Where to Draw the Line?

Where to Draw the Line?

Corporate India welcomes a new jargon in its vocabulary. Corporate Social Responsibility! Although conducting business in a responsibly has been defined in various ways. Philanthropy, sustainability and strategy were always treated separately. CSR amalgamates all the three into one entity. The basic premise of CSR, at least in the Indian context is inclusive development and decreasing the disparity that exists in the country. The message is clear, community and society at large are not merely recipients of corporate philanthropy but are partners with a legitimate stake. Incorporating the social obligation into the firm’s strategy and creating relevant value to all stakeholders is a need of the hour.

The Companies Act 2013 makes it mandatory for companies to spend a minimum of 2% on CSR. Reporting the same is made even more critical. Over 16 thousand companies have come under the ambit of CSR after April 2014. The estimated spend of the Top 100 companies would approximately be 8000 crores. Total spend would be a staggering 25000 crores! The CSR Rules take into account the basic tenets of CSR: Profit, People and Planet. It is critical to keep a balance between the economic, social and environmental aspects of any business enterprise.

There exists a deficit in the ‘social capital’ due to the enormous disparity in our society. Question is who is responsible for building social capital? Simply put it, all stakeholders who live in the society owe responsibility towards society. It is but natural that corporates, who carry on business in society and make mammoth profits, owe a bigger accountability towards it.

The mandatory social spending also demands robust monitoring mechanisms. Hence, measurement is a critical aspect of the CSR projects and programmes. The monetary value associated with the project, its impact and the primary beneficiaries associated have to be defined well. This will enable the executives to provide assurance to the shareholders who might be skeptical of the CSR initiatives. Shareholders would predominantly question the impact of the CSR projects which measurement of impact and monitoring mechanisms unavoidable for companies. The firm also faces the dilemma of acquiring the stakeholder approach v/s beneficiary approach.

Where to draw the line?

The Top 100 companies would already have their CSR policies and strategies in place. Most of them even surpassing the 2% minimum spend. It is the 16 thousand odd companies that need to get it correct. As Napoleon Hill rightly put it “there are no limitations to the mind except those we acknowledge”. Similarly the CSR Rules are only guiding principles and not the final outcome. Creativity and innovation in CSR projects would definitely be a welcome sign for all the stakeholders of the CSR initiatives. There are two approaches to accomplishing the CSR goal. One is to precisely adhere to Schedule VII of the Companies Act 2013 and rules that follow. Second would be to design the CSR policies to synergize with the firm’s business strategy. Either ways the company needs to identify where to draw the line.