Creating Cross-sector Partnerships for a Sustainable CSR

This is an outline of my talk at the CSR Conference organized by the Madras Chamber of Commerce and Industries, Chennai on 2 Mar 2018

A partnership becomes meaningful when its accomplishment as a whole is greater than the sum of achievements of its parts! As is self-evident, the word “part” is an integral part of a “partnership” J

Let’s take a step back, look at the parts in the context of today’s conference, understand their roles and achievements todate:

Some five thousand years ago, our society organized itself into three broad parts.

1. For Profit Businesses: Provide goods & services to consumers, create employment, generate wealth, pay taxes 
2. Governments: Foster competition among businesses, tax them, deploy the resources on common physical & social infrastructure for the welfare of people 
3. Not for Profit Non Govt Organisations: Keep a tab on 1 & 2 on behalf of people, for their general well-being

One can granulate further and make more parts, like academia (but they could be made up of any of these parts, as in academic institutions for profit or set up by Government or not for profit), or media (again could be any of these three parts). There are also For Profit Social Enterprises and Not for Profit Businesses. Keeping those nuances aside, for the sake of ease, let’s recognise these three parts for our narrative and move on.

What has this socio-economic structure achieved in terms of wealth, welfare and well-being in these five thousand years? 

1. As of this evening, we have lived through 17% of this year 2018. That's two out of twelve months. But, do you know that we have exhausted 29% of the natural resources our earth can regenerate in the same twelve months? Which means, we have lived on the resources borrowed from our children and their children. Actually, stolen from them! This description is just a recast of Earth Overshoot Day, some of you would be familiar with. That was 2^nd August in 2017. 
2. Top 1% of the richest people on earth own 50% of all wealth. And, the bottom 50% own a meagre 1%. A statistic we can all be very shameful of…      

These "inglorious" achievements were recognized a few decades ago and we have set for ourselves what we called Millennium Development Goals then. We didn’t get very far, so we have re-set for ourselves Sustainable Development Goals, now to be achieved by 2030.

For a more balanced achievement of wealth, welfare and well-being, as envisaged in SDGs, we need to see ourselves as “partners” in the mission than merely as “parts” doing our own bit. All hands must be on the deck. 2030 will just be here, like tomorrow! Each part does have a different and complementary role in this new “partnership” approach.

1. Government: For scale. Not just for funds, but for its machinery that’s spread across the nook and corner. 
2. NGOs: Terrain knowledge. Social mobilization. Community empowerment. For, there’s no better bet than empowered communities to achieve sustainable development. 
3. Businesses: Surely, not for the CSR money they are manadated to spend. The mandatory CSR spend, aggregating to Rs 25,000 crores, doesn’t even add up to four days of Government’s budget on welfare! It’s actually for their project and financial management capabilities. More importantly, for their entrepreneurial energies, innovation, and for designing the much-needed impact-making interventions. 
4. In addition to the three parts I had outlined earlier, I will call out a fourth part: Technical & Scientific Establishments - these could be from any of the three sectors - for their domain knowledge and for continuous action learning. For designing best practices based on science and evidence. Otherwise, the interventions end up shortsighted.

It’s easy to play the words, parts and partners, but it is not easy to actually forge and foster partnerships. There are more broken and failed partnerships, than there are successful ones. It’s important to recognize the barriers to partnerships before we move any further.  

• Entrenched prejudices colour actions and communications:
• Businesses and Governments think NGOs are too micro-focused and inefficient.
• Governments and NGOs think Businesses are too profit-minded and there’s always something ulterior in their social motives.
• NGOs and Businesses think Governments are just outlay focused and its officers are corrupt.

• Work cultures and practices lead to operational friction and frustration:
• NGOs can’t fathom the need for institutional systems & controls. “Can’t you just trust us?” is their exhortation. 
• Government is too siloed and procedure oriented and end up pushing all action to the last quarter of a year! Do you know that some 27 approvals are required to translate an MGNREGA project idea into a reality? 
• Businesses expect execution like clockwork, which doesn’t make sense when social capacity of underprivileged communities needs to be built.

• And, once partnering starts, there’s a new problem! Of adversarial posturing by each partner, due to perceived threat to their respective territories.
• We know our bit. You don’t need to tell us!

