More money is flowing into charity, thanks to rising social awareness and a law that makes it mandatory for firms to set aside more for philanthropy.
There was a time when successful Indian companies spent a substantial amount of time strategising on new products, markets and profits, but the ‘giving’ part of the enterprise was rarely discussed. Perhaps there wasn’t much to discuss on that front, except in certain large family businesses that ran hospitals, schools and colleges through trusts funded by those families. That has seen a sea change, and driving this change is a new government norm that made it mandatory for companies to spend 2 per cent of their profits on acts of corporate social responsibility (CSR), beginning April 2014. Critics have always said that despite India having the second highest number of billionaires in Asia (90, compared to China’s 213), there is no strong culture of philanthropy. That could be history.
A year after the new law came into force, the results have been heart-warming, with some companies giving more than the stipulated percentage. India’s top 50 listed companies that make up the benchmark Nifty index on the National Stock Exchange spent more than Rs 4,600 crore on social initiatives in 2014-15.
This was more than the Rs 4,281 crore that three times the number of companies spent on CSR during 2013-14. Some of the big CSR spenders in 2014-15 were Reliance Industries with Rs 760 crore, ONGC with Rs 495 crore, Infosys with Rs 239 crore, NTPC with Rs 205 crore and TCS with Rs 220 crore.
Blueprint for charity
But this is just a start. The government is hoping that companies will contribute Rs 15,000 crore a year to CSR, once most of them conform to the norms. A report by the Boston Consultancy Group in February 2015 estimated that close to 16,000 Indian companies are expected to spend $2.5 billion (about Rs 16,500 crore) annually on CSR in the coming years-up from the current $500 million (more than Rs 3,300 crore). Companies have used the first year to set in place a CSR mechanism-get senior executives to drive the function, identify the areas that can be funded, and conduct intensive research on the need in those areas. “We find companies focusing on long-term CSR strategies, doing research, figuring out the areas and the NGOs to be funded, as well as bringing in their clients to be part of the giving process,” said the representative of a foundation that helps companies channelise funds into CSR activities. While education has topped the priority list for companies, other sectors in focus include health, environment, sanitation, drinking water, agriculture support to farmers and rural infrastructure.
However, some corporate captains see philanthropy as something that should come from within and not to be forced upon. Ratan Tata, the 77-year-old Chairman Emeritus of the $100 billion Tata Group that has been contributing 5 per cent of its earnings on CSR, says the mandated 2 per cent becomes like a tax, which everyone pays. In 10 years to 2014, Tata Trusts and Tata companies spent in excess of Rs 8,000 crore on CSR activities. In December 2015, Tata Trusts entered into a five-year partnership with US-based Khan Academy, promoted by former hedge fund analyst Salman Khan, to provide free education using a disruptive model of tutoring in India. It also signed an MoU with the Uttar Pradesh government to work on a nutrition programme targeted at mothers and infants, and in curing diseases such as cancer and anaemia.
Giving back to society
Policymakers argue that such a law encourages more companies to pursue acts of philanthropy and inclusiveness, something that the country needs badly. “CSR is no longer based on the whims of a promoter and there is a professional attitude to it,” says Bhaskar Chatterjee, Director General and CEO, Indian Institute of Corporate Affairs, a government-affiliated think-tank. Sudha Murty, wife of Infosys Founder NR Narayana Murthy, says the 2-per cent rule has helped increase Infosys Foundation’s ability to reach out to the needy-by almost 10 times-since it now receives Rs 260-280 crore from the company, compared to Rs 20-30 crore earlier.
Many big companies already had a CSR channel in place, but they have now stepped up their level of engagement and improved the structure to channelise the funds in a more productive manner. “We choose certain activities and sectors because there is no point in spreading ourselves thin,” says Romesh Sobti, MD & CEO, IndusInd Bank, one of the first banks to release a sustainability report that summarises its CSR work. “Our work on CSR will be closely linked to the businesses that we do, including microfinance, and the geographies that we operate in.” The company, having identified areas such as health, sanitation, rights of the girl child and education as major thrust areas, is conducting programmes in areas in Maharashtra, Uttar Pradesh and Madhya Pradesh. “Signing a cheque is the easiest part, but sustainable deployment of the funds is what’s important,” he adds.
On an individual basis, Indian businessmen have been loosening their purse strings much before the CSR norms came in place. In the first six months of 2014-15, the top 10 givers in India offered more than Rs 18,000 crore to charity, according to a study by Singapore-based Hurun Institute, the latest such on philanthropy in India. Topping the list was Azim Premji, Chairman, Wipro, who gave Rs 12,316 crore to charity in the fiscal. Next came Shiv Nadar, Ratan Tata, Mukesh Ambani and Nandan and Rohini Nilekani, among others. To many, the list is a good representation of responsible entrepreneurship in India.
Loosening heartstrings
In July 2015 Premji said he will give away 39 per cent of his stakeholding in Wipro, India’s third largest IT company, to philanthropy. The stake was worth Rs 53,284 crore at the time, and the money was channelised to Azim Premji Foundation, involved in setting up schools in eight states to provide quality and free education to children. Premji is also the first Indian to sign the Giving Pledge, initiated by Berkshire Hathaway Chairman Warren Buffett and Microsoft founder Bill Gates to invite the world’s wealthiest individuals and families to donate a majority of their wealth to charity. In September 2014, Vedanta Group Chairman Anil Agarwal said he would give away 75 per cent of his wealth of $3.5 billion (more than Rs 23,000 crore) to charity. Nadar, Founder-Chairman, HCL Corp, has already said he will give more than Rs 4,000 crore in charity through the Shiv Nadar Foundation, the philanthropic arm of the IT giant. The foundation runs VidyaGyan and Shiv Nadar Schools, Shiv Nadar University, SSN Institute (an engineering and business school), Kiran Nadar Museum of Arts, and Siksha, a new initiative to reduce illiteracy.
There is, therefore, an increasing social awareness among the rich and the successful, not only to give back to society but also to create systems where the giving becomes more sustainable, and poor families get to stand on their own through continuous engagement. Perhaps that will, in the not too distant future, help India move further up on the philanthropy charts, and not just in the number of billionaires it nurtures.
This article was taken from here.