Serving the Satellite communities through CSR

India has the distinction of being one of the first countries in the world to formulate a legal framework for Corporate Social Responsibility (CSR). Over the years, it has evolved into a pivotal facet of global business strategies, with India standing on top of all other countries in the world. Exactly 10 years ago, India experimented with one of the world’s largest programmes of Corporate Social Responsibility (CSR), by mandating all the statutory companies to take up CSR projects, by spending at least two per cent of their annual profit, towards community welfare activities.

 Ministry of Corporate Affairs, Govt. of India data shows that India has 25, 99, 665 registered companies, of which 63.0 % (16,40,160) are active. (Monthly Information Bulletin, Nov.2023). Companies Act 2013 and Companies (CSR Policy) Rule 2014, which came into force from April 2014, require all registered companies with a net worth of Rs.500 cr or more, or a turnover of Rs.1000 cr or more, or those earning a net profit of Five crore rupees or more per annum, to be CSR eligible. As per this requirement, more than 20,000 of the active companies, have been recognised as CSR-eligible companies.

CSR Projects and Areas

Section 135 under the Schedule VII of the Companies Act, outlines the detailed provisions for CSR. MCA has listed around a dozen activities, that can be taken up under the CSR banner. Primary among them are poverty eradication, health care, education, gender equality, environmental sustainability and rural development. Contribution to various government schemes such as PM’s National Relief Fund, and academic and research institutions are also approved under CSR.

Companies are required to give preference to the local geographical areas for the implementation of CSR projects. But this is only a ‘directory’ and not ‘mandatory’. CSR funds shall also be utilised for the development of ‘Aspirational’ districts, in India, identified by the government as the least developed regions of the country.

Eligible organizations

MCA has notified that four types of institutions are eligible to undertake CSR activities. Societies or Trusts or those registered under Section 8 of the Companies Act, by the Companies, with CSR grant, and Non-government Organizations (NGOs) registered as a Society under the Societies Registration Act, 1860, or as Trusts under the Indian Trust Act,1882 (as a Public Trust) or those registered under section 8 of the Companies Act, 2013 are eligible to receive CSR funds. Similar entities created by the Central and State governments and statutory bodies established under an Act of Parliament or State legislature are eligible to avail of CSR funds. Included among the CSR-eligible companies are both the public sector undertakings (PSUs) and the private sector (non-PSUs). Those companies, with a CSR fund of more than Rs.50 lakh must have a CSR committee, which is empowered to decide and design the anatomy of CSR spending.

An analysis of CSR expenditure by companies/implementing agencies reveals that 32 per cent of the total CSR expenditure has been incurred by the companies directly, 46 per cent by engaging other implementing agencies, and 9.0 per cent has been spent by the non-government implementing agencies.

CSR Expenditure

During the last seven years till 2022, CSR-eligible companies have spent Rs.1,25,955 cr, from 2014-15 till 2021-22 cumulatively. Maharashtra state topped all the 39 states/union territories with nearly a 15 per cent spending (Rs.18,742 cr). During this period, across the development sectors, ‘Education’ ( and allied activities) received the maximum of Rs.47187 cr (37.0%), followed by ‘Health care’ ( and allied activities) with Rs.38011 cr (29.0%), and Rural Development Rs.12, 300 (9.6%), totalling in all 76.6 per cent of the total CSR spending (MCA Newsletter, May 2023). During 2021-22, a total of 20,840 companies had spent Rs.26,210 crore on 39,324 activities, encompassing 14 sectors, and spanning over 39 States/Union Territories.

During the year 2022-23, Tata Consultancy Services has incurred a monumental expenditure of Rs. 783 cr, followed by Tata Steel Ltd contributing Rs. 481 cr towards societal advancement. The others among the top Six are viz., Infosys ( Rs 391 cr), State Bank of India (Rs 316 cr), WIPRO (Rs 215 cr), and Hindustan Unilever Ltd (Rs. 208.32 cr). (India’s CSR Spending Report, 2022-23, India CSR Network).

Corporate – Community Chemistry

During the formative years of industrial establishment, people in the vicinity extended a helping hand to the industry/company, coming up in their region, with anticipated potential for employment. In this phase, ‘companies mattered’ to the people.

Post-establishment, when the companies/industries started their operations/transactions, they depended on the local people for all non-technical and semi-skilled tasks. This proved to be a win-win situation, and during this phase, ‘people mattered’ to the community.

With the anchoring of industrial activities, including production and marketing in full swing, the companies were required to follow certain bureaucratic procedures and processes. At this stage, ‘government mattered’ to the companies. During the take-off stage, expectations from people as well as the government rose high, as these companies were making a profit on the one hand, and polluting the environment on the other.

Therefore in stage IV, people started blaming the industries, due to the negative impact of these industries, through environmental pollution, livelihood losses, and human suffering. Accordingly, from greater independence in Stage I, mutual dependence on the local community in Stage II, and rules and regulations by the government in Stage III, they moved on to Stage IV, wherein they witnessed resistance from the community and restrictions from the government.

