Students taking part in a sports event sponsored by Mahindra Group’s CSR initiative ‘Nanhikali’ at a government school in Mahabubnagar, Andhra Pradesh. Initiatives of the group are pan India, but it prefers to work in areas around its plants or in potential markets of its various business verticals.
Students taking part in a sports event sponsored by Mahindra Group’s CSR initiative ‘Nanhikali’ at a government school in Mahabubnagar, Andhra Pradesh. Initiatives of the group are pan India, but it prefers to work in areas around its plants or in potential markets of its various business verticals.

Corporate myopia crimps CSR scope

Firms prefer to deploy CSR funds within 30-50km radius of their premises, ignoring areas in dire need of aid

New Delhi: For Sunil Chavan, who works as an honorary director at Dr M.L. Dhawale Memorial Trust, a philanthropic enterprise working in geographies like Mumbai, Palghar, Bhopoli, Sumeru, Pune and Bengaluru, fund raising is the primary concern.

“I have been approaching firms to sponsor a part or whole of our projects in tribal region of Bhopoli & Palghar, but I find that firms want to invest in very specific regions, either around the factories or where they have a potential market," said Chavan.

In 2016, Chavan sent out around 150 proposals to firms conducting CSR in the hope receiving some funding for the 30-year-old Trust’s various activities but only 3 companies responded. “Often, the CSR reports suggest the firm is working pan India but in reality, they are restricted to a limited radius of their offices or manufacturing plants," said Chavan.

He cites the example of another non-governmental organisation (NGO) he is associated with in Gadchiroli, Maharashtra called SEARCH. The NGO runs a a hospital for the rural and tribal population in area treating more than 500 patients a day, free of cost. There is no large industry or corporate office within 100km radius (except in Chandrapur) and Chavan says it has been extremely difficult to get CSR funding for SEARCH.

Most companies limit their CSR activities to a 30-50km radius of their factory or office, he adds.

While it is understandable that corporate entities prefer to work in the vicinity of their factories or offices for brand-building and ‘giving back’ to the community they may have taken something from, the resultant concentration of CSR funds in and around cities leaves the vast majority of the country without any financial support, Chavan believes. “I have been refused simply because our trust’s work is not within a respectable distance from their (a company’s) office," he adds.

The two years that CSR rules have been in force have seen funds meant for social development being limited to the environs of factories or market interests, say sector experts. This, says representatives of the not-for-profit sector, limits the scope of CSR funds. But companies insist they have valid reasons for picking the geographies they want to spend on.

CSR rules, which fall under the purview of Section 135 of the Companies Act, 2013, require firms with a net worth of 500 crore or revenue of 1,000 crore or a net profit of 5 crore to spend 2% of their average profit of the previous three years on social development activities such as sanitation, environment protection and rural development.

Incidentally, while the rules are silent on the location of CSR spending, the Act suggests that a “company shall give preference to the local area and areas around where it operates".

Companies believe they must adopt a strategic approach to CSR investments, and choosing the right location is a key consideration. For instance, much of what Maruti Suzuki India Ltd does in the name of CSR is in and around the areas where its manufacturing plants are located—in Manesar and Gurgaon in Haryana.

“We have to invest in these areas because when a large manufacturing plant is set up, the migration into the region is very high and the local infrastructure is not sufficient to cater to all the additional people who move in," said Ranjit Singh, CSR head at the auto manufacturer. “We must address the needs of these people and that’s where CSR funds can play a large role."

The company spent 78.4 Cr on their CSR activities in 2015-16 of which over 41% was allocated towards community development efforts such as water and sanitation projects.

The Mahindra Group, too, prefers to work in areas around its plants or in potential markets of its various business verticals. Rajeev Dubey, group president, HR and corporate services and CEO, aftermarket sector, and member of the Group Executive Board at the conglomerate, believes “CSR aligned with business interests helps establish sustainability of initiatives".

In FY16, the Mahindra Group spent a total of 184.08 crore on CSR activities ranging from education and healthcare to water and sanitation.

Funds for CSR expenditure across Mahindra Group companies are apportioned on the basis of a formula—50% of the total kitty goes to a central fund reserved for pan-India projects linked to business operation areas and/or potential markets and 50% is meant for near-factory locations. “There is a strategic approach to selecting locations for CSR initiatives and it is based on building goodwill along with brand visibility, though that is not the only driving force behind the selection of a location," Dubey adds.

Another reason often cited by companies for opting to work in proximity to their offices or manufacturing units is employee engagement. “Encouraging volunteering efforts of employee-led CSR clubs goes a long way to inculcating good citizen behaviour and contributing towards building a better society," says Sudha Murty, chairperson, Infosys Foundation, the philanthropic arm of IT firm Infosys Ltd.

Infosys started with social/community activities in locations where it operates such as Delhi, Bengaluru and Chennai because “it is important for companies to give back to society and the community in whose vicinity they operate", says Murty.

She goes on to add that “with the increase in the CSR fund, we are expanding to other parts of the country as well. Over the last year, we have reached out to states such as Arunachal Pradesh, Assam, Jammu and Kashmir, West Bengal and Gujarat where Infosys does not operate". The foundation in FY16 spent over 269 crore on projects related to healthcare, education, culture, destitute care and rural development.

Manufacturing companies dependent on natural resources feel bound to the communities around their plants. Pearl Tiwari, president, CSR and sustainability, at Ambuja Cements Ltd, explains that because the cement industry is largely dependent on natural resources such as water and limestone, it is almost a must that it works in and around manufacturing units.

“We are acutely aware that the land we acquire has people dependent on it and therefore feel it is our duty to work with those very people," says Tewari. The company works in 12 states where its cement plants are located.

Sitaram Gupta, executive director at Lupin Human Welfare & Research Foundation, the philanthropic arm of pharmaceutical company Lupin Ltd, shares this view. He believes spending on community/social development around company locations helps in overall development of the region. The foundation spent 20.51 crore on rural development, healthcare, education and infrastructure development in FY16.

While the strategic reasons cited by companies for choosing specific locations are sound, the negative impact of limiting CSR funds to certain geographies is all too visible. For instance, large parts of backward rural districts of Maharashtra, Andhra Pradesh, Madhya Pradesh and Uttar Pradesh have been reeling under a drought for most of the past year. Yet, it is mostly areas in Maharashtra that received corporate support, even though an equally severe drought was taking a toll on Bundelkhand in UP.

Raja Bhaiya, who runs not-for-profit Vidya Dham Samiti in Banda district of Uttar Pradesh, hoped CSR funds would come to the aid of farmers in the drought-hit region. Instead, he says, “CSR money is going to regions close to industrial hubs or urban centres, and that is pointless".

Sagar Ambane from Belgaum district of Karnataka finds this attitude of companies puzzling. Working in the education sector since 2009, he set up Rachnavadi Balak Palak Shikshan in 2011 to help children with learning difficulties and no family support to acquire basic reading, writing and mathematical skills.

He has approached half-a-dozen firms, especially those that spend on education, but has been turned down by all of them. He continues his work with the help of donations collected door to door. “We have very little access, resources and manpower to keep appealing to companies. We don’t even have a website yet. But we are happy to showcase our work to anyone who is interested," says Ambane, adding that 5,000 per child annually and 5,000 per teacher per month can help him scale and improve the quality of education across the district and state.

With companies playing safe and restricting their CSR spending to their areas of operation, large parts of the country remain untouched by the exercise. Clearly, an opportunity lost.