As you are aware that Corporate Social Responsibility (CSR) is a concept that a business has a responsibility to do good. CSR means a company should self-regulated regulate its transactions so that it will be accountable for its stakeholders such as shareholders, suppliers, creditors, financial institutions, social environment, government etc. CSR means a business entity through its actions; programmes and projects should be responsible and accountable towards society, state or country in which it operates and use resources such as natural and human. An entity should be considered as Corporate Citizen and as human as Citizen of a country. We know that a Citizen residing in a country has some rights and enjoying these rights they should be responsible and accountable for development of country. In the same way a Corporate Citizen is responsible to return back to its society and the country through which it is amassing its profit.
“CSR is a form of International Private Business self-regulation, which aims to contribute societal goals of a philanthropic, activist, or charitable nature by engaging in or supporting volunteering or ethically oriented practices.
Furthermore, businesses may engage in CSR for strategic or ethical purposes. From a strategic perspective, CSR can contribute to firm profits, particularly if brands voluntarily self-report both the positive and negative outcomes of their endeavours.
In part, these benefits accrue by increasing positive public relations and high ethical standards to reduce business and legal risk by taking responsibility for corporate actions. CSR strategies encourage the company to make a positive impact on the environment and stakeholders including consumers, employees, investors, communities, and others.
From an ethical perspective, some businesses will adopt CSR policies and practices because of the ethical beliefs of senior management: for example, the CEO of outdoor-apparel company Patagonia, Inc. argues that harming the environment is ethically objectionable.”(source: https://en.wikipedia.org/wiki/Corporate_social_responsibility).
IMPACT ASSESSMENT:
As you are aware that an “Impact Assessment” is study and a process of identifying the consequences of current or proposed action. It is the process of identifying the anticipated or actual impacts of a development, intervention on those social, economic and environmental factors which the intervention is designed to affect or may inadvertently affect.
Impact Assessment may be conducted prior, during and after completion of a programme or a project, etc. Those undertaken prior to commencing a development initiative forecast the potential impacts of the programme and help in planning and designing of the programme. An Impact Assessment conducted post the completion of a programme identifies the actual impacts during and after implementation to enable/ ascertain corrective action if necessary and provide information for improving the design of programme of future interventions.
Through Impact Assessment Studies we access the impacts of a programme or projects going to be implemented or a policy going to be promulgated on existing social, economic and environmental conditions. An Impact Assessment process is a process to critically analysis of conditions or situations and the benefits a society going to receive in future after implementation of a project, programme and policy of the Government. In all major projects, whether it is of infrastructural, social or others, the concerned authorities handling or regulating these projects or programmes required the developer or entrepreneurs to submit their plan with Impact Assessment Analysis to access the exact impact of their projects on social, environmental and economic conditions of the society and the country.
In ultimate analysis, the social, economic or environmental impact that a CSR/Sustainability project has had is the ultimate test of its success. The Impact Assessment is therefore not merely about measuring the outputs and outcomes but a measurement of cumulative effect of outcomes on the development process affecting the society, the economy and the environment.
LET’S CONSIDER SOME DEFINITIONS TO UNDERSTAND THE “ IMPACT ASSESSMENT”
The IAIA ( International Association of Impact Assessment) Defines – Impact assessment (IA) is a structured a process for considering the implications, for people and their environment, of proposed actions while there is still an opportunity to modify (or even, if appropriate, abandon) the proposals.
The process involves the identification and characterisation of the most likely impacts of proposed actions (impact prediction/forecasting), and an assessment of the social significance of those impacts (impact evaluation).
Impact Assessment Aim to ;
- provide information for decision-making that analyses the biophysical, social, economic and institutional consequences of proposed actions;
- promote transparency and participation of the public in decision-making;
- identify procedures and methods for the follow-up (monitoring and mitigation of adverse consequences) in policy, planning and project cycles; and
- contribute to environmentally sound and sustainable development.
WIKIPEDIA – Policy Impact Assessments (IAs) are formal, evidence-based procedures that assess the economic, social, and environmental effects of public policy. Key types of impact assessments include global assessments (global level), policy impact assessment (policy level), strategic environmental assessment (programme and plan level), and environmental impact assessment (project level). Impact assessments can focus on specific themes, such as social impact assessments and gender impact assessments.
