|Demand of the question
Introduction. Contextual introduction.
Body. Discuss how Corporate social responsibility makes companies more profitable and sustainable?
Conclusion. Way forward.
According to UNIDO, Corporate Social Responsibility is a concept whereby companies integrate social and environmental concerns in their business operations. In India, Companies Act, 2013 has made CSR contribution mandatory. According to the concept of CSR, companies have to spend a percentage of their profits towards the welfare of the community they are operating around.
How corporate social responsibility makes companies more profitable and sustainable?
- Reputation: CSR helps in growing the reputation and promote respect of a company which can result in higher sales. It leads to better relationships among stakeholders that enhances performance of organisations.
- Investment: CSR creates positive sentiment in the minds of investors and the public at large. An ethically-based corporate governance leads to more trust in the organisation and its work culture leading to more investors’ interest.
- Competitive advantages: A properly implemented CSR concept can bring along a variety of competitive advantages, such as enhanced access to capital and markets, operational cost savings, improved productivity and quality, efficient human resource base, better decision making and risk management processes.
- Employees’ motivation: CSR leads to higher retention and better morale of the employees. When employees are convinced of the values of the organisation they are working for, they hold the organisation in high esteem. Perceived social uprightness and moral values can win the employees more than any other incentive plans.
- Better Decision Making: Respect for ethics will force a management to take various economic, social and ethical aspects into consideration while making the decisions. Decision making is better as the decisions are in the interest of the public, employees and company’s own long term good.
- Protection of Society: CSR helps in protecting society in a better way than even the legal system of the country. CSR spent on the reduction of carbon emissions & curbing global warming is helpful for the sustainability of the environment.
- Tax benefits: Tax benefit is given on the amount spent as CSR which helps to increase the profit of the company.
- Increase customer base: CSR increases the presence of a company. For instance, when villages are adopted by the companies & developmental works like providing educational, health benefits etc. are provided, the people come to know about the company which ultimately helps the company increase its customer base.
- Sustainable development: Different activities like cleaning, establishing seed banks, schools, solid waste management units, electrification under CSR help to increase the standard of living of the people & their income which increases demands & leads to growth of the companies indirectly.
Thus a small contribution towards CSR works makes large gains for the company. It is often said actions speak louder than words. Thus CSR activities improve profitability and sustainability of the companies. The need is to encourage CSR & use it with the aim of welfare not just for financial profit by the company.