MCA’s directive allowing CSR funds for research and development enabled corporates to support socially beneficial innovation and scientific advancement.
By Abhishek Tripathi
As the Corporate Social Responsibility Rules complete a decade of its existence in the country, with the ever-changing dynamics over the years, the regulation is now deep-seated with India Inc. At this crucial juncture, which permits corporates to autopilot the approach to CSR, it becomes pertinent for the policy makers to reflect on the enablers, learnings, and opportunities.
Enablers over the years:
- Multiple themes: A gamut of themes enabled the companies to bridge gaps between “resource and access” for the vulnerable communities. Several assessment studies indicate that interventions such as digital literacy, mobile healthcare provisions and infrastructure support have led to improved school attendance, lower medical expenses and increased household savings.
- Alignment with SDGs and reasonable efforts: The Global Barometer has enabled the companies to align its activities in sync with its earmarked priorities. Also, companies are focusing on a select concentration to realize a reasonable impact and cut sprinkled outcomes.
- Addressing national emergencies: Unprecedented times of COVID led to alterations in the CSR Rules to allow corporate spending in combating the global crisis. This helped in bridging resource gaps by unifying efforts of corporates, NGOs and government functionaries. ad hoc due to unprecedented scenarios the disasters stirred
- Measuring impact: A key inclusion in the January 2021 amendment earmarked project assessments of companies with a certain scale as mandatory. The amendment also directed the investment modality for such assessments.
- Supporting research: MCA’s directive to include CSR contribution towards research and development paved the way for many corporates to channelise funds towards research that could benefit society at large. Partnerships with eminent institutions and state-level CSR bodies helped contribute towards meaningful innovations and social enterprises.
Gaps
- Skewed spending: Available data over the years implies disparity in geographical spending, with 38% of the spending in the western part of the country, whereas the Northeast receiving just 2.8% of the total CSR fund allocation. Moreover, in FY2022-23, Maharashtra, Tamil Nadu, Karnataka, Andhra Pradesh, Delhi, and Gujarat received 60% of CSR spending, while Aspirational Districts (per NITI Aayog) received less than 20% of the entire CSR contribution. This gap may be attributed to the lack of industries and the inclination of companies towards local area development. The government may consider mandating specific spending in certain geographies as obligatory. This may seem a hard-nosed approach; and therefore, corporates’ inclination becomes crucial.
- Need to recast impact measurement: The impact assessment rule may consider a recasting to also include “type of project” as a criterion apart from mere “investment” and “tenure”. For instance, assessment of COVID support projects could capture only output-level data owing to the fact that beneficiaries could not be tracked or reached during the assessment.
- Reiteration of CSR – In letter and spirit: Contribution to funds mentioned in Schedule VII, although permissible, must not be picked as the only feasible spending option. A thorough contemplation on an “expenditure ratio” may be brought in to ascertain the minimum percentage that must be allocated to project/s other than contributions to scheduled funds.
- Fulfilling resource gaps: A directive of combat the practice of donating consumables, uniforms, protective gear etc., to government departments must be necessitated. These are basic necessities that must be provided and managed by the respective departments. CSR funds must not be directed towards such donations to ensure adherence to CSR Rules in letter and in spirit.
Opportunities
Deeper alignment with SDGs: A deeper dive into aligning CSR with SDGs should enable and motivate companies to aim for an indicator-level alignment. Taking case of a company aiming to reduce poverty by “x” percentage in the local area by implementing livelihoods project. Rather than just reporting alignment with the goal, i.e., End Poverty, the company may communicate the reduction of people living below the national poverty line as a result of the intervention/s in the project’s geography.
Employee volunteering: Corporate responsibility (CR) involves employees at the core in the West; however, it is not a mandate in India. The possibility of involving a certain range of companies to take up impactful volunteering (as part of a CSR project) may be explored by the policy makers. For instance, the top 50 companies with the highest CSR expenditure may be involved in a pilot phase. The indicators may be time-cost, matching donation or any other feasible option. The same may be included in the CSR Report highlighting performance against set indicators. This would, however, require endeavor of the companies to drive and attain worthy results.
While the companies have demonstrated an ardent approach to the concept of CSR, a lot still awaits from the policymakers to improve the horizon. A critical analysis of the gaps and opportunities is vital to encourage continued impactful actions with efficient allocation of resources – intellectual, labor and financial.
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About the Author
Abhishek Tripathi is the Partner at Grant Thornton Bharat.
Views are personal.
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