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India is the first country in the world to mandate a minimum spend on corporate social responsibility. On 1 April this year, indeed, the government of India implemented new CSR guidelines requiring companies to spend 2% of their net profit on social development.

However, Global Reporting Initiative's (GRI) Sustainability Reporting for Sustainable Development conference, held this June in India, issued a joint declaration stating that the 2% ruling could lead to forced philanthropy, tokenism or even corruption, and masking of data to avoid having to comply. Time will show if this legislation will have a real impact on poor people's lives and prevent actual environmental degradation.

The GRI conference, attended by thought leaders from business, civil society, social service, academia and the government, issued the Mumbai Declaration, which among a list of 13 points specifically highlights these issues with the government's CSR guidelines.

Business leaders have expressed concerns from the corporate perspective.

Can government-mandated CSR be a social development path for a nation in which over 900 million have a mobile connectionbut only 600 million (36% of the population) has access to a clean toilet?

The government has set out specific guidelines on how CSR activities should be handled. These stipulate that the CSR activities need to be implemented by a CSR committee that includes independent directors. The government's suggested CSR activities include measures to eradicate hunger, promote education, environmental sustainability, protection of national heritage and rural sports, and contributions to prime minister's relief fund.

The company can implement these CSR activities on its own, through its non-profit foundation or through independently registered non-profit organisations that have a record of at least three years in similar activities. This provision has led to a boom in the number of NGOs that can implement these CSR activities. A recent article in the Times of India reportedthat there are over 2m operational NGOs in India.

Choosing the right one from such a large number of NGOs won't be easy. NGO evaluation portals and the pooling of resources by SMEs could help to streamline the CSR investments, and questions will continue to be asked about the government's role in mandating such investments.

Even as this debate continues, the more important question that the Indian businesses need to answer is how do we align these government mandated CSR activities to handle India's socio-environmental challenges while enabling better long term profits for the business?


The gLAWcal Team

POREEN project

Monday, 11 August 2014

(Source: the Guardian)