India’s most exciting companies instinctively know what it takes to succeed in a challenging business environment. Now, some are applying the same innovation and market nous to addressing the country’s most pressing needs

Lesson one: when asking about responsible business in India, don’t mention the term “CSR”. Why? Because the acronym is guaranteed to provoke the same answer every time. It’s about “giving back to community”.

Phelan therefore focuses his conversations on the opportunity side of the responsibility agenda. Subjects like resource efficiency, renewable energy and low-income markets resonate immediately with Indian executives. As he puts it: “Companies say, ‘well of course we’re doing that. That’s just business’”.

This “just business” attitude is comparatively new. Until recently, responsible business has been the turf of a small coterie of corporate stalwarts – the likes of Tata Group (owner of Land Rover), Godrej Industries, ICICI, Hindustan Lever and Mahindra & Mahindra. For these grandfathers of the movement, it’s not only the business case that matters. “Ethics, culture and values are a significant driver for how companies look at this issue too,” says Shankar Venkateswaran, Indian responsible business expert and Delhi-based director of consultancy firm SustainAbility.

Not so the new generation. India boasts a “florescence” of lean and eager start-ups, as Malini Mehra, founder of the Centre for Social Markets, points out. For them, solving India’s most pressing environmental and social problems is as much a material quest as a moral one.

The healthcare sector provides a case in point. India’s government-run hospitals fall woefully short of the needs of the country’s 1.2 billion inhabitants. Helping fill the gap are innovative private sector providers such as maternity chain LifeSpring (see case study), cardiology specialist Narayana Hrudayalaya and cataract expert Aravind. All boast low-cost, high-turnover business models designed specifically for India’s poor.

Examples of other “unusual suspects” abound in other sectors too, says Sachin Joshi, director of CII-ITC Centre of Excellence for Sustainable Development. A number can be found in the Fast Company’s latest top-ten ranking of innovative Indian companies (see FastCompany.com).

Among them is Eko. The Delhi-based finance provider has created a mobile platform that allows unbanked individuals to access basic services with the State Bank of India via SMS. Also on the list is Naandi Community Water Services, which builds village water purification plants across India.

“It’s the social entrepreneurs that are telling the 20th century businesses how to do business in the 21st century,” Joshi says.

Doing more with less

IBLF’s Phelan agrees. “This is what India is famous for,” he says, in reference to the inclusive business models that India’s social enterprises have come to encapsulate. And word is getting out. “Now companies are looking to India for ideas on how to do more with less.”

Step forward Journeys for Change (JourneysForChange.org). This Mumbai-based non-profit group arranges for corporate responsibility professionals to meet India’s cutting-edge social entrepreneurs. Its week-long itineraries include visits to the likes of Vikram Akula, founder of Hyderabad SKS Microfinance (which raised more than $350m in an IPO two years ago) and Vineet Rai, founder of micro equity investment firm Aavishkaar. Kelly Lauber, global director of strategic planning for corporate responsibility at Nike, credits the programme for introducing a “social venture capitalist approach” to her firm’s social investment programme.

Social enterprise may start with nimble start-ups, but it doesn’t end there. Godrej’s low-cost fridge, Tata Motor’s ultra-economical Nano car and Unilever’s Pureit water purifier (see case study) illustrate how mainstream such inclusive business models now are in India.

The United Nations-backed Business Call to Action (BusinessCallToAction.org) provides more evidence of the same. Monster.com, the global online recruitment firm, has developed an internet job portal (Rozgarduniya.com) specifically targeted at rural youth. The portal is run in conjunction with Indian agricultural commodity firm ITC, which operates village-based internet kiosks across the country.

Such examples are the product of an inherent market logic, reiterates CSM’s Mehra. India’s established corporations grew up in a protectionist, state-dominated era of “bounded growth”. Today, that’s all changed. Thanks to drastic economic liberalisation reforms in the early 1990s, aggressive “newcomers” now flood the market. “As a result, Indian companies by necessity have had to innovate,” Mehra argues.

