India: The Only Country With Legislated Corporate Social Responsibility

Written by on April 16, 2014 in charity, CSR, Measure Impact, Microfinance - No comments

Emblem_of_India.svgCorporate Social Responsibility (CSR) is seen as a smart way to conduct business, making corporate entities into socially responsible citizens, visibly contributing to the social good. Socially responsible companies do not limit themselves to using their resources to engage in activities that increase only profits. They use CSR to integrate economic, environmental and social objectives into the company’s operations and growth. The concept of CSR has evolved over the years, especially in India—now the only country with legislated CSR!

With this new Companies Bill in India, it will hopefully motivate organisations to undertake CSR proactively. Organisations realise that the government here cannot alone uplift society and needs help from businesses. Under this Act, most firms with sizeable business are required to shell out at least two per cent of their three year annual average net profit towards CSR works. According to industry estimates, around 8,000 companies will fall into the remit of the CSR provisions; this would translate into an estimated CSR spend of $1.95 billion to $2.44 billion. Plus, with higher economic growth and increase in company’s profits, this mandatory spending will go up. While many big companies have been actively engaged in CSR activities, the number is low, and this new law will lead to a significant increase in the numbers.

Moreover, the Indian government has made it clear whether promoting healthcare can be considered as a social welfare spending activity by companies. And CSR activities would have to be within India. Livelihood enhancement and rural development projects, working towards protection of national heritage, art and culture, including restoration of buildings and sites of historical importance and works of art, setting up public libraries, promotion and development of traditional arts and handicrafts—all come under CSR.

Various activities aimed at reducing inequalities faced by socially and economically backward groups have been included. Measures for the benefit of armed forces veterans, war widows and their dependents, setting up homes and hostels for women and orphans, setting up of old age homes, day care centres and such other facilities for senior citizens would be considered as CSR work. Other CSR activities include ensuring ecological balance, protection of flora and fauna, animal welfare, agro-forestry, conservation of natural resources and maintaining quality of soil, air and water.

By providing more clarity on standardising the meaning of CSR in the Indian context and providing a favourable policy environment, the initiatives can be strengthened. These definitive steps undertaken by the Indian government imply that if companies employ CSR strategically, it can lead to achieving more sustainable businesses. By creating a pool of resources, whether financial or technical, a win-win situation is within reach of all the stakeholders involved. The mandatory reporting standards introduced in this Companies Bill will strengthen and create uniformity, accountability of actions and will measure the impact of these activities.

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