COROPORATE SOCIAL RESPONSIBILITY (CSR)
Need for CSR
Social Security is considered as part and parcel of democratic societies in which it is the duty of the state to ensure that the citizens are able to overcome the structural vulnerabilities of poverty and social inequalities.
Social Security though primarily a domain of government /state, is nowadays increasingly becoming the responsibility of Private sector also. CSR is a means through which private sector pays back to the society for the services it extracts from it in terms of employees, profits etc. and externalities it imposes on it in terms of environmental degradation, displacement of people etc.
Corporate Social Responsibility (CSR) encourages organisations to protect the interests of communities by taking responsibility for the impact they are creating on people, planet and profits.
The inclusive growth mantra- "Sabka Saath, Sabka Vikas" can only be attained by creating linkages in the development models of Public and Private sector.
Provisions of CSR in India
India has become the maiden country in the world with legislated CSR provisions. Ministry of Corporate Affairs has issued voluntary guidelines on CSR in 2009. These guidelines were incorporated with the Companies Act, 2013. The Policy recognizes that CSR is not merely a compliance, but a commitment to support initiatives to improve the lives of under privileged.
The companies that are covered under CSR ambit are contained in sub section 1 of Section 135 of The Companies Act, 2013. The following categories of companies have to follow the provisions of CSR:
(i) Companies having net worth of Rs 500 crore or more; or
(ii) Turnover of Rs 1000 crore or more; or
(iii) Net Profit of Rs 5 crore or more
According to estimates, around 8,000 companies have come under the mandate of CSR provisions by this Act. The Act specifies that companies have to spend at least 2 per cent of their average profit in the last three years on CSR activities. This translates into an estimated spending in the range of Rs 10,000-12,000 crore annually. With increased GDP and subsequently increased profits, this mandatory spending will increase year over year basis.
As per Section 135, the Company shall constitute a CSR committee of the board comprising or three of more directors with one independent director. The committee shall formulate the policy, including CSR activities as specified in the schedule VII. The companies can carry out CSR activities through their own foundations and trusts or collaborating with NGOs or by pooling their CSR funds with another company.
Why Corporate Sector needs to invest in the Social Sector?
There are several reasons why Corporate Sector needs to invest in the social sector. These are-
• Though government is the major player in the social sector, given the scale of intervention needed, private sector can shore up governmental efforts through its human and financial resources.
• Private sector is needed not just for its finances but also for innovative ideas that can be utilised to solve the problems India is facing. The best practices adopted by corporate sector in its business models could be replicated in the social sector as well. It is argued that Corporate Social Responsibility should go hand-in-hand with Corporate Innovative Responsibility.
• Businesses concentrate on a particular/local community where they are located, so it is easier for them to understand the issues, challenges and the ensuing opportunities for the marginalised that can be garnered through CSR projects. This can remove the harms caused by centralised schemes relying on 'one size fits all' model.
• The corporate sector can itself benefit from these initiatives in terms of a more skilled and productive workforce that can lead to enhanced profits for them.
• Also, CSR acts as a tool of advertisements and publicity for the Corporate Sector.
CSR activities for the marginalised
• Education and skilling of the marginalised - Literacy has been the key element in all the Philanthropic models of the past. In this new era, literacy continues to be important but since education has evolved beyond mere basic writing and reading, corporate sector can involve itself in skill development and training of the youth. This will be beneficial for the youth as it will make them employable and the corporate sector will gain in terms of skilled workforce.
• Self-Help Groups (SHGs) and Micro Enterprises - CSR initiatives can contribute to formation of SHGs and by providing microfinance to them could help in attaining a meaningful livelihood for the members. For Micro Enterprises, CSR projects can focus on -
o Providing market linkages/access
o Providing online sales platform
o Facilitating microfinance
o Provide with facilities for R&D for innovation
o Skill development
o Mentoring and incubation to new businesses
• Elderly Population- CSR initiatives can be used to set up old age homes, day care centres, training centres for caregivers. Also corporates can provide elderly with assistive devices and aids at cheap prices.
• Slum Development - CSR projects can be used for providing affordable accomodation to the slum dwellers, providing basic amenities in slums, skill development of the youth in the slums etc. it can effectively supplement the government's efforts towards creating slum free cities.
• Health Sector - The new National Health Policy envisages private sector to play a defining role in the aim of universal health coverage in India. CSR projects can be used to establish charitable hospitals, to undertake community vaccination drives or invest in preventive healthcare.
• Tribal Welfare - Tribals are the most affected community in India by the activities of the private sector like mining, industrialisation in forest areas etc. The new Mineral Mining Policy also enjoins the private sector to contribute to the welfare of the affected tribal people in the form of investments in health, education, basic amenities, relocation and rehabilitation etc.
(Related Article - A commitment to support initiatives by Jatindar Singh, Page -75)