India’s Answer To Corporate Apathy — The CSR Mandate

In 2013, the Government of India passed a mandate that made CSR spending obligatory for many organisations in the country. By and large, this rule ushered in a new era of corporate social responsibility and pumped some coin into the cobwebbed coffers of Indian nonprofits. The organisations that tirelessly sought to make a difference now had plenty of resources to do so, thanks to the big corporates that were eager to lend them funds. csr-mandate But most nonprofits had inadequate capacities and weren’t capable of effectively handling the sudden surge of financial aid. This meant that corporates also needed to help their beneficiaries with capacity building—monetary aid wasn’t the only answer. In order to do this effectively, organisations had to first create clear-cut CSR policies that defined core objectives. Moreover, they also required measurement models that could accurately evaluate the efficacy of social programs. As many corporates weren’t fully aware of the intricacies within the CSR domain, they sought professional help. Vardaan has been providing end-to-end consulting services to organisations in this regard. The CSR mandate has resulted in a number of positive changes all over the country. But before we get right into them, let’s take a look at how the Act actually works. The 2% Mandate Giving back to society If a company has a net profit of ₹5 crore or more per year, then it needs to spend at least 2% of its average net profits from the preceding three years on social initiatives. The rule also applies to companies that have annual turnovers of ₹1000 crore or are valued at over ₹500 crore. Now, corporates pay a 30% tax in India, which can turn out to be quite a hefty figure for companies with large incomes. But the CSR mandate states that corporates need to pay 2% of their profits before being taxed. Which means that they shell out almost 2.857% of their profits in reality. A company’s CSR spending cannot be deducted from its taxable business income. This is because CSR expenditure is seen as an application of income, which is not tax-deductible under Indian law. Apart from increasing corporate spending, one of other main aims of the 2013 act was to bring SMEs into the CSR mix. Large-Scale Contribution Of The SME Sector SME Growth SMEs undoubtedly have a large influence on the country’s economy, and they can potentially be just as impactful in bringing about social change—according to a 2013 survey, nearly 40% of India’s workforce is employed by these organisations. Many SMEs conduct their business activities in proximity to rural communities and are collectively more aware of the community’s needs. This allows them to tailor realistic social programs that create the necessary impact. After the 2013 mandate, any company with a net profit of ₹5 crore or more had to participate in CSR activities. The Act ensured that these organisations could collectively pool their resources in order to create a sizeable CSR fund. This kind of an alliance proved to be highly beneficial to SMEs, allowing them to reduce their operational costs. In addition, they have also been able to focus more on developing long-term projects that need more resources to be accomplished. Due to the CSR mandate, SMEs in the country are today promoting a variety of causes such as education, environmental sustainability and gender equality. Increased Domestic CSR Expenditure CSR Expenditure Given their higher levels of regulation, it may be understandable that foreign companies end up spending more on CSR initiatives than Indian organisations. The average CSR expenditure by foreign firms has been significantly more than their Indian counterparts in both, 2011 and 2012. But in 2013, the average CSR expenditure by Indian firms rose by about 700%, comfortably outstripping foreign MNCs. In one way, the mandate has definitely improved the engagement levels of Indian organisations in social causes. Although the CSR mandate has created a positive impact in India, there’s still a lot that needs to be done. Tackling the inadequate capacities of Indian nonprofits is a particularly major challenge. After all, nonprofits are ever at the forefront of social change, and in better shape, they can help corporates work some real CSR magic.

