Introduction to the CSR Lifecycle

With the passage of the Companies Act of 2013, India became the first country to make Corporate Social Responsibility (CSR) mandatory. The Act builds on India’s long history of corporate philanthropy, and the Gandhian conception of trusteeship, which views corporate as enabled by society, and legitimate only when it provides benefit to society accordingly. Section 135 of the Companies Act requires private and public companies meeting net worth or net profit thresholds [1] to allocate a percentage of their profits [2] to CSR initiatives. This spending must support community development in defined thematic areas, ideally undertaken in project or programme mode (as opposed to simply writing checks), preferably in the local area around which the company operates. [3] These innovations have the potential to revolutionize community development.

With massive financial and human resources, business may hold the key to scaling up solutions and solving previously intractable issues.India, in requiring CSR by major companies, presents us with a new economic framework. (Source: Shutterstock) 

With massive financial and human resources, business may hold the key to scaling up solutions and solving previously intractable issues. The mainstreaming of CSR- of companies sincerely engaged as responsible and proactive corporate citizens- is underway. India, in requiring CSR by major companies, presents us with a new economic framework. As Michael Porter puts it in his Ted Talk Why Business Can be Good at Solving Social Problems, CSR as standard operating procedure is “Capitalism, but a higher kind. Capitalism as it was always meant to be… A capitalism of shared value, where we can create social value and economic value simultaneously.” [4] Whether this new capitalism manifests globally and as envisioned by Porter, or results in companies in one country simply working to obtain minimal compliance, depends on institutional mechanisms. Accordingly, the Indian Institute of Corporate Affairs (IICA) [5] – my host organization- develops policies, mechanisms, and frameworks to guide the practice of CSR. Such work is a major focus of my fellowship, and this blog is the first in a series intended to share foundational knowledge essential to the practice of CSR acquired during my time at IICA.

The CSR Lifecycle

The CSR lifecycle begins with development of a CSR policy. Beyond being a legal requirement, it is an essential mechanism in CSR because it informs the effectiveness of interventions. (Source: Shutterstock) 

IICA has developed a framework for applied CSR. This framework provides a functional model for all stages of the CSR lifecycle, from policy development to measuring outcomes, and is serves as a useful introduction to the topic. The model for CSR consists of 5 primary stages [6]:

  1. Development of CSR Policy
  2. Baseline and needs analysis
  3. Project development
  4. Monitoring
  5. Evaluation

Stage 1 of the CSR lifecycle begins with development of CSR policy (required by the Companies Act) based on company vision, philosophy, and philanthropic ideas. Beyond simply complying with the Companies Act and other guidelines, a CSR policy should reflect a long-term strategy aligned with the company’s mission statement, vision, and priorities. It should define areas of thematic focus and provide a strategy for monitoring progress. Such policies are most effective when they are developed and executed with strong buy-in from governing Boards. Championship from the Board helps communicate the importance of CSR to the company, establish buy-in from employees and other stakeholders, and ensure that staffing and budgets match CSR goals.

Analysing on-the-ground conditions helps prioritize needs and establish a baseline with which to measure the impact of interventions. (Source: DuTremble, 2020)

Stage 2 of the CSR lifecycle consists of analysis of target beneficiaries through field visits and surveys and identification of needs based on these inputs. Analysing on-the-ground conditions helps to prioritize needs and establish a baseline with which to measure the impact of interventions. Such studies provide an understanding of the local demographic and social characteristics, provide information on existing programs and resources, and enable mapping of problems and identification of key indicators. Analysis, and conceptualization of relevant CSR projects, should include community input and reflect the priorities of beneficiaries. (A detailed discussion on involving community in CSR design is presented in my post Stakeholder Engagement in CSR).  Ideally, an independent third party carries out the baseline and needs assessments.

Stage 3 of the CSR lifecycle consists of developing thematic areas and translating community needs into projects. This begins with identifying commonalities between the thematic areas identified in the company’s CSR policy and the community priorities. With such commonalities serving as target areas, the company can identify positive and negative trends for goal setting. This should include objectives as per the baseline study, clearly defined benchmarks, and relevant qualitative and quantitative indicators. Therein, the company andcommunity can identify specific CSR projects for implementation. Implementation may be carried out in-house by a CSR division or a quasi-independent foundation, through grant-making, or via an implementing agency. The modes of implementation require varying types of due diligence. In all scenarios, the allocation of funds and selection of implementation method/ agency should be transparent and reflect a defined empanelment process.