With odds stacked so badly against partnerships, how do we make partnerships work? Let me share a three-point formula, based on our experience of implementing ITC’s CSR projects in partnership with some 85 NGOs, 9 Governments, and 15 Technical & Scientific Institutions:

1. Co-create projects from the beginning. Conceptualise multi-stakeholder projects after explicitly recognizing the complementary strengths of each partner, and how without any one of them the outcomes would fall short of the community needs. 
2. Design a predetermined review rhythm. A platform of key members of each partner to review progress and remove roadblocks. This way, the engagement becomes more evidence based and resolution focused; otherwise, there’s lot of finger pointing based on different perceptions. 
3. One of the partners must become an Orchestrator of the partnership and take on the primary responsibility for the project outcomes. To convene and harness the collective power. To make things work.

Thank you.

Scaling-up Sustainability Solutions

This blog-post is built around my talk at the WBCSD Annual Meeting held in Chennai last month.

The Background:

2015 was a year of ambition that saw the adoption of the historic Paris Agreement and the Sustainable Development Goals (SDGs). World leaders committed to building an inclusive and thriving low carbon economy, and the SDGs provide us with an all-encompassing agenda for developing our societies while addressing the critical issues of poverty, inequality and environmental degradation. This unprecedented framework for action calls upon each of us to contribute, and forward-looking companies are translating ambition to implementation at scale.

Among other things, the event showcased how companies can capitalize on the new opportunities and economic incentives while contributing to the SDGs, thanks to WBCSD business solutions that align to their strategy and operations. The session in which I spoke zoomed in on how corporate leadership has scaled up solutions in India, and how this can be applied around the world. I shared ITC’s experiences in this regard.

Scale at which ITC operates:

Over the years, ITC has designed and implemented several large-scale programmes to create sustainable livelihoods, enrich the environment and address the challenges of climate change. I illustrate the scale using a couple of examples…

ITC’s soil & moisture conservation programme promotes local management of water resources by facilitating community-based participation in planning and executing watershed projects. Nearly 8,000 water harvesting structures have been constructed under this initiative, covering a total area of about 650,000 acres. It’s difficult to visualise that scale, and for a lay-person anything beyond the sight of a naked eye is big! It may be easier, if I use the analogy of Geneva Lake, a large water body most of the audience present must’ve seen; then imagine the whole city of Geneva of which this large lake is a small part. The area covered by ITC through the soil & moisture conservation intervention is 160 times the size of Geneva city! Yes, a hundred and sixty times.

ITC’s Farm & Social Forestry programmes have greened more than 560,000 acres through tree plantations by enabling financial, technical and marketing support to small and marginal farmers. Again, this acreage by itself may not make sense, other than appearing as some large number. Let me add, that those trees have sequestered more than 5,000 kilo tonnes of CO2, which is equivalent to keeping as many as one million diesel cars off the road, based on specific emission factors! Yes, a million cars.

The ITC e-Choupal initiative is a powerful example of a development model that delivers large-scale societal value by co-creating rural markets with local communities. With a judicious blend of click & mortar capabilities, ITC e-Choupal has triggered a virtuous cycle of higher productivity, higher incomes, and enhanced capacity of farmer risk management, larger investments and higher quality and productivity. These services reach out to some four million farmers. Again, just to visualise the scale, may I say that every Indian farmer could be brought into such a network, with not more than thirty companies operating at this scale.

All these, while ITC’s revenue has grown tenfold over the last twenty years! Profits grew 33 times and the Total Shareholder Returns grew at a CAGR of over 23%

For more details do read the GRI - G4 compliant, comprehensive, Sustainability Report of ITC.

The How of This Scale:

Essentially a three-dimensional approach. Focus. Outcome Orientation. Innovation.

Focus:

Imagine a Venn Diagram. The focus of our efforts is on those areas that converge from three angles. First, the development challenges that matter to the nation. Second, those interventions that create enduring value for our stakeholder communities. As many as 250,000 people participated directly in a “Needs & Priorities Assessment” exercise in the PRA format, earlier this year. Third, those initiatives where our interventions can multiply the impact significantly by virtue of their touch-points with our value chains or their geographical vicinities.

The resultant key focus areas, viz. livelihoods for the poor, sanitation, gender equality, vocational skills, education, and climate action mirror the important global SDGs too.

For a deeper understanding, you can browse through ITC’s CSR Policy and Sustainability Policies.

