Transformative…but for good or ill? Corporate philanthropy in India in the era of mandatory CSR

Andrew Milner

Over the last five years, Indian corporate philanthropy has been transformed by the introduction of mandatory CSR contributions for companies over a certain size, so much so that, to all intents and purposes, the one is practically identified with the other. Companies are evolving from a traditional cheque giving approach to more strategic and longer term engagements. CSR advisory organisation, Samhita, sees this as an evolution where the law is facilitating the shift from philanthropy to responsibility. But what has been the effect of this sudden surge of corporate funding for the social sector and what are the implications, good and bad, for the country’s development?

Roughly $1.2 billionm was spent on CSR in the financial year 2017-18

Roughly $1.2 billionm was spent on CSR in the financial year 2017-18

How much, where from and where to?
The 369 companies surveyed in a 2018 study by NGOBox spent INR Cr 8875.93 (roughly $1.2 billion)[1] on CSR in the financial year 2017-18. Over a third went on education and skill development projects, over a quarter on healthcare and WASH projects. Samhita’s 2016 research suggests this picture has been fairly consistent since the introduction of the Act. Transforming India notes education, health and rural development as the top three areas of expenditure.

Conversely, rights-based issues barely register. Women’s empowerment got a mere 2 per cent of the CSR money from the companies in the NGOBox study and Ingrid Srinath of the Centre for Social Impact and Philanthropy at the Ashoka University observes in a paper to the Duke University that, ‘LGBTI rights, the rights of commercial sex workers, labour rights more generally, Dalit rights and those of tribal communities, especially those facing displacement or loss of livelihood due to mega-projects, the rights of minorities, migrants, refugees and a host of others are all at risk of not getting support or visibility.’[2] There will be more to say about this below.

Geographic distribution
Statistics suggest a geographical bias, too, with the neediest regions benefitting least from increased corporate social spending. According to social impact consultancy Sattva, which cites figures based on Ministry of Corporate Affairs statistics for 2014-16, Bank of India and official poverty rates, the Central and Northern regions which have respectively the highest percentage and the highest number of people living in poverty, attract the smallest share of CSR resources per capita, while the South which has the lowest proportion attracts the largest.

A cautious attitude to giving?
The tendency among Indian corporates to fund uncontentious causes and steer clear of rights issues was also noted in a recent Alliance article, Amitabh Behar. Pradeep Narayanan of Partners in Change thinks it is ‘going to be a norm for some time.’ He gives three reasons. The first is simply lack of experience. ‘They are finding their feet’. Many of them are unused to working with the third sector and on social issues – or both. A second reason is that dealing with rights issues tends to be complicated and ‘they do not want to invest in monitoring system or a team that understands wider rights based programming’. Finally, it’s self-interest: ‘no business would like to harm its existential interest. So it would never disturb its relationship with state or peers.’

Samhita’s research also shows little evidence of a more strategic or fully thought-out approach. Most of the new CSR is simple compliance with the statutory requirements, with 61 per cent of Samhita’s research respondents following this approach. Transforming India notes ‘little beyond anecdotal evidence of a shared value approach’ and little evidence of companies actively pursuing sustainability through their CSR. Generally speaking, it sees this narrow interpretation of CSR as one of the weaknesses of the corporate philanthropy sector. The law is often seen as a maximum rather than a minimum and it is ‘also ambiguous on certain issues such as working with social businesses, which has led to under-funding of the social enterprise ecosystem in India.’

‘Samhita, too, sees greater willingness to collaborate as companies realise their own resources alone will be inadequate to development tasks and greater innovation in the development sector as companies bring their managerial and technical expertise to bear on problems.’

Anushree Parekh of Samhita also acknowledges an element of sticking to what you know. ‘Issues such as trafficking, drug abuse etc involve a high level of complexity,’ and, echoing Narayanan’s point, ‘companies may not have the required expertise to address these.’ Samhita adds that this is exacerbated by absence of common frameworks and standards.

Signs of a more progressive attitude
However, Parekh also points out that their attitude is not always the product of playing safe. First, these are the areas of greatest need identified not only by government (the Indian government has a campaign against open defecation), but by NGOs, communities and employees of the companies in question. Secondly, these sectors have already developed a mature ecosystem, which makes it easier for them to invest in. She also notes that companies are ‘beginning to tackle ‘sensitive’ or ‘hard to address’ cause areas,’ citing a couple of examples: Larsen and Toubro strengthening governance mechanisms and empowering people’s organisations in rural India as part of a four-year programme on watershed management, while the Macquarie Group Foundation is working on a long-term project to respond to modern slavery in Asia.

