Three policy changes due to the pandemic have had an effect on the quantum and nature of CSR spending
The Covid-19 pandemic has been disastrous globally, India not excluded. One would be hard put to point out one positive development due to it. Yet strangely there is one. It has helped push the idea of a company’s responsibility or irresponsibility to society deeper into corporate consciousness.
For one, it has taught companies that it can no longer be business as usual. For another, it has helped focus on the idea of corporate irresponsibility as the obverse of corporate social responsibility.
To be fair to the corporate world, the idea of a company’s social responsibility had slowly seeped into corporate consciousness even before the beginning of the pandemic, if the compliance with Section 135 is any indication. Since the inception of the Companies Act 2013, there has been a steady increase in the mandated corporate spending under its Section 135.
In 2018 the CSR spend was, according to one estimate (nseinfobase.com), ₹10,179 crore. It had increased by 18 per cent in 2019 to ₹11,961 crore. The number of companies spending on CSR had also increased from 1,024 in 2018 to 1,055 in 2019, while the number of companies that had missed the mandatory 2 per cent spending decreased by 6 per cent from 353 to 332.
What is more, the objects on which the money was spent were also gradually becoming more imaginative and in alignment with the Sustainable Development Goals (SDGs) and other national goals, though there were instances of the money going only to government directed projects such as gaushalas and statues.
Policy changes
Three policy changes due to the Covid pandemic have had an effect on the quantum and nature of CSR spending. The first policy change was to allow spending of CSR funds on Covid-related activities. Apart from contribution to the PM CARES Fund and to the State Disaster Management Authority, expenditure incurred on preventive healthcare and sanitation, ex-gratia to temporary/casual workers over and above daily wages, providing quarantine facilities to those affected, amongst others, could be considered as CSR spend.
The second policy change was to allow all donations for Covid-related efforts to be eligible for 100 per cent tax deduction. And the third will allow companies who contribute over and above the minimum prescribed amount to later offset the excess against the CSR obligation arising in subsequent years, if they so desire.
Consequently, corporate India has shown that it cares as much as the PM. Crores of rupees have been donated to various government funds. According to one report, India Inc. spent ₹7,537 crore as CSR obligations in two months on Covid-related concerns. This included ₹4,316 crore in donations to the PM CARES Fund. The remaining ₹3,221 crore was spent on other relief funds, food and ration donation, masks, sanitisers and protective gear kits.
There have also been a few in-kind donation announcements, including for counselling helplines or e-learning resources, drones, and food supply; making free or discounted testing kits or services, or sanitiser available, and so on.
Corporates are also looking for NGO partners working in the areas where they have factories, plants or other set-ups, especially those in remote or rural areas.
Long-term effect
While such generosity is welcome, the downside from a long term point of view is that it has meant a diversion of a majority of CSR funds to short term Covid-related activities, and that too through contributions to the PM CARES Fund. It has left the regular developmental works being undertaken through NGOs dry of funds and halted them before completion.
Very few corporates seem to be taking a medium- or long-term approach, by investing, for instance in food and agriculture supply chains, or livelihoods support post-Covid.
Moreover, many more entities such as Armed forces veterans, and municipal corporations have been made eligible to receive funding, increasing the competition for the CSR pot. The Ministry of Labour is also said to be pushing for expanding the definition of ‘spending’ under the CSR law to include contributions towards a social security fund for unorganised workers. This has made finding funds for long-term development harder for NGOs.
A more positive trend is that of spending on socially relevant advertising round social causes and movements such as environment, gender equality, domestic abuse, race and others. This, if done sensitively and sincerely and is sustained, is likely to change social mores and add more to long lasting positive social change than money on a few discrete projects funded by CSR contributions.
Some instances: Godrej Appliances makes the case for shared housework; some beauty brands have LGBTQ citizens speaking for them; and ITC and many other brands used the Earth Day this year to align their brands with climate change and cleanliness (BS July 17, 2020)
Some start-ups such as Colive, Zolostays, Hello Word and such other co-living companies have shown a social conscience, not by spending out of CSR budgets but by waiving the rents of persons who lost their jobs due to Covid, though it has meant a big loss for them.
Another more positive outcome, though not necessarily connected with CSR spends, is that it has made business to accelerate reform in systems, processes, and policies for long-term transformations in the economy and society and invest more in innovation.
Two sides of the same coin
One final indication of a positive trend is that companies are realising that corporate social responsibility and corporate social irresponsibility are two sides of the same coin; that irresponsible behaviour can bounce back on companies, hurting their reputation and hence profits and productivity.
Covid-19 may not have been directly caused by environmental change, but it has shown how interrelated the world is, and how irresponsible behaviour in one part can have global repercussions. Instead of a virus, think glaciers melting, seas rising, fishing wiped out due to plastic pollution, and so on. The shutdowns, labour migrations and impact on supply chains have had a sobering effect on the mindless quest for greater profits. At least one hopes so.
Article Credit: thehindubusinessline