Her definition of “newcomers” includes foreign companies as well as the fleet-of-foot domestic operators. Foreign investors create the “churn and competition” needed to “create a very new ecosystem of innovation and response”, she says.

Conscious that international investment portends exactly such shake-up, India’s industry lobbyists have been keen to stem the tide. A recent government proposal to allow multi-brand retailers such as Wal-Mart and Tesco to set up shop in India (current rules restrict them primarily to the wholesale sector) met with virulent opposition, for instance.

For their part, however, responsible business managers in India recognise that foreign companies can help push the agenda forward. Many Indian corporations lack the systematised corporate responsibility policies and practices of their foreign peers, says Amrita Bhalla, executive vice-president for human resources at Indian hospitality group Oberoi Hotels and Resorts. “[International brands] are a little bit ahead of the curve so they’re going to raise the bar for us,” she adds.

The remark highlights one of the big challenges for India’s responsible business movement: professionalism. India has made huge strides over recent years in this regard. Many leading companies now have dedicated corporate responsibility teams. Furthermore, business associations such as the Confederation of Indian Industry are active in providing managers with the toolkit required for contemporary responsibility management.

Spreading the word

Yet, beyond the first tier of large Indian corporations, internal capacity still remains weak. “What’s missing are the thousands and thousands of people that can help with implementation,” IBLF’s Phelan spells out.

Engaging business schools is a key step. Again, that is slowly beginning to happen. The prestigious India School of Business in Hyderabad, for instance, runs an annual competition (the iDiya Challenge) aimed at commercialising socially oriented business ideas. Its social enterprise course, meanwhile, ranks among the most popular MBA electives. The country’s prestigious Indian Institutes of Technology and Indian Institutes of Management need to follow suit.

The second big challenge is to adapt universal principles of responsible business into an Indian setting. Some international standards can be adopted off-the-peg, such as carbon accounting norms or non-financial reporting guidelines. At other times, it’s necessary to create “local models that best suit local dynamics”, says Shankar Venkateswaran. Community investment is a case in point. 

India’s capacity for innovative solutions to social and environmental already abounds. Harnessed correctly and the country’s private sector has huge potential to drive social and environmental change.

Unilever Pureit – as safe as boiled water

Only one in four of India’s 1.2 billion people have access to clean water in their homes. As a result, most boil water on an electric hotplate or on a wood-burning or gas-powered stove. This is not only costly, but harmful to the environment. A smaller number buy bottled water, which is even more costly in both financial and environmental terms.

Anglo-Dutch consumer goods company Unilever is marketing a new, low-cost water purifier that it believes could solve India’s drinking water shortfall. More than five years in the making, the product was released across India in 2008 – as Ethical Corporation reported at the time – and has since been installed in more than 6m homes to date.

“If you presume the average family consists of five people, that’s 30 million consumers drinking clean water,” says Deepak Saksena, head of partnerships for Hindustan Unilever’s water business. The health impacts are substantive. Pureit is pitched as one of the most efficient purifiers on the market, meeting exacting germ-kill criteria set by the US Environmental Protection Agency.

The World Bank estimate that one fifth of communicable diseases in India are waterborne. A year-long study by the Indian government’s National Institute of Epidemiology showed that homes using Pureit had a 50% lower incidence of diarrhoea. 

Unilever’s pursuit of a “gold standard” for the products includes a design that doesn’t rely on electricity or water pressure. “We made it hard for ourselves”, says Yuri Jain, vice-president at Hindustan Unilever’s water business. But the hard work is for good reason. As it has no need for electric power, Pureit can be used “anywhere, at any time”.

Adding to the product’s accessibility is its price. The standard model retails for about €14 – much lower than most other purifiers on the Indian market. Even so, it’s still a considerable outlay for India’s low-income millions. So Hindustan Unilever has teamed up with several micro-finance institutions (MFIs) around the country to enable poor consumer to pay in instalments. Monthly repayments are set at about €2, with a typical horizon of nine months. MFIs typically target the so-called “productive poor”; a rung above the “poorest of the poor”, Deepak Saksena notes.

