India is one of the few countries that has made CSR activity for big companies a mandatory regime. It has done so that businesses don't take undue advantage of the environment, improve customer satisfaction, and help better investor's morale. On April 1, 2014, India became the first country to legally mandate corporate social responsibility. The new rules in Section 135 of India's Companies Act make it mandatory for companies of a certain turnover and profitability to spend two per cent of their average net profit for the past three years on CSR. Now, the movement is transitioning from its reliance on purely voluntary activity to the greater use of laws.
The push for legalisation came because voluntary CSR presented problems such as free-riding, CSR facade and false disclosures. Governments are now modifying their "capitalist" approach and considering legal rules. Previously, the companies use to invest in activities which might not be much beneficial for society. Schedule VII of the Companies Act, 2013 lists all the activities which will be considered under CSR. The law in its current form is failing to promote CSR activity. Its poor design and lack of clear obligations, set in a milieu of poor law enforcement, is also not generating an ethical obligation to obey the law in spirit.
It is suggested that it’s time to reform laws – to socialise corporations and CEOs in terms of their legal obligations and the benefits of CSR activity, to design enforcement mechanisms, and to generate ethical behaviour. India’s legal provisions contain vague language and permit a high degree of self-interpretation that undermines legislative intent.
The provisions also appear to be formulated based on a traditional understanding that top management is solely responsible for ethical behaviour and CSR activity, without making the connection between the company and its stakeholders. There is no explanation for how the CSR provision fits within the wider ambit of a corporation’s role and purpose, the duties expected of its directors, or the information it is expected to disclose.
Until such time that the law is made more precise and backed up by effective enforcement and penalties for non-compliance, it will not promote CSR or make companies engage more with stakeholders. Section 135 is merely a stealth tax and will impose unnecessary compliance burdens.
Inequality in India, which was already high, has increased even more. The CSR law does not go far enough in reducing inequality and helping the disadvantaged. Without a persistent apparatus, it is unlikely that the law will result in widespread compliance and real effectiveness. In other words, “required" CSR will remain largely voluntary, but give the illusion of progress.
Innovative Financial Advisors Pvt. Ltd. (Fiinovation) is a global consulting firm operating in multiple disciplines of the social development sector with an emphasis on Corporate Social Responsibility (CSR) and Sustainability. Fiinovation offers end to end CSR consulting services and simplified solutions that has helped various corporations channelize their resources for the upliftment of community on societal, economic and ecological aspects in accordance to their CSR charter. Since 2008, Fiinovation has grown phenomenally and has made a benchmark in the sector through its service quality. It has been able to bridge the gap between businesses and communities through value-based CSR programmes in association with credible civil society organizations on pan India basis in the field of health, environment, education, and livelihood
Fiinovation CEO: Dr Soumitro Chakraborty, Chief Executive Officer of Innovative Financial Advisors Pvt. Ltd. (Fiinovation), was conferred with ‘CEO of the year’ award at the 8th World CSR Congress held in Mumbai on February 18.
The World CSR Congress this year focused on the integration of Sustainable Development Goals (SDGs) incorporate strategies, innovation, and strategic alliances. The award recognizes fiinovation projects exemplary work in the social development sector and noteworthy CSR and sustainability programmes.
Fiinovation Delhi NGO address - 24/30, Ground Floor, Okhla Industrial Estate Phase 3 Rd, New Delhi- 110020.
No comments:
Post a Comment