Is the current individualistic model of CSR spending, with every company doing its own thing, the optimal model for the utilization of these statutorily sequestered funds? What other viable alternative(s) do you suggest?
Refer – The Indian Express
Enrich the answer from other sources, if the question demands.
IAS Parliament 6 years
KEY POINTS
· The Indian Companies Act (2013) mandates Indian corporates, at least 2 per cent of their net profits for CSR (Corporate Social Responsibility).
· The Act defines broadly the social framework within which companies should spend their CSR funds but beyond that, companies have the freedom to identify the projects and determine the modalities of implementation.
· But, this is not the optimal model for the utilization of these funds due to the following reasons:
· Corporates have limited experience and expertise in addressing the complexities of social development.
· The bulk of the CSR money (almost 75 per cent) is allocated to just three sectors — education, health (including sanitation and water) and rural poverty.
· Almost 40 per cent of the money goes to just a few relatively well-developed states — Maharashtra, Gujarat, Karnataka, Tamil Nadu, Andhra Pradesh and Telangana.
· This is because Section 135(5) of the Act encourages companies to “give preference to the local area and areas around it where it operates, for spending the amount earmarked for CSR activities.”
· The current model, in short, aggravates rather than alleviates existing regional and social disparities.
Other alternative
CSR trust
· Corporate pooling of CSR funds into a common “CSR trust” and allow an autonomous body to manage and disburse the funds.
· This body should be a confederation of corporates, NGOs, domain experts and government.
· Its role should be to define the CSR agenda, identify the CSR projects, select the local partners, allocate the resources and oversee implementation.
Benefits of such model
It would
· Enable the pooling of knowledge and experience, the sharing of best practice and the leveraging of scale economies.
· Provide a forum for learning from the grassroots experience of NGOs and the local community.
· Facilitate back-office synergies and reduce duplication of efforts (as mentioned, CSR money is concentrated on just three sectors).
· Allow for a more equitable geographic distribution of funds.
· Provide a platform for the delivery of holistic solutions developed by leveraging the financial and non-financial assets of corporates and by creating development “joint ventures” between companies with complementary assets and skills.
· And thereby generate sustainable income generating opportunities.
