Jul 14, 2023 26 min read
CSR beyond Compliance: Its the intent that matters!
The success of any democracy lies in its capability to be socially responsive towards its citizens. In this endeavour of sustaining a vibrant democracy, India strives extremely hard to extend necessities and benefits to all strata of the society despite its constrained resources.
Who can better understand the gravity and nuance of this situation than a decorated officer of the administration having an experience of more than 34 years in departments such as Finance, Elections, Industries, Education, Corporate Affairs, New & Renewable Energy. Shri Praveen Kumar, a 1987 batch retired IAS Officer of Tamil Nadu cadre assumed the charge of Director General and CEO of the Indian Institute of Corporate Affairs(IICA) in December 2021. As the chief of this think tank, capacity building, and service delivery institute under the Ministry of Corporate Affairs, Mr. Kumar is providing astute and credible intellectual leadership in corporate regulation, governance and running of sustainable businesses. Amongst numerous other accolades, he is also the recepient of the Prime Minister’s Award for Excellence in Public Administration for the year 2019, for his role in acting as Prabhari Officer of the Aspirational District Virudhunagar in TN, which saw the district attain the number one position amongst all aspirational districts.
Read on to find out Mr. Kumar’s thoughts on how organizations can play a constructive role in social rejuvenation, development and empowerment of unprivileged people as he sat down with us over a cup of tea.
In conversation with Bhanu Prakash Semwal and Naveli Singh
Q: Charity, donation and contribution towards nation building are not new concepts for India. How do you define the concept of Corporate Social Responsibility (CSR) and its significance in driving national development?
As you rightly mentioned, philanthropy is not a new phenomenon in India. The culture of charity has always been in the ethos of Indian traditions and finds mention across various religious and literary texts. Mahatma Gandhi advocated the concept of trusteeship to establish social and economic equality. This concept has its origins in spirituality, in which a person voluntarily surrenders his surplus wealth, and entrusts it for the welfare of the poor section of the society.
However, the history of India’s institutional philanthropy is much shorter and can be traced back to a few large organizations pre independence. The initiative gained a little momentum in the mid-20th century when a large number of foundations and trusts were established and a significant portion of donations went to building institutions like universities, research centres, and hospitals. The movement, however, slowed down soon after this period, only to regain its momentum about a decade ago.
So, in response to this gap, the concept of Corporate Social Responsibility (CSR) was introduced. Voluntary at first, India became the first country in the world to make CSR mandatory as per Companies Act, 2013. The act mandated companies to spend a portion of their profit on CSR activities enlisted under schedule 7 of the act.
If you notice all the areas enlisted under Schedule 7 of the act such as eradicating hunger, promoting healthcare, gender equality etc. are national priorities. Any institution implementing projects under CSR is already aligned to national priorities and is driving national development.
Although the total CSR spend in India is limited to the tune of 20K crore, but the impact of CSR activities is much more meaningful and profound. This is due to the fact that the choice and implementation of CSR projects by an organization is not rule bound and has a lot of scope for innovation. CSR projects work as a laboratory, providing room to pilot and test innovative solutions to an existing problem. If the experiments work out, the solution may be scaled up as a national program by the government.
Thus, CSR contributes tremendously to the cause of national development and it is much more than what the amount spent reflects.
Q: You have been a champion of the aspirational districts during your tenure at Tamil Nadu. But as a concept it is generally associated with the Government sector. Similarly, for PSUs there are certain CSR themes defined. Are there any specific areas or sectors where you believe private organizations should focus their CSR efforts? If so, what are they and why?
Section 135 of the act gives power to the board to decide which amongst the 12 laid down areas under Schedule 7 would the company want to take up any CSR activity in. This power is exercised through a committee of the board which recommends the CSR activity areas, amount of expenditure to be incurred on the selected areas and the overall CSR policy of the company.
So, the companies have an option whether they intend to mould their CSR policy as per their business operations or whether they wish to focus on areas beyond their business or location. I’’ll give you an example. Suppose there is a mining firm which realizes that it should take up CSR activities for countering the effects of its operations, it may choose to implement interventions in climate conservation or population displacement or skill development. Alternatively, the company can take up a comprehensive area development approach, i.e., they may choose to develop an area, which may or may not be their area of operation, and invest in activities related to watershed development, disaster mitigation, education, heath etc. It is entirely up to the Board to decide. Private sector organizations can also take a cue from what PSUs have done in the case of aspirational districts. They may choose an aspirational district and work in areas that have not been covered under any government scheme.
