By Laura Quinn
A confusing place to be
Imagine an annual budget of Rs. 20,000 crores managed by 80 managers, none of whom ever speak to each other. Now imagine it’s actually 8,000 managers overseeing that budget, without ever meeting or sharing a word. And turn those managers into three to five-person management committees instead of individuals. Oh and tell each of the 8,000 committees to produce and submit its own, separate annual report. Now think about analysing each of those reports individually because that’s the only way to know how the Rs. 20,000 crores was actually spent. And finally try to make sense of what was achieved, what the impact was, or what was missed out entirely.
Impossible? Correct. Welcome to the world of Indian CSR.
Since the Companies Act, 2013 came into force last April, around 8,000 companies have been mandated to spend two percent of their average net profit from the past three years on Corporate Social Responsibility, within some ambiguous yet fairly restrictive rules set out in Section 135. Estimated as a total CSR budget of around Rs. 20,000 crores per year, the opportunity is tantalisingly close to being incredible. It’s the first legislation of its type in the world - no other country has ever even attempted it - and a funding injection of this scale could represent a critical turning point for India’s development sector, which was variably estimated to have annual revenues of only Rs. 30-35,000 crores before the legislation came into effect. But this funding can only make a difference if it is managed well and directed effectively.
Unfortunately, the reality after the first year of the mandate is quite the opposite. In fact, it’s all a bit of a mess.
- In the best cases, funds are being managed by a CSR manager or team that understands the development sector. But in most, CSR falls under the remit of Corporate Communications or HR departments without the necessary skills and resource to assess NGO partners or measure impact effectively.
- Companies aren’t talking to each other meaning the same mistakes, inefficiencies and failures are getting repeated hundreds of times over from company to company.
- Grey areas in the legislation, and lack of collective experience in interpreting it, are creating a sense of risk-aversion that’s stifling innovation, boldness, and the progress of new ideas for tackling development issues.
- Those social causes which are most attractive (to employees, investors, the Government, and media) are getting a glut of funds - with the Government’s pet missions attracting inflated investments with big tax incentives.
- Tried-and-tested, grass-roots programmes with simple metrics, immediate impact on-ground, and annual funding schedules, are seen as safe options while long-term, more experimental initiatives that have the potential to be real game-changers, are seen as too risky to attract the investment they need.
Ultimately, 70 percent of companies failed to meet their spending targets within the rules of the CSR legislation in 2014-15.
An incredible opportunity
However, as messy as it seems - and it really is - companies are in fact trying. Across the board corporates are struggling with similar issues, trying to interpret the rules, looking for the best programmes to support, and broadly wanting to make a difference. And it’s critical that they do; the CSR ecosystem needs companies see the value of their social investment in order to create a virtuous circle of increasing spends for the long-term. But despite this, the CSR scenario in India right now is inefficient, old-fashioned, eager for easy wins and, perhaps most distressingly, the enemy of innovation.
These are not the qualities of great businesses, and it’s certainly not how to go about changing the world. If Indian CSR continues in the direction it went in 2014-15, India Inc. is going to waste a truly incredible opportunity to transform this great nation.
What we need is a collective strategy, and we need it now.
Let’s imagine the best-case scenario. Try to envisage the collective brainpower of India’s 8,000 most successful companies and all the skills, talent, technology and capabilities they hold. Think about efficiency; think strategy; think “lean” approaches and cloud-based monitoring systems. Think of business-based, financially-sustainable solutions that enable people to lift themselves of out poverty. Think of companies combining forces without the concerns of competition. Imagine being free to invest Rs. 20,000 cores a year in social development without the burden of the public purse. Think of all the innovation and technology that’s at the forefront of one of the world’s biggest markets being directed towards solving its greatest social problems. It's dizzying to even think about the positive impact it could have. And it’s not even that far from being possible.
It’s time to tidy up
Sorting out the CSR mess isn’t going happen overnight. But this opportunity – the first of its kind in the world - is too important to fail. So we, as the CSR “industry”, need to start tidying it up now, and not rest until we make it something to be truly proud of. And there are three simple places to start.
1. Measure and manage
Before we can even begin to figure things out we need a simple way to know what’s being spent, where, with whom, and for what (social) return. ROI is one of the basics of doing business and we must make it a basic of CSR too. A simple, customisable, low-cost, SaaS system would enable companies to measure the effectiveness of their spend, and enable a macro analysis of where money is going, what’s most impactful, and how improvements can be made. We need a Tally for CSR, simple to use and open to all.
2. Share learnings and benchmark programmes
Even after just a year of the CSR mandate, the more able companies are already reassessing their CSR investments based on learnings so far. But most companies don’t have a CSR specialist, and the job of selecting NGO partners and monitoring programmes is left to another function to manage, without past experience in social impact. Inexperienced teams aren’t sure what to look for, or even which questions to ask and the result is hundreds of companies all wasting time (and money) learning the same lessons and funding potentially inefficient programmes. By creating platforms where companies investing in the same CSR space can share best-practice, discuss failures, build on mutual ambitions and eventually pool funds, we can ensure that investment is being directed to the programmes and ideas that will prove to be most effective in the long-term.
3. Inject innovation into impact
One of the great seductions of enterprise is its demand for innovation. Finding the cracks in what’s been done before, combining disconnected ideas into something ingenious, taking leaps of faith that others say it’s foolish to even dream of, is the lifeblood of any great entrepreneur. And social development isn’t so different. But taking a leap of faith, finding an unlikely new macro-solution, or simply thinking differently, are all impossible when your brief is to stay safe and not attract any unnecessary attention. We need to build a critical mass of companies who are ready to take risks with CSR spending and apply the pioneering nature of business to their CSR strategy. If we bring smart companies and great private sector leaders together in innovating CSR and social impact, there’s almost nothing they won’t be able to achieve.
Do One Thing is an impact consultancy based in Delhi that applies strategic thinking and innovation to corporate responsibility.