Govt plans to quantify cos' CSR initiatives

The government is working on a framework for quantifying the corporate social responsibility (CSR) initiatives of companies to permit

trading in them. Backed with some tax incentives, the government expects such a framework to encourage companies to take up CSR initiatives more seriously.

“I think there must be a way of quantifying it (CSR) and there must ultimately be available a trader or an exchange to deal in CSR credits,” said corporate affairs minister Salman Khurshid in an exclusive interaction with ET.

There is no precedent of CSR credits being traded anywhere else in the world and the minister has asked his officials to look at a framework that is akin to the carbon credits trading mechanism.

The idea has found support in YC Deveshwar, chairman ITC, a company that has very strong CSR credentials, and former head of industry body CII.

“Today, for charity, you get tax exemptions and for CSR you get nothing.” Mr Khurshid said. “Mr Deveshwar has supported the idea (to link CSR with incentives),” the minister added.

“The idea of quantifying CSR and linking it with incentives is a workable idea. The incentives could be tax-linked as also non-tax linked. You need to define the parameters well,” said Vikas Vasal, partner, Ernst & Young.

But Mr Khurshid said the idea had not cut ice with Planning Commission member Arun Maira, who was of the view that it could be prone to misuse. Mr Maira had instead argued that companies need to internalise good governance.

The ministry will unveil a draft on corporate governance code by the end of the month, which will also suggest a structure that will quantify what a private company stands to gain for CSR activities beyond a certain level.

Asked on the type of incentives that may be considered, Mr Khurshid said “one simple incentive is tax sops”. Mr Vasal has another suggestion. “If a company runs a school, the government may say that it will bear 25% of the cost burden, something which is a direct incentive.”

CSR framework was not a part of the Companies Bill 2009, but it will be part of the voluntary corporate governance code. The draft code, which will be voluntary, will be kept open for suggestions from all stakeholders for at least a year.