By Anant Srivastava
Grameen Bank founder on the need to create social businesses from CSR
Muhammad Yunus, Economist and founder of Grameen bank speaks briefly on utilising CSR funds to create and support social businesses. It is something we’ve always agreed with. For-profit social enterprises are a great way to ensure that social causes become sustainable in the long run. Presently, CSR funds can only be invested in a technology incubator at a government approved institute. The urgent need of the hour is to expand the scope of impact investing through CSR funds. We can only hope the government is listening.
Strategic CSR – using CSR to build your brand
The only way to do good CSR is to do it strategically. As companies continue to learn from their mistakes and challenges faced in the first year of mandatory CSR and realign their CSR strategies for the future, this Economic Times article provides a fresh take on an old, sound business advice of using CSR to benefit perhaps a company’s most valuable asset – its brand.
Incubators evoke little interest of corporates for CSR money
The first year of mandatory CSR spending proved to be dismal for incubators hoping for CSR funds. 85 of the top 100 companies on Bombay Stock Exchange for which data is currently available, spent just Rs 6.23 cr in total on incubators, that’s less than one percent of their total spend of Rs 6,500 cr. The reasons as mentioned in detail in this Livemint article range from lack of awareness and closed mindedness of companies on considering what counts as CSR to inadequate information on the government approved incubators that can receive CSR funding. It has to be seen if with time, companies’ understanding and perspective on CSR improves and funding incubators becomes a part of mainstream CSR.
Mandatory CSR at the cost of effectiveness and broader sustainability?
From the annual reports being filed, it’s clear that around two-thirds have complied with the government mandated CSR spending. This percentage can be expected to go up in the coming years as companies mature in their understanding of the mandate as well as their internal capacities to undertake CSR activities.
But is this happening at the cost of effectiveness of the activities being implemented? Are companies doing CSR only to comply without bothering about the actual social impact? It may be too early to tell. Thorough impact assessment of CSR initiatives can only happen 2-3 years after the implementation but it is important from the beginning that companies design and follow robust monitoring and evaluation mechanisms to assess impact.
Compliance with the law can also come at an added cost of companies losing focus of broader sustainability principles as pointed out by Shankar Venkateswaran, chief of Tata Sustainability Group, who has been a part of the drafting committee for the National Voluntary Guidelines (NVGs). In our view, this can be prevented if companies take a strategic approach to CSR and consider it as a subset of their broader sustainability practices.
MCA appointed Baijal Committee publishes recommendations on the CSR legislation
The 6 member committee headed by Anil Baijal to come with guidelines on the effective implementation of the CSR legislation as well as monitoring and evaluation of the activities has come out with its first report.
Some important recommendations made by the Committee which could be followed after the government’s approval are:
- Companies (especially smaller ones) should get leniency for the first 2-3 years in complying with the legislation
- Differential tax treatment for various activities under Schedule VII should be curbed to prevent companies forsaking societal benefit for tax saving in choosing CSR activities
- Companies that need to spend more than Rs 5 cr on CSR should take a programme based sustainable approach to CSR while companies spending less than 5 cr can take a less intensive project based approach
- Private companies like public companies should be allowed to carry forward the unspent amount to the next year to be spent in addition to a fresh spend requirement of 2% of the profit.
- Administrative overheads cap can be increased from 5% to 10% of the overall CSR spend. Also, expenditure on capacity building should not count as overhead
- Instead of a govt. vetted databank of implementation agencies, the onus of due diligence before selecting an agency should rest with the board and the CSR committee of the company. Similarly, for monitoring and evaluation of CSR activities, the boards and CSR committees should develop and follow methodologies instead of relying on the government and are free to leverage external firms if required
Hubristic CEOs less likely to spend on CSR than narcissistic CEOs
As absurd a headline as it is, it’s actually true! A study of 464 companies conducted by faculty members from premier universities including the world renowned INSEAD business school found out that hubristic (those full of self-confidence) CEOs are less likely to engage in CSR activities as they attribute the success of their firm solely to their ability and actions rather than external factors. Thus, CSR as a means of engaging and benefiting stakeholders’ just isn’t necessary for them. Narcissistic CEOs, on the end, tend to do better at CSR as they crave for external validation often fulfilled by CSR in the form of good publicity for the company and leadership. Perhaps a little narcissism isn’t all that bad...