Challenges of CSR in COVID World

Corporate Social Responsibility (CSR) has greatly transitioned in India from being philanthropic, voluntary and unsystematic to a more systematic, structured and strategic mechanism in contributing more suitably for society’s welfare. Amendments to Companies Act 2013 paved a new pathway for Corporates to define their focus and vision within the organizational structure. According to the recent government data, the funds allocated and released for CSR initiatives is close to INR 12,000 crores in 2018-19. With the prevailing pandemic, CSR initiatives have been at the frontlines in implementing strategies for crisis relief. However, the focus of CSR funders and NGOs has now shifted to catering immediate relief activities including distributing essentials in the marginalized communities, providing supplies to migrants and targeted support to end beneficiaries.

 

This near-term work may pose a challenge for Corporates and NGOs as they re-align their priorities and ongoing projects which were aimed at delivering long-term value addition for communities at large. In this article, we discuss the challenges faced by Corporates in the face of current COVID-19 pandemic.

 

Firstly, CSR initiatives are facing challenges with the impact assessment of the implemented and planned activities. While the social impact of CSR initiatives is paramount during the times of such unprecedented pandemic, it still comes with its challenges to measure the performance and impact of these initiatives because of sudden project revision and re-shifting of goals to address immediate needs. The ongoing projects with long-term objectives are delayed without fostering a logical conclusion. Instituting compliance and governance programs from a very early stage can strengthen the outreach, and even mitigate leakage or any waste.

 

A recent survey conducted by EY and its report ‘Corporate social responsibility in India: reengineering compliance and fraud mitigation strategies’, talks about the need for due diligence policies for CSR implementation partners. Since the impact assessment amid this crisis posits to be challenging, the report talks about the need for strategies in implementation for a higher level of governance in identifying vulnerabilities and absolute transparency with the third-parties involved. 

 

Secondly, the dynamics between the CSR funders and NGOs will shift to a great extent. To understand the long-term impact on NGOs and CSR funding in times of current crisis, which has an adverse impact on the global economy, FSG conducted interviews focusing on understanding current and expected post-COVID-19 activities, with 18 Indian and multinational CSR funders and 22 NGOs working in the development sector. Based on the interviews, most Corporates have allocated their funds for immediate COVID-19 relief activities such as PM CARES fund or state’s relief funds, while some are also allocating additional funds for post-pandemic relief. According to the trends that emerged in the interviews, funding for traditional CSR initiatives could be reduced to 30-60%. This trend will have a definite implication on CSR funding for NGO partners, even though the impact may vary.

 

As a way forward to maintaining relationships and providing support to long-term NGO partners, the team of senior consultants and advisors at FSG suggested two priority actions. One, to understand the context and situation at the grassroots and support even peripheral activities which are valuable in the context of COVID-19 such as initiatives around mental health, domestic violence against women, maternal and child health, among others, and second, to garner targeted financial support to NGOs so that they can sustain and ramp up once the situation improves.

 

Lastly, even the centralized approach and specification of activities by the government might be a hurdle for CSR initiatives. On March 23, 2020, the Ministry of Central Affairs (MCA) issued its first notification in the context of COVID-19, which specified this novel virus to be a notified disaster and included spending of funds for the crisis relief as an eligible CSR activity by deeming such relief funds to be considered under item (i) and (xii) of Schedule VII of the Companies Act 2013 with relation to the promotion of sanitation, public health and disaster management, however, without stating the mode of divergence of funds towards these initiatives. Later, MCA issued another notification on March 28, 2020, which clarified that the contribution made to the fund set up by the Central Government for relief and socio-economic development, namely, ‘Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund’ (PM CARES Fund) to deal with the distress of the prevailing pandemic.

 

Later, through a general circular issued on April 10, 2020, the MCA gave guidelines of permissible and non-permissible CSR expenditure for COVID-19 relief. Contributions made to PM CARES fund, State Disaster Management Authority, payment of ex-gratia to casual/temporary daily wage workers, and activities under item (i) and (xii) of Schedule VII of Companies Act 2013, would come under permissible CSR expenditure, while payment of salaries to workers and employees, including contractual labour and daily wage workers during the lockdown period and contributions made to ‘State Relief Funds’ or ‘Chief Minister’s Relief Funds’ would be considered non-permissible. This limits the scope of CSR initiatives which were planning on aligning their COVID-19 related activities in tandem with their ongoing projects and makes the scope of activities rather microscopic. It also leaves out the focus on the social implications around the novel virus such as mental health, hunger, lack of proper sanitation and so on.

 

In conclusion, COVID-19 has posed new challenges to the CSR agenda, and it’s time to move on from the traditional definitions around CSR activities. However, in a rush to contribute, corporates should first assess their resources and capabilities to have a more suitable model for crisis management. Innovative and thoughtful business models that help deal with the implications of pandemic may lead to better outcomes. It is important to maintain the supply chain and support small businesses amidst the crisis which can address potential bottlenecks and ensure ability to resume production. Marginalized communities must be prioritized and all these actions can lead to fast economic recovery

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