New CSR Guidelines for Public Sector Firms Shift Focus to Ethics


NEW DELHI: New corporate social responsibility (CSR) guidelines for public sector companies emphasize on ethics and sustainability rather than on financing external projects, according to a draft paper posted on the department of public enterprises’ (DPE) website.

The department will on Monday issue final revised guidelines that will be applicable from the next fiscal year, a DPE official said, declining to be identified.

“The earlier guidelines focused mainly on corporate social responsibility (CSR) activities for external stakeholders—how social causes and environmental concerns could be addressed through CSR projects funded by an earmarked budget for this purpose,” says the draft revised CSR guidelines posted for consultation on the DPE website. “Whereas, under the revised guidelines, a company’s corporate social responsibility is expected to cover even its routine business operations and activities.”

“Reducing the carbon footprint in business processes and bringing in ethics and transparency in business, say with public disclosure of information, will also be included under CSR,” the official mentioned above said.

The draft paper, dated 13 December, was published in consultation with the heads of public sector firms but some industry experts are sceptical of what it can achieve. “It is welcome that the guidelines broaden the definition of CSR, but they may end up confusing the message,” said Seema Arora, executive director at industry lobby Confederation of Indian Industry’s CII-ITC Centre of Excellence for Sustainable Development.

“The objective, which I think is sustainable development, should be made clear,” Arora said. “While good companies will do good in any case, if the impact from these activities is not included in assessment, it can become a tick-box exercise.”
For example, the 25% cap on employees as beneficiaries of infrastructure created under CSR may not be maintainable but that should not matter as long as the infrastructure creates a larger positive impact, she said.

While the old model prohibited expenditure on a public sector company’s own employees under CSR, the new guidelines allow expenditure incurred on infrastructure that directly benefits employees to be counted towards CSR as long as the staff are incidental gainers and form less than one-fourth of the beneficiaries.

“Own employees are important stakeholders and this idea should germinate in rules for CSR for private companies when they come about,” Arora said.

While all public sector firms were required to submit 10 projects (five each under CSR and sustainability heads), under the 2010 guidelines, they will now be required to submit for approval two projects (three in the case of larger companies such as NTPC Ltd) as long as they are “scalable”. Moreover, no distinction will be made between CSR and sustainability.
“There is a distinction between running business sustainably and setting and achieving social targets,” said Rana Som, former chairman and managing director at public sector mining company NMDC Ltd. “Companies cannot run without business and ecological sustainability considerations and neither relates to CSR, which is more about touching lives of people.”

However, Lalit K. Panwar, vice-chairman and managing director of India Tourism Development Corp. Ltd, said, “Functioning in a sustainable and transparent manner is required by law, but I don’t see any conflict if companies find more innovative means under CSR to do it. Companies can regulate themselves to ensure that substantial resources are still made available for health, vocational education and gender-sensitive initiatives.”

The new guidelines leave the CSR spending norms largely unmodified, though a proposal for a minimum Rs.3 crore spending by public sector companies with annual profits of Rs.100-500 crore has been removed.

The 2010 DPE guidelines required public sector companies with profits less than Rs.100 crore to invest 3-5% of their previous year’s profit in CSR activities. For companies with Rs.100–500 crore net profit, the proportion was 2-3% and for those with Rs.500 crore or more, it was 0.5- 2%.

“We have not tinkered much with the CSR spending percentages as the companies Bill will be applicable once it gets passed,” the DPE official mentioned earlier said. The Bill, passed by the Lok Sabha in the winter session of Parliament, requires both public and private companies with net profit, or net worth, above Rs.500 crore to set up a CSR committee and invest at least 2% of their average profit of three years in CSR activities prescribed by the committee.


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