Corporate Social Responsibility (CSR) has become an integral part of business practices in India, mandated by the Companies Act, 2013 and subsequent amendments. Every qualifying company requires spending of at least 2% of its average net profit (profit before taxes) for the immediately preceding three financial years on CSR activities in India. Implementation of CSR initiatives is a positive step towards sustainable development. To ensure credibility and accountability, the act also mandates the conduction of an Impact Assessment of CSR interventions. Impact Assessment is the process of measuring the positive and negative effects of a CSR initiative. While Impact Assessments ensure transparency and accountability, there are several issues and challenges in impact assessment for CSR in India.
I am listing down five issues and challenges that I have seen in my career of conducting Impact Assessments:
Difficulties in measuring long-term impact
Deeply ingrained social and environmental changes may take time to fully manifest. For businesses looking for quick results, measuring the impact of CSR programmes may take lengthier assessment periods. Many CSR projects take time to make an impact, and it can be challenging to gauge their long-term effects. Because of this, evaluating the success of CSR programmes may be challenging. Moreover, the anticipation that CSR programmes will immediately bring about dramatic changes may be too high, leaving people disappointed when these changes do not materialise.
Consensus on what constitutes impact and impact attribution
Impact cannot be defined in a single way, and various stakeholders may have different opinions about what counts as a positive or negative impact. Designing and implementing impact assessments that are valuable and meaningful to all stakeholders may be challenging as a result. Also, determining the direct impact of a particular CSR initiative on a specific social outcome can be challenging, as multiple factors contribute to the overall change.
Lack of baseline and standardized metrics
In most cases, project evaluation is an afterthought or last-minute decision. The issue here is that a baseline value, which is frequently absent, is needed to assess the change and attribution. Additionally, India faces a myriad of complex social issues, such as poverty, inequality, and environmental degradation. Measuring the impact of CSR initiatives on these problems is challenging due to their multifaceted nature. The effectiveness of CSR programmes cannot be determined using any standardised framework or measures as every intervention is unique in itself. Comparing and evaluating the efficacy of CSR projects is difficult since different organisations employ various indicators and approaches.
Limited expertise and resources
Many companies lack the necessary expertise and resources to conduct comprehensive impact assessments and also interpretation of results. We have experienced lack of clarity about the purpose of the impact assessment of a CSR intervention. What are the specific questions that the impact assessment is trying to answer? What are the intended uses of the impact assessment? Therefore, conducting impact assessments can be expensive and time-consuming, and many companies do not have the resources to do them properly. This can lead to inaccurate or incomplete assessments, which can undermine the credibility of CSR initiatives.
Some businesses prioritise sporadic, short-term efforts to fulfil their CSR requirements and compliances. These programmes might not address the underlying causes of social and environmental problems or have a long-lasting effect.
Addressing these challenges requires collaborative efforts from businesses, government agencies, Impact Assessment Agencies, Independent Evaluators, NGOs, and other stakeholders. The development of standardized metrics, increased transparency, better monitoring mechanisms, and a focus on sustainable and long-term projects can help improve the impact assessment process for CSR in India.
Impact Assessment is a crucial tool for evaluating the success of CSR projects despite these difficulties. Companies may learn what works and what doesn’t by doing impact evaluations, and they can ensure that their CSR programmes are having a good impact on society.