New Companies Bill in India mandates reporting of community spend
The new companies bill, proposed by Ministry of Corportae Affiars amongst other important changes, mandates that the companies with annual average profits of over INR 50 million (and a few more criteria) have to develop CSR Policy and committee of the board has to be responsible for implentation of the Policy. The discussions amongst those who are formulating the rules subsequent to the bill indicate that the CSR spend no longer can be donations, but the expense should be based on well formulated projects with anticipated outcomes, monitoring plans etc. The CSR spend can only be deployed on projects that do not directly contribute to business revenue. This is very welcome step.
The media debate and corporate view seem to highly misplaced. Firstly, there seem to be misrepresentation of the bill, that it mandates certain spend. The fact is that it mandates policy/plan and disclosure on spend and outcome. Secondly, this is confused with philanthropy of promoters of such companies and wealthy individuals. This should be avoided and it should be a seperate discussion.
Mainly, the bill uses the word CSR wrongly. The Corporate Social Responsibility cannot be restricted to corporate contributions to community development. This makes the task of the corporates very simple. Rather than addressing complex challenge of generating stakeholder value- value to shareholders, customers, suppliers,employees,government and communities; corporates in this simple interpretation of social responsibility, can do generating value for shareholders and wash off for every other responsibility by contributing a small percentage of profits to the community. Though the bill uses the wrong word-CSR, the mandated reporting framework(in the making) requires the companies to report the performance many aspects of Business Responsibility that covers nine principles of National Volunatry Guidelines on Business Responsibility.
All of us who have a stake in this debate taking a good shape, should actively participate in the deliberations. Otherwise, it can be wrongly directed by some sections of the media as also by the other institutions. The slips already committed in formulating the relevant sections in the bill, are good enough and we will require a good time to correct these.So before it is enacted, if further confusion is not added, one would have less to ask for in revisions. Hope to see all of you actively participating, articultaing your views in the next few days.