How Firms are struggling to decide where to invest for CSR, says Seema Bansal

There is a lot of traction, but also confusion when it comes to apportioning spends on corporate social responsibility or CSR, says Seema Bansal, Director, Social Impact & Development Practice, BCG India. She works with many government programmes and NGOs/foundations on areas of education, public health and food security. She also works with many companies on their strategies on the CSR agenda. Bansal speaks with Shamni Pande of Business Today about how several companies are still trying to find their feet on the front and also how profit should ideally not be a bad word in CSR. Edited excerpts from the interview:

Q. What is the impact, at a collective level, of the law mandating 2 per cent spend on corporate social responsibility, or CSR?

A. Clearly, the impact or development outcomes will take some time to come through. But one is starting to see the impact at the input level. For instance, the CSR spend was Rs 3,000 crore before the Act come into place and that spend is estimated to be anywhere between Rs 5,000 crore and Rs 7,000 crore by end of March this year. Of course, this is much less than was expected and the original target of around Rs 20,000 crore would now be met by March 2016. At least, this is what the industry expects that the spend levels would go up this year onwards and could touch Rs 25,000 crore.

Q. Is there any struggle among companies in terms of figuring out the right space and even in terms of getting their act together on this front?

A. Yes, there is definitely a struggle when it comes to apportioning spends for CSR. That is the reason why the spend is less than the predicted level of Rs 20,000-Rs 25,000 crore. Earlier, it used to be CEO and founders who decided if they wanted to do CSR and the kind of activities they wanted to opt for. But, now, the decision-making process has become complex and, typically, a Board sub-committee needs to meet every quarter to decide on the activities and spends, and eventually this needs to be signed off by the Board. The second part of the struggle was in interpreting the Act and some of the clarifications have come out from the Ministry only last year. So, to take decisions compliant with the Act has not been easy. For instance, there was a lot of confusion about monetising employees volunteering with their time on CSR activities. And only recently it was clarified that this cannot be monetised.

Q. So, in a sense, companies are finding the CSR mandate to be limiting?

A. Yes, companies find the CSR Act limiting. Earlier, volunteering time of staff was a big thrust area, but as this is not compliant, many are reworking their strategy. In fact, many companies had also undertaken activities like running a school and hospital for employees and this also does not qualify asCSR . They are now having to decide if they would continue with these, or take on another activity that is compliant to the CSR Act.

Q. So, will welfare of the employees take a hit as a result of this change?

A. Not really. For many companies that have manufacturing units in distant locations, this continues to be their way of engaging and retaining talent as well. But there will be rollback with employee volunteering activities.

Q. Is there any clear, major trends on what the spends are going for?

A. Education and skilling have always been hot topics of focus for CSR spends as they also resonate with companies' needs for talent readiness and availability. So, this area continues to account for 30-50 per cent of the spends. However, in addition to education and skilling, sanitation has emerged as another big area. And this has got a lot of boost with government's programme on Swachh Bharat.

Q. Is the corporate spending on CSR sufficient to usher in critical change?

A. About $50 billion come from all centrally sponsored schemes and global funding agencies on education, housing, development, public health and food security. Hence, corporate spending is just a small fraction of that universe. But the ability of corporate to bring in managerial skills to government programmes to make them more effective and efficient, is huge. They can aid NGOs to take on their successful pilots and scale them up. But the catch is that volunteering is not a factor that is being counted as CSR.

Q. So, is CSR an obligation or an opportunity?

A. Progressive organisations see this as an opportunity to invest in and get in touch with their future consumer bases, invest in future talent pools and invest in future supply chains. Most corporates see this as an opportunity to strengthen their business in the long term.

Q. Finally, is profit a bad word when it comes to engaging in CSR activities?

A. It shouldn't be. But it is being viewed as such maybe the way the current Act separates profit from CSR. However, if you look across the world, then they are linking development needs of society to new product opportunity. And, eventually, only when companies see this as an opportunity, will we see a wide-scale change.

By Seema Bansal