Saurav K Ghosh sketches the roadmap from conceptualization to implementation of development projects under CSR in accordance with CSR Rules 2014

Corporate Social Responsibility (CSR) in India is still in infancy but the Government took a firm and much needed step in that direction in form of Companies (Corporate Social Responsibility Policy) Rule2014. The policy throws open not only an opportunity but also a challenge for all stakeholders namely Corporate(s), Government, implementing agencies, auditors, taxmen and ultimately the end beneficiaries. What to do, how to do, where to do, how to ensure sustainability and above all accountability for actions and capital invested.

The cumulative value of resource allocated under CSR toaday runs upward of `26,000 Crore. This sum is set to grow every year and will continue as the companies realign their activities to emerging global best practices. By designing a structured work process, outsourcing basic implementation and putting control measures in place, CSR can play as an effective tool with companies to create greater synergy in communities they operate in. This article provides a design framework for turnkey implementation of putting CSR into action.

CAUSE(S) THAT YOUR CSR INITIATIVE COULD ADDRESS/ASSOCIATE

The most critical area of CSR design is the cause with which the Company associates. Some of the suggested routes towards identifying the cause are: i) It should directly complement the mandate of the organization say specific skill based training in plumbing, masonry, carpentry, electrical, shuttering, accounting, retail, hospitality or other specific jobs for companies that are into construction, civil works, manufacturing, designs and service sectors; promoting vocational skills; ii) The end produce from community serves as basic raw material for the corporation like production of specific herbs, fruits, vegetables or cereals, poultry, animal husbandry that are consumed by the industry; implementation of best practices, introduction of new technologies, pre and post-harvest management systems, sorting grading, designing and packaging etc as relevant to the companies perspective; rural development projects; iii) Issues that attract maximum employee participation that is working with children, environmental sustainability, capacity building of existing schools, colleges, scholarships, learning assistance, sports development, need for special children; towards promotion of education; iv) Provide health and nutrition security through support of orphanages, hospitals, day care, slum dwellers, old age homes etc; eradicating hunger, poverty, malnutrition. The list is not exhaustive but suggestive towards aligning Company towards cause.

SHORT-LISTING THE LOCATION(S) FOR CSR IMPLEMENTATION

Easy accessibility to project site holds immense value because remote locations present logistic and administrative challenges. The other reason for careful selection is cultural, societal and actual need compatibility. For example working with farmers and villages in Haryana, Punjab, UP etc would be no go due to high prices of land and non-remunerative farming due to close proximity to Delhi NCR (land prices create much larger value than agriculture). The requirement of these areas would be training and orientation towards financial and implementation of grassroots projects.

With their long term presence in local community they are better equipped as messengers and implementers for your CSR initiative. The choice of the development partner/implementing agency plays a critical role. The following selection parameters may be kept under consideration:

  1. Legal structure of implementing agency – Trust, Society, Section 25 company, Co-operative or Producer Company (ies) etc. Is it closely held within related people or has a wider membership platform. Is it an independent society or registered as foundation for some larger corporation.
  2. At least 3 year track record in project execution.
  3. Regular filing of Balance sheets and annual reports.
  4. Board and its advisor list (for specific project execution).
  5. Presence across the country (if applicable).
  6. Registration with agencies like TISS (TISS CSR HUB) which empanel credible NGOs based on their filtering process.
  7. Present and past funders.
  8. Evaluation report from external agencies for completed projects etc.

The list is again for reference and diligence has to be carried out case to case basis before empanelment.

 

NEED ASSESSMENT: FILTERING, SHORTLISTING OF THE PROPOSALS TO WORK ON

Many a times there is a huge difference in what we think the community wants or needs and the actual requirement that the community has. The best way to minimize this gap is to involve the ultimate stakeholder in project design itself. The process might slow down the implementation a little but the end result is far better than an alienated program design which eventually has no takers.

The involvement of community ensures ownership among beneficiaries, when they are asked to contribute towards the work and if they do, it ensures to a fair level that they are interested in getting the work done and it will be sustainable.  Need assessment can be done in house or with assistance of external agencies like universities and consultants. The thumb rule of costing is that 2-3% of project cost is need assessment; and 3-5% is impact assessment. Ideally independent agencies should do all three jobs namely need assessment, implementation and impact assessment. Need assessment also provides clarity on budget, time allocation and opportunity to design a sustainable model to ensure longevity of the action. The learning, business practices of companies can help in designing more effective programs.

This study also helps in documentation and filing reports which have to be presented as part of annual reports of the funding organization under CSR rules 2014.

 

IMPLEMENTATION AND SUSTAINABILITY

The core of CSR is the actual implementation process. For any agency this is the most challenging part where the ultimate stakeholder is not internal but external. For she has not come to us, we have to go and implement it for them. They have to understand/appreciate that the work is being done for improvement of their quality of life and not just to fulfill another compliance norm. This has been a serious issue with development projects. The beneficiary thinks Funders have to Give and they have to Take. Unless this positioning is not changed, systemic changes can’t be induced defeating the whole purpose of CSR Rule.

Implementation of a CSR program is like any turnkey project where experts from different fields have to be brought in, costs have to be monitored, project timelines have to be met, books of accounts to be maintained and community has to be engaged. For one time intervention internal staff can execute but for any project that looks for a long term engagement, a reliable development agency is a must.

The cost of hiring professionals and managing day to day operations calls for a dedicated team that itself becomes a huge cost and leaves question on their maintenance once the project is completed. With contracting projects both impact and functionality of project can be improved for the development partner has competence and economized costs at their end. Since it’s not a ‘for profit contract’, there are no margins built for implementer where agency puts their own money and completes tasks, submits bills and gets reimbursed. The project disbursal are made as advances and after satisfactory utilization, next round of fund is released. For operations and administrative expenses two best practices can be suggested.

