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13 March 2014, Gateway House

CSR: need for creative alliances

The new Companies Act makes it mandatory for all listed Indian companies to contribute 2% of their annual net profits towards corporate social responsibility. Robust participation through CSR has the potential for socio-economic change, but innovative ideas are needed to ensure it is effective and widespread

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Responding to a question at a private meeting in India, on why international institutions (educational, think tanks etc.) seem to receive more contributions from wealthy Indians, than their own domestic institutions that are in dire need of support, the chairman of a leading global think tank provided a thoughtful view on Indian High Net-worth Individuals and their contributions. The broad inertia of wealthy individuals to contribute with greater largesse to societal causes in India is, he said, a serious dis-service.

This inertia is more serious than just a disservice. India is at a tipping-point, and the mood within the country can turn unfulfilled aspirations into a serious resentment. Accepting the social and economic disparities is a first step; taking sustainable steps to reduce it, is the next, pro-active move that can make the difference.

Institution-building is also the need of the hour, for the pillars of a strong nation are its institutions, and these have largely been ignored. Given the current climate of tense anticipation and vocal resentments, contributions by wealthy businesses must improve. It is a necessity executed in self-interest.

A study by Bain (India) on donations by High Net-worth Individuals (HNWI) conducted in 2012, states that their average contribution in 2011 was 3.1% of their total income – way behind the U.S. (9.1%). It states that too many individuals have been excluded from the economic boom. India is simultaneously home to one of the world’s fastest growing HNWI populations, and one in three of the world’s malnourished children. We cannot be comfortable with this striking imbalance. [1]

For sure, there are organizations and HNWIs that have contributed widely to society. But, clearly this is no longer enough.

The new Companies Act makes it mandatory for all listed Indian companies to contribute 2% of their annual net profits towards Corporate Social Responsibility (CSR). The government has also stated that promoter and company donations to their foundations cannot be included in this. It is well known that many foundations in India are not transparent, nor have the necessary financial audits in place.

India has possibly the largest number of active non-government, not-for-profit/NGOs in the world. A 2010 report in the Indian Express on a study commissioned by the government in 2009 stated that India had 3.3 million NGOs. That number would surely have increased. Still, it is impressive. That makes one NGO for less than 400 Indians in 2009, and many times the number of primary schools and health centers. Yet we continue to lag behind in every aspect. [2]

Robust participation through CSR has the potential to create an enormous socio-economic change. But these plans need to have an action plan that creates a measurable impact. Currently, only a handful of companies have well-structured initiatives. Some examples are Marico, The Tata Group, Hindalco Industries, Mahindra Group and BPCL to name just a few.

Most companies tend to work with an NGO that runs a project they believe is worthy of funding, but often they remain hands off with the due diligence of the project on the ground, nor do they ensure that there is a process that measures the impact.

What is needed, is a more collaborative approach between NGOs in each sector. [4] This will be more productive than each managing its own plans. A collaborative model would also make it easier for donors to contribute towards a broader National Social Program-type structure.

Take the education sector. It has some of the largest local and internationally based NGOs participating with the aim to educate every Indian. Yet there are enormous deficiencies, from lack of schools and adequate classrooms, and availability of teachers. About 75% of the world’s 775 million illiterate adults are concentrated in 10 countries, amongst them, India. Women represent two-thirds of all illiterate adults globally. [3]

If in India there is one NGO for every 400 Indians, among them, the largest number, education providers, why is it that it continues to rank among the nations with the largest illiteracy rates? Clearly something is not working.

An idea could be for the most effective NGOs working in the field of literacy, to combine their strengths and create a common resource center that delivers a high school level education plan for all low income schools in India. This would enable donors to have a transparent organization to support for their CSR and create a coordinated system for collecting CSR funds, delivery of teacher training and curriculum development.

Divided into North, South, East and West zones, there would be regional divisions for each large ground force. These units would have the ability to access funds from the central pool – in which the government’s education and HRD departments must also participate and contribute with resources and with permits processes. The ground teams can focus on enrollments and specific delivery action plans.

This would allow for a more cost-effective and efficient way of working on a national agenda to eradicate illiteracy. The resource center would provide the donors with an annual audited report that maps progress and articulates a forward plan.

Priti Devi is an independent CSR and Social Impact Investment Consultant.

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References:

[1] Rekhi, G., Bhagwati, A., & Sheth, A. Bain & Company, (2013). India philanthropy report 2013. Retrieved from website: http://www.dasra.org/sites/default/files/BAIN_REPORT_India_Philanthropy_
Report_2013.pdf

[2] Shukla , A. (2010, July 07). First official estimate: An NGO for every 400 people in India.  Indian Express. Retrieved from http://archive.indianexpress.com/news/first-official-estimate-an-ngo-for-every-400-people-in-india/643302/

[3] CIA, (n.d.). The world factbook. Retrieved from website: https://www.cia.gov/library/publications/the-world-factbook/geos/print/country/countrypdf_xx.pdf

[4] (n.d.). Retrieved from http://www.gmfc.org/en/action-within-the-movement/gmc-actions/actions-by-imperatives/4-fight-hivaids/past-actions/34-hope-for-african-children-initiative /

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