The future of CSR in India holds great promise, with an expected shift from compliance-driven activities to initiatives that create shared value.
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This year marks the 10th anniversary of mandatory Corporate Social Responsibility (CSR) in India. This landmark legislation has spurred significant growth in corporate giving and social impact initiatives. As we look ahead, it’s crucial to assess the progress made, identify challenges, and envision the future of CSR in India.
On 1st April 2014, India became the leading economy in the world to mandate Corporate Social Responsibility (CSR) through a statutory provision. This landmark legislation, enshrined in Section 135 of the Companies Act, 2013, requires companies meeting certain criteria to contribute at least 2% of their average net profits over the preceding three years towards CSR activities.
During an interview with Rusen Kumar, India CSR; Nirbhay Lumde, an experienced leader in ESG and CSR, provided his valuable insights on the evolution of CSR in India and impact over the past decade.
Excerpts:
1. How has the CSR landscape in India evolved over the past decade? What are some of the key milestones and achievements?
Corporate Social Responsibility (CSR) in India has significantly transformed since its inception. Initially, CSR activities were primarily driven by philanthropy and were not mandated by law. However, with the introduction of Section 135 of the Companies Act in 2013, India became one of the leading countries to mandate CSR spending for companies meeting certain financial thresholds. This legislative move marked a paradigm shift from voluntary to mandatory CSR, emphasising the role of corporations in inclusive growth and sustainable development.
The evolution of CSR in India reflects a journey from traditional charity to a more strategic approach that integrates social, environmental, and human development concerns into the business ethos. The Ministry of Corporate Affairs issued guidelines to encourage businesses to conduct themselves ethically and contribute to economic development while improving the quality of life of the workforce and their families, the local community, and society.
Over the years, the focus of CSR in India has expanded to include a wide range of activities, such as promoting education, gender equality, environmental sustainability, and health care. The National Voluntary Guidelines on Social, Environmental, and Economic Responsibilities of Business, updated as the National Guidelines on Responsible Business Conduct, align with international standards like the United Nations Guiding Principles on Business & Human Rights and Sustainable Development Goals, further refining the CSR landscape in India.
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2. What has been the impact of mandatory CSR on businesses, NGOs, and communities?
The mandatory CSR law in India has transformed the country’s social and environmental development. Since its enforcement, CSR spending has substantially increased, leading to various initiatives addressing various societal challenges. The law has not only raised awareness among companies about their social responsibilities but also among the public, fostering a culture of accountability and transparency.
The positive outcomes of mandatory CSR spending are evident across multiple domains. Companies have taken up initiatives that range from building infrastructure for rural development and promoting education and health care to environmental conservation and disaster relief efforts. The law has encouraged corporations to undertake projects that align with national priorities and contribute to the welfare of marginalised communities, thereby playing a crucial role in the nation’s socio-economic progress.
Introducing mandatory CSR in India has been a game-changer for social development. For businesses, it has meant a shift from sporadic philanthropy to a more structured approach to social responsibility. The mandate has created dedicated CSR departments within companies, fostering a culture of strategic giving and long-term social project planning. The legislation has opened up new avenues for funding and collaboration for NGOs. It has enabled them to scale their operations and increase their impact on the ground. The predictability of funds has allowed NGOs to plan more effectively and focus on achieving their social missions.
Communities have been the ultimate beneficiaries of this mandate. With a significant increase in funds directed towards social initiatives, education, healthcare, and rural development have seen a noticeable improvement. The CSR funds have also helped build infrastructure, thus contributing to the overall development of communities.
However, the journey hasn’t been without challenges. The mandate has sometimes led to a tick-box approach to CSR, with companies focusing more on compliance than the impact. There have also been mismatched expectations between corporates and NGOs, leading to less effective partnerships.
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3. Have there been any unintended consequences or challenges associated with the current CSR framework?
Despite the progress, the CSR framework in India faces several challenges. One of the primary issues is the narrow perception of CSR among some companies, where it is not integrated into the core business strategy and is seen merely as a marketing tool. This approach limits the potential for CSR to bring about long-term sustainable change.
