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Environmental concerns under CSR in India – IMPRI Impact and Policy Research Institute

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Environmental concerns under CSR in India - IMPRI Impact and Policy Research Institute

Mohan Chandra Pargaien

Tree planting or forest restoration has now become one of the important routes to achieve net-zero targets by 2070 as committed by India at the climate conference COP26 conducted last year in Glasgow. There is no doubt that businesses, irrespective of their size, contribute to a large carbon footprint while pursuing the aim of maximising profit. India became the first country in the world to make corporate social responsibility (CSR) mandatory through the Companies Act (2013), requiring all companies that meet a specified financial limit to spend 2 per cent of their average net profit on CSR activities.

The latest shift from the existing Business Responsibility Reporting (BRR) to Business Responsibility and Sustainability Reporting (BRSR) as mandated by the Securities and Exchange Board of India (SEBI) is a welcome move, to provide opportunities and the desired platform to execute larger social and environmental functions by the companies.

Driven by leading international standards, Principle 6 of the RBC (Responsible Business Conduct guidelines) expects corporations to make efforts to protect and restore the environment. The shareholders and consumers are now driving the sustainability agenda of corporations with a special emphasis on the environment. It has more relevance for a country like India with challenges like poverty and a degraded environment and an intricate linkage between the two.

The contribution of businesses towards restoration efforts in India as reflected in its report on the Bonn challenge has not been so encouraging  out of 9,810,944.2 hectares of the total area brought under restoration in six years, only 193,290.3 hectares (2%) were reported to be done by private companies. This data, however,  maybe not be a true reflection because of limitations in data collection. As stated recently by CDP, an international non-profit organisation, there are reports of Indian corporates not disclosing the full information about their impact on the climate crisis, water shortage and deforestation.

In CSR spending, there is a certain bias towards social activities such as education, poverty and health. The environment has taken a backseat in CSR fund allocation. Photo from the CSR data portal, Ministry of Corporate Affairs (As of 14th March 2022).

There are, however, many examples of the remarkable contribution of corporate in environmental conservation towards forest restoration, including tree planting, in addition to their mandatory compliance. Initiatives like Project Hariyali of Mahindra, Sustainable Agroforestry model of ITC Ltd, Afforestation projects of NTPC Ltd, Lake restoration of Allergan, an AbbVie company, are a few among many initiatives associated with restoration activities including tree planting taken up by corporates.

Why is the environment a decreasing priority?

In comparison to other equally challenging social issues such as education, poverty, health, sanitation etc., which the companies have been prioritising in the past, the environment and related issues somehow failed to gain the desired priority. A cursory look at CSR spending over the last seven years in the Corporate Social Responsibility Data Portal of  India’s Ministry of Corporate Affairs, reveals that the spending under CSR is mostly concentrated on education with average spending of 38% towards the sector, while another spending was in health and sanitation (22%) and rural development (10%), followed by the environment sector (8%).

Even under the environment sector, the favoured areas for spending are initiatives such as renewable energy projects, awareness or green initiatives with a meagre allocation for tree planting, rejuvenation and restoration of natural resources like water bodies, forests, grasslands etc. The agroforestry sector, however, received marginal continued funding, thus supporting the objectives of both livelihood and carbon sequestration. This bias towards education, poverty and health with sanitation has remained the same since 2014, which needs proactive re-examination and some corrective actions.

The need to focus on restoration

Forests with their spectacular capacity for carbon sequestration also offer an opportunity to assist in achieving net-zero targets. However, this requires the participation of all stakeholders. The UN Decade on Ecosystem Restoration aims to halt and reverse the degradation of ecosystems on every continent and in every ocean.

To restore 350 MHA of degraded land by 2030 globally, and 26 MHA in India, restoration needs to be prioritised under various environmental initiatives of governmental, non-governmental and private organisations including corporate. The decreasing budget of forest departments in many of the states is also a cause of concern that can be compensated by corporate to some extent from their CSR funds.

Challenges for corporates in bringing restoration under CSR

Among various challenges that corporates face while adopting restoration programmes, including tree planting is its long gestation period and extended completion phase in comparison to other social activities. This along with the lack of qualified implementing agencies including NGOs and the absence of enabling policy interventions for hassle-free selection of areas including degraded forests, make this challenge more difficult to translate this priority into action.

Forest restoration activities, being technical, also need suitable training and capacity building interventions. The state forest departments also need to be a very active partner in ensuring the availability of quality planting material and required technical guidance for other forest restorative activities. Whether the areas targeted are inside the forests or outside the forests in private or institutional lands, we need to take care of the interest of communities duly providing necessary ways and means to take care of their interests to make our approach participatory for an effective and successful outcome.

Apart from these obstacles, there have been instances of geographical biases, convenient interpretation of activities, camouflaging and lack of commitment among companies undermining the sole objective of achieving goals of sustainability.

The 2020 research by WWF, Tree Planting by Businesses, for European countries, states that there is little or no evidence that they (businesses) pay enough attention to tree planting, or to the role of trees in a wider perspective and the emphasis is clearly on the number of trees planted. This warrants attitudinal change among corporate to facilitate a gradual shift of preference toward multipurpose forest restoration rather than just tree planting.

The path forward

Indian corporate being the major agent of the development process also carries the responsibility to maintain a balance between development and the environment. Corporates need to utilise these mandated provisions as an opportunity to become a change agent for sustainable development by looking and acting toward environmental goals beyond CSR mandates, duly refraining from geographical biases, camouflaging and greenwashing.

There is a need for a prioritised shift from the social sector to the environmental sector with much focus on carbon-sequestering channels like Afforestation and restorative approaches by Indian Corporate under their spending pattern of CSR. The networking of implementing agencies especially NGOs, their capacity building and training with suitable incentives have to be ensured through an integrated approach with the involvement of all players.

The states also need to re-evaluate the existing mechanisms and policy frameworks keeping the restoration objectives in mind and formulate strategies to facilitate the active involvement of corporate. This reoriented and renewed approach of the corporate can help to bring a real balance between business and the environment and help India to achieve its net-zero targets.

First published on Mongabay, titled, Reorienting environmental concerns under CSR in India, 28 March 2022

Read another piece by the author, A Diminishing Green in India’s Evolving Megacities, on IMPRI Insights

Read another piece by the author,  Nature-Based Solutions to Restore and Protect Forests: The Case of Telangana, on IMPRI Insights

About the Author

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Mohan Chandra Pargaien, is a Senior IFS officer in Hyderabad, Telangana with areas of interest in environmental awareness and protection, CSR with specific reference to all environmental and socio-economic issues, poverty alleviation, community participation in environmental related issues, and green initiatives

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