Reviewing India’s CSR Policy in the LSE India Summit

India CSR News Network

NEW DELHI: On the agenda at this year’s ‘India at 70: LSE India Summit’ will be a discussion on the Corporate Social Responsibility policy in India, slotted on 29 March, between 11 am-1 pm, at Stein Auditorium, India Habitat Centre, New Delhi.

‘India at 70: LSE India Summit’, the annual flagship summit of London School of Economics’ South Asia Centre, commemorates 70 years of India’s independence this year, and will be held between 29 -31 March 2017.

As is evident from the topic, the narrative of this session will follow a complex course, with questions of intent, ethics, and integrity which it naturally raises. Is CSR a genuine, well-thought out effort by business houses or a cursory process to help them appease a staid governmental directive of forced-down-the-throat philanthropy? There is obviously a vast grey area, a no-man’s land, wherein the answer lies.

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In 2014, in a landmark policy decision, India became the first country in the world to mandate a minimum spend (2%) on CSR initiatives. Under the Companies Act, 2013, any company having a net worth of Rupees 500 crore or more or a turnover of Rupees 1,000 crore or more or a net profit of Rupees 5 crore or more has to spend at least 2% of the last 3 years average net profits on CSR activities.

The fundamentals of CSR rest on the fact that corporates should be responsible for addressing social issues alongside government and public policy. However, many business leaders have since expressed concerns over this CSR law: from the corporate perspective, a mandatory 2 per cent spending is seen as tough, especially when smaller companies are trying to scale up.

Nevertheless, experts note that in a country like India where a large section of the population is still illiterate, the onus of development cannot lie only with the government.

In pre-industrialized India of the 1800s, rich merchants made a custom of sharing parts of their wealth with society. They donated generously to the poor during famines and epidemics, providing food and medicines. During the times of the Raj, India’s pioneering businesses such as Tata, Godrej, Bajaj, Modi, Birla, Singhania and others continued this legacy, being strongly committed towards social causes.

According to Mahatma Gandhi, Indian companies were supposed to be the ‘temples of modern India’ and under his mesmeric and compelling spell, the paragons of business established educational institutions, centres of research and science, hospitals, patronised the arts, all of which bring glory to the country even today. But an inevitable question remains at the heart of all this: were these done for self-grandeur or were they selfless acts of charity?

Currently, a comprehensive and structured CSR methodology has been adapted by companies; corporations have provided improved medical and sanitation facilities, built schools and houses, and empowered villagers through vocational training, all very relevant to a country where most of the rural population do not have access to clean toilets.

The government, on its part, has given specific guidelines on how companies should conduct CSR activities stipulating that they need to be implemented by a CSR Committee that includes independent Directors. CSR activities, as per government directives, categorises CSR under the following heads: eradicating hunger, promoting education, helping in environmental sustainability, protecting national heritage and rural sports, and finally, contributing to the Prime Minister’s Relief Fund.

If the company is unable to implement these through its own non-profit foundation, it can employ an independently registered non-profit organisation with a record of at least three years in similar activities. Naturally, in a country like India, this has spawned the proliferation of somewhat ambiguous NGOs, setting in motion yet another chain of problems.

Even with India’s legacy of a strong philanthropic tradition, the debate around CSR remains unanswered. A survey by accountancy firm KPMG found that 52 of the country’s largest 100 companies failed to spend the required 2% last year. Majority of CSR activities are neither planned nor monitored and thus perhaps do not achieve the intended impact.

The silver lining in all this however is that the overall charitable spends by companies has gone up. According to some reports, the private sector’s combined investments in CSR accelerated from an estimated Rupees 33.67bn in 2013 to around Rupees 250bn after the law came into force.

The LSE India Summit session titled, “Does Forced Philanthropy Work – CSR in India?” will be moderated by Professor Harry Barkema, and will have Mukund Rajan (Chairman, Tata Council for Community Initiatives), Onkar S Kanwar (Chairman and CEO, Apollo Tyres), Anu Aga (former Chairman, Thermax) and Rahul Bajaj (Chairman, Bajaj Group), and will debate whether a compulsory government guideline on socially beneficial initiatives is the correct or best approach.

It would be interesting to know if forced philanthropy, which may have been somewhat unconnected with an overall developmental plan, has had any actual social impact, or if it has become corrupted through fudged data and cursory initiatives to tick the box.  Is there even sufficient and appropriate regulation of CSR spending? And if indeed it has, what should be done in order to bridge the gaps?

‘India at 70’ is part of the India-UK Year of Culture 2017, announced by Hon’ble Prime Minister Narendra Modi and former UK Prime Minister David Cameron in 2015.

Experts at the summit include J A (Tony) Allan, Rahul Bajaj, Mukulika Banerjee, Harry Barkema, Amita Baviskar, S Gurumurthy, Suhasini Haidar, Niraja Gopal Jayal, Kalpana Kannabiran, Onkar S Kanwar, Madhav Khosla, Marcus Moench, Meera Shankar, Mukund Rajan, Kanwal Sibal, Ashley Tellis, Pinky Anand, and Manoj Mishra.