Bottom Line: Corporate Social Responsibility (CSR) has not only been undesirable burden for the real estate developers but also something that has no critical linkage with the brand equity of the developer. The challenge of CSR rating has thus been like measuring temperature with speedometer.¬†Track2Realty¬†nevertheless develops the metrics for the first time. ¬†¬†
CSR means different things to different stakeholders of India Inc. and today there is no reliable rating/valuation methodology to measure CSR standards. Most of the ranking that has been done about the most sustainable corporations is not professionally standardized or uniform.
This is all the more challenging in the business of Indian real estate where most of the analysis have been done without extensive data-driven assessment. The prevailing mindset about the adoption of CSR has always been that of ‚Äėcause because‚Äô.
Track2Realty got into a thorough research to create a new rating/valuation methodology by extensive use of CSR standards to rate and evaluate companies.¬†¬†
In the absence of defined metrics to make valuation by analyzing CSR activities on ground, the first challenge has been to develop metrics that could assess the CSR in its right perspective.
The focus of the study has hence been on both the tangible and intangible assets. The aim has been at defining as to what would be the best way to measure CSR value of the enterprise.
For instance, take the ‚ÄėSix for a Cause’ initiative sponsored by a developer during the IPL and the Cricket World Cup. For every six hit by an Indian cricketer, the organisation donated INR 2500 during the IPL and INR 10,000 during the World Cup.
In total, it donated close to INR 10 lakhs to the Ekam Foundation, a healthcare foundation that provides for poor children. The initiative of ‚ÄėSix for a Cause’ might have helped the NGO and the beneficiaries but the larger questions remain unanswered ‚Äď can it be defined as the desirable CSR initiative?
In the quest to benchmark the CSR in the right spirit Track2Realty got into a dipstick study. The idea has been to evaluate the true spirit of the CSR and differentiate the initiatives taken by the home grown builders as against the larger corporate conglomerates where the real estate entities may not be contributing as much as the corporate groups at large.
Metrics of CSR
Track2Realty has developed 10 metrics to evaluate the performance of CSR. These are:
Compliance & Transparency¬†
Relevant Cause:¬†The first metrics has ben therefore ‚ÄėRelevant Cause‚Äô that is the critical driver to determine the sincerity of the developer towards the social concern and responsibility. It is much easier to pick up something fancy, like say plantation around your project, spend the mandatory budget and then expect the media to take it as an earth shattering news.
What may be worthwhile in general may not be a relevant cause for the beneficiary. There are instances of developers distributing food and blankets during the winter and projecting it as a worthwhile cause to be seen as a developer worth a case study in CSR.
Unless the cause has a long-term sustainability, it can not be termed as a relevant cause, howsoever noble or worthwhile it may be otherwise.¬†¬†
Skill-Based Volunteerism:The second metrics is Skill-Based Volunteerism. The developer may not be skilled enterprise but the contribution must be made for skill-based enterprise; something that touches the future livelihood of the beneficiaries.
Skill-based volunteering means leveraging the specialized skills and talents of individuals to strengthen the infrastructure of one‚Äôs own or nonprofit organisations, helping them build andsustain their capacity to successfully achieve their missions.¬†
The approach must be innovative to¬†harness individual skills to bring solutions for his future employability and livelihood. For example, making arrangements for primary-level teaching of construction workers‚Äô children might be a noble idea and many developers are doing it on site, but it does not fall into skill-based volunteerism. If the developer sustains this sort of endeavor with their future vocational training then only it could be termed as a real CSR activity.
Long-Term Investment:Any worthwhile CSR programme demands long-term investment. It is not something that is a one-time photo-shoot fame moment for the builders. Unfortunately, the nature of real estate business with short-term investment for short-term benefits is juxtaposed to the demands of the legitimate corporate social responsibility.
Most of the CSR programmes in the Indian real estate are short term methods to exhaust the mandatory spend and hence those can not be termed as real corporate social responsibility.¬†
Management Involvement:It is the involvement of the top management that makes all the difference. For instance, in the Indian real estate the developers¬†often claim that they are already giving back to the community.