ENVIRONMENTAL IMPACT ASSESMENTS HAVE TWO ROLES – LEGAL AND EDUCATIONAL.
The legal one is quite straight forward: to ensure that development projects such as a housing estate, a road/bridge or some such construction project has a minimal impact on the environment in its entire ‘lifecycle’ – i.e. during design, construction, use, maintenance, and demolition. Many countries now have laws stipulating that unless an EIA study is carried out (particularly for large infrastructure projects), permission for construction will not be granted by the local authority. But countries in Africa will possibly see EIA processes as a ‘hindrance’ to development as environment is not yet a priority!
The educational one is equally important and probably a forerunner to the legal role – to educate everyone one involved – professionals and users included, of the potential environmental impacts of anything we do. We need to look at all our daily actions as eventually and cumulatively affecting the environment. This includes our daily choices, where a delicate balance between financial and environmental considerations need to be made automatically – without thinking Source: https://www.gdrc.org/uem/eia/define.html
Impact assessment involves the assessment of long-term and/or significant changes brought about through a development intervention or series of interventions. Impact assessment is not a tool or methodology. Instead, it can be carried out through many different tools, methodologies and approaches. What sets impact assessment apart from other monitoring and evaluation (M & E) efforts is that it is always focused on change, and pathways towards change, and never focuses purely on activities or outputs (deliverables). Source: https://www.intrac.org/wpcms/wp-content/uploads/2017/01/Impact-Assessment.pdf
THERE ARE VARIOUS METHODS AND TYPES OF IMPACT ASSESSMENT ; THE PRIMARY CATEGORIES ARE ;
1. Environmental Impact Assessment;
2. Social Impact Assessment;
3. Life Cycle Impact Assessment.
1. ENVIRONMENTAL IMPACT ASSESSMENT; The International Association of Impact Assessment (IAIA) simply defined, is the process of identifying, predicting, evaluating and mitigating the biophysical, social and other relevant effects of development proposals prior to major decisions being taken and commitments made.
The Association lays down the Principle Objectives of Environmental Impact Assessment as follows;
i) To ensure that the environmental considerations are explicitly addressed and incorporated into the development decision making process;
ii) To anticipate and avoid, minimise or offset the adverse significant biophysical, social and other relevant effects of development proposals;
iii) To protect the productivity and capacity of natural systems and the ecological processes which maintain their functions; and
iv) To promote development that is sustainable and optimises resource use and management opportunities.
MAIN PRINCIPLES OF ENVIRONMENT IMPACT ASSESSMENT (EIA):
There are eight guiding principles that govern the entire EIA process: The principles of EIA:
1. PARTICIPATION:The process should provide appropriate opportunities to inform and involve the interested and affected public, and their inputs and concerns should be addressed explicitly in the documentation and decision making. Appropriate/timely access for interested parties is important.
2. TRANSPARENCY:The process should have clear, easily understood requirements for EIA content, ensure public access to the information, identify the factors that are taken into account in decision making and acknowledge limitations and difficulties. Open and accessible assessment decisions are important in EIA.
3. EFFICIENT:The Process should impose the minimum cost burdens in terms of time and finance on proponents and participants consistent with meeting accepted requirements and objectives of EIA.
4. ACCOUNTABILITY:The decision maker should inform decision making and result in appropriate levels of environmental protection and community well-being. Decision makers should be responsible for their actions and decisions.
5. CREDIBILITY:The process should be carried out with professionalism, rigour, fairness, objectivity, impartiality and balance and be subject to independent checks and verification.
6. COST-EFFECTIVE: The process should achieve the objectives of EIA within the limits of available information, time, resources and methodology.
7. INTEGRATED:The process should address the interrelationships of social, economic and biophysical aspects.
8. PRACTICALITY:The process should result in information and outputs which assist with problem solving and are acceptable to and able to be implemented by proponents. Information/outputs readily usable in decision making and planning is important.
