For more bang for the CSR buck, change the rules

economictimes.indiatimes.com:

Philanthropy was practised in other ways too. Even today, religious institutions rent out spaces donated to them. The rental revenues fund their activities.

Going back further in the past, there are examples of rulers and nobles endowing villages and tax revenues to ashrams and religious and educational institutions to help them fund their activities. There is a difference between these two types of giving. The former contributed to the expenditures, while the latter was a one-time grant and helped create a corpus.

More important, both types of philanthropy had different purposes, the former method of allocating funds for meeting expenditure needs had a short-term agenda, such as feeding the poor and providing clothes and scholarships for poor students. But the corpus or asset creation is more about undertaking activities with a longer-term perspective, including building educational institutions, hospitals, funding scholarships and religious leaders. By appreciating this difference, we can better understand the ongoing debate on CSR.

Specifically, a recent newsletter by the ministry of corporate affairs states, 'To ensure that the impact of CSR is deeply felt, it is imperative that the companies take a long-term comprehensive approach to yield productive results. For increased effectiveness and efficiency, it is important to execute CSR efforts strategically with the right balance of capital investments and operational expenses.' Despite impressive growth in CSR spending, there are concerns that this spending delivers suboptimal results. These concerns need to be addressed, but the problem lies in the design of the CSR mechanism itself.