Will the new CSR mandate be a game changer?

As you may know, the new Companies Act of India mandates that companies of a certain size and profitability must spend at least 2% of their net profits on Social Responsibility activities (See Section 135 on Page 80 of the Act)

I was a panelist at the ‘CII National Summit on CSR’ in Delhi held on 30th September 2013. These were my opening remarks in response to the question posed to my panel, “Will the new CSR mandate be a game changer?”

The 2% CSR spend is estimated at about Rs 20,000 Crores. This money is less than what Government spends in five days, considering the annual expenditure budget of Government is some Rs 17 Lakh Crores. Subsidies alone, out of this total amount, exceed Rs 250,000 Crores! Therefore the 2% CSR spend is not going to bring in the game-changing resources…

However, if Corporate India harnesses its ‘innovation capacity’ and leverages the ‘power of partnerships’ to solve India’s social and environmental problems, I am sure it can change the game!

Instead of looking at the 2% amount as ‘a philanthropy budget’, if companies can innovatively embed CSR into their business strategies, larger problems can be solved.

This could be in the form of ‘socially inclusive business models’ where the capacities of low income suppliers and distributors can be strengthened to improve their productivity, market access, and bargaining power, while enhancing the competitiveness of the whole value chain in which the company is a part. Eg. ITC eChoupal.

On the environmental front, investing in renewable energy is a low hanging fruit, given our unreliable grid power, and the high cost of diesel-generated power. Innovation of higher order is required to build ‘green supply chains’ that regenerate the natural resources consumed in a business. Eg. ITC FarmForestry. 

Embedding CSR into business strategies would also ensure that the CSR spends do not get impacted in times of slowdown. Of course, this whole argument is not to rule out the need for philanthropic spends in cases of extreme distress.

Now I come to my second idea. I believe four types of partnerships could contribute to game-changing outcomes:

Partnerships with other Corporates operating in the same geography or working in the same domain can create joint projects and / or knowledge platforms for experience sharing.

Partnerships with CSOs / NfPs for social mobilisation and impact audits.

Partnerships with Communities themselves for gaining deeper insights while designing and executing projects. Also, Users Groups for democratising common property management.

Partnerships with Governments to create markets for trading “social credits” ala “carbon credits”, and for aligning social subsidies to develop inclusive markets rather than distorting markets. This is besides the PPPs for building infrastructure that are already gaining traction.

While no one stopped Corporates from innovating and partnering to solve societal problems – indeed several companies have done so, successfully – the new CSR mandate hopefully inspires many companies to look at this as a game changing opportunity.

Never believe that a few caring people can’t change the world. Indeed it is the only thing that ever has ~ Margaret Mead