Of course, they support this claim by citing the amount of money spent on the CSR activities, money donated by their employees, the number of hours their employees volunteer on their own time, and the number of board seats management holds with different NGOs.
While this is certainly better than doing nothing at all, or acting irresponsibly, the top management of these companies lack the basic empathy to be a part of the community that they intend to serve.¬†
Compliance & Transparency:Being CSR compliant company is one thing but what makes all the difference is to make the company as a whole CSR complaint and transparent. Only a few Indian developers¬†have invested considerable time and resources in developing comprehensive compliance standards and procedures.
Compliances and transparency with CSR serves many of the same functions for companies. Companies with demonstrable commitments to strong social, environmental, and governance standards reduce their legal, reputational, and operational risks, in part by reducing the risk of performance failures and also by building a social license to operate with key stakeholders.¬†
Disclosure Standards:CSR is not voluntary anymore but mandatory and that makes it necessary for the companies to maintain disclosure in the public domain.
But disclosure standards are not confined to state the CSR spend on the statutory files and the website. It is more about the transparency index of the company that genuinely believes CSR has a symbiotic relation with the brand equity.
Today, when the real estate sector in general is seen with suspicion, it is all the more important for the developers to maintain a certain level of disclosure standards and rather create a market buzz around its CSR programmes.¬†
Alliance Partners:Any CSR programme is as good as the alliance partners that it can tie-up with.¬†The big challenge for any developer is how to develop an approach that can truly deliver on these lofty ambitions and, as of now, few have found the way.
However, some innovative companies have managed to overcome this hurdle, with smart partnership emerging as one way to create value for both the business and society simultaneously. Smart partnership focuses on key areas of impact between business and society and develops creative solutions that draw on the complementary capabilities of both to address major challenges that affect each partner.
It is not necessary to have an alliance with big brands to get the media headlines but alliance partners is a broad purview of the eco system in which CSR programmers are run.¬†¬†
For example, a developer that adopts a few villages and forms an alliance with the local community along with Gram Panchayat and the local government representatives as partners has more strong network of alliance partners than any branded NGO joining as alliance partner.
Brand Linkage:Many businesses pursue CSR activities that can at best be termed as pet projects, as they reflect the personal interests of the developers. They often call it philanthropy. While these activities may be presented with much noise and fanfare, they usually offer minimal benefits to either business or society.
More importantly, they fail to link the brand ethos of the developer with the cause, even if the cause is legitimate and relevant to the needs of the neighbourhood.
In the absence of brand linkage the CSR can only generate limited and often one-sided benefits. With philanthropy, for example, corporate donations confer the majority of benefits on society with potential but often questionable reputational benefits to the business.¬†¬†
Beneficiary Perspective:Even after selecting your chosen areas of commitment, finding the potential for mutual value creation is not always straightforward.
The key is finding symmetry between the two sides and being open enough to understand issues both from a business and a societal perspective. Companies that fail to see the beneficiary perspective more often than not fail to create a brand differentiator in the market.¬†¬†
A socially relevant CSR is the one that connects with the beneficiaries‚Äô real needs and then tries to address it holistically. If the beneficiaries of your CSR will benefit from your core activities and capabilities then the company can in turn also benefit from the brand linkage and the word of mouth.¬†
Partnering with beneficiaries is not as simple but when both sides see win‚Äďwin potential there is greater motivation to realize the substantial benefits. Relationships, particularly long-term ones that are built on a realistic understanding of the true strengths on both sides, have a greater opportunity of being successful and sustainable.
Value Creation:Value creation is the ultimate goal of any CSR programme. A CSR programme is as relevant, as useful, and as meaningful as the value it creates for the targeted community and the society at large.
For example, an education initiative that has led to hundreds of qualified and semi qualified work force over a period of time is the value of the programme.
It is the critical element of value creation that differentiates a CSR programme from other charitable initiatives. Unfortunately, there are very few case studies in the context of Indian real estate where the programme has maintained a consistent track record to lead to value creation.¬†¬†
However, in terms of the evaluation of the CSR it is probably the most important metrics to evaluate the CSR of a given company.