Corporate social responsibility: Perspectives in Indian context

Abstract

Corporate Social Responsibility (CSR) has become one of the most talked about subject today with the inclusion of mandatory CSR in the New Companies Act 2013, which has been enforced from 1st April 2014 in India. All companies with turnover of Rs.1,000 crore and more - or a net worth of Rs.500 crore and more or net profit of Rs.5 crore and more - will have to spend at least two percent of their three-year average profit every year on CSR activity. India is the first country in the world to mandate Corporate Social Responsibility (CSR) spending. The paper aims at presenting an overview on the New CSR provision envisaged under section 135, further, this paper investigates the spending pattern of Indian companies contributing towards CSR activities. The study is based on Secondary Data, presented in tables, collected from top 20 Indian Companies from their respective sectors ranked by Economic Times. The Profit after Tax from the Annual Reports of Financial Year 2009-2010, 2010-2011, 2011-2012 and 2012-2013 were considered to assess the difference between actual and stipulated spending. The finding reveals in most cases, companies do not even spend 1% of their PAT on CSR. With the Companies Act, it will mean more than doubling CSR budgets. Companies should look at CSR as a 360 degree perspective - including their business processes, people & planet policies, regulations and compliance. Right now it is largely charity and donations. While the introduction of CSR provision in the Companies Act is a welcome step, however the current discourse of corporate philanthropy without giving any express autonomy to companies in choosing their CSR activities may not yield the desired outcome. Thus, the policy-makers should frame rules for social business projects instead of eliminating it from the scheme of CSR regime altogether.