The latter approach has multiple benefits including the fact that it completes the circle of development. A holistic spread ensures that the population thrives locally. This can result in increased tourism and/ or employment opportunities for different areas. The community can achieve the financial sustainability, which is at the heart of all the efforts.
Q: So while the CSR Act enlists the activities which may be included by companies in their CSR policies and elaborates the procedure to implement them, why do you think companies face challenges while implementing a holistic CSR strategy? How can these challenges be overcome?
I believe the most important factor for any philanthropic activity is intent. Companies generally face challenge in implementation of CSR when they treat it as a tick mark activity. Their intention is limited to be on the right side of the law. For few organizations, CSR stays on the fringes of corporate thinking, resulting in numerous challenges being faced while aligning and implementing their CSR projects with national projects. So, all you need is the right intent and focus. Once an organization realizes the importance and impact of CSR, things start to fall in place.
With right intent the next important thing an organization needs to do is proper research. Before an organization engages in community-based work, they need to understand their capacity for executing a CSR program. This must be accompanied with an assessment of what is needed in the community. Every CSR campaign must be grounded in strong knowledge of and connection to the community or area that one is looking to serve. Alongside, one needs to determine the purpose of their CSR program as it relates to the projected impact an organization wishes to have on society. The values and unique skill set of the organization must also aid and align with the kind of project one choses.
Once an organization makes sense of its offering, a strategy has to be built around the needs assessment that has been conducted within the community the company is looking to serve. Next the organization needs to ensure the sufficiency of internal talent aligned with organization’s vision for CSR. Companies may also opt for talent outside their organization. Indian institute of Corporate Affairs (IICA) provides 9 months training program for certified CSR professionals.
Armed with that internal support, organization can then start building relationships with external stakeholders such as community leaders or organizations to partner with them in CSR campaigns. Such partners are likely to know the law of the land better than the organization’s team members.
A systematic due diligence procedure must be followed with third party agencies to develop mutual trust and transparency.
If the organization still feels that the magnitude of the intended job is beyond their internal resources, then they can opt to join resources with other companies. This must be followed up with a good monitoring and evaluation setup and timely course correction wherever required. If any implementing institution has these systems in place, then 9 out of times 10 they won’t go wrong.
Q: Despite numerous well-intentioned CSR project implementations pan India, inequalities in CSR spending in the metropolitan like Mumbai and hilly areas of Northeast and eastern part of the country including Bihar, Jharkhand has been a burning issue since many years now. How can we solve this issue?
I believe the solution again boils down to awareness and intent. The preference to local area, as indicated in the Act, is only directory and not mandatory in nature. Thus, CSR projects can be taken up anywhere in the country as long as the spirit of the initiative is to work towards national priorities and attain Sustainable Development Goals (SDGs). IICA as a government think tank undertakes various interventions to make companies aware about the fact that the essence of CSR is in the social responsibility, which expands its purview to every nook and corner of the country.
But I agree that as we scratch the surface, the asymmetry in focus starts appearing. Corporations prefer to work in populated cities where the projects are easier to implement and their impact more visible. Companies also in turn face challenges when they are headquartered in say a city like Mumbai, and wish to identify, implement, and monitor projects in far flung areas.
What helps in this situation is a good civil society partnership. The strength of organizations lies in project implementation, whereas need identification and monitoring is the forte of civil society institutions like NGOs etc. A strong partnership between the two can bring in the desired qualitative change.
Businesses need to move towards impact-driven social responsibility. Once an organization realizes the results of their interventions in remote location, it has the potential to become a model location or project. To overcome these challenges, like-minded business should come together to undertake CSR initiatives in remote rural locations and aspirational districts aligning to government schemes.
If we are able to do something in this direction, we will realize that development is not limited to metros and bigger cities.
Q: Like you mentioned, the intent of companies needs to go beyond CSR compliance. But what is in it for the organizations? How can organizations measure and communicate the social and economic benefits derived from their CSR initiatives?
I think the best way to go about it is to be strategic about the way that companies do CSR. By taking a strategic approach, companies can determine the activities that they wish to devote their resources, to become socially responsible and choose that which will strengthen their competitive advantage. It is about tying what you know best and what you do best to a positive impact on society and the environment.
