CSR Policy Review - Guidelines to bridge the gap between Intent and Impact
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Charity?is?deeply?embedded?in?Indian?culture,?the?same?has?transcended?into?businesses.?The?conglomerates?like?TATA,?Reliance,?WIPRO,?etc.?aside?frombusiness?continue?to?contribute?to?the?betterment?of?society.?Though?the?concept?of?companies?giving?back?is?voluntary?across?the?world,?the?Government?of?India?has?legislated?the?Corporate?Social?Responsibility?(CSR)?laws?to?encourage?all?companies?to?giveback?to?society.
1.?CSR?in?Indian?legislation
1.1.?What?does?the?policy?say?
India?spearheaded?the?legislation?of?CSR?activities?in?the?year?2013.?Companies?Act,?2013?-?Section?135?of?the?Act?and?the?CSR?Rules?framed?thereunder?form?the?legal?framework?of?CSR?in?India.?The?CSR?provisions?will?apply?to?companies?that?fulfill?any?of?the?following?criteria?during?the?immediately?preceding?financial?year
are?required?to?spend?2%?of?theiraverage?profits?of?the?previous?threeyears?on?CSR?activities?every?year.?Thecompanies?can?take?up?projects?orprograms?relating?to?activitiesspecified?in?Schedule?VII?of?TheCompany?act,?2013.
The?companies?are?required?to?create?aCSR?committee?of?the?board,?create?a?CSR?policy?that?outlines?its?strategy,?and?also?include?a?report?on?CSR?in?the?company's?annual?report.?In?case?the?CSR?amount?remains?unspent?(in?case?of?CSR?spending?does?not?meet?2%?as?per?CSR?Policy),?the?reasons?for?the?unspent?amount?and?details?of?the?transfer?of?unspent?amount?relating?to?an?ongoing?project?to?a?specified?fund?shall?be?disclosed.
1.2?What?do?companies?do?
Companies?formulate?a?CSR?Policy?andStrategy,?which?includes:
Currently,?the?CSR?landscape?in?India?is?in?a?compliant?stage.?Companies?are?complying?with?all?the?rules?set?by?the?CSR?policy,?but?at?the?same?time,?ground?tracking?of?impact?is?missing.
2.?Intent?of?the?Paper
This?White?Paper?examines?the?CSR?laws?in?India?and?analyses?the?gaps?in?realizing?the?intent?of?the?CSR.?Further,?the?paper?also?outlines?the?guidelines?to?maximize?impact?through?CSR?Laws,?impactful?project?design,?and?technology?integration.
3.?A?Closer?look?at?the?gaps
3.1?Cap?on?administrative?overheads
The?policy?states?that?“Administrative?overheads?shall?not?exceed?5%?of?total?CSR?expenditure?of?the?company?for?the?financial?year.”?It?is?intended?to?ensure?maximum?utilization?of?the?money?toward?social?good.?However,?with?the?ceiling?of?5%?on?the?expenses?toward?administrative?overheads,?hiring?personnel?with?CSR-specific?skills?could?become?a?challenge,?at?a?time?when?lower?salary?in?the?development?sector?is?driving?the?competent?workforce?away?from?the?field.?As?a?result,?we?see?that?in?more?than?30%?of?the?organizations?-?CSR?projects?are?overseen?by?the?Human?Resource?department,?depriving?the?project?of?required?attention?and?competency.
3.2?Focusing?on?meeting?the?2?%spending?compliance?within?the?sameyear
Many?companies?are?putting?forward?a?CSR?fund?to?meet?the?requirement?of?CSR?regulations?by?the?government.?Instead?of?focusing?on?a?long-term?outlook,?companies?are?focusing?on?spending?the?CSR?fund?within?the?given?year.?This?has?resulted?in?companies?continuing?to?choose?conventional?projects,?depriving?of?innovation?in?the?development?sector.
3.3?Funds?limited?to?only?a?fewthematic?areas
As?per?the?CSR?policy,?the?company?which?hasn’t?spent?CSR?money?has?an?option?to?carry?forward?the?fund?for?the?next?3?years?if?a?project?is?designated?as?a?multi-year?project,?or?shall?transfer?to?any?fund?mentioned?inSchedule?VII?to?the?act.?Limited?choices?of?funds,?restrict?the?companies?to?invest?in?their?choice?of?thematic?areas.
3.4?Transparency?and?disclosure
The?companies?are?required?to?report?(Form?CSR?2)?their?CSR?spending,?and?impact?assessment?report?(if?applicable)?as?part?of?their?annual?reports.?Whereas,?the?state?continued?to?shy?away?from?disclosing?how?the?CSR?amount?transferred?to?funds?established?by?the?State?is?spent.
