Visualize an informal discussion among employees about how to donate a small amount to charity, or imagine a formal process of deliberation through which a corporate entity decides how to donate money to a particular cause.
Likewise, think of a team of accountants from a medium-sized company helping a small NGO reboot its administrative and billing systems.
These are examples of the different ways corporations can step up beyond their primary goal of pursuing profit.
Now that the federal government in Nepal wants to drastically change—and, in my view, worsen—the way corporations support social causes, it is important to pause and reflect.
We can start this exercise by asking a few questions.
What are the best ways to harness the power of the private sector for the common good?
What are the elements that can turbocharge companies’ contributions to the wider society?
These are important questions that policymakers, businesses and citizens alike should ask themselves.
On the one hand, we need a balanced mix of policies centered on a tax regime that rewards corporations for productivity and quality, together with an efficient public administration that does not stifle but rather simplifies and incentivizes private operators to bring to the market products and services that meet people’s needs and desires.
But, on the other hand, private companies can also play a different role, facilitating not only economic growth but also contributing to the common good in other ways.
Corporate citizenship, often also referred to as corporate social responsibility (CSR), is a powerful tool at the disposal of a society that wants to maximize the contributions of commercial, non-state actors beyond their traditional “bottom line.”
Normally, when we talk about corporate citizenship, we limit our imagination to the financial resources that private entities inject into projects and initiatives that can directly benefit society or the planet.
Freedom of press means freedom in country: NC General Secretary...
Funding can be directed to nonprofit organizations and local clubs, even at a relatively informal level, or it can be used to support the state, including local governments.
But limiting corporate citizenship to financial support means missing the bigger picture of the power that corporate engagement can have in society.
After all, a corporate grant can have a direct impact on local communities or ecosystems, but the overarching idea behind corporations putting their efforts and energy beyond their ultimate goal of pursuing profits is much larger.
It is about private actors contributing to and supporting some of the biggest challenges facing society by embracing goals that align with their corporate vision and mission.
And do you know one of the best ways of unleashing the power of corporations in society?
It is by engaging their own employees in the process.
There are many ways of involving employees, starting with giving them a say and a decision-making role in how their company can support a cause.
Should a company provide a grant for a particular cause that is aligned with its corporate identity, or should the focus of the grant be broader, more open and perhaps more flexible to meet important requests from civil society actors that rarely receive funding?
Employees can have a say in these decisions through informal internal discussions or in a more structured manner, depending also on the size and working modality of their employer.
Some corporate organizations go as far as establishing a formal foundation, but a simpler, leaner approach can make absolute sense as well. It may even be preferable, especially when registering and maintaining a nonprofit entity, even if affiliated with a company, becomes increasingly complex.
But there are other ways for employees to take ownership of how corporate citizenship is practiced within their companies.
One of them is enabling employees to work pro bono—essentially volunteering their time and skills to support a particular organization.
This is an area that can generate a high level of personal engagement among employees, who can put their knowledge and expertise at the disposal of third parties in the nonprofit sector.
An HR manager, for example, can share her knowledge with a small NGO on the best and most practical ways of identifying and rewarding talent.
A marketing manager, meanwhile, can help a nonprofit counterpart find ways to increase its visibility.
From the perspective of an NGO, the benefits of this approach might not have an immediate impact, as would be the case with a grant. In the longer term, however, a nonprofit organization can build new skills among its employees while benefiting from pro bono advisory and consulting services.
Corporate volunteering, a catch-all term used to describe these practices, is a way to build strong and mutually beneficial partnerships. An employee can derive a high level of personal satisfaction and gratification from building a professional rapport with a world that places a premium on professionalism but is not aimed at maximizing profits.
Clarifying the diversity of ways in which corporate citizenship can be practiced is paramount now that the new federal government wants to introduce significant changes aimed at centralizing corporate citizenship contributions in one national fund.
Currently, regulations mandate contributions only from certain companies and financial institutions.
As reported in a major daily newspaper, “Nepal's CSR framework has evolved over the past decade. Section 54 of the Industrial Enterprises Act 2020 requires medium and large industries, as well as cottage and small industries with annual turnover exceeding Rs150 million, to allocate at least one percent of their annual net profit to CSR activities.”
The report also noted that these funds, which are deductible for income tax purposes, must be covered by annual plans, and reports must be submitted to the relevant authorities within six months after the end of each fiscal year.
The same article also explained that “Nepal Rastra Bank has also tightened CSR governance for banks and financial institutions through revised guidelines requiring CSR spending to be transparent, effective and targeted. The central bank directs financial institutions to prioritisecommunities living in extreme poverty and requires at least 60 percent of annual CSR allocations to be spent within the same fiscal year.”
The proposal to create a centralized fund does not make sense in many ways.
First, past experiences with centralizing corporate resources, such as in the aftermath of the devastating earthquake in 2015, do not offer much encouragement.
To this day, there is no clarity on what happened to that money. Apparently, these funds have either not been spent or, if they have been used, there is a total lack of information about how they were utilized.
But this is not the main concern with the proposal to create a centralized CSR fund.
It would deprive corporations of their agency and freedom to choose how, where and when to donate their hard-earned resources, cutting out not only their owners and executives from decision-making but also their employees.
Better ways can be found.
To start with, why not undertake the very basic action of consulting the Federation of Nepalese Chambers of Commerce and Industry (FNCCI), the Nepal Chamber of Commerce and other umbrella organizations representing the corporate sector on ways to improve the effectiveness of corporate citizenship?
Why not create incentives to identify and promote best practices in corporate citizenship?
Why not assign third parties the task of preparing an annual ranking based on commonly defined parameters and indicators that could create a bit of healthy competition in this area?
Another idea would be to create a National Corporate Citizenship Award in different categories, including one that could attract corporate players not yet covered by the existing regulations.
In the past, the National Business Initiative (NBI), a brainchild of Padma Jyoti, a business personality who has consistently demonstrated a commitment to social causes, has done very positive work in supporting the creation of an ecosystem that can foster innovation and effectiveness in harnessing the power of the private sector for the common good.
Strong codes of conduct and even certification programs could also be developed to strengthen the responsibility of the private sector.
In this particular case, enabling and supporting corporate actors through a light regulatory framework centered on accountability and commitment would be much better than centralization. Centralization, in other words, amounts to depriving the private sector of an important avenue—voluntary in nature and driven by freedom—to contribute to the greater good.
