How Indian companies approach CSR By Shankar Venkateswaran, Chief of Tata Sustainability Group

Understanding the most prevalent CSR models today

The rapid growth of the nonprofit sector that we’re seeing is a new phenomenon. In the 1980s, or even the early 1990s, if you wanted to work with disadvantaged communities, finding suitable grassroots-based nonprofit organisations was a challenge.

And so Indian companies that were so inclined had to set up their own implementing foundations or trusts. This was the route that the Tatas, Godrejs and many others took. Only in the past 25-30 years has this picture started changing.

I used to work with ActionAid, which was set up in the 1970s. It was only after a decade of operating as an implementing organisation that we could evolve into a grant-making institution. Before then, there just weren’t enough nonprofits to support.

For companies setting up CSR units today to comply with The Companies Act, 2013, giving grants is the preferred and often most feasible choice. Especially given their small team size, limited expertise in implementing their own programmes and the large number of potential nonprofit partners.

The CSR models we see today are, therefore, either wholly self-implementing (especially true for companies that have been doing this for decades) or focused entirely on giving grants (more true for companies new to CSR), and in some cases a mix of both.

What nonprofits need to know about the CSR approach of companies?

Companies are trying to get it right
The Companies Act 2013 was a watershed moment in that it created urgency within companies to contribute to CSR. In the beginning, a few companies that hadn’t been giving but were mandated to do so under the Act sought creative ways to “game” the system. But that did not last.

Corporates have realised that since they must do this, it makes most sense to do it well. This thinking has been growing; it may still take some years for CSR to fully adapt, but companies are approaching it in the right spirit.

The question of geography
Different kinds of companies approach CSR differently.

Manufacturing companies want to serve the communities around their factories. They recognise that manufacturing is inherently disruptive and so they must limit its negative impact as much as possible while improving conditions in neighbouring villages. Hence, most seek nonprofit partners working with communities around their plants.

Service-oriented companies, by contrast, can be more geographically flexible. That said, they might prefer to support nonprofits running programmes near their offices so that their employees can get involved.

Manufacturing companies want to serve the communities around their factories; service-oriented companies can be more geographically flexible.

Nonprofits that understand this well can strategise how they develop partnerships with different kinds of companies for greater success.

Most companies are interested in specific and quantifiable outputs, because that is the world they understand
Corporates tend to bring their skills such as project management, technical or specialist skills, and output orientation to their CSR work.

They are most interested in tracking the measurable change that an intervention creates because that’s the world they occupy every day. They derive comfort from seeing thought-through business plans, budgets and audit trails.

At the Tata group, our companies are expectedly output-oriented and we are trying to get many to emphasise long-term outcomes. Some already do this; others are learning how to–it takes time.

The insight for nonprofits, therefore, is to develop proposals that are clear on outputs and processes, demonstrate a well thought-through strategy and are jargon-free.

How nonprofits define core development issues can be very different from how companies do it
What nonprofits define as core development issues, such as social justice and rights-based approaches, will not be embraced easily by companies, not because they lack importance but because measuring outputs, efficiency and the metrics that companies understand is difficult.
Even as CSR evolves, this discomfort with topics that are nebulous, political, and perhaps even controversial, will persist.

Also worth noting is that companies increasingly view CSR as a strategic rather than purely philanthropic activity. This means that companies will want to align their CSR activities with their business because that brings in their expertise and also enables volunteering.
Nonprofits must not judge this as long as the benefits to communities are clear and unambiguous, which is the real purpose of CSR!

Companies’ CSR policies are now publicly available 
One of the many positives of the CSR clause of the Companies Act is the requirement that companies post their CSR policies–defining, amongst other things, the sectors and geographies that they cover–in the public domain. This makes it easy for nonprofits to know what a company’s CSR priorities are and ensure that their proposals are suitably aligned.

How corporate giving will change over the next five years

Post-2013, India is already seeing a growing migration of professionals from traditional development to CSR. As this increases, companies will become more knowledgeable about social issues, what it takes to tackle them and the challenges that nonprofits face. Over time this changing profile of CSR professionals will facilitate greater congruence between the corporate and nonprofit worlds.

Decision-making around whom to fund will gradually improve. Because companies tend to be hierarchical, the people making decisions around whom and what to support under their CSR aren’t always the ones most knowledgeable on the subject.

Because the law demands a CSR Committee of the board, decision-making is now a board agenda, spread across a number of people. While this may slow decision-making, it is worthwhile because now the leadership is more closely involved and decisions tend to be more deliberate and thought-through.

Companies will move away from traditional hands-off cheque-writing.

As knowledge and decisions improve, so will the grant-making model. Companies will move away from traditional, hands-off cheque-writing. Instead they will work together with the nonprofit to identify the problem they want to solve.

While they will increasingly defer to the nonprofit’s expertise, they will bring to bear their own and will seek partnerships that create opportunities for their employees’ participation.

At the Tata group, we understood this a while back and put in place a volunteering programme called Tata Engage that enables employees, their families and even retired staff to volunteer their time and expertise.

