CSR in India: from backroom to boardroom, our article reproduced from the Alliance magazine

The Companies Act 2013, which took effect from April this year, requires large and profitable companies[1] to spend 2 per cent of average net profits during the three immediately preceding financial years in pursuit of their corporate social responsibility (CSR) policy. While the act does not make spending of the 2 per cent mandatory, it does require companies either to report spending or to explain their failure to spend. How are companies and NGOs responding?

The act makes company boards responsible for compliance, taking CSR discussions right into the boardroom. The CSR committee (comprising board members) must recommend a CSR policy, indicating activities to be undertaken and expenditure to be incurred, and monitor the policy. Having approved the CSR policy, the board must ensure it is made public; that agreed activities[2] are undertaken; and that spending is reported or failure to spend explained – an expend or explain approach.

The act encourages companies to work with lean CSR teams and maximize funds spent on projects by allowing them to collaborate among themselves (provided they can separately track and report company spending). CSR spending must be for poor and disadvantaged communities, not only for the benefit of employees and their families. It must be measurable in rupees. Advocacy and human rights spending is not included – these are causes that businesses generally do not support.

How are companies responding?
Based on financial information for the past three years, 16,358 companies would be required to spend US $2.5 billion to $3 billion in the current financial year, while a 2008 study of 1,000 of the largest Indian companies by Karmayog.org found that 49 per cent did no CSR. It therefore seems that for nearly 40-50 per cent of the companies, the next couple of years will involve learning CSR from scratch. Some are likely to make a donation to the Prime Minister’s Fund or other central government funds or contribute to well-known NGOs.

But a couple of hundred companies that are already doing CSR are working on aligning their current programmes with the requirements of the act. Multinational corporations that have been implementing CSR under global initiatives are engaging leading law firms to help them understand the implications. The remaining midsize to large companies will be much sought after by individual consultants and firms seeking to advise them.

Leading industry associations such as the Confederation of Indian Industry and FICCI (Federation of Indian Chambers of Commerce and Industry) have been organizing seminars and workshops, while the Department of Public Enterprises has been running workshops for CSR managers. Several task forces have been set up by industry bodies for creating matchmaking portals, documenting case studies and organizing events to bring NGOs and corporate CSR face to face. The Indian Institute of Corporate Affairs has been organizing outreach programmes for companies and NGOs, and has launched a CSR certification course.

How are NGOs responding?
Out of about 2 million NGOs in India, fewer than 5,000 have been attending workshops and conferences, responding to forms and surveys, etc. Of these, about 3,000 have been seriously engaging foundations, companies, high net worth individuals and India’s decade-old online philanthropy marketplaces. These NGOs are taking concrete steps to engage companies: understanding requirements of the new act, getting validated by organizations such as the Credibility Alliance and GuideStar India; participating in CSR events; strengthening their fundraising team, and so on. There is some nervousness about how to access CSR funds. While the CSR kitty is not trivial, it is likely that the incremental flow will be only about US $1.5 billion to $2 billion, almost the same as the US $1.9 billion received as foreign contributions by 13,193 NGOs during the year ended March 2012. Many government programmes implemented through NGOs have bigger budgets.

Challenges and opportunities
It would be a pity if companies overlooked the existing knowledge and infrastructure created by foundations and philanthropic intermediaries and started reinventing the wheel. Companies and NGOs need to learn about one another and build trust.

The act will bring greater transparency in corporate giving. By 2020, CSR is likely to be more evolved and generate more information to inform giving. The work of NGOs will gain more visibility and market forces will drive greater efficiency and effectiveness. In a few years, CSR rules could move towards giving greater flexibility and shift the accent on reporting from ‘spending’ to impact and outcomes.

1 Companies having a net worth of Rs 5 billion or more or a turnover of Rs 10 billion or more or a net profit of Rs 50 million or more. (Rs 60 = approx US $1.)
2 As per Schedule VII of the Companies Act 2013.

This article by Pushpa Aman Singh appeared in the Alliance magazine, 2 June 2014. The article is reproduced here with permission from the Alliance magazine. The full article is available only to subscribers of the Alliance magazine. 

