Dinesh Shahra, Founder and Managing Director of edible oil manufacturer Ruchi Soya Industries, is a happy man. Spending on corporate social responsibility (CSR) is set to shoot up by around Rs 27,000 crore per year in India. The mandatory giving has been welcomed by some companies, who have given the Bill a thumbs-up.
“The Companies Bill has made CSR mandatory for corporates above a certain threshold. Ruchi Soya has been dynamically doing CSR for over three decades now. We don’t see any hurdles or issues in the new system,” says Shahra.
Ruchi Soya has been actively involved in CSR since 1976. The social initiative programmes are carried out in a sustainable manner through village participation. “It is our policy to work with reputed non-governmental organisations (NGOs) who are like minded,” adds Shahra.
Rana Kapoor, CEO of YES Bank, also believes the Bill will have a positive impact.
“It will provide regulatory clarity and a framework for organisations to deliver on their CSR goals within the larger social and environmental sustainability context,” says Kapoor.
He pointed out that banks play a central role in the economy as financial intermediaries and needed to act as catalysts of CSR and sustainable development. Kapoor adds that CSR activities at YES Bank, “are not just ethical imperatives, but a sound business decision. The bank has focused on the triple bottom line ethos of People, Planet and Prosperity to create enduring value and CSR, and stayed away from traditional philanthropy.”
Ranjita Menon, the ‘Strategic Giving Manager’ at IT major Dell, says that organisations are quickly evolving into responsible and dependable contributors to societal well-being through their CSR initiatives.
“We have put a framework in place since 2009, and we don’t see any hurdles to taking it ahead,” she added.
Praj Industries' Executive Chairman Pramod Chaudhari termed the Bill an excellent initiative by the Government, and one that would encourage the concept of inclusive growth. “The Bill will facilitate larger inflow of funds towards developmental purposes and encourage companies to be socially responsible,” he says. He added that in the case of companies that have been spending much lower amounts, “it would amount to a big shift. This will lead to large sums being available for CSR spends.”
MANY CHALLENGES
At Gati, a distribution and supply chain company, Sanjeev Kumar Jain, Director - Finance, feels the requirement to constitute a CSR committee put in place a policy would ensure structured spending on CSR. “This would also facilitate measurability of CSR initiatives and thereby credibility,” he said.
Jain, however, pointed out that there are several challenges. “Synergising CSR with business remains a big challenge. CSR activity could be used as a public relations tool, rather than to do real work. Moreover, perceptional differences among various corporates could pose challenges for implementation of the provisions of the Companies Bill in spirit. Aligning attitudes of various stakeholders towards successful implementation of CSR would also be a tough task.”
The new Bill states that companies that fail to spend two per cent of their net profit on CSR have to explain why they have not met the requested target.
Pessimists among corporates says one of the major problems with the law is that it measures philanthropic work in purely monetary terms.
“CSR activities can come in many forms and might include a company making efforts to reduce its environmental footprint or donating its expertise to worthy causes. At a time when most of the world has moved beyond philanthropic CSR towards promotional, strategic and transformative approaches, the new Bill mandates that some corporates continue to remain stuck in an outdated charitable mindset,” said an official at a steel major, requesting anonymity.
Clarity Needed
YES Bank’s Rana Kapoor, says that while it is a globally pioneering initiative to streamline and accelerate CSR in India, corporates are keen to have further clarity on the provisions, as also tax benefits if any, in order to ensure tangible outcomes.
An official at a fast moving consumer goods company added that the Bill tends to permit CSR activities in a very restrictive way and has identified only eight categories where CSR activities can be undertaken.
“Why restrict it to just eradication of extreme hunger and poverty, education, environment sustainability, employment enhancing vocational skills, gender equality, etc? There are so many other areas where one could conduct CSR,” he added.
Project mode
Praj Industries’ Chaudhari, too, highlighted some hurdles.
“As per the bill, more than 90 per cent of spending on CSR activities shall be in ‘project mode’.
In most companies, presently a very small percentage of spending on CSR is towards activities in project mode.
It will require a lot of effort on the part of companies to identify reliable NGOs and project themes.
Since companies are also expected to have a scientific baseline survey, monitoring, documentation and evaluation of the projects, most will have to gear up to face this challenge.''
He added that mere donations towards philanthropy or charity would not qualify under CSR spends.
Yes Foundation was launched last year to extend Yes Bank’s sustainability footprint by supporting stakeholders such as NGOs.
As Kapoor puts it: “All sectors of the economy have to play a role and become CSR and sustainable development catalysts, as it can have a far-reaching positive impact.”