The Companies Act of 2013 has ushered in a new era of CSR activity. Since corporate now have to earmark more funds for social projects, it is in their interests to ensure that such investments offer good return, writes RAJENDER SINGH
Corporate Social Responsibility is one of the most critical functions of any organisation in the modern business world. The evolution of CSR as an essential element of corporate operations stems from the fact that social needs need to be addressed by corporates since the latter are a quintessential part of the social system.
CSR in India had its roots in the pre-industrialisation days when wealthy merchants would work for the cause of social upliftment. The initiatives were individual driven and often restricted to specific situations like famine, floods and epidemics. In India, the first signs of CSR were seen during the British period when industrialists like the Birlas and the Tatas took up projects to spread education and feeding the poor.
In the second phase of the growth of CSR, there was an almost unconscious amalgamation of social causes with nationalistic feelings. The businesses took on the responsibility of socio-economic reforms with specific focus on rural development, education etc. The third phase of growth happened in the post independence era. During this period, the Government was the largest employer in the country and Public Sector Undertakings were the order of the day. Together, they ran schools and hospitals across the country.
In the fourth and final phase, corporates began to integrate their social commitments with their business goals. The globalization of the Indian economy in the 1990s created multiple profit-making opportunities for corporates which then naturally became willing to spend more on social causes. This was also the time when organizations realized that for sustainable growth of their business, it is imperative to contribute to society which in turn acts as a business stimulant.
Groups like the Tatas, the Birlas, Indian Oil Corporation etc have been actively involved in CSR for a long time. Different organizations have different areas of specialization with reference to CSR. The Dll Foundation, for instance, has undertaken the Cluster Village Development Programmed in 10 villages of Gurgaon keeping in mind the priority areas identified in the 12th Five Year Plan. This initiative is aimed at empowering communities through well-crafted interventions in the area of health, education, sanitation and skill development.
Today, organizations are taking up activities that have a direct correlation with their field of work. For example, organisations in the manufacturing sector are setting up vocational skills training centres in the vicinity of their factories. This helps in building skills of the locals who in turn can be employed in the manufacturing plants. Thus this activity, on one hand, helps in spreading education as a social cause, and on the other hand, helps in creating a pool of skilled manpower who can be employed by the organisation.
With the passing of the Companies Act, 2013, the Government has provided the right stimulus to corporates for increased involvement in CSR activities. The Act has mandated that companies with a certain turnover compulsorily spend a percentage of their profits on social causes. A committee has to be constituted which should have representation from the managerial board. It is the responsibility of the committee to share its action plan with the management. This should bring in more accountability and responsibility to the members responsible for driving CSR.
At the same time companies will now put more effort in ensuring that they make some gains out of the ‘investment’ while creating value for the society. With the slew of measures taken by the Government and also the corporates, a new era in CSR is on the horizon.
(The writer is the CEO of Dll Foundation)