By Devaprakash Ramakrishnan
Corporate giving is often perceived to be short of altruism with a veiled element of forced philanthropy more to meet legal obligation than heartily gifting. The genesis of Indian Companies Act, 2013 partly owes its origin to stoic resistance of corporates’ voluntary gift, warranting surgical intervention through a legal provision which is celebrated as first of its kind worldwide with a biggest ever increased outlay in 2016 fiscal globally speaking. The demand for tax solace by corporations is often likened to the behavior of expectation of reward in return for endowment.
It is also important to recognize that India Inc is dotted with many family-led conglomerates which have a rich history of philanthropy in true sense, dolling out more than the mandated and much before the act of enshrining corporate giving into law. With the total money reaching $ 1250 million in 2016 fiscal, the CSR (Corporate Social Responsibility) model in India is creating renewed interest for companies, Government and charities. According to CRISIL report, 2017 more than half the companies spent 2% or more in 2016 fiscal, with the exception of telecom and IT companies with 22% rise in CSR spent over fiscal 2015.
The Indian Institute of Corporate Affairs in one its initial estimates peg annual CSR spent tripling to more than $ 3 billion with the law mandating at least 6,000 companies to come on board.
Beyond tokenism and driven by equity
The new-found penchant for CSR is increasingly seen as hypocritical window dressing as referred by Nobel laureate, Milton Friedman, as early as in 1972, who batted for business-driven CSR values. Companies are perceived to be indulging in CSR spree in order to clean up public image attempting to green wash the harm inflicted by them during the course of business. We are a witness to seeing many global brands ‘lying’ to the public about their commitment to sustainable practices.
CSR lifecycle is patchy with over- activism exhibited during the last financial quarter displaying an urge to splurge off annual commitment in one-go with companies desirous of establishing partnerships with charities, becoming too busy with a spate of engagements at the end of the fiscal; states like Maharashtra, West Bengal and Andhra Pradesh and Telangana taking a lion’s share of 34.5% of total CSR allocation in 2016 fiscal, with North eastern states severely underserved with no investment in Andaman, Diu, Daman and Lakshadweep all talk about the need for more equity across spatially, temporally and more importantly calls for introspection from within.
Self-regulation for responsible business ethos
Corporate contribution is increasingly seen as praayachitham (an act of paying back, for the sins committed). CSR by definition is felt to be inconsistent with companies’ interest as such activities are not contributing to profits or shareholders interest; a new business model to define the paradigm of how companies can be the contributors of common good is need of the hour. The current CSR provisions give mandate to companies to trade off the damage meted out due to reckless way business is carried out in return for forced magnanimity.
There is hardly any pressure to dissuade from current business practices which doesn’t question how the money was generated, the extent of dislocation caused nor damage imposed during the normal course of business. There are reports of land acquisition, uprooting settlements, ore, sand, soil or water mining, untreated effluents, pollution and unfavorable terms with farmers and traders indulged by companies.
Often the board room priorities differ from CEO’s excitement on CSR activities with the result it doesn’t find favor with shareholders, accentuated with reported incidents of aligning with Government-led initiatives, heckling to contribute to Governments’ relief funds, investing in accessible geographies than locating in far away, less endowed and more deserving pockets.
The corporate hand-outs in the form of law takes away the sheen of munificence as companies are busy discussing whether it qualifies for CSR than the what they should do, depriving the true spirit behind community investment. Building the tenets of CSR into company’s business plan right in the beginning of the year than waiting for the full year to complete to decide about the CSR share retroactively will demonstrate dedication to cause of social responsibility, by embedding CSR as part of business strategy than as a separate department chasing targets.
Advancing welfare agenda by companies which are otherwise dictated by market based forces demand corporations demonstrating their social responsibility other than the externally visible commercial behavior.
Leveraging value proposition through partnership
Despite Neilson Global study, 2014 on CSR surveyed amongst 30,000 customers in 60 countries to understand the impact of CSR on behavior revealing the vast majority of clients and employees seeing value in social investment, which was well-timed with unfolding of new CSR law in India, it is a pity that CSR continues to be an underdog on outcome and impact indicators.
After all, evidences suggest that companies which has given back has received more in return with increased market share, meeting possible employees and gaining by leveraging company’s business networking. What is required more from companies is a pledge for good citizenship and profiting from sustainable business by honoring human rights, labor standards, gender equity, environment protection than tokenism and tick of the box culture to satisfy merely the Government’s diktat.
The benefit of corporate generosity both from the perspective of social impact and employee engagement will overweigh the monetary investment only if it is perceived as a long-term commitment through leveraging partnerships with charities and civil societies who have the expertise in bringing social change by addressing underlying causes. With almost half the projects implemented outside the channel of charities, urge to see quick results by corporates, trust deficit on both sides, ceiling on charities overhead pegged at 5%, charities’ embroilment with the complexities of corporates’ bureaucracy and more importantly charities’ inability to convince companies on addressing root causes are the real challenges towards evolution of strategic partnership between corporates and civil society organizations which has potential to multiply impact to scale.
Apart from gaining from public relations, good will, brand building, employee motivation, and expanded client base, companies through collaborative approach can look at optimizing costs and results through new way of engaging with peer companies and charities. It is high time that CSR includes a framework for assessing companies’ responsible business behavior right from procurement of raw materials down the supply chain.
Way forward
- Companies need to ingrain tenets of CSR into business plan right in the beginning of the year and CSR should be part of companies’ business strategy and not a one-off activity per se.
- A dash board accessible to top management should be available to the promoters and the board of companies on how CSR is progressing gradually over time with questions on why it is bloating in some periods vis-à-vis absent in other times.
- Companies should be prepared to study the extent of resource-drain caused by and attributable to business activities and discuss ways and means to monetize and invest back so that a strong thinking is internalized within companies on sustainable ways of engaging in business, going forward.
- Companies through a process of social audit and internal mechanism evolve a self-monitoring framework for assessing companies’ responsible business behavior right from procurement of raw materials down the supply chain.
- Companies should be ready to addressing root causes rather than engage in short term one-off activities and be prepared to travel along with well reputed charities to bring about the social change through strategic partnerships with civil society organizations which has potential to multiply impact to scale.
About the Author
Devaprakash Ramakrishnan is a Development Specialist with a deep interest in development finance, CSR and making markets work for the poor with a strong focus on private sector participation. Devaprakash is an Agro-economist who lives in Chennai.
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