When one thought that all that could be said about corporate social responsibility (CSR) has been said in innumerable treatises and articles, it has suddenly got second wind, thanks to the Government at the Centre. Its move to incorporate in the new Company Law a mandatory requirement that companies should spend at least two per cent of their net profits on activities falling within the ambit of CSR, has given rise to a (literally) furious debate among think-tanks and federations of chambers of commerce and industry about the wisdom of the proposed measure, both in terms of feasibility and enforceability.

Ultimately, the Government, realising that discretion was the better part of valour, has backtracked, with a tame suggestion that companies could at least disclose to their stakeholders, presumably in their balance-sheets and the chairman's address, the amounts earmarked and spent on specified CSR-related schemes.

The core element of the objection was that, CSR being all things to all persons, was an elusive proposition, not lending itself to any precise interpretation and that this will make it difficult for companies to decide which activities fell within the nature and scope of CSR and which didn't.

There was also the philosophical or ideological (whichever way one prefers) resistance to any inroads the Government wants to make into domains (such as apportionment of profits for various purposes, whether for advancing business interests or carrying out CSR) which ought to be left to the discretion, good sense and judgment of the companies and their stakeholders. There was also a third argument which was as subtle as it was ingenious: Nothing more is necessary for a company to do by way of discharging its CSR than to conduct its business in tune with laws of the land and achieve wealth-creation and wealth-addition by sticking to the criteria of high productivity, distributable surplus, quality of goods and services, augmenting the Government's, that is, the people's coffers in the form of taxes and duties.

CATCH-ALL COMPLEXION

In this view of the concept, as a paper published in 2006 in the Harvard Business Review titled The Link between Competitive Advantage and CSR (and referred to by India Knowledge@Wharton in an article dated August 2, 2011) points out, creating shared value (CSV) should take precedence over CSR.

“CSV should supersede CSR in guiding the investments of companies in their communities…CSV is integral to a company's profitability and competitive position. It leverages the unique expertise and resources of the company to create economic value by creating social value.” Ergo, no allocations or provisions will need to be made in the name of CSR.

At some point, Ernst & Young jumped into the fray giving CSR a confounding catch-all complexion equating it with corporate responsibility, corporate citizenship, sustainable responsible business, corporate social performance and corporate sustainability.

The Institute of Chartered Accountants of India (ICAI) too, not to be left behind, is said to have set up a subcommittee to define CSR, thereby raising a fresh controversy in the bargain questioning its jurisdiction and competence to do so.

Trading definitions

In short, everybody is having a jolly good time trading definitions and parading erudition. For some, philanthropy is part of CSR, while for some others, vocational training programmes for employees and even subsidised canteen lunches could be it.

The K@W quotes Bill Gates and Warren Buffet that now the effort by companies should go beyond CSR into CSC (Corporate Social Compulsion).

The Government, for its part, will certainly feel happy if the corporates take over its responsibilities for health, social safety net, education et al under the garb of CSR.

Is there any need for these hair-splitting disputations? Is it too hard to recognise CSR when one sees it? Actually, I would call it CSD (Corporate Social Duty) which brings in the sense of social conscience and social commitment.

From that standpoint, I am all for the Government requiring the corporates under the law to set apart a stipulated quantum in fulfilment of that commitment.

In fact, I would increase the prescribed share of profits to be set aside from a mere two per cent to five per cent.

Related Topics
comment COMMENT NOW