Can CSR Help India Achieve its Development Goals?

Washington, D.C.

India’s philanthropic landscape has seen remarkable change and growth in the last 6 years, due to the amendment to the Companies Act which made India the first country in the world to mandate Corporate Social Responsibility (CSR). The amendment, passed in 2014, mandates companies with either a net worth of Rs 500 crore (approx. $70 million), a turnover of Rs. 1000 Crore (approx. $ 140 million) or net profit of Rs 5 Crore (approx. $ 699,125) or more, to contribute 2% of their average net profits of three years towards Corporate Social Responsibility initiatives. The law defines various mechanisms, calculations, disbursal methods and contribution areas towards which these funds can be spent. Due to the mandatory nature of these contributions, many global corporations established in India, international and Indian non-profits, and potentially universities have a much larger pool of philanthropy to draw from when seeking to fund socially impactful projects. This law thus greatly facilitates India to achieve its national and global development goals. However, according to a report by Dasra in 2019, India needs to spend an additional Rs. 4.2 Lakh Crore ($60 billion) annually towards social sector initiatives in order to achieve even 5 of the total of 17 SDGs by 2030.

In a strategic vision document presented in 2018, the Government of India articulated its development agenda. The agenda reflects that India’s own development goals build on the UN SDG Framework, aiming to achieve the UN SDGs by 2030, as well as ensure that India becomes a 4 trillion dollar economy by 2022. It aims to achieve this through “broad-based economic growth to ensure balanced development across all regions and states and across sectors,” while facilitating investment, innovation and upskilling. The CSR law thus greatly facilitates this vision through capital infusion into the social sector, and as per Dasra’s estimates, social sector funds in India have grown by 11% over the last 5 years, with the growth rate of giving in the private sector outpacing the public sector. However, there is scope for much further growth of philanthropy in India, especially since India looks to position itself as one of the leading nations working to achieve the UN Sustainable Development Goals (SDGs). This creates a unique opportunity for international universities and non-profits. It further estimates that corporations and ultra-high net worth individuals can afford to spend 2.5-3.5 times more than they do now towards philanthropy and that 15% of CSR funds went unspent in 2018. The declining trend of unspent funds is depicted in Figure 1.

Further, if one analyses the current trends in CSR spending, there are significant geographical and issue area disparities. Research by Ashoka University’s Centre for Social Impact and Philanthropy (CSIP) reveals that most philanthropy, including CSR funds, only go to a few states. They show that Maharashtra receives the largest share of CSR spending followed by Tamil Nadu and Karnataka, while some of the more populous and significantly less developed states, like Uttar Pradesh, Rajasthan, Bihar, Madhya Pradesh, and Odisha receive far lesser funds. Further, it is important to note that certain issues/thematic areas receive far more funding than others, but it is hard to determine how funds are broken down by theme since current classifications are too broad. A report by McKinsey in 2013 suggested that almost 90% of total donor interest was targeted towards primary education, primary health care, rural infrastructure, and disaster relief, leaving other thematic areas such as livelihood, environment, human rights, governance, food, and agriculture with a dearth of funding. CSIP Research also reveals that as of 2016, nearly 50% of CSR Funds were given to organisations/initiatives addressing challenges in Education and Healthcare. A report by the Ministry of Corporate Affairs details how the Government of India is tracking CSR spends by sector and reinforces that conclusion, as visualized in Figure 2.

All this information highlights a few key concerns- while the funding pool for social impact initiatives is growing, the money needs to be channeled better to generate impact at scale. Further, a more targeted approach towards classifying and tracking investment into key beneficiary causes will help generate more targeted CSR investment in currently under-funded causes. Corporations looking to fulfill this mandate also face challenges in identifying partners to give CSR funds due to a glut of unverified nonprofits operating in India, as well as in identifying implementation partners for causes in sync with the company’s mission and ethos. More broadly, a rethink needs to take place on how corporations evaluate the success of a corporate CSR initiative.

