CSR and Skill Development: A Win-Win Opportunity for India Inc.

In April 2014, a World Bank Report identified India as the third largest economy in the world after USA and China (in terms of purchasing power parity), with a 6.4 percent contribution to global GDP. And yet, India had nearly 20 crore people under the official poverty line. While liberalisation of the economy in 1991 brought in immense opportunities for Corporate India to succeed enormously, the benefits had not been sufficiently distributed. The lower strata of society was still struggling for the basics of education, health and employment. Given its DNA as a mixed economy, the need for balancing capitalist and socialist priorities is an important objective of India’s growth story. And thus, parties across the political spectrum supported the role of corporations in serving society’s needs through Corporate Social Responsibility (CSR). With Section 135 of the Indian Companies Act 2013, India became the first country in the world to mandate CSR spending and reporting, an opportunity if well-utilised, can catalyse Corporate India’s own growth.

Interestingly, CSR has been defined in the Act as activities not providing any direct commercial benefits to companies. An exhaustive list in Schedule VII of the Act, which has been increasing over the last two years, provides ample scope for undertaking a wide range of activities based on the geographic, demographic and strategic priorities of corporations. In fact, in his very first Independence Day address from the Red Fort, Prime Minister Modi highlighted the opportunity for companies to contribute to cleanliness. The very next day, newspapers carried headlines of Bharti Airtel and TCS committing Rs. 100 crore each over a five year period for constructing toilets in rural schools.

Image: Prime Minister Modi invites companies to partner in Clean India Campaign, Independence Day Speech - August 15, 2014 Image Courtesy: BBC

However, under the new regulation, CSR need not be equated with charity or philanthropy alone. It could be very innovatively envisaged and executed. One such area that provides a win-win opportunity for companies such that it falls within the ambit of Schedule VII, and also provides long-term benefits to companies is skill development and vocational training. It has been termed as ‘employment enhancing vocations skills’ as one of the dozen plus core CSR areas in the Act. Let us see how the government, corporations and industry-level initiatives can contribute to this in a significant manner.

Skill Development: An Urgent Need for India

As per a 2010 United Nations Report on World Population Prospects by 2030, 68 percent of India’s total population (of about 152 crore) would be in the working age group (15-64 years). A survey of the skills gap by the National Skills Development Corporation further indicated that over the next decade, Indian industry needs 24 crore people just to maintain the current growth rate. This means creating 20 lakh new jobs every month, or 2.4 crore job annually. The entire Indian education system produces only about 1.2 crore graduates, and another 43 lakh emerge from the larger education system as ‘skilled people’ every year. Of these, a large number of people are not employable due to poor quality of skill sets or lack of relevant vocational training. To reap its demographic dividend, India needs to focus on this gap through skill development and livelihood creation as its core. Else, the outcomes can be potentially damaging to the social and economic fabric of the country.  

Government of India Initiatives

In 2014 itself, Prime Minister Modi gave priority to this concern by establishing a full-fledged central ministry for Skill Development and Entrepreneurship that would coordinate with other ministries and departments of the Government of India to achieve the mission of skilling India. Through the Skill India Campaign launched in 2015, the Government has a target of skilling 40 crore people by 2022 primarily by fostering private sector initiatives in skill development programmes and providing viability gap funding.

Can Corporations play a role in Skill Development?

Corporations can play a major role in this area by utilising CSR funds in a planned way. I would like to share two innovative initiatives from the construction and IT industries that have been in place long before the CSR regulation came into being.

Construction Skills Training Institute (CSTI)

At the turn of the millennium, India needed three crore skilled workers, a shortage created by the boom in infrastructure after the liberalisation of the economy. Realising this much ahead of the curve, in 1995, Larsen & Toubro set up the Construction Skills Training Institute (CSTI) at Chennai to provide vocational training in the construction field. Over the next 20 years, CSTI expanded to six other locations pan-India and trained over 50,000 technicians, besides 125,000 workmen through tie-ups, 150,000 workmen of sub-contractors, and 200,000 workmen through e-learning modules. The employability of the skilled youth is open to any organisation in the construction industry. Thus, investments made by the company have benefitted the youth by improving their employability, and also the company through availability of skilled manpower, though indirectly.

