Corporate Social Responsibility Funds Can be an Effective Tool for Solar Expansion
Initiatives undertaken by companies under CSR have increased
Economic growth has pulled millions of people out of poverty around the world but has also resulted in severe pollution especially in emerging markets like India and China with harmful emissions rising meteorically across the globe over the past decade.
On October 2, 2016, India became the 62nd country to ratify the Paris Agreement. The agreement requires every ratifying member country to come up with a national plan to curb carbon emissions and rising temperatures. India has set a goal of generating 40% of its electricity from renewable energy sources as part of its plan.
As the country gears up to become a leader in renewable energy, access to financing is still one of the biggest challenges.
The concept of Corporate Social Responsibility (CSR), which was introduced through the Companies Act 2013, puts the onus on companies to formulate policies which will help uplift the community.
Per the Companies Act, companies with a net worth of ₹5 billion (~$70.5 million) or more, or a turnover of at least ₹10 billion (~$141 million), or a net profit of a minimum ₹50 million (~$705,000), have to spend 2% of their average three-year annual net profit towards CSR activities in a given financial year.
Even though the policy has been in place for years, compliance has been an issue, and the government is trying to enforce the CSR compliance aggressively.
Why aren’t corporations investing in solar and wind which not only reduce pollution but also help generate energy?
Dr. Anuvrat Joshi, India business development director at Cleantech Solar, said, “Top corporates in India and across the world have made very substantial commitments to include renewable energy in their power mix, and they are delivering on this commitment. This trend has steadily picked up steam over the past five years, and the results are already quite evident across our customer base.”
Joshi added that in many instances, in addition to meeting the CSR objectives of the customer, the decision is economically appealing too.
Tapping into the concept of ‘right to clean energy,’ many companies have started to diversify their CSR funds into solar energy, as it’s not only socially responsible but also fetches good returns in the long run. For example, Tata Steel has installed a 3 MW solar project at Noamudi in Jharkhand.
“Today, solar is one of the cheapest forms of power, especially in India. Many corporations are finding it quite easy to replace 30-50% of their power needs with solar power through on-site and off-site solutions, plus, they are achieving a substantial reduction in their power costs in doing so,” Joshi added.
According to him, such a substantial change requires a strong commitment from the management and all the stakeholders since it involves a lot of hard work to change the status quo – but the best organizations have developed the right internal environment for such change and are well on their way.
Regulatory and other challenges remain, but energy providers such as Cleantech Solar and corporate customers have worked together closely to overcome these and continue to build on the initial success of the past five years. Our portfolio that has grown by multiples in the past five years to a few hundred megawatts today is evidence enough of the success to date, but we feel this is merely a start – a lot more is possible, and it is happening as we speak,” he said.
Headquartered in Singapore, Cleantech Solar is a developer that finances, constructs, owns, and operates solar photovoltaic projects.
A Bangalore-based company, Sasken Technologies Limited uses renewable energy such as wind power and rooftop solar panels within the complex of the office, thus reducing nearly 220 tons of carbon dioxide per month, commented Sunil Dath, head of facilities and IT at Sasken.
According to Dath, as part of the CSR compliance, Sasken has powered up the entire village of Belagavadi (75 km from Bengaluru) in rural Karnataka with inverter-less solar DC technology pioneered by IIT-Madras covering about 250 houses and making it the first village in Karnataka to be powered by solar DC technology.
Hindustan Aeronautics Limited (HAL) has provided solar streetlights and solar water heaters in select villages of south India. As its CSR project, the organization provided 4 kW of solar power systems with battery backup in over 50 government schools in Gubbi Taluk in Karnataka. The company has committed to install 50 MW of renewable energy power projects to reduce its carbon footprint and has already installed wind and solar power projects of nearly 46 MW capacity.
Are solar companies tapping into corporate CSR?
According to Mahathi Parashuram, regional head of public affairs, communications and engagement, Grundfos Asia Pacific Region, “CSR compliance and the global focus on UN’s Sustainability Development Goals are definitely pushing corporates to focus on sustainability more. This has resulted in corporates focusing on solar, water, climate mitigation, and other areas when it comes to their CSR initiatives.”
