The Economic Survey 2023-24 has taken stock of Corporate Social Responsibility (CSR) after many years of detailed analysis, and the NDA Government has attempted an outlook in its third term in office. – M.Rajendran
The Economic Survey 2023-24 has done a deep dive to understand the CSR approach to welfare. It wishes it to be wholesome and whole-of-society, with increasing private sector participation through Corporate Social Responsibility (CSR). In 2014, spending by companies on social purpose programmes was made mandatory through a new provision under Section 135 of the Companies Act 2013.
Before the law was implemented in April 2014, corporate giving was largely voluntary and unregulated, though encouraged by the Ministry of Corporate Affairs.
Some of the oldest business houses in the country have made and continue to make exemplary contributions to society. However, while earlier these activities came under the ambit of companies’ initiatives towards philanthropy, the concept of CSR gained more formal prominence in the late 1990s.
Historically, only a handful of companies engaged in social responsibility efforts, but many more were brought on board following the CSR law’s enactment. CSR activities are a critical part of the business strategy today. This assumes particular importance in India since India is the first country to legislate the need to undertake CSR spending and make CSR reporting mandatory under the Companies Act 2013.
With the robust growth of the economy, corporate profits in India and, hence, the mandatory CSR pool will continue to grow, powering the sustainable and inclusive development that nonprofits are uniquely positioned to accelerate with their last-mile presence on the ground. The successful implementation of the CSR fund in India has driven vital social change. As India’s economic growth continues, sustained efforts from CSR leaders, corporate boards, nonprofit partners, and the government will be critical in addressing long-standing developmental and inequality challenges.
The legal mandate on CSR applies to companies with a net worth of ₹500 crore or more, annual turnover of ₹1000 crore or more, or net profit of Rupees Five (₹5) crore or more. Companies under the CSR mandate must spend TWO per cent (2 %) of their average net profit of the preceding three financial years on social impact Programmes that focus on any of the causes listed in Schedule VII of the Companies Act, 2013.
Ethics are moral principles that govern a person’s actions and reflect beliefs about right and wrong, just and unjust, regarding human behaviour. Social and cultural norms and religious practices shape these morals.
One does not need to be told that social norms are a powerful way of shaping choices and navigating human actions towards the desired behaviour. Highlighting information regarding people who exhibit good behaviour and clarifying the insignificant role of negative influencers can help enhance conformity and deter unethical social behaviours.
The National Corporate Social Responsibility Awards of the Ministry of Corporate Affairs is an initiative in this direction. These awards emphasize ethical behaviour and acknowledge companies that have positively impacted both business and society.
The role of the corporate in the helping sector has never been greater than it is now. Corporates benefit from the higher demand generated by employment and income growth. The financial sector benefits from channelling household savings for investment purposes. These linkages must grow stronger and last longer to meet the infrastructure and energy transition investments in the coming decades. Short-termism can weaken these linkages. For India’s working-age population to be gainfully employed, they need skills and good health. Social media, screen time, sedentary habits, and unhealthy food are a lethal mix that can undermine public health and productivity and diminish India’s economic potential.
The private sector’s contribution to this toxic mix of habits is substantial, and that is myopic. The emerging food consumption habits of Indians are not only unhealthy but also environmentally unsustainable. India’s traditional lifestyle, food and recipes have shown how to live healthily and harmoniously with nature and the environment for centuries. It makes commercial sense for Indian businesses to learn about and embrace them, for they have a global market waiting to be led rather than tapped.
In the eight years from 2014 to 2022, ₹1.53 lakh crore were spent on CSR, and the spending across the last three years constitutes more than 50 per cent of the total CSR amount spent since 2014. CSR compliance has seen a growing adherence over the years, with more than half the companies even going beyond their obligation. For the last three years, yearly CSR spending has been more than ₹25 thousand crore, with yearly CSR spending increasing by 1.5 times in eight years.
While constituting about 2 percent of the companies under CSR mandate, public sector units contribute to almost 17 percent of the total CSR amount. Corporate Social Responsibility has become an important aspect of Indian businesses, and a discernible trend in CSR activity is becoming more a part of strategic decision-making for companies.
Sector-wise, more than threefourths of total CSR spend is in the top four development sectors, i.e., Education (32.4 per cent), Healthcare & Sanitation (38.4 per cent), Rural Development (6.9 per cent), and Environment, Animal Welfare & Conservation (10.9 per cent).
About half of the implementation of CSR funds happens in partnership with nonprofit organizations. This implementation model adopted by companies has provided an excellent boost to the nonprofit ecosystem in the country, enabling the cross-pollination of ideas across sectors. While nonprofits learn analytical and processbased rigour from partner companies, the latter have benefitted from community engagement and inclusive outlook as the corporate citizens of the society.
