CSR : Percentage Debate

Neither voluntary, nor mandatory, somewhere in between! We are in a battle of brains. The debate is turning interesting. While Govt. clearly wants Corporate Social Responsibility (CSR) be in place in letter and spirit, it is giving space to corporate houses to align itself to new realities. Minister of Corporate Affairs is categorical in his statement, “There can be business without charity. There can be charity without business. But there can be no business without orporate social responsibility.” He removes the fuzziness about CSR in saying, "To say that you will protect your labour force with proper equipment and proper clothing is not CSR, but giving people of the area similar equipment because they are living in an inherently dangerous area may be corporate social responsibility."

Now comes the percentage debate. The reaction from corporate bodies are interesting. Reproducing it from today's ET.

Govt won’t set CSR floor for India Inc

Firms Won’t Need To Spend 2% Of Profit

Souvik Sanyal & Deepshikha Sikarwar
NEW DELHI

THE government has watered down its proposal on corporate social responsibility (CSR) by not including a provision in the Companies Bill that would have mandated firms to spend 2% of their profit on social causes.
The final proposal only requires a company to have a policy that targets to spend 2% of its profit on CSR. The bill, however, seeks to make it compulsory for a company to give details of the money it has spent on CSR in its annual report.
“Companies will have to have a policy as to how they will spend 2% of their profit on CSR and there must be a disclosure if the money has been spent,” Corporate Affairs Minister Salman Khurshid told ET. “You can say it is not entirely voluntary, might say it is not mandatory. It is in between somewhere.”
The proposal is a dilution of the government’s stance before the Parliamentary Standing Committee on Finance that it was considering making the CSR spend mandatory.
The government had suggested that it could ask companies having a minimum net worth of 500 crore, or an annual turnover of 1,000 crore, or a net profit of 5 crore in a year to spend at least 2% of their average net profit during the three preceding fiscals on CSR.
While the general view is that companies would welcome a dilution in the government’s stance, some in the corporate world say there is actually no dilution.“This is mandating a 2% CSR spend without actually mandating it,” the representative of an industry body said. CII for voluntary CSR spend
“How can a company declare in its annual report it has not spent on corporate social responsibility?”
In a 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. Khurshid said the government could give incentives to companies at some stage.
“There are no built-in incentives... But let’s see, in future we may look at some incentives,” he said adding that his ministry was still working on the idea of CSR credits and their trading.
The actual spend of most companies on CSR is well below the 2% threshold, and much of it would not be considered if a strict definition is applied.
But central public sector enterprises have a policy that requires them to spend 0.5-5% of their net profit on CSR activities.
The minister said he was not in favour of linking CSR to a company’s area of operation. “To say that you will protect your labour force with proper equipment and proper clothing is not CSR,” he said. “But giving people of the area similar equipment because they are living in an inherently dangerous area may be orporate social responsibility.”
“You have to draw a line between charity, philanthropy and CSR,” Khurshid said. “There can be business without charity. There can be charity without business. But there can be no business without orporate social responsibility.”