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Nishant Banore

Business for a social good? How many CSR projects don't have sustainable impact.

Many of us would have seen this: A top corporate showing great images of how they have donated health products, solar lamps and other worthy things to the poor. The pictures generally show happy faces of “beneficiaries”. The corporate leaders, shareholders, and employees feel good that they are doing good for society. But, is this really doing justice to the whole paradigm of Corporate Social Responsibility?

For a company it makes sense to show “visible” social impact in the short term to shareholders, employees, and customers. As a result, most CSR money goes into doling out short-term freebies to seemingly vulnerable people. In addition, CSR is owned by communications and public relations to publicise these donations to show that the corporate has a heart too.

There is enough evidence, generated by grants of billions of rupees under CSR programmes for the last few decades, that short-term grants rarely have a positive social impact unless in extreme situations such as natural disasters.

For example, one of the well-known corporates donated solar lamps to 200 families in a village. They clicked smiling photos that were used to promote a benevolent image of the firm. But, did the donation create the desired impact?

At first, the 200 beneficiaries were happy and started using the solar lamps for daily purposes such as reading and going to farms at night. But, in a few months the solar lamps stopped working due to technical problems. The beneficiaries did not bother to get the lamp repaired as after sales service was unavailable in their village and they did not value the gifted lamp enough to take the effort to repair it. So, they went back to their old way of using kerosene lamps. Also, due to the donations, the value of solar lamp went down in surrounding villages that did not receive the donations.

So, how exactly should CSR funds be utilised to ensure maximum social impact? Firstly, there is a need to understand that these are funds. Therefore, CSR funds need to be managed by proficient investment managers, rather than by PR teams.

Secondly, these are funds that have a 100 per cent risk exposure and no potential economic upside for the corporate. Hence, these funds can be utilised to cover risk for projects that are potentially very impactful in the long-run, but extremely risky.

One example is that instead of donating unaffordable solar lamps to few hundred beneficiaries, why can’t this money be used to develop an affordable solar lamp that can then be bought by billions of people? The potential impact is huge, but there is a risk of failure as well. But, then, CSR money is already written off the books, so the risk should not concern the corporate.

The second example is that startups have great potential for developing innovative sustainable solutions for social problems. But, Indian startups have few sources of debt working capital to grow their operations.

Why not use the CSR funds to guarantee a line of credit for such high-impact startups?

It’s time that the corporate leaders consider making CSR part of their business model and use the funds in a high impact manner, and governments to take steps to put in more effective regulations to ensure that companies create social good.


Nishant Banore is an Indian School of Business alumnus and co-founder of Desta, a rural marketing and fulfillment company that aims to increase income of rural customers.

 

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