How India Inc Can Make their CSR Spends Count

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Economic Times reported that wow that the new Companies Bill has mandated that organisations of a certain financial strength spend 2% of their net profit on corporate social responsibility (CSR), two things are likely to happen right away. First, the general spend on development projects will shoot up, with more companies having to set aside funds for this.

the-new-csr-lawAnd second, with the government keeping tabs, companies will have to become more transparent about what they are investing in, how and where. Only a handful of companies meet the 2% criterion (or come close) as of now. Fewer still have well-structured, sustainable and far-reaching CSR programmes. But here’s a thought: as they up the ante – and their budgets – for social sector activities, companies might want to pause and think about the best way to make their CSR spend count.

India Inc has gone from chequebook philanthropy and backing causes on a whim to spending more (and in different ways) on stakeholders, be it customers or employees, or rural and semi-urban populations affected by the setting up of factories in their neighbourhoods.

“It’s good to be engaged with people who live in and around your plants, but companies need to look beyond their business interests,” says Amita Joseph, director of the Business and Communities Foundation. “If companies aspire to be national and global entities, their reach [in the social sector] must also be national and global.” Industry gets so many incentives from the government, she adds, that surely companies can have more responsible practices in place.

OUTSIDE THEIR BUSINESS ZONE

Some companies are looking beyond their operational imperatives. Thermax, for example, didn’t feel the need to focus on environment and alternative energy (a popular CSR plank) because it is already involved with solar power, wastewater treatment and reducing carbon footprint as part of its business. “We didn’t want to link our CSR activities to our work,” says Manabedra Nath Sanyal, manager, outreach programmes. “We wanted to look at areas completely de-linked from our business, like education and skill-building.”

As Thermax director Anu Aga puts it: “There are enough causes staring at us in India, like malnutrition, women’s empowerment, rural development and even city planning. I can’t think of a single area where we cannot contribute.” Thermax, which spends about 3% of its net profit on CSR activities, has invested Rs 24 crore on education and other development projects in the last six years, says Sanyal.

As part of the affirmative action programme of the Confederation of Indian Industry (CII), an industry grouping, Thermax looks to increase the employability of youngsters from marginalised communities by arming them with the soft skills they might need to land a job. Of the 500 people trained under the affirmative action programme so far, most already had the requisite academic qualifications and domain knowledge; what they needed was help with personality development, knowing how to interact and work with colleagues, the confidence to max interviews and be more ‘job-ready’.

Thermax tied up with Pune’s English Language Training Institute of Symbiosis to create 60-hour modules administered as a crash course to the students on weekends, and also found placements for most of these youngsters. “There are certain sections of people who are deprived of opportunities or are unable to express themselves properly,” says Sanyal. “Our ‘finishing school’ model helps them develop these skills.”

The company has also partnered with voluntary organisations and the Pune municipal school board to operate after-school centres for students from civic schools to learn English, science and mathematics. Since 2007, the company has been running three Englishmedium schools, and supports a fourth. “The groups we target through our CSR activities are not related to our business practices,” says Aga.

“But that doesn’t make our CSR programme better than others. There’s so much to be done that I’d say companies should stick to their comfort areas and do a good job of [their CSR].”

INCREASING EMPLOYABILITY…

India Inc has been accused of sticking with the safe when it comes to CSR. Education, healthcare and environment seem to be the common pillars that hold up most corporate social sector programmes. Now, employability joins the list. Rakesh Bharti Mittal, vice-chairman and MD of Bharti Enterprises, who heads the company’s foundation, believes if India has to be among the leading economies of the world, it has to be on the back of skilled manpower. This would provide a workforce not just for the country, but also create a bench for global requirements.

That’s why one of the biggest CSR initiatives of the Bharti group are the 254 Satya Bharti schools it runs across the country. Started in 2006, the schools provide free primary and secondary education to rural children.

The programme has reached out to almost 38,000 kids so far, about 49% of them girls. The children also spend about a third of their time outside the classroom, learning about the environment, hygiene and sanitation; and playing sports and inculcating a value system that informs them about backward practises like child marriage and such.

Every year, the Bharti Foundation invests Rs 35 crore on education, the lion’s share of which goes to the Satya Bharti schools. “More and more people are seeking jobs. They have the degree, but not the skills,” says Mittal. “Every child has talent and potential, and it is our duty to support village kids so that they can grow up to contribute to the economy rather than be a burden on it.”

Before school education, Bharti also invested in a school of telecommunications, set up with IIT Delhi at a cost of $5 million, “to develop telecom leaders for tomorrow”. It has also set up an Institute for Public Policy in partnership with the Indian School of Business at its Mohali campus.

