- What is Corporate Social Responsibility?
- Examples of CSR?
- Why CSR?
- Methods of CSR?
- Companies Bill 2012
- Who is covered?
- CSR: Pro-Arguments
- CSR: Anti-Arguments
What is Corporate Social Responsibility?
- Corporate social responsibility.
- Activities done by a company to give social-economic-environmental benefits to the society.
Examples of CSR?
- IndianOil gives special allotment of petrol/diesel station dealerships and LPG distributorships to beneficiaries from among SC/ST/PH/Ex-servicemen, war widows, etc.
- Installation of hand pumps/bore well/tube wells/submersible pumps
- Rainwater harvesting projects,
- Aquaguard water purifiers/water coolers to schools/community center etc.
- Organising Medical/Health Camps on Family Planning,
- Immunization, AIDS awareness
Big companies like Tata, Wipro, Birla, Essar have done many such projects.
- The term “Corporate social responsibility” was coined in late 50s, but it remained just an academic concept for many years.
- The issue was raised in Rio Earth Summit (1992). But MNC-giants were non-committal and lobbied heavily against such moves. (recall how American corporate giants did not allow UN to get control over DNS registry in the recent WCIT Dubai conference. Click me)
- In the 90s, big NGOs such as Greenpeace started exposing the environmental and human rights abuse done by American oil and mining companies abroad. (particularly Shale company in Africa.)
- This led to huge negative publicity for those companies particularly among the consumers in first world.
- Hence the MNC giants started taking up CSR initiatives in third world (Asia, Africa) as a PR-image improvement exercise.
Apart from that, CSR is done for
- Pure philanthropic reasons.
- Earning Good will among customers and local community members.
- Long term interest: e.g. a company spends money in child-education of XYZ, in long term those kids grow up= can provide skilled labour, or atleast earn more money than their parents= more purchasing powers =good for all companies.
- Getting tax-benefits from Government.
Methods of CSR?
|Via Charity||Company will just donate money to Red Cross, UNICEF etc.|
|Via Contract||Company will hire an NGO/another special agency to carry out a project and pay them money.|
|By itself||Company will create separate Administrative machinary and staff of its own, to do the social welfare work. (E.g.in big companies like Microsoft, IBM, Dabur etc.)|
Companies Bill 2012
It’ll replace the Companies Act 1956
|Lok Sabha||Passed it in Winter session (Dec 12)|
|Rajya Sabha||Likely to pass it during Budget Session (Feb 13)|
- Companies bill is likely to come in effect from April 1, 2013.
- This Companies bill contains provisions regarding CSR.
- In Budget 2013, Chindu is likely to allow some tax-deduction /benefits to companies who spend money for CSR, thus making it attractive for the companies to spend money for CSR.
- An estimated 2,500 companies fall into this “mandatory” CSR-reporting category.
- CSR activities in the first year would be between Rs 9,000 crore and Rs 10,000 crore spent in social welfare. This could significantly benefit the society at large.
- Big Companies in India are already making a killing, particularly in mining, real-estate and IT sector, so spending a few crores on CSR shouldn’t be an issue. Besides, Corporate Social Responsibility spending has been kept very low: only 2%.
- Government could increase the tax-rates to collect additional 2% and then spend the money on its own for various social welfare schemes. But instead Government has given flexibility to the companies to do take up projects on their own= there would be corruption and leakages. So, If the companies themselves spend the money on CSR, more likely to show some result.
- Media is unnecessarily creating panic- CSR “spending” is not compulsory, CSR-“reporting” is compulsory.
- This provision will lead to about 30% increase in CSR-linked jobs. (those special project officers, MSW degree etc). For example, Dabur is reviewing its existing CSR programmes in the wake of the latest developments. It will hire more professionals if it feels the need to extend the existing CSR-programmes.
- Companies already paying so much in taxes + global economic crisis= decline in profit.
- It is the job of Government to do all the social welfare stuff. Companies are only responsible to their shareholders and not to society as a whole.
- If company has to spend 2% of profit in CSR= means less profit will be shared among the shareholders.
- Might lead to ‘creative accounting’ (only showing work on paper) or doing work that actually benefits the company rather than society. Corporate Affairs ministry doesn’t have the manpower to manually inspect the CSR-projects done. Thus making the whole exercise useless to society.
- NGOs often feed journalists stories of supposed corporate malpracticies, tribal exploitation etc, which the reporters are happy to print without much background check.
- Hence companies just throw off donation money to such NGOs in the name of CSR and to media houses in the name of “advertizemenst”, just to keep them both in “good humor”. So in many cases, CSR is done because of yellow-journalism and “yellow-NGOism.” Thus, CSR doesn’t cleanse the sins of a company. often it merely allow companies to continue bad behavior in the shadows. (child labour, environmental degradation etc.)
