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CSR mandate to boost social start-ups

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September 5, 2013
Anirban Sen | Aparna Ghosh

Bangalore : For social entrepreneurs and start-ups that specialize in philanthropy consulting, the corporate social responsibility (CSR) mandate of the new companies law could not have come at a better time.

The likes of Samhita Social Ventures, GiveIndia, Enterprise Nube’s Gudville and Rang De are likely to inspire more social entrepreneurs and ventures hoping to tap into the opportunity.

The law, which for the first time, has laid down the ground rules for CSR and is likely to boost corporate charitable activity, would mean that the top 100 companies by annual net sales in 2012 will spend Rs.5,611 crore on such activities, compared with the Rs.1,765 crore they are spending now, according to a March report in Forbes India magazine.

Philanthropy in India is currently funded mainly by charitable foundations set up by India’s corporate sector and wealthy individuals such as Wipro Ltd’s billionaire chairman Azim Premji and former Tata Group chairman Ratan Tata.

“It (the law) changes our business completely,” said Priya Naik, founder and joint managing director at Samhita Social Ventures Pvt. Ltd. “So far, it was only the enlightened companies, so to speak, who would come to us. The reality now is that every company needs to do it... It’s great to see this in place as it will force companies to do CSR in an organized manner.”

“It’s a tremendous opportunity (for entrepreneurs),” added Naik. “A lot of expertise, a lot of money is coming in...and it will provide them plenty of access to networks, access to business, etc.”

Samhita, set up in 2010, works with charitable foundations across the country and acts as a CSR consultant and adviser to large corporations such as Vodafone, Johnson and Johnson and the Piramal Group.

Samhita is funded by the Nadathur Trust established by Infosys Ltd co-founder N.S. Raghavan.

“There will be a new breed of enterprises and consultancies that’ll just look at this area,” said Smita Ramakrishna, co-founder and managing director of microlending venture Rang De.

Rang De, which is registered as a non-profit organization, provides tiny loans to under-served communities and is funded through grants it received from ICICI Foundation and other corporate charities.

“It (CSR) is important as there are no other major countries that have a mandate like this. It’s a great opportunity for social responsibility to get an uplift. And certainly an opportunity for us,” said Subhash Dhar, founder and chief executive of IT product start-up Enterprise Nube. Enterprise Nube last year launched Gudville, a social network for philanthropic activities, and has partnered with Samhita to host campaigns for charities.

Dhar said the new CSR mandate would help start-ups operating in specific niche areas such as filtering and certifying foundations.

“Certifying charities itself is a huge task,” said Dhar, a former global sales head at Infosys.

More start-ups that focus on social causes, such as education for the under-privileged, could come up in the near term, according to Dhaval Udani, chief executive of GiveIndia, which channels funds from donors to NGOs.

“Money won’t obviously be the reason for a social entrepreneur to venture into this space,” said Udani, adding that GiveIndia would not benefit significantly from the CSR provision as it does not focus on the area of corporate charity. “It has more to do with passion.”

Another venture that could benefit from the CSR regulation is Social Venture Partners (SVP) India.

SVP India comprises a network of about 65 experienced philanthropists who focus on training and help companies build group strategies and solve internal governance issues, chief executive Arathi Laxman said.

Companies, such as Britannia, focus on health and nutrition for CSR activities and ventures such as SVP act as intermediaries and advisers to corporations that want to contribute to sectors they are interested in. SVP is in talks with four organizations to help implement the new CSR policy.

However, experts tracking this space also cautioned that it remained to be seen whether CSR in the long run would work in favour of creating an ecosystem of new-age entrepreneurs and raised concerns on transparency in the non-profit sector, with the sudden influx of millions of dollars of venture capital into social ventures.