Lastly, a behavioural change was required. For decades, Indian consumers have been educated to think that boiling water is the only failsafe way of purifying water, explains Keith Weed, chief marketing and communications officer at Unilever. He asks: “How do you convince someone that this new product is as safe as boiled water?” The answer is plenty of advertising, street demonstrations, engagement with the medical profession, and academic studies – such as those already undertaken by the Indian Public Health Association and the London School of Hygiene and Tropical Medicine.

As well as an example of neat technical innovation, Pureit is illustrative of Unilever’s new goal of “decoupled growth” – the notion of selling more consumer goods, while reducing its environmental impact and maximising its social impact. By substituting electrical energy (largely coal-based in India), gas or other fossil fuels used for boiling water, Pureit’s per-litre carbon emissions are significantly lower than either boiled or bottled water. The purifier’s filter can produce about 1,500 litres before a replacement of consumables is needed.

The product is also contributing to Unilever’s stated goal of providing safe drinking water to 500 million people by 2020. The company still has a long way to go, admits Deepak. “If we are to hit 500 million, a significant number will have to come from low-income consumers in India and globally,” he notes. Developing an affordable, sustainable business model is therefore essential to bringing scale to Pureit’s distribution. In a sense, India is providing the company with its test-bed. Eight years after its soft launch (the product was piloted in Chennai in 2004), the purifier is now being rolled out in Indonesia, Bangladesh, Mexico, Brazil, Sri Lanka and Nigeria.

LifeSpring Hospitals: affordable, quality healthcare

The fifth Millennium Development Goal is a reduction of the maternal mortality ratio by three-quarters by 2015.

India is one of the world’s most populous countries and one of the worst performers. There are up to 395 maternal deaths per 100,000 live births in the country, according to the latest figures – that’s six times higher than in China. Most of these deaths could be avoided if adequate pre- and post-natal care was available. Now a solution has emerged from the private sector that could see the mortality rate fall.

LifeSpring Hospitals has developed a no-frills business model that enables it to provide high-quality maternal and child healthcare to low-income families. The for-profit healthcare provider, which operates nine small hospitals of about 20 beds, focuses its services on urban families that earn between $3 and $6 a day. Such families are generally too poor to benefit from private clinic care, and public-funded care may be limited or unavailable due to resource limitations. 

Funded by condom manufacturer Hindustan Latex (now HLL Lifecare) and New York-based private social investor Acumen Fund, LifeSpring operates on a cross-subsidy model of tiered pricing. Through this system, customers have the option to choose to give birth in a general ward, in a semi-private room, or private room. About 70% of each hospital is devoted to the general ward, where it costs between $42 and $85 for delivery, a two-day stay, medicines and a baby kit. A private room, meanwhile, costs closer to $150.

The company’s core business is normal and caesarean deliveries. To achieve financial sustainability, each facility should average about three deliveries a day (just over 50% capacity). LifeSpring’s first clinic in the Moula Ali slum district of Hyderabad averages 140 deliveries per month, nearly five times the number in private hospitals. LifeSpring supplements its revenue from child deliveries with family planning services, outpatient doctor consultation fees, and the rent received from outsourced laboratory and pharmacy capacity. The Moula Ali clinic broke even within 18 months.

To keep costs low, LifeSpring refers complicated cases to other hospitals early on and hires less-expensive auxiliary nurse midwives in addition to general nurse midwives. To ensure quality is not compromised, the network of clinics follows a rigorous protocol system, monitored by staff doctors. Other than this monitoring role, doctors are relieved of all administrative duties, ensuring their time is optimised in medical services.

Today, the company has a dozen clinics across Hyderabad, all located in high-density, low-income areas. In its first five years of operation, LifeSpring helped deliver more than 7,000 healthy children. The company has plans to build 200 clinics across India by 2016.