Monday, September 16, 2013

Kill the CSR - Chattisgarh Government Policy

The Hindu in its September 16, 2013 edition published a story on the CSR policy of the Chattisgarh government under the title 'Chattisgarh wants all CSR spending to go to CM Development Fund'. According to the report, the Chattisgarh government has advised all the private sector companies that are covered under the CSR provisions in the Companies Act 2013 not to undertake CSR activities on their own. They have been asked to contribute the amount (two-percent of the average net profit of past three years) to the CM's Development Fund. Such a contribution will be considered as CSR spending for the purpose of the Companies Act 2013. But the policy is ridiculous.

A directive to contribute to a fund created by the governmnet tentamounts to imposition of tax. This is not the spirit of CSR.

When a company executes CSR projects, either using its own resources or in partnership with another organisation that has experience in executing social projects, it derives number of benefits. It can use CSR projects to develop skills that are required in its business, which serve the both the community and the business. It can build social and relationship capital and earn the goodwill of the local community through developmental projects. Through engagment with stakeholders it can feel the social undrcurrents and social needs that help in identifying business opportunities and threats. It can involve employees in deciding CSR projects and executing them. This helps to sensitise employees to social issues and to develop leadership qualities in them. There are numerous other benefits that flow from CSR initiatives. The Chattisgarh CSR policy robs companies of those benfits.

Companies also should control the temptation to include purely business expenditure in CSR spending. Companies should also not include in CSR that are simply business initiatives. For example, engaging village women to sell company's products cannot be considered a CSR initiative, although it enhances earnings of women and to an extent, empower them by providing a kind of financial independence. Similarly, activities that benefit employees and their families are not CSR.

There is a great need to develop common understanding of CSR.

No comments:

Post a Comment