Corporate for Community

Corporate philanthropy is all set to become a practice thanks to recent amendments in   Companies Act. The amended bill has included a unique proviso of mandatory Corporate Social Responsibility (CSR) in companies operation.  It is now by a statute of law that they are supposed to engage with CSR which was till then a voluntary practice. The Govt. might provide further incentives to motivate the companies to work for social betterment. With the inclusion of CSR in companies act, corporate can safely counter balance the political demand of reservation in private sector through their community development initiatives.

The Bill mandates that companies having net worth of Rs.500 crore or more, or turnover of Rs.1,000 crore or more, or a net profit of Rs.5 crore or more in a fiscal will have to spend a minimum of 2% of the average net profit of the past three fiscals on CSR. If companies are unable to meet CSR norms, they will have to give explanations and disclose reasons in their books for the same. Otherwise, they would face action, including penalty. It is left to companies’ discretion to choose the nature of their CSR programs.

Endeavors carried out by companies for the betterment of community and society are termed as Corporate Social Responsibility. It is considered that they are ethically liable to spend a part of their profit for community development. It is not a new concept for India Inc. Many renowned companies like Tata Group, Aptech, Infosys, Mahindra & Mahindra etc are already enthusiastically engaged in CSR activities. They voluntary provide services in the area of healthcare, education, employment, and environment etc under their CSR projects. This trend of engaging in CSR without a motive of profit emerged twenty years back and is highly popular at global stage as well. In 2011 companies like Statoil, Nestle, Edison, Walt Disney Company, Grupo Ferrovial etc have been listed by Fortune Magazine among top 10 companies involved in CSR.

Though a philanthropic intent involved, CSR has become more of a business strategy. Many global companies undertake ethical business actions, such as maintaining environment sustainability, providing labor etc in order to raise their reputation in market. British American Tobacco (BAT), the petroleum giant BP (well known for its high-profile advertising campaigns on environmental aspects of its operations), and McDonald's are believed to undertake CSR programs in order to avoid ethical questions based on their core operations. However this is not the case in India.

The CSR performance of India Inc has been pathetic. They could neither link CSR with business sustainability nor business strategy. A study carried out by ET intelligence group says that while most companies discuss CSR initiatives at great length only a handful have mentioned the amount spent, either in absolute terms or as a percentage of their sales or profit. Thirty eight companies of the Nifty companies mentioned CSR initiatives in their annual reports or exclusive sustainability reports, but there was no information on the amount spent.

Incorporating CSR as a statutory provision in companies bill is a commendable step. It would make corporate more sensitive and proactive towards their social responsibility. Companies must come forward to complement Govt. efforts for social development. CSR is an ideal measure for complementing government efforts of social development and a win-win preposition for both i.e. companies and society.