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Fostering entrepreneurship through CSR

September 10, 2018

 

Many of you reading this would have heard about Ford Foundation, Rockefeller Foundation, Dell Foundation, Bill & Melinda Gates Foundation. All of these are philanthropic Institutions founded by successful businessmen who made their million through their businesses and wanted to use some of the wealth they made in business to do good for Society, and humanity at large.

 

Over the years, the practice of businesses themselves contributing to social good directly has become more common. Some businesses have chosen social and environmental impact as a core of their business and have adopted certifications like the B Corporation. Some of them call themselves social enterprises while others don’t, but continue to focus on solving a difficult problem that contributes to social good. We call all of them social enterprises for the purpose of this article. Others have allocated funds under Corporate Social Responsibility (CSR) programmes in parallel with their core business.  Prior to the Companies Act 2012 coming into force, CSR was a choice for Indian companies. However, post the new Companies Act, CSR is a regulatory requirement, and that has opened up availability of capital for various new models of creating social good.

 

The areas in which companies deploy their CSR funds are varied. Some have remained focussed on specific sectors, while others have a diversified set of areas that they support. As per information compiled by NGO Box, the largest chunk of CSE funds goes to the education sector [1] .

 

The conventional route for contributing to social good has been through non-profits. However, like mentioned above, several start-ups or businesses have chosen to include social and environmental good as a core of their business. They reach out to customer segment that is left out by conventional businesses. The social impact start-ups do this by improving affordability through improved efficiency achieved by the use of technology or by innovations in delivery models. However, there are those who are extremely poor and hence do not have the ability to pay for the full cost of services or products offered by social enterprises. CSR funding can enable these start-ups to reach out to that segment with high quality essential services or products. This has opened up a new route for CSR to enable social impact.

 

Start-ups use breakthrough innovations in technology and delivery models to reach out to an underserved segment with increased efficiency while creating jobs at a fast pace, the hypothesis being that by supporting large number of social impact start-ups, one can strengthen the economy, overall. In other words, funding social start-ups could be a good way for CSR to maximise the potential of their funds to create large-scale sustainable impact.

 

We have seen two ways in which CSR is enabling social impact through the start-up ecosystem:

 

Funding of Govt-approved Business Incubators: A number of Govt approved incubators have come up to support a strong start-up ecosystem in the country. Given the innovations and job creation that start-ups lead to, the Govt of India feels that supporting entrepreneurship and start-ups is a priority. Over the past few years, there have been examples of CSR funding through incubators: Eg[2] : Mahindra & Mahindra Financial Solutions funded FlyBird Farm Innovations in India’s 1st Food & Agribusiness Accelerator by NAARM a-IDEA & IIM-A CIIE in 2015 through Villgro Innovations Foundation(INR 5 million); At Caspian, last year, we have supported the Technology Business Incubator of ICAR NAARM a-IDEA in building the start-up eco-system in the Food & Agriculture space.

 

Funding Social Projects to be executed by start-ups: Social enterprise start-ups have developed models that enable delivery of healthcare, education, drinking water, etc to low income households and to those in remote locations. However, the social enterprise model is dependent upon the customer paying for the services. As discussed earlier, some customer segments do not have the ability to pay even for the affordable price points that the social enterprise start-ups offer, but can pay a token amount. CSR can step in and support projects that enable access to such essential services and products by paying for the deficit between what the lowest income customer can pay and the cost of the product/service. This will enable efficient delivery of essential products and services to low income households, through innovations in technology and delivery models.

 

 

 [2] 

 

 

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