A Relook at the CSR Rules Can Help Corporate & Nonprofits Alike in the Post-COVID World

A Relook at the CSR Rules Can Help Corporate & Nonprofits Alike in the Post-COVID World

By: Pratima Kirloskar, part of the Promoter Group of Kirloskar Brothers

Pratima is part of the Promoter Group of Kirloskar Brothers and runs the Vikas Trust other than being associated with several NGOs.

The COVID-19 pandemic is a ‘Black Swan’ event of 2020 with seemingly deep and long-term impacts on trade, finance, and global economies. For businesses, the pandemic will challenge their established practices, forcing them to conjure up new ways of marketing their products and services, making new recruitments, operating workplaces, and interacting with their customers, stakeholders, and communities within and even outside the realm of their core businesses. The pandemic will also demand corporates, non-profit organizations, and even the government to rethink their ideas and policies around Corporate Social Responsibility (CSR). 

With expected shrinkages in CSR funds of corporates in the aftermath of the COVID-19 crisis, focus on the self-sustainability of social initiatives will determine their longevity and impact in the long term. Further, for the current financial year, many companies have already channeled their CSR funds to COVID-related causes, which indicate that there would be lesser funds for corporate CSR projects and non-profit organizations. Hence, CSR projects and NGOs that solely depend upon corporate support will suffer and may even be discontinued for want of funds if they don’t start finding ways to become self-sustainable in the long run. 

CSR projects need to be embedded with a concrete business plan and a breakeven roadmap to be self-sustaining. In addition to this, enabling a policy framework will be crucial for social projects to have a deeper and longer-term impact.

Focus on Creating Rural Entrepreneurs 

CSR for urban and rural areas requires a differentiated approach as rural projects ought to focus on developing the local economy by promoting skilling and entrepreneurship among villagers.

Whether a CSR project is linked to rural healthcare, water, irrigation, education, or agriculture, ensuring participation of people from the area will create a sense of ownership among the locals, which will also ensure the sustainability of these programs.

Businesses, as part of their CSR, must start skilling villagers and support entrepreneurial ventures around the needs of the local economy or their own business needs, but aligned to the larger national agenda. 

Link Minimum Wages Rule to Minimum Skill

The inherent purpose of implementing CSR in rural areas is to upgrade villages, bring new opportunities, and develop the rural economy. Currently, under the Minimum Wages Act, the government assures a certain salary to all workers, irrespective of the fact that they are skilled or not. If the government’s Minimum Wages Act is tweaked to link it with minimum skill, then people in rural areas will also be incentivized to learn and upgrade.

Skilling of people in large numbers is crucial for making India a global manufacturing hub and attracting foreign companies to our land. Leveraging CSR to develop new skills among rural people will not only satisfy this need but also make CSR initiatives more sustainable with many SMEs joining the vendor and supply chain of these businesses.

Consider Funding for any kind of innovative technology as a CSR activity rather than only allowing funding of govt. incubators as CSR activity 

Any entrepreneurial idea that can be converted into a commercially viable business and is innovative, disruptive, impactful, and cost-effective should be allowed to be incubated by companies as part of their CSR. Currently, the government allows CSR funds to be allotted only to government incubators, but this rule needs to change to create more successful entrepreneurs.

Relax Amenity Space Rules to Accommodate CSR projects

According to the current land rules of the Maharashtra government, if the area of any building complex is one acre or more, then a certain percentage of the land parcel has to be given up for ( removed open space as those are lungs) amenity space. Often, nothing comes up in these amenity spaces and instead they get turned into slum pockets or garbage dumps. If a large land parcel has a single owner or even a corporate, then this rule could be relaxed to use the space for initiatives serving our national agenda, such as for creating the required infrastructure under the ‘Atmanirbhar Bharat’ initiative. As part of corporate CSR, companies holding such large land parcels should be allowed to convert the amenity space into innovation centers, startup incubators – by anyone and not just government incubators – design centers, rapid prototyping centers, plug-and-play labs, etc.

Realign & Permit all education projects under CSR to go online

The COVID-19 pandemic is a perfect opportunity to realign all education-related CSR projects towards online education. The CSR funds could be used for modernizing the IT infrastructure of schools to facilitate education continuity of children through the online medium. This approach will be crucial as children returning to school will remain a distant possibility until a cure or vaccine against the deadly viral infection is discovered.

Corporate Donations in kind should also be allowed as CSR

With steep declines expected in corporate revenues and profits in the post-COVID-19 times, donation of companies in kind, which may include products they manufacture, instead of committed financial investments should also be allowed under CSR contribution. This will not only ensure continued corporate support to social projects but also lead to setting up critical infrastructures, such as healthcare centers, education institutions, etc in rural areas with the best set-ups, technology, and equipment.

Lift the Five Percent Cap on Administration Spend on Corporate CSR

Currently, under the CSR rules for corporates, there is an expenditure limit of 5 percent on capacity building of employees and personnel, which includes administrative overheads. However, with no such limit set for non-government organizations (NGOs) engaged in similar social projects, which run on corporate donations, they can attract the best of talents to helm their program successfully. As a result of this disparity, the project receives fewer funds than envisaged by the corporate, hence this rule needs to be scrapped to make it at par with the NGOs.