- 26 Jan 2024
Decade after CSR Law Implementation in India: What's Changed?
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As India celebrates its 75th Republic Day, it's a momentous occasion to reflect on one of the country's pioneering moves in the sector of corporate responsibility. In 2013, India made history by becoming the first country to implement Corporate Social Responsibility (CSR) legistation. Governed by the Companies Act of 2013, this law requires businesses to allocate a minimum of 2% of their three-year annual average net profit toward CSR activities. This includes companies with a net worth exceeding Rs 500 crore, a turnover exceeding Rs 1,000 crore, or a minimum net profit of Rs 5 crore in the immediately preceding financial year. After a decade, has this law been a success? Let’s find out.
Why was the CSR law passed?
Businesses thrive on societal resources and hence have an obligation toward social development. CSR giving existed before the law but was practiced by few. The aim of the CSR was to recognize the need to reinvest in the welfare of society and to venture away from a profit-centric approach. CSR, which was previously considered a mere public relations exercise, now focuses on creating real impact, making businesses socially conscious of their decisions, uplifting society, and contributing to the future of a better India.
Impact of CSR law in India
The law has clearly had some positive effects on the private sector. Companies are now slowly getting attuned to the social and environmental challenges prevalent in the country. A sense of social consciousness can be seen among corporate giving, with more initiatives aimed at enhancing access to education, uplifting rural India and executing environmental conservation projects actively. The law also mandates businesses to record and present their CSR efforts, which has made them more responsible for making an impact in different sectors of society and closely monitoring their decisions.
But, despite these positives, there’s a catch!
As per Dasra & Bain’s Philanthropy Report 2023, the public sector carries the weight of 95% of philanthropy in India, emphasizing the need for more corporate companies to step up to help. Although businesses have started showing up and allocating the 2% funds, many still struggle to make the impact they wish to make.
What’s stopping CSR from being successful?
Many businesses have allocated funds but struggle to manage their CSR duties. Here's why:
1) Uncertain goals
Creating a social impact necessitates more than just financial resources; it also demands a well-defined roadmap to maximize their effectiveness. Many businesses are unaware of societal gaps and where their funds could be most beneficial. Gathering data on areas in need of change and understanding the requirements of beneficiaries requires a team of professionals equipped with the necessary skills and a pre-existing relationship with the communities they aim to uplift. Without this, CSR efforts often fall short of their intended impact.
2) Lack of awareness about the benefits
CSR revolves around making a social impact, but it also offers several benefits for companies. Beyond the immediate social impact, it leads to heightened employee engagement, increased investor and stakeholder interest, enhanced brand image, and potentially higher sales. All of these advantages directly contribute to the growth of a brand, making CSR even more advantageous for businesses.
3) Struggles to balance brand and impact
While CSR offers benefits to the company, many struggle to balance it with genuine social impact, leading to unsatisfactory results. When CSR efforts are solely driven by promotion, they not only tarnish the brand image but also diminish the altruistic essence of giving. CSR should be viewed as an opportunity for companies to unite and channel their efforts towards kindness, rather than treating it as a mere obligation.
So, what is the solution?
In 2023, Shiv Nadar emerged as the top donor for the second consecutive time, contributing over ₹2,042 crore, equivalent to ₹5.5 crore every day of the year. However, this is just one part of the story. Over the past decade, India has witnessed numerous CSR initiatives that have made significant impacts, and collaboration has been a common thread among them. Achieving such substantial impacts requires collective effort, and this is where NGOs play a crucial role in supporting businesses to fulfill their CSR objectives.
With access to data, expertise, and effective CSR models, NGOs can transform confusion into impactful outcomes. By infusing a human touch into their CSR endeavors, companies not only make a tangible difference but also build a brand that stands for more than mere profits. While significant progress has been made in the past decade under the CSR law, there's still a long journey ahead. A united front involving the government, corporate entities, and non-profits is essential to unlock the full potential of Indian philanthropy.
As India commemorates its 75th Republic Day, let us envision a future where the CSR narrative continues to evolve, bringing about positive change nationwide. Are you ready to embark on your CSR journey? At Giving for Good (GfG), we understand your CSR needs and are committed to helping you achieve impactful goals. Explore our partnership opportunities and join us in empowering 1,000 children with school supplies, enabling their education for a brighter future. Team Giving for Good wishes you all a Happy Republic Day.
Exclusively written for Giving for Good Foundation by Bhairavi Hiremath
Sources:
https://indiacsr.in/indian-csr-law-forcing-companies-think-about-society/#google_vignette
https://ylcube.com/c/blogs/ineffective-corporate-social-responsibility-csr-law-india/
Bhairavi Hiremath
With words as her medium and a diary full of scribbled ideas, she is usually found looking for ways to use her writing to impact for Good. If she’s out of sight, she’s probably either reading, petting cats, jamming to retro Bollywood, or of course, writing!
