In 2013, India became the first country in the world to mandate the implementation of corporate social responsibility (CSR) activities. Starting in 2014, companies that meet certain criteria have to spend 2% of their profit to tackle priority issues faced by the country.
The introduction of the mandate unlocks an estimated $3 billion (US dollars) in funding for development issues through CSR alone. Currently, funding received from philanthropic giving and impact investing in India is estimated at $8.2 billion. The quantum of funds coming in through CSR adds nearly 40 percent more to the existing private sector spend, which could significantly impact the development landscape in India.
However, the intent behind the law is not merely to direct more resources to development initiatives. The objective of this provision is indeed to involve companies in discharging their social responsibility with their innovative ideas and management skills and with greater efficiency and better outcomes.
In order to realise the intent of the law and implement programs that are innovative, strategic and effective, companies can streamline their approach to CSR in a number of ways – by leveraging their core competencies to implement programs strategically, collaborating with other key stakeholders for large-scale social impact and building the knowledge and capacity of stakeholders within the sector.
1. Approaching CSR strategically
Strategic CSR is when a company leverages their core product or service for their CSR activities, addresses the needs of direct stakeholders or meets business objectives such as targeting new markets, increasing brand visibility and others.
One example of a strategic engagement is the platform promoting good health and hygiene practices, launched by FMCG company. The initiative leveraged the company’s core competencies to address social change – their product portfolio, consumer messaging and connect, marketing expertise in influencing consumer behavior, media, distribution and reach, research – to name a few. The company utilised its strengths and expertise to address key gaps in the implementation of sanitation programs and brought about a change in behaviour towards open defecation practices.
Manufacturing companies that focus on developing the communities around their factory areas are also approaching CSR strategically as this entails undertaking activities that benefit their stakeholders or the business itself such as mitigating any risks from operations.
2. Collaborating for large-scale impact
The budgets, capabilities and resources of companies vary drastically. Hence, it is very difficult for one company, or any stakeholder barring the Government, to make a significant and systemic difference in the development space. Collaboration between stakeholders could facilitate this as it could ensure greater impact in scale, efficiency and geographical spread, reduced risk, knowledge sharing and sustainability of programs.
In achieving wide-scale impact, the government can be a critical enabler. GVK, a leading Indian conglomerate, was able to scale its flagship CSR initiative to 15 states due to the active interest and participation of the state government of Andhra Pradesh (AP). The program, which focused on providing emergency-response care to people in the southern Indian city of Hyderabad, attracted the attention of the state government due to its success. The Government then signed an MoU with GVK while offering to cover 20% of the program cost. Other state governments were also encouraged to get involved and the program was eventually scaled to 15 states across the country.
3. Building CSR knowledge and capacity of stakeholders
There is a need to build and share knowledge, such as formal documentation of best practices and common metrics to measure the impact, which is targeted at CSR practitioners. This sharing of knowledge is crucial to avoid duplication of mistakes.
Companies can engage with implementation partners to improve the quality and delivery of programs, monitor and evaluate progress, build capacity of new and existing personnel and assess the social return on investment of programs. Transferring such aspects of business operations to the development sector can significantly improve the organizational and project capabilities of implementation partners and benefit the sector as a whole.
A large corporate foundation active in the space for the past two years, attempted to do this by conducting a series of workshops, conferences and trainings with small NGOs and grassroots implementation organisations. The foundation aimed to develop the capacity of these organisations by connecting them to experts and trainers to facilitate discussions on challenges, build their capacity and guide them on systems and processes. However, such cases are relatively few in number as CSR is at a nascent stage in India and companies are still exploring their potential roles within the sector.
4. The role of enabling organisations
In order for companies to effectively engage in any of the above activities enabling organisations like the Government, foundations, donor organisations, impact investors and intermediaries have a critical role to play in bridging the gaps in the CSR space.
Partnering with the government and government agencies on CSR projects can unlock access to appropriate government channels and leverage schemes which greatly help in acquiring permissions, connecting with communities and attaining scale. For example, a government partner can help in scaling up the project by adopting the model across a state or encouraging other state governments to replicate it.
Large grant making organisations like aid agencies and large Indian foundations are uniquely placed to guide companies in effectively implementing their CSR budgets as they have decades of experience working at policy and programs across multiple causes. Realizing the potential of the Act, many in India are funding intermediaries to provide knowledge and technical and programmatic support to companies to facilitate corporate investments in sectors such as healthcare, WASH, livelihoods and clean energy. Such organisations play a critical role in facilitating collaborative, strategic and informed investments by companies, NGOs, impact investors, governments and other key stakeholders.
The CSR law presents a unique opportunity for the development sector to evolve at every level; there is a significant amount of funding coming into the sector from a source other than the government or donor organizations. This makes it that more crucial for companies, the government and enabling organisations to collaboratively address gaps faced by stakeholders and create an ideal environment wherein CSR is optimally mitigating some of India’s most crucial development challenges.