India CSR: Will the Real CSR Policy Please Stand Up?

It appears that the ruling on Indian CSR has not yet drawn to a complete close. Last week it was announced that CSR will continue to remain voluntary but guidelines will be given on where companies can direct CSR spend. This week however, Mr. Praful Patel Union Heavy Industries Minister is battling to make CSR mandatory. He recently said, "I think the corporate sector cannot avoid the responsibility of bringing about change in our country and should support initiatives not only of the Government but also outside the Government."

Patel made his comments after inaugurating the National CSR Hub at the Tata Institute of Social Sciences (TISS) in Mumbai. TISS will act as a CSR think-tank and undertake research for projects. According to the press release, possible focus of CSR initiatives will include adoption of villages, pollution control, preservation of environment etc. As per the CSR guidelines drafted last year by Department of Public Enterprises (DPE), Central Public Sector Enterprises would be mandated to create a budget as a specified percentage of net profit of the previous year. TISS will be in charge of monitoring these CSR activities. “We have people working for CSR programme. But looking at the need, we will recruit more people who will be dedicated to the project,” said Prof S Parasuraman, director, TISS. Projects that are identified will then be executed by specialized agencies.

During the press conference after the inauguration Patel opined that the  purpose of mandating companies, both private and Government-owned was to deliver the benefits of overall economic progress which the country has made, to the backward people. He also affirmed that the Department of Public Enterprises under his Ministry will be working "proactively" and will see to it that the state-owned companies meet their CSR targets.

It is still largely unclear whether Patel intends to only include public sector units in his CSR initiatives. It is said that he hoped that the private sector will also share a part of their profits for CSR, as the government or PSEs alone cannot carry on such activities to support sustainable development and inclusive growth. Yet, proposals for mandatory CSR have largely been opposed by Indian companies.

India along with the rest of Asia needs to focus on long-term investment in sustainability. CSR efforts need to be consolidated not just across the public sector but also the private sector. Both sectors have equal responsibility towards socio-environmental issues.

CSR efforts should be thought of in such a manner so that they are:

  • Measurable
  • Consistent
  • Comparable
  • Reflect industry-specific operational realities
  • Weighted on bottom-line impact
  • Forward looking

Again I say, insisting on mandatory CSR will not meet these objectives.