Corporate social responsibility (CSR) initiatives and philanthropy are not the most important effect of business on society, noted expert on competitive strategy Michael E Porter has said.

They are important effects of business on society, but not the most important, Porter said in an address at the Porter Prize 2014 event organized by Indian Council on Competitiveness here.

“The way business affects society most is through business. These include the way we produce, the raw materials we use and the way we create and put together better infrastructure in communities we do business in ‘, he said.

The problem with CSR is that it is not “self-sustaining”, said Porter, who is a Professor at Harvard Business School.

India is among very few countries that had legislated CSR as a mandatory activity for corporates.

Companies that fall within the ambit of CSR provisions of the new company law need to spend 2 per cent of their net profits on CSR.

It is estimated that nearly 16,000 companies out of total universe of 11 lakh companies registered in India will fall under the mandatory CSR net.

Simply put, the CSR spend obligation under the new company law will fall only on 16,000 companies.

SOCIAL PROGRESS

Porter also said India — when compared with other countries with similar GDP numbers — is underperforming on social progress.

“The social progress in India is less than you would expect, given the level of average income per person in the country.

I do take it into consideration that it’s a complex country with lots of States and city level, but these indicators do give an important perspective”

Srivats.kr@thehindu.co.in

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