Another challenge is the need for a collaborative approach to CSR activities, especially in a country as vast and diverse as India. The rural population, which is often the focus of CSR efforts, requires a more coordinated and strategic approach to ensure that initiatives are impactful and address the actual needs of the communities.
Furthermore, there is a need for clarity regarding what constitutes CSR spending, leading to varied interpretations and implementations among companies. The absence of standardised metrics for measuring the impact of CSR initiatives also poses a difficulty in assessing their effectiveness and making necessary adjustments for improvement.
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4. What are some emerging trends in CSR that are likely to shape the future of corporate giving in India?
The future of CSR in India looks promising, with increasing numbers of companies embracing innovative practices and aligning their CSR activities with global standards. The trend is moving towards creating shared value, where businesses seek to generate economic value in a way that also produces value for society by addressing its challenges.
The dynamic and evolving business world has witnessed a significant shift, blurring the lines between Corporate Social Responsibility (CSR) and Environmental, Social, and Governance (ESG). This trend, particularly evident in India, which has had mandatory CSR regulations since 2013, necessitates a deeper understanding of the conceptual overlap between these two frameworks.
There is a growing emphasis on sustainability and adopting green technologies, with companies investing in initiatives that contribute to environmental conservation and climate action. Additionally, there is a notable shift towards gender equality and women’s empowerment, reflecting a broader societal change in attitudes towards diversity and inclusion.
The use of technology in CSR initiatives is also on the rise, enabling companies to implement more efficient and impactful projects. Digital platforms are being used to enhance transparency, measure the impact of CSR activities, and engage with stakeholders more effectively.
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5. How can technology be leveraged to enhance the effectiveness and transparency of CSR initiatives?
Technology has become a cornerstone in enhancing the effectiveness and transparency of CSR initiatives. It offers innovative solutions for data management, stakeholder engagement, and impact measurement. By leveraging technology, companies can streamline CSR processes, from planning to execution and reporting. Digital platforms can ensure that all stakeholders are informed and engaged, fostering a culture of transparency and accountability. Furthermore, technology can aid in aligning CSR strategies with social needs, ensuring that funds are utilised effectively and responsibly. Artificial intelligence (AI), blockchain, and data analytics can provide deeper insights into the needs of communities, optimise resource allocation, and track the progress of CSR projects in real time.
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6. What role can collaboration and partnerships play in maximising the impact of CSR?
Collaboration and partnerships are pivotal in scaling the impact of CSR initiatives. Organisations joining forces can pool resources, share expertise, and tackle complex social challenges more effectively. Partnerships between corporations, NGOs, and government bodies can lead to more sustainable and impactful CSR programs, addressing issues such as education, healthcare, and environmental sustainability. These alliances can also foster innovation, open up new markets, and enhance brand reputation, creating a win-win situation for all involved parties.
Collaboration and partnerships are critical in amplifying the impact of CSR initiatives. Businesses join forces with NGOs, government bodies, and other stakeholders. Such collaborations can lead to innovative solutions that might not be possible for a single entity to achieve. For example, partnerships can enable the pooling of resources for large-scale projects, such as nationwide education programs or extensive environmental conservation efforts. Moreover, collaborations can help share best practices and knowledge, thus improving the overall quality of CSR initiatives. They also provide a platform for various stakeholders to align their efforts with national and international development goals, such as the Sustainable Development Goals (SDGs).
The future of CSR in India is likely to be shaped by how healthy businesses can integrate social responsibility into their core operations, how effectively they can collaborate with other entities, and how sincerely they can commit to making a tangible impact on society. The next decade of CSR in India promises to be even more impactful if these elements are given due importance.
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7. What are some critical areas where CSR can significantly contribute to India’s development goals?
India’s development agenda presents a fertile ground for impactful CSR interventions.
Here, I would like to highlight three key areas where CSR can demonstrably contribute to the nation’s progress:
Bridging the Skill Gap: India’s demographic dividend presents a unique opportunity for economic growth. However, a skilled workforce is essential to capitalise on this potential. CSR initiatives can play a pivotal role in bridging the skill gap by supporting robust vocational training programs, facilitating apprenticeship initiatives, and promoting digital literacy workshops. By empowering youth with relevant skills, CSR fosters inclusive economic growth and empowers individuals to contribute meaningfully to the nation’s economic landscape.
