Companies-Bill-2013

[Update] Voices from the field – social sector’s feedback and preparedness on Section 135

Introduction

The Companies Act 2013 ushers in a new regulatory stance towards corporate social responsibility (CSR) in India. The Act lays down mandatory requirements to ensure spendingof  2% of annual net profit on CSR activities. An estimated 7-8,000 companies in India will be covered under the CSR legislation and the total annual spend based on this norm could be equivalent to approximately US$ 3bn.

NGOs and social enterprises play an important role in implementing corporates’ CSR activities on the ground. The success of the new regulation, to a large extent, is contingent on the social sector’s willingness and ability to absorb the funds and deliver. Being a key stakeholder in the ecosystem, it is imperative that the rules reflect their viewpoints and concerns as well.

Samhita Social Ventures conducted a survey for its NGO and social enterprise network to capture their viewpoints and insights on the CSR provisions of The Companies Act 2013. The intention was to obtain their feedback on the initial draft rules released by the Ministry of Corporate Affairs and to assess their preparedness for tapping into this opportunity.

Around 48 social organizations responded to the survey.

The findings from the survey have been categorized into three categories.

Views and Perceptions on CSR

The social sector on the whole is aware and well informed about the new regulation with a majority of the surveyed organizations being aware of the New Companies Bill 2013. Only 1/10th of the surveyed organizations found the mandatory CSR an image management exercise.  The clause on a three-year track record to prove the credibility of the NGOs in the respective focus areas seemed to be quite ambiguous. A little over half of the social organizations surveyed (58%) had apprehensions about this three year track record suggested by the ministry. Responding to the list of CSR activities under Schedule VII, two thirds of the organizations believed that these activities covered most of the aspects of social development, but a third were of the opinion that the scope should be expanded to include sectors of disability (both mental and physical) and provision of water and sanitation facilities. Majority of organizations admitted to utilize the funds raised through CSR, for their programs and projects.

Existing patterns on CSR

The survey tried to capture the existing scenario of the corporate interactions with the social sector. Companies so far have not engaged with NGOs in a systematic way. About half of the organizations surveyed by us had not received any corporate funding. For those who had, funding for specific projects was the most common type of engagement, followed by one-off donations. Though NGOs are positive about the advantages of employee volunteering programs (50% reported that volunteering was helpful on an unconditional basis). They are beginning to acknowledge that the success of such a program will depend on some conditions being met (33% said volunteering is helpful only if long term and well planned). A majority reported that lack of social sector understanding among corporates, followed by lack of trust and slow processing times are the main challenges preventing more interaction.

Preparedness on implementing CSR programs 

The survey also tried to gauge the potentialities of the New Companies Bill from the point of view of the social organizations. In terms of preparedness of social organizations to absorb the CSR money and use it effectively, NGOs and SEs performed well on reporting and communicating with donors on a regular basis. A majority of the content of these reports included project updates and information on funds received and expenses in their communications, the proportion reporting impact stories and challenges faced was comparatively low. However NGOs and SEs were lagging behind on monitoring and evaluation (less than half used dedicated resources) and impact assessment processes.

Click here to read the full report.