Even as the new Companies Act rolls out stressing inclusive growth, there is cynicism and resistance by bigger, richer companies at the manner in which they are being bulldozed to spend two per cent of their profits towards corporate social responsibility (CSR). "We are already spending more than two per cent, some even 10 per cent. Tap into corporate minds not just their money" for better management of development programmes, is one reaction.
Other reactions vary from "the government has not shown vision in drafting the Companies Act-the framework could have been better" to "laws cannot change the ethics of corporations." The primary role of corporations is to ensure that shareholders gain, but we also want society to benefit.
An estimated 8,000 companies will be liable to CSR. The amount garnered for development is expected to be between Rs 15,000 crore and Rs 20,000 crore.
Corporate houses fear that the mandatory funding will over time be regulated and grabbed by the government to run programmes that are their responsibility. A CSR head, who does not wish to be quoted, says, governments are asking companies to put money into welfare activities like building toilets and providing drinking water, which are primarily their responsibility.
It is like an additional tax on the corporates, was another response. The inclusion of support for relief funds like that of the PM and CM raise questions of accountability, political patronage and fear of corruption. Going against the spirit of the Act, the Chhattisgarh government has even announced the mandatory CSR would go into the CM's Community Development Fund.
Doubts are being expressed about more money coming into the development kitty - not because the corporate intent is weak, but because many of the companies operate in industrial and urban areas and not in rural outback where development is needed.
There is also a possibility that companies putting in money to recharge groundwater and other such extension work, which for many is really a business imperative, will show it as CSR. Companies that work with local communities do so to win goodwill around the workplace rather than because the law demands it.
K K Upadhyay, who heads FICCI's CSR division, says neither repackaging of existing programmes nor "compliance" to a business requirement can be shown as CSR. Bringing in machinery for generating clean energy is "compliance not CSR" because efficiency improves energy production as well as profits.
Schedule 7 lists several areas in which corporates could invest but Upadhyay gives priority to employment. Just a small percentage of the population in tribal and rural areas is employable because they have neither the skills nor the discipline to work for the stipulated seven to eight hours at a stretch. Skill development, employment generation and management of natural resources are FICCI's area of focus. Mining and manufacturing companies need to ensure employment for local communities.
CSR should be part of the business strategy of corporates says a company that deals with milk and nutrition supplements. From CSR it has evolved to CSV (creating shared values). According to the CSV concept 'for business to be successful it must consider the needs of two primary stakeholders - the people in countries it operates and its shareholders.'
As business strategy, there is collaboration with schools and college across the country to create awareness on health and nutrition among adolescent girls. This company has participated in the Science Express Train by putting up an exhibition on nutrition; it has been supplying drinking water for village school children and talking to farmers and women on water conservation. Village women are being encouraged to be financially independent through good dairy practises. The economic growth of 100,000 dairy farmers of Moga who provide milk to the company is reflected in the story of Jitendra Singh who started his association with the company in 1996 with just two cows. Today he owns 78 cows.
A bottling company sponsors FIFA (football) and supports the Olympics to promote health and wellbeing; it supports India's equivalent of the Guinness Book of World Records; programmes in 250 schools; recharges groundwater through rainwater harvesting and improves environment through tree plantation. Under the Women Economic Empowerment initiative, some 5 million women will become small business women selling and distributing the company's beverages. To operate in areas where there is no electricity, they are given solar coolers chilling beverages. To market its popular mango drink, it encouraged farmers to adopt ultra high density farming practises (more trees in less space) of a selected pulpy variety. Combined with drip irrigation, mango yields increased and farmers as well as the company benefitted. To earn credit for gender sensitivity, 15 to 20 per cent of the 50,000 farmers it plans to support will be women. Many of these well thought out CSR activities are indeed good business strategies.