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What’s Next

A Mandate for Responsibility By Suzie Boss

Stanford Social Innovation Review Summer 2014

Copyright 2014 by Leland Stanford Jr. University All Rights Reserved

11Stanford Social Innovation Review / Summer 2014

G o v e r n m e n t

A Mandate for Responsibility

In India, corporate so-cial responsibility isn’t just a good idea. It’s

now the law. In August 2013, the Indian Parliament passed a revised version of the nation’s Companies Act, and the act now requires companies of a certain size to invest 2 percent of net profits in social ben-efit activities. This provision, which makes India the first country in the world to man-date CSR spending, could un-lock as much as $3 billion an-nually, creating a monsoon of opportunities to tackle issues like extreme poverty and child-hood malnutrition. Yet even as companies gear up to meet the new requirement, they and

is to turn isolated viewers into an engaged community. “After you’ve watched and been in-spired by a film, you have the immediate ability to do some-thing,” Erlbaum says.

Eflixir is a recent entry in the media-for-good field. Partic-ipant Media, a production com-pany founded by philanthropist Jeff Skoll, also creates online campaigns to support cause-oriented films. “What they do is tremendous,” Erlbaum says. “But they create campaigns for only the 6 to 12 films that they produce in a year. There are thousands of films out there that nobody has created any kind of social action around.” Participant Media moved into television last year with the launch of Pivot, a cable network aimed at engaging the millen-nial generation in social action.

Media channels like Eflixir and Pivot allow viewers to vote

with their eyeballs, argues Renee Hobbs, founder of the Media Literacy Lab and found-ing director of the Harrington School of Communication and Media at the University of Rhode Island. “People can make viewing choices about the kind of world they want to live in,” she says. Such services offer counter-programming to a mainstream entertainment industry that favors crowd-pleasing fare such as “sex, violence, children, animals, or UFOs,” Hobbs adds.

Erlbaum has big plans for Eflixir. By 2015, he predicts, the company will be “acquiring independent films out of festi-vals” and even producing films that will be “exclusively avail-able on our platform.” Mean-while, he says, Eflixir will fo-cus on distributing “good films that are not getting the expo-sure they deserve.” nP

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our mission is simple.

their social-sector partners are bracing for challenges.

“The possibilities are enormous,” says Priya Naik, founder and joint managing director of Samhita Social Ventures, a CSR consulting firm in Mumbai that is funded by N. S. Raghavan, cofounder of Infosys. “Companies need to think carefully about how to make significant contribu-tions,” Naik says. “If they just want to write a check and be done with it, then we risk a tre-mendous amount of chaos.”

The new law applies to all companies that meet certain thresholds of financial perfor-mance—businesses with an-nual net profits of 5 Crore INR

12 Stanford Social Innovation Review / Summer 2014

(about $800,000), for example. According to the Confederation of Indian Industry, at least 6,000 companies now have an obligation to take up CSR ini-tiatives. Although many Indian companies already have CSR programs in place, they face new reporting and transparency re-quirements. Disclosure of CSR spending on a public website is mandatory, for instance. There is no penalty for failing to meet the 2 percent goal, but com-panies must explain the rea-sons for any shortfall. (Bhaskar Chatterjee, CEO of the Indian Institute on Corporate Aff airs, suggested in an interview with The Telegraph of Kolkata that companies will be “shamed” into complying with the law.)

Under the new CSR man-date, Indian business leaders will need to recalibrate their approach to social engagement. “Smaller companies have been

giving back to the commu-nity primarily through philan-thropy. The need of the hour is to be more strategic,” says Jay Thakkar, a CSR consultant at Accenture who is based in Mumbai. “They must ensure that their CSR and sustain-ability activities fi nd the sweet spot where there is congruence of social benefi ts and business benefi ts.” Eff ective CSR, he adds, “comes down to priori-tizing initiatives based on this sweet spot and then partnering with NGOs and civil society to achieve well-targeted aims.”

Piyush Verma, an investment manager at Lighthouse Advisors India, says that the companies in his portfolio are moving quickly to establish CSR teams that re-port to their boards. A growing number of Indian companies, he adds, are contributing not just funding but also in-house expertise to social causes, and

he off ers an example: “Suraksha Diagnostic in Kolkata does free checks for poor patients across its centers. They also hire eco-nomically [disadvantaged] stu-dents and train them on the lat-est medical equipment.”

The social sector will need to track impact closely, warns Payal Mulchandani, cofounder of the 4th Wheel, a CSR think tank and consultancy based in Ahmedabad. “There’s a risk that companies will invest in a lot of small projects, with little learning or cross-fertilization,” she says. Mulchandani also notes the risk that the CSR re-quirement will create “an open door for greenwashing and cre-ative accounting.” But India’s new approach to CSR presents “an opportunity for innovation in sustainable social invest-ment,” she adds.

Ratan Tata, former chair-man of the Tata Group and

a prominent philanthropist, has said that the national CSR scheme is well intentioned but “vulnerable to exploitation.” In an interview with Philanthropy Age, he predicted that nonprofi t organizations will be “tripping over themselves” to attract funding from companies.

Indeed, for NGOs, the re-vised Companies Act creates unheard-of access to corporate philanthropy. In a survey of 20,000 nonprofi t partners, ac-cording to Naik, Samhita found that 50 percent of NGOs “had never approached corporates for funding before.” Pratik Kumar, CEO of the Magic Bus, a sport-for-development organization, is well aware of the challenges that this boon will bring. He and other nonprofi t leaders, he says, will “need to upgrade our profes-sionalism to match the demands that such a large leap in funding would mean for all of us.” n

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