When CSR is an integral element of an organization’s strategy, it is also a way of maintaining the legitimacy of the organization’s actions in the society by bringing stakeholders’ concerns to the front. When companies contribute in accordance with what they know and what they do best, they are able to be much more effective and benefit the community a lot more. Strategic communication of value created through CSR projects also helps organizations build a good reputation and brand equity. This moral capital built through investment in CSR helps develop consumer-organization trust and protects organization from negative stakeholder assessments. When customers believe that an organization is trustworthy and behaves in a socially responsible manner, the evaluation of customers is positively affected.
The recently introduced concept of Environmental, Social and Governance (ESG) is going to be one step further to CSR. ESG is a sustainability assessment using Environmental, Social, and Governance metrics to evaluate how sustainable and resilient a company is to make it accountable for its sustainability claims. IICA is working on developing a framework for developing an indicator to measure ESG scores of entities. It is envisaged on the pattern of clean energy credits. So for e.g. in future, companies with ESG score greater than a particular value may get benefits like lower interest rates etc. In short term there might be some expenses associated with such measures, but the future holds multiple benefits.
Q: Since you have mentioned ESG, can you also share with our readers any recent developments or trends that have emerged recently in CSR?
Q: Looking ahead, what do you envision as the future of CSR, and what role can civil society play in shaping that future?
Q: How can companies effectively integrate the Sustainable Development Goals (SDGs) into their CSR strategies and initiatives?
The sustainable development goals and CSR thematic areas share a lot of overlap in terms of activities need to achieve either. The CSR regulation sets a broad framework and guides for better sustainable future. The SDGs set tangible as well as defined targets to measure the outcome of activities. The 12 national priority areas under Schedule 7 of the CSR policy brings an opportunity of collaboration as in SDG.
The SDGs draw a more elaborate plan with 169 goals and have a wide spectrum of targets to be achieved. For instance if an organization decides to work in the area of rural development ( as listed in Schedule VII), it may link it to multiple SDGs like ending poverty, building resilient infrastructure, promoting sustainable industrialisation and promoting sustainable use of terrestrial ecosystems. So basically Schedule 7 explicitly gives overall direction to corporates and the SDG targets are measurable outcomes from the CSR projects.
Government schemes are generally spread out across the country and hence their impact is not easy to measure and emulate in a short span of time. CSR on the other hand has a strong role in implementing projects to achieve SDG at local level. Such projects act as a model solution for other areas with similar issues. For example, you would have heard about a village named Odanthurai, located in Coimbatore, Tamil Nadu. This village is popular globally for its development and often called as the smartest village in Asia. The village is 100% sanitised, self-sufficient, and equipped with solar panels, windmills, water supply and every amenity required for a comfortable lifestyle. It is a huge inspiration to other villages of India.
Now if similar development projects are carried out under the realm of CSR for other villages of India, it would contribute tremendously towards achievement of SDG goals of India.
Q: What advice or recommendations would you give to companies seeking to enhance their CSR programs and contribute to the overall development of the country?
Q: Sir, you have had such a long and illustrious career in administrative services where you have gone above and beyond the call of duty. What message would you like to give to our readers who are at various stages of their careers? What have been your motivations and learnings?
Learning is a lifelong journey. But yes, there are a few things that I would like to share.
Each profile and each project comes with a set of expectations. The important thing is that you should always try to maximize the efforts that you put in and your commitment should be up to your satisfaction. One should try to be self-actualized, i.e., take ownership of what you do and try to do it to the best of your ability.
Sometimes your efforts might be recognized, sometimes they may not. At times your colleagues might take the credit. The important thing is to keep up the good work. In the end reward comes to you, internally or externally. No matter who gets the credit, the satisfaction of good work is in itself a reward.
Secondly don’t do anything wrong or illegal. No matter who asks you to do it! And once people know that you don’t do anything wrong, they will stop asking you to do it.
Third important thing is to maintain work-life balance. I am not saying that don’t take your work home. But family should always be your priority.
It is also extremely important is to have a healthy relationship with your colleagues. They may be competitive, but they can be your best support system. If you wake up knowing you’re driving to a place where you enjoy the company of the people you work with, your satisfaction is going to be much higher Exchanging experiences and weekend stories over a cup of tea has more value than you think.
And then enjoy what you do. Troughs will come, peaks will come. I always analyse the worst-case scenario because once you have a strategy to handle the worst case, then you have nothing to be afraid of.
So be honest, be clear and try to do your job to the best of your ability.
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