Evaluating CSR Projects in India to Measure Impact and Progress

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Posted by: Biswaranjan Baraj
Category: Business, Evaluation
Evaluating CSR Projects in India to Measure Impact and Progress

Indian companies spent INR 25,000 crore for their CSR activities in 2020-21. But have we evaluated these interventions to see if the impact is proportional to the resources used? 

According to Pushpa Sundar, the author of Business & Community: 

Business, on its part, needs the consent and cooperation of society and government to operate effectively and make profits. In the long term, there is no hope for business without society’s all round and equitable development. Corporations need communities and vice versa. It is a social contract that is mutually beneficial”. 

Corporate Social Responsibility is based on companies’ need to think beyond their financial gain by giving back to the community in meaningful ways. A company engages with local communities through its CSR and identifies its basic needs to integrate them within its business goals and strategic intent. It is generally understood as a medium through which a company balances economic, environmental, and social imperatives while addressing the expectations of shareholders and stakeholders. 

In many countries, CSR is voluntary and beyond compliance with the law. However, India is the first to have a mandatory CSR spending law worldwide. Section 135 of the Companies Act (Act), 2013 provided the criteria to assess the CSR eligibility of a company, implementation, and reporting of their CSR policies. 

This Act applies to companies with the following: 

  • a net worth of INR 500 crores or more, or 
  • a turnover of INR 1,000 crores or more, or  
  • a net profit of INR 5 crores or more during the preceding fiscal year.  

The ones that fit any of these criteria must spend 2 per cent of their profits on CSR activities.  

Data reveals that in the fiscal year 2020-21, around 17,000 companies spent approximately INR 25,000 crores on CSR projects in 14 different development sectors. The amount corporates spend for philanthropic causes might be more than the amount specified since some spend beyond CSR compliance without officially reporting it to the authorities. 

What does this amount tell us? 

The reported amount is encouraging and reflects that if spent judiciously, companies can work to provide maximum benefits to the community. However, CSR expenditures and having the various trappings of CSR do not automatically translate into an impact on the ground.  

This is why the Act mandates social impact assessment for businesses with a CSR budget of INR 10 crores or more and all projects with an outlay of INR 1 crore or more. This amendment has paved the way for higher spending on impact assessment studies in the case of large CSR projects. 

Apart from statutory compliance, evaluation plays a critical role in assessing the effectiveness and impact of the project activities. It also helps identify the strengths and bottlenecks of implementation processes, which can lead to corrective steps in designing and implementing CSR projects. This way, CSR funds are utilized better with strengthened impact. Additionally, for the company, it leads to better credibility as a responsible company among investors, consumers, and employees.   

At what stage should CSR evaluation take place? 

Evaluating CSR Projects in India to Measure Impact and Progress

Evaluation is more valuable and actionable when conducted at the right project cycle time using a suitable approach, method, and criteria. Impact evaluations after intervention completion give information about the program’s impact on the community and help design better projects in the future. Formative evaluations are conducted during the project implementation stage—these mid-term evaluations are more helpful in identifying the bottlenecks and in taking corrective actions during the project cycle. 

How should CSRs be evaluated? 

The evaluators should use appropriate approaches and methods to derive better actionable insights from such an evaluation. 

For large CSR projects (with a focus on projects with extended gestation periods), a Theory of Change (ToC) should be prepared at the beginning with planned activities and designed pathways to achieve project goals over a planned timeline. This ToC should be traced during evaluation, which can lead to modifications during the project cycle based on the evaluation findings. Among quantitative, qualitative, and mixed method evaluation methods, the mixed method tends to provide better insights, particularly in assessing the outcome and impact of CSR projects. However, it depends entirely on the context and objectives of the evaluation.  

What are the parameters on which CSR projects are evaluated? 

To support evaluation practice, the Organization for Economic Co-operation and Development (OECD) Development Assistance Committee (DAC) defined six evaluation criteria, which have shaped the design and evolution of international development evaluation over the decades.  

  1. Relevance: is the intervention doing the right thing? 

Relevance helps in understanding contextual factors of CSR activities from the community’s perspective in the project location area. Before starting the project, the relevance should be adequately assessed during the designing phase. 

  1. Coherence: how well does the intervention fit? 

Coherence is essential to increase efficiency and outcome and can be categorized into internal and external coherence. If the company has multiple interventions in the same geographical areas or for the same target population, there should be coherence and interlinkages between the intervention and other interventions. External coherence considers the consistency of the intervention with other actors’ interventions in the same context and tries to avoid duplication of efforts 

  1. Effectiveness: is the intervention achieving its objectives? 

Effectiveness helps assess the extent to which the CSR project objectives were achieved or are expected to be achieved, considering their relative importance. Effectiveness should typically be measured after the mid-implementation stage. 

  1. Efficiency: how well are resources being used? 

Efficiency is the extent to which the CSR project delivers or is likely to deliver results in an economical and timely way. There are several ways to measure efficiencies, such as cost-effectiveness or value-for-money analysis. Since such funds tend to be limited, CSR projects should utilize the budget in the most efficient way possible.  

  1. Impact: what difference does the intervention make? 

The impact is the extent to which the intervention has generated or is expected to generate significant positive or negative, intended or unintended, higher-level effects. Each CSR project tries to achieve impact; accordingly, the activities and inputs must be efficiently planned. 

  1. Sustainability: will the benefits last? 

Despite not being emphasized in CSR projects and evaluation, the sustainability criteria are essential to achieve the net benefits of the CSR projects so that they continue or are likely to continue. Thus, using the evaluation result, the systems’ financial, economic, social, environmental, and institutional capacities can be assessed and emphasized, which is needed to sustain the net benefits over time even after the completion of the CSR project.  

Apart from the above criteria, equity and gender should also be used as cross-cutting evaluation criteria, creating evidence for generating equity and gender-focused-CSR projects to eliminate gender bias and help marginalized communities prosper. 

Who should conduct these evaluations? 

An independent agency should evaluate with expertise and experience in designing and conducting the evaluation. Once received, evaluation results should immediately be presented to the CSR committee of the company. The CSR committee should use the findings to design and implement better CSR projects while taking corrective actions if required. The evaluation may be complemented by monitoring to monitor the progress and process.  

What is the way ahead? 

Many companies use evaluation as a powerful tool to implement their CSR agenda better. In the coming time, backed by law, more and more companies in India will evaluate their CSR projects, allocating more budget for the evaluations. Apart from the need for an evaluation to fulfill statutory compliance and to showcase a company’s social and sustainability measures, evaluation is also used as a learning tool to achieve better efficiency, effectiveness, impact, and sustainability of the CSR projects for the benefit of the community. 

References: 

https://www.epw.in/search/site/CSR 

Biswaranjan Baraj – Assistant Vice President, Sambodhi

Author: Biswaranjan Baraj