The Companies Act, 2013 came into effect on April 1, 2014, thus making India the first country to mandate a minimum spend on Corporate Social Responsibility (CSR) initiatives. Corporate Social Responsibility is not new in the context of Indian private sector, with companies like the Tata Group actively undertaking CSR activities and contributing towards the socio-economic development of the country for many decades now. The Companies Act serves to boost the involvement of the private sector in India’s development. This is evident from the overall increase in fund allocation for CSR activities in the country.
According to India CSR Outlook Report (ICOR) published by NGOBOX, 58 percent of the companies met the CSR norms in FY 2015-16 as opposed to 48 percent the previous year. The data of the top 91 NSE firms analysed by Next Gen Pvt. Ltd shows that the total CSR spend of these firms in the FY 2015-16 was INR 6,033 Crore; up from INR 4,760 Crore in FY 2014-15 when the data for top 100 firms was analysed.
The CSR clause in the Companies Act, 2013 states that companies with a (i) net worth of INR 500 Crore, (ii) revenue of INR 1,000 Crore, or (iii) net profit of INR 5 Crore have to spend two percent of their net profit in of the last three years on CSR activities. These activities can be hunger, malnutrition, or poverty eradication programmes, or programmes promoting education, gender equality, and healthcare, among others.
The surge in CSR spending in the first two years of its inception suggests that the overall response to the idea has been positive. Corporate India has realised that their CSR initiatives are not just allowing them to give back to the society, but also helping them build brand awareness, thus having a positive impact on their brand value.Stalwarts of the field expect to see the trend continue in 2017-18.
“It is expected that FY 2017-18 will be marked by increased instances of corporates and non-profits working in tandem and pushing for stringent reporting and actions that are tangible to both-the society and brand With ever increasing opportunities for the youth, the social sector is all set to attract more talent and emerge as one of the major hiring sectors in the coming years. In addition, the sector will also see migration of talent from other sectors, thus adding to its value, holistically”
Furthermore, it has been observed that the CSR mandate is influencing decision making in the corporate sector, with companies contemplating two approaches: (i) creating a separate wing for CSR with one of their board members as its head, and (ii) forging a partnership with a not-for-profit organisation with the latter acting as the implementing partner. It is expected that FY 2017-18 will be marked by increased instances of corporates and non-profits working in tandem and pushing for stringent reporting and actions that are tangible to both-the society and brand.
Increased CSR spending put non-profits and philanthropic arms of corporates in a better position to hire the best talent, especially the youth. Studies suggest that youths associate with a cause or work that helps them make a positive impact. With ever increasing opportunities for the youth, the social sector is all set to attract more talent and emerge as one of the major hiring sectors in the coming years. In addition, the sector will also see migration of talent from other sectors, thus adding to its value, holistically.
In the coming years, corporates will be aligning their CSR spends with Sustainable Development Goals (SDGs). This will elevate them to the stature of’problem solvers’ rather than just being donors. Investors will reinforce the initiatives that grow the shareholder value by finding innovative solutions for both local and global problems. As a whole, it will help corporates formulate a sustainable business strategy wherein they will be able to help the community and at the same time, create value for their brand.
As part of their sustainable business strategy, corporates will not just engage in CSR practices, but will also encourage their employees to do the same. This will be done by engaging every employee with a strong mission, while providing them a platform to solve real world problems. Several companies have already started working on this front, encouraging their employees to participate in initiatives organised by their philanthropic arm or a partnering non-profit.
In the years to come, corporates will have to formulate their CSR strategy around the need to solve a problem and not just to meet the CSR requirements as stipulated in the Companies Act, 2013. With the demand for transparency and accountability increasing, companies will have to adopt the practice of detailed reporting of CSR strategy and use it to make informed business decisions. The next few years will also mark the transition of reporting to digital experience, with story telling becoming an important attribute of highlighting the impact.
There will be a strong need to engage the investors around sustainability initiatives as companies will be scrutinised for their impact on local communities-the innovative manner in which they address socio-economic issues in particular. As a result, an individual’s understanding of such issues will be considered a skill-set with significant weightage.
In addition, companies will have to quantify the CSR impact in financial terms, so that the data can be used to formulate strategies for the future. The advent of big data will also have its impact on CSR trends with companies using the data available in copious amount to get a better understanding of complex issues in the socio-economic sector.
The CSR Act came into effect in April 2014. Three years on, CSR has become an integral part of the business strategy in the corporate sector. Companies are supporting social causes to bring about a positive change, and in doing so,they are participating in the country’s socio-economic development along with the Government and non-profits. Each sector is vying to stay true to the cause and therein lies the mantra that will define lasting partnerships for sustainable development of the country in the years to come.
Shri Madhu Pandit Dasa is Chairman,The Akshaya Patra Foundation. He has nearly three decades of selfless work behind him. He has been instrumental in conceiving and implementing many social initiatives that has impacted millions of people in this country, giving them a better quality of life.