CSR by tobacco companies: Brand promotion or social welfare?


IndiaCSR News Network

10431519_1035300626486507_2334952031942932941_nNEW DELHI: Caught in a tricky situation, the government has set up an inter-ministerial panel to look into CSR programmes of tobacco firms to ensure that such activities do not look like promoting use of such products.

The new Companies Act makes it mandatory for all major corporate entities to spend at least 2 per cent of profit on CSR (Corporate Social Responsibility) works.

As this law applies to certain tobacco companies as well, it has created a tricky situation as social welfare activities of such firms can give an impression about promoting tobacco use, even as the government has stepped up its efforts to discourage people from using such products.

Sources said that a nine-member panel, set up by the Health and Family Welfare Ministry, has been asked to suggest a mechanism by next month to address this issue.

It would look at devising a “mechanism” to prevent tobacco industry from deriving unintended incidental benefits from their CSR activities, they added. Besides, the panel would also suggest a road map in moving forward on the issue.

While the new companies law requires compulsorily spending on CSR activities, there have been apprehensions in certain quarters about this provision with regard to entities engaged in tobacco business, including those manufacturing cigarettes and gutkha among others.

This mainly pertains to concerns that CSR works of such entities could result in promotion of tobacco products.

Government has set up the committee after the Madras High Court recently asked it to look at how best CSR scheme of the tobacco trade can be met and the model that has to be framed in this respect.

The court’s ruling in August came on a plea filed by Tamil Nadu People’s Forum for Tobacco Control.

According to sources, officials from Health and Family Welfare, and Corporate Affairs Ministries, World Health Organisation, India and doctors from the All India Institute of Medical Science, among others, are part of the panel.

Under the Companies Act, 2013, certain class of profitable companies are required to shell out at least two per cent of their three-year annual average net profit towards CSR activities. The provision is applicable to companies having at least Rs 5 crore net profit, or Rs 1,000 crore turnover or Rs 500 crore net worth.

These norms are effective from April 1 and the eligible companies are required to set up a CSR committee of its board to formulate a policy for carrying out such activities.

In case of non-compliance with CSR norms, the concerned entities would have to provide reasons to the Ministry.

In India, there are some leading companies that are also into the business of tobacco and related products,.

Meanwhile, the government has been making efforts to discourage people from using tobacco products as they have harmful effects on health.

Tobacco companies have incidentally been among the largest spenders on promotional activities, although they cannot directly promote any tobacco product on most platforms and therefore have to depend on indirect advertising.

ITC, a major player in tobacco business, has expanded its presence in various other sectors and also happens to be the country’s third most valued firm after TCS and ONGC.

Other listed players in tobacco business include Godfrey Phillips, VST Industries and Golden Tobacco.


source: http://economictimes.indiatimes.com/news/company/corporate-trends/csr-by-tobacco-companies-brand-promotion-or-social-welfare/articleshow/45666648.cms

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