(First appeared in the Hindu Business Line of 3rd March, 2014)
India’s new Company Act 2013 and the accompanying rules that have finally been announced will impact the points of intersection between India’s for-profit and not-for-profit organizations. The threshold of Rs 5 Crore# annual profit and the minimum 2% of net profits prescribed will force a flood of fresh entrants and funds into the field. This is even after allowing for some of the old wine of on going welfare /civic /environmental schemes in the newly labelled bottles.
Of course, there are questions. Any change in the status quo raises questions. Why 2% of net profit for CSR? How about a more calibrated move, especially given the depressed business conditions and compressed profitability. There are also questions about the collective capacity of business and NGO sectors to efficiently utilize large sums, estimated to be on either side of Rs 10,000 crores. The limited infrastructure and random initiatives for audit, certification and training of NGOs, raise questions about the bandwidth to handle the increased magnitude of the task.
Here are some expected corporate responses, all legitimate.
Swallow the bitter pill, like another tax: If a child is forced to read, he will pick up a comic, not his text book. Expect a similar response from companies without a philanthropic track record. Compliance response of the law-abiding, with the stoicism of paying up a new tax.
Tonic for the brand: Back a theme in sync with the brand personality. Equally, the theme can also be something that bleaches a blemish. Note that oil majors are among the highest spenders on ‘green’ campaigns. If a women’s brand (or even a macho brand) runs a media campaign on gender equality, even if there is no action on the ground, welcome it for its potential to alter attitudes as possibly did Havel’s social messaging and Tata Tea’s “Jago re”.
Demand generators: Who will not welcome promotion of hygiene, even if the awareness campaigns are by marketers of tooth paste and toilet soap?
Spread it thick with proximate stakeholders: Gain the loyalty of neighbourhood community and customers, by making them the beneficiaries.
Integrate with operations: Train masons, if you are a construction company; train mechanics, if you sell any machine. That will ensure low-cost product service and reach, will keep customer complaints down.
Employee engagement/ voluntarism: When the scramble for reliable NGO partners begins, the inadequacies in the NGO sector will become obvious. That may force some companies to try employee voluntarism – and be surprised by hiked employee motivation even without a salary hike.
For friendship’s sake: Back spouse’s fancy or oblige a friend and sign cheques. Such lazy CSR would mean not benefiting from the many creative options and foregoing the opportunity to endear itself to crucial stakeholder groups while making a lasting difference.
There are indeed wide options. The designated fields include poverty alleviation, health, nutrition, education, environment and the like, with some additions expected. The ultimate objective of any CSR project is self-sustainability. That presupposes sustainability of the external help during the implementation stage and until stabilisation. To succeed, a CSR programme should have lasting relevance to the beneficiary – and equally, to the sponsor. This is important, because, organisations cannot be charitable, only its people can. And people in leadership roles change. The only way to ensure longevity of partnerships is to choose themes and tasks that uphold the shareholder interest. That is the rational thing businesses can do to enhance shareholder value, at the same time ensuring that the clasp of the helping hand is not released halfway, when the beneficiary is getting up and finding his feet.
Anything short will be cruel, and, less importantly, a waste of good money.
(# Every company with minimum net worth of Rs 500 Crores or turnover of Rs 1000 Crores or net profit of Rs 5 Crores comes within the ambit.)