Mitigating Climate Risks: Achieving India’s Net Zero Goal

Mitigating Climate Risks: Achieving India’s Net Zero Goal through Equitable CSR Funding

Relevance:

GS-2: Development processes and the development industry —the role of NGOs, SHGs, various groups and associations, donors, charities, institutional and other stakeholders.

Context:

The Reserve Bank of India (RBI) recently released a report on currency and finance that highlights the need to address climate risks and work towards India’s net-zero target by 2070. One of the recommendations put forth in the report is the mandatory geographic diversification of corporate social responsibility (CSR) spending. While this suggestion is commendable, its implementation requires a paradigm shift in the ecosystem to ensure a fair distribution of CSR funding.

What is Corporate Social Responsibility (CSR)?

• Corporate social responsibility is a concept in management that encourages businesses to incorporate social and environmental issues into their everyday operations and relationships with stakeholders.
• CSR, also known as corporate citizenship, is typically defined as the process by which a business achieves a balance of economic, environmental, and social imperatives while also meeting the expectations of shareholders and stakeholders (Triple Bottom Line Approach).
• A sort of self-regulation known as corporate social responsibility, or CSR, shows a company’s accountability and commitment to furthering the social and environmental well-being of communities and society.
• Clause 135 of the Companies Act, 2013, governs the notion of CSR in India.

Current Scenario and Concentration of CSR Funding

• Section 135 of the Companies Act states that companies should prioritize areas near their operations when deploying CSR funds.
• While this approach has led to increased funding for social issues, it has also resulted in concentrated spending in the most industrialized states.
• As of the fiscal year 2020-21, 10 states received 80% of all CSR funding, indicating a preference for local areas despite the government’s clarification that preference is not mandatory.

Local Preference and the Social License to Operate

• Companies often prioritize local projects due to a desire to support the communities in close proximity to their business operations.
• They are familiar with the challenges faced by these communities and can leverage their knowledge, relationships, and networks for greater influence and positive outcomes.
• By investing in local projects, companies can obtain a “social license to operate” through the goodwill and influence gained from making a positive impact on nearby communities.

Challenges and Regulatory Shifts

 Overcoming the strong preference for local projects requires regulatory changes and a shift at
the ecosystem level.  Companies face challenges in accessing remote locations, identifying the needs of local
communities, and finding trusted implementation partners.  Grassroots non-profit organizations often struggle to showcase their impact on national
platforms, creating an information gap with funders.  Achieving an equitable distribution of CSR funds necessitates a high level of trust between
companies, as well as between the private, public, and social sectors.

Building Partnerships and Collaboration

• A partnerships-based approach can help achieve scale and foster equitable fund distribution.
• Collaboration between larger companies and smaller social enterprises and non-profits can involve pooling funding, talent, resources, and innovations to address complex challenges.
• Established non-profits with significant budgets can promote and elevate the impact of grassroots organizations, providing compliance support and acting as trusted conduits to strengthen the social ecosystem.
• Intermediaries and ecosystem-building organizations can assist companies in identifying smaller grassroots partners.

Aligning with Local Government and Programmes

• CSR programs can align with local governments through initiatives such as the Aspirational District Programme (ADP) and the Aspirational Block Programme.
• These programs encourage collaboration among local, state, and national governance entities, as well as external agencies, to foster convergence with national and state schemes.
• Participating in such programs allows companies to develop meaningful relationships with government departments, influence local governance practices, streamline district administration work, and undertake impactful projects in vulnerable districts.

Mitigating Climate Risk: Balancing Autonomy and Accountability

• Collaborations should strive to maintain the autonomy of non-profit organizations while ensuring accountability to funders.
• In projects located in remote areas where staff visits may be infrequent, technology-enabled monitoring and evaluation models can be employed.
• The use of tools for real-time data transfer, dashboards, accounting software, virtual field visits, and video conferencing can bridge the gap and enhance accountability.

Conclusion

For corporations aiming to be true national partners in realizing environmental and social goals, establishing trusted partnerships with a diverse set of non-profits and local governments is crucial. By embracing geographic diversification of CSR spending and implementing equitable fund distribution, companies can contribute significantly to mitigating climate risks and achieving India’s net-zero goal. Regulatory changes, collaboration, and technology-enabled monitoring are essential elements of the path toward a sustainable and inclusive future.

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