CSR funding in post-lockdown India

As India gradually unlocks and the private sector gets accustomed to the ‘new normal’, where does corporate social responsibility (CSR) stand? Let’s take stock of CSR funding in post-lockdown India.

The economic recession we are experiencing due to the pandemic has already seen company stocks performing poorly across the board, from the SME startups to multinational conglomerates. Apart from advertising and marketing, the departments to take the worst hit are the CSR teams who’ve been asked to curtail their budgets. 

Post-lockdown India

With salary cuts and layoffs being announced in the most valued of employers including Reliance Industries, The Times of India, Air Asia and the like, management teams are busy putting out fires. It’s understandable that they’d rather put the house in order than consider allocating funds for philanthropy, responsible businesses and community development. There are tough decisions to make. The complete stoppage of all economic activities since March 2020 has impacted even the usually solid F&B industry.

PM CARES, really?

Amidst the pandemic, Prime Minister Narendra Modi announced the cute-sounding PM CARES Fund (or Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund). Why did we need a separate fund for the national disaster that is the COVID-19 crisis, when the PM National Relief Fund already existed to which corporates and individual persons can donate as well? 

There was initial confusion over the tax relief for donations towards PM CARES. Perhaps to loosen the purse strings of the mighty India Inc., the government declared on March 31 that contributions to PM CARES will be exempt under Section 80G of the Income Tax Act. The monies started pouring in from all quarters of the corporate bandwagon. The government then went on to amend the company law whereby these contributions from industrialists would qualify as CSR spend! 

The Ministry of Corporate Affairs (MCA) has changed Schedule VII of the Act – which pertains to CSR activities – to provide for this. In Schedule VII, item (viii), after the words ‘Prime Minister’s National Relief Fund’ the words ‘or Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund (PM CARES Fund)’ have been inserted.

In effect, a major chunk of a company’s CSR funding will be directed towards the national fund, adversely affecting the money that would be spent on CSR projects in education, farmer welfare or rural development. 

Bear in mind that State Relief Funds for COVID-19 cannot be claimed as CSR spending by companies, indirectly compelling industrialists to choose PM CARES over relief funds in their home States.

In a swift move, Chhattisgarh Chief Minister Bhupesh Baghel depicted the lack of transparency here. He went public with details of the contributions made to the chief minister’s relief fund. Days later, he asked the Centre to return CSR donations made by companies from his State to PM CARES. Congress leader Rahul Gandhi has also demanded on audit, and asked that the accounts be made public.

CSR and the economic slowdown

Financial experts predict that the economic slowdown India is currently experiencing will deepen in the coming months. Naturally, lower profits will reduce budgets for CSR funding in post-lockdown India. The coronavirus pandemic has left CSR team heads struggling to justify their activities beyond food distribution and relief. Companies won’t be as invested in corporate citizenship as they were in the last financial year. 

Consulting firm FSG interviewed 18 CSR heads/ CEOs and 22 NGOs that work as implementation partners. According to the FSG report about the impact of COVID-19, traditional CSR funding is set to drop by 30%-60%. Social projects will be severely impacted, with corporates prioritising local relief work and food distribution.

What should NGOs do?

There is a feeling of uncertainty among NGO partners who depend on corporate funding for projects varying from digitising government schools to water conservation in draught-prone villages.

Although financial decisions are being made by CSR committees comprising directors who have little contact with the people on ground, CSR teams and their heads will stick to contractual commitments they’ve made to nonprofits. However, it’s the verbal and informal agreements they might not be able to keep. Smaller nonprofits will find it harder to find new donors.

Social distancing isn’t going anywhere. CSR professionals, volunteers and staffers at humanitarian organisations, especially those on-ground, will have to devise new modes of work and delivery. If a community you work in, becomes a coronavirus cluster, how would you reach out to the people? Would digital remote programmes work? 

NGOs need to consider how to optimise resources and cut costs with funds drying up while still maintaining their key components in core areas. Corporates will probably focus more on COVID-19 relief measures, so they need to plan their projects in a way that includes the crisis. For instance, if you work with artisans in a rural area, you could commission them to create art and craft that raises awareness about handwashing and social distancing. 

There’s no doubt that CSR funding in post-lockdown India will be vastly different. The COVID-19 pandemic has affected every part of our lives, for good or bad, and the CSR domain is no different.