CSR - Corporate Social Responsibility or Confused State of Redistribution???

The last few decades have made it clearly evident that economic development can no longer be viewed in isolation from environmental protection and social progress. The nature of issues confronting us along with an increasing interdependence among nations necessitates that countries act collectively, in the spirit of multilateralism to chart a sustainable course of development. As a large complex democracy, committed to enhancing the quality of life of its people, and actively involved with the international coalition for sustainable development, the path that India has taken will be of interest to those who believe that a better world is not just essential, but possible. (http://moef.nic.in/downloads/public-information/Sust_Dev_Stocktaking.pdf)

The framework of sustainability is generally talked about in global political forums and remains a topic of global debate. But over the years, it has now been accepted that Sustainability is the responsibility of one and all. Consequentially, the need to integrate sustainability into business practices has now become widely recognized. Many Indian businesses have realized the importance of sustainability and there is much appreciation that sustainability offers returns on multiple levels: be it an opportunity to better understand the businesses’ underlying risks, or an opportunity to develop innovative solution and reach new markets.

India is experiencing an all time high on CSR now. Government of India has shown a rather proactive interest in framing CSR guidelines. Suddenly we have lost the view of which Ministry is exactly responsible for the domain of Corporate Social Responsibility! With Ministry of Corporate Affairs coming out with the National Voluntary Guidelines on Social, Environmental and Economic Responsibility of Businesses in 2011, it was apparent that the government was thinking seriously about CSR and sustainability reporting. Now the Ministry is also revising these guidelines to remove any discrepancies and clarifying certain clauses within it. The Ministry of Environment and Forests also came out with guidelines of Corporate Environmental Responsibilities for businesses and institutionalized these as part of the Terms of Reference for all clearance projects in 2012. The biggest uproar was created when the Companies Bill 2012 carried a clause that made CSR mandatory for all registered companies. After the passing of the Companies Bill 2012, it has become mandatory for corporates to adopt Corporate Social Responsibility (CSR). What was once voluntary has now become a law. The new legislation makes it mandatory for companies to spend every year at least 2 per cent of their average net profits made during the three immediately preceding financial years on corporate social responsibility (CSR) projects. The Department of Public Enterprises under the Ministry of Heavy Industries and Public Enterprises has also come out with Guidelines on Corporate Social Responsibility and Sustainability for Central Public Sector Enterprises that have come into effect from 1st April 2013.

With so many guidelines to conform to, the entire framework of CSR has become rather confusing. Now companies are finding ways to include their existing activities into the CSR realm. For instance, a company already doing some work on water management and recycling for the long term benefit of the aquifer and for sustainability of water supply for the company, might like to include the activity under CSR and use the 2% part for their already existing work. Now this will not help them to increase their contribution towards CSR, rather it will make their approach skewed. Now their energies will go in deciding how to best wiggle their existing work under the CSR provision. To an extent, this seems right too, as there are corporate giants that are spending much beyond the 2% of profit portion for sustainability/CSR activities. But for the companies who haven’t yet started on CSR will look at this as an obligation, and not as a long term responsibility.

An interesting insight here: as the regulatory landscape for CSR within India is evolving, we can see a similar evolution of sustainability reporting trends amongst the corporate too. Around 80 Indian companies have reported their sustainability initiatives according to GRI guidelines in 2012, as against 42 companies in 2010. This trend demonstrates the rising commitment of Indian Corporates towards sustainability.

Therefore, yes, we do have a strong base to say that we are ready for CSR. We have the requisite regulatory support, we have the corporate commitment towards it, we have the capabilities and we know how to generate finances for it. What we are still working on is clearing the confusion surrounding all this. Let the various Ministries take a coordinated approach towards CSR in general and give the country one single framework to answer all their queries. Let the government give them a clear guidance of what can and cannot be constituted as CSR. The least we would want is Corporate Social Responsibility to turn into a Confused State of Redistribution of the CSR money in the existing profit-making activities for companies.