Business leaders with a vision to build corporations that go beyond profitability are increasingly finding a social purpose that enables them to deliver a positive impact. The total CSR (Corporate Social Responsibility) spend by the top 500 Indian companies crossed Rs. 50,000 cr in the four financial fiscals from 2014–2018, and with new amendments to the Companies Act, this could gain impetus. Now, the Companies (Amendment) Act 2019 also brings a stronger compliance responsibility for corporates, with penalties for CSR violations to be considered a ‘civil liability’, instead of a criminal offence, as was announced earlier. The penalties for companies violating CSR norms include fines ranging from Rs. 50,000 to Rs. 25 lakh, with imprisonment of up to three years for defaulting officers.
The push by the government to make India Inc. a ‘good corporate citizen’ should be seen in the context of the unspent CSR amount of Rs. 60,000 cr. from 2014–2018. While companies could invest these resources in traditional CSR initiatives, in our experience, there is also the potential to create social impact through corporate innovation programs. At T-Hub, we have several examples of how such corporate partnerships can drive transformation and change the lives of citizens. Take the case of YES Bank’s ‘YES Fintech Accelerator’ program, launched in collaboration with T-Hub and Anthill. The program enabled YES Bank to leverage startup Anytimeloan’s assessment model, making much-needed credit available to underserved small and medium businesses. Here, corporate innovation was driving substantive social impact.
Expanding the scope of CSR
Now, with the current legislation, the government’s latest decision to allow companies to provide CSR funds to incubators funded by the centre or state or any state-owned companies comes as a shot in the arm for startups. It will undoubtedly pave the way for stronger collaboration between startups and the private sector. Both government-supported and publicly-funded academic incubators are eligible for such CSR funds. Corporates can seize the enormous need and opportunity to help incubators, such as T-Hub, to remain focused on achieving SDGs (Social Development Goals). Further, academic incubators operating in science, technology, engineering and medicine will especially benefit from investments from corporates who wish to usher in innovation in these areas.
Since India needs to step up its efforts to become a global R&D hub, corporates can opt to spend the mandatory two per cent CSR fund on critical research projects that need to be proved on the ground before they are implemented in communities. For example, L&T has entered into a five-year agreement with the Indian Institute of Technology, Madras. L & T will use its CSR funds to find innovative technological solutions to develop assistive devices for the differently-abled. The funds will also be utilised for smart city planning through traffic monitoring. The company set up The Centre for Rehabilitation Engineering and Assistive Technology (CREATE) in IIT Madras to spearhead innovation through such CSR initiatives.
Driving the pace of innovation
Corporates that want to stay at the forefront of innovation should collaborate with corporate innovation programs like those hosted by T-Hub to reach their social and business goals. This approach would enable them to leverage cutting-edge technology to build India’s technological and social infrastructure.
Undoubtedly, the need of the hour is for corporates to invest CSR funds in facilitating progressive projects. Such projects will create a social impact in the areas of education, access to clean drinking water, and fight against poverty and malnutrition, among others. However, CSR funds should also be utilised in non-social impact areas such as innovation hackathons, as it would enhance the ecosystem.
Towards this end, T-Hub’s corporate innovation programs seek to find a synergistic connect between startups and corporates. These provide a fertile ground for innovative ideas that could lead to unique solutions using smart, scalable technology.
Promoting a sustainable startup culture
The coming years are expected to witness more CSR expenditure for corporate innovation programs created by corporates and incubators. However, there would be some challenges along the way.
One of the primary reasons why corporates are not flocking in droves to invest CSR funds into incubators is due to lack of awareness. With the government expanding the scope of CSR to include incubators, the onus lies on the latter to encourage more corporates to participate in such programs.
It will result in a win-win situation. Alongside propelling innovation, corporates will also get an opportunity to divert CSR funds into a variety of areas. Incubators and startups, in turn, gain a competitive advantage and scale business models with the backing and resources of established companies.
Perhaps, it would also pay to look at the larger picture. When corporates start focusing CSR spends on corporate innovation programs, India would be on the right track to promote a sustainable startup culture. Further, today’s corporates operate with a heightened level of social conscience. By unlocking CSR funds to boost innovation within corporate programs, such as the ones run by T-Hub, larger benefits trickle down to society. Crucially, CSR empowers companies to do good through a strategic approach. There is no better way to invest in the future of the country.