Automotive Industry in India: The Need for a Strategic Focus on CSR

Submitted by Namrata Rana

By Prof. Utkarsh Majmudar and Namrata Rana

Part II of II

The automotive industry is one of the key drivers of India’s economy, accounting for around 4% of India’s GDP and over 200,000 jobs. Both local and global players dot the automotive industrial landscape and will contribute to making India amongst the world's top five auto-producers by 2015.

CSR Activities by Auto Companies

A study of CSR initiatives by automotive companies conducted in association with Indian Institute of Management Udaipur has revealed some interesting facts.

Society of Indian Automobile Manufacturers (SIAM) lists 25 companies in the passenger car and two-wheeler industry. Out of these only four companies – Tata Motors, Mahindra, Maruti and Toyota – bring out India-specific sustainability reports. Global companies include India-related activities in their global reports. Some others provide CSR-related material on their website and annual report. Five companies provide practically nothing.

Based on data taken from websites as on 20 Oct 2013.

This low level of India specific CSR reporting is not surprising.

1. The field of sustainability reporting is rather new.
2. The cost involved in collating the data may not be worthwhile. Or…
3. Not enough work is going on to report.

The landscape is likely to change with 2% mandatory spend on CSR based on conditions that will cover several automotive companies.

Given this, we asked: what do automotive companies do for CSR? They carry out CSR activities in 10 broad areas – Rural Development, Healthcare, Education, Community Development, Vocational Training, Environment, Women Empowerment, Road Safety, Traffic related, Safety / Training Related activities. However our analysis of sustainability reports has revealed that most of these activities are directed toward employees and communities.

Customer Initiatives – A Missed Opportunity?

The battle for the potential car customer is often fought through glitz and glamour in television commercials. Celebrities, models, exotic locations and very often the hint of excitement, and speed, play an important role in seducing customers about the latest automotive to hit the roads.

The commercials say a lot about the consumer and the companies promoting them. Celebrities are shown driving over pavements, wooing girls, jumping over street vendors and demonstrating stunts on busy roads. SUVs are taken into pristine forests and lakes while disturbing animal habitat.

This clearly seems to contradict the fundamental ethos of social responsibility and sustainability. The consumer, however, does not seem to be complaining—both car and two-wheeler companies are flourishing.

What is often glossed over is a little known fact: Indians account for 9% of deaths caused by traffic accidents worldwide.

One would have thought that this would find place of prominence in CSR reports. However, our study of 25 passenger car and two-wheeler companies (in India) reveals that CSR initiatives are largely centred around employees. Community initiatives, too, are mostly around manufacturing plants, where families of employees are likely to be residing. Customer initiatives were found to be relatively few.

While Hyundai and Toyota have road safety initiatives, Maruti Suzuki, is perhaps the only Indian automotive company that has significant focus on road safety and focuses on this across stakeholder groups. Various road safety initiatives are conducted across dealers, suppliers, customers, employees and communities.

The study of 14 Global Sustainability and CSR reports we conducted has revealed that many of the global sustainability reports mention large customer focused initiatives in several other countries. Nissan has initiatives like Hello Safety, Be Safe with Nissan and Safe Driving Forum. BMW creates school route maps for children and has a Safely to School project for children. A traffic school for children between the ages of two and six is regularly held at BMW Welt in Munich, where children are taught the basic rules and potential risks of road traffic.

While nine of the 14 global reports mention India specific CSR and Sustainability activities, overall, they make a passing reference to CSR and CSR in India.

India-Based CSR Programs – Need for a Strategic Focus

From our study we can see that CSR activities seem to building up in the automotive sector, yet they fall short on many grounds.

1. Lack of strategic focus on CSR – Most programs seem sporadic and inconsistent over the years.
2. Need for wider stakeholder involvement – Most activities tend to be focused on employees and surrounding local communities. Though this makes business sense as it enables companies to keep employees and communities on their side, there is a need to shift focus to larger communities. Customers are a key constituency. They are hardly addressed. Without customers there would be no company.
3. Working together for common good – With large social improvements waiting to be tackled there is a crying need for companies to band together to address problems rather than focus on piecemeal improvements. Social impact bonds and Collaborative platforms could be a way in that direction.
4. Trained CSR Professionals needed – There is a greater need to professionalise CSR activities as most companies are ill equipped to handle complex social problems with tools that are not necessarily known to corporate managers.
5. Passing the Materiality test – The companies that have India-based GRI reports showcase extensive work in CSR across stakeholders. Most reports however, don’t find any mention of issues that concern all of us such as urban mobility, traffic congestion, pollution, roads, signages, alternative fuels, fuel conservation. A proper materiality assessment is perhaps the need of the hour, so that companies move away from somehow putting together a report to creating strategic focus on issues with long-term impact.

This series is the result of a joint collaboration project between Prof. Utkarsh Majmudar and Namrata Rana. This study was supported by IIM Udaipur. We would like to thank Prof. Janat Shah, Director IIM Udaipur, for his contribution and support.

• Related: Global Apparel Companies in India: Can They Be Socially Responsible?