Philip Kotler and Nancy Lee in their book “Corporate Social Responsibility: Doing the Most Good for Your Company and Your Cause”, write “Corporate social responsibility is a commitment to improve community well-being through discretionary business practices and contributions of corporate resources.” (p.3)It is an accepted business philosophy. Business magnates select social causes, take up charity initiatives and encourage their employees to support and participate. Their contribution is evaluated. Overall welfare of the society is one of the important concerns of the business leaders now. They have integrated CSR initiatives as part of their business strategy and such initiatives have resulted in enormous goodwill for the products of the company. There has been substantial increase in the number of loyal clientele. Business leaders have learnt the art to align business goals with social and cultural goals.
CSR and Recession
Has the recessionary trend eroded the enthusiasm of the business leaders as for their CSR initiatives? Recession arrived like an avalanche and the business leaders were not ready to meet this serious challenge. This has been the testing time for the grit and heroism of the Corporate Sector. Toby Radcliffe, in his article “CSR View from the Field (2009)”, writes, “Global recession, embedded in the financial sector, is creating an environment of cost-cutting and streamlining. For leading international saving and wealth management groups, the current economy has produced a particularly challenging environment in which to operate. It has also produced a challenge for sustainability.”
The importance of CSR during recession is more than in a normal business situation. The need to augment sales and cash flow is felt acutely by business establishments during recession. For example, when a child is sick, it needs more care. The case for CSR attains truest dimensions in recession. To think of pruning the budget of CSR is harmful from the long term perspective of business. CSR, in addition to direct donations to Non-Governmental and philanthropic organizations, is part of the marketing budget as well in the form of HR and training g programs, innovation and experimental expenses, research and other non-core activities. If the management decides to cut the CSR budget, it will not be a decision of foresight and imagination. Axing the budget may prove counter-productive.
CSR is part of the business objectives
Business organizations through the CSR initiative, have now realized that philanthropic activities are not totally separate from the business objectives. Doing good and doing well are alternative beats of the same heart. Social and environmental considerations are now not the secondary, but part of the primary goals of the business establishments. The best think-tanks work out the CSR initiatives.
The survival of any business organization depends upon the responsiveness of the consumers that support the organization in particular. When the consumers withdraw support to the products, company will suffer direct losses. When the goodwill of the people is lost, the organization suffers notional losses. Regaining the trust once lost and recouping the original reputation are no ordinary tasks.
You cannot drive a vehicle at top speed, while the reverse gear is in operation. Competition in the market is tough, even when the business conditions are normal; retaining and pushing the reputation is going to be the herculean task in period of recession. The importance of CSR initiatives is like the need of the oar to the boat sailing in the rough seas.
CSR, Recession and Brand Loyalty
Brand-building is an astute process. Once the brand building process reaches certain levels, wealth creation follows automatically for the Organizations. Such organizations, when they are involved in permanent CSR initiatives, say for example running a school for the blind or education for girl-children, reducing financial aid or withdrawing from the project altogether, will cause immense human problems for such vulnerable sections of the society.
Great loss of goodwill will ensue and the Organization may face a backlash. Recession is not a permanent phase in the business world and it has to go. But if the goodwill of an organization is lost, the brand image will suffer much. Howsoever powerful may the waves, their real nature is mere water! Not too in the distant future, recession will just be a memory!
After churning out the essence of a vast array of spiritual texts Sage Vedavyasa concluded thus: “To help others is the greatest act of merit, and to cause intentional pain to others is the greatest act of sin.” Will the budget planners of CSR draw inspiration from this wise saying?