Companies in India, particularly mid sized and small ones, may go dutch to meet corporate social responsibility (CSR) norms under the new corporate law, a move that can help them cut down on common costs and maximize impact of the money they spend on philanthropy.
India has become the first country in the world to make it mandatory from this month for firms with a net worth of over Rs 500 crore or yearly sales of Rs1,000 crore plus or those booking net profit in excess of Rs 5 crore to allocate at least 2% of their profits to social responsibilities. State-run Rural Electrification Corporation has decided to contribute about Rs2 crore to a literacy project which was already receiving funds from the largest public sector natural gas company GAIL (India).
More such arrangements of resource pooling between firms with shared philanthropic ambitions are being thrashed out in what could well become a trend. "REC's decision to back non-governmental organisation Aroh Foundation's Padho Aur Badho, a government-led right to education initiative which had received about Rs5 crore from GAIL, came after it approached Indian Institute of Corporate Affairs (IICA), an arm of the Ministry of Corporate Affairs, which in turn identified that the PSU's social vision matches that of GAIL and advised it to join the ongoing project," said a consultant with direct knowledge of the matter.
NGOs, development sector consultants and the government are all betting big on the future of such social joint ventures. For instance, Samabhavana Society, a home-grown not-for profit group which works with 'difficult communities' such as male sex workers is rolling out this month its prototype portal where it will showcase work of different grass-roots level NGOs with marginalised population and exhort various corporate groups to invest their CSR funds in their area of interest.
"We are already sifting through the track record of the work NGOs have done with different communities in last three years. This would be classified into different categories and hosted on the cloud for the companies to review where we can help channelise their funds into groundlevel work," said Jasmir Thakur, founder of Samabhavana Society. It will generate periodic reports of progress and build plan to use social media platforms to display the kind of results such collaborative pieces of work are generating.
"That the government is bullish about the prospect of such groupings going is apparent from the fact that we have specially set up a dedicated cell under National Foundation for CSR (NFCSR), an arm of IICA to facilitate more such alignments between companies," said Nikhil Pant, chief programme executive of NFCSR. The government is focusing on helping 1,400 top listed firms to comply with the norms and this trend may gather more steam as the focus shifts to smaller firms, he added. While spelling out nuanced rules for the CSR obligations earlier this year, the corporate affairs ministry made an explicit mention of such possibilities.
"A company may also collaborate with other companies for undertaking projects or programmes or CSR activities in such a manner that the CSR committees of respective companies are in a position to report separately on such projects," says the new corporate law. The logic behind such team-ups is compelling. "Of the 16,400 odd companies in the CSR net this year, almost 14,000 companies would need to make small contributions of less than Rs1 crore.
Individually, they may not achieve much but splitting the bills can help them rationalise administrative, back office and other common spends and attain economies of scale and make a meaningful difference," said Linn Dorin, chief principal of Global Finance Strategies (GFS), an international development consultancy which advises donors, governments and NGOs in areas of finance, administration and operations. GFS, which entered India this year, is in hectic talks with multiple companies and is working out such cause led groupings.
[courtesy: Shubham Batra, YASHODHARA DASGUPTA & Soma Das, ET Bureau ]
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