Is the PR business ready to face the CSR challenges pushed by the new Companies Bill?
24th January 2013
India Inc is at the edge of one of the biggest changes in history. The new Companies Bill 2012, already passed by the Lok Sabha, creates a strong policy framework for CSR activities. Once the Bill is law it is expected to be taken up by the Rajya Sabha in the upcoming budget session in February – “companies with a net worth of Rs 500 crore or more, or a turnover of Rs 1,000 crore or more, or a net profit of Rs 5 crore or more will have to set aside two per cent of their average net profits in the preceding three years for “corporate social responsibility” activities."
This analysis by Business Standard shows that at least 457 out of the 500 companies that make up the BSE 500 will end up spending a whopping Rs. 6,751 crores in the first year of the Act becoming law. This is bound to create strong market opportunities for the PR business as companies put in CSR programmes.
Such a major policy stimulus for CSR-related activities is unprecedented anywhere in the world and is expected to create a shift in communication challenges for the PR industry. Sudha Sarin, Managing Director at IPAN Hill+Knowlton Strategies says, "CSR has been used as a reputation management tool for a long time. But the Companies Bill will put this function to the fore of reputation management. Very often, companies engage in CSR as a crisis management device, however, we will now see CSR playing a greater role in building and managing reputation, as opposed to simply as a solution to reputation crisis management. It will be more proactive than reactive. This also calls for greater involvement of strategic communication partners from the word go.”
The question being asked is whether India Inc is ready to put in place the level of CSR programmes that will soon be required. “This is an interesting question. At first glance, one is tempted to say that it is a regulatory and mandatory ‘burden’ for companies, and yes, many have candidly expressed their displeasure at the prospect of compulsorily having to spend two per cent of profits on CSR. However, there are many examples of companies already sitting with drawing boards and charting out the next steps. Steps such as partnering with communication agencies, CSR advisors, making hires to support the new function and working closely with business managers. From our research, there is promising progress we see, and this is definitely a space to watch out for.” Says Sudha Sarin.
Once the new law comes into place PR insiders say that private companies can no longer be seen as such; in today’s increasingly transparent society with a 24/7 social media gaze, companies are social institutions. This will increase the pressure for PR to be more strategic. As Nitin Mantri, CEO of Avian Media, which has just launched its Corporate Responsibility and Sustainability practice in January 2013, says, "Companies will go all out to create 360 degree campaigns that are creative, innovative and which facilitate information, education and communication to cover a larger section of audience. The shift in strategic communications will result in campaigns that would go beyond media messaging, brand positioning through online and offline mediums but will involve community conversations as an integral part of the overall exercise."
Communications experts believe that Indian companies will also need to work to understand what entails CSR. Sharmistha Ghosh, Account Director at Avian Media says, "While corporate India is slowly warming up to the new social responsibility parameters and taking baby steps in moving away from mere philanthropy to sustainable programmes, it will take a lot of time and efforts for companies to change their “charity” mindset to a well rounded CSR approach."
Communication strategists such as Sudha Sarin believe that, “CSR has to go far beyond collecting and matching donations by employees, one day of volunteering in a year, sponsoring a school or an event or giving charity to NGOs. Recent developments in India have definitely put the focus on the need for skill development, which is also an issue high on the government’s agenda. Another hot issue that I foresee is the principles of ethical procurement and business practices, one that is increasingly determining purchasing decisions across consumer and business segments.”
CSR programmes would therefore need to move beyond transparency and production efficiencies to addressing deep seated problems facing India.
PR insiders therefore flag-off specific areas to focus on for CSR. Nitin Mantri says that “Extensive CSR campaigns can be carried out for betterment in water, sanitation, conservation of energy and health In places, where industries are being set up surrounding settlements, education (primary and skill-gap), creation of livelihood, health services, local welfare programmes and community engagement activities are the various areas where companies can contribute and deliver aplenty. Besides, with its conceptual expansion, issues pertaining to human rights and business ethics can also form an integral part of CSR."
The Companies Bill, once it becomes law, will set in motion sweeping changes in the way Indian companies build their public profiles, creating both challenges and unprecedented opportunities for the Indian PR business.