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  • Writer's pictureGeneral Carbon

Mandatory CSR in India- Companies Act and Draft Rules are now available !


Highly impressive  is the speed with which draft CSR rules a part of rules detailing companies act, approved by both houses of parliament and accented by the President of India only a few weeks ago, are notified . Refreshingly,  these are kept very simple and far away from being prescriptive. Concerns and apprehensions of Business spokesmen on 24X7 news channels in India, I hope, have been addressed adequately. Congratulations to the team led by capable young minister of corporate affairs, Mr. Sachin Pilot.

Sachin Pilot

The draft rules now available for public comments are commendable for articulation of the guiding principle. What many sustainability professionals have apprehended that the act and rules only cover community development actions and devoid of business linkage etc is addressed adequately in the preamble of the rules. it states that

CSR is the process by which an organization thinks about and evolves its relationships with stakeholders for the common good, and demonstrates its commitment in this regard by adoption of appropriatebusiness processes and strategies. Thus CSR is not charity or mere donations. CSR is a way of conducting business, by which corporate entities visibly contribute to the social good. Socially responsible companies do not limit themselves to using resources to engage in activities that increase only their profits. They use CSR to integrate economic, environmental and social objectives with the company’s operations and growth

So guys, in the Companies Act 2013,is not about, compulsory “philanthropy” “giving back”, but is is enlightened business transforming its business to address social, economic and environmental challenges and delivering value to all stakeholders- not just the shareholders.

I am delighted that the rules are kept very simple,flexible and very sure that it will along with the other provisions of the Companies act will go a long way in re positioning a company for generating long term shareholder value.

Edward de Bono said, “There is never any justification for things being complex when they could be simple.”

More over, in the text of the rules, I can read a pragmatic model of shared value concept of porter and Krammer( though I do not fully agree and appreciate that this approach is superior to Triple Bottom Line approach) The rules requires

a company to undertake projects contributing to alleviation of certain listed/identified social and environmental problems

the projects can be undertaken any where in India, jointly with trusts and similar organisations,jointly with other businesses

the projects can (should, keeping in mind the guiding principles) be business linked,deliver value to various stakeholders of the business, deliver environmental,social and economic value

the projects can be shared value generation working with various stakeholder groups

The rules donot permit you to

simply donate and book this as CSR expense of the company do normal business activities and book the expense under CSR the projects done solely for the benefit of employees cannot be CSR projects

So, greening the supply chain, product/packaging take back,collection,recycling programs, local employment generation by involving community in some parts of supply chain, contract labor welfare programs, local community development, watershed development to strengthen supply chain etc. etc.

A variety of programmes/projects that deliver value to your business and at the same time to the society,environment and economy- projects generating shared value- are eligible CSR projects.

Identifying, designing and deploying such projects require co creation and innovation. Sure, the companies do not look this whole “innovation” “transformation” exercise as a simple expenditure accounting and compliance process. If they do- they are making an expenditure for CSR as mandated- without delivering value to either to the “society” or to “their business”.

So great- the rules pave a way for sustainable transformation of business.

#CompaniesAct #CSR

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