Despite four years of the CSR legislation, philanthropy in India is still very much moving up the learning curve. Ratan Tata and Ruth Shapiro discuss the effects of the CSR legislation and the Doing Good Index 2018.
Doing good can do even better
By Ratan N Tata & Ruth A Shapiro
It’s been four years since the corporate social responsibility (CSR) legislation has been in effect in India. There is no doubt that more funding has become available and there’s heightened interest in all aspects of privately funded social investment. It is time to take a relook so that the legislation realises the impact that is intended.
According to KPMG, which has been carrying out a study of the reports from India’s top 100 firms each year since Section 135 and Schedule 7 of the Companies Act, 2013, and CSR Policy Rules, 2014, came into effect from April 1, 2014, the results of this past year have been quite promising. KPMG reports that there has been a marked increase in overall CSR spend with the bulk of the funding going into education and health.
It also reports that a significant number of companies are surpassing 2% and that the projects are both becoming more strategic and, in the past year to a much greater extent than in previous years, with a wider spread across the country, including in states with lower economic development. Still, the wealthier states of Maharashtra, Uttar Pradesh, Tamil Nadu, Karnataka and Odisha account for 32% of all CSR projects, while the more disadvantaged states and Union territories of Manipur, Tripura, Chandigarh, Daman and Diu, Dadra and Nagar Haveli receive the least CSR support with less than 10 projects combined.
This is not so surprising. Companies are more likely to fund in areas where they have operations and expertise. In fact, the law allows companies to focus their attention on where they operate.
According to KPMG, 71% of companies have implemented projects that have followed this strategy.
The report also states more and more companies are directing their CSR efforts with and through existing non-profit organisations. In 2017, 57 of the 100 companies surveyed “implemented their CSR projects through a combination of direct implementation, own foundation or implementing partners”. An “upward trend” in working with partners.
Although four years old, CSR in India is still very much moving up the learning curve. As all stakeholders experiment, innovate and learn by doing, it is possible to improve systems to maximise the impact of this incredible shared.
The Centre for Asian Philanthropy and Society (CAPS) has recently completed the ‘Doing Good Index’ (DGI), a first of its kind survey looking at the factors that enable or impede private social investment. Several of the indicators help us to see additional gaps in the charitable sector.
According to DGI, there are more than 100 universities teaching philanthropy, non-profit management and social entrepreneurship. This is excellent news, as both companies and nonprofit organisations need knowledgeable talent to design and carry out projects. Despite this, however, 72% of the surveyed organisations said it is difficult’ or ‘very difficult’ to find skilled staff. Additionally, 41% of organisations surveyed stated that they had no one with corporate experience sitting on their boards.
These statistics lead us to a recommendation. Many non-profit organisations often lack skills, such as financial planning, accounting, organisational development, measurement, evaluation, IT management and marketing. These are skills usually found within companies. Currently, the CSR legislation allows companies to include 5% administrative charges in CSR tabulation.
We suggest that the ministry of corporate affairs incentivise companies to encourage employees to provide technical assistance as a volunteer, or aboard member, for those non-profits also receiving grant support. Employee time should be included in a company’s 2% commitment. A combination of both financial and technical resources will enhance the impact of a company’s donations.
India is the only country with such a progressive policy as our CSR initiative. Let’s learn from this experiment and put in some useful fixes to make it even more effective and impactful. financial commitment.
To view the article on The Economic Times click here.