As of April 1, 2014, any private limited company and listed company in India with a net worth of 500 crores or a turnover of 1000 crore or net profit of 5 crore must spend at least 2% of its average net profit on 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 proper process and management. Let us see some basic steps for CSR implementation in India.
• A performance-based view: A performance-based execution model is critical to the success of any CSR project. Once the need is known, the outcome must be defined and it should be tracked as a business objective.
• Partnership with civil society organizations: These partnerships are expected by law and are most important for using resources, skills, knowledge and experience from both company employees and residents. Everyone must be aware of the resources and distribution mechanisms available to ensure that the funds and other resources are utilized effectively.
• The rigor of monitoring: Defining project indicators is an important task during the planning phase. They become the objective measure of progress. The participating organization should define a quantity and quality related approach to data collection based on the monitoring framework.
• Long-term view: The company will not 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 has achieved the decided result, it will leave the CSR in question, but the impact must continue to be. The activities should become part of the community’s life to ensure that there is no turning to the old scene.
Building CSR implementation model:
• Needs assessment: This is a structured approach to understanding the exact needs of a community. It should align with Section 135 of the Companies Act as well as the need for the local community. It ensures that the community gets involved in CSR from the planning stage. Health, water, sanitation and microfinance are common needs assessed as they have a major impact on community development. Needs Assessment has additional steps such as defining assessment frameworks, data collection and synthesis.
• Solution design: This phase identifies potential partners and uses LFA (LFA) methodologies to understand the impact of social programs. Output, Outcome and Impact are the most important parameters to consider in project design. While designing the solutions, it is important to check if the proposed solution is right for a particular community, current conditions and location. Something like tree planting of specific trees does not work in all climates and in all conditions. As CSR implementation budgets are pre-approved, the proposed solutions must fit into these budgets or there must be a security from the government or any other authority to provide the additional funds if required.
• Partner selection: Once the solution is designed, choosing the right partners depends on the credibility, expertise and relevance of the partners. Credibility includes compliance with legal and income taxes along with any recognition and awards earned by partner organizations. The expertise must be related to the area of expertise as well as related to the CSR topic. Knowledge and experience in solving specific problems is a plus. It is important to check if the partner organizations have processes in place in accordance with the expected outcome. The partner should also involve the company’s 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 CSR implementation in India. It is extremely important to understand and assess the current level of community related to CSR activities. It is known as a basic assessment, which is a one-off activity. When project work starts, there should be a monthly or quarterly reporting mechanism to ensure that any restrictions or bottlenecks are immediately known to all stakeholders. In addition, an annual social audit is also required. The audit ensures that the project progresses as expected and delivers the expected results to the community. Except for the baseline assessment, all other assessments are recurring. With each new assessment, the baseline changes successfully with the implementation of CSR.
• Impact assessment: The impact assessment is critical as it helps you understand the exact impact of the project.
The evaluation or impact assessment has four key parameters:
• Relevance to urgent social needs is paramount and benefits should reach the right recipients. It is an important aspect once the benefits are visible; there may be people who would like to be part of this initiative just to get the benefits without being involved in the project or those not involved in the targeted community.
• Efficiency related to a strong focus on results and ensuring results are achieved. There must be a clear improvement in the quality of life for community members. The success needs regular measurements against the targeted result. The committee members are part of the implementation and the CSR Board oversees the project and takes regular updates. The CSR Board and the CSR Committee together with the partner organization are key to CSR implementation in India.
• Strong efficiency in the utilization of the available resources is critical, as the resources are not unlimited and the time frame is also well defined. The number of beneficiaries may be limited at the start of the project, but should continue to increase to cover all who are intended to be part of CSR initiative planning.
• Sustainability assessment is related to post-project verification, whether the impact is still there. This type of revision is there after the end of the project. For example, a sanitation system implemented during a CSR activity for a home where it was not there. Once the CSR implementation is over, the community will have to adapt to the habit of having the sanitation system in place for each new home built in this location in the future.