CSR in a corporate can rally for better research in academic institutions

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The role of academia in society has been evolving to create a better linkage in solving societal problems.  The United States, United Kingdom and Europe have created an ecosystem that links government, industry and the older technology institutions. This ecosystem helps take technology solutions to the market place to solve problems of the industry and those faced by society in general.

In India our academic institutions have the primary purpose of teaching and do research as a secondary activity. The government of India supports much of the basic research work. Taking research output to the market place is encouraged by government agencies like Technology Development Board (TDB) and National Science and Technology Entrepreneurship Development Board (NSTEDB) among others. With the introduction of the new Companies Act 2013, Indian industry through the mandated Corporate Social Responsibility (CSR) funding can play a very important role in bringing new and innovative technologies to address quality of life issues across the nation.

In the new Companies Act 2013, Section 135 has a provision for compulsory expenditure on Corporate Social Responsibility (CSR).  Activities that is eligible to be considered as CSR is listed in Schedule VII of the Act. Companies fulfilling any one of the criteria below must spend 2% of their profits averaged over the 3 previous financial years in the current year;i) Turnover of Rs 1000 crore or more, ii) Net worth of Rs. 500 crore or more, Iii) Profit after tax of Rs 5 crore or more.

There are three distinct ways for academia to interact with industry and benefit from their CSR funds. In the activities listed in Schedule VII of the Companies Act, 2013, there is aline item that reads as follows: “contributions or funds provided to technology incubators located within academic institutions which are approved by the Central Government”. Creation of Technology Business Incubators is supported initially by NSTEDB, subsequently the expectation is that Industry through their CSR funding can support established incubators. This is the first way that CSR funds can be used by academia.

In General Circular No: 21/2014 dated 18th June, 2014 the Ministry of Corporate Affairs offered many clarifications on what can be supported under CSR.  For academia the clarification is important as it allows for research on items under Schedule VII of the Companies Act 2013 as eligible CSR expenditure.  Depending on the legal status of the academic institutions the industry could benefit with certain tax exemptions. For instance the Indian Institutes of Technology (the older ones) can receive CSR funds and can also offer the tax exemptions  under 80G 2 (a) (iiif) of 100%, Sections 35 I (ii) of 175% and Section 35 2AA of 200% as per  Income Tax Act . Academic Institutions can utilise CSR funding to take their research outputs to the field.

As an example the Indian Institute of Technology, Madras (IITM) is committed to a mission of developing strong and sustainable partnerships with academia, industry and entrepreneurs. There is socially relevant and innovative Research and Development (R&D) underway at IITM in the areas of water purification, sanitation (household and larger scale), rural electrification using solar/DC supply, new generation DC motors, indoor air purification, various low-cost, high-tech health technologies, cost-effective housing, new pedagogies and many more at various stages of development and implementation. IITM has solicited support from the CSR funds of Industry and have had funding for their incubators and socially relevant projects. This the second way academia can benefit from CSR funds.

Academia have a third method of interaction that involves designing a CSR programme with a company based on its CSR policy.  This is another way that Intellectual capability and expertise within academia can be utilized to serve society working closely with industry combining their expertise and areas of interest to address civic issues in line with Schedule VII of the Companies Act, 2013

The CSR rules permit companies to pool their funds to implement projects.  This allows several corporate houses to support very large projects proposed by academia. There is another provision in CSR expenditure that is beneficial to the companies working withacademis. The CSR guidelines state that the mode of engagement with an implementing agency should be as projects/programmes with a longer duration. This is useful as business houses need not hunt for new projects every year to spend their CSR funds on.

CSR funds can be used to get academic research to reach out and solve a critical social issue.  This funding can bring us on par with ecosystems of the developed world.