Corporate social responsibility (CSR) has become the buzzword today. India was the first country to introduce statutory provisions with respect to Corporate Social Responsibility. Before CSR became a compulsion for companies under the Companies Act, 2013, companies invested in CSR based on their commitment to social change. In an interview, Ratan Tata said “The mandated 2 percent the government has (enforced) becomes like a tax”. He added that the big amount of money that gets generated through such contributions can be utilised better if the government can clearly identify projects or sectors which are in need of funds. After the Companies Act 2013 came into effect from April 2014, EY estimated that India Inc would invest around Rs 22,000 crore towards corporate social responsibility activities. Considering this vast outlay, it becomes imperative for companies and media to report on the real on-the-ground impact, effectiveness and fairness of CSR policies.
Is making CSR mandatory justified? In an article for The Guardian, Ashok Prasad voices that such a mandatory rule could also lead to corruption. The government suggests that a company can implement its CSR activities directly or through a non-profit organisation. This has led to many CSR initiatives relying on ‘strategic partnerships’ between the company and the NGO. These NGOs are most often intermediaries, meaning they don’t run social projects themselves but fund smaller Nonprofits that are involved in the field. There is nothing wrong with companies partnering with NGOs for CSR initiatives but there are questions that need to be answered- What will be the role of the company if the NGO is spending its funds? Who is responsible and accountable for the implementation of the social initiatives? How is the impact of such initiatives assessed? Transparency and Accountability is a major challenge in CSR funding. The criteria on which corporations fund a Nonprofit are absent. Social monitoring of these funds is also questionable.
In many instances, corporate houses establish their own foundation arms and charitable trusts. Money spent on these trusts is tax-exempt so is the income of a charitable trust. This leads to opportunities for tax evasion. Are there social audits of corporate-run charitable trusts?
Says the head of CSR of a diversified conglomerate, “A company I know tied up with an NGO to build toilets in a village but forgot to ensure water supply for the facility. This situation led to the facility being used as a storage dump. The entire investment was a waste because the company and the NGO did not implement the strategy effectively, and did not monitor its outcome. On paper, the company can report that it built a certain number of toilets and has impacted positively to improve the hygiene and sanitation in the village, but the reality is actually very different.”
HUL’s Project Shakti is popularly perceived as a model example of CSR. According to HUL’s website, Project Shakti provides livelihood enhancing opportunities to over 70,000 Shakti Entrepreneurs who distribute HUL products in more than 165,000 villages and reach over four million rural households. In complete contrast, a report titled ‘The Reality of CSR’ by Asia Monitor Resource Centre paints a bad picture of Hindustan Unilever. According to its authors “In Hindustan Unilever’s Doom Dooma factory in Assam about 700 workers have been attacked since 2007 for asserting their basic rights.” Does having a showcase CSR project compensate for bad practices in business?
A recent example of a corporate takeover of a village in India is shocking. Anna-Kitex group which employs around 15000 people in Kizhakkambalam chose to take part in local body elections through its CSR wing and won 17 out of the 19 seats. With the 2% mandatory spending on CSR, is it possible that companies might now start taking part in elections to control their stakes instead of working with the local representatives for larger social good?
An effective and honest CSR policy goes a long way in ensuring positive and sustainable impact on the lives of its target beneficiaries. However it’s very important that CSR does not become a mere gimmick, advertising strategy, tool of peripheral development and a path for political ambitions. If this undesirable and dangerous outcome has to be prevented then all of us in the civil society need to ask tough questions and seek answers to them.
This post is authored by Nikhita Salian– Student Blogger for Creatively Unsettled.
“I am Mumbaikar who is currently pursuing my MBA in Systems from Sydenham Institute of Management Studies, Research and Entrepreneurship Education, inclined towards socially relevant activities that create a positive difference. A computer engineer by choice who loves reading fiction, writing articles and coding. Mahatma Gandhi’s famous words: Be the change you want to see in the world’ resonates with me.”