Why do businesses engage in CSR? Can CSR activities become financially feasible?

 

Why do business engage in CSR? Can CSR activities become financially feasible?

Corporate Social Responsibility is governed by Section 135 of Companies Act, 2013. Government of India has also set up a National Corporate Social Responsibility Data Portal. It is an initiative of Ministry of Corporate Affairs to spread the CSR related data and information reported by companies registered with it.

There are various reasons due to which firms engage in CSR activities. Various stakeholders of business want company to help society as businesses use society’s resources to earn profit. So, they should help society also by improving the quality of life of people by helping in preserving the natural resources and help in sustainable development of the society. As awareness among stakeholders is increasing businesses are taking more interest in CSR. CSR activities can become financially feasible in various ways which have been discussed below.

·       Contribution in CSR related activities help companies make a good reputation. This also helps businesses in avoiding negative publicity. As they try to impress various stakeholders like nongovernmental organisation, social groups, etc. These organisations highlight if a business misusing resources or wasting them. This leads to negative publicity. Hence, business spend in CSR to have a positive impact on these stakeholders.

·       CSR also helps in reducing employee turnover. As CSR activities motivate and help in retaining employees. Various studies like of Timberland has provided employees the opportunity to take significant amounts of paid time off to volunteer for social causes of their choosing. The company notes that this program helps ‘‘attract and retain valuable talent’’ (Pereira, 2003) have proved that spending money in CSR has positive impact on employee turnover.

·       Customer related motivations is one of the way in which business pursue CSR activities as they help them in getting more customers. For example Kotak Mahindra Bank as a token of appreciation for every customer who chooses for an e-credit card statement, they plant a sapling in partnership with Grow-Trees.com. Many companies partner with NGOs and other social groups through which they donate a part of the price you pay in a CSR project. This attracts customers in purchasing products of that company.

·       Companies can also save production cost as many business have stopped extra packaging or have switched to packaging using recycled material. This reduces the cost also helps in improving company’s reputation.