India's Corporate Need To Realize The Intent Of The CSR Law
When India moved, back in 2013, to enact legislation making CSR spends mandatory for all corporates with a turnover of more than Rs.500 crores, the move had been met with the predictable protests. After all, corporates claimed, we already do CSR work, and holding us hostage to a specific number is an unnecessary interference in business. For its supporters, the law was an acknowledgement of the limits of government welfare efforts in a country where 70 percent plus of GDP is private. But as time has demonstrated, the law was a much needed push for big business in India, prone to a very narrow ended focus on their gains over everything else. In fact, if anything, the patchy adherence to the law since then only makes a case for more changes to drive CSR efforts in relevant areas.
Today, as I see it, CSR sends in India suffer from four major issues.
Number one is the proximity effect, where firms end up spending most of the money near their own locations, be it the office or the manufacturing plant. While the latter is understandable, the focus on areas near the office simply means a huge distortion of CSR spends, with 'rich' states like Maharashtra, Haryana and Gujarat taking away the largest shares, at the cost of poorer states that do not happen to be attractive enough to get corporate
A second issue is the lazy option of donating to relief funds that are eligible, be it natural disaster funds of the central government or others. I believe this is very limiting, and misses a key objective of CSR spending, which is to sensitize employees to the challenges the less privileged in this country face. Or showcase the power of CSR to better engage with community or introduce better practices. It has been shocking for me to see schools ‘adopted’ by well known corporate suffer the most basic deprivations like lack of fans, lights or even power, even as the sponsor corporate believes that all is well.
The next big change will come from the employees joining corporate life, an increasingly diversified group now, who will increasingly look to make an impact beyond their workplace
This brings us to the next issue. Follow ups and monitoring. Be it construction of toilets, plantation of saplings, or even distribution of medicines or books, we find corporates reducing CSR work to a compliance requirement, where as long as the paperwork is in order, nothing else matters. That, to my mind, is a criminal waste of resources and efforts. Corporates need to identify and work with better external agencies to take end to end ownership of the projects, with remuneration linked to clearly lay down performance metrics. And tracking the agency should involve physical site visits and checks, not a blind belief in letters or pictures.
And finally, we have the letter of the law itself. Like too many of our laws, the law suffers both from the way specifics have been defined, as well as the room for ambiguity it leaves open for exploitation. Lack of compliance is not really penalized, going by disclosures so far. Something as ridiculous as ‘staff training for fire safety’ for instance, is included as an allowed CSR expense, making a mockery of the intent behind the law. Areas like waste management, energy conservation and shifting to renewables could do with a lot more support than the current law allows.
So is there reason for being hopeful that things will change? Of course yes. For the INR 15,000 crore CSR sector, the next big change will come from the employees joining corporate life, an increasingly diversified group now, who will increasingly look to make an impact beyond their workplace.