CSR at 12: Some good intent, some State-forced compliance

In 2013-14, during the last months of the UPA government, mandatory Corporate Social Responsibility provisions were added to the Companies Act. Firms of a certain size that are profitable are required by law to spend money on public welfare, whereas prior to that, such spending was voluntary. Companies gave to society because they wanted to. Henceforth, they would have to.

There is something odd about the State mandating the market to give to society. But it was not surprising. Post-independence India harboured a deep suspicion about private enterprise, and successive governments took it upon themselves to shepherd the private sector. Telling companies how they should spend their profits was bound to happen.

In the dozen years since then, a lot of water has flowed under this bridge. A few other developments have also taken place, which have shaped the landscape for giving. As a result, there is enough to look back on, and ask what has worked well, what hasn’t, and how the way forward could be different.

On the plus side, the law has brought a lot of money into the giving space and turned a lot more companies towards this path. Close to Rs 40,000 crore is now spent on CSR initiatives. While a lot of this is in places companies find easier to work in, the law has reached everywhere. A few months ago, I compiled a list of companies based in the poorest district in the state that were reporting CSR spending and found at least 25.

On the downside, many of them were not naturally inclined to give, nor had they made it a habit. As a result, many firms now view it as compliance, and typically assign one of the managers to ‘take care of this too’. Such people are usually not incentivised to perform as competently as their core functions, and in many cases, don’t know how to do it. So they’ve been dutifully checking the boxes as asked. Most of this money is wasted.

Another chunk of wasted money is from spending on things that are quite complex. The trouble with forcing people to spend on public purposes is that they begin to think of themselves as experts in their chosen subjects, which they clearly are not. The asymmetry of power between those who give money and those who receive it feeds this mistake.

A lot of the problems are social and political, and cannot be addressed by technical, financial or managerial interventions. But if those are the only tools an organisation has to guide its spending, it will inevitably see the problem through those lenses.

Others grumbled that they were being asked to do the State’s job. There’s some truth to that. We’re now seeing a trend: many government departments are seeking CSR funds to do things they should be doing themselves. Often, when the public seeks something from the government, the response is, ‘Can we find CSR money to do that?’ The answer is often ‘no,’ and even a ‘yes’ comes at the cost of saying no to something else.

There is some good news. In the middle of all this flux, some companies have also seen the law as an opportunity to do some good, and even told themselves they could spend the funds better than the sarkar might have done if it had been paid as taxes instead. A few are developing theories of change, and spending CSR monies according to the theses they have developed. These are true green shoots, even if they are too few.

But they too face constraints. Doing ‘good’ is honey to political bees, and inevitably, the government began to steer this. The range of things companies could give to was reduced, reporting requirements were raised, and some companies were nudged to give to favoured recipients and goals. The Nehruvian State is alive and well, decreeing that it alone knows whither we must go.

One area that sensible spenders would like to focus on is support for communities. There is a dawning realisation that NGOs are not the best stewards of changemaking, and that local communities might be more invested in progress. Also, local people can engage the government in a very different way compared to how NGOs approach the State. Citizens have a kind of freedom that organisations don’t, and it’s worth leveraging that.

In an ideal world, the guidance from the government would be very different: teach young people to become problem solvers in different domains, collaborate with the State to help it conceptualise and execute policy, and accelerate the adoption of good products, services, and solutions. That matrix for changemaking would fit well within the meaning of ‘social responsibility,’ coupled with the strengths of the corporate world.

The writer is a social entrepreneur, founder of Mapunity and LVBL, and co-founder, Lithium, wakes up with hope for the city and society, goes to bed with a sigh.

Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH.