With inputs from: Yes Bank | Hero MotoCorp | HCL | Godrej | Toyota | JK Tyre

With CSR rapidly gaining social and economic currency, so much so that it was made mandatory by the government (through the CSR Act of 2013), companies have scrambled to get their programmes in order. But with great (social) responsibility comes great challenges. And this is what we sought to explore to bring in another year with three simple questions to corporates and social organisations alike, focusing on the challenges faced while –

  1. a) deciphering/decoding the CSR Rules (2013 Act)
  2. b) identifying right partners to work with
  3. c) monitoring, evaluating and reporting programmes/projects

Simple enough, and here’s what we unpacked from the responses that we received (which weren’t that many, unsurprisingly—perhaps because they simply did not know what was going on. Either that, or they were busy doing groundbreaking CSR work).

On CSR Rules, some, like Hero MotoCorp, have adopted a patient approach in understanding all its nuances and implications. For Yes Bank, the standardisations and guidelines brought in by the 2013 Act were much welcomed even as work was needed to ensure its CSR projects followed the requirements of the law, which in turn necessitated multiple reviews and re-strategising. An interesting observation on their part is that even as overall CSR spends have increased, the total expenditure continues to remain below the prescribed 2 per cent of profits (which holds true for many companies). On the other hand, there are companies that claim to be spending much above that 2 per cent figure even before the legislation was passed.

So the question remains: in the absence of strict enforcement, does it even make sense to have this rule? If companies are unable or unwilling to spend the requisite amount, does it mean there’s a lack of suitable projects, partners or intention? This is possibly the biggest challenge for companies struggling to put this law into practice.

Some, like JK Tyre and Toyota Kirloskar Motor, point out the fact that CSR for them (and many others) preceded the Act, citing initiatives like JK Tyre’s Parivartan that are more than a decade old. However, they have attributed the Act for bringing CSR to the boardrooms and thus giving it the importance that it always deserved. As Pradyumna Pandey, vice president and HR hHead at JK Tyre, says, ‘Corporates are now linking CSR to business sustainability and that’s a very positive outcome of the Act.’

For Godrej Industries, challenges mainly consist of questions that are raised due to this law – for instance, if government projects can be supported, whether private companies (such as training service providers) can be funded as part of CSR activities, if in-house environmental projects can be considered as CSR, and how schemes like National Employability Enhancement Mission (NEEM) and Building & Other Construction Workers (BOCW) Act relate to this law. With the clarifications issued in 2015 and 2016 by the government and discussions with industry peers and other experts, they have been able to get some clarity.

However, many NGOs face challenges in accessing expert advice on CSR-related issues, especially the possible implications of the Act. To address this gap, HCL Foundation has initiated nationwide CSR Symposiums for Nation Building that, apart from helping NGOs with capacity building, provide a forum for them to better understand CSR laws and grants.

While selecting NGO partners, companies may have different processes but the underlying philosophy remains the same. Some use evaluation matrices that have a list of predefined parameters and background checks. Toyota Motors has adopted the strategy of evaluating more than three implementing partners for each project, based on factors like sustainability, innovation and uniqueness.

HCL has separate selection processes in place for their rural and urban initiatives. For rural development projects, an application-based process is adopted with due diligence conducted on the applicants, followed by reviews from sector experts, field visits, interviews and final presentations to the jury. For urban projects, an RFP process is followed. This approach may be one way to address the differences that arise from the nature and location of such projects.

As with most other sectors in this country, the development one is also unstructured and NGOs, while doing some great work in their respective fields, have failed to institutionalise due processes and frameworks that most companies are looking for, making the selection process less evidence-based and more branding and network-reliant. Compliance is another pressing issue with many of them resorting to irregular, ad-hoc reporting structures. This is a direct fallout of the lack of regulations and industry standards on disclosures for this sector. As HCL Foundation has found repeatedly, the good work done by most NGOs is tarnished due to their lack of legal, compliance, governance and financial sustainability processes. This is a huge challenge for companies since many NGOs who otherwise could have excellent proposals and rigorous implementation processes are automatically disqualified. However, HCL believes that adequate training and investment in technology-led solutions can help correct this.

NGOs are encouraged to adopt solution-based, sustainable models as corporates aren’t the best at designing effective, long-term solutions. Instead of simply being implementation partners, they need to come up with innovative solutions that these companies can get onboard with. Corporates, on the other hand, are better off focusing on their management and organisational capabilities.

On monitoring and evaluation, companies are applying practices and technology, hitherto reserved for IT and business projects, to CSR programmes as well. While the typical modus operandi is to have monthly and quarterly progress reports and track KPIs, the primary challenge is verifying the reliability and accuracy of the data while at the same time interpreting the reports in a way that leads to tangible steps towards course-correction and improved performance. NGOs need to embrace enhanced disclosures and reporting mechanisms so as to be able to effectively and openly communicate their proposals, processes and performance to internal and external stakeholders.

Ensuring control and compliance, governance, controlling for risk, and performance management are some key challenges, but these are critical to the success of the programmes. Enhanced disclosures and transparency in reporting are required but many companies fail to ensure that their partners abide by these best practices, often leaving a gaping hole in reporting. Regular need assessments and understanding the requirements of target beneficiaries are much-needed steps but there’s little evidence to suggest that these are taken up frequently enough and with the kind of dedication and investment necessary to make such exercises worthy. The question is: do the higher-ups at these companies realise that monitoring the impact of CSR programmes is as critical as the actual implementation?

The main takeaway from this investigation is that while organisations have adapted to the new normal since 2013, challenges abound while choosing and doing work with NGOs, and while managing the evaluation of their own programmes. There are no easy answers, except for constant vigilance, consistent reporting, and a bit of self-introspection.