MUMBAI: Economic Times reported that Surgeon-social entrepreneur Devi Shetty of Narayana Health is agonising over an issue of the nonmedical kind these days. The electricity bill of his expanding hospital complex in Bangalore has spiralled to Rs 1.2 crore a month, straining his financials. Shetty is now reaching out to corporates to help him tide over this energy emergency through deploying of energy-efficiency interventions and their corporate social responsibility (CSR) monies.
Around Rs 22,000 crore is expected to gush into the social sector from the next financial year onwards as Indian companies ramp up CSR spends in keeping with provisions under the Companies Act, 2013. It stipulates certain companies — with a net worth of Rs 500 crore or a turnover ofRs 1,000 crore or a net profit of Rs 5 crore — to spend at least 2% of their average net profits made over three preceding years on CSR programmes.
At a conference last week in Mumbai to link up companies with social sector players, Shetty told an eclectic gathering of corporate decisionmakers, foundation heads, and NGOs that the idea of “disassociating healthcare from affluence” could indeed come true, given the new circumstances. “We need 2 million heart surgeries a year,” he said, urging companies to devise partnerships or seek out patients from under-privileged sections directly.
Companies had sunk into complacence as the Companies Bill traversed through the laborious legislative process through the year. Now, with April 2014 looming large, many are staring at the woeful inadequacy of the CSR initiatives they had been flaunting over the years.
After an initial phase of indifference and, later, even sly attempts by a few at gaming the rules — fitting in what they are doing currently as CSR or looking for loopholes to avoid doing what they ought to be doing — companies are now preparing for a new era or a new genre of CSR interventions.
On sensing the corporate hurt at ‘being told what to do’, the government too has been changing its stance: from citing Section 134 — which talks of fines and imprisonment — to a more liberal view of defining what constitutes CSR, and implementation methodologies.
“All the governmental sabre-rattling of the recent past has given way to ‘let the company board decide’ mode,” says Shankar Venkateswaran, director, Pricewaterhouse-Coopers. “The government is more flexible in its approach now.”
A few weeks ago, in Mumbai, Bhaskar Chatterjee, director-general of the Indian Institute of Corporate Affairs (IICA), an arm of the ministry of corporate affairs, even endeavoured to dilate on the essence of ‘comply or explain’ nature of the law. If a company fails to achieve CSR targets, all it is expected to do is put out the reasons, in its annual report and on its website.
The challenges, however, are real. Over 16,000 companies — ranging from large ones like Reliance Industries (CSR spend of Rs 285 crore in 2012-13, or 1.36% of its net profit) to small ones like financial services firm JM Financial (Rs 2.16 crore, or 1.21%) — will have to ramp up, re-organise and tweak their CSR approaches. ETIG data shows that three-fifths of the top 100 CSR spenders in India Inc in 2012-13 spent less than 2% of their net profit for that year.
For example, by the new yardstick, JM Financial, which spent Rs 2.16 crore on CSR in 2012-13, will see its annual CSR budget balloon to Rs 5 crore. A spokesman for JM Financial confessed that in the past, what the company attempted was “ad-hoc giving” and that it will now take a re-look and identify causes where it can make a real, lasting impact.
“We are telling companies, while on philanthropy, they can choose to be strategic as well, by aligning CSR with their core strengths,” says Priya Naik, founder and joint managing director, Samhita Social Ventures, a CSR consultancy supported by NS Raghavan, a cofounder of Infosys, that had put together the conference where Shetty made his remarks. A host of companies are, therefore, now in the exploring, reassessing, and even reclassifying mode.
Her colleague Krishnan Neelakantan, Samhita’s MD, cites the case of a PSU that runs 23 hospitals with a substantial financial allocation. When the hospitals began operations years ago, they were employee-centric but eventually metamorphosed into community hospitals. Yet, the company did not treat it as a CSR activity. “The spend is still categorised under employee welfare,” says Neelakantan.
With the wait-and-watch period behind them, companies are now engaged in a flurry of capacity-building activities. In the next three months, a company will have to put in place a CSR structure: appointing a board CSR committee, formulating clear policies, hiring expert personnel, and devising implementation and monitoring mechanisms. It will also have to decide whether to run programmes single-handedly through its own foundation, if it has one, or seek out external partners, or form broad coalitions to undertake meaningful interventions.
How this pans out will depend on who in the organisation is pushing the CSR agenda. “If the CSR agenda is driven by the branding and communications people, then there will be a bias to go it alone, and ignore opportunities for collaboration,” says Naik. Serious players, with substantial amounts to deploy, will have to examine the collaborative approach. “If we need to scale up, we will have to work with the government,” insists Paresh Parasnis, head of Piramal Foundation. “There is no option; the developmental challenges in India are huge.” The foundation maintains health helplines across six states, runs a fleet of mobile health units and tele-medicine centres.
In certain areas like healthcare, foundations have built significant expertise, which they can share with others. In line with this thinking, a hearing-aids manufacturing company is in talks with Parasnis for a joint rollout of a programme.
While Corporate India is awaiting the final CSR rules, which are expected to be announced anytime now, and is also preparing to make deep forays into water, education, healthcare, livelihood generation, skill building et al, a deep churn, a rash of ‘distortions’ are expected in the social sector. Foundations that traditionally supported NGOs now wonder whether they will have a role to play. Worse, they are beginning to see an erosion of values they had tried to build into the sector over the years. NGOs are gleefully fleeing from the portals of foundations as they are being wooed by corporates with easy money, some even accepting money to work in areas they have no clue about.
(Article first published in Economic Times on 23 December 2013)
