Aligning Corporate Social Responsibility Initiatives with Sustainable Development Goals

CSR as a Measure to Offset the Social Cost of Doing Business

Very often it is not realized that doing business extracts costs beyond the economic costs reported in the accounting statements prepared by the companies. In an ideal scenario, businesses would be adjusting their profits to net out the impact of social and environmental costs but the difficulty in estimation and non-standardization of such an approach renders the idea of accounting for such costs untenable. These costs in an economic sense are negative externalities and stakeholders have become more cognizant of the impact that businesses have on the society and the environment.

Therefore, companies all over the globe are making increased efforts to demonstrate that they are committed towards the social and environmental causes. In this context, CSR initiatives prove to be a useful tool to demonstrate this commitment with concrete actionable initiatives.

Corporate Social Responsibility Regulations

The CSR initiatives impact not only just the companies’ performance and brand perception but it also has an impact on the local communities, which in turn impact the country as well. This is the reason policymakers often make it a point to encourage these programs.

Many countries around the world have enacted CSR laws encouraging positive corporate citizenship. There already are mandatory CSR reporting requirements in several countries, including UK, France, Sweden, Norway, Australia etc. CSR is taken very seriously in India as well. In fact, India is among few countries in the world to have rolled out regulations mandating CSR spending. Section 135 on CSR under the Companies Act 2013, provides a framework to help companies to work towards various development challenges. It allows companies to proactively identify and implement projects to meet the social and environmental challenges.

The Act provides the criteria to demarcate companies which fall under the ambit of the law. It also prescribes the quantum of the mandatory spends and a broad list of activities which business should undertake using CSR funds, leaving no scope for ambiguity. This also helps the businesses to align their CSR strategy with the key priorities of the nation including health, poverty alleviation, education, clean and safe water etc. which are de-facto part of the SDGs as well.

How Corporates Contribute Towards SDGs

Climate change risks are now a usual agenda item for discussion in corporate boardrooms. With the shifting focus on Sustainable practices, organization performance is increasingly considering the extent to which Environment, Social, and Governance (ESG) factors are integrated into the long-term value creation. Organizations are witnessing increased expectations from both shareholders and consumers to work on sustainability front and provide transparent disclosures on their impact on climate and put efforts for making operations and products sustainable in terms of impact on climate.

In India, pioneering business houses have done exemplary work in terms of not only sustainability reporting but rather incorporating sustainability into the business models and thereby creating value for shareholders while simultaneously having a positive impact on society and environment. For example:

SDGs and their Connect with CSR

The SDGs highlight a set of large, chronic, inter-connected and complex challenges plaguing the world. The genesis of SDGs can also be linked with the concept of hidden social and environmental costs. Since Industrial Revolution 1.0, the model of development has been to focus on the economic gains i.e. Profit and Loss, which led to economic growth while adversely affecting the Balance Sheet of natural assets including air, water, soil, forests, etc. which are used to create economic value. This practice is clearly unsustainable and hence, SDGs are in place to monitor progress on these aspects as well. Given that both CSR and SDGs have a similar genesis, it is no surprise that both are interlinked and together they have tremendous potential to provide a suitable model for sustainable growth.

In fact, in the Indian context, the CSR activities mentioned in Schedule VII of the Companies Act, 2013 provide guidelines of the areas under which CSR initiatives can be undertaken. Each of these guidelines can be mapped to one or more SDGs:

In a nutshell, CSR regulations provide a broad direction for corporates to engage in activities which will lead to a sustainable future whereas SDGs help in defining tangible well-defined targets to measure the outcome of those activities. Global surveys by leading consulting firms show growing importance of the SDGs to business activity including the CSR strategies. Further, focusing on the SDGs also allows multi-national companies to address a significant challenge – how to devise an effective CSR approach for businesses spanning across multiple geographies. Without common guiding principles in place, developing a cohesive CSR approach may have been difficult for companies with cross-border business operations. Since SDGs are inherently universal, they can serve as a framework to address cross-border CSR issues.

Ways to Align CSR Strategies with SDGs

Measuring social impact has been an evolving effort for companies over the years. At times, businesses prefer to report efforts rather than impact and most of these disclosures are those that are mandated by the government. However, the pandemic has brought a sharp focus on the ‘S’ in ESG. Investors and businesses are now getting a lot more serious about their social metrics. They are looking for more measurable and meaningful disclosures for social reporting.

The SDGs cover a broad spectrum of issues ranging from climate change, gender inequality and the eradication of poverty. It is therefore imperative for companies to map their line of work and then take on goals that they can contribute to and shape their CSR strategies accordingly. Some of the CSR initiatives taken by leading Indian businesses having impact on several SDGs include:

In a nutshell, businesses have tried to touch upon key SDG targets in various ways through their CSR initiatives. These examples are for the purpose of illustrating how CSR initiatives can align with SDGs. However, it may be unrealistic to work out an all-encompassing strategy impacting all the 17 SDGs for most companies. A practical strategy is to focus on specific targets, perhaps those which align with already existing CSR activities. This is a pragmatic and useful way for companies to make the transition, paving way for a longer-term approach through which they commit holistically to working on several SDGs through CSR activities.

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