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Rebooting business model for maximizing CSR gains

By Devaprakash Ramakrishnan On 13 July 2017
Rebooting business model for maximizing CSR gains

Since coining the word, Corporate Social Responsibility (CSR) in 1930s by Harvard Professors, Berle and Means, the term, CSR has undergone transformational change globally. After the advent of Indian Companies Act in 2013, the understanding of CSR in India has taken a big leap bringing positive vibes in the annals of community investment with business houses becoming serious in creating foundations or finding an ally in charities and more importantly companies going extra board in giving back including brave disclosures, with sea change in their mind set towards investing in long term projects.


The aid architecture is undergoing a metamorphosis with reduced role for institutional and bilateral donors bringing in new generation donors into play, with more and defined role for local and private players. This decade has seen many countries seeing phenomenal growth bringing in perceptible and positive changes in human development indicators. India is also one amongst such rapidly growing economies, though pockets of poverty and exclusion remain. There is a huge connect between companies and poor as producers, workers, labors or consumers of commodities, services and products. Private sector increasingly feel the urge to empower the community around them by either moving them up in the value chain or employing productive worker population or offer market for consumers through value for money for their products. Some of the corporates have a vision through the lens of sustainability and empowerment far better than their development counterparts and Non-Governmental Organizations. Quite a few of the private companies have articulated vision on development themes like women empowerment, climate change and well being of community and look for measurable outcomes on health, education and environment.    


While CSR law could take much of the credit for some of the far-reaching changes brought about in Indian aid landscape, it has also sown seeds for co-creating share value and social enterprise bringing meteoric changes in the way companies look at community investment. Making up for three fourth of the GDP, 90% of jobs creation and 75% of domestic capital formation, private sector in India is jettisoning towards giving a new lead to development finance by unlocking $ 1250 million in 2016 fiscal forming approximately a twentieth of the overall foreign assistance, $ 2.4 billion received by India in 2013. Corporate giving used to be merely Rs 147 million in 2013 with an average investment of 22.6 million for Indian companies and Rs 19.5 million for multinationals just before the company law embraced Section 135 which was considered to be a watershed in bringing corporates on board as partners in Indian development. Number of companies investing in CSR went up from 1470 in fiscal 2013 to 5,097 in fiscal 2016, with many companies spending more than budgetary requirements.    


Positive vibes and discordant notes 

Number of companies collaborating with charities have went up to 50% in 2015-16, as against 30% in 2012-13, dissuading the practice of 19% of companies which used to write out cheques in 2012-13, to a more orderly investment for social change through well-designed projects with logic models. Similarly, the average spent on individual projects going up by 20% is an indication of the desire to spend in large projects, with energy sector taking a lion’s share of 34% of the overall CSR pie in 2015 fiscal, followed by financial services sector.


With multi-national corporations remaining underdogs spending merely 78% of their budget, when compared to their national peers spending close to 92%; the revelation that smaller listed companies spend relatively more on CSR than big companies can also be interpreted as market investment by companies desirous of expansion. One other disturbing trend is that companies tend to park CSR projects close to their plants and operations, with Maharashtra topping the investment list with 57 corporate houses. One third of business houses retaining implementation exclusively with them rather than through strategic partnerships with civil society organizations is also a challenge constraining to take impact to scale. Many defaulted companies stating CSR funds to be invested in multiple years for creating sustained impact points to companies' dilly-dally on planning for long term CSR investment and inadequate capacities to implement on their own.   


Encouraging pointers on global scene  

With private sector in developing countries contributing 60% to GDP, 80% to capital flows, 90% to job creation and with foreign investment outpacing development assistance by four to one, business has a crucial role to play in achieving Sustainable Development Goals (SDG). The raison d’etre of the corporate world being profit making should not be seen at odds with the goal of inclusiveness and sustainability. The sliver lining is that unlike the Millennium Development Goal (MDG) conversation, private sector was very much part of the SDG finalization. The two-important global development on engaging private sector namely business courageously acknowledging the past transgressions and slips and embracing the SDG score card which has potential for building a strong case for investing in companies are quick wins for Indian private sector. There is increasing need for business to reboot itself into socially responsible operating model with the noticeable rising trend of companies openly coming forward to integrate sustainability goals into core business and not merely in the CSR department, including acceptance of minimum standards for ethical sourcing, efficient supply chain management guaranteeing fair wages, governance diversity, gender parity, safety standards, workers’ rights and transparency while dealing with primary constituents like clients, displaced community, vendors, shareholders, board and employees.   


Taking good leaves out of the book of Indian CSR model 

With over 9 million private companies in India, some of them with turnover of more than INR 100,000 crores having multi-country presence in terms of manufacturing or market potential, Indian CSR model which made corporate giving mandatory is emerging as the fabled musk deer searching all over for the source of scent which comes from itself, showing as a beacon of light to the rest of the globe for emulation and learning. Started as a mandatory prescription, CSR model holds potential to emerge as rethinking on the fundamentals of operating model through shared value proposition by taking key stake holders as partners in business.   



(Devaprakash Ramakrishnan is a columnist and writer with deep interest in development finance engaging many years on aspects, bottom of pyramid and making markets work for the poor with strong focus on private sector participation. After a decade of work as development banker, with an advisory role for Government for a major women empowerment program, Dev chose to work for a charity for over a decade giving programmatic lead to grow a regional hub with focus on learning through collaborative networking internally and at sector level. Dev is a post graduate in Agriculture with specialization in agricultural economics and lives in Chennai.) 

Tag : CSR community empowerment livelihood inclusion rural India CSR

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