Outcome Orientation:

Often, sustainability interventions are designed as point solutions. They do make a difference, but not at scale. For example, provision of information or knowledge to small holder farmers. This is certainly one component of the services provided by ITC e-Choupal. While this is a necessary condition, this won’t, by itself, raise their incomes. The information and knowledge need to be often translated to investments on the farm. But, given the inherent risk associated with farming, farmers hesitate to make those investments. This is where our livestock and such other interventions that bring supplementary incomes come into play, which enhance the risk bearing ability of the farmers. Once the intent to invest is there, the next challenge is gaining access to the recommended inputs, credit, crop insurance, farm machinery etc. The intensity of agriculture has a bearing on natural resources like water and top soil. Without a community effort, individual farmers get trapped in the tragedy of commons and exhaust these resources, and face an unsustainable future. This is where our soil & moisture conservation interventions come into play. And so on…

Thus, commitment to the eventual outcomes - and doing whatever is necessary as well as sufficient - only can demonstrate the impact and involve the communities on larger scale.

This integrated approach of ITC and the impact is well documented in a report published by APAARI.

Outcome is not a static target but a dynamic goal as the communities evolve. New goals get set on an ongoing basis to make the programmes contemporary and strengthen their enduring relevance. For example, in the sixteen years since the first e-Choupal was rolled out, the model is in its fourth version now!

Innovation:

Investment in sustainability initiatives at this scale cannot be sustained by merely keeping a portion of the profits aside. With our Chairman, Mr Deveshwar articulating the paradigm of “responsible competitiveness” for growth, the entrepreneurial energies of the whole organisation are harnessed to innovate business models that improve business competitiveness while creating sustainable livelihoods and enriching environment.

“Making Markets Work for Green GDP and Sustainable Livelihoods” is the theme of one of his speeches at ITC’s Annual Shareholders Meeting.

More importantly, co-creating solutions together with the participating communities makes the innovations relevant. This approach also synergises the complementary strengths of the multiple stakeholders, and helps execute the programmes at scale. Call it a PPPP – Public Private People Partnership – approach, if you will…

Will the new CSR mandate be a game changer?

As you may know, the new Companies Act of India mandates that companies of a certain size and profitability must spend at least 2% of their net profits on Social Responsibility activities (See Section 135 on Page 80 of the Act)

I was a panelist at the 'CII National Summit on CSR' in Delhi held on 30th September 2013. These were my opening remarks in response to the question posed to my panel, "Will the new CSR mandate be a game changer?"

The 2% CSR spend is estimated at about Rs 20,000 Crores. This money is less than what Government spends in five days, considering the annual expenditure budget of Government is some Rs 17 Lakh Crores. Subsidies alone, out of this total amount, exceed Rs 250,000 Crores! Therefore the 2% CSR spend is not going to bring in the game-changing resources...

However, if Corporate India harnesses its 'innovation capacity' and leverages the 'power of partnerships' to solve India's social and environmental problems, I am sure it can change the game!

Instead of looking at the 2% amount as 'a philanthropy budget', if companies can innovatively embed CSR into their business strategies, larger problems can be solved.

This could be in the form of 'socially inclusive business models' where the capacities of low income suppliers and distributors can be strengthened to improve their productivity, market access, and bargaining power, while enhancing the competitiveness of the whole value chain in which the company is a part. Eg. ITC eChoupal.

On the environmental front, investing in renewable energy is a low hanging fruit, given our unreliable grid power, and the high cost of diesel-generated power. Innovation of higher order is required to build 'green supply chains' that regenerate the natural resources consumed in a business. Eg. ITC FarmForestry. 

Embedding CSR into business strategies would also ensure that the CSR spends do not get impacted in times of slowdown. Of course, this whole argument is not to rule out the need for philanthropic spends in cases of extreme distress.

Now I come to my second idea. I believe four types of partnerships could contribute to game-changing outcomes:

Partnerships with other Corporates operating in the same geography or working in the same domain can create joint projects and / or knowledge platforms for experience sharing.

Partnerships with CSOs / NfPs for social mobilisation and impact audits.

Partnerships with Communities themselves for gaining deeper insights while designing and executing projects. Also, Users Groups for democratising common property management.

Partnerships with Governments to create markets for trading "social credits" ala "carbon credits", and for aligning social subsidies to develop inclusive markets rather than distorting markets. This is besides the PPPs for building infrastructure that are already gaining traction.

While no one stopped Corporates from innovating and partnering to solve societal problems - indeed several companies have done so, successfully - the new CSR mandate hopefully inspires many companies to look at this as a game changing opportunity.

