The ministry of corporate affairs’ idea to make a mandatory threshold for CSR expenditure?2% of profit?along the lines of what the department of public enterprises prescribed for the central public sector enterprises, was hotly opposed by private businesses and industry. However, it is apprehended in many quarters that in the absence of a mandatory provision on CSR for the private sector, the public sector will remain at a disadvantage.
Anyway, the ministry of corporate affairs is coming up with a bill that provides for CSR in the Companies Act. It has already come out with the revised Voluntary CSR Guidelines in 2011, which are expected to induce the corporates for greater CSR engagement. The government’s message is that since it does not have the resources for taking care of social sector needs like education and health, corporates have to come forward and share the responsibility.
While this underlines the government?s intent, the CSR activities of Indian businesses may be clubbed into five major groups. The first group includes companies which are not interested in CSR as they do not consider it of any use. This group is dominated by SMEs and also large trading companies that do not have much public interface.
The second group of businesses are those which consider CSR as an avenue for saving tax, and they engage in CSR activities in a manner that tax is saved to the maximum, irrespective of whether the social interests are served or not.
The third group believes in philanthropy and see CSR as ad-hoc charity?donating to various groups and activities according to the need of the situation and orientation of the leader, irrespective of its connection with the business activity. This group includes mid-sized to large companies.
The fourth group comprises large companies with large profits, but the benefits of CSR is not appreciated and considered avoidable to the possible extent.
The last group, the fifth, includes businesses, both large and small, which appreciate the business benefits of CSR and try to internalise CSR in their business practices. In other words, CSR is in their business DNA.
Looking at the national CSR scene, the fourth group of companies, the number of which is large and growing, is the pivotal group, which is sitting on the fence. The statutory provisions are expected to influence this group the most, by inducing them to jump the fence and join the fifth group, to infuse CSR in their DNA.
Before going ahead, we need to appreciate the cause of this group of businesses staying without any CSR engagement. The primary reason for this is the lack of orientation of the top management team. The orientation is influenced by knowledge and exposure. The top executives of these businesses constitute professionals with expertise in different business functions but with very little social sector expertise or exposure. NGOs are not comfortable dealing with such corporate executives. This gap in perception and communication can be bridged only through CSR professionals, who talk the language of both business and society, and can effectively communicate with business and social leaders with ease. If, these CSR professionals come to the boards of large companies to influence the perception of the directors and develop effective communication channels with social sector agencies, it would be lead to mutually beneficial, win-win relationships.
The CSR director on the board should be a strategic management expert with exposure to both business and social sector activities and processes and the capacity to strategise. Essentially, he should be able to effectively transform the DNA of the business from a non-CSR business to a CSR-centric business.
To promote CSR, all stakeholders have to appreciate the need for a CSR director on the boards listed companies, to start with. The experience can be used to gradually cover non-listed companies. It may be noted here that change is more influenced by men than money.
Ranjan Mohapatra is a management & CSR consultant