Hot On The Heels Of Change—5 Insights From The 2015 AVPN Conference

Intentions and results are inextricably connected. If you intend to do something, then you better do it —there’s little point otherwise. All non-profits have good intentions, but very few actually end up achieving what they set out to do in the first place. From unsupportive grant makers to insufficient talent, a host of problems constantly threaten to derail their progress. Venture philanthropy is an approach conceived by those looking to fix the spate of issues that NGOs frequently face. And in our part of the world, there’s no better way to imbibe ideas of venture philanthropy than by attending the AVPN Conference. One of the Asian Venture Philanthropy Network aims is to equip NGOs with the right kind of knowledge and skillsets. This year, they held a massive conference where 478 dedicated delegates gathered under one roof to grapple with common hurdles. At Vardaan, we were glad to be one of the 304 organizations attending this event. Here’s what we learnt from it. Insight 1 – Embracing Venture Philanthropy EMBRACING VP Increasing the flow of intellectual, human, and financial capital to the social sector is a pretty difficult task. And since venture philanthropy practices aim to do just that, we’ve decided to evolve our approach a little bit. Advising social enterprises and raising funds for them will be our two new areas of practice. In other words we intend to tap into this fast emerging sector in the Indian landscape which will have a profound social impact in the years to come. Insight 2 – Being A Bit More Subtle avpn 2 Sometimes, in order to have dessert, you need to plow your way through the main course. The same logic applies to the trickier aspects of social change—in order to have the necessary impact, your efforts may need to be indirect. For instance, if your actual plan is to help a community become more self-sufficient, then your initial aim should be to build better houses for the members. Identify that one thing which everyone in the community is desperately in need of, and get busy trying plug that gap. Once you gain the trust of community members, it becomes much easier to achieve your long-term objectives. Insight 3 – Keeping Donors In The Loop avpn It’s the donors that pump life into every nonprofit. And understandably, not all NGOs know how to deal with them in the best manner possible. The idea is to involve the donor in each and every step of the project being undertaken. This way, the contributor’s perception of your efforts aren’t based only on results, which sometimes may not be that appealing. In one survey, nearly 82% of NGOs agreed that they needed smarter, more engaged donors, while more than 90% of donors felt that they required more data and better opportunities. Clearly, there’s a gap that we need to address here. Insight 4 – Companies Need To Engage Their Customers engage their customer Big companies in the fashion, airlines, hospitality, and film industries often have deep engagement levels with high-net-worth individuals (HNIs). Such organizations need to make their customers an active part of their CSR endeavours. Not only does this lead to better funding, it also provides more incentive for companies to engage themselves in social initiatives. Insight 5 – Building Organizational Capacity last Non-profits require all the talent that they can get their hands on. But as the problem often lies, they may not always have the money to pay the salaries of their employees. This can be quite demanding for a person who’s already doing a lot without expecting much in return. Ensuring that key staff members receive their monthly income is an effective way to build capacity. It’s also important to build a proper network and maintain long-term relationships. Trust us when we say that sometimes, all it takes is one phone call to make a lasting change in the lives of millions. Here are few photographs from the AVPN Conference’ 2015 which Vardaan attended.

India Inc and CSR: A Complicated Relationship

The relationship between Indian corporations and CSR activities has taken a complete U-turn over the past decade; the importance of social contributions has skyrocketed. Every major company today is finding creative and unique ways to implement CSR directives. Glaxosmithkline, for example, exclusively focuses on health and healthy living. The company establishes programs in tribal villages where they offer medical check-ups, treatment, health camps and health awareness drives. They also provide money, medicines and equipment to non-profit organizations that work towards improving health and education in underprivileged communities. The Reliance Industries’ ‘Drishti Project’, focuses on treating visually challenged people from economically weaker sections of the society.   csr-in-india The Mandate Traditionally, most Indian companies have been known to be very stingy with their contribution to society in terms of Corporate Social Responsibility. This changed with the passing of the Companies Act, 2013. The act makes sure that every corporate earning a net profit of more than INR 5 crore, or a turnover exceeding INR 1000 crore, spends at least 2% of its average net profits, from the last three fiscal years, towards CSR activities. This initiated a barrage of CSR initiatives by major companies in the country, which not only provided much needed development to weaker sections of society, but also helped create a favorable corporate image in the mind of the consumer. Importance of CSR   A Change In The Tide While CSR wasn’t a very big part of running an organisation back in the day, it has proved integral to the growth of some of the biggest companies in our country. Tata is well known for being actively involved in giving back to the community, and the development of infrastructure. When other organisations were trying to find ways to escape spending money on sustainability and social work, Tata was busy setting up hospitals and research stations. Let’s take ITC as an example. Being a highly-varied conglomerate, they needed to isolate the taboo associated with their tobacco units and make sure it didn’t stain their image across different sectors. To do this they introduced a unique CSR strategy in the form of the 1 Rupee scheme. Classmate, ITC’s line of stationery products, gives INR 1 towards the education of underprivileged children from the sale of each Classmate notebook. Through this scheme, ITC ended up contributing over INR 214 crore towards CSR in 2014-2015. Not only did this scheme increase the sales of Classmate notebooks, but also managed to substantially dilute the cigarette taboo linked to their products. This is just one example of how CSR can be seamlessly incorporated into company operations. It’s arguably one of the best ways to increase stakeholder retention, as it is a visible effort from the organisation to give something back to society. Why Invest In CSR? A study by Hewitt & Associates found that morale was 55% better, business process were 43% more efficient, public image was 43% stronger, and employee loyalty was 38% better in organisations with strong CSR programs. Many organisations don’t see how easy things like customer engagement become, if they put in a little effort into designing and implementing new and innovative CSR strategies. For example, Walmart is one of the loudest voices in environmentalism. They’ve run ad campaigns to raise awareness about sustainable product choices that customers can make while shopping at their stores. With minimum expenditure, they found a way to do something ‘good’ which helped them grow their consumer base on the side. You can even use it as a tool to differentiate yourself from your competitors. PepsiCo and Coke have been relentless in trying to up each other with their CSR activities. Coke has a tie-up with WWF, where they engage in protection of fresh-water sources, and replenishment of ground-water. PepsiCo too runs sustainable agriculture programs which not only help small farmers, but also help secure a supply of raw material to the company’s manufacturing plants. Companies actively involved with CSR find it easier to recruit employees, even in tight labour markets. Employees tend to stick around longer with such organisations, leading to increased employee retention, which also cuts down largely on recruitment and training costs. In fact, a survey by Net Impact found that 35% of workers would take a pay cut to work for a company committed to CSR. How Can CSR Work For You? The Reputation Institute’s 2011 ‘Pulse Survey’ found that CSR is responsible for more than 40% of a company’s reputation. At Vardaan, we specifically deal with CSR management and offer all-round solutions on how to achieve CSR objectives. Trust us when we tell you that the days of simply donating a cheque are absolutely over. Even with hundreds of corporations actively investing more time and resources into their CSR initiatives—some with full-fledged social responsibility departments—there are certain firms that are relatively apathetic about creating real social change. What needs to change is the mindset that CSR is just another scheme to drain money out of the company, without any tangible short-term or long-term benefits. An effective CSR system not only helps society, but can also increase profit margins and generate immense goodwill. It may not be the only way to get the same results, but is definitely the easier and more socially responsible way of taking your organisation where you want it to go.