Environmental Stewardship: Combating climate change and environmental degradation is critical for India’s future. CSR initiatives can be crucial in promoting environmental sustainability through several avenues. Companies can support adopting renewable energy solutions, spearheading water conservation programs, and promoting sustainable agricultural practices. By leading by example and fostering environmentally conscious practices within their operations, companies can inspire a much-needed shift towards a greener future.
Enhancing Healthcare Access: Ensuring quality healthcare access remains a significant challenge in India. CSR programs can play a vital role in addressing this disparity by supporting public health facilities, providing preventive healthcare awareness campaigns, and facilitating access to essential drugs, particularly in remote and underserved rural areas. CSR initiatives can contribute significantly to a healthier and more productive population by promoting preventative healthcare and improving access to essential medical services, laying the foundation for a thriving India.
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8. How can companies ensure their CSR initiatives are aligned with the needs of communities and contribute to sustainable development?
Companies must adopt a bottom-up approach in their CSR strategy to ensure CSR initiatives are aligned with community needs and contribute to sustainable development. This involves engaging with the community to understand their challenges and aspirations. To ensure that our CSR initiatives resonate with the needs of communities, we must begin by conducting comprehensive needs assessments. Engaging with local communities—listening to their voices, understanding their challenges, and acknowledging their aspirations—is paramount. We gain valuable insights that inform our strategic decisions by involving stakeholders such as community members, NGOs, and local authorities.
India is a diverse tapestry of cultures, languages, and socio-economic contexts. Recognising this diversity, companies should tailor their CSR programs accordingly. What works in an urban setting may not be relevant in rural areas, and vice versa. For instance, a rural community might prioritise access to clean water, while an urban neighbourhood may need skill development programs. Customisation ensures that our efforts resonate with the specific needs of each community.
CSR cannot be compartmentalised – it must address multiple dimensions. A holistic approach considers social, environmental, and economic aspects. For instance, a health program improves well-being and indirectly impacts education and livelihoods. By understanding these interconnections, we can design more effective initiatives. Sustainable development demands persistence. Companies should view CSR as a long-term commitment rather than a series of short-term projects. Continuity matters. Building enduring partnerships with communities fosters trust and ensures lasting impact. Let us move beyond sporadic interventions and embrace sustained engagement.
Quantifying impact is essential. We must define clear objectives for each CSR initiative and establish baselines. Key performance indicators (KPIs) help us track progress. Metrics could include improved health outcomes, increased literacy rates, or reduced carbon emissions. Balancing quantitative data with qualitative insights – capturing stories of changed lives paints a more comprehensive picture.
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9. What are some best practices for measuring and reporting the impact of CSR activities?
Measuring and reporting CSR activities’ impact involves quantitative and qualitative methods. Transparency is critical, and companies should strive for open communication about their CSR activities’ successes and areas for improvement. Demonstrating the tangible impact of CSR initiatives is paramount for ensuring continued stakeholder buy-in and effective resource allocation. Here, I advocate for a multi-pronged approach to measuring and reporting CSR impact:
- Establishing Clear Objectives and Metrics: The foundation of impactful measurement lies in defining clear and quantifiable objectives at the outset of any CSR initiative. These objectives should be meticulously aligned with the chosen social issue and the overarching CSR strategy. Subsequently, identifying relevant metrics becomes crucial. While some metrics might be purely quantitative (e.g., number of individuals benefitted, trees planted), qualitative assessments through surveys, focus groups, and community feedback are equally important to capture the initiative’s social and behavioural impact.
- Leveraging Technology and Data Analytics: Technology offers powerful data collection, analysis, and visualisation tools. Utilising online platforms for data gathering from beneficiaries and stakeholders allows for real-time feedback and facilitates a more comprehensive understanding of the initiative’s effectiveness. Data analytics empowers companies to identify trends, measure progress against set goals, and make data-driven decisions for continuous improvement.
