New Delhi: Several foundations run by corporate houses plan to devise a common strategy to ensure transparency in their social and community development operations, such as tracking spending in and progress of such projects in their annual reports.
The effort is significant because it brings together a wide range of Indian companies to share ideas on innovating sustainable programmes. Among them are Multi Commodity Exchange of India Ltd, Anil Dhirubhai Ambani Groupand media company Bennett, Coleman and Co. Ltd, which are expected to meet sometime next month in New Delhi.
Audit firm KPMG will partner with them to offer guidance on evaluating corporate social responsibility or CSR programmes—a trend companies are slowly embracing as India’s expanding economy contrasts sharply with growing local protests over land for future industrial projects.
The network alliance stems from the first sustainability summit that was organized in January by the Associated Chambers of Commerce and Industry of India.
CSR could prove to be a valuable asset in an age of mergers and acquisitions, especially as it helps companies spread their brand name, says Sudhir Kumar Sinha, group vice-president of Anil Dhirubhai Ambani Group. “While CSR activities are still low in India, the platform will give an opportunity to define and understand its practices.”
The new network will also serve as a common ground to lobby with the government for tax exemptions and safeguard other interests in the future, said Pooran C. Pandey, director of Bennett Coleman’s Times Foundation. He said his foundation has already sent questionnaires on CSR to 300 chief executive officers; the final report will be released during the April meeting.
Indian companies have made little progress in reporting development projects. And only 48 companies have so far given their commitment to support the United Nations Global Compact, a charter for improving the global business environment through standards, such as labour rights and fighting corruption.
Addressing business leaders in May last year, Prime Minister Manmohan Singh said “Corporate social responsibility must not be defined by tax planning strategies alone. Rather, it should be defined within the framework of a corporate philosophy, which factors the needs of the community and the regions in which a corporate entity functions.”
Some say companies have an inherent “mental block” in reporting development programmes. A recent KPMG study among 27 Indian companies showed that a mere 8% mentioned their social expenditures in their annual reports, and only 25% filed CSR reports at all.
But a quarter of them are also signatories of the Global Reporting Initiative, a 10-year-old movement started by an NGO called Coalition for Environmentally Responsible Economies (CERES) and the United Nations Environment Programme. This encourages companies to make voluntary disclosures and lays down framework on improving reporting principles.
“Most companies tend to give to charities than make long-term development commitments. When a company voluntarily opens up for self-evaluation, it creates value for shareholders when competing with other companies,” said Parul Soni, associate director of KPMG’s Aid and Development Services.
An estimated 100 corporate foundations and 25 foreign firms are involved in CSR activities in India, but statistics on input and output are elusive.
According to Times’ Pandey, the Indian corporate sector spent Rs30,000 crore on social expenditure during the last financial year, up from Rs17,500 crore the previous year. Quoting from a government report, he said, companies drew a total exemptions of Rs5,500 crore under income-tax laws last year.
These figures, an analyst said, sound improbable as Indian companies still do not distinguish between philanthropy and internal practices to benefit stakeholders such as employees and community.
Companies, too, continue to rely on different models to earmark its social expenditure, making it difficult to measure the overall impact.
For instance, the Steel Authority of India Ltd (SAIL), the country’s largest steel company, spent Rs100 crore on CSR last year; this was 2% of its profit after tax, exclusive of dividend tax, according to SAIL spokesperson N.K. Singhal. Yet others, such as Tata Steel Ltd, which runs a 850-bed hospital and rural projects in 800 villages around Jamshedpur, spends an average of Rs150 crore as part of its annual revenue expenditure.
What eventually makes up for CSR of a company ultimately depends on leadership; as part of company decision, about 66% of Tata Sons, the holding group of the Tata group, is today owned by a trust.
Pharmaceuticals company Jubilant Organosys Ltd, already runs an anti-tuberculosis programme with the government of Uttar Pradesh. (Some members of the Bhartia family, which runs Jubilant, have a majority stake in HT Media Ltd, the publisher of Mint.)
MCX, whose foundation is in the process of getting registered, has conducted pilot workshops to provide information on agricultural commodity prices through the country’s wide postal network.
Apart from schools and hospitals that are run by trusts and societies, the government, too, is exploring to widen the scope of public-private partnerships to build and maintain schools and hospitals in return for a fixed annuity payment.
“Everyone is aware that the strength of the country is its people,” said Shefali Chaturvedi, the social development initiative director at the Confederation of Indian Industry. “One can’t be part of the growth story by ignoring them. It will be a foolish thing to do.”