Monday, March 12, 2018

Indian CSR model

Indian Corporate Social Responsibility (CSR) laws has only set minimum standards, but not created an impetus for positive action. The reported expenditure on CSR projects doesn't give a good metric of societal welfare. There are issues emerging in the Indian CSR model that is worth being paid much attention to. At present the fate of most CSR can be termed as similar to glorified IRDP scheme. There is huge noise but nobody to verify the impact measured. The characteristics of Indian CSR model:

Integration of business objectives with CSR: A study by Macarthur Foundation has found that CSR spending is highly agenda-driven and closely aligned to the corporation’s business strategies, competencies and brand recognition. Tata Motors started a safe driving program. ITC went in and realigned its supply chain to help farmers. HUL works with children in schools and mothers through health clinics to educate them about hygiene behavior.

The scope of CSR is limited as it is seen either as a Public Relation exercise or Branding campaign by most of the companies.That is why outreach initiatives involving mass participation, such as the Marathons are funded by CSR rather than direct marketing sponsorship. Few companies responsible for acquiring of lands through coercion, disposing of toxic waste unchecked, doing unmeasured usage of ground water and unethical labor practices are able to counter this with positive PR campaign.

Lack of Professional Human Resource: Companies deploy mostly Human resource from HR, Public Relations and Marketing department in CSR wing. CSR with a good budget requires independent function and skilled project managers. The lack of vision leads to poor strategic planning and bias mechanism to channelize the money. There is also too much interference by the top management without required skill set for the course correction and arbitrary suggestions to partner NGOs.

Government interference in CSR: Current government has been actively encouraging CSR investments in its pet schemes such as the Swachh Bharat Abhiyan initiative. Hence, government priorities have resulted in a very large chunk of CSR money being invested in a handful of programs to win direct or indirect goodwill from the government. Instead of revenue collected through taxation of the companies for democratically determined priorities, CSR money goes into whatever the companies prefer to emphasize. In other words, ‘mandatory’ CSR will remain largely voluntary.

Sectoral Preference: There are interesting insights while reading India CSR Outlook Report 2017. CSR spending is almost uniformly focused on community development, education and health, and is often directed to mostly well-established NGOs and causes. Education projects received almost one-third of total CSR spent. Skills development projects received 5% while Swachh Bharat related projects received 7.3% of the Country’s CSR spent.

CSR fund is primarily focused on health and education because they are for short term, tangible and more visible. Community Development, Relief work, Women empowerment, Environment protection, working with disables & orphans comes secondary activities in the list. The tertiary level of involvements are in the field of skill development, livelihoods, and financial inclusion. These activities are not much taken up due to complexity in program design, lack of professional experience and exposure of CSR team in the given sectors. Journalism Fellowship, Rights and advocacy-based grants are neglected by the CSRs. The reason of neglect is simple as the funding outcome may come indirectly lead to confrontation with the state.

Funded NGOs: As far as funding NGOs is concerned, CSR spending has more strings attached than a foreign foundation. Instead of organizing the community, NGOs work on survival instinct. Local NGOs are approached by CSRs to implement their own pre-formulated programs according to their own agendas and outreach policies. This means a big gap arises between CSR requirements and real development needs.

Fraudulent Practices: Some companies are using onhire charitable trusts to fabricate CSR spending. Read more at:How Indian companies are misusing public trusts to launder their CSR spending.

Impact Investors: CSR funding currently cannot go directly towards impact investments at present. But Impact investors can currently adopt a Social Venture Fund (SVF) legal entity under Category I of India’s securities regulator SEBI’s Alternate Investment Fund (AIF) Regulations. The recommended amendment will be allowing CSR guidelines for financing to a Social Venture Fund.

There are no quick fixes when it comes to solving social issues. India Inc needs to wake up to its social responsibilities. Indian CSR is in a nascent stages and will take years of maturity to support activities with intangible outcomes. The impact numbers with the length and breadth of the activities are available but there is lack of strategy and sustainable investment models. The future lies in the deployment of entrepreneurial mind of corporates in designing of the impact interventions. Report on India Inc spending on CSR 2017-18 will give the readers a story towards change in a year.

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