As the company’s CSR goals target conservation of water and energy, Grundfos has donated solar pump solutions to rural villages to curb the water crisis and solve the problem of intermittent electricity.
Recognizing the importance of renewable energy, Grundfos claims that the company is one of the first to offer an off-grid water pumping system. “Through these solutions, we also keep the lifecycle costs low for solar water supply,” he told Mercom.
Meanwhile, there are solar companies which believe that companies focus more on the technological aspects and price when discussing collaboration for rooftop projects through CSR funds.
Data shows that CSR’s presence in clean energy has been negligible so far.
According to ‘Energising Development-CSR in Clean Energy-What are India’s top companies up to,’ research conducted by Samhita, of the 100 companies, only 39 had programs in clean energy. The Mumbai-based social enterprise that collaborates with companies to develop CSR initiatives, in its research revealed that over 50% of the top 100 companies have CSR programs in other social activities like education, sanitation, livelihoods or skills but only industries which are into power, oil, and gas, are likely to support clean energy projects such as solar, wind and hydro.
“Access to energy interventions were sometimes perceived to be highly technical in nature. This could discourage CSR teams in companies that may not have the required capacities and capabilities. While decisions on CSR projects within health, education, skills, and others were helmed by CSR teams, clean energy cuts across CSR, sustainability and even business portfolios, leading to fragmented decision making and greater lead times. Companies found it difficult to source qualified and technically competent implementation partners in geographic areas of interest,” states the report.
According to the National CSR data portal, a wing of the Ministry of Corporate Affairs, Government of India (GOI), IT giant, Infosys, for example, spent ₹664.8 million (~$9.36 million) on solar projects in Karnataka and ₹71.7 million (~$1.01 million) in Telangana during the financial year 2017-18. However, this is more of an exception than the rule, and it was hard to find similar CSR investments in solar.
So why aren’t other large corporations investing in solar and where are these funds going?
According to the National CSR, most of the CSR funds have been invested in Education and Healthcare, among other areas.
Under the environment, animal welfare, conservation of resources a total amount of ₹10.06 billion (~$142.23 million) was spent in 2017-18 (FY), out of which ₹75 million (~$1.06 million) was spent in agro-forestry, ₹165.4 million (~$2.34 million) was allocated for animal welfare, ₹1.45 billion (~$20.5 million) was spent on conservation of natural resources and ₹8.37 billion (~$118.34 million) was spent on environmental sustainability. The amount spent on solar and wind was negligible with the funds under environmental sustainability going to vague and diverse areas like – Global Himalayan Expedition, Biomass cookstove project, Watershed development, ecological balance, Agroforestry, among others.
On condition of anonymity, an official from the Ministry of Corporate Affairs said, “CSR policy relates to the activities to be undertaken by the company as specified in Schedule VII to the Act. So, as per the policy, it is the board of directors who decide on which activities will benefit from the CSR funds of their companies. The ministry doesn’t instruct the company on which project or where to spend the money.”
For India to reach the target of adding 175 GW of renewable capacity by 2022, and the long-term Paris Agreement goals, it needs to adopt an ‘all of the above’ strategy and also tap into CSR funds toward building a robust clean energy ecosystem and reduce environmental damage.
“Solar and wind development seem intimidating to many businesses who do not have the energy background. There are plenty of opportunities for solar and wind firms to educate and communicate the benefits and ease of installing renewable energy to companies who have the CSR funds to spend while helping protect the environment,” said Raj Prabhu, CEO of Mercom Capital Group.
Image credit: Sasken technologies
Anjana is a news editor at Mercom India. Before joining Mercom, she held roles of senior editor, district correspondent, and sub-editor for The Times of India, Biospectrum and The Sunday Guardian. Before that, she worked at the Deccan Herald and the Asianlite as chief sub-editor and news editor. She has also contributed to The Quint, Hindustan Times, The New Indian Express, Reader’s Digest (UK edition), IndiaSe (Singapore-based magazine) and Asiaville. Anjana holds a Master’s degree in Geography from North Bengal University, and a diploma in mass communication and journalism from Guru Ghasidas University, Bhopal.