At the surface level, it seems to be an initiative which only has brownie points to showcase. And in formal conversations, no stakeholder is holding back any praising term to underline the good intentions it quintessentially carries. Corporate Social Responsibility (wp) laws which came into the effect this April and provisions for a mandatory 2 percent social welfare spending ( across 11 broad categories) by companieshaving at least Rs 5 crore net profit, or Rs 1,000 crore turnover or Rs 500 crore net worth is being commonly viewed as that ultimate panacea which will further integrate India Inc. into that larger exercise of nation building. Surely there are some murmuring notes of this being a case of ‘forced philanthropy.’ But then these voices are from behind the curtains as of now.
Even as the new wp law was shaped by the UPA government (amongst few of its last hour initiatives), the new government is perfectly in sync with its spirit and intentions. “Under the law the structure for spending on wp activities is absolutely well drafted and it is without any ambiguity,” Minister of State for Corporate Affairs Nirmala Sitharaman said in her inaugural speech at the recently held Shreshth Bharat seminar in the national capital which was organized by Indian Social Responsibility Network (ISRN). And other stakeholders present on the occasion exuded confidence that desirable results would become visible soon. “India Inc. spend around Rs 10,000 crore in social work every year. With the new law coming into the effect from this fiscal, this amount will certainly go up,” Chandrajit Banerjee, Director General of CII pointed out.
But even as it is early hours in the day for the implementation of the new provision, there are some serious issues which abeg for some sound response, sooner rather than later. It has got more to do with the specific roles of stakeholders with the change in the eco-system. And this clearly includes approach – from somewhat serious under a voluntary environment uttermost seriousness when it has become mandatory. “ There is a big difference between charity & wp. Before April 1, what companies had been donating in the name of the social work was charity. But wp laws make such social help pursuit more formal and structured,” pointed out Parul Soni, Executive Director of Ernst & Yong. According to Lt. General Rajendra Singh, CEO of DLF Foundation, “ wp laws clearly ask for a more focused approach in this gigantic task of nation building. We must do projects in the areas which are national priority- like sanitation, health, upgradation of skillsets, etc. It also calls for more attention of the stakeholders to do projects in the under-developed pockets in the country.”
The most vital issue of the day probably is that of finding credible partners to undertake the actual work on the ground for the entities. No doubt we have companies like Tata which has philanthropy in its DNA and the recently emerged stars on the horizon like WIPRO or other conglomerates which have dedicated foundations or trusts of their own, same does not hold true of the majority of nearly 16,000 corporate entities which come under the wp ambit. And the most viable and immediate solution for them probably lies in partnering with NGOs. But herein lies the rub. With nearly 3 million NGOs operating in India, it is increasingly becoming baffling for the corporate to figure out a genuine partner. “ Sometimes industry shy away not because of any funds issue but they do not know how it will be exactly utilized,” Banerjee underlined. “ It is no secret to anybody that companies are struggling to get implementation partners. There is some kind of trust deficit between the both sides on a general basis. Under the wp programme, companies’ spending will be very focused and there needs to be a perfect understanding between companies and their implementation agencies as how the money will be utilized. But it will take sometime for the evolution of a matured understanding. Plus, NGOs have their own capacity issues,” Soni said without pulling any punches. Manoj Agarwal, Chairman, Great Value Group went a step ahead while suggesting how the chaff can be separated from the grain. “ The government should make it compulsory for the NGOs to acquired credit rating certification from some reputed agency for getting funds from the corporate.”
And then there are other issues like modalities for social auditing which is slated to become prominent as the wp drives come under the lense going ahead. Equally important would be more clarity on the some of the stipulated provisions like defining net profit vs average net profit, the possible role of holding/subsidiary companies in wp activities and its formal recognisition, etc. Clearly, while the first act has begun on a smooth note, there could be troubling sub-plots in not so distant future.