SIGNIFICANCE OF EIA IN VARIOUS PROJECTS:
1. EIA is Important to ensure peaceful operations and conflict management in many projects.
2. Environmental impact assessment is not a procedure for preventing actions with significant environmental impacts from being implemented. Rather the intention is that project actions are authorised in the full knowledge of their environmental impacts.
3. EIA is more than technical reports, it is a means to a larger intention, the protection and improvement of the environmental quality of life.
4. EIA is a procedure to identify and evaluate the effects of activities (mainly human) on the environment- natural and social. It is not a single specific analytical method or technique, but uses many approaches as appropriate to the problem.
5. EIA is not a science but uses many sciences in an integrated inter-disciplinary manner, evaluating phenomenon and relationships as they occur in the real world.
6. EIA should not be treated as an appendage, or add-on, to a project, but be regarded as an integral part of project planning. Its costs should be calculated as an adequate part of planning and not regarded as something extra.
7. EIA does not give decisions but its findings should be considered in policy- and decision-making and should be reflected in final choices. Thus it should be part of the decision-making process.
8. The findings of EIA should be focused on the significant and essential issues. It is also required to provide a sufficient explanation on why they are important, and study its validity in order to facilitate a basis for policy decisions.
9. Government has time and again appointed committees to look into environmental protection. Example- Gadgil and Kasturirangan Committees on Western Ghats ecology.
There is a need to strengthen the implementation of EIA, Independent EIA Authority is required for fair and objective decisions. There is also a need for centralised data bank for storing information and the transparency must be maintained in dissemination of all information related to projects from notification to clearance to local communities and general public.
2. SOCIAL IMPACT ASSESSMENT; is a method of evaluating the Social effect of various infrastructure and social development projects, to assess how major developments may affect populations, groups and settlements. It finds its origins in Environment Impact Assessment (EIA) and is carried out as part of or in addition to EIA.
The IAIA – By “social impacts” we mean the consequences to human populations of any public or private actions that alter the ways in which people live, work, play, relate to one another, organize to meet their needs and generally cope as members of society. The term also includes cultural impacts involving changes to the norms, values, and beliefs that guide and rationalize their cognition of themselves and their society.
BASIC MODEL FOR SOCIAL IMPACT ASSESSMENT The Link between Environmental Impact Assessment and Social Impact Assessment Impacts on the social environment resemble bio-physical impacts in several ways.
1. Social and biophysical impacts can vary in desirability, ranging from the desirable to the adverse.
2. They also vary in scale-the question of whether a facility will create 50 or 1000 jobs, for example, or will have the potential to spill 50 or 1000 gallons of toxic waste.
3. Another consideration involves the extent of duration of impacts in time and space. Like bio-physical impacts, some social impacts can be of short duration, while others can last a lifetime; and some communities “return to normal” quite quickly once a source of disruption is removed, while other do not.
4. Social impacts can also vary in intensity or severity, a dimension that is defined differently in different project settings, just as an objective biophysical impact (e.g., a predicted loss of 75 sea otters) might have a minor effect on populations in one location (e.g., off the coast of Tamilnadu), while amounting to significant fraction of the remaining population in another location (e.g., off the cost of Mumbai).
5. Similarly, there are differences in the degree to which both type of impacts are likely to be cumulative, at one extreme, or mutually counter-balancing, at the other.
It is important to consider the social equity or distribution of impacts across different populations. Just as the biological sections of EISs devote particular attention to threatened or endangered plant and wildlife species, the socioeconomic sections of EISs must devote particular attention to the impacts on vulnerable segments of the human population.
Examples include the poor, the elderly, adolescents, the unemployed, and women; members of the minority and/or other groups that are racially, ethnically, or culturally distinctive; or occupational, cultural, political, or value-based groups for whom a given community, region, or use of the biophysical environment is particularly important.
A SOCIAL IMPACT ASSESSMENT FRAMEWORK
To predict what the probable impact of development will be, we seek to understand the past behaviour of individuals and communities affected by agency actions, development, or policy changes. We use a comparative SIA method to study the course of events in a community where an environmental change has occurred, and extrapolate from that analysis what is likely to happen in another community where a similar development or policy change is planned. Put another way, if we wish to know the probable effects of a proposed project in location B, one of the best places to start is to assess the effects of a similar project that has already been completed in location A.
