Strategic CSR and Intellectual Property

The introduction of the new law governing companies in India, namely, The Companies Act, 2013, has brought about the issue of Corporate Social Responsibility (CSR) to the forefront. CSR is basically a management concept by which companies integrate social and environmental concerns in their business operations. As per the law, every company, private limited or public limited, which either has a net worth of INR 500 crore or a turnover of INR 1,000 crore or net profit of INR 5 crore, needs to spend at least 2% of its average net profit for the immediately preceding three financial years on corporate social responsibility activities.

Strategic CSR is an evolution of CSR where CSR becomes the core competency of the Company rather than just a part of the company policy and CSR becomes the company’s goal. The question is if Strategic CSR can enable a company to grow as the investment needed is huge.

The development of the Prius by Toyota Motor Corporation is a good example of Strategic CSR.  Toyota stole a march on its competitors by creating a car that was not only innovative, but also had competitive advantages and environmental benefits.  Toyota patented the technologies relating to the car.  Toyota took such a huge lead that competitors such as Ford and others started licensing the technology from Toyota.  Thus Toyota was able to monetize its intellectual property.  Toyota was able to do this only because Strategic CSR was the core competency of the company. The intellectual property enabled the company to gain and grow. This is but a tiny example of how a company can innovate and create intellectual property through the adoption and use of Strategic CSR as its goal and objective.

Indian companies that have lagged in the innovation department have a huge opportunity to charter a new course which will result creation of intellectual property and thereby expand their revenue stream.