As of April 1, 2014, all private and public joint stock companies in India with a net worth of Rs 500 crore or a turnover of Rs 1000 crore or a net profit of Rs 5 crore are required to spend at least 2% of its average net profit in Corporate Social Responsibility (CSR) Activities.
When using these large funds, it is extremely important to have a framework and strategy in place along with the right process and governance. Let’s look at some basic steps for CSR implementation in India.
Fundamental principles:
• A results-based view: A results-based execution model is essential to the success of any CSR project. Once the need is known, the Outcome must be defined, and that must be tracked as a corporate goal.
• Alliance with Civil Society Organizations: These partnerships are expected by law and are most important in utilizing the resources, skills, knowledge and experience of both corporate employees and residents. Everyone must be aware of the resources available and the distribution mechanism to ensure that funds and other resources are used efficiently.
• Rigor of Supervision: Defining project indicators is an important task during the planning phase. They become the objective measure of progress. The participating organization must define a data collection approach related to quantity and quality based on the monitoring framework.
• Long-term view: The Company is not going to be part of any CSR implementation project for an endless time, and everyone should be on the same page about this fact. Once the Company achieves the decided outcome, it will exit that particular CSR, but the impact must remain. The activities should become part of the life of the community to ensure that it does not go back to the previous stage.
Building the CSR Implementation Model:
• Need evaluation: This is a structured approach to understanding the exact needs of a community. It must align with Section 135 of the Companies Act, as well as the need of the local community. Ensures that the community is involved in CSR from the planning stage. Health, water, sanitation and microfinance are common needs assessed, as they have a great impact on community development. The needs assessment has additional steps such as defining the assessment framework, data collection and synthesis.
• Solution design: This phase identifies potential partners and uses Logical Framework Analysis (MLA) methodologies to understand the impact of social programs. The Products, the Result and the Impact are the key parameters to consider in the design of the Project. When designing solutions, it is important to verify whether the proposed solution is suitable for a particular community, current conditions, and location. Something like tree planting specific trees will not work in all climates and all conditions. Since CSR implementation budgets are pre-approved, the proposed solutions must fit within those budgets, or there must be a guarantee from the government or any other authority to provide the additional funds if necessary.
• Selection of partners: Once the solution is designed, the selection of the right partners depends on the credibility, experience and relevance of the partner. Credibility includes legal and income tax compliance along with any recognition and awards earned by partner organizations. The experience must be related to the decided territory, as well as to the topic of CSR. Knowledge and experience in solving particular problems is an advantage. It is important to verify if the partner organizations have processes aligned with the expected result. The partner must also involve Company employees in the activities if it is important to the Company.
• Monitoring and evaluation: As in any other project, continuous monitoring and evaluation is very important in the implementation of CSR in India. It is extremely important to understand and assess the current level of society in relation to CSR activities. It is known as baseline evaluation, which is a one-time activity. Once project work begins, there should be a mechanism for monthly or quarterly reporting to ensure all stakeholders are immediately aware of any constraints or bottlenecks. Other than that, an annual social audit is also required. The audit ensures that the project progresses as expected and provides the expected results to the Company. Other than the baseline assessment, all other assessments are recurring. With each new evaluation, the baseline changes with the success of the CSR implementation.
• Impact evaluation: The impact assessment is critical as it allows you to understand the exact impact of the project.
The evaluation or impact evaluation has four key parameters:
• Relevance to pressing social needs is paramount, and the benefits must reach the right beneficiaries. There may be people who would like to be a part of this initiative just to get the benefits without having any involvement in the project or those who are not involved in the target community.
• Effectiveness related to a strong focus on results and ensuring the achievement of results. There must be a clear improvement in the quality of life of the members of the community. Committee members are part of the implementation, and the CSR board oversees the project and makes regular updates. The CSR Board and CSR Committee, together with the partner organization, are key to the implementation of CSR in India.
• A strong efficiency in the use of the available resources is essential since the resources are not unlimited and the time frame is also well defined. The number of beneficiaries may be limited at the beginning of the project, but it should increase to cover all those who are intended to be part of the planning of the CSR initiative.
• The assessment of the impact of self-sustainability is related to the verification after the project, if the impact is still there. These types of audits are there after the completion of the project. For example, a sanitation system implemented during a CSR activity for a house where it was not. Once the CSR implementation is finished, the community must adapt to the habit of having a sanitation system for each new house that is built in that locality in the future.