Corporate Social Responsibility has indeed been an integral part of the Indian business environment for years now, governed more by traditional and cultural values rather than by rules and regulations. Traders and merchants reportedly helped commoners tide over difficult times, by offering cash and kind to people in need. Established family-owned businesses run by Tata, Birla, Godrej, Bajaj and several others carefully balanced their economic agenda with the social development initiatives and still continue to serve as notable examples.
However, CSR in earlier times was focused on philanthropy and donations to causes that deserved support – notably in a proactive manner. Trusts funded by large businesses supported socio-economic development during the time of independence. Post-independence, the onus of fair distribution of wealth and resources was on the Public Sector, which failed to scale up to requirements, shifting the responsibility back to Private players. Both industrialization and the subsequent globalization created a boost in business prospects and economic prosperity enabling private sector firms to integrate CSR initiatives into their business practices and prospects, thus garnering goodwill and reputation.
CSR – Post-2013
Amendments to the Indian Company Act in 2013, among other things, made it mandatory for large companies satisfying specific criteria to spend 2% of their profits towards CSR activities in india , the scope of which to have been spelled out. It is, however, worth noting that there are no punitive actions for non-compliance.
Companies that were always into social development, ethical and eco-friendly business practices continue to do their bit, probably getting better visibility due to the newly-found significance of CSR.
Statistics from NGOBOX analysis of CSR reports in 2017 indicate higher CSR spends on education, healthcare, environment and other sectors. It has also been observed that several companies have been unable to make the mandated contribution just because they lack clarity on CSR regulations, or their partner firms did not have the capacity to handle the planned projects. Of the 100 companies considered for the analysis, 36% could not meet mandated requirements, while over 33% of them spent more than 2% on CSR initiatives.
While the increase in CSR contribution is encouraging, there is a widespread opinion that forced CSR is more likely to result in contributions made simply to comply with the regulation. Pressurized to meet CSR obligations companies may team up with just about any company involved in social development projects. Given the fact that the country has a multitude of mushrooming NGOs who are in need of funds, complying with spending requirements may not be difficult, but it may hardly reach the intended cause.
In present times, CSR fund managers must pay more attention towards CSR monitoring & evaluation, and intervene in a timely manner to make sure that things go as planned. Partnering with the right CSR Company and a suitable implementation partner, familiar with the local terrain and its challenges can help align social development with organizational objectives in a successful manner.
Yet another distant possibility is that companies that have been promoting social welfare, eco-friendly ventures proactively may now be tempted to limit their spending, now that the CSR is capped at 2%.
With CSR rules open to interpretations and no punitive action in place, companies are free to support any permitted CSR activity. Though even the smallest of CSR ventures that attempt to serve society and environment are welcome, the needs of the hour are to invest in the right cause, thorough due diligence in selecting an implementation partner, and active CSR monitoring & evaluation. Sustainable and ethical practices driven by moral obligations though can prove more rewarding.