STAGES OF PROJECT /POLICY DEVELOPMENTS
The above are the basic social dimensions that can be measured which reflect fundamental and important characteristics of a community. Studied over time, these characteristics give us insight as to how social structure will be altered when change occurs.
Faced with a proposal to implement a new ski area, for example, the community and the agency proposing the change can profit from the experience of other comparable communities that have already undergone a ski area development and thereby gain a reasonably accurate expectation of how the project will affect their community.
Forecasted impacts are the difference in the human environment between the future with the project and a future without the project. Since we cannot see the future, we look at similar communities that have experienced similar policies or projects in the past.
The social impact assessment model is comparative. Our experience has shown the forecasts can be made about probable social impacts. The model also permits a restudy of the impacted community in the future to assess what the actual impact has been, so that the fit between forecasts and outcome can be matched.
SOCIAL RETURN ON INVESTMENT: is a method of monetizing the non-financial Social and Environmental value created by enterprise. It is a principle based method that provides a consistence approach to understanding and managing an organisation’s impact. Since the Social Value created is more likely to be qualitative in nature it may difficult to monetize it.
SROI IS BASED ON SEVEN CORE PRINCIPLES ;
1. Involve stakeholders;
2. Understand what changes;
3. Value things that matter i.e. use Financial Proxies for indicators in order to include the values of those excluded from markets in same terms as used in markets;
4. Only include what is material;
5. Do not over claim; make comparisons of performance and impact using appropriate benchmarks, targets and external standards;
6. Be transparent;
7. Verify the results through appropriate independent verification.
IMPORTANT STEPS IN CALCULATING SROI:
3. LIFE CYCLE IMPACT ASSESSMENT is a technique adopted to assess the environmental impacts associated with all stages of a products life cycle from cradle to grave. The primary aim of this Assessment is to compare the full range of environmental effects assignable to products and services as to improve process, support policy and provide a sound basis for informed decisions.
Life cycle assessment (LCA) is a multi-step procedure for calculating the lifetime environmental impact of a product or service. The complete process of LCA includes goal and scope definition, inventory analysis, impact assessment, and interpretation. The process is naturally iterative as the quality and completeness of information and its plausibility is constantly being tested.
Life Cycle Inventory (LCI) – is the life cycle inventory, which is the data collection portion of LCA. LCI is the straight-forward accounting of everything involved in the “system” of interest. It consists of detailed tracking of all the flows in and out of the product system, including raw resources or materials, energy by type, water, and emissions to air, water and land by specific substance. This kind of analysis can be extremely complex and may involve dozens of individual unit processes in a supply chain (e.g., the extraction of raw resources, various primary and secondary production processes, transportation, etc.) as well as hundreds of tracked substances.
Life Cycle Impact Assessment – is life cycle impact assessment, the “what does it mean” step. In LCIA, the inventory is analysed for environmental impact.
For example, manufacturing a product may consume a known volume of natural gas (this data is part of the inventory); in the LCIA phase, the global warming impact from combustion of that fuel is calculated. There are various methods globally for categorizing and characterizing the life cycle impact of the flows to and from the environment, which can somewhat complicate the comparability of different LCA studies. Other variables in LCIA include the system boundary (how far upstream, downstream and side stream does the analysis go), the functional unit (what is the volume/mass/purpose of the object being assessed), and specific LCIA methods such as allocation (how are impacts assigned to the product and by-products, on what basis). When comparing two LCA studies, these factors are critical to understanding if the comparison is apples-to-apples.
LCI and LCA should not be confused with life cycle costing. Life Cycle Costing is another life cycle approach (i.e, cradle to grave) but it looks at the direct monetary costs involved with a product or service and not environmental impact.
THERE ARE TWO TYPES OF LCAs:
1. THE ATTRIBUTIONAL LCAS– which establish burdens associated with the production and use of product, or with specific service or process at a point of time.
2. THE CONSEQUENTIAL LCAS- seek to identify the environmental consequences of a decision or a proposed change in a system under study ( oriented or future), which means that market and economic implications of a decision may have to be taken into account. It describes how decisions affects the world.
3. SOCIAL LCAS- is under development as a difference approach to life cycle thinking intended to assess social implications or potential impacts.
