Commencing this April, the new Companies Act, 2013, will require a certain class of companies to mandatorily spend on corporate social responsibility (CSR) initiatives. The statutory provision under Section 135 of the Act mandates every company having net worth of Rs 500 crore or more, or turnover of Rs 1,000 crore or more, or net profit of Rs 5 crore or more to spend in every financial year at least two per cent of the average net profits made during three immediately preceding financial years.
CSR in India, although not a new concept, is largely confined to the philanthropic space; the give-back to the society is voluntary and only after the profits are made. Some businesses have however shifted gears by contributing to education, health, cultural and research activities and community development programmes.
Globally, however, the concept of CSR has evolved considerably; internationally recognised definitions and guidelines propound that CSR is a management concept where responsible businesses achieve a balance of economic, social and environmental imperatives, while at the same time meeting the expectations of the shareholders and stakeholders. CSR is seen as a strategic business management concept that is built into core strategy and business operations and increasingly, the focus is on how profits are made without compromising the ability of future generations to meet their own needs.
Businesses are aware that CSR and the sustainability agenda are here to stay and such concepts are integral to business life cycle plans. Even in a climate of economic slowdown, some corporations have invested in developing sustainable business models and have attempted to achieve a win-win situation for both the businesses and society. Coming years will see greater emphasis on triple bottom-line approach (financial, social and environmental focus); and beyond unique selling points, sales and share prices businesses will have to invest in sound business strategies that will have an impact on societies.
The advent of this new CSR provision would drive many companies in India into uncharted waters—beyond charity and philanthropy. The Act, under Schedule VII, enlists activities that could be considered by companies whilst developing their CSR policy. According to the Indian Institute of Corporate Affairs, of the 1.3 million companies in India, about 6,000 to 7,000 companies are covered under the new CSR provision and an estimated Rs 27,000 crore will flow into grassroots development and social enterprise sectors every year, says a think tank. It remains to be seen how CSR capital will be channelised to gain the maximum return on investment.
Children in India constitute one of the popular target groups to potentially benefit from CSR initiatives. Children are considerably recognised as market force and businesses directly or indirectly interact with them daily. While it is universally recognised that businesses have a great potential to play a positive role in empowering the lives and livelihood of children, many of who are vulnerable and voiceless, a Global CEO Study on Children and Business by Boston Consulting Group revealed some disappointing trends. Thus, for many CEOs child rights were rather ad hoc than visionary. There was low level of awareness/knowledge and understanding of the value-add in addressing child rights. Business operations through the lens of children were narrowed down to child labour and for some, child rights was not of any relevance at all as their companies did not engage in child labour.
Addressing prohibition, and elimination of the worst forms of child labour is a no-brainer; however, it is equally pivotal for businesses to consider child rights in a comprehensive perspective. Responsible businesses ought to: ensure their products and services are safe, provide decent work and labour conditions for employees at all levels, ensure responsible marketing and advertising (including awareness on positive self-esteem, healthy lifestyles, non-discriminatory and non-violent values), ensure child rights is an integral part of consideration when acquiring or using land for business operations and so on. Such good practices can improve risk management, enhance brand reputation, garner consumer’s trust, impact on share prices and place the businesses in a good standing in society.
The inter-linkages between children’s rights and business principles is an emerging concept that widely recognises the potential of businesses to do greater good for children. Accordingly, businesses are encouraged to follow due diligence process to ensure children are not harmed as a result of their activities and relationships; and businesses are called to have a public policy commitment, strategic social investments, philanthropy, advocacy and a communications strategy. Given that children and young persons in India constitute a significant population, it is believed that through this new Act, a number of CSR initiatives empowering the lives of children will be up for grabs. Any CSR initiative on children should aim towards building the capacities of children in a sustainable manner; offering one-off programmes or token benefits will not alleviate inherent inequality and discrimination but only heighten poverty and exclusion. For example, access to quality education would require long-term commitment, sustainable investments and strategically designed proposals taking into consideration ground realities and partnerships.
To bring a lasting benefit it is vital that strategic business management must be home-grown and developed, implemented and monitored in partnership with local community not for profit. Sure, the government will reserve the paramount duty to protect, respect and fulfill children’s rights; businesses and other stakeholders will have a responsibility to do everything in the best interest of the children.
It is imperative to remind ourselves that children are equal stakeholders and not passive by-standers in any process aimed to bring changes in their lives. Further, well-defined focus on the most marginalised is crucial to bring positive and comprehensive change today as well in future.
Children are not looking for empathy or gifts; investments in their name should not be window dressing but promote sustainable and inclusive development. The age of socially responsible business is upon us; and it is about time for businesses in India to inspire, innovate and show leadership in addressing collective challenges. In doing so, businesses are called on to promote good practices and operate in a transparent and ethical manner; for, what is in the interest of children is everybody’s business.
[Monica Vincent: Author is an analyst in law, public policy and international affairs and an advocate at the Madurai Bench of the Madras High Court]