3.5?Disproportionate?CSR?FundSpending?across?thematic?areas?andgeographies
The?spending?is?inequitable?across?geography?and?thematic?areas.?From?the?graph?below?it?can?be?seen?that?there?is?an?inequitable?distribution?of?funds?across?sectors,?the?maximum?share?of?CSR?spending?goes?to?education?followed?by?health?and?rural?development.?More?than?30%?of?the?spending?is?on?education?alone.
States?doing?well?continue?to?receive?CSR?share.?The?states?with?good?economic?activity?tend?to?reap?the?benefit?of?CSR,?whereas?the?states?behind?continue?to?be?deprived.?In?the?year?2020-21,?Maharashtra?alone?received?14%?of?the?total?CSR?spent?in?India.?The?top?5?states?received?33%?of?the?CSR?amount.?The?infographic?below?presents?the?state-wise?CSR?share?over?the?years.
3.6?Localized?CSR?spending
It?is?observed?that?in?the?initial?days,the?industries?focused?on?spendingCSR?funds?within?their?local?areas?togain?the?trust?of?the?community,?buildrelationships?with?the?local?authorities,create?a?positive?image,?etc.
The?CSR?policy?of?the?State,?except?forthe?mandate?on?spending,?does?notplace?any?restrictions?on?thecompanies?on?where?the?money?shallbe?spent.
4.?Guidelines?and?Forwardsuggestions
The?CSR?laws?continue?to?focus?on?regulating?the?funds,?and?ensuring?the?fund?is?somehow?utilized.?Unfortunately,?as?a?result,?companies?are?ignoring?impact?and?just?focusing?on?timely?spending.?The?State?needs?to?make?room?for?Impactful?projects,?and?the?following?can?be?some?of?the?ways?to?nudge?this:
4.1?Increase?cap?on?administrativeoverheads
The?state?in?consultation?withCompanies?must?relook?at?this?clauseof?keeping?the?administrative?cost?at?5%and?thus?make?way?for?the?young?andcompetent?workforce?to?consider?CSR,this?would?pave?way?for?impactfulwork.
4.2?Create?Sustainable?DevelopmentGoals?(SDGs)?specific?funds
The?State?should?create?funds?that?are?specific?to?SDGs?or?even?activities?mentioned?under?schedule?VII?of?the?Companies?Act,?2013,?this?ensures?equitable?spending?of?money?across?thematic?areas?and?flexibility?for?the?companies?to?contribute?to?the?thematic?area?of?their?choice.
4.3?Transparency?and?disclosure
The?State?should?consider?disclosing?how?the?money?is?spent?so?that?companies?find?value?in?contributing,?and?also?know?the?impact?created.?In?last?one?year?i.e.?from?FY?20?to?FY?21,?the?contribution?to?the?funds?established?by?the?government?has?doubled,?in?order?to?keep?this?momentum,?it?is?high?time?that?the?government?lays?down?mechanism?to?disclose?spending?details.
4.4?Increase?the?number?of?years?thatan?ongoing?project?can?extend
In?the?recent?amendment,?the?State?hasmade?provisions?for?multi-year?projects.?Ongoing?Project?means?a?multi-year?project?undertaken?by?a?Company?in?fulfillment?of?its?CSR?obligation?having?timelines?not?exceeding?three?years?excluding?the?financial?year?in?which?it?was?commenced,?and?shall?include?such?projects?that?were?initially?not?approved?as?a?multi-year?project?but?whose?duration?has?been?extended?beyond?one?year?by?the?board?based?on?reasonable?justification.
This?is?a?very?good?move?to?encouragecompanies?to?take?up?long-termimpactful?projects.?However,?socialchange?takes?time?and?3?to?4?yearswould?not?suffice,?the?state?soldreconsider/increase?the?duration?oflong-term?projects?in?futureamendments.
4.5?Guidelines?on?implementation?viathematic?example
To?create?a?sustained?impact,?thecompanies?should?be?open?toexperimenting?with?new?developmentmodels?and?fund?projects?that?addresssystemic?challenges?alongside?workingwith?the?government.
Here’s?a?quick?guide?to?how?educationinterventions?could?be?approached.?Asimilar?approach?can?be?followed?inother?thematic?areas?(Health,Environment,?Livelihood,?etc.)
4.5.1?Stakeholder?Engagement:Beneficiaries?must?be?seen?as?keystakeholders?and?must?be?involved?inthe?program?design?stage?itself.?Keystakeholders:
4.5.2?Identifying?focus?areas?of?intervention:?Taking?a?cue?from?the?materiality?assessment?(materiality?matrix)?done?by?companies?to?identify?material?issues,?a?similar?framework?is?proposed?to?identify?focus?areas/interventions.?The?prioritization?in?this?context?shouldn’t?be?misunderstood?to?focus?on?one?intervention?at?a?time?but?is?to?identify?what?is?that?a?school?needs?yet?design?aprogram?that?is?holistic?and?does?not?compromise?on?the?set?of?children?currently?studying.
