Now that top-rung companies will be making big spending on corporate social responsibility (CSR), how do we ensure that the funds are spent effectively, and make an impact? One tool to do so would be social audit. Nirmala Sitharaman, minister of state for commerce and industry, finance and corporate affairs, also endorses it. Addressing a national seminar on CSR, ‘Shreshth Bharat’ organised by the Indian Social Responsibility Network (ISRN), she said the government can only go a certain distance to verify how and on what the corporate houses are spending. Therefore, social networks can play an important role in social audits of CSR implementation.

“The ministries can go back to companies to see if they have spent and how they have spent on CSR. We cannot question corporate houses … [we cannot say] if they haven’t spent then give us the money (reserve for CSR spending). Social audit will ensure that funds are properly utilised,” she said.

Under the Companies Act 2013, companies with at least '5 crore net profit, or '1,000 crore turnover or '500 crore net worth will have to spend at least 2 percent of their three-year annual average net profit towards CSR activities. They can carry out livelihood enhancement and rural development projects, protection of national heritage, art and culture, including restoration of buildings and sites of historical importance and works of art, setting up public libraries, promotion and development of traditional arts and handicrafts.

The day-long seminar was divided into four sessions covering various aspects of CSR and its challenges. In the first session the panelists discussed the corporate sector as a vehicle for societal development; the second session focused on relationship building beyond funding. In the third session the emphasis was laid on the challenges in implementing CSR and the importance of social audit. And in the fourth session the CSR was seen as new dimension in tourism.

Lalitha Kumarmangalam, chairperson, national commission for women and also of ISRN, said her organisation will be a bridge between the corporate sector and the NGOs so that the two can meet in a sustainable manner.

Emphasising the need to focus on making India open defecation free through CSR, she said it is not just about building toilets but social awareness also needs to be raised to ensure that people use toilets. She also said it is important to take gender into account and to ensure that usable toilets for women are built along national highways, railways and other public places.

Indumathi Rao, founder, CBR Network, Bangalore, saw the sustainability of CSR initiatives as the biggest challenge. She said CSR should be a long-term relationship between corporate houses, NGOs and the government. And even the withdrawal of funds should not affect its future.

Manoj Agarwal, chairman of Great Value Group, suggested that the government must increase CSR spending from 2 to 5 percent in the next budget and further increase it to 10 percent over the years. Also, the government must announce national awards for best practices and strict action should be taken against those who are not performing such activities. He also emphasised on compulsory credit rating for the NGOs.

Parul Soni, executive director, Ernst & Young, said many companies are struggling to get good implementing partners because of a huge gap in perception between the two sides, NGOs and corporate sector. He said the time has changed and the corporate sector no more wishes to support one-time activity. “They now look for programmes and projects in which they can invest,” he added.

Sitharaman also launched a book, ‘A guide to corporate social responsibility – beyond funding’, on the occasion.

This story appeared in the October 16-31, 2014 print issue

Governance Now was a media partner for the event.