CSR law: A way to reduce trust deficit between NGOs and Companies


By Jaideep Sarin

Manesar:  With companies that fall under the ambit of the new guidelines of Corporate Social Responsibility (CSR) likely to report about their activities from next month, the trust deficit between them and NGOs is likely to reduce, a senior functionary in this field said.

“Over the years, a fairly large trust deficit has developed between NGOs and corporates (over CSR activities). Corporations, for their part, find it difficult at times to place their faith in NGOs. Their hesitation relates largely to issues of ethics and implementation capabilities.

“The new legislation will lead to a synergistic partnership between corporations, NGOs and the government which would also allow for greater transparency in the operations of all three agencies,” Bhaskar Chatterjee, director general and chief executive officer of the Indian Institute of Corporate Affairs (IICA), told a media outlet in an interview.

“Government data can help guide CSR agendas into areas it is most needed, corporations have experience making sure the projects are streamlined and costa conservative, and NGOs have experience and knowledge of marginalized and underserved areas of society as well as experience in operational transparency. If a symbiotic relationship can develop between corporations, NGOs and the government, socially responsible programmes will have a measurable impact faster and more efficiently than if there is less transparency and no trust,” Chatterjee said.

The new CSR rules under Section 135 of the amended Companies Act, 2013 came into force from April 1 last year. Companies falling in the ambit of the new rules were mandated to spend two percent of their net profit (average of last three years) on CSR activities.

Rough estimates indicate that nearly Rs 25,000 crore (over $3.5 billion) could be spent by companies in CSR activities in the first year (2014-15) itself.

“Presently, it is estimated that nearly 14,000 to 16,000 companies are likely to come under the ambit of the CSR legislation. Actual expenditure will become clearer after companies do their CSR reporting and audited results are made available in the public domain from September onward,” Chatterjee said.

Except for large corporates and old companies, most of the companies falling under the ambit of the new rules are first-timers who do not have much expertise about CSR.

Corporate Social Responsibility
credits: willnevergrowup.com

Chatterjee pointed out that the spirit of the new CSR rules was not to have the government control the CSR funds of companies engaged in the activity.

“The role of the government is to create an enabling environment so that companies are motivated, encouraged and inspired to undertake meaningful, impactful, sustainable and result-oriented projects and programmes on the ground. The purpose and spirit of CSR law is not that the government is to use or control any funds either for management of CSR or for doing CSR management in any way,” Chatterjee pointed out.

The IICA, which is under the ministry of corporate affairs, was set up to provide a holistic think tank, capacity building and service delivery institution, operating through effective partnerships with corporates and professionals and institutions. It has set up a CSR Implementing Agency Hub to create an extensive database of the implementing agencies. It has also launched new courses to meet the burgeoning demand for trained CSR professionals from the corporate, public and NGO sectors.

With the new rules in force, the CSR sector activity is likely to be streamlined in the coming years.

“There was a time when development and corporate sector functioned in a mutually exclusive fashion. In fact, many a time, they found – and continue to find – each other as an adversary. The changing milieu, however, is encouraging them to come to the same table. The business regulations in India have already created a platform for NGOs to play a part by recommending the implementation of CSR projects through NGOs and development sector agencies,” Chatterjee said.