Mandatory CSR not a great idea, feels India Inc

Excerpts from What's Hot on CNBC-TV18 Watch the full show » Nifty BSE | NSE 29/05/12 Are Mutual Funds betting on Nifty?

Corporate social responsibility (CSR) spends will now be made mandatory for corporate India, sources in the Ministry of Company Affairs told CNBC-TV18. If approved, companies will have to spend 2% of the average net profit on CSR.

Mandatory CSR will be made part of the amendment to the Companies Bill. Currently, CSR 2009 guidelines are voluntary. CSR will be mandatory for companies with Rs 500 crore networth, Rs 1,000 crore sales, or net profit of Rs 5 crore or more. Such companies will have to formulate a CSR policy. Directors will have to disclose CSR in their annual report.

CNBC-TV18 had chronicled the social outreach initiatives of India Inc on its special show 'The Heart of Business'. Through the course of the series, influential leaders of India Inc spoke about their take on making CSR mandatory.

Adi Godrej, MD, Godrej Group said, "Philanthropic organizations should be allowed to operate reasonably freely and not with control to my mind. When governments start controlling things, things don't work as well as when people are motivated to do these things."

Kiran Mazumdar Shaw, CMD, Biocon Ltd says making CSR mandatory would make it cosmetic. "I don't think anything should be made mandatory because it then becomes very cosmetic, I think there needs to be a realization from corporate India that they have to necessarily engage in this because without that their businesses themselves are not sort of exuding good governance," she said.

 

She added, "The whole thing is, how the markets look at companies in terms of their CSR initiatives will be a better way of getting people to engage in CSR activities than making it mandatory because I have seen it that when R&D was just engaged in because it was a good tax break nothing happened. But when people really start believing in R&D everything is possible."

Nitin Paranjpe, MD & CEO, HUL is not in favour of the idea. He said, "I am not in favor, I don't know what will be achieved, the history of this country and the companies out here and many other people would have shown we try and do this people will find a way out. It is not about ticking the box, it is about the belief that this will be good for us, the more education that we can have around this issue, the more conviction that we can build around this issue we will see a difference. I have said this to our teams when I talk to them that if I trace the history of social responsibility in this country it has moved considerably. Not long ago, at all times businesses realize that they must contribute to society, but there was a period when it was all about charity and philanthropy etc.

He added that there was also the concept of trusteeship. "But in the large measure within an organization the act of running the business and the act of doing social good were mutually independent things which happened in the organization."

 

Paranjpe said, "It is our belief and a point of view that these two mutually circles are coming closer and closer together and I think today that there is a small intersection which has already happened between these two. What does it mean? That in the small intersection there are such approaches which are doing well for business and doing good to society. But the intersection is still small today which means if you are not disciplined enough and if you are intellectually lazy you could find many strategies which are doing good for business without doing anything for society and doing any good for people."

 

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