Active involvement of CMDs is the starting point

Ranjan Mohapatra

The department of public enterprises (DPE) had issued its first formal corporate social responsibility (CSR) guidelines in 2010, followed by the sustainable development (SD) guidelines. CSR and SD were given 5% weightage each in the annual performance evaluation under the MoU system. Based on the observations in the last two years, DPE has revised and merged the two guidelines and issued the revised ?guideline on CSR & sustainability? to be effective from April 1, 2013.

The new guideline has come out with many meaningful and essential provisions that could make a huge tangible impact on development. But the real challenge is in implementation.

The revised guideline has focused on many key aspects of CSR planning, implementation, monitoring and reporting. The main areas of focus includes the role of top management in CSR, personal involvement of the CEO/CMD, role of independent director as the head of the CSR committee of the board, two-tier CSR organisation structure, CSR communi cation and CSR collaboration, merger of CSR and SD guidelines, a reduction in the number of CSR projects from five to two & three to focus on large projects for better impact, and sustainability reporting.

In all these, it would be evident that the personal involvement of the CEO /CMD is the most crucial provision, and this is the starting point for making the revised guidelines implementable. This is because, if the CEO is actively involved in CSR planning and implementation, all other provisions of the guidelines will be implemented effectively.

The limited success of the CSR guidelines during the last two years is essentially rooted in the limited involvement of the CEOs/ CMDs of CPSEs. In most CPSEs, the CSR department operates as a stand-alone section and is run by people from unrelated departments who dispense funds in ad-hoc charity. The guideline was not being implemented in spirit. Efforts were being made to comply with the guidelines in any manner possible.

Therefore, the most crucial provision of the revised guideline is the personal involvement, drive, passion and zeal of the top management, including the CEO, in implementing CSR. But, the real question is how to implement and evaluate CMD involvement.

As per the revised guideline, in MoU evaluation, the performance of the CPSE would be judged on parameters like: (i) the degree of involvement of the employees and the top management in internalising the CSR and sustainability agenda within the organization; (ii) the degree of success in implementing CSR and sustainability projects they undertake during the year; (iii) the expenditure they incur on these activities (vis-?-vis the annual budgetary allocation); (iv) the effectiveness of the two-tier organisational structure in the process of planning, implementing and monitoring the CSR activities; (v) the efforts made and the success achieved in the engagement of key stakeholders through adoption of a good corporate communication strategy; and (vi) the adoption of sustainability reporting and disclosure procedures and practices.

The weightage assigned to each of these non-functional performance indicators would be decided during the MoU task force meetings. Thus, the key issue of measuring the involvement of CMDs and other intangible parameters is left to the task force members. As informed, the DPE is orienting the task force members for this crucial task.

Apart from evaluation, the key challenge is to implement; to make CMDs passionately involved in CSR. Today, the CMDs have to manage not only the ?profitability or economic bottom line? but also the ?social and environmental bottom lines?. Thus the task enhancement from single bottom line to triple bottom line management is happening without any meaningful change in the skill enhancement of candidates. The Public Enterprises Selection Board is yet to take note of this massive change in the task profile of the CMDs and its implication on the required skill-set for the CMDs. The DPE has to induce the PESB to improve upon its selection procedure to ensure that the required skill-set is available with the CMDs.

The author is president, Vision Consulting and editor-in-chief, CSR Vision. email: r.mohapatra1@gmail.com