Give It Up for Corporate Philanthropy in India

As Prime Minister Narender Modi travels the globe in the greatest flurry of diplomacy India has seen in recent memory, and as India’s GDP growth overtakes China’s, it’s no wonder that India’s firmly in the international spotlight. After a cautious first year in power, expectations of the government remain high in terms of economic growth but also for addressing the country’s profound development challenges.

Indeed, almost 25 years after the end of the “Licence Raj” when India began to open up its highly regulated and protected economy, the benefits of economic development have been mixed. Many marginalised people have remained poor and the rich have gotten richer. In fact, India’s top one percent now holds close to half of the country’s total wealth. No wonder resentment is rising.

As India enters the second year of its CSR law mandating companies of a certain size and profitability to spend two percent of a rolling three-year average of corporate profits on corporate social responsibility activities, hope springs eternal. With federal and state governments’ failure to deliver basic human services and infrastructure, can corporate largesse and ingenuity fill the gap?

The Thin and Blurry Line Between Philanthropy and CSR

“The vast majority of CSR activities in India are philanthropic in nature: adopting a local village, building schools and providing meals to schoolchildren. Clearly, these are worthy causes but they are often selected in the absence of strategy, rigour or impact measurement.”

In India, the line between philanthropy and CSR is thin and blurry. Many corporate leaders still view the two terms as synonymous and their priorities suggest as much. The vast majority of CSR activities in India are philanthropic in nature: adopting a local village, building schools and providing meals to schoolchildren. Clearly, these are worthy causes but they’re often selected in the absence of strategy, rigour or impact measurement.

To understand corporate giving in India, one needs to consider that business families account for 85% of businesses in the country. The leaders that run these family enterprises often view their companies’ philanthropic activities as their own. So, not surprisingly, corporate philanthropy often mirrors their personal interests.

Fortunately, this situation is starting to change. New ways of doing good are emerging and some wealthy, high profile leaders in India are signaling a new approach to philanthropy.

High Profile Philanthropists are Emerging

As reported in the Economic Times, “The traditional mold is being broken by the likes of Azim Premji, Sunil Mittal, Shiv Nadar and a few others who are carving out large portions of their individual kitty for causes they champion. By doing so, they not only free themselves from a restrictive corporate framework or pressures of all hues, they position themselves to innovate and work with unlikely allies, including the government, in ushering ‘system changes’ that have far-reaching impact. Their brand of philanthropy recognises the deeper set of issues that govern social inequities and they chip away at them systematically.”

Forward thinking leaders are focusing efforts on capacity building, supporting civil society organizations, and accelerating ‘shared value.’

Wipro chairman Azim Premji recently became the first person in the country to sign up for the Giving Pledge, an initiative started by Bill Gates and Warren Buffett in 2010 in which the world’s richest people dedicate the majority of their wealth to charity. Premji recently transferred 12.5% of his holding in Wipro — worth US$2.2 billion — to the Azim Premji Trust. His focus is working with governments across India to address the capacity building challenges of the government school system.

Similarly, Amit Chandra of Bain Capital, a well-known philanthropist, has come to appreciate that capacity building is key to helping civil society tackle some of the thorniest issues. All of his philanthropic money is now earmarked for this purpose.

Anand Mahindra, Managing Director of the Mahindra Group is also taking a progressive view of philanthropy. He believes that the line between business strategy and philanthropy will soon erode in the name of “shared value”. He has come to the conclusion that poverty can’t be solved by charity so he is helping social enterprises scale up with philanthropic capital.

Others, like Ratan Tata, chairman emeritus of the Tata group, are going straight to the root cause of some of India’s development issues. According to another article in the Economic Times, Tata “believes India is still feudal in its mindset and that much of the inequity in society can be attributed to the debilitating caste system. Dalit (low caste) issues, therefore, were integral to his giving. And now, his successor, Cyrus Mistry, too is experimenting with innovative platforms to drive Dalit entrepreneurship.”

Human Rights Don’t Make the Grade

Beyond these trendsetters, most philanthropy in India is overwhelmingly focused on health and education with other issues like sanitation, women’s rights, disaster relief and environmental conservation trailing far behind. However, there is one major exception: human rights.

It’s one area of philanthropy that many corporates and high net worth philanthropists avoid almost completely. In part, this is because human rights don’t figure as a charitable activity under India’s income tax laws. However, it’s also out of fear of retribution by the government.

No wonder.

The government has tightened the Foreign Contribution (Regulation) Act rules on foreign funding of NGOs, and has recently clamped down on thousands of advocacy and human rights organisations. (This is part of a wider trend in Asia as explained in a recent Economist article).

In April, the Ford Foundation, which has distributed more than $500 million USD in its six decades in India, found itself on a security watch list as the Indian Home Ministry looked into its funding of a local organisation run by a prominent activist and critic of Prime Minister Narendra Modi.

The government’s reason for the scrutiny? Concern that Ford funds were compromising “national interest and security.” It’s a vague and sweeping statement that certainly gives the government lots of latitude to silence groups that don’t align with its views. Many NGOs are understandably worried.

But this dark spot aside, as India grows economically and as its philanthropy and CSR practices mature, we can expect to see old approaches replaced by imaginative and innovative ones. With the size and scale of the challenges in India, the world’s sure to benefit from the lessons learned.

Peter ter Weeme is a Principal at Junxion. He works with companies and NGOs across India and southeast Asia to enhance their impact and accelerate the uptake of responsible business.

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