As more CSR funds flow to social causes, education and health are crowding out other issue areas. In a notification amending the 2013 Companies Act, the Ministry of Corporate Affairs outlines ten areas of CSR for companies to channel their efforts. While the list covers topics such as national heritage and training to promote rural sports, the majority of companies are trending towards promoting preventative healthcare and sanitation, education, and gender equality. The Act’s divorce between companies’ core competencies and their CSR endeavors spurs this tendency.
A study conducted by Samhita Social Ventures found that, in India, “78 of the top 100 companies have had at least one program to address education...validating the widely held belief that education is one of the most popular sectors for CSR programs.” Within this field, specific types of educational efforts rise above others. The Economic Policy Group published a report on the breakdown of education spending, revealing that primary and secondary education in India account for 68% of CSR spending, with other efforts and groups like research institutions acquiring no funds.
Our research on a variety of India’s top 500 companies shows that alongside education, health-related efforts are popular. This is not surprising given that progress was already being made in these fields prior to the Act, so companies can now capitalize upon pre-existing infrastructure to help organize their programs. Despite past efforts, there is still great need. Moreover, the Act directs companies to give preference to CSR projects in areas near their operations. Thus, community building has been a prominent focus for companies, and, as central pillars of uplifting a community, education and health efforts are on the rise.
Supporting health and education NGOs like the Smile Foundation or Udaan Welfare Foundation is more visible, more traditional, and less controversial than partnering with research institutions or media organizations. Rohini Mohan, a journalist at the Economic Times, points out that while education, health, and sanitation are widely supported causes and easily provide quantifiable results, other organizations like grassroots activist groups or research institutions are less aligned with the views or goals of some companies. For example, an oil and gas company is unlikely to support a research group who publishes articles promoting renewable energies replacing oil and gas.
With the focus on education and health, more controversial social causes such as LGBTQ rights or combating sex trafficking are failing to garner the support they deserve. This trend of tipping the scale toward safe causes could potentially lead to a crowding out of NGOs geared towards less mainstream issues. Traditionally, a responsibility of the government is to dominate efforts regarding education and health. With government duties now being shared by NGOs and corporations, little financial support is left for NGOs with more diverse agendas. Here we also see corporates aligning their CSR focus to government priorities. For example, the UPA’s push for primary education and women’s empowerment drew much corporate response. Now, the push is on building toilets and corporates are, once again, responding. It seems government social responsibility has been renamed and funneled into corporate social responsibility, and government priorities have become corporate priorities, especially when it comes to health and education.
Perhaps one of the reasons companies are trending towards health and education efforts is due to the Ministry of Corporate Affairs mandating that “CSR activities not include the activities undertaken in pursuance of [the] normal course of business of a company.” Unable to align their efforts and business expertise, companies are looking to the larger and more accessible causes to get involved with, thereby reducing compliance costs (link to compliance post). However, many professionals, from business professors to CSR researchers to companies themselves, have pointed out the negative ramifications that arise from such a separation. It is understandable that the government would be hesitant to allow companies to promote their brands through disguised CSR efforts. However, not allowing companies to engage in efforts that align with their core competencies strips them of their expertise and in turn gears them towards working on the traditional, and thus more easily accessible, causes.
India’s law does not recognize the impact on a wider array of social causes that can come from a company integrating CSR practices with their expertise. There is a significant amount of legwork required to conduct CSR outside of a company’s core areas of business, which has warranted many delays in reaching the 2% threshold. This includes figuring out how to organize and carry out CSR efforts such as acquiring the necessary human capital and redistributing finances, which has proven a demanding task for one fiscal year.
Although the Ministry of Corporate Affairs outlined ten broad sectors for companies to channel their CSR efforts, the results are less diverse, trending toward specific and safe projects within the delineated areas. Only time will tell whether or not the scale will eventually balance out.