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Pushpa Aman Singh is CEO of GuideStar India. Email pushpa@guidestarindia.org

How Public Sector Enterprises (PSEs) can engage NGOs for CSR: A presentation on the larger and more challenging roles that can be taken by PSEs in NGO partnership

I was impressed that 64 participants from 22 PSEs turned up for a well-executed workshop on CSR for PSEs organised by Bombay Chamber of Commerce and Industry (BCCI) on Feb 16, 2012. I was even more impressed that it was not a business-as-usual day for the participants, far from it. There was serious and furious note-taking, coupled with eager questions, and as we took a break for lunch, that did not seem to affect the momentum of their enthusiasm – the questions and the knowledge-seeking just continued, unabated.

To witness PSEs, the hard-core, multi-crore giants who set up public infrastructure facilities, move from being compliance-oriented to being triple bottom-line-oriented in spirit was inspiring! As the GuideStar India session on “Essential Elements of Partner NGO Selection and Measuring the Effectiveness” progressed, there were “Aha!” moments and there were takeaways. In the first segment we talked about why PSEs need to decide their specifications and criteria for selection before calling for applications - a one-size-fits-all approach, inviting applications from one and all, would backfire on the PSEs being overwhelmed with applications. It would also waste the time of NGOs that do not meet basic specs (cause/ location) in creating proposals. Also, PSEs need to explore the NGO data available on platforms (www.guidestarindia.org, www.Propoor.org, www.Karmayog.org), ask around, check with other PSEs, local corporate & Government institutions/other donors for references, etc.

The soul of the presentation was to motivate PSEs to move from check-signing philanthropy to get-your-feet-dirty philanthropy. Equipped with local knowledge (social, cultural and geographical), resources, and hard-to-come-by project management skills, PSEs, by choice, can leverage that advantage to exert a lasting, deep, huge and path-breaking impact on local communities. They can choose to be fantastic enablers of community-owned projects by becoming supportive (as well as result-oriented), strategic and systematic in their engagement with NGOs.

Additionally, one of the untapped dimensions in Donor-NGO partnerships is the financial and other benefits of co-funding with other foundations, grant makers and corporate entities:  Co-funding opens up the project to efficient interdisciplinary knowledge transfer, leverages the strengths of existing robust partnerships, increases the depth and the breadth of interventions in a community, and leads to a more holistic, sustainable and high-quality intervention- in the truest sense, multiple donors come together, collaborate and complete each other, rather than compete against each other.

For instance, in a post-disaster scenario, if one donor, limited by funding criteria could only construct houses, s/he could collaborate with another donor who could fund sanitation, and another for kitchen gardens etc. to result in a well-rounded intervention for the beneficiaries, because, an incomplete remedy - house construction without sanitation - can run the risk of spawning more diseases i.e. houses turning into slums due to improper waste management. 

Given the multi crore (1 crore = 10 million) annual budgets that PSEs are mandatorily required to spend on CSR, the key concern is of finding NGOs that can effectively implement programmes of scale. I impressed upon the PSE participants to also invest in NGO capacity building programmes and to fund the creation of infrastructure in the voluntary sector to enable effective CSR. This would mean supporting aggregators that address areas such as: mapping the sector, doing accreditations, building NGO capacities in strategy, governance, financial management and programme management.

During the session, we also discussed about PSEs sharing their skills in procurement and project management to co create and co implement projects with NGOs by weaving in employee volunteering opportunities into projects. PSEs can also play a critical role in disaster preparedness and disaster response given the strength of their infrastructure, logistics and reach.

The Tata Institute of Social Sciences (TISS), which hosts the National CSR Hub, is the focal point for facilitating NGO Partner Selection and it is creating a pool of Empanelled NGOs. I urge TISS to build on existing data available with various aggregators and intermediaries such as GuideStar India, GiveIndia, Credibility Alliance, Propoor & Karmayog so that they can create a pool of NGOs quickly and it would save NGOs the trouble of resubmitting information that is already available and vetted by other organisations.

In closing, it was a motivating endeavour by the BCCI and the palpable enthusiasm of the PSEs suggest strongly that they are listening and gearing up for NGO partnerships, but the question is, “How many NGOs are ready to take on the road-builders to be partners in building lives?”

Pushpa Aman Singh, CEO GuideStar India was invited by the Bombay Chamber of Commerce & Industry to do a session for CSR managers of Public Sector Enterprises on Feb 16, 2012 in Mumbai.