The three next steps for corporate social responsibility

The three next steps for CSR to succeed

It’s now been over a year since Section 135 of the Companies Act 2013 came into effect and it has sought to alter the way corporate social responsibility (CSR) is approached in India.

• Besides, mandating CSR spending by companies of a certain revenue and profit size, the Act urges companies to leverage their business acumen and core competencies to address social issues in the same manner as they would carry out other business operations.
• However, many companies are still faced with challenges in implementing effective CSR strategies—lack of clarity about regulations with respect to what is allowed under the law, lack of knowledge about sector and industry best practices, too few implementation partners who have the capacity to work with companies and so on. In the year ahead, what will it take to make the most of this opportunity to transform the social sector? Here are three essentials for CSR to succeed in India.

Government as enabler

• The current government has expressed interest in working with companies. Its multiple calls to action—Swachh Bharat, Beti Bachao Beti Padhao, Skill India—appeal to all stakeholders, especially companies, and help the latter align their social engagement strategies with government priorities.
• Although this is a good move to ‘democratize development’, the government needs to work towards creating a more enabling environment, too.
• The government should leverage the CSR law to meaningfully engage companies in the development sector and create frameworks that facilitate public-private partnerships for the implementation of long-term and impactful programmes.
• This becomes even more important in sectors such as skilling. The government has engaged industry bodies to identify, prioritize and implement programmes that provide ‘marketable skills’, that is, skill sets that are required by employers. However, it is necessary that the government, companies and implementation agencies are focused on completing the cycle of the programme by providing jobs to those who are trained.
• Alongside, companies must aim to approach, engage and work with state governments and local government bodies to ensure better access to the end beneficiary, delivery channels that will help scale up and fast-track projects.

Adopt a business approach

• Most companies that have implemented social engagement strategies have not looked at their CSR strategies through the same lens as their core business functions.
• Hence, aspects of business operations that can be lent to CSR implementation such as tracking the utilization of budgets by implementation agencies, monitoring and evaluating programmes, hiring the right people, building capacity of internal and external personnel to deliver, communicating impact to relevant stakeholders and assessing (social) return on investment have been largely ignored.
• The Act mandates the setting up of a CSR committee which consists of at least three company directors and reports to the board. In doing so, the legislation seeks to make CSR strategy an executive-level agenda. This provides an opportunity for top-level management to apply their expertise and experience to the company’s social engagement strategy.
• CSR budgets have grown exponentially, and there is now added responsibility on the part of a company to ensure optimization and efficient implementation of programmes.
• Besides, research has shown that investors place an emphasis on CSR and sustainability reporting, especially around the utilization of funds. Communicating impact to this target group is a global best practice and necessity of modern business.

Explore collaborations

• Budgets vary from company to company and despite the quantum of funds available, and the intent to implement social programmes, a single company may not be able to sustain a multi-intervention-oriented and long-term CSR approach which is scalable. The Companies Act 2013 allows for collaboration between two or more companies by using a separate legal entity.
• There are many hurdles to collaboration between companies—competition, lack of attributable impact, insecurity about the brand strength of partners—but collaboration between companies will allow stakeholders to leverage their strengths to complement partners’ efforts and, therefore, provide a comprehensive programme for beneficiaries and achieve scale.
• A collaborative model that addresses all concerns is crucial and isn’t limited to company-company partnerships alone. In a ‘Collective Impact’, all participants have a common agenda, including a shared understanding of the problem, a plan of action that leverages each stakeholder’s expertise and clear metrics to track impact. It goes beyond pooling resources.
• There is no denying that the CSR law presents a significant opportunity for the development sector to evolve at every level.
• There is now a significant amount of funding coming into the sector from a source other than the government, foundations, philanthropists and donor organizations.
• However, the CSR law will be a lost opportunity if stakeholders do not understand each other’s perspectives, leverage each other’s core competencies, and build capacity to deliver and create the right frameworks for knowledge sharing and collaboration.