By Ahona Ghosh & Kiran Kabtta Somvanshi
MUMBAI: Even as the government tries to coax private companies to spend more money in fulfilling their corporate social responsibilities, public sector undertakings remain laggards. Ten large PSUs, which were together mandated to spend 1,313 crore in FY12, managed to disburse less than half that amount.
According to Department of Public Enterprises (DPE) norms, Central Public Sector Enterprises (CPSEs) with net profit of over 500 crore need to spend 1%-2% of their profits on CSR activities. The 1,679 crore allotted for CSR is based on 2% of net profit.
Under the new Companies Bill – passed in the Lok Sabha in December last year, and likely to be passed in the Rajya Sabha this budget session – PSUs and private companies with over 5 crore in net profit must spend at least 2% of profit on CSR or report the reasons for their failure to do so.
As private companies transition to the new norms, PSUs are still struggling to live up to norms on CSR spends laid out by DPE three years ago. Some PSUs struggle for want of dedicated CSR professionals who can direct the money well, others for an insular mindset and lack of partnerships with the NGOs, yet others for inability to identify good social projects or, simply put, lack of a top management vision for CSR.
State Bank of INDIA has a five-member central CSR team, but only one of them is dedicated to CSR. Others also handle corporate communications. This team allocates budgets to circle heads who dole out funds to regional branch heads who then disbursed the money to projects. While decentralizing and working in the local communities is helpful, the process is cumbersome. “Such loosely held bureaucratic structures cause delays in money reaching projects which results in the inability to spend allocated funds within a specified time period,” says a senior executive of the CSR division of a public sector company, who declined to be named.
Adds Jayanti Shukla, executive director, United Way, India:”They don’t have dedicated teams and one person handles two or three functions with CSR as an added responsibility.” She feels companies need dedicated teams for CSR.
PSUs also struggle to find good social projects. “Far too often, we come across instances where NGOs are run by the wives of bureaucrats as a medium to extract money in the form of donations from us. We are very careful in selecting the projects which we support,” a senior executive of the CSR division of a PSU reveals.
Finding sustainable projects is ONGC’s biggest challenge.”We are unable to get good projects. In tier 3 and tier 4 towns, we find that there aren’t good organisations to partner with,” says an ONGC spokesperson.
ONGC supports causes in areas like education, healthcare, entrepreneurship, environment protection and protection of heritage sites among others.
Coal India, too, spent only 27% of its allocated CSR budget last year. Ajit Kumar, general manager, Human Resources and CSR says there are two reasons for this gap – absence of a monitoring system and lack of manpower to implement projects at ground level.
To address this, Coal India has recently signed a MOU with Tata Institute of Social Sciences to carry out needs assessment on projects. Their NGO partners work with Kumar’s team to implement projects and carry out reporting on impact created by the projects. Coal India is streamlining its dedicated CSR team to be more efficient in monitoring project work.
SBI, which has not partnered with NGOs for CSR on projects is reconsidering this. SBI could soon work with NGOs to disburse more money on larger projects over 25 lakh soon after the new Companies Bill becomes law, the company spokesperson says.
“Companies (often) don’t know how to address these issues which are so different from their particular industry and core competencies. They would be well advised to engage with the leading edge NGOs,” says John Elkington, a global authority on CSR and sustainability, conceived the ‘triple bottom line.’
SBI is grappling with this dilemma. According to spokesperson, CSR works better if it is related to the core business needs. For example, their rural branches work with schools to distribute purified drinking water filters. While the local branch employees interact with the students, they know they are recruiting future customers. “CSR is about sustainability of our business and not about philanthropy. When our employees engage with the community they are building a good brand image which is good for business,” says the SBI spokesperson.
PSUs are showing intent in taking CSR seriously. “In the last 2 years, there has been an enormous shift in the mindset of top management of companies. People at the level of COOs are now sitting in on these meeting with us. It’s a clear indication they are taking CSR seriousl,”says United Way’s Shukla. Organisations like United Way are now helping companies connect with NGOs that work in the kind of social projects the former is interested in. Shukla now routinely engages with large PSUs keen on restructuring their CSR strategies.