Never believe that a few caring people can't change the world. Indeed it is the only thing that ever has ~ Margaret Mead 

Bringing about enterprise accountability and the concept of triple bottom line

Some of you may remember my tweets and Fb updates on the subject a couple of months ago, when I participated in a panel discussion at National Geographic's Green Conclave. I got busy soon after, and couldn't post a blog. Yesterday a friend asked for some material on triple bottom line, and I decided to write it now...

There are two arguments on what a good Corporate Citizenship is. One argument views business enterprises as pure economic citizens. The other, a position taken by ITC, sees them as Socio-economic Citizens.

Pure Economic Citizen argument says enterprise accountability starts with earning profits and ends with paying taxes; that the responsibility towards social and environmental aspects is best left to other organs of society viz Government and Civil Society Organisations. Further that the focus of Business Enterprises should be on satisfying the shareholder desire for a return on their financial investment to the exclusion of non-financial stakeholders.

Essentially, the argument is that the Corporates, as artificial entities, should have no social responsibility; people or real individuals must have social responsibilities. Generating profit by servicing consumers in a competitive environment is considered the most socially responsible act of an economic enterprise.

On the other hand, ITC views enterprises as socio-economic citizens and therefore as accountable to today's & tomorrow's society and environment from which it is drawing resources, besides to its financial shareholders. The expectation from socio-economic citizens is that the core business activities must be implemented with broader responsibility towards ALL the stakeholders. In other words, enterprises must demonstrate positive economic, social and environmental performance over long term. This is called Triple Bottom Line approach.

Of course, the trade-offs in the value created for multiple stakeholders make Triple Bottom Line approach a difficult path to follow. ITC has creatively enmeshed the interests of shareholders, the poor, and environment to build business models that overcome the trade-off challenge. ITC eChoupal initiative, Social Farm Forestry programme in Bhadrachalam area and Agarbatti business linked to women self help groups are some examples of Triple Bottom Line approach by ITC.

Other panelists argued that such enmeshing isn't easy and the trade-offs are inevitable, pushing companies to be profit focused or compromise on profits. I proposed that Government could do four things and create a market mechanism to deal with such a trade-off challenge.

1. ‎Make TBL reporting mandatory. Peer group and market pressure will then automatically broaden accountability of enterprises
2. Define TBL accountability metrics clearly along outcomes lines. For example, Water Positive and Carbon Positive Corporates...
3. Create tradeable instruments from such metrics. TBL then becomes a source of economic advantage
4. ‎Deepen the market for these social credits by mandating threshold TBL for bidding in Govt projects. Non TBL enterprises can buy credits to be able to bid

Corporate Social Responsibility (CSR) - A socially responsible investment?

Yesterday, the Net Impact Club of ISB hosted a Panel discussion on "Corporate Social Responsibility (CSR) - A socially responsible investment?" PS Narayan (Wipro), Janet Geddes (KPMG), Unmesh Brahme (formerly with HSBC), Mudit Kapoor (ISB) were my co-panelists.

I was the first speaker; this is what I said in my opening remarks. Highlights from what other panelists said in their remarks, as well as the questions & comments by the audience are mentioned in italics, integrated into the text of my remarks for the sake of seamless reading thematically...

Is CSR good, bad or ugly? Actually, it is not one CSR and therefore there can't be one view. I see four steps in the CSR ladder. Pick your step and stick your label :)

Step 1 in the CSR Ladder: Earn Profits. Pay Taxes. Leave the rest to Governments.

Traditionalists argue that the focus of business enterprises should be strictly on satisfying the shareholder desire for a return on their financial investment to the exclusion of other non-financial stakeholders.

Are Corporates economic citizens? Or socio-economic citizens?

Corporates as artificial entities should have no social responsibility, real individual people must have a social responsibility.

Generating profit by servicing consumers in a competitive environment is the most socially responsible act of a Corporate.

Is CSR a way circumvent the society's perception that profits are bad?

Step 2 in the CSR Ladder: Implementation of Core business activities with broader responsibility towards all the stakeholders.

Demonstrate positive economic, environmental and social performance over long term. Triple Bottom Line Reporting along these lines. Since these activities are cost / investment intensive in the short run, these are typically supported by the market mechanisms such as Green Taxes, Emission Trading etc. Many times there also conflicts in trading-off interests of one stakeholder vs another. At a threshold level, typically such responsibility is driven by statutes too. Many companies go beyond those threshold voluntarily and adopt higher standards.

Are the three bottom lines mutually exclusive or reinforcing?

Most ethical companies are also the most profitable, per a global survey...

