CSR: Achieving its True Purpose

The Companies Act 2013, was a watershed moment in the history of corporate India. Forward looking rules for better corporate governance were framed to give fresh impetus to corporate India. There were many firsts to companies Act 2013, mandatory women director on boards of listed fi­rms was one of the initiatives which was hailed by women community & top corporate honchos across the board then the most talked about provision, which was the provision of mandatory CSR. Introduction of CSR rules was the most debated and talked-about point since the Draft Companies Bill was presented in the Lower House of the Parliament in 2011. Technically, with the new Companies Act, India became the leading country to make companies invest a part of their profi­ts for communities as a compliance. In the budget 2019, violation of CSR provisions was made a criminal offence, thankfully better sense prevailed and it was not implemented as such a draconian measure would have eroded the sanctity of a well thought out and noble provision.

It is stipulated in the Section 135 of the Companies Act, companies having a net worth of INR 500 crore (Cr.) or more, a turnover of INR 1000 Cr. or more, or a net profi­t of INR 5 Cr. or more in a given ­financial year are required to spend 2 percent of their average net profi­t (of previous three years) on CSR programs. Indian companies top honchos did not need to be incarcerated to follow these laws. Most of the corporates strictly followed the provision.

If we look at the overall CSR ecosystem in India, the total CSR fund investment by companies in India would cross INR 50,000 Cr. by 31st March 2019, since the applicability of the mandatory CSR provision. A large chunk of this is towards education, skills development projects, healthcare and sanitation initiatives all of which are top priorities for the central government as well.

Corporates also have rejigged their management structure by setting up CSR departments, recruiting people especially for CSR and setting up budgets. CSR projects are highlighted in annual reports as well and companies which have seriously worked towards making CSR a priority have reaped immense benefits.

There is an annual spend of 11000- 14000 Crores bulk of which is cornered by top ten companies with RIL taking the lead by spending Rs.817 crores followed by TCS. There are four Public Sector organizations in top ten spenders led by ONGC with an annual budget of Rs.518 Crores which have spent huge sums of money on CSR.

But all this brings us to the question whether the real objective of CSR been achieved? Are our schools our villages our ITIs our women are better off today and to what extent have they benefitted? If we look at the overall CSR ecosystem in India, the total CSR fund investment by companies in India would cross INR 50,000 Cr. by 31st March 2019, since the applicability of the mandatory CSR rules. A large chunk of this is towards education and skills development projects, followed by healthcare and sanitation initiatives, all of which are top priorities for the central Government as well.

Corporates were roped in to have better management and to execute the projects in a professional manner and not merely provide the funds but that has not really happened. It was believed that if all these projects as these are handled by professional organizations they will be executed in a seamless manner with industry Government partnership and red carpet will be rolled out to industry, but instead of red carpet some of the projects are stuck in the quagmire of red tape. Even though industry had the will and capacity to execute projects but somehow they have not been able to do so.

Let us take an example, say a corporate wants to provide furniture, computers and other lab equipment but getting approval from state Governments can become a herculean task and favoritism rules the roost in allocation of funds as well. A sycophant principal who is in the good books of administration will get all the funds. It was believed that industry Government partnership will ensure that projects are executed faster and in a seamless manner but that is rarely the case.

Also these budgets are allocated on annual basis and there is pressure on corporate managers as well to execute the projects and consume these budgets and at times money is spent on projects which are not usually required. Lot of money has been spent on building toilets under SBA or installing sanitary napkin vending machine or health camps under sanitation but it has not imparted the real value. Providing desks, laptops, smart boards, library books etc. h not served the desired purpose. All this is being done by state Government as well.

Corporates should enter only into niche areas which require long term planning and dexterity in management. Some of the projects on sustainable development with the goal to improve the overall infrastructure of the area fall under this category. CSR is not a quarter to quarter or year to year project. CSR projects should have long term development goals, merely installing of a sanitary pad vending machine, constructing toilet blocks or giving books to the library or desktops and benches to the school doesn’t serve the broader purpose of CSR which was to bring managerial efficiencies into the system.

Mentioned below are some of the measures which can help bridge the gap:

Giving away laptops or desktops is not a bad initiative but it should be a complete package like imparting computer education to the children of the school so that they can actually use these machines. Installing projectors and smart boards is one thing but training teachers to use these tools to make life of student’s better is of tantamount importance.

There should be minimal Government interference, may be Government can publish the list of schools and colleges district wise and what kind of activities are required. Let’s say Haryana Government can list schools in Bahadurgarh which require toilet block and RO water system. Corporates operating in that area can then chip in and make their contribution. Similarly, Government can advertise that this school has a requirement of trainer in the field of robotics. Corporates can engage agencies which work in the field of robotics.

Similarly giving scholarship to pupil is a good initiative but taking out an hour from your work schedule and imparting managerial training to college students to make them employable is even better.

Health camps are good but getting health insurance for all the villagers is even better.

Deploying an ambulance to ferry passengers to nearby hospitals can also be looked into.

Construction of toilet block is good but engaging a contractor from the same village or area will not only provide employment but will also help maintain it.

Construction of cow shelter is good but engaging a veterinarian to manage the shelter is even better.

All the above mentioned measures involve long terms planning, dedication and a vision. Corporates cannot work in isolation. Industry Government partnership with clearly defined objectives is needed if CSR has to realize its true potential of transforming the lives of people.