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Lead Essay

Published on: March 29, 2022, 4:40 p.m.
The metamorphosis
  • Illustration: Panju Ganguli

By Srikrishna Sridhar Murthy and Meera Harish

Corporate Social Responsibility (CSR) in India has come a long way since 2014-15, when the Companies Act 2013 introduced a structure and mechanism for systematic and impactful social spending and outreach by corporates. 

While the year 2021 marks the beginning of the ‘Decade of Outcomes’ towards the achievement of the United Nations Sustainable Development Goals (UNSDGs), we have been calling this the ‘Decade of Action’ as we watch corporates increasingly align their CSR strategy to the SDGs and align them sharply to national priorities. CSR and SDGs are like the double helix model of the DNA, intertwined inextricably – both call for sustainable development and with the clients we work with, we enable choices in CSR that are both strategic and long-term/sustainable.

While 59 per cent of the CSR spend in India during 2014-20 was towards Education, Healthcare and Rural development, in the last few years, corporates have started contributing towards other SDGs like SDG 6 (Clean Water – an increase of 66 per cent in CSR spend in 2020 compared to 2014), SDG 9 (Industry, Innovation & Infrastructure – an increase of 22 per cent in 2020 compared to 2014), SDG 13 (Climate Action – an increase of 70 per cent in 2020 compared to 2014). The Data Stories from our data platform, India Data Insights included in this issue capture the details across all SDGs. 

The catalytic role played by the NITI Aayog to ensure collaboration between the private sector, the social sector and the government has also ensured significant scaling up of collaborative work on the ground, including in India’s 112 Aspirational Districts, where the transformation is significant. 

Innovation and digitisation

Several corporates in India have now transitioned from looking at CSR merely as a way to primarily fund education and healthcare initiatives to looking at finding innovative solutions for large-scale social problems. They have done this by directing their CSR funds towards incubators and research institutions. They pilot these innovations and demonstrate the potential to scale, at which point they segue to funding accelerators that solution for scale. 

Besides innovation, the other trend has been digitisation. The pandemic has played a catalytical role in digitisation efforts resulting in several corporate, taking to digital innovations, especially in health-tech, fin-tech, and agri-tech! In many ways, the CSR of yore is almost unrecognisable among many progressive thinking corporates, which are aligning their CSR priorities to the nation’s priorities and trying to move the needle there in a non-linear fashion. In fact, as of 2019, 18 per cent of the top 100 CSR spenders in the country have gone on to set-up their own corporate foundations too!

For those of us working in this ecosystem, these transitions are palpable. From ‘project mode’ regular CSR in 2014 to now innovations and digitisation for scale, the corporate-CSR ecosystem has come a long way. 

The segue to ESG 

And as we write this in 2022, CSR has segued into the next phase in India – ESG. The adoption of strong ESG standards by corporates is the next important strategic step in the evolution of CSR practices in India. While CSR has largely been outward looking thus far for organisations, with lesser focus on solving problems directly related to them, ESG norms integrate internal and external factors. Importantly, ESG measures social responsibility in a way that can be understood by investors, customers, regulators and employees and several agencies such as MSCI now accord an ESG rating to corporates.

While robust ESG policies naturally make the world a better place to live in for all of us, they have a three-fold direct impact on corporates as well: reputational, operational and financial. They improve a corporate’s brand value, help attract talent, counter investor activism, and result in reduced regulatory interventions. A corporate can have better operational efficiency, manage climate-related risks better, and boost innovation. And on the financial front, a high ESG rating can help a company tap into new markets and customers and access cheaper debt and equity capital. There has been significant correlation between good ESG practices and valuations and stock price performance.

As in the case of CSR, the government of India and regulators are helping accelerate the adoption of best practices. SEBI has mandated BRSR (Business Responsibility and Sustainability Reporting) for the top 1,000 listed companies from 2022-23. It is based on the nine principles of the NGRBC (National Guidelines on Responsible Business Conduct). This report is the first step towards the standardisation of sustainability disclosures in India, which is expected to get more stringent in the years to come.

And, as the government, regulators and corporates are focussed on creating a more robust strategic ESG ecosystem, there is a lot more talent migrating from the corporate to the social sector, bringing in fresh views and ideas. Cross-sector collaboration is gradually increasing, with corporates not just funding projects but working with other ecosystem players, to drive significantly more impact by leveraging their talent, expertise, systems and processes, networks and platforms. 

Newer tools for social impact 

Pushing the envelope on innovation has also led to pushing the boundaries on the various tools put to use for social impact, whether they be rolling funds or Development Impact Bonds – the latter an innovative instrument, where an initial investor funds a project and an outcome payer provides the investor a return on capital after the results (as measured by an evaluator) hit a certain target, thus ensuring impactful spending.

One of the earliest examples was the involvement of Children’s Investment Fund Foundation and UBS to reduce the gender gap in education in rural India. The emergence of a new class of investors and the availability of these new instruments is nudging corporates towards faster adoption of high ESG standards and helping social enterprises raise capital.

With all these changes, the Indian corporate CSR ecosystem of 2022 is not the same as what it was in 2014. It is the proverbial caterpillar metamorphosing into a butterfly and how!

(Murthy is co-founder and CEO, Sattva; Harish is Partner, Sattva)

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