The Methodologies have been developed for assessing Impact, according to the precise purpose of Assessment, the organisational context, the socio-economic context, available budget and research capacity.
It may include any or all;
i) Quantitative Statistical Approach;
ii) Qualitative Methods; and
iii) Participatory Approaches.
PLEASE NOTE THAT- whatever mix is used for Impact Assessment, consideration should be given to transparency and public accountability, stakeholder involvement, reliability of the information obtained, reliability of inference for policy improvement, cost and skills requirements.
LET’S CONSIDER “IMPACT ASSESSMENT” CONDITIONS IMPOSED BY GOVERNMENT IN CORPORATE SOCIAL RESPONSIBILITY COMPLIANCE BY ELIGIBLE COMPANIES.
Corporate Social Responsibility (CSR) is a mode of self-regulation that is fused into a business model. It is also called corporate conscience, corporate citizenship or responsible business. As a self-regulatory mechanism CSR policy monitors business and ensures that it complies with the ethical standards, norms and spirit of the law. CSR is about business actions that deliver some social good beyond the financial benefits and that is required by law.
” This increases long-term benefits for the company and trust of its shareholders. It imparts high ethical standards in conducting the business and creates positive public relations. CSR strategies positively impact the environment and all its stakeholders like consumers, employees, investors, communities (Source: Wikipedia.org).
Corporate social responsibility is not a one time, ad hoc and stand-alone philanthropic activity. It is a continuous activity and should be closely integrated and aligned to the strategies and business goals of the organization. Social goals of the company should be integrated to the business goals of the company.
Corporate Social Responsibility and Sustainability involves the commitment of a company to all its stakeholders that it conducts a transparent and ethical business in an economically, socially and environmentally sustainable manner. Stakeholders include employees, investors, shareholders, customers, business partners, clients, civil society groups, Government and non-government organizations, local communities, environment and society at large (Source: DPE Guidelines).
NEED FOR IMPACT ASSESSMENT:
impact assessments help funders, grant-makers and companies to understand and evaluate the impact of their social investments in programmes and projects on their target beneficiaries or society. The findings of an assessment also help funders and companies to make evidence-based decisions in implementation and identify hurdles, allowing for programme continuity, scale, sustainability, efficiency, etc.
Social Research plays a vital role in offering the required tools and methodologies to efficiently and effectively implement CSR programs. Social research ensures the best utilization of efforts and capital besides keeping CSR effort on the right track.
The significance of social research is still not rightly understood by the CSR professionals in India. Social Impact Assessment (SIA) is one of the most powerful social research studies.
“Interventions without Impact Assessment are performance without knowing results.” Performance assessment is to be done after needs are assessed and funds and resources are invested to keep track and to ensure progress. Hence, SIA helps in understanding :
1. Whether the programs were designed in line with the needs of the community and organization’s mission/vision.
2. Whether the right mechanism was adopted for implementing the interventions.
3. Whether the goals and objectives decided at the beginning of the programs were achieved.
4. Whether there are any unexpected changes or negative effects in the lives of the target community.
Thus, SIA can play an important role in evaluating the alignment of goals, project planning and implementation ensuring maximum Social Return on Investment (SROI).
IMPACT ASSESSMENT IN CSR
The first systematic attempt is to assess the impact and measure the contribution of CSR to the social, economic and environmental goals of the Country. The main questions addressed through the study are:
- What benefits and impacts does CSR actually bring to the economy and society outside the company?
- How can all stakeholders better measure and evaluate the impacts arising from CSR?
- How this can be used for integrating the public policies with corporate strategy?
SOCIAL IMPACT ASSESSMENT – can be made for the entire CSR initiative of the organization or just a selected project. It is used to appraise the strategies adopted in the implementation of CSR programs, to assess the performance and report the impact and also to recommend any required improvements to align the activities with the goals, mission and vision.
