The CSR imperative Companies Bill, 2011 The Companies Bill that has been passed by the lok

sabha on December 18, 2012 has introduced certain new features, new concepts. Inclusive growth has remained at the heart of governments economic policies and it has undertaken substantial initiatives to ensure dignity for common people. Government has proposed to ensure industries efforts in Corporate Social Responsibility (CSR). The Companies Bill, 2011 Under Sec 135 requires companies with Net worth of Rs. 500 crore. Turnover of Rs. 1,000 crore or more to set up a Corporate Social Responsibility Committee of the Board of Directors. This Committee is to devise a CSR policy to engage in social development areas as laid out in the Scheduled VII of the Bill. Such Companies are required to spend every year at least two percent of the average net profits made during the three immediately preceding financial years. Monitoring and providing information on the CSR activities is part of the Bill. In case the company is unable to spend the requisite amount, it would have to mention the reasons in its annual report. Schedule VII covers a variety of activities relating to poverty eradication, education and skill development, gender empowerment, health, and environmental sustainability, among others. It has also included contribution to Prime Ministers Relief funds and other funds as also social business projects in the ambit of CSR. The Bill has been passed by the Lok Sabha. Conscious of the responsibility to society, Indian business has been at the forefront of social development activities, and did not favor mandatory spending on CSR, stressing that corporate should be allowed to align themselves to the requirement over time.

When the Bill is passed, India will be the first country to include provisions on CSR in its Company Law. The apprehension is that the provision should not be counterproductive, leading to expenditure by companies just to fulfill legal requirements, rather than devising strategies with maximal societal impact. As companies are at different levels of maturity, a flexible CSR policy would work better than mandated spending. Moreover, we would have wished for greater clarity on eligible CSR activities, reporting, and monitoring, unspent funds pertaining to a particular year, overseas CSR activities, and treatment of CSR by trust and societies set up by the companies. The lack of information in these matters would create much confusion till sorted out. With the Companies Bill set to become law, companies would need to evolve specific CSR policies and work with NGOs and civil society in translating them into action. A concern arises regarding the capacity of civil society organizations to handle the large expenditures involved. Only a handful of NGOs are of sufficient scale and experience to deal with corporate requirements, while often smaller organizations suffer from a credibility gap. Similarly, while many corporate engage in social responsibility work, they would have to add more focus and commitment for which they may not have necessary expertise. The partnership of Corporate and NGOs has to be developed with care in order to derive the best outcomes for society. With civil society organizations looking for more professionalism in their approach and corporate seeking strategic deployment of resources, mutual synergies are high.