The Companies Act 2013 expects large companies in India to spend 2 percent of their net profits on corporate social responsibility projects. From the time of its effect in 2014, there has been much debate over if the CSR initiatives taken by companies have been good enough.
Companies have cried foul seeking rationalization of the CSR law as it enlists genres such as eradicating extreme hunger and poverty, education and social business projects as the key areas companies can work in and none others.
There have been several reports of companies spending less than 2 percent on CSR and many choosing to use CSR activities as a way of promoting their brand instead of working for a cause.
The area needs active participation from companies as well as experts on the subject to help entrepreneurs dissect how companies can ensure they indulge in innovative and productive CSR activities.
Here are the top 5 ways to improve CSR as suggested by experts at panel chat at the Economic Times Compendium.
Board Committees Must Take CSR Seriously
CSR is a lot of money. The keen challenge is to move beyond issuing cheques or creating physical assets. The need of the hour is some innovative, new, replicate and scalable initiatives.
Can corporate take an ecosystem view which is start with results, X-ray to what is broken and fix it and look into solving the problem is a question that needs answering. Another important point that needs answering is can corporate think of scalable ideas.
Do What No One Has Done
The internal strength is being creative and doing what no one has done before. Anant Bhagwati, Partner Bain & Company, believes two things in CSR are striking issues – one is the fascination with what one likes as opposed to what will give results and less study to figure it out if the issue is deep.
It needs to be found out how social enterprises including startups can play a role. While there are policy issues relating to social startups, the field must be worked on. The panel members say by 2021, deductibles in the form of taxation are expected to go away.
Follow the Private Equity Philosophy
MNCs, SMEs, global companies have all experimented with new areas. The discussion now is of a calling up mode. The availability of credible organisation to partner within vicinity or at a local level needs to be explored.
Surrogate advertising is not CSR says the panel. You cannot impose your brand. The government expects you to be honest and clean about how you put your CSR funds.
Create Capacities with Funds to NGOs
Non-government organizations do not get 100 percent deduction, they get 50 percent of it and the capacities are severely constrained. It is important to create capacities with these funds and that is something that cannot be solved by the government or by social startups.
NGOs have the right intent but cannot match up to corporate expections. They usually work on a day-to-day basis and are not thinking five years ahead. Once NGOs receive funds, are they applying to use it for purpose for which they got funds. As long as bonafide is done no questions are asked say the members.
India has a handful of NGOs that can get a Rs 50 crore fund.
View Different Problems With Different Lens
There lies a huge challenge in handling hardware and software behind a livelihood or agricultural practice put in place for CSR. For example, building toilets is easy but getting people to use it is difficult.
People solve two problems with same lens. Getting the right mechanism to define outcome and what milestone one is putting now to 5 years hence is important. CSR initiatives whether product or service is not worth it if it is not big enough or focused and not making a small dent.
Companies must build and an entity that solves the broken problems. Corporate put money in go solo. They should rather be a part of the ecosystem and solve one problem at times.
Get an Executing Agency in Place
The CSR regulation is strict on who the funds can be given to. NGOs should have a 3-year track record along with stringent due diligence in finding the right NGO. CSR committee has to be formed in a company and a director report that says where the money has to be utilised as planned are paramount.
The panel suggests companies can do it inherently or inhouse and via an NGO with strict guidelines. One needs to form a coalition of the right kind of NGOs. Also, one entity cannot do this. Where will I get the funds from become a syndrome problem.
A group of investors who are supporting one cause should come together to help an entity to ask a question.