Effective CSR needs three actors

Corporate social responsibility (CSR) and sustainability have been the most talked about subjects of late, especially in the context of the new Indian Companies Act, 2013.

While the Act may have kick-started a revolutionary phase for the development of CSR in the country, there is merit in looking at the real challenges.

The current economic scenario has not helped much in narrowing the rising disparities between the haves and have-nots. The next 12–18 months may see the macroeconomic condition stabilising and showing signs of growth, with India Inc improving its bottom line.

However, there is need to evolve a strategy to improve the triple bottom line, that is, the economic, social and environmental performance of businesses in India.

Traditionally, India has seen significant philanthropic activity, on individual as well as corporate fronts. Though most giving began as religious philanthropy, a lot of it has been directed towards ‘social causes’ over the past few years.

The Bain Philanthropy Report (2012) notes India’s rich increased their contributions from 2.3 per cent of household income in 2010 to 3.1 per cent in 2011.

That said, for a country that consistently features on the lower rungs of Human Development Index, there is an urgent need to address developmental concerns in a manner that moves beyond the lens of ‘causes’. Crucial gaps within the social, economic and environmental fabric of India need to be addressed in a strategic, scalable and sustainable manner.

There seems to be a clear advantage in looking at the direction and structure that Section 135 has set for industry; this is so that it can channelise its energies towards a positive social and environmental impact.

The Act has brought out a huge opportunity for a tripartite partnership between the Government, businesses and NGOs. The Government identifies relevant sectors that need support, formulates conducive policy and spends a significant amount on the social sector.

What business brings to the table is its ability to take on higher, balanced risk backed by managerial expertise, which can bring about the most pertinent transformations required today.

Securing services of ‘basic needs’ such as water, sanitation, housing and education for a vast majority of the population remains a pressing need even in 2014.

Looking at the efficacy in delivery of the last mile by the ‘third sector’ (NGOs), and their inherent capability to connect with communities and execute large projects on ground, this makes an excellent combination for accelerated social impact.

With the Ministry of Corporate Affairs releasing the much awaited CSR rules, corporate boards are putting together robust CSR policies, which will be central to equitable, inclusive and sustainable growth. Such policies would need to look at strategies which are action-oriented, concise, easy to communicate, aspirational and global in nature, in the sense of being simple to replicate.

However, most importantly, the CSR policies would need to resonate with the values that an organisation believes in. Integrating CSR principles within the core business operations is critical for business sustenance.

Corporate boards would need to assume the responsibility of effective implementation of its CSR vision. Since the Act specifies induction of independent directors, there is a potential to make them responsible for the CSR policy which in turn creates a need for robust training and sensitising them on these issues.

The guidelines of CSR expenditure of 2 per cent of average profits in last three years also throws up a challenge in appropriate channelising of funds, defining results, measuring impact, focusing on core competencies, maximising resource utilisation and core competencies without losing sight of the overall development goals.

We have seen great corporate examples in India who have applied a holistic approach that is unique, scalable and replicable. However, going forward, a multiplier effect is much needed to achieve our developmental objectives year on year.

Financial institutions are uniquely placed as they are connected across sectors given their intermediary role in an economy. Banking, financial services and insurance (BFSI) sector can influence economic outcomes through the capital that they infuse in the market.

Therefore, by assuming the role of a CSR catalyst the BFSI sector would have a far greater influence on wider economic, social and environmental objectives, thus mainstreaming CSR and sustainability.

Proactively investing into social sectors, innovating financial products and services for the bottom of the pyramid, integrating environmental and social aspects into lending decisions and training its own human capital to be CSR professionals would be a role that BFSI sector could carve for itself.

With huge CSR funds that would be pumped into the development sector, BFSI as a conduit of financial efficiencies may leverage this strength to build financial and non financial efficiencies within NGOs and social enterprises.

In this new scenario, credible training assumes a vital role as there is a lack of professional resources with the ability to deliver the CSR that is demanded by India Inc today. This clearly emerges as a business opportunity for social enterprises.

With the mandate of CSR being formally introduced to the dashboard of the boards of companies in India, strengthening independent director course curriculum is critical.

With the world moving towards Sustainable Development Goals, from the Millennium Development Goals, a ‘business-like’ approach to developmental issues may ensure a secure and realistic solution to sustainable development in India, given that our country has framed a “first to the world” CSR mandate for India Inc with wholesome social transformation as its key objective.

The writer is president of Assocham