Textile Companies Focus On CSR, But Still Fall Short Of Mandate

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Textile Companies Focus On CSR, But Still Fall Short Of Mandate

Following the Companies Act 2013, textile companies are pursuing their corporate social responsibilities (CSR) more professionally than earlier. More and more companies are spending 2% or more of their net profits on CSR activities. It is mandated that companies with a net worth of Rs 500 crore or more, or companies with a turnover of Rs 1000 crore or more, or PAT of Rs 5 crore or more, will need to spend 2% of their average net profits of preceding three years towards CSR activities.

A recent study by Technopak Advisors, commissioned by the Ministry of Textiles, found that the number of textile companies adopting CSR practices has increased over the last 3-4 years. Out of the 50 textile companies under study, only 12 companies had a CSR policy in 2012-13 while all had a CSR policy in 2014-15.

Only nine companies had a CSR committee in 2012-13 while all had a CSR Committee in 2014-15. Sustainability reporting and communication has gained enormous significance in the past few years, with organisations across the world establishing diverse social, economic, and sustainability footprints.

Opportunities

The CSR norms and requirements have brought a whole range of new economic opportunities. CSR consultancies are mushrooming in all parts of India, as there is a large amount of capital, which needs guidance and support.

Additional human resources are being hired and delegated to work on a company's CSR profile. NGOs have been fast to take advantage of this growing interest in philanthropic activities by companies.

CSR activities have also improved retention rates for employees in various companies. Interventions that encourage and enable employees have significantly boosted employee morale and provided a sense of belonging in the company.

Challenges

There are challenges too. Some believe, somewhat erroneously, that CSR spends could hold back innovations, as companies may opt to spend on mandatory CSR rather than innovations. Innovations - be it in product, material, production, supply chain, will improve a company's bottomline and performance, something that proactive companies understand well. Some legitimate concerns involve the siphoning off or misuse of these huge funds. However, in the examples ahead, companies have been able to innovate and use fund efficiently.

Textile industry contribution to CSR

Of the 50 companies analysed in the study, 45 textile companies contributed Rs 68.52 crore towards CSR initiatives in 2014-15 out of which 49% contribution was made in education and 18% supported healthcare. Only 2% contribution was made in skill development.

The number of textile companies preparing Business Responsibility Report has gradually risen from 5 to 7 in the last three years. All the companies had a CSR policy in 2014-15 whereas only 16% had a CSR policy in 2010-2011.

It was observed that a shortfall of about 22% exists in the actual CSR spend and what is mandatorily required of the companies. The study classifies the identified companies as proactive, active and passive in undertaking CSR activities. Companies such as Aditya Birla Nuvo, Donear Industries, Raymond, Arvind, Century Enka, among others are quite proactive in their CSR activities. Ten textile companies have been identified proactive. Grasim, Bombay Dyeing, Indo Rama, Vardhman Textiles and Nitin Spinners are classified active. And a long list of 29 companies including SRF Ltd, JBF Industries, Sangam India Ltd, Alok Industries, Himatsingka Seide are passive.

It is estimated that CSR spends in India could triple to over Rs 11,000 crore over the next few years, as more and more companies take up CSR activities. Textile industry is a large beneficiary of these CSR activities as a number of non-textile companies have been taking up CSR projects to improve tailoring, weaving, embroidery and other similar skills in rural and semi-rural areas. This is creating a skilled and semi-skilled workforce for the textile industry.

Innovative models in CSR

A look at some of the innovative CSR activities in the world.

GoCoop

India's first global online marketplace, GoCoop enables handloom and handicraft cooperatives and artisans in connecting directly with buyers. GoCoop also supports national and international buyers including wholesalers, retailers, brands, designers and consumers in efficiently sourcing hand-made fabrics and craft directly from the producers resulting in better price for both buyers and sellers. GoCoop links 60,000 weavers and artisans through 4,357 cooperatives and sells more than 15,000 products.

Project Sankalp

Indian Cotton Association Limited (ICAL) and Bollgard Team offer a platform to companies to help cotton farmers in better practices, and to fulfill their CSR obligation.

Project Insights

1. ICAL and Bollgard to help cotton grower from sowing till harvesting

2. Guidance to farmers on best agronomic practices to enhance their productivity

3. Project location profile

4. States: Punjab & Haryana

5. Districts: Bathinda & Sirsa

6. Villages: 6 (3 each in each district)

7. Impact: 300 farmers with minimum 300 acres

IKEA: Promoting Sustainable cotton farming

IKEA partnered with WWF to improve social and agricultural practices in farms in India, China, Pakistan. IKEA became the founder member of a global platform, the Better Cotton Initiative (BCI). The company has a target of sourcing 100% better cotton in the next few years.

Integrating Supply Chains

A lot of CSR initiatives have entailed projects where communities have been added into the company's supply chain in a way that benefits both the company and individuals.

Raymond Limited launched its first training centre to impart tailoring skills to underprivileged youth and tailors in Patna. Raymond also assisted the trained students in placements in the company owned outlets, and in setting up their own tailoring shops. The programme is being expanded to other smaller cities too.

Similarly, Patagonia, in the US, is working with Nature Conservancy and Ovis 21 to promote a sustainable grazing protocol to help build the soil and reverse the effects of overgrazing in 15 million acres of grasslands in South America. It is also producing merino wool of the finest quality, which it uses for many of its signature products.

Material Innovations

A lot of companies have ventured into the field of material innovations where new products are being created from newer materials. Nike in collaboration with NASA, US department of State and the US Agency for International Development has founded LAUNCH to encourage innovations in sustainable materials.

Vision Textiles was founded in Shanghai and then expanded to the world. They started a new brand Waste2Wear in 2012 focusing on recycled textiles. Waste plastic bottles are processed to obtain recycled polyester (RPET).

This is converted to yarn, which is then used to make a wide range of textile products including, but not limited to fashion apparel and accessories, corporate and school uniforms, medical wear, home ware, bags and packaging.

Levis launched a Waste

Waste Management

As part of their umbrella CSR initiative Plan A, M&S launched its Shwopping campaign in 2012. The campaign allows customers to drop off unwanted garments at an M&S store in a 'Shwop Drop Box'.

The company incentivizes this by giving away £5 vouchers at the store. Within a year, 4 million garments were shwopped and 1,300 tons of clothing has been saved from the landfills.

H&M also launched a global recycling programme in the US where people can bring in bags of used clothes and exchange them for 15% discounts on their subsequent purchase. These garments are then classified into 4 categories - rewear, reuse, recycle and energy. Any revenue collected from these activities is used to fund the customer coupons, donate to local charities and reinvest in H&M's sustainability initiatives.