MANDATORY CSR IN INDIA - is it really MAKING A DIFFERENCE?

When the new Indian Companies Act 2013 came into force from 1st April 2014, many within the sector hailed Section 135 as a "game changer". After completion of two fiscal years, in this issue we debate whether "mandatory CSR" has made a difference to either corporate India or the voluntary sector! 

Debabrata Guha
Chief Executive
Tata Power Community Development Trust

Making CSR disclosure mandatory under law is a step towards making CSR a priority in conducting business and helps in nudging the corporate towards ‘inclusive growth’. This is a good starting point.

At the House of TATAs CSR has been a part of our DNA. Today the trust that the TATA brand evokes is not only due to the quality of our product and services but also for the goodwill that we earned through our CSR work. 

Growth through industrialization comes at a cost. It impacts societies that get displaced, it impacts environment. It is therefore morally necessary for business houses to minimize these impacts. We owe it to our future generation.

To have significant impact the Companies/NGOs should carefully select the field of work, which would benefit the target beneficiaries most. For this, one needs to do a careful need assessment rather than adopting a general approach. Emphasis should be given to make an initiative self-sustaining, wherever possible, within a definite period of time and move on.

We must acknowledge that there are good and bad species in every field. The same applies for NGOs. While for the good ones, it will be a boost to intensify their efforts. At the same time we need to guard against the unscrupulous ones who would take this opportunity in furthering their vested interest.

Tatapower Community Development Trust (TPCDT) is the CSR implementing arm of Tatapower and its subsidiaries in India. They operate mainly in the vicinity of Tatapower business units, focusing in the field of Education, Health and Livelihood

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Pearl Tiwari

President (CSR & Sustainability)
Ambuja Cements Limited

Mandating CSR law has opened up vast opportunities for India Inc. to actively participate in fulfilling their social responsibilities. It is true that companies’ operations do impact their neighbouring communities both positively and negatively. While an industrial setup provides better job prospects and improves socio-economic status of people, there is also a struggle to share common resources between the company and the community. The CSR law is thus an attempt to bring in a strategic focus on societal development and creating a streamlined process for corporates.  

Unquestionably, any company is primarily responsible to do its business right and serve the interest of its shareholders. However, its liability also extends to other stakeholders, of which its neighbouring community is an important part. Interestingly, even before the mandate, corporates had been sensitive to community needs and were implementing related projects. For instance, Ambuja Cement has been spending much more than 2% on its CSR since many years and has achieved complete compliance and beyond with reference to section 135 of The Companies Act.
Now, as more and more companies are partnering with NGOs, there is an increased demand for documentation and adherence to compliance norms. This is also creating better prospects for NGOs to transition from an informal setup to a stronger and robust system of documentation.
Also, while talking about partnerships, I feel there is still a lot of scope for different companies to collaborate and build on each other’s’ strength. The CSR mandate is indeed a promising move for corporates to create synergies and bring a large scale, lasting impact on the ground.

CSR has been an integral part of Ambuja Cement since its inception. Ambuja Cement Foundation (ACF) was established in the year 1993 as the CSR arm of the Company. With its presence in 21 locations in 11 states, ACF has been working with a vision to create a sustainable, prosperous society, built on long-term partnerships. Currently, ACF has an outreach of over 1.8 million rural population and is yearning to do more.

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Delnaz Paliwalla

CEO

Bombay Community Public Trust

 ‘Social Responsibility’ and ‘Statutory Giving’ were merged together through this one of a kind legislation. While the intrinsic nature of CSR is voluntary how does forced philanthropy create any change?

Business houses have undertaken voluntary charity for decades hence practicing CSR without calling it so. But this legislation has made CSR the ‘buzz word’ in every boardroom. After all, CSR has become target focused and numbers driven. This, in my opinion, has led to a shift from philanthropy to community investing. Today the agenda is not just about doing ‘good’ but forming partnerships that can yield returns that encourage economic and social growth. The focus is on impact and the vision is long-term.

