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16 July 2009/

Doing well by doing good

by Ben Knapp at 5:41 am 16 July 2009
Filed under: Branding, CSR

In India’s recent elections, the incumbent government was re-elected on a promise of ‘inclusive development’. An attempt is being made to ensure that India’s economic growth benefits all members of society equally. Government realises however that their intervention alone will not be enough to affect upward progress on such a broad level. Indian corporations will also play a large part.

Nandan Nilekani, former co-chairman of Infosys, believes that “it is not enough to run a profitable company.” Henry Ford said effectively the same thing nearly 100 years ago. So western and eastern companies alike have long realised that the reckless pursuit of profit is a short-term game. Nevertheless, the recent economic meltdown was a result of too many companies adopting a short-term focus (reckless profiteering) in favour of a more long-term one (socially-aware behaviour).

The idea that companies must be socially aware, that they bear a responsibility to stakeholders and not just shareholders, is deeply ingrained in Indian culture. A majority of shares in The Tata Group is owned by charitable trusts. The AV Birla Group had a charitable spend of over $10 million in 2003, Reliance Industries spent $7 million the same year. CSR is more than cash outlay of course, and corporate contribution is not always quantifiable. When Hindustan Unilever helped 50,000 women in rural areas to become entrepreneurs, not only did they increase the financial independence and self-esteem of these people, they also gained impressive distribution in otherwise difficult to reach areas.

What better and more satisfying way to do business can there be? Incidentally, it’s also a good recipe for brand building. A reputation based on putting a wide group of stakeholders before shareholders may not please the financial community. But it will create trust and thereby attract top recruits, positive PR and eager consumers. The AAA rating will follow not long after.