Corporate Social Responsibility

• Official definition of CSR
  • The World Business Council defines CSR (Corporate Social Responsibility) as “the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large”.
  • Accordingly, corporate responsibility involves a commitment by a company to “manage its role in society as a producer, employer, marketer, customer and a citizen in a responsible and suitable manner”.

• Government moves on making CSR mandatory
  • The Companies Bill 2009, which is likely to be tabled in the forthcoming budget session, has proposed that companies will have to earmark 2% of their average net profits during the preceding three years for corporate social responsibility spending or disclose to their shareholders if they fail to do so.
  • The government had earlier taken a similar stance before the Parliamentary Standing Committee on Finance. It had told the panel that it could ask companies having a minimum net worth of Rs 500 crore, or an annual turnover of Rs 1,000 crore, or a net profit of Rs 5 crore in a year to spend at least 2% of their average net profit during the three preceding fiscal years on CSR. However, later the ministry diluted the proposal following intense lobbying from the industry.
  • In an earlier presentation to the government, the Confederation of Indian Industry had demanded that the new law should not specify an amount to be spent on CSR, and that a decision on the actual spend be left to company boards. The industry body had suggested that CSR should be voluntary and backed by a system of state recognition and honour.
  • To check non-compliance, the parliamentary committee had recommended separate disclosures by companies in their annual reports through a CSR statement indicating the company policy as well as specific steps taken.

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