You’re welcome to add your own pro-anti agruments in comments.
great article about CSR and this change was needed from past few years, since companies does not give any regards to the society the earn from…
To encourage CSR, Government should give tax rebate to the companies. Also, while evaluating bids for various Government and Private Projects, weightage for CSR should also be introduce by the Government. While giving Business Awards for corporates, using only turnover as a basis, they should look into their philanthropy activity.
corruption,pilferages will b there in the guise of CSR to avoid paying taxes. there will be dual benefit to companies…less tax and also in good books of the public at d same time….strong surveillance on d part of d govt is must..
I strongly agree with you !!
Like us , a company is also a legal entity in society. So a company obviously has responsibility towards society. CSR should be must so that it could help local people directly, the companies have better knowledge about their surrounding environment.It is just like a cooperation between society & companies which would be beneficial for both.
every organization is established with a purpose. this ‘purpose’ has undergone sea change in the last century. Earlier the main goal used to be profit-by-any-means but as of now it’s next to impossible. The ‘value addition’ concept calls for taking care of needs of every stakeholder be it employee,shareholders,suppliers, THE KING(consumer) or the community in general..
Infact a corporation is just a subset of society, so it’s normal for the society to expect a sound ‘corporate social performance’ from it..
Making csr mandatory is one step forward in making corporates realize their relationship with the society..
Definitely CSR is encouraging for development and should not be condemned …..CSR would help to increase spending on overall development..NTPSC,ONGC etc have already been involved in such work.Actually govt should increase CSR spending from corporates.According to report only 12 families holds 80% of business of India.For achievement of goal “SOCIALIST” enriched by constitution of India it can be considered as a small step.
But govt should enact body to monitor actual implementation of CSR projects and must provide trained and efficient staff for this.Though it have some anti argument but they are outweighed by its merits…
If CSR spending is not mandatory in the bill, then what is new in the whole process? Since many companies are already doing a lot for the society. Had it been mandatory, then it would have made more sense – My personal opinion.
It is better to link the CSR with windfall profit of the corporates and also to increase the percentage of CSR then . For compnay to sustain health of it is important like share holders divdend and Profit and risk management process . Already companies are accountable in many ways to governement for their bussiness and if it is mandatory it increases the burden on the Companies like Accountancy.NGO monitoring, Responsibility,Resources and inspite of this many chances are there for them to keep their investment on their surroundings only keeping long term view of profit even they are more oppulent than others.From the other side of view with NGOS as most of NGOS are showing the funds in operational cost (i.e meetings in 3 & 5 star hotels etc with very little going to the needy.In the Long term it leads to LOSS of trust in both of them and may raise unneccessary CIVIL issues which already are in huge count . From governement side it has to keep the members to track the CSR and make sure the Code of conduct of the members is white and more laws.First of all we should understand the term SOCIAL in CSR which is mostly welfare and Non justiciable and it should be voluntarily inspite of obligatory . Tax exemption increases the corruption levels and already we have plenty of smart loop holes to avoid tax exemption .So this should not be the thing inspite of this the Govt can organise the programmes and raise the funds and distribute the funds by forming an adhoc body consisting of state welfare executives and making each penny responsible for it which is already part of their work and dissolving the body therafter . Keeping the companies as monitoring authority of their funds and thus this leads to STATE MARKET approach which will sustian in the Long run and less the burden of the Govt and Company and both are resoposible to each other and supervisory on each other. please see this URL for more information
Good Article & insight into the CSR.
What i feel is the companies Bill 2012 should have been discussed & debated much more in the parliament.
Since this CSR is considered important, the bill should have had the provisions for the creation of a new office which would look into the affairs of all the companies, rather than just giving it to the co-orporate affairs ministry. If the members have felt that this office has some scope for corruption, then they should have given the opportunity to a Private firm, like a PPP model.
though the law stipulates that just reporting is compulsory, it is a must that companies should be made accountable, they are using up all the limited resources we have on the planet. And they are getting consumed at a faster pace, the activites like improving green cover, taking up programs of afforestration, development of mangroves & corals can be taken, the govt should have given guidelines in these direction. They improve the living conditions on this planet as well as it will be a great place for other spices to live on this earth. Because one should think of the future generations and their existence otherwise we can’t see this earth for not more than 100 years from now :).
Governments have to play a vibrant role, simply passing of laws doesn’t any good.
Hi Mrunal, this is about the example No-1 you had stated (IOC offering Pumps on special quota). I feel it is not an CSR activity but it is as per the reservations a PSU has to oblige set by the ministry? Kindly clarify! Thank you.
