Primacy of social intent

Primacy means first place. Primacy of social intent means that creating social impact is the organisation's first and primary objective — not a side activity, a CSR gesture or a marketing line.

Chapter 1 describes what social intent looks like. The organisation serves a social good, has a social mission, creates social value through social change, builds social capital and has a social bottom line. Making profits and distributing them among board, staff or stakeholders is not its intention. Extra resources go back into the stated objectives.

For the Social Stock Exchange, SEBI turned that idea into a test. Regulation 292E of the ICDR Regulations says that to be identified as a social enterprise, an NPO or FPSE shall establish primacy of social intent by meeting specific eligibility criteria. Fail the test and the organisation is not a social enterprise for SSE purposes — it cannot register, and it cannot list.

The criteria under Regulation 292E, as set out in Chapter 1 and restated in Chapter 3:

(a) At least one eligible activity from a list of 18. These include eradicating hunger, poverty, malnutrition and inequality; promoting healthcare including mental healthcare, sanitation and safe drinking water; promoting education, employability and livelihoods; promoting gender equality, empowerment of women and LGBTQIA+ communities; environmental sustainability and climate change; protecting national heritage, art and culture; and training for rural, national, Paralympic and Olympic sports. They also include supporting incubators of social enterprises; supporting platforms that strengthen the non-profit ecosystem; livelihoods for rural and urban poor; slum development and affordable housing; disaster management; financial inclusion; access to land and property for disadvantaged communities; bridging the digital divide; the welfare of migrants and displaced persons; Schedule VII activities of the Companies Act, 2013; and any other area SEBI or the Government identifies.

(b) Target population. The enterprise must target underserved or less privileged population segments, or regions recording lower performance in the development priorities of central or state governments. Chapter 3 gives examples: SC, ST and OBC communities, people with special needs, the elderly, children, at-risk adolescents, migrants and displaced persons.

(c) Predominance — FPSE only. At least 67% of activities must qualify, measured on a 3-year average of revenue, expenditure or customer base.

(d) Exclusions. Corporate foundations, political or religious organisations or activities, professional or trade associations, and infrastructure and housing companies except affordable housing.

Chapter 3 adds that the social enterprise may deliver products, services or programmes, or work on research, policy analysis, awareness building, governance or capacity building.

Who checks it later. Chapter 5 tells the Social Impact Assessor to conduct a preliminary entity review to establish the primacy of social intent, and lists assessing "the demonstration of the social intent of the organisation" in the assessor's scope of work.

Illustrative organisations.

The Mandir Trust case is the one candidates miss. A religious organisation running a school does an eligible activity. It is still excluded at step (d), and the exclusion is decisive.

Chapter 1 (1.3 and 1.4.1) introduces primacy of social intent and the Regulation 292E criteria. Chapter 3 (3.1.1) restates them as SSE eligibility requirements, and Chapter 5 makes establishing it part of the assessor's preliminary review. Chapter 1's sample questions include a fill-in on what a social enterprise must establish. Chapter 3's first sample question asks which conditions a social enterprise must fulfil — both primacy of social intent and a focus on underserved populations.

• Primacy is required of NPOs and FPSEs alike. Only the 67% predominance limb is FPSE-only.
• An eligible activity alone is not enough. The target population must also be underserved or lagging, and the organisation must not fall in an excluded category.
• Exclusions trump activities. A corporate foundation doing excellent eligible work is still excluded.
• Primacy of social intent vs predominance. Primacy is the whole test; predominance is its 67% limb for FPSEs.
• Workbook slip. Chapter 3 (3.1.1(a)) says primacy is established "as per the 17 Social Development Goals (SDG)". The SDGs are the Sustainable Development Goals, and Regulation 292E lists 18 eligible activities, not 17.
• The housing exclusion is worded two ways. Chapter 1 excludes "infrastructure and housing companies"; Chapter 3 excludes "infrastructure and housing finance Companies". Both keep the affordable housing exception.