By the IIC SAST team

In our experience, before implementation, or monitoring, extending or modifying any government scheme, the first issue to address for any project is the problem of funding. Government funds alone are almost never sufficient for everything that needs to be done, so finding other sources of funding, or other organizations to fill in these gaps becomes important.

One of the first sources usually suggested is Corporate Social Responsibility (CSR) funding. When it was first suggested that our IIC team should investigate how to secure CSR funding for our organization, it was portrayed as a mystical source of funding that was just waiting to be used for government purposes. Through secondary research, informal interviews, and information-sharing with other IIC teams we have found that the reality, is a bit more nuanced and difficult than that.

Though many private companies have a long history of philanthropic work this practice has been formalized and regulated in India in a unique way. The 2013 update to the Indian Companies Act mandated that any company with a net worth of Rs500 crore, a turnover of Rs 1,000 crore, or a net profit of Rs 5 crore is required to spend 2% of its average net profit on CSR activities. CSR activities must take place in India, and are required to be ongoing projects or activities with a large multiplier effect, effectively ruling out “cheque-book charity”.

The Ministry of Corporate Affairs has clarified that in-principle CSR funds should not be used as a funding source for government schemes and should have a larger multiplier effect. That said, the CSR board is able to decide to supplement a government scheme if all other components of the law are complied with. This means that a company is not able to donate funds to a pool to fund government programs, but they are able to coordinate with government departments to develop programs which support a government scheme in some way.

From informal interviews on the topic, it seems that if a company is interested in allocating CSR funds towards a given project, there are generally three broad methods by which CSR funds can be donated and managed. The first method is for the donor company to both fund and implement the project by itself. Though companies do not necessarily have to use their own employees in this case, this is encouraged, to some extent, under CSR regulations which allow companies to count the cost of employee “volunteer time” towards requisite CSR targets. The second method is for a company to partner with a third party organization, usually an NGO, which implements the proposal on behalf of the company and sends them reports on progress. The third, and less traditional method is for money to be donated directly to a fund which the government organization uses in implementation of the scheme and is responsible for monitoring the effectiveness of the program and keeping the company donating funds apprised of the situation. For IIC teams working within the government, the advantage of this final method is that it allows the government control over implementation, but it comes with significantly larger administrative efforts to manage the project and the responsibility of monitoring and evaluating the project and updating the donor company.

In sum, while CSR is by no means a quick-fix for underfunded departments trying to make up the shortfall, it can be very effective at “filling in the gaps” in government implementation. While advising governments, we must first identify demonstrated gaps where public funding meets a shortfall and propose projects so that this implementation gap can be filled through CSR funding.  Increased coordination along these lines could enable government and private organizations together to make big strides in social development work.

Note: Special thanks to Dhruv Gupta for sharing his findings from a CSR conference