While studying the social development sector in India over the last year, the thing that struck me the most was that there were such few Indian donors who came forward to create a steady, dependable and voluntary flow of capital to the sector. Most of the NGOs which are working across a variety of issues across the country have foreign donors which are either foundations set up by wealthy foreign nationals or philanthropy efforts of large global organisations or through international government grants for developing countries like India. Another way of money coming into this sector is through the local chapters of international development organisations which set up offices here to extend the work done by their parent organisations.
While large Indian corporates have increasingly set up foundations to work in the field of social development, it is restricted to few very large corporate houses and barring few private initiatives targeted at individual giving, the philanthropy sector seems to have been bypassed by the majority in India.
The new CSR law, part of the recently passed Companies Act, is set to change the above. It is a welcome step even though the near-mandatory aspect of it may put off the corporate sector to begin with.
What does the law say and how has the Corporate Sector reacted so far
The New Companies Act says CSR is obligatory for a company fulfilling any of the following criteria:
a) Net worth greater than Five Hundred Cores,
b) Turnover greater than One Thousand Cores, or
c) Net profit greater than Five Cores.
Also, minimum annual CSR spend in every financial year should be at least 2% of average net profits made during last 3 financial years. An interesting aspect of the new regulation is the Comply or Explain criteria which puts the onus for non compliance on the corporate by having to provide a plausible explanation of why it has not complied if that’s the case.
In a recently organised event on the New Companies Act, by an eminent Law Firm, the discussions on the CSR panel were very insightful. Most corporate representatives voted that their organisations were involved in some form of corporate giving efforts already and that they supported those efforts. But when asked if they were in favour of the 2% CSR law, they almost unanimously said no. This might seem dichotomous to begin with but further discussions revealed the reasons for the push back. There were concerns about if this will become a legitimate route for money to be siphoned off for political purposes, to extended families of rogue managements, to grease palms of officials who may be stalling an approval etc. Take a look at these concerns. To my mind, they are reflective of the general malaise that the corporate sector has come to associate with doing business in this country and hence their resultant apathy. The push back is for the government’s inability to ensure that funds that are allocated for social reforms reach their beneficiaries because of graft, red tapism and outright insincerity of the people involved through the chain. And then for the govt to hold the higher ground and ask the Corporate Sector to contribute for social sector seems like a case of the guilty punishing the innocent. And yet, I would urge the corporate sector to be the one to take the higher ground and say, yes, we will do our bit to attempt to reach out to the large section of the Indian population, across the variety of pressing issues that the poor of this country face today.
There can and must be safeguards put in place to ensure that the worst fears of the corporate sector, in terms of misuse of this law, does not come true. This can be done by ensuring that recipients of the funds are authentic NGOs which have been in existence for a minimum number of years, is run by people who have spent certain minimum number of years working on the ground on causes they are associated with. Any allocations to another institution/foundation/trust should pass strict criteria of no relation to political parties or should not tantamount to transfer of funds within family members/groups.
If CSR is approached by the Corporates as a strategic initiative which is built on principles of sustainability, it will become in their business interest to integrate this endeavour in their business activities and give it similar attention. It then also has the potential of driving results that can contribute back to the business.
Beyond CSR: Philanthropy is neither the prerogative nor the responsibility of the rich alone
India is a vast country and the economic divide here is amongst the starkest in the world. The divide itself throws up an opportunity to bridge the divide, somewhat. I remember reading somewhere recently about the number of blind people in our country and the number of deaths on a daily basis and if every person pledged to donate his/her eyes, blindness could be eradicated from our country within months. Improbable as it seems, there is a thought here. Let’s extend this analogy to the social sector – We have a fairly large and growing Indian middle class, the upper middle class along with the rich and the ultra rich. I am not really going to talk about the latter here because let’s assume that they fall in the category who have already set up their trusts/CSR chapters/foundations through which they are engaged in social development work or will be soon enough doing that under the mandatory 2% CSR law. I want to focus on the large upper middle class, the HNI, the self employed professional, the mid market promoter, the salaried professional, the INDIVIDUAL. The educated, evolved, conscientious, and self actualised individual which represents the great Indian Middle Class Dream and which has been the lure for numerous foreign companies to come and set up shop in India. This section while represents a very large and powerful force to reckon with, is somewhat stuck in that zone where they haven’t started thinking about strategic philanthropy because they think;
a) It is the job of the much richer to give
b) We will give when we are older
c) We are already giving to our domestic help’s kid / driver / local vendor etc anyway
d) Even if I give what difference will my small amount make?
e) I have no idea where the money goes and what good does it do
f) I am not aware of the various giving options and am not sure of the authenticity of the various new NGOs mushrooming
g) I pay my taxes honestly and frankly that is enough charity given that more than half the country’s population doesn’t
All these are issues that can be tackled with by forming smaller communities that work towards a common cause. (Except of course the last one, where at some point you have to acknowledge that you are more fortunate than others for having all you do and parting with a small amount of money on a regular basis will not make you any poorer but can really go a long way in someone else’s less fortunate life). For those who face the other issues can tap into many social enterprises that are doing a great job in bringing the donors and the NGOs together and take the additional responsibility of doing background checks on the NGOs, track the flow of funds and evaluate the impact created. For effective and easy personal giving, Gudville.com is a wonderfully effective platform for individual philanthropists to adopt a cause, contribute to it, raise awareness about it and encourage their friends to do the same.
In Bain & Company’s India Philanthropy Report 2013, they point out that:
a) Younger relatives significantly influence their families’ charitable giving
b) Young donors show higher potential than other age groups to increase their contributions.
Well, that’s good news. It shows (from their sample set), there is a desire and awareness among the young to make their independent mark in this space and their involvement goes a long way in how the others around them think about philanthropy. We have to hope that it is reflective of the larger population and that they will be tapped into in order to expand the circle of giving.
Why is it important that everyone gets involved?
According to the authors David Bornstein and Susan Davis of the book ‘Social Entrepreneurship’, the current version of the social impact movement is version 3.0 which looks beyond individual founders and institutions to the change making potential of ALL people and their interactions. It recognises that social entrepreneurship, and hence social effort, is contagious. Every person who acts socially responsibly, whether by building institutions or by strengthening existing solutions through their investing, philanthropy, managing, advocacy, research, teaching, policy making, purchasing, writing and so forth, emboldens others to pursue their ideas and solutions and the movement intensifies. It is the best form of a contagious disease.
The compounding power of the individual effort is very powerful. We must ensure though that sporadic and passive individual effort is replaced with more strategic and sustainable approach. Somewhat like a PSR (Personal Social Responsibility) version of the CSR.