New CSR Rules....... CSR versus sustainability

CSR versus sustainability – the new law has missed out on something. 

 CauseBecause Bureau, New Delhi March 5, 2014

With the introduction of Section 135 in the Companies Act and corporate social responsibility (CSR) taking centre stage in the Indian business environment, many corporate groups are expected to initiate social programmes starting next financial year. Will all these CSR programmes be aligned with sustainability and how should the impact of such programmes be measured?  
In order to address such questions and find a way forward, Institute of Rural Management Anand (IRMA) is organizing ‘Round Table on CSR – The Road Ahead and Exhibition of CSR Initiatives’, a two-day event at the IRMA campus on 24–25 March 2014. The event will engage various stakeholders including corporate bodies, ministries and representatives from civil society and other relevant organizations. Concurrent with the Round Table will be an exhibition showcasing CSR initiatives of companies.  

Answering CauseBecause’s query on how IRMA sees the mandatory CSR spending clause, Dr Girish K Agrawal, convener of CSR Round Table, said, ‘One of the critical CSR activities covered under Schedule VII specifically talks about  ensuring environmental sustainability, ecological balance... maintaining quality of soil, air and water. This is the most positive feature among other scheduled activities and was not covered earlier. While other activities mentioned in the Schedule have been the focus of most companies engaged in CSR, this clause goes a long way in meeting the crucial need of the hour because negative externalities arising from depletion of common property resources are becoming alarming in view of environmental changes impacting India. China is already asphyxiating under air pollution.’  

When askedwhat will be the 'take away' from the event and why should corporate as well as development and social sector organizations participate, Dr Agrawal, who is also the coordinator of Center for Social Entrepreneurship and Enterprises and associate at Center for Rural Infrastructure and Corporate Social Responsibility, IRMA, said, ‘The background for this round table debate is when a company depletes common property resources and engages in CSR activities (as per the new law), does it serve the spirit and purpose of the Act while fulfilling development goals of the Government? Are these activities aligned with sustainability? In the event, the way forward will be underlined. We expect that some directions will emerge about policy changes that are required to redress any deficiency, if any, and how should Schedule VII activities be executed to so that they are sustainable.’  

Commenting on exclusion of ‘guiding principle’ in the new rules, Dr Agrawal said, ‘It is a disheartening change. It was in consonance with Part II operating provisions but has been deleted entirely. Now all activities that are undertaken in pursuance of its normal course of business are explicitly excluded. The result of such change may be that cola companies or junk food retailers whose main products give heavy doses of calories to consumers and create enormous healthcare costs on society have no further incentive to improve their business processes except those arising from consumer awareness, which take a long time to effect.’

The guiding principles in the earlier rules read: CSR is a way of conducting business, by which corporate entities visibly contribute to the social good. Socially responsible companies do not limit themselves to using resources to engage in activities that increase only their profits. They use CSR to integrate economic, environmental and social objectives with the company’s operations and growth.  
When questioned about the 'business angle' in CSR, Dr Agrawal stated, ‘The value addition to Indian businesses now appears to be remote and lies in the hope that customers will value companies' products more because they are spending money in scheduled or socially beneficial activities – a link that is at best tenuous in Indian consumers’ context since they are probably more price-conscious.’