What You Ought To Know About The CII CSR Summit & NGO Mela 2015

  CII CSR Summit & NGO Mela 2015 Big buzz in the room…. Many hopeful and expectant participants…. Looking forward to the first ever conference since the mandate on the CSR spend organized by CII in Bangalore. And the theme was very relevant “Social Impact through Partnership between Governments, Corporate and NGOs”. More than 200 people were gathered and 40 plus NGOs had setup their tables in the NGO Mela. Spread over half a day and power packed with some of the big names who are involved in influencing the transformation and hopes of CII playing big role in driving the change in owning the issues in the society. This looked like a great beginning. And we also want to be part of it. After the Companies Act was passed in 2013, corporate social responsibility became a priority for every big company in India. Our consulting company Vardaan advices corporates, not for profits, social enterprises for maximising returns, capacity building to create social impact. This year, we decided to attend the CII conference to see how we could improve our impact assessment skills. This is what we found out. The Bigwigs Speak Out As we made our way to the venue of the Summit, we noticed the presence of more than 200 participants. One of the speakers for the day was Rajni Mishra, the Chief General Manager of SBI. Being a Government-owned bank, the SBI has a 1% CSR spending mandate as opposed to private-sector companies which need to spend at least 2% of their annual revenues on CSR activities. According to Mrs. Mishra, the SBI had spent around Rs 15 crore on building toilets for schoolgirls around the country. She also emphasized the need for programs like Swachh Bharat that aim to make small but meaningful changes in society. According to her it was a great example of partnership where various bodies could work together and bring huge transformations through such programs in the overall development of the nation. Mohandas Pai, Chairman of Manipal Global Education had a different take on the subject. Mr. Pai was of the view that corporate needs to focus on business and as part of growing their business they need to engage themselves in environmentally sustainable work. However with the mandate in place the best way to bring about change is for groups to work together. He shared the story of how one man’s dream to not have even one child go hungry paved the path for Akshay Patra and its successful story. He stressed on the importance of CII playing a stronger role in bringing groups to work together on causes; if we have to bring about a significant change in society. NGOs Need Better Ways To Gauge Impact One major topic discussed in the conference was about building the capacities of NGOs to better understand the impact of their projects. The Centre For Social Initiative and Management offered a few interesting impact assessment models to consider. This organization works with NGOs to help them accomplish their long-term goals and has an impressive roster of clients. Rang De, one of CSIM’s clients, shared their impact assessment story with us. Although their efforts were commendable, we weren’t really sure as to how they arrived at certain conclusions. There was a lot of talk about quantitative assessment at the conference, but we still feel that there’s more to it than just that. Bridging The Skills Gap The other main topic of discussion was the shortage of skilled labour. Most of the participants at the summit found that dealing with this problem was not as easy as it seemed. One idea was to bridge the skills gap by building sustainable partnerships between NGOs, corporates, and the government—many were still skeptical, though. However, the story of Labournet Services resonated well with the audience. GayatriVasudevan, the CEO of the organization, explained how Labournet is today a platform for unorganised labour sectors to develop skilled workforces. She’s accomplished this by working with both the private sector and the state to create relevant and industry-specific training modules. Others too felt that Industrial Training Institutes were essential to tackling to this problem, but stressed the challenge in finding employment for the newly trained. In this vein, Bosch, the German MNC, shared some of their vocational training models with the participants. On the whole, the CII conference turned out to do exactly what it was to supposed to—it brought together a bunch of CSR-friendly organizations and hosted an enlightening discussion on how to maximize the impact of various CSR initiatives. And at Vardaan, we’ll be working hard to make sure our insights help your programmes in every way possible.