CSR - A WIN - WIN BUSINESS MODEL Col. Prakash Tewari (Retd) CSR and R & R Tata Power Company

Prelude Impacts of Business Integrating Business and Society Emergence of CSR Mapping Social Impacts Responsive CSR vs Strategic CSR Moral Purpose of Business Seeting n Impacts of business 1

“Human Beings are animals, We are sometimes monsters, sometimes magnificent, But always animals.   We may prefer to think of ourselves as fallen angels, But in reality, we are risen apes.” - Desmond Morris 3

Business can impact society in three ways Business and Society Business can impact society in three ways Economic Environmental Social Business

Impact of Business on Society Impact on business on society can be positive as well as negative. Pollution Deforestation Climate change Economic growth Raising standard of living

Business Impact on Human Development Business impacts poverty, literacy, education and life expectancy. Economic growth is only a means, though an important one, for human development. Human development is both an outcome and a process of enlarging people’s choices to lead lives they value.

Business and Environment In today’s world, environment is an increasingly sensitive issue. This means that any failure to follow environmental norms could promptly result in a public litigation being slapped on the corporate.

Economy Vs Ecology Economy and Ecology

Impact of Business on Communities Change in livelihood patterns on account of natural resources being impacted Change in land use / leading to socio-political-economic impact (loss of identity, culture change) Land owners become landless, or marginalised farmers Socio-psychological impact thru contrast in living standards Stress on local environment quality (air emissions, effluent, etc) Make 2 slides

Impact of Business on Communities Stress on local ecology (flora and fauna) Stress on local resources – water, land, rural energy sources Increased dependence on the industry by the community Influx of migrant labour Opportunities for Business to secure goods and services Opportunities for community to improve their quality of life

Scope of Collaboration Environmental Reducing carbon emissions and hence decreasing the chance of environmental irregularities. Social If people do not have the resources to deal with today’s stresses, then they are unlikely to be able to deal with the additional stresses associated with climate change Adaptability Gap Economic Protect , enhance and diversify asset base through economic activities Scope of Collaboration Adaptibility gap Economic stresses are problems caused by natural irregularities and disasters, which in turn occur due to climatic change. For example less rain or floods effecting crops and hence economic effect of less income in that season. If people do not have the resources to deal with today’s stresses, then they are unlikely to be able to deal with the additional stresses associated with climate change, a condition known as the ‘adaptation deficit’. Adaptation to climate change must start with reducing this deficit. To this end, many strategies currently used for development and poverty reduction have an important role to play. It can be reduced through two measures – using of clean energy to reduce the climatic change and hence the environmental irregularities. Microfinance services can enhance the livelihood asset base through direct income effects, indirect income effects (from education and training), and non-pecuniary effects (i.e. stronger social networks and increased confidence). Micro Credit, insurance and savings therefore help households protect and build up enough assets so that the impact of a shock or stress is not as immediate or damaging, i.e. they are able to minimise or entirely avoid depleting their asset base, or have a larger asset base from which to draw in order to deal with variances in income and consumption.   Methods of Collaboration Financing of clean energy choices by Microfinance clients Many microfinance clients presently use inefficient energy sources. If we can change their energy sources to make an immediate impact on the environment and also give a positive effect to them. Also many of them do not have energy for their use, providing them with renewable energy would increase their productivity and will lead to increased income and hhence increased development. Carbon trading aggregation Carbon credits can be aggregated from these clean energy products and then these can be used to generate additional income. Also this would need a value chain for selling and also people on the ground to aggregate – which would lead to more jobs. This income can either subsidize equipment or be used to pay back the loan. Earning carbon credits Projects approved by designated CDM (Clean Development Mechanism) in the developing countries could earn carbon credits and sell them to the countries that required reducing the greenhouse gas emissions under the international agreement. Any project that was set up after January 1, 2000, was eligible for CDM recognition. Basically CDM projects are divided into three categories. Large scale projects. Forestation and reforestation projects. Small scale CDM projects. Projects with less than 15 MW Electrical output or projects with less than 15000 Tons of CO2 emission reductions belong to this category. UNFCCC's agencies have established methodology, tools and procedures for approving, monitoring and calculating the CER's for various types of CDM projects. 3