The growth of foundations
The civilindia.com website lists 187 corporate foundations in India (2016 figure). Many of these antedate the 2013 Companies Act, but the demands of the Act have certainly sparked new growth. Pradeep Narayanan notes an increasing preference, especially among large companies to start foundations. He cites a number of reasons: ‘foundations can be used as PR giving greater visibility to the brand. Foundations can serve as a platform to create a nexus with both civil society and the government and, in fact, can allow corporates to start accessing government funds from various schemes.’ Samhita’s research agrees that there is a trend to set up foundations, ‘which are more likely to be grantmaking than operating’.

More funding for NGOs? Divided opinion

At the same time, there is a growing tendency to fund NGOs, says Samhita, with 85.9 per cent of large companies using NGOs to implement programmes, according to Samhita’s own research and research from CRISIL (2018 figures). ‘Given that CSR needs to address the needs of communities in the vicinity of company’s operations and factories, which may be located in remote and rural areas, many companies are funding and supporting smaller and more local NGOs.’ Against this, however, Ingrid Srinath, asserts that ‘only about a third of all CSR spend is routed through external implementing partners, belying expectations of how much additional support NGOs might expect to receive as a result of the law.’

Samhita, too, sees greater willingness to collaborate as companies realise their own resources alone will be inadequate to development tasks and greater innovation in the development sector as companies bring their managerial and technical expertise to bear on problems. Corporations, they argue, are bringing a new rigour to development. At all stages of a project, ‘companies are asking questions traditional donors have shied away from.’ Companies, for instance, are often keen to incorporate exit strategies right at the start of a project.

More money, more awareness
One obvious result of the Act is a large increase in the amount of corporate money available for social programmes. Ingrid Srinath estimates that ‘it has increased the quantum of corporate philanthropy, possibly to about twice the amount reported was spent prior to the existence of the law.’ In addition, as Pradeep Narayanan point out, companies have begun to take the idea of philanthropy more seriously. ‘Many have started talking about wider development and most have board level committees to speak on these issues. Many of them have brought on board at least one team member to engage with CSR portfolio.’ KPMG’s CSR Reporting Survey for 2017 also finds that the top 100 companies are taking their CSR responsibilities seriously, at least to the extent of making public a statement of intention and the way their CSR is administered. There is also an increase in disclosure of focus areas of CSR – 72 companies doing this in 2016-17, up by 22 per cent from 2014-15.

Anushree Parekh points to two other benefits the mandatory CSR provision has had: it is breaking down siloes between three main players, corporates, government and civil society; and the demands of companies to demonstrate effectiveness have created a stimulus to professionalisation in the NGO sector.

The negative effects
However, it is the negative effects of the Act that have drawn more attention. Ingrid Srinath notes that ‘it prioritises certain kinds of work…there is a list of themes that the government thinks are good things to fund and, corporates being corporates, they stay within the narrowest definition of those things rather than test the boundaries.’ In addition, she says, the reporting requirements disincentivise long-term work – which exacerbates the tendency to caution, noticed earlier – ‘so it’s very much programme money, 12 month cycles, direct service delivery… and staying completely away from anything that is long-term, that is advocacy, that is rights-based, that is strategic in terms of going where the need is.’

Anushree Parekh believes that the idea that companies are using CSR to whitewash dubious business practices is a generalisation. She argues that many companies are still finding their way with CSR and, as they progress, their interventions mature.

The new money is also having a distorting effect on the NGO sector. As Amitabh Behar points out in his recent Philanthropy Thinker post, there is a vogue for NGOs offering what are often simplistic, technical solutions to complex problems. These are attractive to new corporate money because they seem to hold out the prospect of immediate gratification and because such NGOs are likely to speak the same language as business. Pradeep Narayanan also notes that companies are using mandatory CSR ‘to build a nexus with NGOs. If there is one NGO they fund, there are ten others in a queue waiting for funds.’ A dependency is created and ‘NGOs as an independent voice vis-a-vis business is gradually disappearing.’

The political dimension
We have already noted that the caution Indian corporates display often has a political ground, in fact, political considerations play a large part in the new corporate philanthropy. Srinath notes that ‘a lot of it seems to be directed at buying political goodwill – funding the PM’s relief fund [although, according to the latest figures, donations to this cause have dropped significantly], or areas the PM has made clear his priorities are or funding the NGO that’s run by the daughter of your MP.’

The Vidhana Soudha in Bangalore; the largest Legislative building of India.

The Vidhana Soudha in Bangalore; the largest Legislative building in India. ‘CSR is an important area which should be leveraged for filling health infrastructure in public health across the country.’

