On December 13, 2014 the Entirelyso! team organized its first conference ”Dreamer Doers 2014”: a baby step in its ambitious goal of democratizing social entrepreneurship. Besides interesting topics like “Inclusive business” and “need of scale of social enterprises”, we also visited the role of “Corporate Social Responsibility” as an enabler of social enterprises. Intuitively it seems that social enterprises could be one of the major execution channels for CSR initiatives. The thought was further strengthened given the amendment to the Company’s Law, mandating a 2% share of profits to be spent on CSR activities.
At EntirelySo!, we decided to do a quick study of the CSR spend (2014) and CSR activities of the top 100 companies (by revenue) listed on the Bombay Stock Exchange. Here are the findings:
- The cross-industry average CSR Spend is approximately 1% of ‘Profit Before Tax’.
- Yes, ‘Profit Before Tax’ is the realistic metric to be taken to compute CSR spend amount. Once you get into the details of the law, you’ll realize that the term ‘net profits’ actually means the “PBT” and not the ‘Profit after tax’ figure.
- Only 11 companies, out of 100, were proactively meeting or exceeding the mandated 2% spend criterion. Most of these were Steel companies. Not IT. Reliance Industries stood out as the biggest spender on CSR with 700 Crores being pumped.
- In fact, IT and Banking companies came out as laggards in spending. These sectors need to scale anywhere between 3X-9X to be compliant.
- At least 20% companies had a CSR spend deficit of 100 Crores+.
- Education and Health were the most popular areas of CSR spending (46% initiatives) while Women Centric initiatives were the least popular (11% initiatives).
We did not delve into the efficacy of the initiatives. But from the description, most of the initiatives seem like one of projects which do not necessarily have an impact sustainable over the longer term.
I believe that with the push from the government, corporations big and small have an opportunity to make a phenomenal difference to our society and environment, provided we have the will. The finance ministry and financial analysts have estimated the total inflow into CSR for FY15 to be in the range of 15,000 crores to 22,000 crores (2.5 – 4 Billion USD).
Instead of opting for a ‘tick-in-the-box’ approach, corporations need to invest in transformational initiatives: which elevate the quality of life and the state of being to a totally new level. If even after spending 4B$, we do not see a positive, sustainable change in the economically deprived sections of the society, collectively we have failed … and money is definitely not the problem!!
Social enterprises are for profit organizations which redefine the objective of commercial organizations from “maximization of profits / shareholder value” to “maximization of stakeholder value while ensuring self-sustainability”. Stakeholders include both core and fringe. RangDe (www.rangde.org) and SELCO (www.selco-india.com) are some examples of successful social enterprises which have achieved significant impact and scale of operations. These and many other smaller organizations can act as execution partners for larger corporations for their CSR programs. Social Enterprises (SEs) will gain operational and business maturity from such partnerships. Partnership of social enterprises and corporations on CSR will therefore fuel a positive cycle of maturity thereby continuing to make SEs more mature and operationally relevant for large scale/ large impact CSR programs. I think it is time Social Enterprises and corporations work on the hurdles that prevent cooperation.