Corporate social responsibility (CSR) in India is now being gauged through a new lens – public private partnership (PPP). Since the government introduced the 2013 Companies Act (Section 135), companies have been mandated to spend two per cent of their average net profit on CSR activities and initiatives based on the three preceding fiscal years Around 16,000 business entities – both public and private sector – are expected to utilise this provision for CSR spending, unlocking anywhere from five to seven billion USD for the implementation of various social initiatives.
With its existing and latent expertise, CSR is already seen as an effective lever to help the corporate sector scale its efforts in nation building, however there is a new twist to the tale. With the amendment of the Indian Companies Act, Schedule 7 now encompasses a host of sector specific interventions (such as health, education, sanitation, etc.) that qualify as CSR initiatives. Historically, PPP models have been applied to cases of large infrastructure projects, though the effective application of PPP has yet to stand the test of time in more localised social and community infrastructure building. Given the scale and considerable amount of work to be achieved through CSR, using a PPP model in the social domain could be quite promising, given the legal weight that CSR has acquired in India with the recent amendment.
The ‘impact of business on society’ is one of the key debates shaping CSR efforts the world over. This idea most succinctly exemplifies (and perhaps even defines) what CSR actually is, in the face of several convoluted definitions and open-ended expressions. It is though, commonly accepted that CSR is more broadly defined as ‘corporate citizenship’ and is not just limited to one of the three pillars of the triple bottom-line (a measure of sustainability where social, economic, and environmental performance parameters align). The United Nations Global Compact’s (UNGC) Ten Universal Principles also commonly denote the same meaning and spirit, leaving no space for vague approaches or interpretations.
The new law on CSR laid out in the 2013 Companies Act is well aligned with national development goals and priorities, UNGC principles, and the 17 Sustainable Development Goals (SDGs) announced by the United Nations in January 2016. CSR principles continue to gain momentum and acceptance after the 193 UN member states agreed and ratified the SDGs at the General Assembly. Against this backdrop, CSR provisions in Indian law are well-timed and augur the initiation of a new model of PPP in the social sector. As businesses’ responsibility to society is increased a new social contract is being built, as the state withdraws as the main welfare provider, a trend that is globally visible.
Schedule 7 of the Companies Act stipulates the areas of CSR intervention in a set of key issues that qualify as CSR activities and initiatives for eligible companies[i] In general, the provisions advocate for projects that address the national goals of eradicating poverty and ensuring the well-being of society’s poor and marginalised. All provisions under the Schedule are integral as they are so far, the best attempts to align business goals with social aspirations. The provisions in Schedule 7 also initiate a call to collective action for large scale changes to some of India’s major national development goals. One of the key and more measurable goals is inclusive and sustainable housing as seen in smart cities, which the private sector is well-positioned to address. Once citizens have housing, they are more likely become employed and have more disposable income to spend on things such as health care and education, in turn benefitting the gross national product. The Indian government’s goal of providing housing to all citizens by 2022 is currently being implemented quickly, though building the targeted 3,000,000 housing units per year will accrue a cost of approximately 50 billion USD by today’s economic and political standards. The trade-off is transforming the lives of millions of people who otherwise would not be able to afford housing.
Habitat for Humanity, a leading global non-profit that works to provide housing for the disadvantaged, published a report in 2014 entitled ‘Opening the door to improved lives: tackling inadequate housing in Asia-Pacific’. The report demonstrated how addressing housing needs of the poor leads to overall poverty alleviation, and that PPP is essential to effectively solving the issue. Habitat’s report is a significant addition to existing knowledge on housing for the poor, as it details the opportunities and challenges to be addressed, and the importance of placing the housing needs of the vulnerable and marginalised at the very heart of the development debate in the Asia-Pacific region.
It is said that Indians aspire to be homeowners, and the Census 2011 puts a number to this emotional attachment. Only 69 per cent of urban households actually own their home in India. It is in this context,
that the Indian case, within the Asia Pacific region, stands out with approximately 400 million people who do not even have the capacity to rent housing, and about a quarter of the population still under the poverty line. Of these 400 million, the majority face issues of lack of safe water, sanitation, and hygiene. City infrastructure is reeling under extreme pressure due to migration from rural to urban areas, which is adding to the housing problem. This fast-developing phenomenon presents a challenge for urban planners and city administrators, and essentially calls for three urgent measures:
- Taking into account good practices from small nation states or autonomous regions such as Singapore and Hong Kong;
- Building partnerships and collaborations between government and specialised agencies and non-profits with sectoral expertise and experience; and
- Aligning public policies in tandem with the changing times.
The Indian government’s recent initiative to build smart cities is a unique move with an ambitious plan to provide housing for all by 2022. This move is intended to build adequate infrastructure for the people below the poverty line through sustainable housing. However, the government should simultaneously consider identifying adequate resources and expertise that are already available within the private sector, ranging from project implementation skills, trained manpower, and financial resources. Habitat for Humanity’s work in the Philippines, particularly in providing housing infrastructure in partnership with local government, is a good example of this and could potentially be replicated and scaled.
In India, however, the problems with housing have been structural and are retrievable. The housing sector in India is a part of a concurrent list in the Indian constitution, which potentially neglects to give the sector infrastructure status. State coordination, which was seen to be taking place under the Jawaharlal Urban Renewal Mission (2005) – a massive infrastructure initiative by the Urban Development & Poverty Alleviation Ministry in India – somehow could not be realised. In a new emphasis that is being put on the universal housing scheme by the Indian government, state coordination is now making progress and if all goes well, the project will be fully functioning by the year 2022, much ahead of the 2030 implementation deadline of the SDGs.
Any new developments in providing housing for India’s poor would have a better chance of success if there is an effective partnership between the government, corporate sector, and non-profits. This could allow for much needed structural changes that would aid in the implementation of public policies, and in turn address the enormity of the issue at hand. It seems possible, that leveraging the newly implemented CSR provisions and developing robust PPP mechanisms can provide space for value generation by all stakeholders involved, while at the same time bringing decisive changes to the social infrastructure space.
A meaningful transformation of India’s housing sector hinges on PPP, equity investment, and working with non-profits that have the ability to attain the 2022 housing goal, while garnering support from businesses via the two per cent CSR provision. This latter criterion is critical in helping build effective partnerships between the government and private sector, and also bridging the gap between housing needs and availability for some 400 million people in India.
To achieve more sustainable and inclusive economic growth, trust-based working partnerships are needed, particularly between governments and the corporations engaged in CSR activities. Only this way can PPP models be harnessed at a time when governments the world over are withdrawing from welfare measures due to financial pressures caused by a host of economic and political factors.
India remains no exception to this paradigm.
[i] The full list of CSR activities listed in Schedule 7 of the 2013 Companies Act: (i) eradicating extreme hunger and poverty; (ii) promotion of education; (iii) promoting gender equality and empowering women; (iv) reducing child mortality and improving maternal health; (v) combating human immunodeficiency virus, acquired immune deficiency syndrome, malaria and other diseases; (vi) ensuring environmental sustainability; (vii) employment enhancing vocational skills; (viii) social business projects; (ix) contribution to the Prime Minister’s National Relief Fund or any other fund set up by the Central Government or the State Governments for socio-economic development and relief and funds for the welfare of the Scheduled Castes, the Scheduled Tribes, other backward classes, minorities and women; and (x) such other matters as may be prescribed.
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