12 October 2018
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Friedman in his book Capitalism and Freedom argued that “there is one and only one social responsibility of business - to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game”.
Under CSR activities, many a times the charitable endeavors undertaken by companies have little to do with their core product or business practices like ONGC’s support for Swachh Vidyalaya Campaign. There are also companies that promote CSR activities in the area of their expertise, like Infosys’s support for Computers@Classrooms initiative. As the companies are essentially guided by profit motive, apprehensions arise that either these initiatives would be unsustainable or they are just a marketing strategy. Thus, the question remains that how ‘social’ can be the Corporate Social Responsibility.
Nonetheless, this philanthropic activity has attracted significant attention across globe, especially among policy makers. In India, with a goal of ‘inclusive growth and equitable development’, CSR was conceived as an instrument for integrating social, environmental and human development concerns in the entire value chain of corporate business. As a first step towards mainstreaming the concept of Business Responsibilities, in 2009, Ministry of Corporate Affairs had issued 'Voluntary Guidelines on Corporate Social Responsibility. In order to make the philanthropic activities more efficient and ensure more accountability and transparency, in 2014, Government of India made it mandatory for companies to undertake CSR activities under the Companies Act, 2013. With this Act, India has become one of the few countries in the world to have a statutory provision on Corporate Social Responsibility (CSR).
The Act is applicable to companies with an annual turnover of Rs. 1,000 crore and more, or a net worth of Rs. 500 crore and more, or a net profit of Rs. five crore and more. The Act encourages companies to spend at least two percent of their average net profit during the three immediately preceding financial years in a few focus areas notified under Section 135 of the Act.
Education and skill development are two of the broad areas specified in the Act for eligible CSR activities. The education activities mentioned under schedule VIII includes promoting education, including special education and employment enhancing vocation skills especially among children, women, elderly and the differently abled and livelihood enhancement projects.
An estimate by the Ministry of Corporate Affairs shows India has 13,000-15,000 companies falling under the CSR mandate. However, in order to comply with CSR rules, among the 5,097 companies that have filed annual reports in 2015-16, only 3,118 companies had made some contribution towards CSR expenditure[1]. In 2016-17, the domestic companies have lined up with an amount to the tune of Rs. 13464 crore to fund their CSR projects and activities and it appears that education is the most preferred intervention area for companies, especially companies with medium CSR budget. In fact, CSR in India has witnessed a surge in education spending over the last three years. Education and skill development together witnessed the largest absolute increase in allocation as the amount spent on this sector has increased from Rs. 3188 crore in 2014-15 to Rs. 5124 in 2016-17[2]. This is around 38 percent of the total money spent under CSR in 2016-17. However, the distribution of CSR interventions for education varies across states. Maharashtra is the most popular destination for CSR followed by states like Gujarat, Karnataka and Tamil Nadu. Mostly three models are adopted by these companies in these states to carry out CSR activities in the field of education - a programme owner or a fund provider or an implementation partner. An analysis of data found Reliance Industries Limited, Bharti Airtel group; Wipro Limited, Tata Consultancy services, Infosys and public sector undertakings like Oil and Natural Gas Corporation (ONGC), and National Thermal Power Corporation Limited (NTPCL) are some of the companies with higher CSR commitment for education and skill development.
A mapping of education and CSR activities of the top 100 companies’[3] shows infrastructure building, providing learning materials and supporting children with monetary and non-monetary incentives in schools are the most popular CSR interventions in education by these companies. Recently, under the Swachh Bharat mission, a number of companies taking CSR initiatives in constructing toilets at schools. As there is no separate category for sanitation projects in schedule VII of the CSR rules, these activities are reported as activity under ‘promoting education’.
However, the other important areas of education like promoting sports & physical education in school, construction and development of libraries and laboratories, teacher’s training, and early childhood care and education are not getting significant attention under CSR. Only 20 percent companies have actually aligned their CSR projects towards Sustainable Development Goals (SDGs) and have made disclosure regarding the same in their Annual Report. Also, for most of the companies, the data on CSR activities reported in the public domain are very sketchy and do not provide details of fund allocation and amount spent on different interventions/sub-themes under education.
The existing facts and figures on CSR activities on education reflect very little strategic thinking and innovation. This also shows that companies in India view CSR more as a charitable endeavour. In the absence of an enforcement mechanism or penalties for non-compliance, “mandatory” CSR remains largely voluntary in nature. Many activities that companies undertake are both profitable and good for society. With this mandatory clause, many of them are basically classifying their activities as CSR with no real change in social welfare. Even if there is a real increase in socially beneficial activities, the spending on activities is mostly determined on the basis of the companies’ preference rather than the priorities for the sector or people or area of interventions.
Despite its limitations Government of India has started to look at CSR as one of the potential sources of financing education and skill development. The draft education policy by MHRD for inputs (2016) states that ‘government will take steps for reaching the long pending goal of raising the investment in education sector to at least 6% of GDP as a priority and in order to supplement the Government efforts, investment in education by private providers through philanthropy and corporate sector responsibility will be encouraged’[4].
Investment on education and skill development through CSR is probably innovative at policy level. However, if we look at the total fund flow through CSR activities in education, in 2016-17, it was merely seven percent of the total MHRD[5] expenditure and a negligible 0.033 percent of country’s GDP. Currently India spends around 3.7 percent of GDP on education, which is way below the figure of six percent of GDP, recommended by Kothari Commission in 1966. Given the accumulated deficit of the years, this meager allocation through CSR is nothing but a drop in the ocean. Probably it would be a better alternative for the government to increase the corporate tax and use the additional revenue for provisioning of public goods like education to reduce inequality systematically and in a democratic manner.
[1] http://www.mca.gov.in/MinistryV2/csrdatasummary.html
[2] https://csr.gov.in/CSR/developmentlist.php
[3] http://www.samhita.org/wp-content/uploads/2014/11/CSR-in-Education-Report.pdf
[4] http://mhrd.gov.in/sites/upload_files/mhrd/files/nep/Inputs_Draft_NEP_2016.pdf
[5] Ministry of Human Resource Development-Union Education ministry
The views expressed in this piece are those of the author, and don’t necessarily reflect the position of CBGA. You can reach Protiva Kundu at protiva@cbgaindia.org.