Effective CSR needs change in mindset

Social responsibility is not a new concept in India. Wealthy merchants shared a part of their wealth with the poor in the pre-industrialisation era. Prodded by Mahatma Gandhi’s notion of ‘trusteeship’, they set up charitable trusts for the benefit of the common man during the Independence movement. Post-Independence, the government encouraged charitable trusts by giving them some tax benefits. However, it was only in April 2014 that India made corporate social responsibility (CSR) mandatory for companies operating in the country through an amendment of the Indian Companies Act. Those with a net worth of Rs 500 crore or revenue of Rs 1,000 crore or a net profit of Rs 5 crore were asked to spend a minimum 2% of their average profit over last three years for social good. The guiding idea was that the companies should not limit themselves to engage in activities that increase only their profits, but use CSR to integrate economic, environmental and social objectives with their operations.

Three years on, the results testify to the success of the CSR law. The total spending by the companies under this head has been growing. As Union Minister for Corporate Affairs Arjun Ram Meghwal told Parliament in its just-concluded session, an assessment of CSR expenditure of 172 companies shows that they spent Rs 3,360 crore in 2015-16 against the mandated Rs 2,660 crore. This means that many companies have started going beyond the legislative mandate. There are many large companies like Infosys, Wipro and Tata Steel which have their own well-established foundations through which their CSR funds are spent. However, a vast majority of companies lack both experience and expertise to plan activities that come under the CSR and tie up with one or more non-profit organisations.

Three years after the CSR law, it is now time to review its impact and think of ways to improve it. Corporate social responsibility should not remain confined to mere compliance with the law. It is a commitment to support initiatives that measurably improve the lives of the underprivileged, and both the government and the corporate leaders must realise this. A new generation of Indian business leaders has emerged to change the perception that business is antithetical to societal needs. This change must be deepened through interactions between the government and industry leaders. The mandatory spending on CSR should not be reduced to another piece of legislation. It should lead to a change in the mindset of the corporate world that looks up to CSR as an opportunity for growth. The CSR law must be transformed into an instrument of social and economic change.

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