It is 10 years since Corporate Social Responsibility (CSR) was enshrined into law on April 1, 2014. Companies meeting certain criteria are required to spend at least 2 per cent of their net profit, over the previous three years, on CSR activities which include among others; education, healthcare, gender, environmental sustainability.

Schedule-VII of the Companies Act 2013 elaborates them further. South Africa is the other G-20 country where CSR is embedded in law. But in most advanced nations, it is either voluntary or run on traditions.

The principle behind CSR is — a company impacts many beyond its shareholders and hence it is appropriate to give back to the society. Besides, ethical investments will always improve the company’s reputation, customer and employee loyalty. CSR investments by Indian companies have reached a significant ₹30,000 crore per year. A few issues and suggestions gleaned from the field are discussed, with the objective of making CSR investments more effective.

The issues

The unequal relationship of beneficiary (grantee is usually a NGO/Trust/Society which implements a project) and benefactor (company which pays for it) is the first hump to cross. CSR commitments usually happen in the second quarter, after a board’s approval of financial results and annual budgets, leaving six to nine months’ time for the benefactor or implementer. With a smaller implementation window, tangible physical assets/hardware get priority for funding. Creating capacity among communities, essential for development, takes a backseat, because that takes time.

Annual commitments or sanctions present uncertainties both for continuity of funds and long-term hiring of implementation staff. If investments are weather or time sensitive, the grantee is expected to use its own resources for implementation and seek reimbursement.

For example, when a young FPO gets funding for a processing unit, mobilizing working capital for procuring produce and marketing its output becomes the responsibility of grantee, which promoted the FPO! Some suggest that a region should be funded only once and in brief timeframe, which doesn’t augur well for development. There are large number of grant seekers and lesser grant makers. Hence, some donors prefer to work through middleman (agencies) for identifying grantees and projects. The law doesn’t proscribe this. But the grant-maker loses connect with the ground, depending on these agencies for identification and also monitoring and evaluation (M&E). This unusually empowers middle agencies which hold the keys for several grant-makers. Personal biases creep in as grantees make a beeline to them.

Some suggestions

In CSR, the selection of a genuine and capable partner is of paramount importance, reflected by their ethos of inculcating self-reliance in communities, their record and contingent of expert staff.

While CSR doesn’t permit granting corpus funds to NGOs, a long-term financial commitment with assured annual instalments helps, because grantees are partners and not contractors. Building capabilities of partners and sectoral development must be the very focus of CSR, as it can initiate a virtuous circle. This requires embracing risks, promoting innovations and longer time commitments.

On M&E, measuring impacts is essential, but converting everything into numbers doesn’t help. Lives and livelihoods matter, hence ‘qualitative reporting’ must take precedence alongside ‘quantitative reporting’.

It is also noticed that companies don’t have sufficient staff or experience to deliver CSR. Short internships and structured rural involvement programmes can help. While the underlying principles of ESG and CSR are distinct, boundaries between them often blur. It is a good practice to allocate identifiable budgets. These changes will infuse ‘heart’ and soul into the ‘mind’ of CSR.

The writer is former deputy Managing Director, Nabard. Views expressed are personal