The Companies Act 2013 brought focus on Corporate Social Responsibility (CSR) using the logic – Companies take resources in the form of raw materials, human resources etc from the society. By performing the task of CSR activities, the companies are giving something back to the society.
The term CSR has been defined under the Companies (Corporate Social Responsibility Policy) Rules, 2014 that came into effect from 1 April 2014, which includes but is not limited to:
- Projects or programs relating to activities specified in the Schedule; or
- Projects or programs relating to activities undertaken by the Board in pursuance of recommendations of the CSR Committee as per the declared CSR policy subject to the condition that such policy covers subjects enumerated in the Schedule.
The activities that can be done by the company to achieve its CSR obligations include eradicating extreme hunger and poverty, promotion of education, promoting gender equality and empowering women, reducing child mortality and improving maternal health, combating human immunodeficiency virus, acquired, immune deficiency syndrome, malaria and other diseases, ensuring environmental sustainability, employment enhancing vocational skills, social business projects, contribution to the Prime Minister’s National Relief Fund or any other fund set up by the Central Government or the State Governments for socio-economic development and relief and funds for the welfare of the Scheduled Castes, the Scheduled Tribes, other backward classes, minorities and women and such other matters as may be prescribed.
An objective analysis of the above shows that the government has attempted to transfer part of its developmental responsibility to the corporate sector; surreptitiously levied an additional corporation tax in the garb of mandatory CSR expenditure; and is simultaneously subsidising such expenditure through making CSR expenses tax deductible.
Government has no control over such haphazard expenditure of CSR funds. A parliamentary question (Lok Sabha Starred Q 373; 11 Aug 2017) proves the point.
PETER DRUCKER had explained CSR thus:
The proper social responsibility of business is to tame the dragon, that is, to turn a social problem into economic opportunity and economic benefit, into productive capacity, into human competence, into well-paid jobs, and into wealth.
CSR was thus social entrepreneurship which the great Indian polity and bureaucracy have reduced to obligatory expenditure. For business, it is turning out to be just another tax and cost of doing business in India.
The above was first posted on FaceBook on 23 January 2018. A report on 05 March 2018 in Indian Express substantiated the slapdash expenditure of CSR funds.