CSR – Think beyond financial target

By Sharad Kumar

With the emergence of new and new Corporates in India the role of CSR has become very instrumental in uplifting the society and restoring the environment. About 21.92% of Indian Population lives below poverty line with 25.70% rural population and 13.70% urban population (Data Taken from RBI Annual Report 2012).According to Government Data as on 31.12.2014 there are 272 backward districts out of 664 districts in India i.e almost 40% districts in India are backward.

CSR which started as a voluntary concept has become mandatory for corporates after the introduction of Companies Act 2013 from 01/04/2014. As per the new regulations under the Companies Act, 2013, the Government has mandated a minimum CSR expenditure of 2 per cent of the company’s profits, for all organisations above a certain size of revenues and profit. Every company having net worth of rupees five hundred crore or more, or turnover of rupees one thousand crore or more or a net profit of rupees five crore or more during any financial year has to carry out CSR as per the new regulations. “If all eligible companies spend their mandated budget this year (FY 2014-15), CSR expenditure is estimated to grow about four times to USD 2.5 billion (over Rs. 15000 Crores) and technology companies will likely contribute about 20 per cent or more of this,” according to a report by consultancy firm BCG and Nasscom Foundation.

Role of Government 

The whole idea of making CSR mandatory is a big step and a noble idea. This huge sum of money if spent in a planned manner can do wonders for the society and the environment. The only problem is the lack of clear vision of the Corporates for undertaking CSR works. In the attempt to fulfil the financial target of 2% Expenditure on CSR, the prime focus of the Corporates has shifted from uplifting the society to achieving the target. The lack of vision and proper guidelines for undertaking CSR works has resulted in doing random CSR works mostly in the field of infrastructure and Funding of NGOs which definitely help in spending more and thus achieving the target.

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The focus of the Corporates needs to be changed with issue of CSR guidelines addressing the following points:

The role of Government (State Government, Central Government, Local Administration) and public representatives (MPs, MLAs, Sarpanch, Parshad) in the CSR spending in a district/area must be clarified.

Joint consultative committees with all the Corporate members, district administration and public representatives in each district may be made so that issues could be addressed in a more systematic way with the all the stakeholders knowing their area of work. This will minimize the duplicity of CSR works done by different Corporates in a district.

Social Parameters like x% of unemployment, y% literacy, IMR & MMR must be introduced for assessing the CSR performance of a Company.

For example – Depending on the CSR fund and the Geographical Location, Corporates should be assigned different districts/Development Blocks/Villages/Wards and performance may be assessed in terms of social metrics %  reduction in unemployment, literacy, IMR & MMR etc.

Depending on the size of CSR funds, area of work may be recommended through guidelines.

Role of Corporates

The present scenario has lack of uniformity in CSR Spending and there is least alignment between the CSR works done by a Company in a particular area and the actual needs of the society. Although the role of Need Assessment and Baseline survey is very important and beneficial for undertaking the CSR works in the right areas, a blend of recommendations  from Local Administration and Baseline survey in determining the areas of intervention can help in achieving better results.

Another area of concern is selection of good NGOs for undertaking CSR works of a Company. There have been repeated incidences where NGOs have irresponsibly spent huge amounts of CSR fund but social impact was minimum. Therefore, due diligence must be done meticulously with strict parameters for selection of NGOs in different fields of CSR.

Secondly, Corporates have to understand that random infrastructural works like community halls, drains, roads are not going to serve the purpose of CSR. The whole idea of behind CSR is to bring social and economic upliftment of the society. Thus, a systematic intervention of the society is necessary for planning out of CSR activities of a Company understanding the basic and the deep social and economic issues of the Geographical location of work.

The key to success of CSR in India is to have a systematic approach with the Corporate, Government and Public Representatives being on the same track. Aligning CSR activities with needs of the society is necessary to get outcomes which can create real and considerable impact.

About the author:

Sharad Kumar works as Assistant Manager (P/HR) in Western Coalfields Limited (A Subsidiary of Coal India Limited).

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