CSR & SDGs: Need for alignment and suggestions for progress

What are SDGs?

Understanding the growing need to focus on sustainability in social, environmental and economic growth, Sustainable Development Goals (SDGs) were adopted by 193 countries on 25 September 2015. SDGs are 17 goals, covering 193 targets for a greener, more peaceful and more equitable future, to be achieved by 2030.

Where does CSR come in?

Businesses cannot flourish in a world gripped by issues like poverty, climate crisis, violence, and inequality. Times are gone when businesses’ only responsibility was to make a profit. Companies are no longer only responsible for the ROI of their shareholders. A broader set of stakeholders are now watching businesses while doing their work. These stakeholders include governments, consumers, potential consumers, competitors, suppliers, and others. When the future of the whole is at stake, businesses cannot just be economically healthy; their survival is also stringent upon the well-being of society.

The Concept of CSR (corporate social responsibility) builds on the notion that businesses are not only responsible for shareholders but should also seek to benefit the broader community/society in which they exist. This expectation is also because businesses primarily depend upon society for consumers, human capital, and other resources, making companies liable for giving something in return that is at least not harmful.

Their businesses must be doing well while simultaneously contributing to resolving the broader societal challenges. Doing business-as-usual is not going to bring any advantages to businesses; all the more, it may bring some harm. Consumers are now becoming increasingly conscious about the choices they make. According to a report by PwC, 78% of consumers today consider whether a business incorporates a sustainable agenda into its corporate strategy before interacting and engaging with any businesses. Consumer and other stakeholders’ pressures are increasing daily, demanding businesses to be more sustainable. So to respond to such normative pressures, organizations must align their businesses with global priorities like SDGs and contribute towards their achievement. Also, the emphasized role of businesses in achieving SDGs demands looking at other efforts that businesses have already been making (since before the adoption of SDGs) towards the same agenda, and CSR covers a significant chunk of efforts to the SDGs direction.

What CSR Has Done Towards This So Far

Though the concept of CSR has been around for decades, its importance has gained traction as stakeholders; specifically, consumers, are becoming increasingly aware of societal challenges like climate change, inequality, unfair labour practices, health care disparities, and poverty. This pressure from stakeholders has led corporations to focus on CSR practices rigorously and be responsible. As per S&P 500 Index, more than 90% of the companies worldwide publish their CSR reports, which is significantly higher than just 20% in 2011. 

Many large corporations have launched innovative plans to impact different segments of society and reduce disparities significantly. For example, Coca-Cola’s 5x20 CSR model was efficient and focused on employing 5 million women employees worldwide by 2020 in their plants. Johnson & Johnson has committed to using 100% renewable energy sources by 2025 for its energy needs. Similarly, Ford Motors is aiming to make all its vehicles carbon-neutral by 2050 and Netflix and Spotify have announced the provision of 52 weeks of paid paternal leave. Also, in the likewise direction, Starbucks hires 5000 workers every year from military veterans and their spouses.

As far as India’s performance is concerned in CSR, a total of 17007 companies have launched around 36,865 projects focused on different CSR programs in 14 development sectors in the year 2020-21, with total spending of INR 24,865 crores. However, Covid-19 hit the performance in the next year sharply, as reported by an article published in Business Standard in January 2022. Section 135 of the Companies Act 2013 deals with CSR-related regulations in India. Apart from that, companies also comply with voluntary guidelines and international standards such as ISO 26000: social responsibility guidelines, Global Reporting Initiative Guidelines, and UN guiding principles. All these factors indicate the dedication of the Indian private sector and government to CSR initiatives. However, as time progresses, continuous improvements are needed in operationalizing CSR-related efforts to deliver maximum positive impact on society.

How SDGs align with the CSR goals of companies

As companies have been making similar efforts in the form of CSR, the overlap between CSR and SDGs makes it easy to align current CSR activities with SDGs so that the business community can work together with national and regional government bodies toward the greater good. Furthermore, 17 adopted SDGs have been associated with 169 targets, with broader coverage and efficient measurement mechanism, making them ready for business implementation. There have been multiple calls for businesses to contribute toward SDGs from the UN. Because businesses are an indispensable and significant part of society, their contribution is of paramount importance. To achieve The UN’s 2030 agenda, aligning CSR and SDGs is even more crucial. However, it is easier said than done. Bringing these two together is a significant change project. Thus, it requires careful attention and involvement of the actors of society. United Nations, National Governments, and the academic community are working alongside businesses to bring CSR and SDGs under the same umbrella to make united and more vigorous efforts toward sustainable development.

Aligning CSR with SDGs calls for a deep understanding of both phenomena individually. CSR is mainly associated with three aspects: Environment (reducing the impact of business on the environment), Ethical (equality and fair treatment to all stakeholders - including providing opportunities to those who are struggling and have lesser reach), and, Philanthropy (better society, a better world through donations, charities, sponsorships, and other forms of helping the community)

Schedule VII of the Companies Act 2013 lists twelve areas to guide CSR efforts. All 17 SDGs can find similar action areas in Schedule VII to align CSR and SDGs into a single framework.

