CSR in India

Background:

The Indian Companies Act, 2013 under section 135, have made Corporate Social Responsibility “Comply or explain” model in India. The companies obligated under CSR ACT fall under the following threshold:

Private Sector Companies:

• Net worth of Rs. 500 crores or above,
• Turnover of Rs.1000 crore or above or
• Average yearly net profits of Rs.5 crore above

They are supposed to spend 2% of the net profits before tax on Corporate Social Responsibility.

Public Sector Companies:

As per the research conducted by IIM-A and reports, the CSR spend is accounted to be over Rs. 28,000 CR (Unnithan, 2015) in 2015. According to the latest report the top 75 companies have sent only Rs. 4,000 CR (Arora, 2015) and are supposed to file their return with the Ministry of Corporate Affairs on or before 30th September 2015 for the year ended 31st March, 2015.

Current Scenario on CSR

More than 80% companies have taken the “Explain” route due to lack of knowledge on CSR, obscure CSR Act, absence of monitoring by the Government and lax in execution on non-compliance. Many companies have not taken this provision very seriously and waiting for what the Govt. does.

The Govt. of India, Ministry of Corporate Affairs has appointed a Committee to assess performance of companies on CSR for the year ended on 31st March 2015 and make recommendations to the Govt. for its effective implementation. The said Committee is expected to submit its report by end Sept 2015. It is expected that the said Committee will make robust suggestions in stricter implementation in the area of CSR spent, projects, monitoring & evaluation, CSR audit, fines for non-performance (Bureau, 2014) and such other remedial measures after taking into consideration view of the companies.

Issues in CSR Compliance:

Many companies who desire to implement CSR guidelines do not have trained manpower, they also do not know how to identify, implement, monitor and evaluate the CSR project. The CSR guidelines do make it clear on how to address all these issues but it appears companies are on defence for some reasons or the other. The consensus on CSR Law is still questionable since many company officials question as to why we should do CSR ? It is Government’s responsibility as we pay taxes. The India Inc. has to be shown a future road-map on benefits for being a Sustainable and CSR Compliant Company. Internationally, the companies proactive in CSR have shown higher profits by increase in Dow Jones Sustainability Index (Only 1 company “Wipro” has registered on DJSI) and on sustainability index of their national stock exchanges which is lacking in India. In South Africa, the Government recognizes and gives subsidies to companies who are CSR Compliant. There are many such tools introduced by the Government to encourage companies to do CSR which are yet to be devised in India.

The Government of India, has projected CSR as a cost intensive/ donation oriented process than sustainability and responsibility process which is daunts the Corporate World. Moreover, there is acute shortage of CSR trained manpower or company officials do not get adequate time to look at CSR functions as CSR isn’t imbibed in Business Strategy. Some of the other challenges Corporates have seen is to find suitable NGO for implementation of the project.

It is absolutely essential for the companies to find out ways to comply with CSR guidelines than excuse by “Explain”. In order, to make India the world’s first Sustainable and CSR Proactive country the CSR Professionals have researched and proposed the following plan of action.

The Ministry of Corporate Affairs, Govt. of India, New Delhi has formed a Committee under the Chairmanship of Mr. Anil Baijal, former Secretary to the Govt. of India to study and evaluate the CSR scenario in the country post implementation of the first year ended March 2015. The Committee is expected to interact with all the stakeholder’s viz. representatives of corporate sector, NGOs, Industry Associations, and CSR Professionals and give recommendations to the Govt. of India to accelerate the CSR movement as expected. We are of the opinion that considering the trends as being observed during last 12 months we all CSR professionals recommend the following:-

1. Consensus Building: Engagement with the Industry Leaders to explain modalities of the CSR Law, clear their grievances, reasons or the issues of the companies as to understand the challenges to implement CSR activities as expected and suggest remedial action plan.

2. Forfeit Non-Compliance: Recommend to the Government to introduce stricter penalty clause issue show cause notices to the defaulting companies.

3. Social Monitoring: Streamline and regulate the CSR spends by effective monitoring and evaluation mechanism to avoid companies spending in a wrong way or siphoning of funds under CSR

4. CSR Education: Encourage and promote CSR training and make it mandatory to investors, board members, CSR heads and employees in the CSR Department, NGOs and CSR professionals.

5. CSR Rating by Government: Develop rating and ranking model for the CSR compliant companies and promote them through media and Govt. platforms and forums.

6. Support system: Create Help Desk at Ministry of Corporate Affairs.

7. Incentives to CSR Compliant Companies: Recommend intangible incentives in the form of award, reward - subsidy, recognition or such other forms to induce companies to spend on CSR.

We believe the above steps would lead to enhanced inclusive growth in the coming 2-3 years. The Government of India would be able to achieve greater heights when India INC. will be proactive on Sustainability and Responsibility. We support “Make in India” but propose “Make it sustainably and responsibly in India!” that would be a differentiating factor from our competitors.

We believe that all the above recommendations may be considered by our Hon’ble Prime Minister and Hon’ble Finance Minister. We have, herewith annexed the signatures of the supporters of the above recommendations.

A delegation of CSR professionals would like to meet both the PM and FM and request for a suitable date and time for such a collection representation in the interest of Nation Building through CSR.

Thank you.

Sincerely,

Team of CSR Professionals in India.

Annexure – 1

We hereby, affirm to the above points mentioned in the white Paper to make India world’s first sustainable and responsible country.

Please sign to realize this vision.