Image: Larsen & Toubro: Construction Skills Training Institute Image Courtesy: L&T ECC

Mission 10X

In 2007, Azim Premji launched Mission 10X (now a not-for-profit trust under Wipro) to overhaul the teaching and pedagogical methodologies in engineering colleges so that students have greater exposure to practical aspects along with classroom learning. This initiative aimed at making students more deployable. It also provided indirect benefits to IT companies as they could spend lesser time in orientation and training and induct fresh recruits on actual assignments much faster. The Mission 10X Learning Approach (MXLA) used by many universities in India aimed at empowering faculty of engineering and science colleges with new and innovative teaching-learning techniques. By 2015, Mission 10X reached out to 23,000 engineering college faculty members from 1,250 colleges across 25 states. By leveraging technology, its core competence, and collaborating with leading academic and industry bodies, it developed technology platforms and learning kits that would further innovation in this space. In this case also, the initiative benefitted the IT industry as a whole, and the company indirectly.

Image: Wipro Mission 10X Inaugurated at a College in Kerala Image Courtesy: SCMS Group

A similar project was undertaken in 1998 by Microsoft’s ‘Working Connections’ in partnership with the American Association of Community Colleges (AACC). The US$ 50 million five-year initiative achieved results that benefited many communities while having a direct impact on Microsoft and the American IT industry.

Are there examples of Industry-level Initiatives in Skill Development?

While companies have thus contributed in smaller pockets, there is now an opportunity for industry-level and group-level (in case of large business houses) initiatives. An example of an industry-level initiative for skill development is the National Academy of Construction (NAC). Located at Hyderabad, NAC was spearheaded by L&T Construction in collaboration with the Government of Andhra Pradesh and other contracting companies for providing vocational training specific to the construction industry to the youth. It was the first of its kind institution for skill-building through PPP (public-private partnership) mode. The Government of Andhra Pradesh provided land, and the Chief Minister served as the Chairperson of NAC. Its funding was through contractors, who paid 2.5 percent of the bill deducted at source to the Government of Andhra Pradesh (now of Telangana also). In my research of over 100 corporations across multiple industries, there isn’t another example of an industry-specific skill building institution through collaboration among industry peers and government agencies, such that the benefits accrue to the industry and the economy. Such an institution is a win-win for all participants. Starting with one centre and training 150 technicians per year in 1998, NAC has grown to 138 centres across Andhra Pradesh and Telangana with a target of training a lakh technicians every year.

Image: National Academy of Construction, Hyderabad

There could be similar initiatives in the iron and steel industry, where local entrepreneurs can be encouraged in mining and iron-ore processing industries; or the chemicals and agro-based industries where native manpower can be trained for providing products and services, inputs and raw materials at different levels in the value chain, instead of the company establishing a base and employing the people for a wage. In this way, an intentional two-tier industry structure can be built. The need to look for sourcing from other countries could be reduced by internal capacity-building and quality improvement by using local resources and strengthening the manpower base.

In all these cases, the role of companies could be in terms of financial support in the initial period, and subsequently through training and quality development, areas which are currently lacking in smaller towns and villages. Large numbers of urban and rural youth are employable but not deployable. According to a Labour Ministry Report, in 2012-13, one out of every three persons in the age group 15 to 29 years who have completed at least their graduation, was found to be unemployed (due to lack of deployable skill sets). Thus, it is in making them deployable where companies can help in a big way, especially in areas where they hold business expertise. This could lead to a reduction in levels of unemployment, thereby reduction in poverty and assist in breaking the vicious cycle of unemployment-poverty-illiteracy. What would initial be a CSR activity, could eventually lead to mainstreaming of the rural youth with greater economic and social empowerment.

This needs to be the real spirit behind CSR – transformation, not just charity; outcomes, not just output. 

What is the Way Forward?

India transitioned from a philanthropy-based approach to CSR in the last century, to an engagement-based approach in this decade. There is now an opportunity to progress towards an empowerment-based approach to CSR, where beneficiaries are economically empowered to take care of themselves and their families.

As the Indian economy matures, large scale shifts in the working population from agriculture to other sectors of the economy are imminent. These sectors require specialised skill sets. This gap can be bridged through comprehensive efforts at various levels. When such initiatives are implemented on a large scale, India would truly reap the benefits of a rich demographic dividend. Corporate India can play a significant role in making this a success story. The CSR legislation can be seen as an opportunity to positively catalyse this growth story.

Know more about India's leading corporations and their unique approach to business in 'WIN-WIN CORPORATIONS: The Indian Way of Shaping Successful Strategies'.

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Note: This article was first published in the Yes Bank National CFO Forum.