The distribution of CSR investment is primarily centred around the hubs of corporate headquarters in the country, while underdeveloped areas remain relatively less funded. For regionally-balanced CSR spending, there is a need for enhanced investment in organizational growth and capacity building for nonprofit organizations working in underdeveloped areas.
With the changing face of Indian businesses, the next most palpable thing that companies are looking at is changing the way they engage with society. Indian companies have grown by leaps and bounds over the past decade and have been able to establish a strong footprint globally. These companies have made a remarkable contribution to furthering India’s growth story.
However, even though inclusive development has underpinned our broader growth agenda, and we have seen significant progress in achieving our social ambitions (at least from the point from where we started), the pace of progress has been inadequate, and we still have a long road to cover.
A Report from the high-level committee on corporate social responsibility – 2018 pointed out that In the last few years, the implementation of Corporate Social Responsibility (CSR) has gathered critical mass and is now poised to consolidate and grow further. CSR awareness and CSR consciousness have grown dramatically among large and mediumsized companies, which now look at CSR to build a strategic fit with the community and environment in which they operate. The CSR mandate has broadly aligned with national priorities such as public health, education, livelihood, water conservation, and natural resource management.
More importantly, it has generated national interest and debate on its potential role and the corporate sector’s responsibility in achieving Sustainable Development Goals (SDGs).
In the 2020-21 Economic Survey, it was mentioned that In the recent past, private sector spending under Corporate Social Responsibility (CSR) initiatives had been a major avenue for private sector involvement in the SDG framework.
In 2020, the highlight of India’s SDG initiatives was the Voluntary National Review (VNR) presented to the United Nations High-Level Political Forum (HLPF) on Sustainable Development, which is the highest international platform for review and follow-up of the SDGs under the auspices of the United Nations Economic and Social Council. The reviews are voluntary and country-led and aim to facilitate sharing experiences, including successes, challenges and lessons learned.
NITI Aayog presented India’s second VNR to the HLPF in July 2020, highlighting the country’s accomplishments and how to achieve the SDGs.
The ‘Voluntary Guidelines on Corporate Social Responsibility ‘5 were issued in 2009 to mainstream the concept of business responsibility. The guidelines were developed based on India’s sociocultural context, priorities, and global best practices, including the United Nations Guiding Principles on Business & Human Rights and the Paris Agreement on Climate Change. The revised guidelines were released as the National Guidelines on Responsible Business Conduct6 in March 2019. The NGRBC has been designed to assist businesses in embracing the principle of responsible conduct.
The Economic Survey of 2018-19 indicated India’s commitment to the above in its Economic Survey 2018-19, where it pointed out that the Swachh Bharat Mission Gramin (SBM) set up the Swachh Bharat Kosh to encourage Corporate Social Responsibility and accept contributions from private organizations, individuals and philanthropists.
Students in B-Schools are nowadays taught the importance of ensuring equitable access to funds, for which the companies must adopt two key policies: scaling in and scaling out. Scaling in involves focusing on deeper, targeted impacts within select communities, particularly those surrounding factories or in aspirational districts, to address their comprehensive social needs. Scaling out entails expanding the reach of Corporate Social Responsibility initiatives to broader populations through national programs aimed at tackling the root causes of inequalities.
India is listed amongst the countries that have recorded the highest income inequality gaps. Post- 2014, the CSR funds became a boon for implementing or ensuring that the social sector programs get required resources outside the Union Budget. CSR has become the secondlargest source of social sector funding in India, according to a 2022 Bridgespan Group report. It is projected that, at this momentum, CSR could channel an additional Rs 6.3 lakh crore for social development by 2033.
Contemporary businesses can make a difference at the ground level, and this possibility should be leveraged earnestly. A company can be sustainable only when it sees itself as an integral part of the broader community. Adhering to the concept of a triple bottom line of 3Ps- People, Profit and Planet – can be the only way forward for companies.
The Economic Survey 2023-24 has given the Government and Corporate an opportunity to revisit the 2018 Report of the high-level committee on corporate social responsibility. Some suggestions need strengthening, and a few need to be introduced through amendments.
‘Social Impact Companies’ should be created as vehicles within the CSR framework to pursue social outcomes while being permitted to achieve conditional profit that can be distributed. CSR contribution to social impact bonds raised by such Social Impact Companies or not-for-profit companies bringing upfront risk capital may be considered on a pilot basis. A small step towards it has been taken in the Union Budget of 2024-25. As the report of 2018 had articulated so beautifully. “The main thrust and spirit of the law is not to monitor but to generate a conducive environment for enabling the corporates to conduct themselves in a socially responsible manner while contributing towards human development goals of the country.
The journey to achieve the ultimate objective of philanthropy is long.
