A market-based CSR approach

Updated: Aug 21 2014, 07:17am hrs
Innovation is sometimes just thought about as thinking big and starting small. However, when trying to address Indias development challenges we also have to think about scaling fast.

This is especially true when considering the size of these challenges. In India, 400 million are without electricity and 500,000 people die each year from the effects of indoor air pollutiona result of toxic fumes generated from cooking on open fires and inefficient stoves.

But there is potential for change with the recent corporate social responsibility (CSR) norms mandating 2% CSR spend for companies above a certain threshold. This policy is estimated to unlock R 15,000 crore for the social and environmental sectors.

However, just because organisations are mandated to do good doesnt mean they will do it as well as they can. Focus should also be around finding ways to create long-term sustainable impact that will significantly address Indias development challenges. Simply pouring funds into short-term projects can create a dependency to live off and be sustained just by donations.

Instead of looking at aid as the only answer; it is important to askis it possible to tackle major global development challenges in ways that are both scalable and sustainable While the Shell Foundation doesnt have all the answers, our experience over the last 14 years has shown us that taking a market-based approach can be a more cost effective way of delivering long-term impact at a global scale.

The Shell Foundation has been working in India and globally to create business-based sustainable solutions that are designed to be scalable and financially self-sustaining. Why Well, some of Indias development challenges can be viewed as market failures where there is a lack of products and services for low-income consumersand where entrepreneurs and companies can play a key role in delivering a solution.

For example, the Foundation developed a long term partnership with Envirofit to address the challenge of indoor air pollution by creating a viable and scalable clean cooking stove business. Envirofit has developed durable, efficient and affordable ($15-$30) clean cook stoves that reduce harmful emissions by up to 80% and fuel usage by up to 50%.

In 2009, Envirofit started selling clean stoves in just two states Karnataka and Tamil Nadu and today is operating across 16 states and 40 countries globally. But to scale up this level and create greater impact, Envirofit needed to overcome a number of market barriers, such as raising consumer awareness, building a distribution network from scratch and increasing affordability.

They achieved this through support from a range of private and public organisations such as NGOs, MFIs and CSR programmes. For example, they developed early stage partnerships with Ambuja Cement, Amul and Ultratech Cement to promote the use of clean stoves by leveraging their existing community programmes and finding new ways to make stoves more affordable for their customers and employees. This work has now improved more than 64,000 lives.

In some cases, companies can use their CSR capital and skills to catalyse innovative solutions. This could be through R&D initiatives and incubating ideas that leverage the skills, expertise and resources to develop products or services that target low-income consumers. Once developed, corporate organisations can partner with social enterprises to reach new customers.

Take, for example, our partner Dharma Life, a social enterprise that creates a network of village entrepreneurs to sell social-impact products developed by social enterprises and corporate organisations. Currently, they have a network of 1,500 village entrepreneurs working across 6 states in India selling products such as solar lights, clean stoves and beneficial products by Coca-Cola and Unilever.

They partnered with Coca-Cola India to distribute and sell a low-cost nutritional drink, Vitingo, that addresses iron-deficiency and anemia. Dharma Life are also distributing a water purifier made by Unilever that doesnt require electricity and is aimed at low-income consumers, helping to prevent diseases such as typhoid and diarrhea.

Our experience has shown us that with the complexities and nature of working in the development sector, it is necessary to have a range of organisations that can make the journey from innovation to scale more achievable.

New and innovative organisations tackling social issues, such as Envirofit and Dharma Life, have to overcome a number of market barriers to achieve scale. They are operating under harder working environments, lack access to capital, work without a developed market infrastructure, supply chain systems and distribution networksall of which play a pivotal role in achieving scale.

However, the CSR Bill provides an opportunity for companies to leverage their resources, skills and budget to create and accelerate the development of lasting social impact. Whether it is directly supporting social enterprises to scale up, leveraging distribution networks to improve access to products and services, creating an inclusive business, developing a new product or building the infrastructure to support a sectorall of these are necessary to addressing Indias development challenges.

So instead of thinking big and starting small, maybe we should think scale, work together and maximise our collective impact at a national level.

Anuradha Bhavnani

The author is regional director, Shell Foundation, an independent charity