CSR Notification: CSR Impact Assessment Made Mandatory

CSR Impact Assessment is the process of comprehending the impact that has occurred in the lives of the beneficiaries, where the project was implemented. This helps to understand the overall outcome and impact of the project from the eyes of the beneficiaries. The New Rules in the Companies Amendment Act have brought in some changes which show Government’s encouragement towards the corporates to pursue impact assessment for their ongoing CSR projects.

The New Rules require all the implementing entities intending to undertake CSR activities to register themselves with the Central Government by filing form CSR-1 electronically for all CSR projects effective from 1st April, 2021. A unique CSR Registration Number will be generated for all companies submitting Form CSR-1. In this way, a list of all the participating entities is maintained by the Ministry of Corporate Affairs, which would increase the chances of timely fulfilment of proposed activities.

This past performance record of the implementing agencies can be referred to by the companies which will help them decide their engagement for future CSR activities.

The corporate social responsibility rules that were declared on 22 January, 2021 states that every company having an average CSR obligation of Rs 10 crore or more in the three preceding financial years, will have to undertake an impact assessment study of its projects, through an independent agency. According to Ministry of Corporate Affairs data, CSR expenditure has increased from Rs 10,066 crore in the FY 2014-15 to Rs 18,655 crore in 2018-19 with a cumulative total of Rs 79,000 crore having been spent throughout India. Henceforth, each CSR project would be given a unique registration number upon submission of the Form CSR-1 which can be used to track the project.

Impact Assessment study is not static and one-off, but a dynamic and responsive process that is an integral part of any project. Practices include the involvement of communities in measuring and defining the impacts, extensive and ongoing stakeholder engagement, community-based agreement making, and use of deliberative democratic methods among others.

It requires stakeholder engagement, identifying and involving key stakeholders in assessing impacts, and also informing recommendations for mitigation or avoidance. Such approaches may involve the formation of community consultative committees and actively engage community stakeholders in impact identification, action planning, and future visioning.

Objective of CSR Impact Assessment Studies

CSR Impact Assessment is a transparent process to measure and report the social objectives of a CSR project. The assessment study is expected to identify imbalances between the agreed objectives and the final implementation of any CSR Project. It will help the companies to understand the current impact & limitations to the expected impact. It will also provide the multi-stakeholder perception of CSR projects & inputs to the CSR policy. Internally, it helps ensure greater verifiability of data & accountability.

It’s important to have strict & accurate monitoring and evaluation plan as part of any successful project implementation. It not only helps to be assured of implementation of policies as planned but also helps to address intense public scrutiny and legal compliance.

Benefits of undertaking CSR Impact Assessment for any project:

Helps to track, assess and report the progress of the sponsored project and undertake course corrections.

Facilitates the CSR team to understand how each stakeholder has met the assigned responsibilities.

Assists the plans of the CSR Committee and executes the activities in a transparent way.

Assess the competency of implementing partners and plan future CSR projects based on their strengths

CSR Impact Assessment studies initiated by the Corporates may also include financial audits geared towards verification of reliability and integrity of financial information.

Measuring impact will never be easy and monitoring a process that is fraught with subjective issues like culture, behaviour, attitudes, etc. will always require deep thought and understanding. Needs Assessments, Baseline Surveys, and Research are key to designing for long-term outcomes and impact.

Response of Corporates

During the past amendments, in the initial years of the rules taking effect, most companies were focused on compliance instead of tracking how their initiatives fared. It is recommended that companies incurring CSR expenses, they must put in place monitoring mechanisms to strengthen the project.

Definition of CSR Impact can be different for every organisation.

One of the methods is by calculating SROI, wherein the impact is measured in terms of monetary value derived by the community as a whole.

For certain organisations, the impact is defined as the actual change made in the social and environmental aspects.

An insight-driven method of evaluating social impact is mapping the behavioural change among the beneficiaries receiving the interventions.

CSR Impact Assessment Study: For every Sustainable Project

More often than not, CSR programmes in India are evaluated on their investments and returns. It is high time to understand the need to shift from this approach and focus on the data of the beneficiaries, whose lives have been impacted. This can be done by using quantitative surveys with both the beneficiaries and the key stakeholders. Moreover, to complement these findings there is a need to understand the underlying reasons for change among the beneficiaries.

A CSR Impact Assessment study helps the board to place the CSR funds towards its optimum utilization, by allocating them to the initiatives that drive maximum impact and can be scaled up while programs leading to limited impact can be curtailed.

The organisations that are implementing CSR projects in partnership with any social organisation, the process of assessment can be a useful exercise of capacity-building, where the two organisations can work closely to achieve their common goals through the knowledge of outcomes shared by such assessments.