- Transparency and Credible Reporting: Stakeholders have a right to understand the impact of their company’s CSR efforts. Regular reporting that adheres to recognised frameworks like the Global Reporting Initiative (GRI) Standards is crucial. Transparency fosters trust and encourages constructive feedback from stakeholders, enabling companies to refine their CSR strategy for an even more significant impact.
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10. What are your hopes and expectations for the future of CSR in India? What needs to be done to ensure its continued growth and effectiveness?
The future of CSR in India holds great promise, with an expected shift from compliance-driven activities to initiatives that create shared value. There is a need for a more data-driven approach to CSR, emphasising transparency and impact measurement. Integrating CSR with business strategy and adopting innovative practices will likely enhance the effectiveness of CSR programs. Companies should collaborate with government and non-governmental organisations to ensure continued growth and prioritise healthcare, education, and environmental sustainability. The future of CSR in India is envisioned as one where corporate responsibility seamlessly blends with societal development, leading to a more inclusive and sustainable future.
The convergence of CSR and ESG signifies a move from isolated, one-off initiatives towards amore holistic and integrated approach to sustainability. By incorporating ESG principles into core business strategies, companies will move beyond compliance-driven CSR activities andembed responsible practices within their operations, decision-making, and risk management frameworks. The convergence of CSR and ESG presents a significant opportunity for companiesto create long-term value for all stakeholders. By adopting a holistic and integrated approach to sustainability, businesses contribute to a more equitable and sustainable future.
As we celebrate a decade of mandatory CSR in India, I am optimistic about the future. I hope to witness a transformation where CSR transcends compliance and fully embraces the principles of Creating Shared Value (CSV). Here’s what I believe will pave the way for continued growth and effectiveness:
- Merging Purpose with Profit: The future of CSR lies in a strategic shift where companies identify social and environmental challenges that intersect with their core business operations. By addressing these challenges, companies fulfil their social responsibility and create shared value. This can translate to enhanced brand reputation, improved employee engagement, and innovation potential based on addressing unmet social needs.
- Impact-Driven Approach: Moving beyond mere philanthropy, the future of CSR lies in a laser focus on measurable impact. Companies must embrace robust impact assessment methodologies to ensure their CSR initiatives effectively address critical social challenges while simultaneously creating shared value opportunities aligned with their core business strategies.
- Multi-Stakeholder Collaboration: Fostering collaboration between businesses, government agencies, NGOs, and social entrepreneurs is paramount. This collaborative spirit fosters knowledge sharing, joint advocacy efforts, and the scaling of successful models to achieve widespread and lasting societal change. By working together and embracing the principles of CSV, all stakeholders can contribute to building a more sustainable and inclusive future for India.
By embracing these fundamental tenets, CSR can become a powerful force for positive change in India. It can empower communities, bridge social inequalities, and contribute significantly to building a more sustainable and inclusive future for our nation while simultaneously creating shared value for businesses and society.
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About Nirbhay Lumde
Nirbhay Lumde is a seasoned leader in ESG and CSR with a vision to create a more sustainable and equitable world. He has over 20 years of experience designing and implementing innovative solutions to address environmental and social challenges. As the head of ESG, he oversees the strategic integration of environmental, social, and governance factors into the core business operations and value creation. He is also passionate about using technology for positive social and environmental impact. He believes that tech can be vital in tackling climate change and achieving the Sustainable Development Goals.Some of his notable achievements include:
- Published two books on CSR and ESG: “ESG and CSR: Strategies for Career Success and Corporate Responsibility” and “Corporate Social Responsibility in India: A Practitioner’s Perspective”.
- Co-authoring an Ivey Case Study on “Employer Branding through Purpose-Driven CSR” showcases leveraging CSR initiatives to attract and retain talent, enhance its reputation, and create value for its stakeholders.
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About the Author
Rusen Kumar is the founder and managing editor of India CSR – The CSR chronicle of India. He writes on CSR, Sustainability and Environmental affairs.
(Copyright@IndiaCSR)
Updated on April 5, 2024
