The New Companies Act to change the CSR scenario in India
The Companies Bill, 2011, aimed to give a modern legislation for growth and regulation of corporate sector approved by the Union cabinet is set to become an Act during the Winter Session of the Parliament. The Act makes companies answerable towards corporate social responsibility and makes it mandatory for companies with a net profit of Rs 5 crore or more to spend 2 per cent of its Profit after tax (PAT) on CSR informed Dr. Bhaskar Chatterjee, IAS, Director General & CEO, Indian Institute of Corporate Affairs, Ministry Corporate Affairs, Government of India in his address here at the 13th Annual Greentech Global Conference on Environment and CSR at Novotel Hyderabad Airport, Shamshabad today. Not spending or even failing to report the same in the report to Ministry of Corporate Affairs (MCA) attracts fine of Rs.50 lakhs and even imprisonment of 2 years informed Dr. Chatterjee.
Earlier in 2009 when the first set of guidelines were issued, it was just few sentences was just imploring the organisations to do something. But now the scenario has changed, the companies are not just answerable to its shareholders but also to its stakeholders, the people who are affected by its business. To give a better understanding on the subject of CSR Dr. Chatterjee threw light on what is not CSR. Cheque-book charity where you give a cheque to a temple or an organisation and forget and think that your CSR activity is over is not CSR. Mere cutting cheques is not CSR, he said. Anything done to your employees is not CSR, it is a human resource activity. Anything done by volunteers of your organisation cannot be counted as CSR. CSR must be conducted by professional implementation using implementing agencies. Any activity that is not a project is not CSR, the Project should have a starting time and an ending time. Mere monitoring or documenting with pictures of a program or activity is not CSR. And lastly that activity that has not been given board approval, passed by the board and does not have a board resolution number is not CSR. These are the six golden rules for the CSR activity to bear in mind he said.
The proposed Bill also lists the specific activities which qualify as CSR initiatives or programmes. Take for example, eradicating extreme hunger and poverty, promoting education and gender equality, empowering women, reducing child mortality, improving maternal health, combating the human immunodeficiency virus and the acquired immune deficiency syndrome, malaria and other diseases.
We will soon have a meeting with the Governor of Reserve Bank of India urging them to make these rules/guidelines also applicable to all the banks in the banking sector, he said.
Elaborating on these points as the time has come to shift gears when the companies Bill will become an Act and clarified the ambiguity on what is CSR. The CSR frame work of this country is changing rapidly, companies are setting up CSR Departments and Wings, he opined. Corporates must go beyond financial gains and must be accountable for social, economic and environment effects of their business.
What CSR means to western world is different from what it means to us. For us in India social development is more important. The ministry wants companies also to take part in the development of the society.
Mr. Chatterjee also gave away Greentech CSR Awards to Bhaskar Beas Management Board, Hindalco India Ltd, The Shipping Corporation of India Ltd, Ultratech Cement, Central Bank of India, GAIL, Hyderabad based Ramky Foundation and others as a recognition to their excellent performance.
Responsible Business refers to the commitment of an enterprise to operating in an economically, socially and environmentally sustainable manner while balancing the interests of diverse stakeholders. It is not new to India. We have records of companies like Tata doing this as old as in 1906.
The Ministry of Corporate Affairs in India has established the Indian Institute of Corporate Affairs (IICA) as a unique world-class institution to function as a think tank, action research, service delivery and capacity building support to the Ministry, corporate sector, professionals and related stakeholders said Mr. Chatterjee.
Earlier Mr. Kamleshwar Sharan, President of Greentech Foundation welcomed the gathering. The today national seminar with a theme Managing Natural Resources & Wastes for Sustainable Environment was kicked off on Monday and concluded today evening. Among other important issues addressed during the two day meet include: Challenges in Waste management, challenges in CSR implementation, Reuse Technologies of Waste Water and a holistic approach to self sustainable CSR in Projects. 250 Environment and CSR professionals from across the country participated in the meet.