This has worked for established NGOs that are able to engage at a much larger scale with CSR departments. Such partnerships are seeing effective projects with long-lasting impact. Sadly, the benefits of this trickle-down effect have yet to be seen on the smaller, grass-root level NGOs. Most of these remain under funded and this large pool of CSR money seems out of their reach.

This legislation could easily have ended up becoming tick-box for companies. But this has not been the case, the CSR story may not have grown in leaps and bounds but concerted efforts by both NGOs and corporates make the coming years very exciting for this sector.

The Bombay Community Public Trust (BCPT) was set up as a People’s Foundation to address the various development problems affecting the citizens of Mumbai. The Trust works in partnership with individual donors and companies to support NGOs and causes in the areas of education, child-welfare, health, livelihood support and elderly care. 

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I certainly think the new CSR Act is making difference and will be

Niraj K Lal
Head – CSR
Arvind Foundation

stronger in years to come. Following is why I am saying so:I consider mandatory CSR Act as a landmark act. It is most certainly making real difference. To me the Act has done four unprecedented things for CSR fabric of the country.

First, it has steered companies to create a CSR structure leading to better governance. A CSR Committee, declared CSR policy, Board’s approval to CSR initiatives, defined yet flexible schedule VII initiatives are all steps which are directionally correct.

Second, it has given CSR a continuous rather than ad hoc approach. The growing 2% CSR funds will be available year after year and that is when the projects will start becoming programs.

Third, getting talent into CSR that has the contextual and applied knowledge and putting in strong monitoring and evaluation mechanisms through the technology based data solutions has already started. I can visualise that this will lead to setting up of new CSR benchmarks.

Last but not the least, though in a little long term, it will start making CSR more strategic to businesses, bringing in innovations to make it win-win for company and the community and take it beyond 2% and will create such CSR models for social renewal that pave way for new kind of Private-Private Partnerships (PPP) – something that I am very positive about.
Arvind’s CSR philosophy is based on the notion that society and the corporation are inextricably linked, and that a company can improve its own functioning by influencing the environment in which it operates. It is this philosophy that transcends through all of Arvind’s CSR initiatives. 

If you would like to be part of our next debate or suggest a topic, write in to connect@capindia.in 

Social Enterprises - Fad Or Fact Of The New World

Social enterprises have become trendy and almost every donor, investor and entrepreneur’s favorite. Many believe these enterprises are the answer to every developing country’s myriad socio-economic woes. Quite a few disagree and feel that there is undue hype over what’s essentially old wine in a new and attractively packaged bottle! 

The economy of a country can be assisted when more jobs are created so I personally feel that we don’t need to define enterprises into separate categories of social enterprise and non social enterprise. Both should be creating opportunities for employment and this in itself filters down directly or indirectly to a wider population. By thinking of social endeavors as nonprofit companies it may shackle the whole thinking of growth. Without profit one can not necessarily set aside enough for capital expenditure and research and development of further products or services.

Social enterprise is not clearly defined so whilst one could argue that a processed food company that makes expensive foods for a high income population is not one, it could nonetheless be implementing technology and other strategies to help farmers increase their yield.  Similarly the law allows for a company that provides teacher training to both high fee paying schools and municipal schools to be set up as a section 8 company but is it a social enterprise? My sense is that people who are entrepreneurial by nature and have great ideas to develop products and services may not think as ambitiously about growth if they set themselves up as a section 8 not for profit company.

Rather than a separate category for social enterprises there can perhaps be better tax incentives for small companies or for those set up in very impoverished rural areas. Social Entrepreneurs need not think that profit is a dirty word. After all higher profits and income should also lead to higher donations. Similarly more taxes paid on profits mean more money available for better public infrastructure, roads, health care facilities etc which benefits the population at every socio economic level.

Tina Vajpeyi,Finance Consultant

(Tina Vajpeyi is qualified as a Chartered Accountant in the United Kingdom. She has held various roles such as is a Finance Consultant with Aangan & CAP and prior to that she was the CFO at The Akanksha Foundation.)