It looks a great step towards social responsibility of the GOI. I think it must be compulsory for the companies to spend on CSR. I work in Indian Oil Corporation as project engineer in paradip refinery project. As I see If company spend some money on community development, there will not be much difference in the profit of the company. In-spite of all company is taking many things from the surrounding society so It becomes company’s responsibility to take step towards development of the society.
Rather doing advisement, company should do really good for the society to make good PR-Image. I hope bill passes and becomes and ACT soon.
deepakji apni company( ioc ) to loss me chal rhi hai…to CSR ka kya matlab hai…. wese apka dept. kon sa hai….i’m in operations, GIS.
Hey, what about the provision for tax rebate on the differently abled ppl hired by the companies? And also was it earlier mandatory to submit x% of profits to Govt. in case a company fails to appropriate minimum(x%) to csr?
CSR is not new term but the way have been opted to implement is quite very transparent basically for PSUs. As i m working in PSU and dealing CSR, i can say if company directly hiring the NGOs through NITs, there will be great changes in the society and chances of money manupulation will be less. As campare to goverment sachemes. Monitirng of CSR activities is done by third party, basically govt. appointed agencies.Compay’s emplyoyees will not directly do CSR activities etc..
Organisations need return on investment on every acts/actions perform by them. The returns may be in form of economic i.e. profit to shareholders or psychological i.e. deriving a sense of satisfaction of doing good for the society. The very basic nature of human needs ranges from monetary to self esteem. CSR provides an opportunity to get oneself absolve from moral responsibility towards larger society. This activity is not a part of value chain in the business of corporate houses bu rather forms a peripheral activity. According to Peter Drucker, organisations doesn’t need to put extra efforts in terms of CSR but rather need to make efforts in order to make their business value chain efficient and environment friendly. This will not only result in reduction of wastage but will improve their profitability and brand image in the market by following sustainable practices.
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thanks mrunal sir ,,, crystal clear,,,,your blog is helping me a lot… no amount of thanks giving will suffice,,,
What is the difference between net worth, net profit and turn over? – I have confusion between net worth and turn over
hi, sir .
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thank you sir for your valuable ideas and help.
Of Course CSR raise the ‘social accountability’ of the corporate sector, but from a broader economic development view-angle its hardly beneficial. This is due to the fact that the MNC giants are quite indulged in and worried about their own industrial projects in the eve of Global market downturn and policy paralysis. They wont spend much time and use their foresight to contemplate over CSR and throw some erratic projects just for the sake of producing a report at the end of the year.
Instead had Government decided to play as a ‘middleman’, the scenario could have been different. If Govt would have decided to collect those 2% profit from the MNC’s and invest it in some properly and radically planned projects, that would yield some productive value. Even if the MNC’s assumes the responsibility of some projects like, building hand-pumps or renovating health centers, they will hardly bother for the maintenance of their services. So in any case Governments intervention is necessary for the fruitful implementation of these projects.
Now one anti-argument for the Governments role as a middleman is it will lead to a lot of corruption and a large part of the money will get ‘invested’ in entertainment purpose of some unscrupulous persons. Now its again a Government responsibility to ensure transparency in the procedure of channelizing the investment (As they are doing in case of MNREGA :P).
One has to think at a higher level. The name of the bill itself says CSResponsibility. It is the responsibility of each one of us to give back something to the earth since we have established ourselves by taking so much from it. Of course one can give pro and anti arguments to it by saying that it is someone else’s job to do it and etc.etc. and that companies and businesses live to earn profit, agreed but this definition has to be changed if we as a humans have to survive. It is to inculcate this value of responsibility in each one of us. I mean I wonder many times that during school days teachers and some special alumni who used to visit us used to ask the same question repeatedly that what did we want to become when we grew up and there used to be no counter question after our replies that whatever that we become, what would be our social responsibility, what would we give back the people and the earth from whom we would take so much to become someone. I wonder. I know that I have taken this topic to a different platform but I believe that it’s high time that we start thinking long term and not just react spontaneously to an event. All of these great companies and the work they do could be proven foolish by presenting simple facts. But what to do, it is human nature that will see only what it wants to see and even if you present n no.of facts to prove them otherwise, it wouldn’t work. They probably need a Big Bang…. To realize that it’s high time that we start thinking and acting smart. That bang is going to come someday but that day it would be too late, I just wish I could create a fake bang to make them realize.
Companies now will find it more liability then responsibility to spend on csr activities which will not allow corporates to spend whole heartedly…It may lead to jst spending of 2% and reporting to corporate ministry without having a single thought whether the spending done by them is actually making profit to the society…so, the csr activity should have been left on the wisdom n conscience of corporates.
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and it’s compulsory to spend.