Corporate Social Responsibility is a management concept whereby companies integrate social and environmental concerns in their business operations and interactions with their stakeholders.
“CSR” is a corporation’s initiatives to assess and take responsibility for the company’s effects on environmental and social wellbeing.
Mahatma Gandhi introduced the notion of “trusteeship”, according to which the industry leaders had to manage their wealth so as to benefit the common man. Trusteeship is a socio-economic philosophy that was propounded by Mahatma Gandhi . It provides a means by which the wealthy people would be the trustees of trusts that looked after the welfare of the people in general.
Do you think India’s law which makes it mandatory to spend minimum Corporate Social Responsibility spending (2% of average profits of the past three years) for corporations above a certain size is a right measure without loopholes? Critically analyse. (200 Words)
The roots of CSR lie in philanthropic activities and now encom passes all related activities like corporate citizenship, shared value, corporate sustainability and business responsibility. In India, it has been introduced by the Companies Act 2013.
The core areas where the profit under CSR have to spend are promotion of education, combating HIV-AIDS, gender equity, women empowerment, environmental sustainability, poverty reduction etc. But critical analysis opens another aspect of CSR which is its negative side. Some loopholes are to be tackled which are
- The new Companies Act gives complete freedom to the companies to decide on the areas on which they would like to contribute in the society. But this freedom leaves the space for ambiguous and vague decisions. It is also possible that company is primarily doing their own promotion in disguise of CSR.
- Since CSR imposes the responsibility upon profit making companies then most of the time these companies takes it like obligation and just want to complete it without any zeal and proper planning.
- Companies have a free hand to do the CSR activities through a third party like an NGO, which will result in mushrooming of dormant NGOs and lead to massive embezzlement of funds which can otherwise be better streamlined and utilized.
- A CSR initiative to cover for eradicating poverty would squander printing of thousands of thousands of colourful brouchers and superfluous marketing techniques where the actual benefit to the needy would be diverted.
Some possible amendments are necessary which would take care of the sentiments of all the stakeholders. There is a need to ensure that the stakeholders are incentivize and extract some benefit from the CSR spending.