1.2

Down to Earth - - GOVERNANCE -

How­ever, the ac­tiv­i­ties should not tar­get wel­fare of employees and should not be in the area of oper­a­tions of the com­pany.

As com­pa­nies file their an­nual re­ports,it seems that In­dia’s ex­per­i­ment with cor­po­rate so­cial spend­ing has been part suc­cess and part fail­ure. Down To Earth spoke to se­nior of­fi­cials of sev­eral com­pa­nies about their as­sess­ment of the csr in­vest­ments. Most of them agreed that while spend­ing at the com­pany level has gone up, con­fu­sion over the le­gal pro­vi­sions is hold­ing many com­pa­nies back from spend­ing. An as­sess­ment of con­sumer goods com­pany by fi­nan­cial daily Mint says that though this is the first year of im­ple­men­ta­tion, csr spend­ing has went up by 57 per cent over the pre­vi­ous years.

Low in­vest­ments

mca had ex­pected that csr would gen­er­ate 12,000 crore in 2014-15.“But in­vest­ments worth only

crore have been made so far,” says Jatin­der Singh, sec­re­tary, phd Cham­ber of Commerce and In­dus­try. The cor­po­rate af­fairs min­istry has al­ready set up an in­ter­nal com­mit­tee to as­sess why the in­vest­ments un­der the csr laws have been be­low ex­pec­ta­tion. Go­ing by their an­nual re­ports, com­pa­nies like Reliance In­dus­tries Lim­ited, Wipro, itc, Hin­dus­tan Unilever and Mahin­dra & Mahin­dra have not just met the tar­get but ex­ceeded it. How­ever, there are also com­pa­nies that have been un­able to meet the tar­get.Bharti In­fratel Lim­ited and Dr Reddy’s, for in­stance, have spent 1.8 per cent and 1.74 per cent of their prof­its, re­spec­tively, on csr (see ‘ Who stands where’).

But most of the com­pa­nies are spend­ing on ar­eas man­dated un­der the law.“A lot of the funds ap­pear to be go­ing for ed­u­ca­tion and health. Th­ese in­vest­ments also help in im­prov­ing com­pany’s brand value,”says Ra­jiv Ku­mar, se­nior fel­low at the Delhi-based think tank, Cen­tre for Pol­icy Re­search, and for­mer sec­re­tary gen­eral of the Fed­er­a­tion of In­dian Cham­bers of Commerce and In­dus­try (ficci).Multi­na­tional cor­po­ra­tions like Reliance In­dus­tries Lim­ited and Bharti In­fratel Lim­ited have spent ma­jorly on ru­ral health and ed­u­ca­tion.Sim­i­larly,Dr Reddy’s, which is spend­ing most of its csr money on ed­u­ca­tion and health, is just con­tin­u­ing the com­pany’s csr spend­ing pol­icy. In 2013, a sur­vey of csr ac­tiv­i­ties of 50 com­pa­nies by au­dit firm Ernst and Young showed that most of the spend­ing was on health, ed­u­ca­tion and ru­ral de­velop-ment. All the com­pa­nies, the sur­vey found, had ini­tia­tives in the ed­u­ca­tion sec­tor.

No penalty for de­fault­ers

Notwith­stand­ing the good per­form­ers in the first year,the Act suf­fers from a ma­jor flaw— it doesn’t pe­nalise a de­faulter but just re­quires that the com­pany “ex­plain”the rea­sons for its fail­ure to spend. Many com­pa­nies are now pre­cisely do­ing this. For ex­am­ple, Bharti In­fratel Lim­ited, in its an­nual re­port, says: “Out of the to­tal csr al­lo­ca­tion of 192 mil­lion ( crore),a bal­ance of 19 mil­lion ( crore) was left un­spent due to ex­ten­sive time spent on re­search and de­lib­er­a­tions on so­cial con­cerns/lo­ca­tions of in­ter­ven­tion.” Sim­i­larly, Dr Reddy’s has ex­plained its

Wipro

ITC

HUL in­abil­ity to spend the man­dated amount to lack of “re­ceiv­ing sys­tem”.

Re­cently Maneka Gandhi, the Union min­is­ter for women and child de­vel­op­ment, crit­i­cised cor­po­rate houses for not tak­ing the csr tar­get se­ri­ously. This was in re­sponse to Cor­po­rate In­dia’s un­en­thu­si­as­tic re­sponse to Prime Min­is­ter Naren­dra Modi’s call to cor­po­rate houses to do­nate or use the csr route to fund his flag­ship Swachh Bharat Ab­hiyan.But many cor­po­rate of­fi­cials point out that there is a con­fu­sion over the law be­cause of the con­stant change it is go­ing through. In the last one year, rules have been changed more than a dozen times—ei­ther deleted or clar­i­fied, lead­ing to new in­ter­pre­ta­tions.For ex­am­ple,just a day be­fore the law came into force, the gov­ern­ment brought in changes in the list of ac­tiv­i­ties el­i­gi­ble for csr fund­ing by in­clud­ing ac­tiv­i­ties pro­mot­ing health­care and pre­ven­tive health­care. In Jan­uary this year the gov­ern­ment clar­i­fied the types of or­gan­i­sa­tions through which the csr money can be spent. “By then, we al­ready had our strat­egy ready based on ear­lier rules. But we had to change our strat­egy, which dis­rupted our spend­ing,” says a se­nior of­fi­cial work­ing with a tele­com com­pany.

By Oc­to­ber, when an­nual re­ports of all the com­pa­nies are usu­ally in, In­dia would get an over­all pic­ture of how its legally bind­ing csr spend­ing has per­formed. Hopes are, how­ever, high. “Grad­u­ally, com­pa­nies may start in­cu­bat­ing so­cial re­spon­si­bil­ity as part of their busi­ness,” Ku­mar con­cludes.

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