Apr 25, 2016

To mitigate social risk, engage with the community

Source : The Hindu

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Businesses need to learn to think beyond the bottomline and develop tools to interact with the world around them

In a connected world, businesses need to think beyond the bottomline, and worry about how their actions are affecting the world around them.

“India and the world are growing unequally. What is happening to climate change? When there’s such a huge shortage of water what happened recently with the Indian Premier League? (The cricket league was blamed for its insensitivity to the drought in Maharashtra). If businesses don’t look more broadly at what is happening around them they will lose their social contract,” said Nisha Agrawal, CEO of not-for-profit Oxfam India. Ms Agrawal was part of a panel discussion in the city on impact of social risks on business.

Oxfam, in association with KPMG, earlier on Thursday, released a report titled, ‘Impact of social risks on Indian businesses’, which showed that the perception of Indian corporates about the vulnerable groups they are affecting is limited to their operations and supply chains. Corporates need to understand that doing business is increasingly being shaped by social and environmental challenges, the report said.

Social risks, in the study, have been defined as the perceived or real negative impacts on, and threats to individuals, groups, communities and societies from social changes triggered by development related activities and the actions of stakeholders such as corporations, non-governmental organisations, industry associations, government institutions, and regulators. Additionally, any changes resulting from demographic and environmental factors are considered social risks.

“There is an overlap of the key risks that affect business and society. Corporates need to start making social risk a part of their business strategy, and weave the impact into their corporate strategy,” said Narayanan Ramaswamy, partner & head for social sector practices at KPMG India, who moderated the discussion.

The way corporates could do that, added Santosh Shidhaye, senior vice president at IL&FS Limited, was to incorporate the cost of mitigating both the social and environmental risk in the project cost. His company, he said, had applied the model to their projects.

Proactive approach

Given how powerful a player the corporate sector is, it needs to be more proactive on social risk and not merely comply with regulation. “They have to become part of the force for good in a broad way. They need to take responsibility for what is happening in the country and the planet and go beyond saying, “this is my business, I need to comply with these laws, and if I don’t, I’ll lose my reputation,” said Ms Agarwal.

A corporate needs to believe that it is not setting aside money for social development; rather, believe it will help it to build its own business. “If one starts with this premise it helps the bottomline in the long run,” said Rema Mohan, head of the CSR division at the National Stock Exchange.

Regulation is just one of the ways to bring about change, said Ms Agarwal. Consumer sentiment, investors and civil society can contribute equally. Investors, particularly, have a very strong role to play, and decide where the money goes, said Prerana Langa, CEO of YES Foundation. “Who will not listen to somebody who is giving you money? Banks must look at having an environmental and social risk policy as part of credit appraisal,” she said.

The panelists believed, though, that the movement for change had already begun. Just as risk management had evolved from managing government regulations or labour to thought given to the environment or communities, said Ms Mohan.

“In the long run, social risks are integral to business. Ignore them at your peril. They reflect in many of your activities, and not just CSR,” said Mr Ramaswamy

Even if new-age companies are overly focussed on the bottomline, they can make a difference in areas where the government cannot get in, such a education, said Ms Mohan. “Corporates can work together with NGOs, ensure systems and processes are in place, besides accountability, monitoring and valuation of projects. As we progress, more companies are becoming transparent and aspiring for excellence certifications. We will see this being a focussed activity,” she said.

 

Source: The Hindu

 

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