Corporates often direct the money allocated under CSR to certain causes only. Time to diversify a little.
The concept of corporate social responsibility (CSR) often draws a certain degree of scepticism from ordinary citizens on the street. There is a lack of clarity on what CSR entails.
Having said that, the introduction of CSR rules under section 135 of the Companies Act has given the Indian corporate sector greater impetus in directing their profits for social development-related activities.
As per the rules introduced in April 2014, companies with a net worth of Rs 500 crore or more, a turnover of over Rs 1000 crore or a net profit of Rs 5 crore are mandated to spend at least 2% of their three-year average annual net profit on CSR-related social development initiatives.
There are three modes through which companies can deploy these funds—setting up a CSR department section, a corporate foundation, or combining their efforts with non-for-profit partners with expertise in the field. Healthcare, education, sanitation, and the empowerment of women, are just some of the popular activities that fall within the ambit of CSR.
Since April 2014, data has shown rising CSR expenditure, but questions remain with regards to how that money is spent and the impact these initiatives have on the ground.
One of the significant challenges, among many, when it comes to CSR is that most corporate entities spend in only certain causes at the expense of others. Moreover, most of these causes, like literacy and sanitation, for example, already receive substantial support from the state, and international donor agencies.
Companies do not look beyond immediate tangible benefits that are easily quantifiable. That’s the world in which they function.
“Also, worth noting is that companies increasingly view CSR as a strategic rather than purely philanthropic activity. This means that companies will want to align their CSR activities with their business because that brings in their expertise and also enables volunteering,” said Shankar Venkateswaran, Chief of Tata Sustainability Group, in an interaction with the India Development Review.
Irrespective, there are three sectors that could use more attention from funds directed for CSR.
Clean energy access:
In a recent study on the top 100 companies with the largest CSR spends from the BSE 500, Samhita, a CSR consultancy firm, found that only 39 had programmes in clean energy in 2015-16.
“On average, the clean energy budget amounted to six per cent of overall CSR spends, with the median budget being INR 2.45 crore,” the report states.
By comparison, almost 90% of the companies have a CSR program in education, sanitation or skills and livelihoods. It’s not as if these issues aren’t important, but that energy access plays a critical role in addressing better health, livelihood or education outcomes. It’s all about inculcating an integrated approach towards achieving social change.
As per the study, corporates are hesitant in investing here because of its highly technical nature. Thus, most companies prefer to spend on energy products distributing solar lamps or lanterns for households, instead of building off-grid facilities. In a country where 300 million people are without access to electricity, a lot more is required.
“Companies can support innovations to promote bottom-of-the-pyramid (BoP) technologies; develop B2B (business to business) models to provide seed capital to social enterprises via technological incubators, and explore pooled-funding options to drive scale and impact,” the study states.
None of the companies among the top 10 in CSR spending directed any funds to slum development, said a recent report. Unlike clean energy access, the problem here is both regulatory and structural in nature. There is little clarity on the legal status of slums.
Among the top 100 NSE companies, a mere Rs 9.78 crore out of Rs 6810 crore of total CSR money was spent on slum development in FY 17.
“Slums are difficult communities to work in. You need to navigate many local, social and political elements. Unlike villages, slums do not have a defined self or local government and therefore no representative voice. Moreover, slums in larger cities are tied closely to political interests,” said Anushree Parekh, a senior researcher with Samhita, to Mint.
These projects are very complex regarding both planning and execution, not to mention the lack of clarity on what slum development means in terms of CSR. “The term ‘slum area’ shall mean any area declared as such by the central government or any state government or any other competent authority under any law for the time being in force,” the government said in a notification last year.
What about ‘unauthorised slums’ that in fact need more support? “Since jurisdictions and boundaries of legal and illegal slums aren’t clearly defined, planning and execution of projects are extremely difficult,” said Parekh.
It’s not as if companies do not work in slums, but their involvement is limited to piecemeal initiatives in education, health and sanitation. Slum development, however, entails an integrated approach which includes all of the above initiatives. Although the cost of failure is high, a success story could do wonders for the lives of slum dwellers.
Unlike the above two sectors, sports have enjoyed the benefits of CSR spend a little more, although not nearly enough. In FY17, the top 100 NSE companies spent a mere 122.71 crore on CSR activities out of Rs 6,810 crore.
“A lot of companies feel that while opening one school can educate at least 200-300 children; training one athlete only has a limited impact. They need to realize that the ripple effect of one athlete performing well can indirectly impact lakhs of others,” said Viren Rasquinha, former Indian hockey player, who now runs Olympic Gold Quest (OGQ), a not-for-profit foundation that trains Indian athletes, to Mint.
However, major corporate entities like Reliance and Tata that have invested a significant amount across communities situated in near their area of business, and other parts of the country. This sector isn’t short of intent and money. What it needs is greater emphasis on building the right structure and execution, something that they excel in.
Admittedly, the focus here is seemingly on top 100 companies listed on the BSE, but the data tells us that firms with that kind of money could do more in these important areas.