Reflections on CSR in India

by Deepak Arora, CEO, Essar Foundation — The Companies Act, 2013 is considered to be one of the most significant legal reforms in India, having introduced several new provisions, among which those with regard to the Corporate Social Responsibility (CSR) have gained utmost importance. Two years into the enforcement of the prototypical CSR law, the practitioner and the decision maker in the Indian corporate is asking questions… has the law impacted CSR the way it was expected to? Has the law been understood in its spirit and executed? Does the law require revisiting and amendments?

Historically, philanthropy has been an essential element in the functioning of business houses in India. However, the approach and spending areas being too vague, the legislation provides direction and definition to the way CSR ought to be planned and the areas where the interventions are most needed. However, without long term planning, consultation and strategies towards designing CSR programs there continues to be a dominant dependence on NGOs for CSR implementation. At the same time, NGOs who were expecting a wave of large funding in terms of donations are inadequately prepared to handle such scale and strategic management of corporate CSR.

‘Compliance’ may have been playing a more prominent role in the way CSR is being perceived by the Boards. Meanwhile, there have been more instances where the local government bodies have either sought reporting from corporates or directed the CSR fund usage into their identified priority areas. This sort of intervention might have two sides to it. One, that this would eliminate possibilities of duplication of efforts by government and corporates while indicating real developmental needs of an area. The other side to it is that the autonomy of the Boards in deciding the CSR plans is obstructed by the government instructions one might be obliged to undertake. Adding to this, a lot of States have begun constituting state level CSR authorities where large consultancy agencies have taken over the job of deciding the direction of CSR in states. The question here is, are there too many players in the CSR space now? The number of stakeholders a CSR entity might be managing is already quite many, and not to mention, diverse. Having multiple decision-making authorities may be making things a lot more complicated for CSR managers. Moreover, this is in direct contradiction to the intent of the law itself, where the provisions suggest that the CSR structure and direction is the Board’s mandate and responsibility. 

With regards to the investments being made in infrastructure and demonstrable pilot projects in the surrounding areas of industry presence, there is a large amount of concentrated input going into designated zones of CSR presence, whereas the geographical areas beyond these zones stay immune to the impact of such interventions. It’s pertinent to ask whether this has created islands of excellence, thus increasing the divide between haves and have-nots. It also might mean that the discrepancies between issue-based interventions and location-based development are even starker.

The thematic areas for CSR are primarily around education, health, sanitation, environment and livelihoods, with more or less the same approach adopted across locations. According to the India CSR Outlook Report, 2015, about 32% of the CSR spending was on Healthcare and WASH, and 29% on Education and Skills, whereas a mere 6% was on gender equality and 1% was in rural sports. Certain issues, like those relating to child sexual abuse or human rights, either largely remain untouched or superficially taken up. Presumably, the corporates believe that being involved in such sensitive issues may ruffle feathers among sections of the society or media if not treaded upon cautiously, and may end up having a negative rub-off on their brand image. Investing in infrastructure or assets like schools, toilets, mobile medical vans or community halls may be considered a safer investment as it is more visible and measurable, after all.

Similarly, with large scale and rigorously promoted national developmental schemes like Swachh Bharat and Skill India, CSR funds are being rapidly mobilized into the kitty of such schemes. Besides, contributions to these schemes are incentivized to evoke greater interest. Understandably, a structured approach with localized planning and advanced resource planning is being ignored.

Considering the limited scope of CSR provisions in the law and multitude of compliance points, in the coming years the emergence of philanthropy organizations—besides the existing CSR bodies—may be seen among Indian companies. On the same lines as that of the Bill and Melinda Gates Foundation, such philanthropy offshoots of companies may be seen working on more widespread pertinent issues, with or without direct linkages to business mandates.

Something that is, however, working holistically in favour of the CSR sector is that the questions are being asked from all quarters, and thus leading to a coming together of practitioners, decision makers and thought leaders for meaningful discourse around the issues. Optimistically speaking, corporate leaders and boards will continue to seek more value out of CSR, including brand visibility. This implies the CSR space will continue to grow and evolve, with strategic CSR being undertaken with shared value philosophy embedded in the ethos of the corporates. However, it will take a few more years for it to move beyond mere compliance and mature in a manner that the national development indicators are measurably enhanced, and that rural development is principally driven through CSR and their collaborators in India.