…IN DIFFERENT WAYS

At the Godrej group, employability is one of the three important components of its CSR programme, called Good and Green. Among the company’s big goals for 2020 is the training of one million rural and urban youth in various kinds of skills in the hope that they will add value, in one way or another, to the organisation’s supply chain of vendors, dealers or even customers.

“There are various schools of thought on CSR activities, and one says a company shouldn’t mix business with what it does for society,” says a member of the CSR team, not wanting to be identified. “But we’ve been able to strike a balance between what provides economic value and what creates social capital.”

In January, when the group started its beauticians’ training programme, the idea was to provide livelihood opportunities for women to either join a salon, or become a small entrepreneur and start one of their own. The company provided the wherewithal in training, technique and product information. But while this is a high social-value activity, the unspoken quid pro quo was that the beauticians, because of their familiarity with Godrej products, would prefer to stock these over other brands. Thus, they would become brand ambassadors for the company, creating economic value for it.

Similarly, when Godrej launches its training programme for retail associates in early 2013, it hopes to become the preferred supplier for many of these ‘kirana’ stores. The company needs to look at these innovative CSR activities because it calculates that by 2020, about 33% of its revenues will come from Good & Green products and initiatives.

BECOMING ORGANISED

When CSR spend becomes mandatory, companies will have to formalise their processes. They will need to choose causes more judiciously, structure their programmes better, and devise ways to make sure the impact of their projects is measurable at every step. “They will need to form CSR committees and bring in professional staff who can understand the imperatives of the social sector and also articulate the top management’s vision for CSR,” says Sudhir Singh Dungarpur, partner and head, development sector practice at KPMG.

“Companies will need to select their partners more carefully and make sure the spend on CSR is relevant and achieves the desired outcome.” In short, CSR, activists hope, will become a part of a company’s core strategy, not just something that looks good to do.

There is a compelling reason for this, of course. “Ultimately local communities are the ones from whom companies take their land, water and other resources,” says BCF’s Amita Joseph. “If organisations don’t provide employment or other benefits, like access to medical or educational facilities, communities will feel they have been given short shrift by the company. Trying to put up a plant in an area where the people are not favourably disposed towards you, could have the local community up in arms.”

This is best addressed, says Rajesh Tiwari, founder-CEO of the Indian Centre for CSR, a not-for-profit organisation championing social returns, by a more thorough study by the organisation of its stakeholders. Usually, there are just four: customers, employees, the environment and society. “Organisations have the propensity to transgress the boundaries of CSR into philanthropy and charity,” adds Tiwari. “Now, they will need a better study of their stakeholders, their needs and aspirations, and then create an action plan that can run for several years.”

Ambuja Cement, which spends 2.3% of its net profit on CSR and has set aside Rs 60 crore for 2012-13, does that. “A few years before we set up a plant, a team from the Ambuja Cement Foundation (ACF) visits the location for a needs-assessment of the local population,” says director BL Taparia. “We then structure our CSR programme around those needs.”

In an arid area like Junagadh, in Gujarat, the company took up water harvesting and conservation efforts. When it realised that the Tata Group was about to put up a hotel near one of its plants, ACF started hospitality training courses for locals; similarly, it started driving schools when an auto company was about to set up a plant nearby.

The company’s mobile health units and cadre of local caregivers – created in the 12 villages adjoining its plant in Chandrapur, Maharashtra – now serve the population of almost 160 villages, most of whom are well outside Ambuja’s purview of operations. “Our philosophy is simple,” says Taparia. “We’re going to be in these areas for the long term, so we owe it to the local people to assist with their development.”

Till now, the government has largely run programmes in the social sector, with corporate aid in some instances. In case of the growing number of such private-public partnerships, the transparency and accountability that the Companies Bill makes contingent on corporates, will now pass to staterun mechanisms as well. Companies will insist on things being run more professionally, even with their government partners. The same goes for voluntary organisations. Indeed, social sector activists feel companies will be called upon to strengthen the institutions of their development partners as well, like helping them with fund-raising, better management and HR and such.

But CSR in India will have come of age when companies begin to pool their efforts. “For much greater impact, companies should come together on similar programmes,” says Dungarpur. “The spend will increase exponentially, and they will be able to bring in more expertise with shared resources.”

Larger organisations already engaged in this can become the first movers in such concerted efforts and persuade smaller organisations to come along. “When a company says, ‘I don’t want my logo on that programme’, and still goes ahead with the project, that’s when India Inc’s CSR programme will have truly matured,” adds Dungarpur.

(Economic Times)

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