Corporate Social Responsibility Jumping for joy for mandatory CSR spending

Published on November 30th, 2012 | by Chris Milton

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Mandatory CSR spending a step closer

Jumping for joy for mandatory CSR spendingMandatory CSR spending moved a step closer this week after and announcement by the Indian Ministry of Corporate Affairs that it had received no objections to the controversial Clause 135 of the Companies Bill 2011.  This helps clear the way for the bill to become law sometime next year.

Clause 135 states that all businesses with a net worth of $90 million, turnover of $180 million or net profit of $900,000 will have to donate 2% of their average net profits over the past 3 years to CSR schemes, or if they do not have the funds available explain why this is the case.

This is a story I’ve followed ever since the clause was first introduced to a predecessor bill in 2010.  Battles have been fought over the precise nature of the regulation (disclosure only, introducing the “pay or explain” nuance, etc) but the government has stuck firmly to the 2% expected spend and the level at which it is activated.

Quite how this will play out over the years remains to be see.  The bill replaces legislation which is over 50 years old and includes other measures to strengthen corporate governance in India, including fixed term appointments for non-executive directors and the ability for corporations to be be sued by class action suits.

In short, it brings India fully up to speed with international business best practice and puts the country a little ahead of the curve in some areas, despite its misgivings around emissions reduction targets.  Well known businesses which will be affected include Infosys, Tata and ICICI Bank.

All of which raises an interesting question.  If some of the world’s leading IT, automotive and financial services businesses are forced to make a minimum 2% contribution to their CSR schemes, what will their international competitors do?

I’ve long argued that regulation will have to come into CSR in one form or another: for example the EU has said it will make “legislative proposal on the transparency of the social and environmental information provided by businesses” by 2014 and China has recently published a new legal framework on green and sustainable business.

The tide is definitely turning and it’s not the US which is leading it.  Which might mean that it will end up influenced by other countries’ definitions of responsibility, not defining them.

Picture credit: Jump for joy / bingbing / CC BY / trimmed by Chris Milton.





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About the Author

is a seasoned sustainability journalist focusing on business, finance and clean technology. His writing's been carried by a number of highly respected publishers, including The Guardian, The Washington Post and Scientific American. You can follow him on twitter as @britesprite, where he's one of Mashable's top green tweeters and Fast Company's CSR thought leaders. Alternatively you can follow him to the shops... but that would be boring.



  • http://www.greenbusinessowner.com/about/ Scott Cooney

    Holy cow. I wouldn’t have guessed India would lead the charge on that, but the influence of large companies there is probably proportionally a lot smaller than it is here in the U.S. Is there anything that says where this money needs to be spent?

    • http://www.britesprite.co.uk Chris Milton

      India is a stirring giant which could yet come to eclipse both China and the US in the end. It has many problems, not least of which is terrible and engrained social inequality, but the spirit burns much brighter and they’re keen to break free from the business model of either.

      The proposed law simply states that the money has to be spent in the company’s CSR programme, which of course means the company has to have a CSR Programme in the first place. However there’s no strict definition of what counts as that, although there is encouragement for companies to adopt projects which are allied to their own business sector.

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