HarperCollins has come out with a book that talks about Corporate social responsibility (CSR). How does CSR, as framed by the Indian law, blend into a company’s philosophy, adding value to its core business activity? How does one operationalize a constantly evolving law? How does one bring employees, shareholders and Board members on the same page in interpreting CSR?
Titled Doing Good and penned by Meena Raghunathan, the book simplifies complex frameworks of CSR in the Indian context, making it easier for corporates to plan their corporate social initiatives.
Following is an excerpt from the book: Page 163 – 166.
The Responsibilities of Auditors
While auditing of CSR activities has not been mandated, the various steps and processes do need monitoring to ensure that the letter and spirit of various provisions of the law are met. Proper disclosure of expenditures in the required formats has to be ensured. The accounting, recognition of expenditures and disclosures must be compliant with applicable accounting standards, and the transfers of unspent amounts must be done properly, etc. Moreover, when an outside implementing agency is carrying out CSR activities on behalf of a company, the expenses have to be certified by auditors, and independent practitioners have to give a report on utilization of CSR funds. Hence, auditors of both the company and the implementing agencies have a significant role in ensuring proper processes and compliances (for more on this see Institute of Chartered Accountants of India, 2020).
The Role of Employee Volunteering in CSR
Employee volunteering has been a pillar of CSR for decades now. Historically, volunteering has been seen as one of the benefits of an active CSR programme. It helps to boost employee morale—not only do employees feel good that their organization is concerned about the community, but it is also a source of satisfaction to get involved and put their skills and time into activities which make a difference in the lives of others. Volunteering helps corporate staff to understand societal realities and to develop empathy, as well as become aware of stakeholder concerns. It supports innovation, team building, leadership and organizational development. It reflects the organization’s commitment towards society at large.
While employee volunteering is a critical part of CSR today, under the law it is not counted towards the mandated CSR spend. Nor can financial contributions by employees be counted as part of the spend. Nor does the law give any type of credit for employee contributions. It is not even a checkbox that a company has to tick in its list of CSR compliances. While urging corporates to encourage volunteering, the MCA has clarified that these cannot be monetized and shown as CSR contribution. One would wish for a governmental stance that provided more of a nudge on this. However this lack of support should not, and fortunately has not, deterred companies from encouraging employee volunteering.
Such initiatives span a wide gamut. Sometimes the focus is on financial contributions. Payroll deduction is one method by which companies facilitate employees to donate money. Employees can opt to have a fixed amount deducted from their salaries every month and given to social causes. This may be to the company’s own foundation, or it could be given to an external NGO that the company may have tied up with. This helps employees who have an urge to give but are hesitant because they are not aware of the credentials of various NGOs and whether their money will be used as they intended. By undertaking due diligence and monitoring, the company is able to certify the credibility of these organizations. In fact, payroll giving has evolved to an extent where there are specialized agencies which undertake the management of payroll deductions and donations.
Companies may also raise funds for specific causes or in response to specific events. For example, during disasters like Covid, floods, or earthquakes, companies have come up with diverse ways to help their employees to ensure that their donations reach the right hands. Sometimes, corporates match the donations of individual employees with their own contributions. In case of donations, employees typically look for income tax exemptions and hence, the company needs to facilitate mechanisms for providing the necessary receipts and certificates.
Some companies have tie-ups with NGOs to enable employees to go out into the community and engage in hands- on activities—teaching in a local school, counselling youth, helping organize a health camp, etc. Those with their own in-house foundations may create such opportunities within their own communities. Not just employees, many corporates encourage families of employees to get involved too. Several agencies are coming up to help volunteering at scale. Another venue for employee involvement is to work with government campaigns, e.g., encouraging staff to support the Pulse Polio endeavour, or Road Safety Week observances, etc.
Setting aside a day or days for community service is another popular method to encourage volunteering. Some multinationals have put into place a mechanism whereby their staff across countries and continents work towards this purpose on a designated day. The day may or may not be a working day. The cause may be the same across geographies—e.g., improving infrastructure of local schools, spending time with children in orphanages, or with senior citizens in assisted homes. Or the initiatives maybe locale-specific—e.g., in some countries it could be beach clean-up campaigns, in others it may be about painting and taking up repairs in government schools, and in yet others about creating awareness on endangered species.
A very meaningful way of volunteering is to enable employees to use their core skills to contribute to community development. For instance, the IT team can help develop apps for the needs of an associated foundation and NGOs; it can maintain computers in neighbouring government schools, and provide IT training for the teachers of these schools. Accounts departments can help NGOs improve their accounting systems. Finance teams can help in capacity building for communities on financial literacy, while HR teams can help through career counselling and career preparation inputs for local youth.
A few companies make community involvement and volunteering a part of the performance management system of their staff, even going to the extent of making it a criterion for promotions to senior management. Others have rewards and recognition systems. Volunteering gets a fillip when a company has a clear policy for this and the top management is seen to support this spirit. The arguments for companies to support, encourage, and facilitate voluntary involvement of staff are very strong, and hopefully Indian companies will continue to do this.