There is a need to widen the scope of the mandated spending on CSR
Anshu Gupta | October 28, 2015
Corporate social responsibility (CSR) is a good idea and the new Companies Act has put the concept in a structured way. There was a time when corporates were giving away old clothes and other materials and termed it CSR. But the new law is changing the way CSR is looked upon, although the entire outlook might not change immediately.
As per the law, anything that you do beyond two percent is not CSR. In reality, corporate social responsibility does not just mean two percent of the corporate money. Unfortunately, we all have started looking at it like this. But this is not the idea behind the concept.
Whether it is individual social responsibility (ISR) or CSR, the real responsibility is beyond two percent. CSR is the idea behind that two percent. Just one part of it is regularised or is being put under certain structure.
So the companies that are not making that sizable chunk of profit or are into losses, also have the responsibility towards society. Let’s not narrow it down the way it has been done in the last one year, by media or CSR professionals.
These CSR professionals are just preaching or training people on how to spend their two percent on CSR. But the real goal behind this is that companies behave responsibly towards the society. And while behaving responsibly they make better use of their profits.
The core of CSR is different and it is wrongly projected these days. That perception must change. It is still in its initial stages so it can be changed.
There has been a mushrooming of many CSR consultants in the last one year. This two percent business has become a parallel business in itself. But it needs to be nurtured in the right way. Everyone, be it an individual or an organisation, must pay back to the society.
Also, there is the problem of wrong understanding of the provision which says that companies must spend CSR money around their vicinity. The corporate houses must be headquartered in cities but the problems are spread way beyond that.
However, it is not mandatory to spend money in the vicinity where corporates are headquartered. It is extremely important for institutions to understand that if they want to contribute in the nation-building then they must use their money diligently. And for that one needs to go beyond the vicinity.
There are some organisations which are working on this line, with open minds. They are not adamant on how the law is written. They are trying to understand how they can actually bring the change by bringing other things under the purview of the law.
The restrictions mentioned in the law are stopping corporates from being innovative. So child education can be an issue under CSR, but child sexual abuse may not. At present, though, that is much more important and relevant. For instance, the law mentions that if the corporates contribute money to the PM relief fund, it will be considered as CSR. The PM relief fund already has a lot of money. A lot of people struggle during disasters because there is a lot of dependence on it. Why can’t corporates be free to work with other entities who work for disaster relief?
No question of trust deficit
No corporate in this country can claim that they are extremely honest. Problem exists at both ends. So there is no question of trust deficit. If you want to work with honest people, you would find them.
When corporates have no hesitation to appoint experts to provide food or taxi services for their employees, why do they hesitate in engaging with the development sector for spending on CSR. Corporates do not have expertise in that, nor do they understand the ground reality. Their mandate is to make profit. Why do they start their own foundation and spend money through their development arm. Why can’t they get in touch with people who work in development sector full-time and who understand the needs of people.
Many a times foundations run by corporates collect money from their employees for contributing to disaster relief work. For instance, during the Uttarakhand floods in 2013, about 140 corporate entities contributed to the relief work. Later we found that less than 25 percent of them contributed their own money (share from profit). The rest of them had collected money from their employees.
If you create a structure where you mandatorily ask employees to contribute in the foundation, you are restricting them to look for other options.
There is huge expectation in the sense that – if you see in the last one year – the sector, the corporate and the government – have not spoken about anything else but CSR money. Where is that CSR money?
A number of organisations do not even pay their taxes properly. Do you really think money that is expected to be spent on CSR activities will really come out? But there are people who were doing good work even before the law mandated to spend on CSR activities and they continue to perform.
How things have become complex
Suddenly everyone is talking about numbers and particular reporting patterns to be followed. Now everything revolves around money. Companies were spending money on CSR activities even before the law mandated it. But that was comparatively free money, and reporting patterns were mutually decided. The new regime has created problems for people who have always spent money with genuine intentions.
Even when the law has restricted companies to spend in particular areas, there are organisations which look to invest in different areas; otherwise no one would have come forward to contribute to the cause which we are dealing in – clothing, sanitary napkins and others.
Simplifying the law
There is a need to widen the scope of the mandated spending on CSR. Let people contribute money to the issues they want to. It is also important to move out of the entire game of numbers and how many lives a particular programme has impacted or will impact. Social change cannot always be measured with particular parameters and on numbers.
Numbers might be very important for the corporates or the government but for the substantial social change, there is a need to see the qualitative changes that a particular programme brings along. If the focus is on qualitative change, the numbers will automatically follow.
If numbers remains the only criteria to decide the success of a programme, then companies would not prefer to go to places like Uttarakhand, where it takes two days to reach a village only to find very few families. And perhaps this is the reason the development does not reach far flung areas, where the cost of delivery is much more. There is also a need for openness to the issue.
The government is asking corporates to invest in schemes launched by them. Till the implementation is effective, there is no harm in contributing in such schemes. At the end of the day, what really matter is the fact that the project is implemented on ground and by whom it is done is irrelevant.
If the government can do efficiently there is no harm in contributing in such schemes.
We have seen a lot of new people coming in with good intentions. Some of them were open to the idea of implementing programmes with innovation, which is very encouraging. We feel doing good work to the society is a collective responsibility. If people are provided their basic rights, a functional toilet or getting education, it does not matter who provides it.
Analysing the first year
After analysing the first year of mandatory spending on CSR activities, I have two major worries.
People in remote areas who cannot afford to do paper work, how will this entire game impact them. They are in a desperate need of money and they are doing really good work on ground. It is important to make the process simplified so that right people are benefitted. If we make the process easy it will penetrate deep.
Secondly, if we stick to the traditional agenda it can create some problem. Money should go where it is needed the most.
[As told to Jasleen Kaur]
(The column appears in the October 16-31, 2015 issue)
Gupta, founder of Goonj, received the Magsaysay award this year.
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