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Social Enterprises can be game changers in solving India’s social sector issues. Social enterprises create innovative products and services to solve social problems through commercial strategies. Social enterprises are not business operators who simply wear a social tag. We’ve come across many founders with impeccable track records who have started social enterprises to solve social issues across health, energy, skills, livelihoods, water and so on.

Some great examples of social enterprises are Aravind Eye Hospital that was setup way back in 1976, LabourNet and Head Held High in skilling, Rural Shores for rural BPOs, SELCO, Tara and Ecozen in energy and GRoboMac and Kamal Kisan for agriculture.

Another important aspect that demonstrates the sustainability of the SE movement is the evolution of the roles of impact investors and large donors in actively supporting SEs. Aavishkaar, Acumen, Ankur Capital, Omidyar, Unitus, Villgro, Menterra, Michael and Susan Dell Foundation etc. are providing early stage grants or equity and guiding SE founders to scale up operations and service delivery.

Although many companies are interested in partnering with SEs, we have not seen a major shift in funding patterns when it comes to CSR. Companies prefer to fund NGOs as the laws are still evolving with respect to SEs after the Companies Act, 2013 was introduced. Few companies that have been early movers and have partnered with SEs for their CSR are the likes of Mphasis, Mahindra Finance and Genpact.

Anil Misquith, Exec Director, Strategic Initiatives, Samhita Social Ventures

(Samhita works with companies and foundations to deliver effective corporate social responsibility initiatives.)

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Avanti Foundation in collaboration with BRM started Avanti Young Women Leadership Program in 2011. It was conceived with the objectives of:

• Bridging the gender inequity
• Developing leadership and social skills among young girls
• Exposing them to social issues, thereby creating large scale social impact.

What started with 250 girls, has reached 13000+ girls in 5 years. Besides building life skills among the girls, more than 25000 citizens have been made aware about social issues through this initiative - a kind of ripple effect!

A cooperative, non-profit, for-profit or any other form are social enterprises as long as their objective is doing social good.

What differentiates them from their counterparts is that they:

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  Keep cause at the centre instead of wealth creation.
• Collaborate and engage different stakeholders in the process of addressing social issues.

Based on these differentiating factors, the dynamics of social change and potential impact that social enterprises can create, can't be ignored.

More and more individuals and organisations are looking for ways and means to make a valuable contribution to society. Given this scenario, social enterprisess are surely here to stay, have a say and make a way!

Akshat Singhal,Co Founder-The Blue Ribbon Movement

(The Blue Ribbon Movement (BRM) is a hybrid social enterprise working towards building leadership for a better world.) 

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 Recently, I attended an Executive Education programme on Social Entrepreneurship at an international business school. One of the case studies for discussion was about marketing by the sports apparel brand, Patagonia. The discussion got heated around the question: Is Patagonia a social enterprise, or is it just another business, apparently, with founders with social conscience and commitment to save the environment? The case study quoted the founder of Patagonia saying that he believed that business had the potential to alleviate the world’s problems and inspire positive change. The class was divided among those who thought Patagonia was a social enterprise and those who thought it was not since its raison d’etre was to make profits.

In the world of impacting social change, evidently, social enterprise and “NGO” are not binaries. Given the scale and complexity of the problems that they both want to address, it will take all kinds of players and approaches, playing to their strengths and expertise to make a difference. The distinction if at all (and there will always be exceptions) is that social enterprise, being located within the framework of business, responds to manifested demands and fields competition, while “NGOs” often have to unearth latent needs and address them despite adversaries, and not competitors in the conventional sense. Low-cost, primary, health care and caste-based discrimination, even when it was not considered an issue that needs intervention, are examples of both categories. 

Being located in the business framework, financial viability lies at the central core of the strategy with an uncompromising focus on building replicable models and this may come closest to being the differentiator for social enterprise. Not coincidentally these are the two aspects that funders and “NGOs” have locked horns on more often than any others in the last two decades at least. Beyond that, we are all facilitators, working in interlinked synergies, with marginalized communities who will ultimately make that definitive change in their situations. The effort to define one category as distinct or superior is really futile.

