CSR: When virtue turns into vice

CSR: When virtue turns into vice

The Memorandum of Understanding (MoU) signed between Government of Karnataka and an art foundation for adoption of a renowned art gallery in the heart of Bengaluru has brought into sharp focus the abuse of Corporate Social Responsibility (CSR) funds and the need for a well defined public policy to avoid such misappropriation and future controversies.

Although noble in its intentions, CSR is a bad law. It expects corporate honchos to be social reformers. India has become the only country in the world to mandate corporations to spend 2% of their profits for social good. Estimates of various think tanks and consultants vary widely with predictions of 5,000 to 15,000 companies coming under the purview of CSR provisions as defined in the Companies Act, 2013 with a likely spending of Rs 5,000 to Rs 25,000 crore every year. The Act expects companies to create a CSR committee to monitor activities but there are no stringent penalties for non-compliance.

For such humongous spending, enforcement provisions in the law are extremely thin and thus it is impossible for anyone to scrutinise expenditures or verify compliance.

It has been two years since the law was introduced and many companies have admitted to not meeting their CSR obligations. There are serious questions on whether the CSR will have the much needed impact on social sector and benefit the poor and the deserving as envisioned.

On the contrary, there are vociferous demands for the CSR funds from governments and well to do sections of society. The Modi government wants corporates to spend their CSR bounty on its flagship programme of Swachh Bharat and toilet construction.

The blame for allowing adoption of iconic buildings and public spaces by using CSR funds lies squarely on the shoulders of the Karnataka Government. The Karnataka Tourism Vision Group (KTVG) recommended that the state’s most visited monuments, parks and iconic structures to be adopted by corporations or revived through a PPP model. The vision document of KTVG consisting mostly of Bengaluru centric corporate honch-os is hardly visionary, is lopsided, lacks creativity and will do more damage if implemented fully.

There are no new or refreshing ideas. Devoid of members from most other districts, public policy experts, academia and cultural practitioners, the report is a dream for real estate developers, PPP promoters and corp-orate India that want to ride the CSR wave for brand promotion.

It also recommends creation of new government departments and management authorities while proposing to build a 435 acre MICE (Meetings, Incentives, Conferencing, Exhibitions) facility near the Kempegowda International Airport in Bengaluru. It is a tragedy that the state government has allowed a Bengaluru-centric crony group to influence policy pertaining to such iconic buildings, famous parks and important monuments that belong to the citizens of the state.

Utter failure
The Tourism Department must recognise that the adoption programme has been an utter failure. Moreover, most developed countries do not allow its best tourist destinations like the Statue of Liberty, Golden Gate Bri-dge, Eiffel Tower, Tower Bridge or Westminster Abbey to be adopted by corporations. Even bankrupt Greece has avoided seeking help from corporations for the maintenance of Parth-enon or Temple of Poseidon.

The state government must act immediately to scrap the adoption as well as the tourism policy and restore Lalbagh, Belur-Halebid, Ranganthittu bird sanctuary to its original status after the expiration of current contract. It is ironic that the state spends Rs 6,500 crore on keeping afloat loss making state owned companies, subsidises Rs 18,000 crore of goods and services, borrows Rs 32,000 crore to fund various boondoggle programmes but cannot find the money to support public spaces, art, music, cultural and tourism infrastructure.

An alternative would be for the state government to create a fund, like Chief Minister’s Relief Fund, which is manned by all stakeholders in order for companies to donate CSR funds.

Data from the past 2 years highlights the fundamental flaws in the CSR law. Companies are funding a wide variety of causes by using their own foundations and accounting for them under CSR expenditures. India’s largest corporation spent part of its CSR funds on the Dhirubhai Ambani hospital and rebuilding Reliance Foundation hospital.

A 2-wheeler giant funded Vedanta Cultural Foundation for teaching and propagating Vedanta philosophy. Other large companies contributed to tiger reserves and environmental causes while many have made contributions to government initiatives like Skill India and vocational training.

The Centre along with state governments and corporations, must revisit activities relating to CSR expenditures. For a start, the governments must avoid asking companies to fund its own initiatives. And for an optimal outcome, majority of CSR funds must be directed to villages and towns that lack basic living conditions and are deprived of social development. The CSR law is here to stay and hence, better to fix it at this nascent stage to make it effective and benefits reaching the needy.

(The writer is a Bengaluru based money manager)

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