CSR in the aftermath of Covid-19

Every citizen has an ethical duty to act responsibly towards society and the environment. Corporate Social Responsibility (CSR) refers to a company's performance of stipulated obligations in this area. In India, the CSR law came into effect in 2013, it being only the second country in the world, after Mauritius, to have mandated CSR. According to it, all businesses with a turnover of more than Rs 1000 crore, net worth of Rs 500 crores or more, or net profit of Rs 5 crore or more, must spend at least 2% of their average net profits earned during the three preceding financial years towards CSR activities. As mentioned in Schedule VII of the Companies Act, 2013, these funds are to be broadly spent on “Promotion of Education, Healthcare Facilities for Women and Children, Eradication of Hunger and Poverty, Promotion of Gender Equality and Women Empowerment, Combating with Deadly Diseases, Environmental Stability, Contribution to PM Relief Funds, State and Central Funds, Employment Enhancing Vocational Skills, Protection of National Heritage, Art, Culture”, etc.

The Covid-19 pandemic has significantly changed the landscape of the world economy. With all physical operations of industries and companies put on halt, around 32 million people were driven to unemployment in India, according to Pew Research Centre, and millions of others in the informal and self-employed industry found themselves unable to sustain during the complete lockdown. In many areas, progress was set back by several years, the burden disproportionately heavy on the less privileged.

(source: National CSR Portal)

But despite these circumstances, Corporate Social Responsibility continued to be a major priority for companies with a total CSR spending of about Rs 24,865 Cr. (as per the Ministry of Corporate Affairs data), a significant increment from Rs. 21,231 Cr. in 2021. The same data highlights how the majority of companies (>55%) spent more than the 2% mandate. Looking at the state-wise distribution, Maharashtra ranked first, with Rs 3307 Cr. of CSR spending. The sector-wise distribution shows the biggest share went to Health & Sanitation+ (Rs 8706 Cr.) followed by Education and Livelihood (Rs 8020 Cr.) and Rural Development (Rs 1818 Cr.).

What did the Government do?

Soon after the onset of the pandemic in March 2020, the government announced that spending on Covid relief activities would be eligible for CSR. In 2021, the rules were amended to include any funds spent on “creating health infrastructure for Covid-19 care, establishment of medical oxygen and storage plants, manufacturing and supply of oxygen concentrators, ventilators, cylinders and other medical equipment for countering Covid-19” to further incentivise companies to contribute to the country’s fight against Covid. Alongside this, any unspent amount allocated to CSR must be transferred to the unspent CSR account within 30 days of the end of the financial year, and if the amount still remains unspent for 3 years, the same must be transferred to funds such as the PM National Relief Fund, PM CARES Fund, Disaster Management Fund, Clean Ganga Fund, etc.

What did corporates do?

As a result, over the last two years, Covid has taken up a major chunk of the CSR spending, amounting to Rs 11,000 Cr., which is more than 75% of the total spending in 2020 and around 60% of that in 2021. As per India’s National CSR portal database, the proportion of CSR spending allocated to education has declined from 39% in 2018-19 to 32% in 2020-21, while the proportion allocated to gender equality has decreased from 3.1% in 2018-19 to just 2% in 2020-21. Similar patterns can be observed in other development sectors, with the exception of contributions to the Prime Minister's National Relief Fund, which have increased from 2.3% in 2018-19 to 9.6% in 2020-21. This dramatic increase in contributions to the PM national relief fund can be attributed to the 2021 amendment.

(Source: National CSR Portal)

Top CSR contributors in 2021 were Reliance Industries Ltd., Tata Consultancy Services Ltd., Tata Sons Pvt. Ltd. and HDFC Bank Ltd. among others, whose CSR policies followed similar trends of generous contributions of central funds, production and distribution of medical supplies like oxygen, sanitisers, gloves, masks, and PPP kits to hospitals and other Covid care units, as well as other monetary donations to NGOs.

However, Covid-19 also brought forth some innovative utilisation of big corporates’ funds such as Zomato collaborating with national and local NGOs including Action Aid, The United Foundation, Caritas India, Don Bosco etc., to support the underprivileged in their campaign ‘Feed the Daily Wager’ (April 2020), collecting Rs. 32.57 Cr. for the same. Marico, with an aim to stimulate the country’s brightest brains, awarded CREA Worldwide, Log 9 Materials Scientific, and Saral Design Solutions a sum of Rs. 2.5 Cr. collectively under their ‘Innovate 2 Beat Covid’ campaign for coming up with low-cost Covid healthcare solutions. Tech Mahindra Foundation, which manages the CSR operations of the Tech Mahindra group, came up with a mission of ‘Empowerment through Education', focusing on three major areas of education, employability, and disability through more than 150 projects in 11 sites across India. Along similar lines, the Vodafone idea foundation awarded 2500 students with scholarships to ensure that their education was not compromised by a lack of funds during the pandemic.

In the wake of Covid

While the direct effects of the pandemic on public health and the economy were plain as day, Covid-19 has worked in the backdrop for the past two years, worsening many social issues while escaping notice, and setting back decades of progress. According to Edelman’s Annual Trust Barometer, 78% of the Indians sampled believed that the pandemic had worsened social inequalities, and disproportionately affected the less privileged. The sentiment isn’t unique to India, as in the same study, 68% of the people worldwide agreed with the statement.

