Palm | Kelapa Sawit

With the government's intervention, CSR debate in India has taken a perverse course.

Indian companies, and foreign companies operating in India, have by and large failed to demonstrate respect for responsible business practices. Their inaction, and often irresponsible behaviour, is a result of the fact that India lacks a robust stakeholder community. A good chunk of NGOs in India are only too happy to receive donations than to press them to adopt responsible business practices. No wonder, most companies get away with PR-ish charity in the name of CSR.

Multinational companies operating in India have also found it convenient to join the charity-CSR bandwagon rather than setting leadership examples. Many of them have respectable CR initiatives in their home country but in India their CR fails to rise above charity.

Industry's apathy prompted the government last year to introduce voluntary CSR guidelines for listed companies. Though the CSR guidelines are quite impressive in the sense that they include several key issues such as care for stakeholders, workers rights, human rights, environment and inclusive development, the industry does not seem to be obliging. The industry actually started lobbying for incentives such as tax breaks if it were to spend on CSR.

Government officials are divided. India's corporate affairs minister has been quoted saying that companies may be provided fiscal incentives for participating in CSR activities. But a senior official in his ministry recently said that companies should adopt CSR as a corporate culture rather than asking for incentives. He even indicated that if companies fail to adopt CSR, the government may even make CSR-spend mandatory.

Now the perverse piece here is that CSR is being interpreted as philanthropy. Unfortunately, India Inc needs to include larger issues that have become more pronounced with breakneck economic development. These issues include climate change/carbon emission, environmental protection, anti-pollution measures, working conditions, human rights, customer protection, privacy and bribery.

India is even pushing for a bill in parliament that would require companies to spend at least 2% of their profit on CSR activities.

Most likely, companies will have to deal with local politicians and legislators who would want companies to spend on their pet projects. The legislation will also give rise to potential accounting fraud where companies will falsely claim expenditure on CSR.

But this is what happens when the private sector does not take voluntary action. Legislative action then appears as the only alternative. But legislative CSR is compliance, not CSR. Did we not teach all these years that CSR is when companies go beyond compliance?