In this scenario, the need for multi-sectoral partnerships is significant. Partnerships cutting across the academic, not-for-profit and corporate sectors will ensure that socially impactful initiatives launched in India can be well researched and conceived, expertly implemented and generously funded. Further, the presence of international universities and non-profits in India presents unique opportunities to address the previously mentioned gaps. Many international universities have presences in India as Section 8 companies or non-profits which allow them to conduct research and other activities in India. Given global universities’ wide-ranging research expertise in varying fields, collaborations with Indian universities and non-profits present great opportunities for conducting localized, socially impactful research on under-served and under-funded causes.

Further, multi-sectoral partnerships like these are attractive to donor companies looking for effective deployment of their CSR money. The Government of India’s Ministry of Corporate Affairs recently issued a circular expanding corporation’s CSR mandates to include centrally funded and state-funded academic institutions, universities, and incubators. This enables corporations to direct CSR funding towards Indian public academic institutions, which means global universities collaborating with these institutions can also access this funding for joint academic initiatives. This also encourages Indian and global philanthropic foundations to collaborate with Indian public universities towards establishing on-campus endowed chairs or initiatives which can receive these CSR funds.

However, as with any opportunity present, associated challenges also remain, and are detailed below:

  1. It is yet to be seen if this expansion in the CSR mandate will be extended to private universities in India. Private universities also conduct significant amounts of socially impactful research, and the expansion in the mandate should benefit them as well.
  2. Current methods of analysing CSR funding flows to sectors are not aligned with the UN SDGs. If the government were to track CSR spends of organisations based on the SDG it is aligned to, it would greatly facilitate accurate tracking of the impact the corporate sector can have in achieving the SDGs.
  3. The corporate sector also needs to prioritise outcome and impact-oriented assessment of their CSR initiatives, and ensure that comprehensive monitoring and evaluation of their CSR initiatives take place. This will enable the focus of CSR projects to shift from infrastructure/resource provision to actually tracking its use and effect to demonstrate real impact.
  4. Current regulations as under the Foreign Contributions Regulation Act (FCRA) need to be reviewed and revised to remove bureaucratic and procedural hurdles for well-intentioned and compliant global universities and non-profits operating in India. This will go a long way towards improving the ease of doing business in the country and therefore accelerating economic growth.

To conclude – India, home to 1/6th of all humanity has a huge role and responsibility to achieve the SDGs- not just for itself but for the planet. Currently, India contributes to 20% of the global gap in 10 out of 17 goals, and thus it is imperative for India to succeed in order to achieve global success in moving towards a more sustainable future. To this end, India has made great strides in moving towards achieving the SDGs through its initiatives to improve public sanitation (Swachh Bharat and ranking districts on sanitation performance), educating its population, increasing the use of renewable energy and moving towards providing everyone healthcare through Ayushman Bharat. The government thinks tank NITI Aayog has revolutionised how India analyses its performance towards achieving the SDGs by ranking state and union territory level SDG achievements and has spurred extensive inter-state dialogue on how to achieve the SDGs at a local level.

However, an even more focused effort needs to be made to ensure that resources from all sectors – public, private and civil society – are leveraged and made to collaborate in order to drive the achievement of the SDGs from the grassroots level. A focus on driving philanthropy to empower people at the bottom of the pyramid is essential for India to develop sustainably and equitably. To provide a platform for such wide-ranging collaboration, Sannam S4 is organising an Annual SDG Conclave, that aims to convene leading Indian and global universities, non-profits and corporations to discuss how India can leverage global, cross-sectoral partnerships to achieve the SDGs by 2030. The current level of inter-sector collaboration thus needs to intensify, and regulatory and bureaucratic hurdles impeding collaboration and accurate tracking of private-sector impact need to be removed. This is essential in order for India to successfully march towards a more sustainable future and meet the SDGs by 2030.

Kaajal Joshi, Research and Operations Assistant at Sannam S4

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