Make CSR Mandatory for India Inc

By B.S. Raghavan

For this column, I have been surfing more than 50 Internet sites for the past couple of hours to get some idea of the figures and percentages of allocations for corporate social responsibility (CSR) by Indian private sector enterprises, but in vain.

All I could manage to get was a sentence in the report of a symposium, rather pretentiously titled “CSR : An exercise with a conscience” held on March 10 in Mumbai under the joint auspices of the World Bank and the Harvard Business School.

It claims that the CSR spending of private and public sector companies in India for 2009-10 was $7.5 billion (or roughly 30,000 crore) and $700 million (or Rs 300 crore) respectively, but there is no documentation to substantiate it.

There was no further information available on sector-wise allotments, as also on the adherence to requirements such as fulfilment of overall development needs and priorities, social inclusion, education, environmental protection and the findings of social and performance audit, if any, was undertaken.

The only bits of data available, and that too not in a consolidated form facilitating a comparative analysis were on the amounts spent by some public sector enterprises (PSEs) which are by law mandated to spend two per cent of their profits after tax on CSR.

Parliament, and the Standing Conference of Public Enterprises (SCOPE) and the civil society, in general, have long been demanding a level-playing field between the public and private sectors, whereby spending a prescribed proportion of earnings on social welfare projects and schemes is made binding on the private sector as well.

INDIA INC UP IN ARMS

The Parliamentary Standing Committee on Finance, headed by the former Finance Minister, Mr Yashwant Sinha, had proposed that companies with a turnover of Rs 1,000 crore or net profit of Rs 5 crore or more should earmark two per cent of their net profit for the preceding three years on CSR, but without specifying what, in their view, would constitute CSR and how the funds allocated should be channelled.

India Inc has been up in arms against even this bland proposal, insisting that it would mean unwarranted intrusion into its affairs and lead to harassment by vexatious inquiries by government inspectors to verify the mode and extent of compliance with the law. It has been vociferously claiming the right to decide its CSR for itself and according to its own enlightened self-interest and conscience.

The last ditch stand by India Inc has been so thorough and effective as to pressure the Government to cave in by giving up the idea of incorporating the Standing Committee’s proposal in the new Companies Bill. The Corporate Affairs Minister, Mr Veerappa Moily, has given the solemn assurance that private corporate bodies need have no apprehension on this score, adding that “Compliance is not mandatory, (only) reporting is”.

PM’S STERN WARNING

Meanwhile, instances of utter social irresponsibility and manifestations of greed are multiplying. From what happened in J. P. Morgan Chase which has coolly come to terms with more than $5 billion trading loss to India’s second biggest corporate fraud (after Satyam) of Rs 8,700 crore in Reebok India, it almost seems that, for aught corporate honchos know or care, there has been no financial crisis and no ongoing turmoil in Euro Zone.

Even the strong dose of bitter medicine that the Prime Minister, Dr Manmohan Singh, administered some time ago to India’s richest tycoons assembled before him has apparently had no effect. His warning of social unrest, if they did not heed Gandhiji’s advice to look upon themselves as trustees of the people, is worth repeating (mark every word): “In a country with extreme poverty, industry needs to be moderate in the emolument levels its adopts…The electronic media carries the lifestyles of the rich and famous into every village and slum. Media often highlights the vulgar display of their wealth…. An area of great concern is the level of ostentatious expenditure on weddings and other family events. Such vulgarity insults the poverty of the less privileged, it is socially wasteful and it plants the seeds of resentment in the minds of the have-nots…”.

The Government’s decision to let India Inc off the CSR hook distinctly goes against the tone and content of the Prime Minister’s stern warning.