These industries are now in stage V, where political forces, have started mounting pressure for profiting from the industries by inciting people, organizing agitations, and even stalling their activities wherever they can. In strategic projects of national and regional importance such as Nuclear plants in Tamil Nadu, India has also witnessed certain international machinations.

 These changing scenarios in our social structure, political fabric and bureaucratic system, have been posing a grave danger to peaceful industrial / business operations more than ever in the past. Cooperation with or resistance by the community, government, political parties, anti-social elements, and sometimes terrorist outfits (in certain north-eastern regions), depends on the type of industries and their positive or negative impact on the community and the larger society.

Industrial disasters

‘Industry-Community Conflict’ occurs for various expected and unexpected reasons. Some of the industrial disasters that struck India in recent years, and people’s response towards them, unfold the type of harm they made to people and the environment. India witnessed the world’s worst industrial disaster Union Carbide India Ltd., (Bhopal, Madhya Pradesh) killing 15000 people, 2000 animals, and injuring nearly six lakh people on Dec.2, 1984. Deep in the jungles of central India, Tribal people in Hariharpur (Chattisgarh) have been opposing the proposed opening of the new Parsa coal mine for over a year since March 2022. In July 2023, the takeover of acquired fertile lands in the Neyveli (T.N.) region by the Neyveli Lignite Corporation (NLC Ltd.) met with massive resistance by the farming communities, fuelled by political parties.

People’s protest against the proposed oil and natural gas exploration project in Thiruvarur (TN) in 2017 mirrors another anti-industry psyche of people, activists and political parties. Recent disasters include a massive oil spill in Chennai, Tamil Nadu which spread over almost 20 km in the sea, caused by Chennai Petroleum Corporation Ltd (CPCL) in December 2023. The oil spill has affected hundreds of families, and their livelihoods that are dependent on the coastal habitat, biodiversity and aquatic life. All these industrial disasters and exploratory projects have met with stiff resistance from the affected people, ignited by activists, and inflamed by political parties.

Typology of Industries

From these bitter experiences, we need to learn a lesson, by analysing the inherent anatomy of industrial operations and business transactions. Let us examine the typology of industries in terms of their positive or negative impact on people around and afar. Certain industries release pollutant objects, harming the environment, people and their livelihood resources. Cement and chemical factories may be cited as examples, which cause health problems to the people and curtail farm production in its rural neighbourhood. Secondly, there are some industries such as gas plants, and ammonia plants, that release toxic gas, lethal to the human population.

In the third category, industries like lignite production, and oil pipelining, cut into the productive lands of farmers and threaten the livelihood of the poor families. Fourthly, certain mega projects like nuclear plants cause lifelong health problems for humans. Fifthly, there are some industries located amongst people’s habitations, but they help people and promote their development, through their community welfare programmes. They never harm them. Finally, industries that are located even far away, benefit people as their primary goal. These half a dozen types of industries could be classified under three categories:

1. Industries that are harmful to people, their environment, land resources and their livelihood.

2. Industries whose operations do not harm the people and their environment in any manner.

3. Industries, which transact their business primarily, but also promote people’s welfare, and environmental protection, under their CSR programme.

Industries of the first category have an inherent potential to hurt their stakeholder communities, and harm the environment, through major hazards like fire, explosion, toxic release, and environmental damage. A study by BITS, Pilani and IIT, Kanpur reveals that, over a decade, 560 industrial accidents caused significant environmental harm, impacting air and water quality, and claiming 2500 lives, besides injuring 8500 individuals.

Industries under the first type, whose industrial operations imperil either the people or their resources mildly or acutely, cannot afford to ignore people’s interest, unless at their own cost. Under the above circumstances, such corporates can make use of their CSR programme more magnanimously in the neighbourhood communities. Further, they also need to take cognizance of the following factors:

– Individuals, groups or communities who have been receiving benefits from the corporate, extend their cooperation, but only so long as they continue to be showered with benefits.

– When the corporates downsize the benefits or distance from people for whatever reasons, the community upscales its anti-industry policies and organizes agitations or indulges in stalling or closure of industrial operations.

Accordingly, any corporate whose operations affect the nearby communities whether slightly or seriously, need to explore ways and means of getting closer to the community, not merely by building up public infrastructure in the community, but by ‘bridging the social divide’ within people, and unify the various warring groups, through service activities. The CSR programmes of such corporate need to balance infrastructure-building and people’s harmony-building.

By doing so, we build peace both in our industry and our satellite communities. The gain or savings an industry makes in ignoring the communities around will be much smaller compared to the loss it may incur, in case of people’s agitation and political confrontation. Such conflicts will only throttle the regular industrial operations, and threaten the very survival of an industry.

CSR is an opportunity to assuage the feelings of affected people and usher in peace among the anti-industry communities, more by pre-empting and preventing such agitations, rather than by curing and corrective measures.

Dousing the Community fire

Industries that are pollutant, hazardous, and threaten people’s livelihood in their proximate area, may consider the following strategies, to dilute the ire of the people, and douse the fire caused by activists and agitators:

– Establish schools, from Pre-primary to Plus two, inside the industrial premises, with priority for children from stakeholder communities.

