It’s the Impact that drives the CSR
Our every action has an impact on the people around us, even though we might think it doesn’t matter but it does, maybe in a short-term or long-term period. The same goes with the corporations, in the big corporate world which keeps on expanding each day, every organization is a corporate citizen. Corporates are known to be the profit-making organization who aims towards their growth, and while doing so, sometimes their social responsibility takes a back seat. To solve that, the Ministry of Corporate Affairs, Government of India introduced statutory Corporate Social Responsibility (CSR) through the Companies Act, 2013 making CSR a mandate* for the corporates which is one of its kind, and till date, India is the only country to have such law and regulations on CSR. The act aims to make corporates socially accountable to themselves, their stakeholders, and the society at large.
The introduction of CSR laws in India provided a very structured and transparent outlook, and the Ministry of Corporates Affairs (MCA) constantly amends the law to make the CSR initiatives more effective, efficient, and impactful.
With the same aim, this year in January 2021, amendments in CSR were rolled out to make it more accountable and streamlined. One such amendment was making a compulsion of impact assessment for any corporate having a CSR obligation of ten crores or more within the three immediately preceding financial years. Any project having an outlay of 1 crore rupee or more and are completed, the corporate need to get its social impact assessment done through a third-party organization, but not before one year of project completion. Given that, it’s not a compulsion to conduct impact assessments for the project which are less than 1 crore, however, any organization falling under the CSR obligation can get it done voluntarily as well.
To understand the importance of impact assessment, it is more important to first understand Social Impact Assessment (SIA):
Social impact is the effect on people and communities that happens as a result of an action or inaction, an activity, project, or program. It means, when a corporate decides to implement a project in a community, they are planning to make some positive modifications in the existing system of the community and once the project is completed, an impact assessment is conducted to understand how the changes they made in the community are affecting the people and the community at large.
SIA helps in understanding if the project’s aims and objectives are achieved or not, it gives a comparative study between the expected results and achieved results, what were the risk factors encountered during the project implementation, it also helps in understanding the pros and cons of the project, it highlights the points to keep in mind while upscaling and replicating the project to get more effective results. It also helps in predict and mitigates any negative impacts caused due to the project along with identifying opportunities to enhance the benefits of the project.
So, in short, it can be said that the SIA is a tool that is used to assesses all aspects of the impacts be it social, economic, cultural, environmental, or any other during and after the project implementation.
For example, an X company installed a Community Water ATM, as the implementation completed one year, they decide to do SIA. Now, there are two situations that they might face:
1. The Community Water ATM is still operative, and the community is getting benefited from it. Or
2. The water ATM is not functioning and its presence in the community is not making any difference.
If the Case is 1, then it shows that the intervention was able to create a positive impact in the society, which can be access to safe drinking water, decline in water-borne disease, prevention of muscular and bone disorders in women and children of the community which usually happen on carrying a heavy load for a long period among others. One of the main elements of any successful intervention is its sustainability and it’s very important to keep in mind while planning the project. Like in this case, to keep the Community Water ATM operative once the corporate has exited the community, they would need someone from within the community to operate and maintain the Community Water ATM which can only happen if someone is trained to perform the task effectively. However, sustainability being the most important aspect for a successful project, it is also one of the aspects which can be neglected easily and if not given the needed importance, the project even after putting so much effort will not be able to create any impact in the community and all efforts will be wasted which will be our Case 2.
Data collection tools to conduct social impact assessment:
Both qualitative and quantitative data are collected for conducting SIA. The project proposal and reports, census and vital statistics, government documents, published research on the community and its people, and other reliable documents are used to collect secondary data while Primary data are collected through the project-specific survey, field research, focus group discussion among others.
Quantitative data is collected through surveys and Qualitative through key informant interviews, Focus Group Discussions (FGDs), community meetings, and others.
The collection of these data is very important to understand the kind of impact the intervention has caused in the community, be it positive or negative.
Social Return on Investment (SROI) is also one of the methods used to conduct SIA. SROI method includes all the beneficiaries that are beyond the scope of the company’s accounting and its fiscal and financial statements. The aim is to assess both the benefits and the negative impacts of a company’s activities on stakeholders. This type of analysis combines the use of qualitative, quantitative, and financial information gathered and analyses them to estimate the amount of “value”, including mental health and well-being, created, by a project or by the overall operation of an organization.
Formula for calculating SROI:
SROI = SIV−IIA/ IIA×100%
where: SIV = Social Impact Value
IIA = Initial Investment Amount
Conclusion:
SIA is one of the important tools to understand a project’s impact on the community to drive improvements that increase the value of programsalong with that, it also helps in understanding the areas of improvement and what was done right during the project and making SIA a compulsion for projects leads to the seriousness of corporations by making them accountable for the impact they create on and off-field.
*Companies that fulfill any of the following criteria during the immediately preceding financial year: -
Companies having a net worth of rupees five hundred crores or more, or
Companies having turnover of rupees one thousand crores or more, or
Companies having a net profit of rupees five crores or more.
It is a mandate to spend at least 2% of the profit immediately preceding the financial year.
*This article has been written by Meenakshi Bhardwaj; a part of the Third Planet Foundation team based on her understanding. This article is to be used for information purposes only.
Third Planet Foundation
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