Why PSUs should do CSR

The public sector has been instrumental in developing India’s economic power,keeping it safe from the global economic crisis. The net profit of PSUs has increased by almost six times in 2006-07 in comparison to 1997-98,and is now at Rs 81,550 crore. The 48 central PSUs listed on BSE as of February 8,2010,account for close to 30% of the total market capitalisation of the exchange. This is significant as a total of 4,880 companies are listed on the exchange.

At this point in time,while the Indian public sector is surging ahead,sustainability and corporate responsibility is sweeping the world,induced by climate change and global terrorism. Thus,the corporates as well as governments have been called upon to adopt policies responsible towards the society and the environment. In response to this global trend,inclusive growth and CSR as a policy is being promoted by the Indian government. As a part of this process,CSR is mandatory for CPSEs and is evaluated with a percentage weightage,reflecting its importance. CPSEs have been engaged in social activities in the past by spending a part of their profit but in an ad hoc charity mode. Thus,the transition from ad hoc charity to strategic CSR is not going to be easy. The CPSEs,which were till recently struggling to achieve profitability,are suddenly assigned the task of achieving triple bottom line targets i.e.,environment,social and economic bottom lines. Many CEOs of PSUs are yet to come to terms with the impact of the guideline. The usual practice of CPSEs is about to get a shock as the guideline demands proactive and strategic planning instead of a compliant and reactive approach.

The challenges are multi-faceted. First is the strategic integration of social and environmental issues with the corporate strategy,which demands comprehension of environmental issues,societal issues along with positive orientation of the top management. Second,skill building in CPSEs is required to plan,implement and monitor CSR programmes. Lastly,the most important challenge is to change and transform from a deeply entrenched single bottom line culture to a triple bottom line culture. This challenge of transformation demands dynamic leadership with wide vision and determination.

Thus,the new CSR guidelines demand more from the top management in terms of strategic leadership to initiate and nurture a culture of the triple bottom line. If challenges are met and CSR is applied as a key strategy,the opportunities are manifold.

At the national level,major change initiatives (both in social and environmental area) are possible. For example,the Saraswati River revival project supported by ONGC,which is under implementation,is expected to solve a major water crisis in the river basin,with many ecological and socio-economic benefits,apart from rebirth of a river. The CPSEs can design and implement innovative education and health delivery models,in an adopted district,investing money and the managerial capital,to be replicated by the government. The R&D sector attracts limited investment from the government. Needless to say that most of our R&D institutions are badly managed. CPSEs can use CSR budgets to support strategic areas of R&D that are beneficial for the nation. The Tata Group has already shown the direction by investing in areas of national interest such as the Population Foundation of India and setting up the Tata Institute of Fundamental Research.

At the corporate level,effective CSR management has the potential for cost savings,better employee retention,improved customer satisfaction and trust,competitive advantage,public approval and reduced conflicts with social and environmental authorities leading to better corporate image.

Thus,it may be concluded that opportunities are more abundant than challenges. Therefore,CPSEs are expected to rise to the occasion and score high on all the three bottom lines.

The author is president,Vision Consulting and chairman,Vision Foundation,New Delhi