With the advent of the new CSR law in India, there have been several discussions on its provisions, lack of specificity and pros/cons.
Many feel this would turn out to be merely an accounting exercise, with companies no longer willing to look at innovative solutions for societal good.
Some 8,000 companies come under the purview of the Act, pooling an estimated value of more than $100 billion for CSR activities alone. With the Centre and States focusing on nurturing an ecosystem for organisations to flourish, there are several opportunities for businesses to gain from CSR, within the purview of the law as it stands today.
An analysis of the CSR activities of the top 300 firms reveals that while 34 per cent of them implement the law through their own foundations, another 30 per cent collaborate with NGOs and other institutions.
Can a company leverage this law to create some value for its own business, and at the same time uphold the spirit of the law itself?
Blue ocean strategy The law lists 10 top priority social activities that companies can invest in; the best strategy for a company would be to invest in an allied function.
Pharma companies could invest in awareness and diagnosis camps, manufacturing companies could invest in vocational training, companies related to food processing could invest in opening up markets to eradicate hunger in inaccessible areas, and the like.
To elucidate this idea further, let’s consider a pharmaceutical company, say company A, producing drugs for children.
Such a company can use the CSR funds to create awareness camps in inaccessible districts or create a platform of grassroot-level partners to disburse heavily discounted drugs to these children.
This creates a win-win situation for all the stakeholders; not only will rural India get a chance to substantially improve its access to life-saving drugs, companies themselves unleash the real potential of drugs in India.
The effect could be magnified if companies pool in the CSR funds. Since the law also permits a company to “associate with 2 or more companies for fulfilling the CSR activities provided that they are able to report individually”, a group of companies with similar interests could create demand for their products in hitherto untouched segments.
Monitoring NGOs The interesting aspect of the CSR law is the fact that it allows companies to invest in NGOs operating for more than three years in India; this is alleged to have increased the number of NGOs in India, with all of them looking for a share of the CSR pie. With roughly 2 million NGOs operating in India, the huge question of how these funds and NGO activities are monitored comes to the fore.
Perhaps, in this context, it is essential that a unique monitoring and impact assessment portal be set up. A good example would be the Charity Navigator operating in the US; this is an independent charity evaluator that ranks NGOs on financial accountability and transparency.
This is an opportunity for an Indian business to pursue. Can we build an evaluator that could go a step further, and rank NGOs based on a composite score of impact/reach, procedural efficiency, and financial transparency? The effect of such an evaluator would be similar to that of the Credit Information Bureau credit rating system that we have in place currently, with two-sided network effects: NGOs, often accused of non-transparency, get an opportunity to portray their efficiencies and also get more access to funds, whereas corporates get an opportunity to choose NGOs in the areas of their choice, increase the distributive effects of their markets, and get access to extensive data regarding their own end customers.
Of course, it is imperative to keep in mind the spirit with which the CSR law was enacted. In this context, it is perhaps encouraging for corporations to give back to the society what they take from it.
The writers are with the Indian School of Business, Hyderabad