Understanding Corporate Social Responsibility and Socially Responsible Investing - Part 1

Enterprises are often built with the objective of generating profits. However, as the business grows overtime and establishes itself, it needs to stand for more than making money.

In India, multinational enterprises are governed by corporate guidelines and practices that dictate goals for sustainable development for the society. The dialogue on Corporate Social Responsibility (CSR) is about six decades old. Roots of CSR can be traced back to corporate philanthropy, popular in North America in the 1950s. Back then, CSR encompassed a one-time charitable donation supporting a social cause.

In the recent past, the importance and form of CSR is not restricted to donating money. Businesses are increasingly interested to weave social support culture into their organizational fabric. CSR in India manifested in three major forms with businesses creating trusts and institutions dedicated to a social cause. In the 1890s Jamshedji Tata developed scholarships to aid students in pursuing education opportunities outside India. From banks and allied institutions financially aiding small and medium scale businesses to corporates contributing for a greener planet, CSR has come a long way.

As the application of CSR widens and gains momentum, it has become crucial for companies to identify a social cause they deeply care about. Consumers, employees and stakeholders associate CSR with the brand image and they hold companies accountable for their actions that create adverse social impact. There are companies that create a robust CSR plan unrelated to their core businesses and the second type are companies that create value propositions around a social cause. Companies that aim in lowering the usage of fossil fuels, creating biodegradable options, organic products do fall under this category.

Companies that operate in the renewable energy space reducing carbon emissions are great examples. As adoption of clean energy proliferates based on Sustainable Development Goals (SDG’s) and Paris Agreement targets, the importance of companies operating in the renewable energy sector has skyrocketed because of its clean energy production and cost savings.