But these political considerations operate both ways, with Indian politicians often just as intent on cultivating the goodwill of corporates. ‘Indian policy-makers in even as important a sector as health have started looking at CSR as a source for financing their implementation system,’ says Pradeep Narayanan, with the result that ‘national health policy depends on CSR for realising health objectives of the nation.’ Corporate Watch, too, cites the 2017 National Health Policy: ‘CSR is an important area which should be leveraged for filling health infrastructure in public health across the country.’

Moreover, Ingrid Srinath draws attention to a recently concluded partnership between NITI Aayog, the government’s National Institution for Transforming India, and the Piramal Foundation and quotes NITI Aayog CEO Amitabh Kant’s belief that ‘public-private partnerships, aided by technology, can bring radical transformation in the country, boosting implementation of various government schemes.’ Under the partnership, the foundation will work closely with government agencies to strengthen public systems in health, education and nutrition and worries about ‘democratic accountability and governance under such outsourcing’.

Corporate philanthropy as cosmetics
This takes us into murkier waters. Amitabh Behar castigates Indian corporate philanthropy for using corporate benevolence to mask unacceptable business practices. One of the examples he gives concerns the Vedanta Foundation which, he says, ‘promotes the livelihood of young people from poor and excluded communities in the state of Odisha while local activists claim that Vedanta business operations are responsible for the loss of thousands of traditional livelihoods among tribal and other excluded communities.’ Vedanta is also the parent company of Sterlite Copper, which is involved in a long-running dispute with the local community over the effects on health and the environment of its smelting operations in Thoothukudi, Tamil Nadu. In May this year, 13 people were killed and dozens injured when police fired on protestors against the expansion of the smelting plant.

‘The new money threatens to introduce a leviathan not only into the Indian philanthropic landscape, but into the political landscape, too with corporate support underpinning both the non-profit sector and, through partnership with government, large slices of welfare provision.’

It is the Act itself, rather than simply its interpretation, that is contributing to this process, argues Ingrid Srinath. First, ‘by defining CSR narrowly, it permits the separation of corporate philanthropy from corporate human rights, environmental and governance practices,’ and it ‘buys the silence of large sections of the non-profit sector who do not wish to be labelled “anti-business” when corporate philanthropy is a large source of new funds for NGOs.’

Anushree Parekh believes that the idea that companies are using CSR to whitewash dubious business practices is a generalisation. She argues that many companies are still finding their way with CSR and, as they progress, their interventions mature. They cite the example of Viacom 18, a media conglomerate, which ‘initially focused their CSR strategies and funds in the sanitation sector as a response to the government’s call to action.’ However, the company came to realise that that using their core competency as a media company in order to promote behavioral change was the most effective way for them to proceed.

Everyone concedes that there are weaknesses in the implementation and interpretation of the Act. As Anushree Parekh observes, ‘the ecosystem lacks a common taxonomy and understanding. There is a strong need for the development of a framework that will define and assess excellence in CSR right across all the stages of the CSR lifecycle,’ and notes that ‘what the corporate philanthropy sector needs is open and candid dialogue to reduce the trust deficit,’ among all interested parties.

Still early days
There is no denying the potential of Indian corporate philanthropy following the introduction of Section 135. The massive injection of resources into the development sector from corporate sources could be of unquestionable benefit to that sector. Many of the weaknesses now evident – the lack of experience of the social sector, the absence of infrastructure, the uneven distribution of resources – may be remedied by time and experience. Some of our respondents see signs of this already.

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However, more sinister possibilities also exist.  The new money threatens to introduce a leviathan not only into the Indian philanthropic landscape, but into the political landscape, too with corporate support underpinning both the non-profit sector and, through partnership with government, large slices of welfare provision. The upshot of this? An overmighty private sector with none willing or able to call it to account. Between the best- and worst-case scenarios, there are many possible variants. It’s still early days. Whether the benefits of increased Indian corporate giving will outweigh the drawbacks will depend on the vigilance with which CSR is overseen, the work of organisations advising novice corporate donors – and, of course – the intentions of the corporate donors themselves.

Andrew Milner is associate editor of Alliance magazine


Footnotes

  1. ^ According to the conversion table, www.onemint.com/2011/04/07/crores-to-millions-calculator, on 26 October 2018
  2. ^ Ingrid Srinath, ‘Cornucopia or Poison Pill?’, paper presented at a 2017 conference convened by the Duke Human Rights Center at the Kenan Institute for Ethics. Cited by kind permission of the author and Duke University.

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