As we continue to be in the grip of deadly second Covid wave, lack of capacity and capability of our human saving institutions to save a human life in a health crisis situation got exposed. It was a terrifying shock to the countrymen when they found health infrastructure of the fastest growing economy crumbling to the Covid 19 infection and subjecting the people infected with the virus to get consumed like sitting ducks.
The second wave caught the government off guard and more importantly it highlighted the dire need for strengthening the healthcare sector with state-of-the-art infrastructure. Now bridging the huge infrastructural gaps in healthcare sector across the country needs exposed by the pandemic is an unprecedented challenge and huge funds are required to bring the healthcare sector at a level to bear the brunt of any Covid-19 like extreme health emergency situation. In the current economic scenario, which got heavily battered in the Covid-induced lockdowns last year, arranging the funds for improving capacity and capability of the healthcare sector is a going to be formidable challenge as revenue generation avenues stand currently squeezed to a large extent.
In the past one year of the ongoing Covid crisis, when every sector of economy received a major setback, the pandemic has brought about a change wherein responsible and responsive businesses have become more important. The crisis has pushed corporate leadership to take the forefront especially being responsive to safety to employees, effectively running core operations and responding to change. It’s the corporate sector which has been using corporate social responsibility initiatives to support people to fight against the virus. We saw some examples of benevolent individual corporate leaders offering resources to combat COVID-19. Some companies not only funded non-profits and PM CARES Funds but also voluntarily spent money on manufacturing PPE kits and also rolled out relief efforts in their community.
Basically, the concept of the CSR has been evolving from 2014 when India became the first country to legally mandate it. It is a ‘self-regulating business model’ that implies the procedures of interaction by a company with its stakeholders and the general public at large, creating a scenario of being socially responsible. According to Section 135 of Companies (CSR) Rules, 2014 and Schedule VII of Companies Act 2013:
Every company with a net worth of Rs 500 crore or more or turnover of Rs 1,000 crore or more or net profit of Rs 5 crore or more during the immediate preceding financial year, must have a CSR committee and spend at least 2 per cent of average net profits earned during three immediate preceding financial years to CSR activities.
Meanwhile, let me share a piece of data with respect to CSR spending of the companies. According to the India Philanthropy Report 2021 by Dasra and Bain & Company, “India’s CSR expenditure for FY20 stands at Rs 17,885 crore, down from Rs 18,655 crore the previous year. CSR constitutes 28 percent of India’s total philanthropic giving, but is expected to further decline by 5 percent this year.” The report reveals that listed companies’ profitability declined by 62 percent in the months immediately following India’s initial Covid-19 lockdowns.
Now, the fast changing circumstances during the pandemic times, especially when we are in the midst of deadly second wave, has once again set the stage for major shifts in the CSR activities of the corporates and other businesses. The Ministry of Corporate Affairs (MCA) has been working overtime to expand the horizon of CSR activities. In view of the extreme medical emergency arising out of the second Covid wave, the ministry announced that companies could use CSR funds for “creating health infrastructure for Covid-19 care, establishment of medical oxygen and storage plants, manufacturing and supply of oxygen concentrators, ventilators, cylinders and other medical equipment for countering Covid-19”. Earlier, in the last month, the government had clarified that CSR funds could be used to set up “makeshift hospitals and temporary Covid care facilities”.
The relaxations in CSR rules will be encouraging the companies falling under CSR net to spend a good portion of their CSR budget on raising healthcare infrastructure. Notably, the MCA clarifications have come at a time when the companies are engaged in drawing up their CSR budgets. Since there is a cap in the expenditure of CSR funds in a particular sector, there is need to enhance such cap for healthcare sector. Otherwise, the companies won’t be able to divert sufficient CSR funds to the health sector, which is need of the hour. In this extreme health emergency which is unprecedentedly consuming thousands of human lives daily, CSR funding in other traditional social focus areas can be put on hold till we come out of this mayhem.
Notably, new CSR Rules notified in January introduced significant changes to monitoring and evaluation of CSR activities, and utilisation of CSR expenditure.
From today’s business point of view, those companies spending money on public welfare through CSR initiatives have a direct influence on their customer base. A ‘socially responsible’ company is a point of attraction for customers and the company’s effective CSR initiatives garner customers’ loyalty for the company. A loyal customer base is a guaranteed bright future for a company. So it makes a sense for companies to tailor their CSR initiatives in these Covid times in such a way that extend immediate and long term relief to the general public.
In other words, as put by experts, useful CSR initiative in Covid times would be giving a company the power to stand out in today’s saturated market and connect with customers on a level that ensures long-term loyalty and potentially even brand advocacy.
Ultimately, the most important thing to keep in mind is that when a company uses corporate social responsibility to build and improve its brand — sincerity is the key. The company should not lie to its customers and should be truthful in every claim it makes. The acts of the company should speak for it being devoted to a cause in real sense.
Meanwhile, there is possibility that many CSR projects may not be in line with laid guidelines, but may be morally right. Here the government needs to encourage such initiatives and explore the possibility of including such identified projects within the ambit of CSR activities.
In succinct, the COVID-19 pandemic has subjected the companies’ corporate social responsibility (CSR) response to an unprecedented stress test. They have to understand that in every crisis there are risks and opportunities. It’s the most opportune time for the corporates across the country to further embed themselves into the social fabric of the communities aroud them (in the areas where they operate). At this time of mayhem when the virus is consuming human lives at a pace never-seen-before, tailoring CSR initiatives specifically to the combat Covid-19 will help the companies to present a pathway to protect their consumer trust, investor confidence and workforce loyalty.
Above all, CSR emerges as a powerful tool in the given circumstances to address the infrastructural gaps in the healthcare sector. Let this powerful tool do the talking and this will go a long way to protect the lives of people from the extreme health emergencies like the present one.
This is also an opportunity for the younger generation of entrepreneurs to donate towards reshaping the infrastructural facilities in health sector. They may not be governed by the CSR rules, but being socially responsible is always a good idea to explore. Let them chase profits, but sharing it with society and community will make them outstanding.
(The views are of the author & not the institution he works for)