Corporates must look at all their spheres of influence viz. workplace, local communities, environment and supply chain & marketplace

Step 3 in the CSR Ladder: Poverty and environment focused social investment and philanthropy programmes.

Approaches vary from a simple Write-a-Cheque, to Venture Philanthropy, to Strategic Philanthropy. While write-a-cheque simply brings financial resources from Corporates, Venture & Strategic Philanthropy approaches bring other corporate resources such as management & entrepreneurial skills multiplying the impact. Any which way, scale & sustainability of charity is limited. Most typically

How do you decide how much money you put into CSR programmes?

What are the metrics of success of a CSR programme?

CSR is a social license to operate in backward districts, especially if you are in industries that extract from community resources, such as mining.

Is CSR a license to kill? As in extractive industries harming the environment!

Corporates have an ability to do good. They should see this as a responsibility to do good, because society is in dire need of good deeds.

Trying to solve world's problems, just because we have capability is arrogance! Patronising!

Isn't the best way to deploy CSR funds through supporting Social Entrepreneurs?

How many CSR initiatives are really scaled? To make any meaningful impact?

Doesn't a lot of employee volunteer work end up as a picnic, without any real work on the ground?

Even a picnic is good; better than not doing any good at all...

CSR funds are no more than a "tax" by Corporates on the market - by raising consumer price, paying lower salaries to employees, lower dividends to the shareholders or lower prices to vendors. This is more true in non-competitive markets, where corporate have such pricing freedom.

Focus of my talk today is to share ITC's experiences in adding the Fourth Step to this CSR Ladder: I refer to ITC's innovative business models, wherein our need for creating shareholder value is enmeshed with that of local communities in a mutually supportive, interlocking and interdependent partnership… ITC's eChoupal, Farm Forestry are in this league. Agarbattis is another business on similar lines!

Emerging economies, in particular, offer a low hanging opportunities to create such enmeshed models. Typically small producers have constrained access to markets, whether for information or knowledge, for inputs or output. As a result issues like low productivity, low share of consumer price, high transaction costs limit the incomes of these producers. Demand signals also aren't transmitted to these producers effectively, for them to be able to respond to changing consumer needs. On the other hand, corporates who source from these small producers suffer too, from high transaction costs, poor quality and delivery schedules, lack of traceability to product source point and so on... Corporates can invest in R&D, appropriate infrastructure and integrate these producers into their value chains to improve coordination, cut transaction costs, enhance quality, increase productivity to create win more - win more relationships. Higher the Corporate efforts to increase incomes of the poor, more the profits for Corporates themselves from such relationships. As a result scalability ans sustainability of such models is never a strategic challenge. Value chain integration can effectively deal with several environmental aspects too.

In ITC's eChoupal and farm forestry examples, the social impact is through better livelihoods to small farmers and poor tribals. Conservation Agriculture and Carbon Sequestration deliver environmental benefits, while competitive sourcing of high quality farm / forest produce bring the economic benefits to ITC.

While executing such initiatives, it is very important that the communities themselves are fully co-opted into the design and execution of the business models. This ensures relevance of the solutions as well as lower costs. On the other hand, one has to work closely with Governments to ensure that subsidies do not unduly distort the markets.

Typical drivers of CSR: Enhanced Reputation, Employee Motivation, Economic Advantage, Risk Management, Innovation & Learning, Statutory Compliance

Consultants help in CSR strategy formulation, due diligence, monitoring & evaluation, organisational development

If companies are indeed genuine about CSR, they shouldn't be part of Corporate Communications or Corporate HR...

CSR strategy gets formulated by corporates based on their perspective of themselves; whether they are Pure Capitalists (markets will deal with all issues), Social Contractors (explicit & implicit expectations from society) or Ecologists (we are but one of the species on this planet living at a point of time)

Mobius strip can be seen as a metaphor for the complex global challenges

Push factors for CSR: Environmental Conflict & Climate Change; Pull factors for CSR: Opportunity for inclusive business growth

Is regulation the path go down in India? Or leave to the discretion of Corporates?

How do we rope SMEs in to CSR mindset? Even workplace fairness, to start with...

Is India ready to buy green products at higher prices?

How to bring CSR & sustainability thinking into B-schools?

Is bringing affordable consumer goods to BoP CSR?

Isn't dealing with Naxalism a business agenda? How many CEOs want to have a serious action plan for this?

General bias of the hall, as sensed by me, at the end of the panel discussion was " Corporate Philanthropy is bad CSR. Making profits is good CSR. Models that enmesh business & community interests is the best CSR! "