Mandatory Corporate Social Responsibility in India: How Is It Working?

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February 9, 2017; American Bazaar

The American Bazaar foresees exciting things for India’s philanthropic sector, based on a report called “India’s CSR: Taking Singles instead of Hitting Sixers,” which analyzes the latest trends in Indian philanthropy and corporate social responsibility (CSR).

The new report analyzes “one of the world’s most interesting experiments to promote private philanthropy—the CSR requirement in the 2013 Companies Act.” The act makes it mandatory for corporations in India with revenues of more than 10 billion rupees (approximately $131 million) to give two percent of their profits to charities. The Guardian noted the great debates the law sparked between NGOs and businesses, as its enactment made India the first country to mandate CSR initiatives.

Just as the Indian government pushes inclusive demonetization to reduce corruption and technology access for all Indians, it is pushing India’s corporate sector to provide the seed capital and philanthropy for solutions to India’s most challenging problems in education, healthcare, the environment and skills development.

The Economic Times India attributes an 11 percent growth in India’s “millionaire club” to the 2013 Companies Act. The credit is based on a trickle-down view of regional development; wealthy Indians—including non-resident members of the Indian diaspora who live overseas—raised the incomes of the average Indian household in ways that benefit the philanthropic sector: “In 2016 alone, 924 startups received funding…creating rapid advancements on the technological, medical, financial and retail fronts.” The phenomenon underscores the claim that the 2013 Companies Act has been successful in “thrusting philanthropy rates in India” in a way that benefits regional, and transnational development.

The American Bazaar notes that Indian companies practiced CSR before the Companies Act was enforced. Such philanthropy was practiced “without calling it so.” Corporate housing, and subsidized living, and employee retention practices have been linked to community development initiatives. From the onset, the Guardian elaborated on NGOs concerns about how any “forced philanthropy” risks “tick-box behavior, tokenism, or even corruption, and masking of data.” However, many agreed that only time will show any real impact of the legislation.

So, what have we learned so far? Nish Acharya, former director of innovation and entrepreneurship in the Obama administration and senior fellow at the Center for American Progress, explains in the American Bazaar that NGOs in India “see a sector that is still in the early stages of getting organized.” The “newness” to philanthropy in India makes it difficult for NGOs to provide more constructive feedback. This assessment is derived from the India CSR report’s interviews with 39 leaders of India’s largest NGOs—“the very organizations receiving CSR funds.”

Three core themes resonated from recommendations about what is still needed to generate more constructive feedback. Companies should do the following:

  • “Move beyond the check” by ensuring that CSR departments engage more with their NGO partners;
  • “Emphasize the corporate in CSR” by actualizing the role of corporate to assist NGOs in areas of operations, finance, marketing, and governance; and
  • “Focus on impact” by generating and implementing more long-term rather than short-term internal projects and strategies.

Doing so can better scale NGO and external partners’ efforts in influencing public policy. Thus, pushing the corporate world to support more functional CSR mechanisms and partnerships proves a must.

The problem is that dictated development agendas through mandated CSR fail to meet the actual needs of communities: “Thus, many efforts labeled as ‘progress’ in India…have led to increased marginalization and inequality for the local poor.” Top-down philanthropy, as is no revelation to NPQ readers, is not only at times unhelpful but sometimes actually destructive to community. NPQ has discussed the issue in many places; here, it’s addressed by David Ellerman, who spent a decade at the World Bank.

The American Bazaar stresses the core concept of CSR.

Worldwide, philanthropy is the private engine that launches new ideas, build civil society organizations and provides proof of concept for transformative solutions…The combination of mature grant-makers, a robust economy, new technology platform means give India’s civil society and philanthropic sector new hope to address major challenges that had previously been viewed as too big to impact.

Acharya says India faces some of the world’s largest problems, and it seems difficult to rely on the government alone. With respect to education, Acharya points out that “nearly 400 million Indians do not receive the education that they deserve.” Money Control alleges the government’s investment in education is “woefully inadequate.” According to the New Delhi Times, literacy rates in rural areas are 71 percent, and 86 percent in urban areas. This situation exists despite the “numerous policies and advancements” in education and workforce development initiated by Prime Minister Modi and his cabinet. Although the Indian Express acknowledges such advancements, especially in higher education, the system still faces a great deal of scrutiny. When it comes to healthcare, millions of people across the developing country still suffer from disease and malnutrition. The Financial Express reports that the Bombay High Court says the South Indian state of Maharashtra’s “progress and prosperity is pointless when 50 percent of children in the state are malnourished and below the poverty line.”

Acharya also points out additional “problems of the affluent” attributable to the fast-growing economy. The growing middle class suffers from high cholesterol levels, heart disease, and other non-communicable diseases, as noted in a Daily News and Analysis article. As Acharya accuses Indians of driving “cars that pollute the environment,” the New York Times confirms a new study reporting that India has surpassed China by ranking number one in causing premature, air pollution–related deaths at an annual rate of 1.1 million. Meanwhile, as Business Insider India expresses concern about the fate of skilled immigrant “Indian techies” in the USA as President Trump pushes companies to “hire American,” the Daily Pioneer points out notable skills gaps in India’s growing manufacturing and automotive sectors.

Acharya says that two major global treaties will have a special focus on judging India over the next decade. The United Nations Climate Change Agreement (COP 21) “ties India to global climate change reduction goals.” American Bazaar also highlights India’s commitment to the United Nations Sustainable Development Goals (SDGs) to “target the elimination of global poverty and the advent of sustainability by 2030.”

We have yet to discern how the 2013 Companies Act will generate more functional development outcomes in India under the watchful eyes of the UN. For now, it is too early to tell. Yet, in agreement with Acharya, indeed, “the next decade is expected to be very exciting for philanthropy in India.”—Noreen Ohlrich