October 08, 2014

India’s Mandated CSR Law: The Power Of Possible

Carol Cone

Carol Cone On a purpose

In my role as Global Edelman Business + Social Purpose, I was very fortunate in the fall of 2014 to visit India.

In 2015 the country instituted the world’s first mandated CSR law, requiring all companies doing business there, with at least $830,000 profits, to allocate 2% of three years average net profits against key social and environmental programs. While the issues are diverse – education, water and sanitation, financial inclusion, hunger, poverty and malnutrition amongst others – the intent of the Act is clear: to achieve significant impacts at the grassroots related to critical societal issues in India.

With this historic milestone, my visit was extremely busy: a keynote speech, client meetings, trainings to Edelman colleagues and media interviews.

The title of my speech, “the Power of Possible” built from the new law, and some significant country wide events and trends: the election of Prime Minister Modi, bold leading Indian companies, a large millennial population and mobile phone penetration nearing 80%. Coming from a poor background, Prime Minister Modi is a passionate advocate of raising the level of India’s lower class, especially by providing banking and sanitation, two key actions to support their dignity and advancement. In his recent Independence Day speech he vibrantly challenged his country: “We walk together, we move together, we think together, we resolve together and together we take this country forward.”

It was fitting that my speech at Praxis 2014, was held in Agra, home of the Taj Mahal. Constructed from 1632-1653 by over 20,000 workers, this breathtaking monument is the physical manifestation of possibility. (Imagine transporting thousands of tons of white marble from Rajasthan, hundreds of miles away by 1,000 elephants with no roads, let alone crafting the magnificent building!)

India’s-Mandated-CSR-Law-2

Edelman, now India’s largest PR firm with 400 staffers in 11 offices represents some of India’s largest companies, as well as multinationals. Our meetings were fascinating as all clients took the new law seriously. Some discussed new programs, while others mentioned expansion of previous commitments.

I see the new law as a “gift” to India. A comment that was shocking to many in attendance at my speech. I explained the law thoughtfully sets out key infrastructure requirements that took the developed world decades to understand towards the creation of strategic and impactful public-private partnerships for social good. It also formally introduced CSR to the Boards of thousands of companies who may not have understood nor practiced the concept.

Key actions the law requires: establishment of a governing CSR committee of 3 senior members (one independent from the company) with responsibilities to oversee CSR policy setting, its framework, implementation, measurement and reporting.

For those who want to understand the depth of the CSR mandate, PwC has written an excellent handbook.

The new law holds the potential for what is estimated to involve 8,000 companies, investing more than $2 billion in social programs. Yet I saw even more potential.

In my speech I challenged the audience to align their CSR commitments with business strategy, adding more resources from their companies, including key products, services, human resources and communications to programs. Incorporating these resources, could expand the impact two or three fold.

For example, there is currently a business coalition in India, let by Dr. Mukund Rajan of Tata Sons (disclosure: Edelman client), to have skilled volunteerism hours counted as part of the 2%.

India already has leading companies taking innovative actions towards social issues.

Hindustan Unilever, following Unilever’s global Sustainable Living Plan (disclosure: Edelman client) has multiple campaigns taking place in India. One of the most notable is the Lifebouy hand washing initiative. This program aims to change the behavior of children, especially under the age of five, to learn how to wash their hands to prevent life threatening diseases that often lead to tens of thousands of deaths to children at their most vulnerable ages. A fascinating innovation, the color green, had been added to the soap. It “magically” appears when a child washes for the correct amount of time. A terrific idea to impact behavior change for sure.

Another campaign, from middle market jeweler Tanishq, celebrates an almost unspoken Indian subject, remarriage. The “bold and revolutionary campaign” states, Adweek, immediately sparked social media conversation and was named one of the world’s top women’s empowerment ad campaigns.

Innovative products are also coming to market, specifically focusing on health issues. The Shell Foundation focuses on products and systems that support inclusive economic development. They fund concepts that support job creation, access to energy, urban mobility and sustainable supply chains. Its Envirofit cook stove utilizes more healthful power sources than kerosene. With sales over 300,000 this innovation provides health and environmental benefits and is now the #1 cookstove in India.

The Mahindra Group stimulates social innovation through its “Spark the Rise Fund”, a digital platform for individuals, or groups to submit concepts to develop innovations. Project ideas are considered in technology, energy, agriculture and rural development, infrastructure, transportation, lastly, social entrepreneurship. Those selected for funding are called “sparks.”

Companies are also recognizing the power of volunteerism, with the Times of India hosting multiyear campaigns to encourage citizens and employees to engage in literacy training for children and most recently to English training to up level skill development.

With a population of 1.2 billion, with more than 700 million living on $1 per day, the CSR mandate under the Companies Act should stimulate strategic engagement with social issues. Corporations can comply at the very basic level of the law or use this historic moment to innovate for the betterment of India, its people and economy. The choice is there. I trust the PR profession will help guide their clients to long-term, strategic and impactful programming viewed as key investments for India’s future.

While the law has been in place for almost a year, early research shows that most of the 16,500 companies required to spend on CSR fell short of the 2% target. At the same time, some of the largest companies in India spent more than the required amount. There is a huge opportunity for India and the future of purpose and we are excited to be a part of the journey.

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