By K Yatish Rajawat
NEW DELHI: There is a new urgency plaguing corporates these days, the Companies Act says that they have to report a spend of 2 percent of their profits as deployed in Corporate Social Responsibility (CSR).
Section 135 of the Companies Act 2013: CSR Reporting Requirement
According to Section 135 of the Companies Act 2013, all companies with revenues above Rs 1,000 crore and profit above Rs 5 crore have to now compulsorily report CSR spends.
CSR Implementation and Confusion
Please note it is reporting only and not mandatory for companies to spend it, they have to report also if they are not able to spend. CSR is a confused endeavor which should ideally help properly monitor passionate but directionless spending. Most companies would do CSR as a ‘do-good’ activity to show their employees and investors that they are not rapacious greedy profit seeking entities (which they actually are).
CSR as Brand Building and Potential Misdirection
Companies would use CSR as a brand building exercise, employee engagement, placating a local community around their factory, or even as a parking spot for the pet themes of the chairman’s wife. PSUs, particularly the oil companies, are famous for disguising the social activities of the spouses of the top bosses under the guise of CSR.
Challenges in CSR Departmentalization
Worse still is the case when CSR, as a brand building exercise, is headed by brand head or is under the marketing communication/ public relations head. In several cases, the CSR function is even headed by the corporate affairs or the person heading government liaison. The government has asked PSUs to deploy 80 percent of their CSR funds in Swachh Bharat campaign.
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Branding vs. Purpose in CSR
If CSR is under the brand function, the only role that it plays is to see whether the company’s logo is properly displayed at the location of the activity. The brand guys are least worried about the impact of the initiative but are very concerned if the NGO also raises money from a rival company. To give the CSR responsibility to branding officials kills the very purpose of the initiative.
CSR Under Corporate Affairs: A Tool for Appeasement
On the other hand, if CSR is under corporate affairs, it becomes a tool for appeasing politicians, by launching initiatives in their constituencies. It is an official way of bribing without giving money directly to the politician. For instance, a search giant appeased a cabinet minister in the last government by building an online market place for traders in his constituency. There are more blatant ways: every politician has an NGO, the easiest way is to hand over a grant to these NGOs.
Questionable Practices in CSR Departmentalization
Corporate affairs and government relations department are the worst places for parking CSR. Though the law does not prescribe yet, sooner or later auditors should question this practice while writing the notes to accounts for companies which do this. The hypocrisy of bribing under the guise of CSR should be dis-continued.
CSR Under HR Departments
HR departments working on CSR is lesser of the above two evils but the department has to be capable of handling such activities. HR professionals are not trained to conceptualize or execute projects. MBA students who choose HR function do it because they do not want bottomline responsibilities. CSR also needs to have targets and quantifiable outcomes.
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National Conference on CSR and Lack of Clarity
At a National conference on CSR organized by the software lobbying body Nasscom, it was interesting to note that confusion continues on CSR. Professionals debating about CSR came from all kinds of functions and almost none of the company had a dedicated CSR clearly.
Government Diktats on CSR Deployment
Moreover, there is a complete aversion to the idea of diktats from the government for deployment of CSR fund. CSR head of a Delhi based telecom and retail company asked a pertinent question: The government has asked PSUs to deploy 80 percent of their CSR in Swachh Bharat campaign. Do you think this is the right way to go? Though, he did admit, publicly, that his own chairman has committed Rs 100 crore to the campaign, obviously out of the CSR fund.
Challenges in CSR Fund Deployment
The issue is that most companies are a little lost when it comes to deploying their CSR funds. A search giant says it allows it employees to nominate ‘outlandish and even crazy ideas’ as part of its CSR spend. An IT giant says it looks at education, training and skills for its CSR functions.
Skilling and CSR: A Point of Contention
Skilling is interesting as there is National Skill Development Corporation (NSDC) that is a government and private sector enterprise with a huge budget and mandate to do it. And NSDC, in its immense wisdom, is also channelizing CSR funds for skill development.
Lack of Vision and Focus in CSR Initiatives
The issue is the one raised by the telecom CSR head. If the companies do not have a vision and focus isn’t it proper that they follow where the government wants to build scale, instead of frittering away their resource on pet themes directed by misguided enthusiasm?
Need for Research in CSR Initiatives
For instance, a CSR head of another IT company talked about building and installing nests for sparrows in Pune. Little realizing that the decline in the sparrows population is not because of lack of nest but is due to a combination of issues ranging from pesticides in grains, increase in population of cats, rodents and pigeons, etc. Building nests will not increase the population of sparrows.
Importance of Research in Sustainable Solutions
The reason such initiatives take place is because most companies do not spend money on research of a problem or the solution. They go by the feel-good proposals of their employees and just go out installing nests. There are exceptions, of course. NIIT, for instance, ploughed in all its CSR into building a university. Now, if NIIT University also did research on social problems and identified solutions it could really set the ball rolling.
The Role of Research in CSR
Research into social problems is ignored almost even though it is the best way to create sustainable solutions. Not only should CSR funds be spend on research it should also be spent on advocating solutions that the research throws up. As it will never be possible that with so little funds widespread research can happen. Only when the government moves in tandem will there be any impact in a country as large as India.
Urbanization and CSR: Ignoring the Urban Population
Research into urbanization and its impact on citizens, quality of their life, policies needed to improve the status of our cities is one of the most important area. India is urbanising at a pace never seen before. We are tilting the global scale on climate change, water and usage of natural resources.
Balancing CSR Efforts: Addressing Urban and Rural Needs
While it is fashionable for NGOs to work in slums, or villages as they feel that people there require it, 40 percent of our population is in cities and also require help. Though it might not be fashionable to help them, it at least deserves 40 percent of our attention.
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