Rukmini Datta,Corporate Social Responsibility, Cipla Foundation

(Cipla Foundation takes Cipla’s socially focused business legacy forward. It mirrors Cipla’s relentless commitment to improve lives and fight inequities on key fronts. To build accessibility and affordability, initiatives focus on Health, Skilling, Education and Disaster Response.)

We would love to hear your opinions. Write to us at conenct@capindia.in

Funding for Corpus, Core staff and Overheads is Essential for Organizational Sustainability!

Donors look for Scale in projects and programs while project implementing agencies (NGOs) mostly worry in terms of the organization’s own Sustainability. Donors like to see long term Impact but NGOs are often so cash strapped that they habitually react on short term Impulse! Both, donors and implementers have a common purpose (to bring about positive social change) but the paths they consider treading are often different.

 

The dictionary meaning of ‘to sustain’ means to last in strength. For donors this means that the objective for which funds were given to an NGO has been fulfilled and the impact will endure. For an NGO it means this, plus that the NGO lasts. However, NGOs are kept waiting anxiously for months before corporates decide to fund projects. Funds may even be refused. So, how shall NGOs sustain themselves?

Despite the mandatory requirement that companies spend 2% of their profit on social causes, it is not easy for NGOs to get funds. NGOs need well-trained people to implement projects. Corporates prefer to fund capital but not operational costs. Some have started forming their own foundations and giving directly to beneficiaries. There is a trust deficit.

In a room, across a big table sit corporate donors on one side and NGOs on the other -- not communicating. Can the two come together in real time sustainability? Yes, if donors ‘adopt’ NGOs, ie. keep their employees on their payroll, pay their administrative costs at source, so NGOs can focus on long term programs. Donor funds will be properly utilized and accounted for while the NGO works like another “department” of the company with targets, deadlines, evaluations, and yet independent. An example of this type of sustainable partnership is that of Thermax with its partner NGOs.

Dr. Viney Kirpal

Executive President, GREAT foundation, Pune.

GREAT Foundation, Pune provides equal opportunity to economic equality through quality education for less privileged children. It has/is working in 78 schools for over 37,500 students in three States.

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Grant making bodies are driven to optimally utilize their resources to maximize their returns. It is the same rigour they bring to the development space - to ensure that every rupee spent is making a difference and maximizing impact. While analysing projects and the costs associated with it, grant makers pay close attention to how effectively the NGO is run. They check that overheads, core staff salaries and other expenses  are within acceptable limits and try to put standardized systems and processes in place. 

But grant makers also need to be attuned to specific needs and complexities of the work done by the organisations they fund. NGO's often work across a number of sectors each operating in a unique manner and demanding a variety of human resources which cannot always be standardised. At their end, they can at times be too close to the problem, focussed on just the issue they are tackling or bound by the location they operate in. The organisations  may need to broaden their vision, trust the grant makers intent and take advantage of feedback to improve their systems and processes to ensure that the beneficiaries receive the maximum benefit.

Ultimately, it is critical for grant makers and NGO’s to function as partners. Sustainability and growth both cannot be achieved unless these two bodies work together harmoniously. Scalability cannot be accomplished unless there is Sustainability. The two are interdependent on each other and hence the focus should be on strengthening the resources of the organisation for long term growth. This should be arrived at in a transparent manner and as a two way dialogue between the partners.

Amrita Nerkar

Corporate Social Responsibility, Cipla Foundation

Cipla Foundation was registered in 2011 to take Cipla’s socially focussed business legacy forward. It mirrors Cipla’s relentless commitment to improve lives and fights inequities on key fronts. To build accessibility and affordability, initiatives in India focus on Health, Skilling, Education and Disaster Response.

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Any significant dialogue on sustainability needs to address itself to two key aspects , which are as follows :

• Sustainability for whom
• What does this sustainability actually mean

In the development sector and space, sustainability is often defined as sustainability of processes, results and outcomes, mostly in favour of communities, where the development work takes place

Donors demand sustainability of processes and their outcomes, but not necessarily of the Institutions that facilitate these results and outcomes. And here is where the debate starts to heat up- Development organisations need to sustain themselves within finite time frames to allow them to do the work they are committed to . Often this dichotomy of perceptions and focus lead to issues where sustainability remains a pipe dream for all.