The CSR checklist for companies

  • Define your outcomes and stick with them over time. Change takes much longer than the 1-2 year timeline companies expect because, often, development interventions are about changing traditional practices and mindsets and making them future-proof. Determine these outcomes the same way as you approach business: Understand customer needs and find solutions that meet those needs.
  • Be adaptable. Community interventions involve people and cannot be deterministic. There needs to be room for flexibility for the nonprofit too.
  • Invest in the nonprofit-corporate partnership as it is inherently complementary. Nonprofits know what companies don’t and vice-versa because, at the end of the day, CSR is simply social and human development undertaken by companies!

This article has been reproduced from the India Development Review website as told to Rachita Vora and Devanshi Vaid of IDR 


Lets bring the UN Guiding Principles to Life By Rohan Preece, Project Manager, Partners in Change

Seven years ago the United Nations Guiding Principles on Business and Human Rights (UNGPs) was launched. It was historic because it was the first successful attempt to coherently and universally codify businesses’ responsibilities for human rights.

One of the crucial features of the UNGPs is that it locates businesses as being accountable for human rights abuses that occur outside their ‘four walls.’¹

The UNGPs say that businesses should be responsible for their impacts and exercise their power to prevent negative impacts to which they are linked.

This might all sound very promising in abstract, but what does it mean for how businesses should actually operate?

Happily, thanks to a number of legislative developments internationally, we are now better placed to answer this question.

Earlier this year France confirmed support for its Corporate Duty of Vigilance Law. This mandates companies with more than 5000 employees, or more than 10,000 people working for that company or its subsidiaries, to establish and enact human rights due diligence across their operations and supply chains, showing the steps that they have taken to attend to human rights and environmental risks. Those companies that do not publish plans may be ordered to do so by courts and even have to compensate victims who have suffered as a consequence of non-compliance:[i] thus meeting the UNGP requirement of access to remedy.

This French law goes further than the 2015 UK Modern Slavery Act, which mandated reporting on steps to address forced labour and human trafficking within the supply chains of UK businesses, and also further than the 2010 California Transparency in Supply Chains Act had done. Under the British and the Californian law, there is an onus on companies to make disclosures related to their supply chains; but not the same punitive dimension in relation to failures of due diligence.

More developments are in process. The Dutch Parliament this year approved a Child Labour Due Diligence law, which requires companies to scrutinize whether child labour is going on in their production process and in the supply chain, at least to Tier 1. This initiative in particular is designed to protect the ethical interests of the Dutch consumer: to assure her that she is not consuming products made using child labour. There has also been a movement in Switzerland, called the Responsible Business Initiative, to embed human rights due diligence into Swiss law, with efforts also afoot in Spain and in Sweden.

For businesses that manage production chains as part of their core work, the legislative developments in Europe have gone at least some way towards mandating the UNGPs. Much more is required in these areas, though, including to extend legislation to all companies, regardless of size; and – notably in the case of the Modern Slavery Act – to add teeth – moving from accountability to report to accountability to be vigilant and to widen the scope of human rights impacts under scrutiny.

Yet progress is progress, and a common feature of these legislative developments is their implications for supply chain transparency and due diligence, with large multinational companies now required to disclose how they are tackling specific human rights issues among their suppliers. This is at least partially consistent with Article 13 of the UNGPs, which expects companies to ensure respect for human rights within their own operations and in their value chains.

There have also been exciting developments in the banking sector. About one year ago 13 Dutch banks, government, trade unions and civil society agreed to commit to human rights principles and due diligence with regard to their project financing and corporate lending globally. The various components of the commitment also include a requirement to report on the UNGPs and to investigate whether the activities of the banks concerned either cause, contribute or are linked to human rights violations. Though also not without its shortcomings, the Agreement, known widely as the ‘Covenant’, is an important step forward, with Governance managed by a Steering Committee and a Reporting Committee that produces an annual report. The Dutch banks’ work is also feeding into the OECD Working Group on Responsible Business Conduct and there are plans to develop similar agreements at both OECD level and the EU.

Thus in terms of international legislation affecting companies in India and their supply chains, and of course in terms of domestic reporting requirements for Indian companies, the years following the UNGPs has seen significant movement towards making at least certain strands of the UNGPs mandatory. The changes have been limited, highly selective, and insufficient; but definite nonetheless.

At the very least what these developments show is that the UNGPs are not just a set of platitudes. It is a living document that is growing in relevance and can help to shape future legislative developments in other countries. Here in India, there have been some promising moves this year, including NHRC arranging discussions with companies on business and human rights. There has also been widespread support for the Sustainable Development Goals, the achievement of which is impossible without the active cooperation of businesses and their respect for human rights (cf here SDG 8, SDG 12 and a number of other SDGs and SDG targets). But we remain a long way off.

The UNGPs, developed with business centrally in mind, is an invaluable tool for furthering the SDGs and in realizing the vision of the Constitution of India. It is time decision-makers in India, in business and in government, use it more constructively.

The views of the author are personal

¹ The responsibility to respect human rights requires that  business enterprises: (a) Avoid causing or contributing to adverse human rights impacts through their own activities, and address such impacts when they occur; (b) Seek to prevent or mitigate adverse human rights impacts that are directly linked to their operations, products or services by their business relationships, even if they have not contributed to those impacts.

Article 13, United Nations Guiding Principles on Business and Human Rights