committee.
UNIDO (United Nations Industrial Development Organization) on the other hand has been advocating the ‘Triple-Bottom-Line’ (TBL)-Social, Environment and Financial accountability for quite a while now. This integrated approach is relevant to all enterprises, small, medium & large.
While key purpose of any Business to exist, is to generate economic wealth and employment, it has to also fulfill its responsibilities of being a ‘responsible Citizen’.
Therefore, an organization needs to willingly accept and participate in building the society at large. Businesses can see CSR activities as opportunities to move above charity or pure philanthropic endeavor to something more useful and meaningful for their business.
They can leverage this to enhance their brand equity. This is an oft-forgotten role of CSR – to be able to build purposeful brands!
To fully appreciate what brand equity is all about, we need to first define the ‘Brand’.
There are many definitions of what a brand is. At Vertebrand we define it as below:
“A Brand is a bundle of functional benefits and added values that some people value enough to buy into repeatedly”.
In this competitive and digital era, brands struggle to keep a sustainable differentiation (added values) which keep them ahead of their competition. A well- thought through efficiently & effectively run sustainable CSR can provide that differentiation so vital in building a Brand Equity.
Brand equity is both for Internal customers (current and future employees & Investors) and External stake holders – customers, vendors, government bodies & society at large. Well-executed CSR makes the Internal customers proud and happy leading to brand loyalty, which we know builds strong brand champions.
Unfortunately, few companies in India have truly leveraged CSR for the benefit of their corporate brand equity.
Based on Annual Reports, Top 3 companies for CSR in 2019 have been Tata Chemicals, Infosys Ltd. and Bharat Petroleum Ltd. Employees of BPL contributed rupees 4.27 crores as CSR for Covid-19 relief fund. From the way CSR is managed in these organizations, it clearly fuels the passion of Internal Champions to build the Brand equity.
Concept of CSR is not new to India. The term maybe. Philosophers like Kautilya from India promoted ethical principles while doing business. The concept of helping the poor and disadvantaged has been cited in most religions of the world. “Zakaat” followed by Muslims, is donation for one’s earnings which is specifically for that purpose. Similarly, Hindus follow the principle of “Dharmada” and Sikhs the “Daashant” to cite a few.
While CSR is well practised & reported by almost all Fortune 500 companies, yet there is no single definition of CSR that is universally accepted. Three key definitions that are widely accepted –
- Philip Kotler and Nancy Lee (2005) define CSR as “a commitment to improve community well being through discretionary business practices and contributions of corporate resources” whereas
- Mallen Baker refers to CSR as “a way companies manage the business processes to produce an overall positive impact on society”.
- Archie Carroll describes CSR as a multi layered concept that can be differentiated into four interrelated aspects – Economic, Legal, Ethical and philanthropic responsibilities.
Many corporations around the world are engaged already in CSR. Here we are short listing just two such interesting examples showcasing CSR, impact on Brand Equity:
- Chipotle and Intermarche –
Food waste statistics are very shocking. Nearly 33% of food produced in the world is lost or wasted – $990 Billion. (Source: Food and Agricultural Organization of the United Nations). “The Inglorious Fruit and Vegetable” campaign, aimed at reducing waste of less-than-perfect-looking food by Intermarche, a French Supermarket. By selling “inglorious” produce at a 30% discount, and heavily publicizing the initiative. They even ran an ugly fruit and vegetable contest on their Instagram page. As per Intermarche: “This initiative is a complete success because it’s win-win-win campaign: consumers get the same quality products for cheaper, the growers get money for products that are usually thrown away and Intermarche increased its business by selling a brand new line of products”.
- Cadbury Diwali ad–
Cadbury created sweet surprises for local businesses across India. Powered by AI, Cadbury created a hyper-personalized ad to reach out to over 1800 local retailers, across 260 pin codes, whose businesses is being promoted locally through the campaign. The campaign has caught the attention of netizens as it is being applauded across social media – Brand Cadbury has won hearts & eyeballs !
While all customers are important, the millennials and Generation Z is driving the business of today. They believe companies should invest in improving society and look for solutions that will assist the environment at large. They believe companies must transparently share the positive impact they are making.
A sustained and well run CSR will go a long way in enhancing the Brand Equity of any organization – small or large.
High time Indian Corporates look at CSR as a strategic initiative that will positively impact brand equity – rather than a mere charity for a social cause !