Monitoring and evaluation help ensure that projects yield expected outcomes and inform the effectiveness of future interventions. The above image depicts an electronic monitoring system that supports human monitoring infrastructure. (Source: DuTremble, 2020)

Stage 4 of the CSR lifecycle consists of monitoring as established in the CSR policy. Monitoring mechanisms should include real-time and mid-term monitoring. Real-time monitoring allows identification of issues and problems as they arise. It ensures the availability of necessary resources in the right quantity and time in the field, and helps keep projects on time and within budget. Similarly, mid-term evaluations help ensure that projects yield the expected outcomes by allowing for modification based on changing circumstances or new knowledge. By examining the model of implementation through survey tools and focused group discussions, companies can identify mid-course corrections so that the project achieves the intended purpose.

Stage 5 of the CSR lifecycle consists of impact evaluation. Completed at the conclusion of a project, impact evaluation provides companies with an opportunity to measure impact and promote their good works. It also provides an opportunity to learn from successes and challenges and incorporate learnings into future CSR projects. Ideally, an independent third party conducts the impact assessment on a project-by-project basis. Such assessments should include site visits by the team and implementing agency, and measure changes in previously identified indicators. The activities and their impact should be communicated internally as well as in annual reports and other public communications. Review of lessons learned in monitoring and impact assessments provide an opportunity to modify CSR policy and strategy to enhance outcomes.

Implications

The above framework provides a model for effective CSR programming. Through clear and detailed CSR policies, assessment of needs, thoughtful project development, monitoring, and impact evaluation, companies can maximize CSR outcomes for the company and community. Whether such efforts result in a paradigm shift, in Porter’s Higher Capitalism, is contingent upon the sincere and effective use of such strategies to guide CSR.


Sources:

CSR: The IICA Way. National Foundation for Corporate Social Responsibility. Indian Institute of Corporate Affairs. Brochure. No date.

Porter, Michael. Michael Porter: Why business can be good at solving social problems. TED. 2013.

The Companies Act, 2013. Ministry of Corporate Affairs. Website. Retrieved 2020.

Notes:

[1] The Act applies to companies with a net worth of rupees five hundred Cr. or more, or turnover of rupees one thousand Cr. or more or a net profit of rupees five Cr. or more during immediately preceding financial year.

[2] Applicable companies must allocate, in every financial year, at least 2% of the average net profits of the company made during the three immediately preceding financial years to CSR.

[3] The Companies Act, 2013. Ministry of Corporate Affairs website. Retrieved 2020.

[4] Porter, Michael. Michael Porter: Why business can be good at solving social problems. TED. 2013.

[5] Established in 2008-2009 by the Ministry of Corporate Affairs, IICA is a think tank that specializes in corporate governance policy. IICA houses a number of schools and centers, including the National Foundation for Corporate Social Responsibility (NFCSR). IICA was instrumental in enactment of the Companies Act of 2013 and continues to work to build India’s CSR ecosystem. Under this objective, IICA assists companies with the development of CSR strategies; conducts baseline, needs, and impact assessments; and provides project management, monitoring, and evaluation services. IICA serves as an intermediary between corporations, stakeholders, and policymakers, bridging the gap between public and private interests.

[6] Adapted from CSR: The IICA Way.

Dominique is serving as an American India Foundation (AIF) Clinton Fellow with the Indian Institute of Corporate Affairs in Gurugram, Haryana. For her Fellowship project, she is studying the national indicators for aspirational districts, identifying possible investment areas for corporate social responsibility, and creating a framework for corporate engagement. Dominique graduated with a Bachelor’s in political science in 2013 and a Master’s in community development and planning in 2015. With focuses in comparative politics and economic development, she went on to serve six years as a regional community development planner. As a principal planner with the Central Massachusetts Regional Planning Commission, she built and managed a program to shepherd communities through state initiatives, coordinated comprehensive planning efforts, and led a variety of community engagement and economic development initiatives. In this role, she also served as a municipal circuit rider, staffing town planning and economic development offices. Prior to her career in regional planning, Dominique worked in the private sector and completed government internships at the local, federal, and quasi-governmental levels. Her mission is to build pathways out of poverty using economic growth as a vehicle for social and economic opportunity. Through the AIF Clinton Fellowship, Dominique will be working on corporate social responsibility projects. She is excited to develop a broad knowledge of India’s development ecosystem, gain new tools and perspectives in community development, and contribute to initiatives serving under-resourced areas and populations.

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