How to handle added responsibility5 min read . Updated: 23 Feb 2014, 04:47 PM IST
Ways and approaches to developing meaningful corporate social responsibility programmes, in line with the new Companies Act
“CSR has come in from the cold," writes John Elkington in an email interview. The founding partner and executive chairman of the UK-headquartered consultancy Volans says there’s no excuse today for poor corporate social responsibility (CSR) planning by companies. If anything, there are more resources available—both online and advice from brick-and-mortar consultancies—to help companies design meaningful CSR programmes than ever before.
The Companies Act 2013, coming into force from April, includes a section that will ask businesses reporting annual profit of more than ₹ 5 crore, revenue exceeding ₹ 1,000 crore, or having a net worth of over ₹ 500 crore, to mandatorily spend at least 2% of profits in CSR activities. According to the Indian Institute of Corporate Affairs, these conditions will cover at least 6,000 companies across the country. The section on CSR has not yet been notified.
To be sure, business-community engagement is not a new idea in India. In her book, Business & Community: The Story of Corporate Social Responsibility in India, Pushpa Sundar writes that CSR began in the country as charity by individual merchants as early as the 1850s. In the past, the Union ministry of corporate affairs has released guidelines for CSR. However, this will be the first time that the government mandates CSR contributions for some companies. The new law is expected to spur CSR spending to around ₹ 20,000 crore in areas including eradicating extreme hunger and poverty, promoting education, empowering women, reducing child mortality, and for environmental sustainability.
We spoke to industry experts on how companies can devise meaningful social responsibility strategies in line with the new CSR rules.
Use the springboard
It should come as no surprise that the most successful examples of CSR are where the brand and its social initiatives are well integrated, and where the company stands to also gain from its CSR activities, adds Quinn. “Look at what your priorities are. Then ask questions like who are your customers, what do they care about? If you are an online books retailer, your consumers are most likely young urbanites who might care about the environment and about women’s rights; do something in those areas," she advises.
Quinn says Tata and Unilever offer good examples of socially responsible behaviour in India. In this context, Unilever’s Lifebuoy Help a Child Reach 5 hand-washing campaign to reduce instances of diarrhoea, acute respiratory infections and eye infections in young children works really well. Among the smaller companies, she cites examples of start-ups like Mumbai-headquartered No Nasties, which sells T-shirts made using fair trade organic cotton and shares a part of its earnings with non-governmental organizations like Atma (dedicated to educating underprivileged children).
Apurva Kothari, founder of No Nasties, which sources cotton from regions like Yavatmal in Maharashtra that have seen some of the highest incidences of farmer suicides in the country, says CSR wasn’t an afterthought for him. “Social and environmental responsibility is the very foundation of the organization, and we have build a brand on top of this foundation."
Lookout for opportunities
Tractors-to-resorts conglomerate Mahindra & Mahindra Ltd (M&M) spends 1% of profit-after-tax on CSR, says Sheetal Mehta, chief of CSR at the Mahindra Group and trustee and executive director of the KC Mahindra Education Trust.
M&M already has a CSR council in place, one of the key requirements of the new CSR rules outlined in section 135 of the new Companies Act. According to the rules, businesses will have to form a committee to devise and oversee their CSR projects. The committee, comprising at least three board directors, including an independent director, will be charged with deliberating on and publishing details of the company’s social responsibility projects and budgets in its reports and on its website, at the beginning of the year.
While the 25-member CSR council at M&M decides how to spend half of its CSR outlay, sectors and group companies have a say in how to use the remaining 0.5% of profits for social responsibility programmes. The reason: The sectors have an understanding of what the local communities need most. Mehta cites the example of its “Lifeline Express" programme launched with the Impact India Foundation. She explains that under this programme, M&M sends a train full of doctors and nurses to communities that don’t have access to quality healthcare. A lot of these programmes have been carried out in areas where M&M has factories—including in Nagpur, Maharashtra, and Rudrapur, Uttarakhand.
The CSR council directs spending in areas like educating the girl child. Mehta explains that here too the programmes are designed in such a way that they take a 360-degree view of the problem. Mehta says: “Mahindra CSR focuses on making 100% linkages." For example, it is planting fruit-bearing trees in Araku, Andhra Pradesh, as part of its Mahindra Hariyali project. These trees give shade to tribal farmers growing coffee. Many of the girls receiving educational support thro-ugh the Nanhi Kali project are daughters of these farmers. The project, therefore, links support for education of the girl child with increasing green cover, she adds.
Once the rules are notified, Mehta says, M&M will be required to “more than double" its current CSR outlay. “We will scale some projects, like our Mahindra Pride Schools, to give livelihood training to scheduled caste, scheduled tribes youth," she says.
The new CSR rules will set the protocols for monitoring and reporting progress in CSR projects. The companies will be required to publish their plans and budgetary outlays for CSR activities in advance. The CSR committee will also watch keenly as the year progresses, and will be asked to explain if the company fails to meet its CSR objective.
Elkington indicates that companies need to also keep in mind new approaches to reporting, including on social media and networks. “As the agenda goes mainstream, so reporting must too," he says. “Companies developing CSR strategies need to decide on their level of ambition, and use business case and materiality tools to work out what their priorities are going to be. Older tools, including stakeholder engagement and reporting, are being joined by new approaches based, for example, on social media and networks. But the ultimate aim in all of this must be to mainstream this agenda, ideally having it end up with senior leaders like the CFO (chief financial officer)—a trend I see in the integrated reporting field," he says.