CSR and sustainable development: Do Indian companies care about the environment?
The trends highlight a dichotomy in the way companies approach environment protection interventions in India
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Data analysed by the ministry of corporate affairs for CSR expenditure of all Indian companies in 2014-15 showed that 14 percent (Rs 1,213 crore) of total CSR spending in India was made on activities focusing on conserving the environment. It was the third highest expenditure on a social impact issue after education (32 percent) and health (26 percent) and was greater than the amount spent on rural development (12 percent).
These figures highlight that companies today have an increasingly broad understanding of the risks and opportunities that climate change poses to their strategies and operations and that larger issues of sustainability triggered by climate change are becoming an integral component of dialogues with the major stakeholders. At the same time, verifiable corporate and partners’ accountability and reporting have proven to be key drivers to CSR getting embedded in the mainstream of strategy and business operations of companies.
A study conducted by NextGen to analyse the CSR expenditure (INR) of the top 100 companies for FY15-16 supports this trend. Among these companies, the top spenders in environment conservation were primarily from the following three sectors:
- FMCG - ITC (72 crore), HUL (22 crore)
- Energy companies – NTPC (44 crore), IOCL (30 crore)
- IT and financial services companies – Wipro (48 crore), Axis Bank (28 crore)
1. Focus on sustainable projects with long-term impact
A decade ago, the most common CSR activity with a focus on the environment was planting trees. Indian companies today are instead focusing on projects that have a sustainable long-term impact, such as installing solar powered lighting systems and water conservation projects.
By far, the most attractive environment-related CSR initiative involved the use of renewable energy, ranging from solar street lamps and lanterns to biomass cook stoves and various rooftop solar projects. The other emerging focus area tackles water-related issues with several projects on watershed development and rainwater harvesting.
One of the reasons why companies may prefer such projects to tree plantation drives is that access to clean water and energy has several cascading effects on the social and economic development – ranging from opportunities for better education, health, and income to increased safety for women and lower deaths due to reduced indoor pollution.
2. A shift from philanthropy to responsible business and strategic CSR
Companies have started moving away from traditional philanthropic projects and have begun institutionalising CSR activities strategically, thereby bringing business responsibility to the forefront.
Thus, for FMCG firms that source raw material from farmers, issues like securing and sustaining the livelihoods of farmers growing inputs for their products as well as local water regeneration has become extremely critical. Similarly, for energy companies, which are often considered to be the worst climate offenders, investing in environment-friendly projects serves to mitigate their risks from a reputation point of view.
3. Mainstreaming sustainability into business operations and the rise of shared value projects
For several of the largest spenders on environment-related projects, sustainability has become a way of doing business. ITC’s CSR Committee is aptly called the "CSR and Sustainability Committee." Similarly, HUL’s projects focus on water stewardship tie-in with Unilever’s global focus on addressing water scarcity. Axis Bank spent nearly 28 crore on reducing GHG emissions through the use of renewable energy and optimising energy efficiency, choosing to concentrate on reducing the company's footprint on the environment.
At the same time, several large companies are starting to work on shared value projects which create value for both the community and for the business. For example, as per their Sustainable Living Plan 2015, HUL has a clear road map to source 100 percent of agricultural raw material sustainably by 2020. And their sustainable tea procurement project carried out as a part of the CSR activities serves a dual purpose- meeting the 2 percent criteria as well as the company's own responsible business targets.
4. Environment protection is still not mainstream among a majority of companies
Despite the emergence of individual thought leaders, sustainability is still not at the forefront of CSR activities among a majority of Indian companies. This trend is apparent even among the top 100 companies. Only about a third of the top 100 companies spent a significant portion of their CSR budget on environment-related activities, with such projects accounting for a mere 10 percent of the total number of CSR projects carried out in FY15-16, as per the study conducted by NextGen to analyse the CSR expenditure of companies.
Conclusion:
The trends visible in the CSR projects about the environment highlights a dichotomy in the way companies approach environment protection interventions in India. While some are thought leaders in the space and see sustainable development and environment protection as an opportunity, for many others, the pressing need for acting on conserving natural resources hasn’t arrived yet.
As we move towards a low carbon economy (as a part of the Paris Climate Treaty, India pledged in its Intended Nationally Determined Contribution (INDC) document to reduce its carbon emission intensity -emission per unit of GDP- by 33-35 percent from 2005 levels over 15 years), it is hoped that more companies take their cue from the emerging thought leaders and use the opportunity of the 2 percent CSR obligation to work towards mitigating their impacts on the environment
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