A fixed slab of 10-15% as administrative expenses (depending on project size) can be earmarked to meet development agencies operations or Actuals (Salaries and tour travel) plus 6-8 percent may be allocated to cover administrative expenses. Again these are benchmark figures as best suggested practices and not sacrosanct rules.

 

MONITORING, EVALUATION AND SOCIAL IMPACT ASSESSMENT

As per mandatory CSR reporting “the Board’s report of a company covered under these rules pertaining to a financial year commencing on or after 1st day of April 2014 shall include annual report on CSR containing particulars specified in Annexure 2.”

The evaluation and assessment not only plays critical role from compliance perspective but also helps to improve, redesign and take corrective measures for project implementation. A continuous feedback mechanism and 3rd party assessment report consolidates CSR commitment and effectiveness of project. It also provides a strong review position to assess work of implementing agency and brings greater transparency in operations.

The impact assessment parameters and methodology is beyond the scope of this article. However universities, Government agencies, independent experts are available depending on project scope. Some of the leading agencies are Hardic on, Dept of Social Welfare (Universities pan India) and TISS among others.

Social impact assessment by agencies provides a strong platform for direct interaction of funders and their beneficiaries. This results in better designing of program.

MANAGING BRAND EQUITY/ SOCIAL RETURNS/PR

Invariably CSR projects, be it with innovations, application of clean technologies, empowerment of woman, national integrity or value add to existing functions catch media attention. This helps to a great extent in providing development models to other agencies to replicate. Like successful design and production of low cost sanitary napkin by Jayaashree Industries has helped many nonprofits, funding agencies to replicate the model and touch millions of lives. It’s however important to check the tax implication of such activities (branding, advertising etc) mentioned

in contract on overall fund for project;

if they are explicitly mentioned in the memorandum signed between the funding and implementing agency.

 

ALIGNMENT TO GLOBAL PRACTICES AND AFFILIATIONS

Sustainable Development Goals or the SDGs, 17 in all, as envisaged by the Global Network Compact of the UN range from halving extreme poverty rates to halting the spread of HIV/AIDS and providing universal primary education, form a blueprint agreed to by all the world’s countries and all the world’s leading development institutions. The UN is also working with governments, civil society and other partners to build on the momentum generated by the SDGs and carry on with an ambitious development agenda. In today’s global perspective where corporate governance is a norm, SDG and alignment of an organization’s CSR goal puts it in global perspective and exhibits the forward thinking of Indian companies.

The SDG are similar to CSR mandate under Company Act namely i) Eradicating hunger, poverty, malnutrition, promoting preventive health care and sanitation and making available safe drinking water; ii) Promoting education, including special education and employment enhancing vocational skills especially among children, women, elderly and the differently abled and livelihood enhancement projects; iii) Promoting gender equality, empowering women, setting up homes and hostels for women and orphans; setting up old age homes, day care centers and such other facilities for senior citizens and measures for reducing inequalities faced by socially and economically backward groups; iv) Ensuring environmental sustainability, ecological balance, protection of flora and fauna, animal welfare, agroforestry, conservation of natural resources and maintaining quality of soil, air and water; v) Protection of natural heritage, art and culture including restoration of buildings and sites of historical importance and works of art; setting up public libraries; promotion and development of traditional arts and handicrafts; vi) Measures for the benefit of armed forces veterans, war widows and their dependents; vii) Training to promote rural sports, nationally recognized sports, Paralympic sports and Olympic sports; viii) Contribution to the Prime Minister’s National Relief Fund or any other fund set up by the Central Government for socioeconomic development and relief and welfare of the Schedule Castes, the Scheduled Tribes, other backward classes, minorities and women; ix) Contribution or funds provided to technology incubators located within academic institutions which are approved by Central Government; x) Rural development projects.

Working or aligning the CSR activities to above mentioned activities automatically puts the organization in CSR compliance.

 

ENSURING SUSTAINABILITY OF THE PROJECT OVER A LONG TERM HORIZON

Charity is injurious unless it helps the recipient to become independent of it. -John D. Rockefeller

At its core the CSR rule targets the innate character of humanity – act of doing good.  However in trying to do good, most of the times we end up making the recipient further dependent. The project design, its implementation and the overall philosophy of CSR activities should be to make a dependent, independent and further make them interdependent so that sustainability of the endeavour is ensured. Whenever a profit project is designed it looks at multiple risk assessment models, multiple cash flow models, vets it through various business models. If a small but tactical attention is given to act of doing good, it will go a long way in terms of ensuring sustainability.

CSR objective should be to create collaborative models under organizational umbrellas to

  • Build collaborative relationship between organization, academic/scientific research and individual through right information, right technological input and right structure for implementation.
  • Empower beneficiaries to scale up and manage their operations by providing them opportunity to design their own program, collate community resources, provide access to funds, innovations and knowledge share among themselves.
  • To weave stake holders (Community – Government Schemes- Funding Agencies – Research Organizations) in a single fabric to create a symbiotic supply chain for assimilation and dissemination of knowledge/ resources to ensure holistic development of communities that they work with CSR will take time to become part of company’s strategic milestone. Larger Indian corporate and multi nationals however have put CSR practices in place but in many firms it is still a side function. Also the cost of fund management (admin cost) with quality people is steep which doesn’t optimize fund utilization. However successful business models are built on the pillars of technology, networking and outsourcing. The same applies when it comes to implementing and delivering social projects that are gaining momentum with changes in policy frame work.

(The writer is co-founder and secretary of Community Friendly Movement and a holder of prestigious Ashoka Fellowship)