CSR: As a social enterprise ecosystem enabler

In a historic move in 2013, the Indian parliament passed its first update to the country’s corporate law in 50 years. Among many other reforms, one that caught much attention was the one that mandated CSR spend of 2% of profits (before tax) by all public and private companies registered in India meeting a revenue and profitability criteria.

At EntireIySo! we have been tracking the CSR spend trends over the last three years since the CSR law was enforced. We believe that for slightly mature Social Enterprises (having operations for 3 years or more) have significant opportunities for a win-win collaboration.  As of FY16, the top 100 companies listed on the BSE have grown their spend by almost 30% CAGR over the last three years. Despite this growth and a spend of 7100 crore, the overall underspend (as per the 2% rule) still stood at 2079 crore.  In India, there are about 7000 to 8000 companies who need to comply. We estimate that the net spend on CSR, at 100% compliance, should aggregate to 20,000 to 25,000 Crore INR annually.

[ Check the detailed CSR spend analysis and presentation at the DreamerDoers Conference 2016 Here ]

CSR, though not a core business activity of the corporates, has significant mindshare of the Board of Directors. For publicly listed companies, the Board is directly responsible to articulate the CSR initiatives and framework to the shareholders and the market regulator. Further CSR is one of the core pillars of brand building. Social and Environmental responsibility are fundamental pillars of the existence of corporations.

With “social impact” also being core to the vision and mission of social enterprises, we assume that collaboration with corporates is but natural.

Over the last 3 years, EntirelySo! has interacted with hundreds of social enterprises and understood that areas of concern.  Three that stand out are

  1. Capital Access
  2. Market Access
  3. Resource Access

The average CSR budget for the top 100 companies is about 70 Crore (maximum being 650 crore).  Capital access is one of the challenges that can really be solved with CSR collaboration.

So what can SE’s do to be visible and realise a CSR partnership ? Besides having real, on-the-ground connect and operational maturity,  our analysis indicates that the following factors are key for a successful collaboration

  1. trust and transparency
  2. alignment of cause
  3. corporate brand recognition
  4. adherence to reporting / monitoring processes

One of the major reasons, cited by the companies, for non-compliance is, lack of visibility of trusted execution partners. At the same time, data from MCA (Ministry of Corporate Affairs) indicates that as of 2015, there are 4878 companies incorporated under Section 8. Obviously there are gaps either in visibility or impact capability.  Either of them are solvable problems.

Today we have the right environment in India to create transformational social impact at scale.  Regulations, Corporations, Non-profit or For-Profit social enterprises and impacted beneficiaries have witnessed multiple examples of transformative change being brought about by CSR initiatives in collaboration with execution partners.  [ See the case study of How Naandi Foundation has transformed the Araku Valley Region here ]

EntirelySo! is a social enterprise to enable social enterprises. If you are a Social Enterprise feel free to reach and join our Social Venture Founders Forum.  Let us collaborate to  make the our world a beautiful place to live.

CSR: A Social Enterprise Ecosystem Enabler ?

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.

CSR Spend Analysis of the Top 100 Companies listed on the BSE

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).
Distribution of CSR 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.

How to make your CSR – Socially Sustainable?

Sustainability of CSR impact is the key aspect that differentiates socially responsible corporate from the rest. In the minds of every CEO or CSR Leader, the question that remans unanswered is How to make CSR – Socially Sustainable?

Today’s for-profit-business world considers several options to make there CSR contributions. Most commonly found ones are –

  • Encouraging employees to engage in community service activities
  • Supporting Education Establishments
  • Supporting Local Government Initiatives
  • Volunteering in Disaster Recovery

Continue reading “How to make your CSR – Socially Sustainable?”