– Start homes for the Aged, either around the industrial premises or away from their reach, for the parents of workers and employees.

– Recruit as many potential non-technical employees as possible from among the educated youth from the satellite communities.

– Create skill training opportunities., ITIs, polytechnic colleges, and skill training centres, in those trades pertinent to the in-house industrial operations.

– Scale down the male-female worker ratio, and tilt it in favour of maximum women workers and employees.

– Encourage economic participation of the stakeholder groups, particularly the women in the common service operations (such as milk, vegetables, canteen operations, stationery for students, tailoring centres, mobile phone service shops, wholesale grocery stores, and similar trades with as much subsidies as possible.

– Organize Self-help groups (SHGs) among women, promote savings habits, and provide livelihood support loans at a lower interest, and plough back the repayment money among fresh members.

– Form youth clubs, provide them with sports materials, and encourage them to green the industrial premises through environmental promotion activities.

– Start supplementary Education and Nutrition Support centres in villages, with regular tuition teachers among the local people, and guest teachers intermittently for tough subjects like Maths, English and Science.

– Establish community service centres (CSCs) through village (Elders) committee, with one-time grants such as installation of R.O. Plant, vessels/furniture for hire, two-wheeler mechanic shop, infrastructure support for community service centres and the like. Proceeds from all the above may go to a separate community-level CSR fund, to be used only for similar ventures.

– A Mobile clinic with a Doctor and Nurse on specific days to select villages, for providing basic health care, primarily for the poor/elders, the bedridden and chronically ill persons.

Policy changes

– The CSR committees of Industrial Companies may decide to maximise the share of their CSR fund, as much as 70 to 80 per cent, to be spent on the satellite communities and stakeholder groups.

– Secondly, these corporates can entrust the CSR programmes either to their in-house Social service foundations/trusts, or NGOs for implementation in their vicinity than in remote locations.

– Thirdly, these companies can avoid giving huge grants such as Rs.30 lakh for temple construction/consecration, Rs.25 lakh for conferences, Rs.20 lakh for book fairs, and incur similar expenses, which are not going to be beneficial either to the individuals or their families.

– Fourthly, the CSR committee may scale down their contribution to mighty government organizations and mega institutions, which will be just a drop in the ocean.

– Fifthly, the proportion of CSR funds should concentrate on community-friendly services such as a preschool centre, a drinking water tank, solar lighting, community-owned Share-auto, assistive devices for the disabled, medicines for school-going HIV children, and so on.

– CSR CSR-eligible companies need to consciously avoid pleasing the political party leaders, in anticipation of mustering community support during crisis times. Instead, these companies may as well spend on the communities directly, because political parties may keep changing every term, whereas the communities are sustainable.

– Further, the CSR committee may promote CSR projects, that provide resources to people over a longer period (e.g., livelihood loans) than one-shot (e.g., community feast) or short-term grants for religious festivals.

Wrap up

The global scenario today is far more competitive, cut-throat and confrontationist today, than ever in the past. The frontline countries are racing against each other in a competitive atmosphere, not only to grow but also to outsmart others. In this race towards growth, certain jealous and venomous countries resort to ‘leg-pulling’ strategies, to topple the growth of their enemy countries. Corporates form the foundation and fulcrum of today’s economy, as against agriculture in the yesteryear. While most of corporates have smooth sailing, some are treading on tough social, political, bureaucratic and environmental terrains, leading to either the obstruction of their activities temporarily, or in the worst case, destruction of their operations permanently.

Today’s corporate are compelled to follow certain advanced technologies and appropriate methodologies in their technical operations, which may go against the interests of the immediate neighbourhood communities and the environment. On the other hand, communities of today are far more disharmonious and disoriented, and they dance to the tunes of politicians and anti-social elements. They are averse to scientific justifications by industries, but avaricious to gain from these agitations and confrontations. Their botheration centre more around their harms and hardships, than on the growth of the economy and progress of the society.

This will never stop once and for all and will repeat as long as the wheels of the industry keep moving forward. The best option available before the industries and the government to avoid the ‘industry-community conflict’ is to channel most of their CSR funds towards rapprochement with the satellite communities and stakeholder groups. Engagement of the community in all possible industrial and support service activities will be yet another strategy to make people as partners in the industrial operations. Yet, the ball lies in the court of the industry to minimise the harms and hardships to the community, by exploring advanced scientific and technological means of their operations.

Views of the author are personal and do not necessarily represent the website’s views.

Dr. M.P. Boraian, a retired Professor from Gandhigram University, Tamil Nadu, brings over four decades of expertise in Rural Development. His illustrious career includes serving as the Nodal Officer for National Level Monitoring, extensive consultancy for NGOs, and being honored with a United Nations ILO Fellowship. Recognized for his outstanding contributions, he received the ‘Best Outreach Faculty Award’ from Gandhigram Rural University. A prescribed author by the University Grants Commission, Dr. Boraiyan’s influence extends to post-retirement, engaging in impactful Corporate Social Responsibility programs for ONGC, RAMCO, Azim Premji Foundation, and Sterlite Copper, showcasing his enduring commitment to community development in India.