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CSR: Govt Not Keen On Mandatory Investment By Companies
June 14, 2011
CSR: Govt Not Keen On Mandatory Investment By Companies


14 June 2011

The Government is not keen to make it mandatory for a company to invest two per cent of its net profit in Corporate Social Responsibility (CSR) activities, said Mr D.K. Mittal, Secretary, Department of Corporate Affairs, at a meeting on Monday.

Instead, the Government will issue flexible guidelines which will be directional. These guidelines will be contained in the new Companies Bill which is to be tabled in Parliament during the monsoon session.

Earlier this year, a draft of the new Companies Bill proposed that two per cent of a company's net profit should be mandatorily kept aside for CSR activities.

This was for companies in the private sector with a turnover of Rs 1,000 crore or more, or net profit of Rs 5 crore or more for the preceding three years.

This was met with opposition by the industry.

“We want companies to include a CSR code in their annual report. This will make it mandatory for companies to mention the CSR guidelines that they adhere to or don't in their annual report,” said Mr Mittal.

“We can't make this investment mandatory. If we do, then companies will find thousand and one ways to escape the mandates,” said Mr Mittal. He also said that CSR is an important part of a company's business strategy.

He also said that the National Foundation for CSR would be meeting corporations next week to discuss the idea of sponsoring the poorest districts of the country.

Report on CSR

In a study conducted by KPMG and Bombay Chamber of Commerce and Industry (BCCI), it was found that 69 per cent of the surveyed companies had separate CSR budgets, 73 per cent of the surveyed companies felt that participating in CSR activities enhances brand image and 19 per cent of the companies invested 5-10 percent of their profits in CSR activities.

Data were collected from 75 companies with a turnover ranging from less than Rs 100 crore to more than Rs 2,000 crore across manufacturing, services and infrastructure sectors.

The study titled ‘Status of CSR Philanthropy to business sustainability' was released by Mr Mittal at the Annual General Meeting of Bombay Chamber of Commerce and Industry (BCCI) on Monday.

With more and more companies engaging in socially sustainable business, there has been a shift from the charity model to a community investment model. Many companies are partnering with NGOs to engage in CSR activities, said Mr Arvind Sharma, Director, KPMG, Climate Change and Sustainability.