Corporate Social Responsibility through Outcome-Based Funding: Innovative Pathways for Impact and Scale in Education?

• In Event: Funding and outcome based decisions in education

Proposal

During the last decade, several countries in the global South have witnessed a steady improvement in enrolment rates in K-12 education across gender and socio-economic groups. Despite ensuring increased public funding for school education, the issue of learning poverty raises doubts about the efficacy and effectiveness of traditional financing mechanisms. In addition, there is an urgent need to address the transformative changes technology brings in the economy and society. These changes have huge implications for the purpose and process of education in a digital society. Education systems in the global South need to build accessible digital infrastructure, adopt innovative pedagogical methods, train educators, and deliver outcomes in a time-bound way to keep pace with the technological changes. However, the governments have failed to bridge the funding gap and are looking towards the private sector to augment the funds available to meet SDG4. There is a need to leverage non-state philanthropic money to ensure an equitable and inclusive digital society. Corporate Social Responsibility (CSR) is seen as one of the ways to bring in additional resources and expertise in achieving this goal by enabling innovation, collaboration, and scaling up.

In India, it is mandatory for eligible companies to invest 2% of their average net profit in the previous three years on social development projects (Companies Act 2013). As per the Govt. of India’s database, education has been one of the most attractive sectors for corporations to invest their CSR fund. In terms of the CSR fund distribution in different thematic areas in the social-development sector in 2022-23, the education sector has topped the list. Out of the total CSR funding in the country, more than one-third of the funds supported the education sector. However, there is a recent change in the way corporations are funding education interventions in India. There is growing interest from corporations to adopt outcome-based funding (OBF, henceforth) instead of traditional input-based funding. Corporate governance and accountability measures also need to gauge the efficacy of the CSR funds through their impact. For instance, recently CSR funding was channelized through outcome-based funding in the following ways:

Haryana Early Literacy Development Impact Bond (2019-21): The first-ever Development Impact Bond in India to utilize domestic sources of CSR funding, rather than foreign philanthropic donor funds.

Skill Impact Bond: This Bond, launched in 2021, has CSR partners as the outcome funders. It aims at skilling 50,000 youth including 60% women by 2025.

LiftEd: This Impact Bond has partnered with CSR funders to improve in-school learning outcomes and initiate a systemic change in the education sector. It provides support to the Government of India’s foundational literacy and numeracy program .

Emerging evidence at the global level suggests innovative financing mechanisms, such as the Impact Bonds, have paved the way for experimenting with new funding mechanisms that focus on the outcomes, instead of the inputs. Innovative financing mechanisms allow more flexibility and innovation compared to traditional input-based funding mechanisms (Avelar, Terway, & Dreux Frotté 2020). By pooling more resources from the for-profit and non-for-profit actors, they could enable scaling up the digital infrastructure and create an adaptive learning environment apt for the digital society.

The growing interest towards OBF in the funding mechanisms of CSR not only has implications for the efficiency and effectiveness of the programs but also on the relationship between State, corporations and civil society organizations. The OBF turn of CSR entails a new form of educational governance based on incentives provided based on the targets achieved (Ball 2020). This paper situates the changing nature of CSR in the larger context of the “interstate system, the world economy, and shifts in the locus of political power within the nation-state” (Mundy, 2020). The legal mandate on CSR requires active involvement of the corporations in planning, implementation, monitoring and evaluating of the CSR activities instead of merely donating resources to the education sector. Hence, the Indian CSR could best be conceptualized under the theoretical framework of Public Private Partnerships (PPP). In policy-documents, PPPs are promoted to ensure an effective “partnership” between the government and the private actors where the latter can help the former by infusing funds focusing on outcomes, exchanging expertise, sharing technical know-how and ensuring efficiency. According to Steiner-Khamsi & Draxler (2018), PPPs could provide global solutions to the local problems, in addition to strengthening the governance of education programs. The traditional CSR adopting OBF now falls under “new philanthropy” as the corporations are adopting new ways of funding to support educational interventions and creating impact (Phills, 2008).

Against this backdrop, this paper aims to
i) map the current trend of CSR spending on education through OBF in India
ii) examine the rationale, and impact of outcome-based CSR funding in the Indian education sector
iii) seek to understand the challenges of partnering with innovative financing mechanisms such as the impact bond given the legal bindings on CSR in India

The paper focuses on a few cases of select corporations that played a crucial role in Education Impact Bonds and other innovative financing mechanisms to support educational interventions through outcome-based CSR funding in India. The key stakeholders of the CSR organizations were interviewed through open-ended questions to understand their rationale, perceived contribution, and challenges in adopting innovative ways to fund the education sector in India. The primary data was analyzed using qualitative methods including thematic content analysis. The preliminary findings suggest the corporations see an opportunity to create impact as the OBF enables alignment of all partners and ensures a singular focus on outcomes. Another feature of OBF they appreciated is allowing more flexibility to the service providers compared to the input-driven CSR-funded programs. They revealed how the unique structure of outcome-based CSR was compliant with the legal framework in India. It broadens the scope of future possibilities of many such innovative partnerships to bridge the funding gap to achieve SDG4 and prepare education systems for a digital society. In short, this paper reflects on the changing dynamics of CSR funding and evolving relationships between State, philanthropies, and market in India.

Author

• Emon Nandi, Tata Institute of Social Sciences