Integrating Business & Society CSR understand interrelationship between business & society Corporate need healthy society Society needs successful corporate Focus on intersection than friction Mutual dependence implying principle of shared value

Emergence of CSR Issues that shook corporate Corporate response

Justification Moral Obligation Sustainability License to Operate Reputation Good citizens – ‘Do the right things’ ‘Meeting needs of present without compromising future generation’ Permission from Govt, communities & stakeholders Justify CSR initiatives – Brand, image, morale & values of stock

School of Thought Focus on tension than interdependence Non strategically aligned Fail to identify/prioritize/make impact Uncoordinated & philanthropic Not linked to internal/external activities Lost opportunity Social benefits dissipated

Identifying Points of Intersection Interdependence takes 2 forms Company impinges through its operations External social conditions influence corporations

incoming material, storage, data collection, service Mapping the Social Impact of Value Chain Air pollution Warm water discharge Ash disposal Impact on livelihoods Energy & water usage Worker safety & labour relations Displacement Loss of livelihoods Loss of infrastructure Irreversible loss to natural resources Conservation DSM Efficiency LAND ACQUISITION technically feasible location identification, purchase of land LOGISTICS incoming material, storage, data collection, service OPERATIONS Generation (emission measurement), transmission (decentralised), distribution (smart grid) TRADING advocacy, open axis regulation, short term transactions, REC, website CUSTOMER MANAGEMENT customer support, complaint resolution, repair Transportation Impacts (e.g., emission, congestion, logging roads, safety) Pollution Dust (SPM) Health HIV/AIDS Pricing practices (e.g., price discrimination among customers, anticompetitive pricing practices, pricing policy to the poor) Consumer protection Global partnership for development

Support Activities Hbr study take paper Cut 2 3 points frm tech dev Financial Reporting practices Corporate Governance Practices Transparency Education & Job Training Labour Standards *Gender equality CORPORATE INFRASTRUCTURE financing, planning, investor relations HUMAN RESOURCE MANAGEMENT recruiting, training, supervision system *R&D *Relationships with Universities *Ethical Research practices *Product Safety Procurement & Supply Chain practices PROCUREMENT components, machinery, advertising and services TECHNOLOGY DEVELOPMENT product design, testing, process design, material design, market research Hbr study take paper Cut 2 3 points frm tech dev

External Social Conditions Fair and open local competition Intellectual property rights Transparency Availability of human resources Availability of scientific and technological infrastructure Sustainable natural resources Context for Firm Strategy The rules and incentives that govern competition Input Conditions Presence of high quality, specialized inputs available to firms Local Demand Conditions The nature and complexity of local customer needs Peculiarity of local demand (e.g., cultural and society specific needs) Demanding regulatory standards Related and Supporting Industries The local availability of supporting industries Change colour Availability of local suppliers Access to firms in related field

Choosing Social Issues Social issues that are not significantly affected by a company’s operations nor materially affect its long-term competitiveness Social issues that are significantly affected by a company’s activities in the normal course of business Social issues in the external environment that significantly affect the underlying drivers of a company’s competitiveness in the location where it operates Generic Social Impacts Value Chain Social Impacts Social Dimensions of Competitive Context Good Citizenship Mitigate harm from value chain activities STRATEGIC CSR Hbr courtesy Strategic philanthropy that leverages capabilities to improve salient areas of competitive context Transform value-chain activities to benefit society while reinforcing strategy RESPONSIVE CSR

The Moral Purpose of Business Contribution to economic prosperity Corporate social integration towards building shared value Leading to self sustaining solutions Deepak apte 9820602965