With corporate social responsibility (CSR) set to become a reality from April 1, a large sum of money will henceforth be available for CSR activities from profit-making businesses. Considering the entire spectrum of 9,000-10,000 companies expected to come under the ambit of CSR obligation, it is expected that R15,000-20,000 crore may be available per year for CSR activities. This is a large sum of money which, if used judiciously, can provide a great opportunity to reap high benefits and value from causes, projects and programmes funded from this pool.
Traditionally, companies have tended to orient their CSR activities mainly towards philanthropy and pet projects?projects that personally interest the owner and, in some rare cases, even as propaganda. These activities have had limited and often one-sided (either to society or business) benefits and value. Also, except in case of large groups/corporations, the CSR efforts in India, hitherto, could at best be described as sporadic, ad hoc, and lacking in strategic intent or direction. However, with CSR becoming mandatory and the consequent manifold increase in the availability of funds for CSR, businesses will now have to start thinking in terms of expanding their CSR initiatives well beyond philanthropy, pet projects and propaganda activities to include programmes and projects that are high on benefits and value addition quotient to both the society at large and to the businesses and their stakeholders. For this, the emphasis and focus of CSR efforts will now have to be on partnering with other businesses/corporations/companies, government, local bodies, panchayats and/or civil society organisations in finding innovative and creative solutions to critical social, economic and business challenges.
Graduating from philanthropy, pet projects or propaganda types of initiatives to partnership-based innovative and creative initiatives, however, would require businesses to devote considerable attention and resources in articulating and defining a long-term CSR strategy that, inter alia, will also have to have discussions and definition of company?s CSR vision, long-term goals, guiding principles, and outcomes. Such a strategy document will also need to elaborate upon how the CSR effort will be managed, what institutional structure will be created to manage the CSR effort, and what programmes/projects will be undertaken to accomplish the intended outcomes and goals. In addition, such a document will also have to have discussions about processes and procedures for CSR budget formulation, approval and disbursement, as well as discussion about procedures and processes for individual programme/project identification, formulation, design, appraisal, approval, monitoring, evaluation and closure/extension. Furthermore, such a document will also need to clearly spell out indicators, means of verification, and institutional arrangements for measurement and verification of impacts and outcomes.
With CSR neither being their core competency nor the core activity, businesses will find it challenging to not only develop a comprehensive CSR framework document, but also to implement the planned initiatives. The challenge will be especially daunting for many small businesses/companies who are not involved in any CSR activities to date. Even among large groups, there will be some limitations with respect to the domain knowledge and skills required to bring innovativeness and creative fervour to the issues that they may intend to address under the expanded CSR regime. To roll out the expanded CSR, therefore, extensive assistance and support from external individual and institutional experts will become inevitable. Also, considering that many smaller businesses may find it infeasible to create elaborate internal infrastructure to manage CSR efforts, external support will also be needed in the form of ?intermediaries? to act as aggregators of CSR funds from smaller businesses to implement a common programme of mutual interest.
External assistance on a continuous basis from aggregators or individual or institutional experts, however, will require large resources. Though the companies have now been allowed to use 5% of CSR obligation towards management and administration of CSR activities, looking at the experience from many bilateral, multilateral and target funding level based demand side management programmes would indicate that there may be a need for hiking this level to 10-15% to ensure efficient administration of CSR initiatives, including project and programme development, design, management, implementation and evaluation on a continuous basis.
Similarly, to ensure effective and efficient use of CSR obligation, two practical issues would need a re-look. First, considering that different companies would be in different stages of preparedness for CSR with many smaller companies who did not have a tradition of CSR being less prepared for CSR as compared to many big business houses which have had a tradition of CSR; there would be a need to gradually ramp up the CSR targets, rather than insisting on meeting the 2% target from day one. Second, considering that many of the CSR initiatives are likely to be in the nature of multi-year projects and programmes that require phased funding whose levels would be different in different years, it may be necessary to allow the companies to meet the CSR obligation not on a year-on-year basis but over a period of time of, say, five years, wherein between the set period, the spending on CSR could be below or above the target of 2% with overall spend over a set year period being equal to the set obligation of 2%.
Pramod Deo is former chairman and Vijay M Deshpande is an energy economist and former principal advisor (economics), CERC