As per the UN SDG report, Covid-19 has set back over 4 years of progress in poverty eradication, almost 4 decades of progress towards gender equality, and slowed down efforts toward many other SDGs. Global health systems have been overburdened, and many key health services have been disrupted, posing grave threats to progress in combating other fatal diseases. Compared to levels prior to the pandemic, tens of millions more people today live in extreme poverty and endure worse hunger. Approximately 147 million youngsters across the globe missed more than half of their in-person teaching over the past two years, negatively impacting their education and well-being. Women have been disproportionately affected by the socioeconomic repercussions of the pandemic, suffering from job loss, an increase in unpaid care responsibilities, and a growing epidemic of domestic abuse that occurs in silence. That being said, progress in the sectors of education and gender equality has been impacted most heavily as pointed below.

Education

India has the world’s second-largest school system after China, with more than 250 million children enrolled. Following government orders, all schools, colleges, and other educational institutions were closed in March 2020, and as a result, all schooling went into remote mode for almost 2 years. However, according to a report by UNESCO, only 36% of all enrolled children received any learning or study materials from their teachers. On the other hand, more than 75% of families had trouble ensuring their children had access to these lessons due to little to no access to digital devices like smartphones and an internet connection. Overall, students may be at least 8-9 months behind in their education, according to an article by the Economist.

Indian schooling system goes beyond education, especially at the primary level, with government schools being the only source of basic services such as mid-day meals, immunization, health checks, protection, etc. According to the same UNESCO report, India has 120 million children enrolled in the mid-day meal scheme, but school closures in the last 2 years have taken away what is most often the most fulfilling meal of the day for these children. Schools also provide provisions like sanitary products for adolescent girls, the closure of schools has taken away this provision, creating further barriers to basic menstrual awareness and hygiene. Another important aspect of physical schooling was ensuring protection for children, especially young girls, against abuse and violence, which saw a rise during the lockdown.

Gender equality

India does not fare well when it comes to gender equality, being placed 140th out of 156 nations (down 28 places from the previous year) on the Global Gender Gap ranking by the World Economic Forum in 2021. According to the global statistics compiled by the United Nations on the harmful effects of Covid-19 on gender equality, women had a higher rate of employment loss with 26% of women experiencing job loss in India compared to the same rate being 20% for their male counterparts, and more female pupils dropped out of school as well; according to a study published in The Lancet. Another alarming indirect impact of Covid-19 has been observed with a rise in domestic violence against women during this time period. In 2021, the United Nations Entity for Gender Equality and the Empowerment of Women conducted a poll which indicated that 45 per cent of women had experienced some sort of violence since the start of covid-19. This is without acknowledging the fact that due to a lack of documentation, the severity of these cases is often underestimated.

CSR investment in gender equality, women's employment, and the reduction of other gender-based inequities in India has decreased during Covid-19 affected years. The year-on-year growth rate of spending on gender parity has precipitously declined from 203% in 2015-16 to just 72.6% in 2020-21. According to the UN SDG report, due to the pandemic, parity between men and women in national political leadership has been set back so far that achieving gender equality will require an additional 40 years.

The way forward?

After duly analysing the impact of Covid-19, a strong need can be felt that the very way in which CSR is defined, needs to be evolved. As India, along with other nations of the world, has been pushed back by several years on the progress made through CSR efforts, there is a need to come back stronger. For that, companies need to assume a role which demands their attention beyond just the mandated 2% spending. In addition to standing in unison in times of crises, the CSR ventures of our Indian corporates need to contribute largely to major social issues to aid a significant advancement in societal progress. Being home to 13,34,119 active companies as per the Ministry of Corporate Affairs Annual Report 2021, India as a country does possess great potential to nudge these companies towards investing in emerging issues as part of their CSR.

A fundamental step in the right direction would be to start by aligning our CSR regulations with the United Nations Sustainable Development Goals which are wider in scope having 169 targets catering to 17 SDGs, providing companies with a wider canvas of opportunities that can be exploited as per their potential and capabilities. An environment that encourages innovation in CSR at the root level, needs to be developed for better advancement. Initiatives such as strongly established incubator centres in top educational institutes of the country (for instance IIT Madras’) go a long way in utilising the mental resources of the students as well as the faculty. Additionally, as established NGOs at the local and national levels already have the capabilities to solve the ground-level problems, companies in collaboration with them (like Zomato successfully showcased during Covid) could make a much bigger impact.

The avenue that demands the utmost attention going forward, however, is the amalgamation of government and corporate efforts when it comes to CSR through a legal mechanism termed as Public-Private Partnership (PPP). As Nobel laureate Prof. Muhammad Yunus and former Indian Education secretary Anil Swarup stressed, such collaborations should be the way forward as the pandemic brought out the shallow nature of the current social ventures. The same has been utilised by certain businesses during Covid, such as Apollo Telemedicine Networking Foundation (ATNF) & ATC CSR Foundation India in Madhya Pradesh, and Mann Deshi Foundation in Maharashtra; which worked efficiently to provide healthcare access to previously untapped rural areas. The success of their efforts further advocates the need to encourage such ventures on a larger scale.

In taking away the modes in which companies were expected to function, Covid has forced a new approach to their role in society, opening new avenues and greater potential in the process. How that translates to tangible action, remains to be seen.