Is CSR just marketing in another form? Here is how to really measure it well

Published: October 16, 2017 4:14:32 AM

Traditionally, governments are responsible for spending on social sector reforms to support job creation, especially in rural areas, such as the MGNREGA. The government also supports by spending on health programmes such as erstwhile NRHM, which has now transformed into the National Health Mission.

The outcome of CSR should be measured by the impact, not by inputs.

A recent announcement by finance minister Arun Jaitley that after the Companies Bill made it almost mandatory for corporate India to spend on CSR, it would result in more than Rs 14,000 crore of CSR expenditure on social sector. However, what is more disturbing to hear is that the government looks at this expenditure as substituting or supporting the government’s social sector programmes. Traditionally, governments are responsible for spending on social sector reforms to support job creation, especially in rural areas, such as the MGNREGA. The government also supports by spending on health programmes such as erstwhile NRHM, which has now transformed into the National Health Mission. Similarly, education is supported through the Sarva Shiksha Abhiyan, which is being championed as the programme for universalising elementary education. Under this government’s aegis, the rural poor can hope to get educated, and later expect jobs in rural areas, and then there is government support for health to reduce wasteful expense on healthcare. Now, if the government is looking to reduce its future expenditure on sectors such as health, education or job creation, it would lead to reduction in fiduciary trust. The government must support the weakest link in the society, namely the rural poor, for which it now looks for support from CSR spends of corporates.

It’s one thing to look at corporate as partners in programme implementation, for which we have seen PPPs that had been a mixed bag of success. If the government expects corporates to build toilets for rural households to reduce open defecation free (ODF) targets, it’s at best a noble thought that corporates are least ready and least willing to implement. If under this duress, the new toilets are built, it may not result in a big success. The fact is that the government expense in social sector is many times that of `14,000 crore CSR spend. In our recent research to understand how corporates in India are spending on CSR, we found that almost all eligible companies spend on areas such as education, health, sanitation, water, environment and community welfare—and the funds spent on any of these CSR projects may or may not result in much impact. So, the problem of social sector spending is that everyone is looking at the expenditure, but little attention is being paid to the impact created in the ground. Our research showed that companies are clever enough to figure out where and how to spend on CSR activities, so that this expenditure helps them bring more business. Today, most companies are not aligned with the Companies Bill that mandates them to spend and report on CSR.

Our research also showed that many companies in India engage only with local communities around their place of operations and the beneficiaries of CSR are generally the local population. Little concern is shown by even the largest corporates or even PSUs to develop scalable models of CSR that can be extended across the country, even with the help of local NGOs in each geographical area. Since companies collaborate with local NGOs, this partnership can help them validate CSR’s scalable models to help expand the socio-economic impact of CSR activities across the country. But taking a more holistic view of CSR is irreplaceable since, currently, in our sample of companies, we observe that most firms have adopted the same sectors for CSR (healthcare or education), and then they spend CSR budgets on a project-to-project basis (doing some health camps, adopting a village, building a road, maintaining a facility and so on).

Companies often try to align their business strategies with CSR strategy will help firms to leverage their CSR expenditures. We found that mining companies are aware that they are “bigger sinners” since they create negative environmental footprint, so they spend more on cleaning the environment. Companies such as ITC know they are accountable for creating cancer since they sell cigarettes, and so ITC has a more elaborate CSR and sustainability plan to convince stakeholders of its intent. Similar is the case with most other companies.

As an outcome of this research, we proposed that companies be measured based on normative guidelines to measure CSR Impact Index (CSRII), which should ask specific questions, such as:

• Is the CSR activity carried out as per the recommendations of the firms’ CSR committee and CSR policies?

• Do local communities that are the targeted beneficiaries require these CSR activities?

• What forms of partnerships were developed or used for these CSR activities?

• What is the social and economic impact of CSR activities on targeted beneficiaries?

• What is the Return on Investment of CSR activities?

• Is the CSR impact sustainable?

We hope companies would be held accountable to such questions when the government measures how well have they fared on CSR spends. The outcome of CSR should be on impact, not on input.

Ramendra Singh
Professor, IIM Calcutta

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Switch to Hindi Edition