Organizations can outsource the SIA activity to a third party or can be done internally by the organization itself. To bring the desired impact and maximum positive change to the society and the community through CSR, SIA plays a key role. It is not only important but a must for all the organizations to have SIA study done periodically to ensure the best utilization of their funds, resources and efforts.(Source: csrtimes.com)
LET’S CONSIDER REGULATORY CHANGES IN CSR REPORTING AND IMPLEMENTATION
On January 22, 2021, the Ministry of Corporate Affairs amended the earlier CSR Rules of 2014 and notified the Companies (Corporate Social Responsibility Policy) Amendment Rules 2021 to make impact assessment mandatory for companies undertaking CSR activities and CSR expenditure above a specified threshold. The move aims to create accurate parameters in assessing the impact of CSR activities by shifting the focus from expenditure alone to impact assessment, and improve the quality of CSR projects while enhancing accountability and transparency.
According to the January 2021 amendment, impact assessment is mandatory for companies with a CSR budget of INR 10 crore or more in any fiscal year and all projects with outlays of INR 1 crore or more. These impact assessments must be undertaken by an independent agency.
However, it is suggested as best practise that impact assessment be undertaken for all projects as standard procedure Especially long term projects.
Please Note That :
i) companies falling in above criteria must undertake Impact Assessment at least one year after programme implementation is complete.
ii) As per Rule No. 8, if companies have multi-year programmes (say 3 years), impact assessment needs to be conducted after completion of three years of the programme. Additionally, a follow up assessment needs to be conducted one year after the completion of the programme to better understand the programme’s after effects.
However, if programmes are renewed or scaled up after each financial year, they would be treated as individual single year programmes, and separate impact assessments should be taken up every year.
iii) Companies or their CSR initiatives cannot conduct impact assessments (self-assessment) on their own. An independent agency must be engaged for the assessment.
iv) Impact assessment related expenditure may be booked as a CSR expense as long as it does not exceed 5% of the total CSR spending or INR 50,00,000, whichever is less.
v) The limit of expenditure is applicable on the total CSR budget of the financial year.
vi) Under the amended rules, “Administrative overheads” will now mean expenses incurred by the company for ‘general management and administration’ of Corporate Social Responsibility functions in the company but shall not include the expenses directly incurred for the designing, implementation, monitoring, and evaluation of a particular Corporate Social Responsibility project or programme.
Further, a Company undertaking impact assessment may book the expenditure towards Corporate Social Responsibility for that financial year, which shall not exceed five per cent of the total CSR expenditure for that financial year or fifty lakh rupees, whichever is less.
Please Note That Cost for researchers/consulting is neither part of the INR 50 lakh cap, nor the 5% cap on Administration expenditure.
vii) The Impact Assessment should be conducted for those projects, which have completed one year or for on-going projects ( period more than three years).
CONCLUSION: Impact assessment has become a medium through which organisations can communicate to their key stakeholders—their implementation partners, shareholders, and board of directors about the effect of the initiatives shared with the beneficiaries.
In order to conduct an impact assessment that delivers on these key areas, investment to acquire expertise is imperative. It is also important to develop appropriate skill sets across the various partnerships for efficient and effective execution of a CSR project.
Impact assessment helps the board direct the CSR funds towards its optimum utilization, where initiatives that have a maximum impact can be scaled up while programs leading to limited impact can be curtailed. For organisations implementing programmes in partnership with social organisations, it can be a useful exercise of capacity-building, where the two organisations can work closely towards achieving their common goals through the knowledge of outcomes shared by such assessments. The outcomes of these assessments can also be a way of communicating with the wider eco-system of beneficiaries who can learn about the impact and build their own agency towards addressing the community challenges. It becomes a proof-of-concept that organisations can use to build and scale their programs across geographies.
Footnotes:
1. https://thdc.co.in/sites/default/files/EvalutionIITRoorkee2015-16.pdf
2. https://www.intrac.org/wpcms/wp-content/uploads/2017/01/Impact-Assessment.pdf
3. https://www.iaia.org/
4. https://samhita.org/impact-assessment-faqs/
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DISCLAIMER: the above article is only for information and knowledge of readers. The article has been prepared on the basis of available information on various forums at the time of preparation. The author has taken all precautions to put before readers true and right aspects of subject matter. The views expressed in the article are the personal views of the author and same should not be taken as professional advice. In case of necessity, it is recommended to readers to consult with CSR Professionals for more understanding and clarity on subject matter.
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