Corporate social responsibility (CSR) in India has evolved since 1965 when Prime Minister Lal Bahadur Shastri, at an event inauguration in New Delhi, urged the corporate fraternity to fulfil its obligations towards customers, workers, shareholders and the community at large. In 2009, the voluntary guidelines on corporate governance and CSR were disseminated by the Ministry of Corporate Affairs in the wake of a scam in a major enterprise. These guidelines were later included in the Companies Bill, 2011, that got promulgated as the Companies Act, 2013, based on several modifications. This Act made CSR mandatory. Perhaps the reason for imposing a statutory obligation was the need to strengthen trust between the business community and the society that had taken a beating owing to various scams. The eroding trust had spurred some segments of the society to discredit and disparage even the ethical corporate achievers and wealth creators.
As per the Act, every company with net worth of Rs 500 crore or more, or turnover of Rs 1,000 crore or more, or net profit of Rs 5 crore or more during any financial year is required to spend on CSR at least 2 per cent of its average net profits made in the preceding three years. The spending is to be undertaken in conformity with a policy formulated by a committee of the board comprising three or more directors, including at least one independent director. An ideal policy is steered by a company's CSR vision statement and includes selected areas of social responsibility, budget and its apportioning, governance structure, roles and responsibilities along with a monitoring and reporting architecture. As mandated, it should be regularly brought before the board.
The amended Schedule VII of the Companies Act, 2013, lists the activities which could be included by companies in their CSR policies. These activities have been determined, keeping in mind people's aspirations and the need to preserve our planet. When it comes to people, the emphasis is mainly on poverty eradication, potable water, sanitation, preventive healthcare, and gender equality and empowerment through education and employment-centric vocational skills. As for the planet, the Schedule highlights the need for environmental sustainability, which has acquired great significance nowadays. Even Prime Minister Narendra Modi, while highlighting his goals for 'New India' during his Independence Day address, emphasised, inter-alia, the perils of climate change and the dire need for water conservation. It is about time that we, as a nation, realise that continued global warming will create catastrophic conditions, causing widespread loss of human lives and property. We have already witnessed the fury of nature in some parts of our country.
Even as companies pursue their ongoing CSR projects, it may be prudent to take note of both stated and implied goals and ideas of PM Modi. Statements made from the ramparts of the Red Fort are well processed and provide a broad strategic framework for various stakeholders to evolve suitable strategies and implementation plans. Although concerned ministries will pursue his goals and unique nation-building ideas, some programmes need to be included in CSR policies and must be started immediately. These include freeing India from single-use plastic, ensuring water conservation and making it available to all households, implementing small family norms, eliminating the use of chemical fertilisers and making India an open-defecation-free country. According to open-source data, several companies are already committed to some of these goals. However, there is a need to have every company on board. Although the total CSR amount available with the business community is a drop in the ocean compared to national developmental budget, its judicious spending would have a meaningful impact on people, supplement the government's efforts and help preserve our planet to some extent.
Besides provisioning for requisite facilities and infrastructure, action plans for additional activities would necessitate a comprehensive public information campaign aimed at raising awareness levels and managing perceptions. People follow new initiatives only when they understand the shortcomings of prevalent systems and practices and begin to realise the benefits of change. Corporate houses should consider constituting small teams possessing excellent interpersonal and conceptual skills for not just influencing people's behaviour but also for developing the prowess to implement additional activities in concert with various stakeholders. Wherever it is necessary, specialists' services from medicine, agriculture, rainwater harvesting, waste management and other fields should be obtained. For capacity maximisation, collaboration with like-minded partners should be considered, albeit with due diligence. Current provisions of the law also allow a company's board to decide on undertaking CSR activities which have been approved by the CSR committee through a registered trust, society or a company established by the enterprise or through its holding/subsidiary/associate company.
Ideally, all major CSR activities should be implemented in concert with state governments to maximise value for the identified communities and avoid duplication of efforts. Programmes focussing on neighbourhood communities help develop mutually beneficial relationships and strengthen trust. As a matter of principle, the responsibility of running all projects should ultimately be passed on to the community. For instance, the Indian Army undertakes its civic action projects in insurgency-afflicted areas with a philosophy of helping people to help themselves. In such cases, the consistent endeavour is to empower people with the necessary skills and expertise so that they can run the projects on their own. The success of various programmes should be gauged by their impact on people and the environment and not just by the output. People's ownership of the projects is an essential benchmark of success.
The CSR teams of India Inc., given their people-friendly endeavours, are much respected and listened to by the communities they serve. So, these teams are ideally placed to change the perception and behaviour of the people concerned, which is a prerequisite for effectively implementing any new social programme. Undoubtedly, the contributions of the corporate world towards nation-building have been phenomenal. Its leadership, CSR teams and countless unseen hands which work tirelessly for the success of various initiatives, rightfully deserve special kudos.
The writer is former Chief of the Indian Army and now sits on a company's board.