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Why CSR makes sense for start-ups

A report by CRISIL says smaller firms spent more on CSR than many large cap companies

Patanjali Pahwa  |  Mumbai 

Why CSR makes sense for start-ups

As Chennai battled the floods, Ola had boats in action to help people get from one end of the city to another. The subtle take on the state of infrastructure aside, it made for a decent feel good story. At the same time, start-ups were endearing themselves to the people of Chennai and the rest of the country.

Zomato donated food, Paytm and others offered free mobile phone recharges. At a time of natural disaster, help poured in. But for several of these companies, it wasn’t an isolated call to action.

Start-ups have started to wake up to the concept of corporate social responsibility (CSR) recently and the marketing potential it brings. CSR is usually mandated on listed but some start-ups are doing it on their own. A report released by CRISIL said that smaller firms spent more on CSR than many large cap While the spends can’t be compared, experts said the need for CSR made sense for start-ups as well.

Sandeep Murthy, partner at Lightbox, an early stage venture capital firm based out of Mumbai, said that there are various lenses through which one can look at these activities. “For the customer, it is encouraging to know that the brand you are associating with has a cause as well... for the employee, they don’t work just for the money, they see meaning to their jobs and for the company it is reach that traditional marketing activities couldn’t achieve,” he said.

Aruna Reddy, head of the entrepreneurship cell at ISB, agrees with Murthy. She explained that for smaller, unlisted social activities meant establishing connections, which in turn helps the bottomline.

“These companies will have no problem giving back so it creates an ecosystem, which helps them back in return by giving them business and generates goodwill,” she said.

And it is the ‘that’s cool’ factor, which has pushed the unicorns to make subtle changes to the way they reached out to their consumer.

Snapdeal, for example, has a microsite that has sunshine appended to the moniker. The site acts as a marketplace for charities. Each charity is listed as a seller, and in the case of Goonj, a social welfare Non-governmental Organisation (NGO), customers can donate anything from shawls to socks for those in need during winter. This is not new for the Delhi-based company. In 2014, Snapdeal had tied up with Sahara One Media & Entertainment for a film on the Bhopal gas tragedy, which is a cause that had several other start-ups involved as well.

Paytm last year had run a campaign, where it offered to double the donations that customers or employees made for the cause.

“We have several such campaigns. We have, in some cases, said that we will donate double the revenue of the day,” said Shankar Nath, senior vice president, Paytm.

The Softbank-funded start-up has a strategy and uses a specific metric, which sanctions organisations working on social causes. “To put it simply, we evaluate the organisation’s ability to create an impact and the type of cause the individuals are rallying around,” he added.

This was one of the reasons, Paytm decided to get into a partnership with where the company will sponsor 1,000 Right To Information (RTI) requests. The company receives “five to 10” applications every month. “The applications are reviewed by our marketing and HR team. We evaluate the offers on a case-by-case basis,” he said. Paytm has partnerships with Milaap, a micro-lending platform, where customers can opt to give loans to anyone listed on the website.

“We have these programmes because we want to give back to the ecosystem. There are no announcements when we make these partnerships and there are obligations,” said Nath.

While, Paytm funds companies, the likes of Bookmyshow has a more hands-on approach. BookASmile is a two-person team being run by Farzana Cama Balpande, whose primary source of funds are the Re 1 per transaction that the ticket-booking website allows customer to donate.

“We had been incognito for the longest time but now we are trying to get more active,” said Balpande. She explained that the idea started with collections used to fund small theatre groups. But it has grown to varied causes and has more or less stayed close to the services the ticket booking portal offers.

“Our most interesting project was a sports programme we funded in a little village in Kashmir. I had heard of a CEO who had quit his job to help out at a school and we wanted to help” she said. The school had a sports programme and no kits, so Balpande collated the funds and sent a kit to the school.

This is possible as just “20-30%” opt out of the BookASmile programme when they are booking a ticket.

The company recently launched an internship programme to give under-privileged youth an opportunity to get organisational experience. “We give them a three-moth internship and we hope we can absorb them into the company as employees someday,” she added.

Ola, too, has used CSR to improve the bottom line. The company has been in a battle with Uber to retain drivers and one of the ways it has used is education. Gurukul, in association with Avanti Learning Centres, is an after school programme for the drivers, which the company hopes will help them perform better. This programme is an additional incentive, experts said, for drivers to pick Ola ahead of Uber.

ISB’s Reddy said that these activities will not remain isolated to the unicorns with money to burn and the trend of it being adopted by smaller start-ups, too, is growing.

“Almost 70-80% of them[start-ups] are involved in a version of these activities. This number will grow because information and resource sharing isn’t as taboo as it used to be,” she said.

First Published: Thu, January 28 2016. 12:52 IST