In?the?above?diagram,?on?the?Y-axis,stakeholders?consist?of?governmentauthorities,?school?leaders,?teachers,parents,?and?children.?The?X-axisrefers?to?the?implementationpartner/company's?expertise?toaddress?the?challenge.
4.5.3?Program?design?and?implementation:?Conventionally?the?programs?are?designed?to?address?the?needs?of?a?particular?stakeholder,?like?focusing?only?on?FLN,?teacher?training,?or?introducing?STEM?in?silos.?This?approach,?though,?has?shown?significant?short-term?outcomes?for?a?small?group,?but?the?majority?of?students?continue?to?receive?meager?education.
There?is?a?need?to?shift?lenses?fromstakeholder?focused?to?system-focusedprograms?to?create?long-lasting?andholistic?impact.?The?infographic?is?asample?of?the?various?programs?in?aschool.
4.6?Leveraging?Technology?to?solve?forgaps?in?the?CSR?Ecosystem
Technology?can?be?leveraged?at?variousstages?of?the?CSR?journey?to?improveimplementation?&?generate?betterimpact.
4.6.1?Execution:?Good?execution?woulddirectly?factor?into?the?impact?createdby?the?capital.?There?are?various?waysin?which?technology?can?help?in?thisscenario.
a.?Bringing?all?donors?and?receivers?tothe?same?plane?&?enabling?donors?topool?money?instead?of?working?in?silos
b.?Spanning?global?instead?of?local
c.?Stakeholder?Management
4.6.2?Monitoring:?Active?monitoring?isa?crucial?step?in?the?lifecycle?of?anyproject, ?and?technology-basedmonitoring?can?prove?to?be?a?greatasset.
a.?Technology-based?monitoringprovides?eyes?on?the?ground
b.?A?standardized?monitoringframework?can?facilitate?theengagement?process?for?corporateswith?multiple?stakeholders?acrossmultiple?geographies
4.6.3?Reporting:?Reporting?is?a?pivotalactivity?to?assess?and?steer?any?CSRactivity.
a.?Donors?should?have?completetransparency?on?how?the?CSR?fundsare?being?utilized,?for?which?activities,towards?which?beneficiary?within?whatintervals
b.?Tech-based?program?managementplatforms?can?enable?stakeholders?todraw?clear?value?statements?for?theboard-level?executives.
4.6.4?Learning:?If?the?above-statedpoints?are?executed?then?an?extensivedata?pool?will?be?gathered.?This?datacan?be?leveraged?to?great?extent?acrossvarious?areas?of?CSR:
4.6.5?Strategy:?A?great?strategy?will?be?adirect?by-product?of?learning-basedplanning.
5.?Conclusion
India?is?the?first?country?in?the?world?to?make?CSR?mandatory,?the?Companies?(CSR?Policy)?Rules,?2014,?provide?a?robust?framework?for?companies?to?partner?in?contributing?to?the?country’s?development?challenges?through?its?skills,?technology,?and?innovation.?Though?the?debate?on?if?CSR?to?be?voluntary?or?legally?enforced??Should?companies?be?mandated?to?report?on?their?CSR??continues,?there?has?been?an?upward?trend?of?companies?binding?with?the?law,?and?the?amount?spent?on?CSR?is?witnessing?an?increasing?trend?over?theyears.
The?big?companies?and?early?adopters?continue?to?innovate?and?create?an?impact?through?their?programs.?However,?the?distribution?of?CSR?amounts?is?inequitable?across?geography?and?thematic?areas.?This?could?be?the?result?of?companies?focusing?on?spending?CSR?money?within?the?same?year,?which?in?turn?limits?companies?to?go?beyond?the?localregion?or?experiment?with?new?models.This?has?deprived?the?company?of?reaching?the?needy?and?creating?impact.
The?recent?amendments?to?the?CSR?laws?allow?companies?to?fund?multi-year?projects,?thus?creating?room?for?impactful?programs.?Now,?the?companies?have?to?move?away?from?looking?at?CSR?as?mere?compliance?and?come?forward?to?fund?impactful?programs?that?are?considering?innovative?social?models?to?address?grassroots?problems.
As?companies?ride?on?this?advantage?inthe?CSR?laws,?to?create?impact,?it?isnecessary?that?the?following?areconsidered:
Mentor: Aashi Agarwal
The future belongs to those who see possibilities before they take shape. It belongs to the trailblazers who, with unwavering determination, break through the fog of doubt and pave the way into uncharted worlds.
2 年Ingenious. Companies in democratic societies everywhere in the world should be obliged to spend parts of their profits on a social community. A real role model ??