Perhaps defining finite time frames where NGOs, CSOs wean themselves off donor funds, whilst at the same time ensuring sustainability of processes, outcomes, benefits- in terms of community led sustainable outcomes would be one way to solve the impasse and ensure that true sustainability is attained within realistic and measurable time frames.

Sustainability of community led development processes would then best be achieved through their own capacity building and ownership, with support from NGOs, CSOs. During this time donors have to be convinced that such processes are vital to ensure sustainable outcomes at the community level.

Alka Pathak

Trustee, The Resource Alliance

The Resource Alliance inspires sharing and collaboration to create powerful change in the social impact sector.

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People in general really appreciate the work NGOs and people dedicated to causes do, but when it comes to parting with funds there’s a general mistrust in the air. We’ve all heard proclamations like “I’d rather give 2 sacks of rice than give money” or “I don’t know how much of my money will actually reach the beneficiary.” However, these arguments are misplaced.

For instance, let’s take the “sack of rice” argument, which is analogous to “program cost”. One might believe that such a donation has a high chance of complete disbursement to the beneficiary, that there will be no “loss in translation”. But that misses the big picture – “how will the sack of rice effectively reach the beneficiary in the right form?”

The answer to this question is “overheads”.
There are several other costs in the equation – cooking costs, including cook, gas, oil, spices, etc.; infrastructure costs including kitchen, cooking equipment, etc.; distribution costs; and delivery costs such as cutlery among others. 

Therefore, while “program costs” are core, one cannot undermine the importance of “overheads” without which effective delivery would be impossible. So let’s give it the respect it deserves!

Shreeja Kanoria

Director Communications, Ballygunj Society for Children in Pain (CHIP)

CHIP is an NGO working in the field of children education and health.

We would love to hear your experiences and views on this debate. Write to us at connect@capindia.in

Government Vs. NGOs -- Transparency or crackdown?

Watch a heated debate on “We the people” a popular television program anchored by Ms. Barkha Dutt and now on You Tube: https://www.youtube.com/watch?v=TZquk5pqIOU

                                             

The debate veers around two key issues:

1) Should board members and officers of NGOs be asked to make their personal assets public or is this a new clash between government and NGOs?

2) Is the Lokpal Act being diluted by keeping the heat on NGOs instead of bureaucrats and politicians?

We, at CAP, watched the debate and smiled occasionally and sighed at other times!

In our view, the non-profit sector is far more regulated than the for-profit sector. But, the non-profit sector has always been given a bad name and hanged.

The trouble is, there is no consistency in our laws. Under the Constitution of India, "charity' is a State and not a Central subject. Hence in Western India (Maharashtra, Gujarat, Rajastan and Madhya Pradesh) we have Public Trusts Acts and rather 'over-active' offices of the Charity Commissioner (who also plays role of Registrar of Societies). But, a trust in Delhi or Bangalore files returns only with the Income tax (and Ministry of Home Affairs only if registered under FCRA).

In Maharashra alone there are about half a million registered trusts and societies (but these also include religious and temple trusts and societies).

Thus, all of Western India files returns with charity commissioner at the state level, income tax at the central level and MHA (if registered under FCRA). In between there are other labour related compliance (including shops & establishments act) and several other registrations and compliances there under, depending of the nature of activities.

It is alleged that NGOs handle “public funds” hence they should be more accountable than the Government or the Corporate Sector.

But, where does government get its funds from? The public, through taxes!

Where does the corporate sector get funds from? The public, through investors!

So why punish only NGOs!

No one is against transparency and accountability at an organizational level. But, why must board members who serve on NGO boards in a fiduciary capacity and without remuneration be compelled to declare their private wealth in public? By what logic or legal definition does a trustee or an officer become ‘public servant’ merely because more than one million Indian rupees is received from a foreign source, which again is private funding for charitable causes in India and to fill gaps in the Government of India’s own delivery system!

Noshir H. Dadrawala