Thus, the primary step towards matching CSR and SDGs for corporations can be to start making target areas defined in SDGs as their CSR goals. Initially, corporations can dive deep into their CSR target areas, look for similar targets associated with SDGs, and direct CSR efforts towards identified SDG targets. Gradually, corporations should look for ways to broaden their scope of operations by bringing more SDGs and related targets under their operational coverage. This alignment shall help corporations and other stakeholders effectively measure the impact that companies can bring through their efforts and incorporate corrective measures.

Currently: SDGs and CSR in India

India is making gradual progress towards SDG implementation. Efforts like converging the country’s national development agenda with SDGs (Sabka Saath Sabka Vikaas - Collective Efforts for Inclusive Growth) and launching of SDG index to track the country’s progress as a whole reveal India’s commitment toward sustainable development. Apart from these initial efforts, India has also launched nationwide projects like Sashakt Bharat - Sabal Bharat (Empowered and Resilient India), Swachh Bharat - Swasth Bharat (Clean and Healthy India), Samagra Bharat - Saksham Bharat (Inclusive and Entrepreneurial India), Satat Bharat – Sanatan Bharat (Sustainable India), and Sampanna Bharat- Samriddh Bharat (Prosperous and Vibrant India). SDGs closely tie to these projects.

However, corporations are out of scope when such nationwide efforts are launched and implemented. Despite making CSR-related regulations changes to match SDGs, regulatory mechanisms do not pressure organizations. The launched SDG index only measures the performance of states and UTs and doesn’t apply to business corporations. Companies are not bound to report their SDG progress, nor is there any mechanism in place to track the efforts of corporations. The country’s budget for 2022 does not even mention SDGs. Indian government’s 2020 report on SDGs progress includes no mention of bringing the corporate section into action for achieving development agendas. As reported by Press Trust of India (PTI) in 2022, out of the top 50 companies, 35 failed to report their efforts and achievements under all 17 SDGs. 80-90% of Indian companies are interested in investing in primary education and health care, leaving behind other areas, as per a KPMG 2020 report.

All these factors explain the incident of India’s rank being demoted for the third consecutive year in the global sustainable development report, 2022. Where India houses one-sixth human population of the world, it ranks 121 out of 163 nations that signed a commitment to SDGs. As only eight years are left before the 2030 sustainable development agenda deadline, many believe that the country is completely off track. Despite these sobering facts, there are also waves of hope flowing. Indian corporations acknowledge their importance in achieving the country’s agenda towards a better world and are making considerable efforts. Hindustan Unilever Limited has topped the list with the maximum number of time-bound targets, followed by Tech Mahindra and ITC. A report by Capri Global Capital and Hurun India recorded Grasim Industries as ranked 1 having a sustainability score of 47, followed by Tech Mahindra, Tata Power, and Wipro.

Suggestions about a CSR framework focused on SDGs

Though the current CSR policy, CSR voluntary Guidelines, section 135 of the companies act 2013, and other suggestions are in place, India needs to improve its ways of contributing toward the 2030 sustainable development agenda if the goal is to meet the agenda by 2030. Mainly, business corporations are required to step up and start viewing SDGs as one vision of their corporation. Some suggestions enlisted below may accelerate the country’s efforts.

• The Indian government must develop more stringent laws and regulations to enforce responsible behaviour among companies and incorporate penalties for those that do not comply.

• The government should launch an SDG index that allocates all companies with a value indicating their SDG performance.

• In today’s fast-moving world, where technology is leading the world, the government’s efforts towards utilizing technology for achieving SDGs can generate enormous benefits. This effort shall be directed towards tech-savvy companies to lead the business community in the right direction.

• SDGs should be incorporated into performance evaluation measures of the companies, thus encouraging organizations that are leading the way in achieving SDGs.

• Along with launching government-funded missions and programs, companies should be encouraged to introduce time-bounded sustainability-related programs.

• Efficient utilisation of resources is an important point. Governments and companies should try to determine efforts to generate maximum impact from the efforts made.

• As the country has moved from voluntary to mandatory CSR, now efforts should be directed at removing loopholes from the existing laws to make them more rigorous

As the world recovers from the pandemic, both SDGs and CSR assume added importance in helping the world not just recover the years of progress lost during the pandemic, but also find ways to accelerate the steps toward our sustainable agenda. Public and private cooperation in this case is paramount. An alignment of CSR with SDGs will open up many greater opportunities for Sustainable Development, with wider knowledge and financial resources to grasp these opportunities. At the same time, it will provide a much-needed change to the present landscape of CSR, offering a brand-new dimension, and a newer approach to how companies can give back to society. Lastly, the world, as a whole, will look forward to a more optimistic future, one with ensured equity, reliable social systems and a greener environment.