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CAN CSR BE MANDATORY Kuldeep Indeevar FMG-18 A 91027 

Likelihood

The government is likely to make it mandatory

for big companies to earmark at least 2 per cent

of their net profit for corporate social

responsibility (CSR) activities in the new

Companies Bill. The new provisions will apply to

companies having a net worth of Rs 500 crore

or more, or a turnover of Rs 1,000 crore or

more, or a net profit of Rs 5 crore or more, in a

year. Directors will have to make suitable

disclosures in their reports to members. The

committee feels that separate disclosures in

their annual reports indicating the company

policy as well as the specific steps taken for CSR

will be a sufficient check on non-compliance.

With this context we present following

arguments.

Won’t Work

Philanthropic organizations should be allowed

to operate reasonably freely and not with

control to my mind. When governments start

controlling things, things don’t work as well as

when people are motivated to do these things.

Voluntary compliance are always better than

forced, companies who do not want to do it

forcefully will find a way out of it, it should be

proactively done by business community.

The whole thing is, how the markets look at

companies in terms of their CSR initiatives will

be a better way of getting people to engage in

CSR activities than making it mandatory

because we have seen it that when R&D was

 just engaged in because it was a good tax break

nothing happened. But when people really start

believing in R&D everything is possible.

If businesses are forced to undertake CSR, then

it’s probable that at least some corporations

will begrudgingly find ways to shirk this

requirement with as little effort as possible.

Dominant Logic

The idea of businesses investing in essential

services that allow them to conduct their day-

to-day operations, but at the time of making

this investment, with a little creative thinking,

could they spend a little extra and build the

infrastructure or service with the larger

community in mind.

For example, What about a company that builds

(or rents) a new corporate office and allows a

not for profit charity to use some space for its

needs? It may be more efficient than donating

money to a charity so that they can pay their

rent. Or, a company only needs some jobs filled

part-time. A marketing person may only be

needed part-time, but the corporation may hire

them full time, and donate the left over hours

to some corporate social responsibility jobs.

Diluting Conviction

Companies that voluntarily undertake corporate

social responsibility activities says something in

its own right about the companies that do

contribute to society in the absence of a

mandatory policy.

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CAN CSR BE MANDATORY Kuldeep Indeevar FMG-18 A 91027 

We don’t know what will be achieved, the

history of this country and the companies out

here and many other people would have shown

we try and do this people will find a way out. It

is not about ticking the box, it is about the belief 

that this will be good for us, the more education

that we can have around this issue, the more

conviction that we can build around this issue

we will see a difference. Not long ago, at all

times businesses realize that they must

contribute to society, but there was a period

when it was all about charity and philanthropy

etc.

It is our belief and a point of view that these

circles of business logic and social responsibility

are coming closer and closer together and we

think today that there is a small intersection

which has already happened between these

two. What does it mean? That in the small

intersection there are such approaches which

are doing well for business and doing good to

society. But the intersection is still small today

which means if you are not disciplined enough

and if you are intellectually lazy you could find

many strategies which are doing good for

business without doing anything for society and

doing any good for people.

The Word

A rules-based approach to CSR, as proposed in

the Bill, has its advantages, but CSR ultimately

depends on the personal integrity of the people

who manage a company. Investing at least 2 per

cent of average net profits in CSR may be hard

to quantify but all will agree that CSR is not a

neutral topic. It is not an unjustified intrusion

into corporate affairs.

References

I.  "Is a Compulsory CSR Cess a Good Idea?" Business

Standard :: Business News, from the Business Standard .

Web. 09 Jan. 2011.

<http://bsl.co.in/india/news/iscompulsory-csr-

cessgood-idea/408111/>.

II.  "Mandatory CSR Not a Great Idea, Feels India Inc -

CNBC-TV18." BSE Index and Securities Information.

Web. 09 Jan. 2011.

<http://www.moneycontrol.com/news/business/mand

atory-csr-not-great-ideafeels-india-inc_475926.html>.

III.  "The Telegraph - Calcutta (Kolkata) | Business | Move

to Make CSR Mandatory." The Telegraph - Calcutta

(Kolkata) | Frontpage. Web. 09 Jan. 2011.

<http://www.telegraphindia.com/1100911/jsp/busines

s/story_12923055.jsp>.

IV.  "Unilever to Halve Ecological Impact by 2020: Harish

Manwani - CNBC-TV18." BSE Index and Securities

Information. Web. 09 Jan. 2011.

<http://www.moneycontrol.com/news/business/unile

ver-to-halve-ecological-impact-by-2020-harish-

manwani_500360-1.html>.