Compulsory Corporate Social Responsibility (CSR)?

By Astitwa:

On January 24, 2012, as reported by moneycontrol.com (http://www.moneycontrol.com/video/cnbc-tv18-comments/companies-bill-mps-root-for-compulsory-csr_656491.html), the MPs and Member of Corporate Affairs (MCA) met to discuss the Companies Bill, in which it was proposed to make CSR a compulsory activity for every firm. As expected, there was powerful lobbying from both sides and the bill raised many questions. While some members wanted CSR to be compulsory, others found it to have negative impact on unlisted companies. Earlier, on September 5, 2011, the government had made it clear that CSR was not compulsory for all firms and it was just limited to PSUs and state-owned companies (Full report here).

So, should CSR be made compulsory? Or, it must be a matter of choice? Should this issue be politicized killing all scope of healthy debate? Let us discuss these million dollar questions in more detail.

Corporate Social Responsibility (CSR) has been a business theme in the corporate world ever since the inception of the ideals of capitalism. However, it has been only in the past decade that CSR has been pushed forward by social scientists, corporate tycoons, state governments and the policy architects as the dire need of the society. This has led to the adoption of CSR practices in several corporate companies on a large scale. So, when we discuss the hullabaloo regarding CSR being made a compulsory task for business units, we should keep in mind the fundamentals of economy and ethics, in our profit-driven minds.

The unprecedented development that the world has witnessed in the past fifty years has come at the cost of depletion of natural resources. Corporate companies have been struggling to maintain a synergy between sustainable development and economic growth. As we all know, we have lost severely in creating a sustainable world. Unchecked and unregulated industrial growth in the past decades, accompanied by poor CSR policies has led us to this pathetic situation today. Our environment is polluted, water is contaminated, deforestation has eaten our greenery and we are left with nothing but scary results of erratic monsoon and critical climatic changes.

If we view the stance of the Indian government to make CSR a compulsory initiative for every corporate firm in this light, we can justify that the decision is commendable. In fact, it is the need of the hour to mobilize herculean efforts from corporate companies, both medium and large scale, in the field of CSR. Our environmental degradation has resulted due to poor understanding and integration of CSR as an excellent business theme.  The corporates must not view CSR as a government intrusion in their profits or corporate affairs. Donating a meagre 2% of the net profits of the company in the sustainable development of the society is definitely not a waste but an investment, which is bound to return its benefits in the form of enhanced living.

Corporate companies must realize that today, CSR is more of a responsibility than an obligation. It is a commitment, on the part of the company to the stakeholders and the community that the society is being cared. Integrating sound CSR practices in the business model of a company gives it an edge over the competitors because CSR initiatives act as a buffer, a self-regulating mechanism for the corporate firm to review its policies and ensure that it is in tandem with the legal and ethical policies of the government.

Compulsory CSR also acts as an impetus for the companies to incorporate CSR policies in their business model leading to a sustainable planet, wherein the triplets of profit, people and the planet is kept in mind, in planning every business model. CSR is truly the ideal standard to benchmark the ‘socially acceptable behaviour’ of corporate companies. It is integrating business ethics, commercial success and well-being of the society.

While corporate bigwigs have been engaged in CSR for decades, still it requires a sea change in the attitudes of several other companies in our country towards CSR practices.

Today, we need to redefine CSR to include it in a broader framework of business and corporate values. Corporates must integrate CSR into the core values of their missions. The CSR department should not be a dull team, isolated from the rest of the company. It should be a dynamic body and it must not function merely like any other management wing. The principles of CSR must be integrated into the values of the company and only then it is possible for the firm to truly create a successful CSR initiative.

The challenge in the current era is to apply sound CSR practices without compromising on the profit part. So, if BMW is launching a luxury car, it makes sure that the technology is par-excellence to meet the objectives of sustainability. If Nokia is selling a billion cell phones every year, it ensures that it keeps the planet green by well organized recycling plans and initiatives.

A bill by the government in this directive will surely be a legal and official announcement for creating effective CSR plans. However, we must not forget that no paper or official order can be achieved without the honesty and integrity of the people at the helm of power. So, even if government makes plans for ensuring sustainability, it will be defeated if corporates try to find the loopholes in such policies and bend them in their favour. The dreams of CSR go far beyond profits and money. If corporate companies and commercial units can realize this, bills related to compulsory CSR activities will not be seen as threats but as an asset to make the economy stronger and value-driven. That will raise the overall health of the society and even the economy. It depends on us what we really want to choose. It is high time that we discard the ideals of Gucci capitalism and accept sustainable and responsible capitalism as the new order of the world economy.