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Company and community

Chhattisgarh’s new CSR policy only deepens the disconnect between the two.

The Chhattisgarh government, in its quest for a different paradigm for financing social development, has gone beyond the provisions of the new Companies Act. While the act mandates that a defined percentage of profits should be devoted to socially useful activities, it leaves individual companies free to choose which activities, only broadly indicating what is considered socially useful. Chhattisgarh’s Corporate Social Responsibility Policy 2013 makes it compulsory for companies to pay CSR contributions into the Chief Minister’s Community Development Fund, whose purpose is the holistic development of districts affected by mega industrial projects. The Chhattisgarh State Industrial Development Corporation, which will operate the fund, will pass on the amounts to the concerned district.

Non-compliance is punishable by the withholding of grants or facilities by the state government, albeit after a hearing. Admittedly, companies have not contributed to the welfare of local communities as much as they can and should. Or it has been done in such an ad hoc manner that there is a disconnect between the needs of the community and the local industry’s plans for it. The Central enactment and state policies have brought the need for CSR into the corporate consciousness. However, the Chhattisgarh policy is misconceived for a variety of reasons.

Making companies channel their CSR resources into a common pool under state control runs counter to the spirit of CSR, which is to encourage companies to be responsible for the welfare of communities because it is in the interests of both company and community.

Ultimately, the business of business is business, not social development. It will contribute to the latter only when it becomes obvious that the goodwill generated by the CSR contributions adds to the bottom line in the long run, that is, out of enlightened self-interest. A company is interested in doing good, even if out of compulsion, if it can also be seen to be doing good. This means the community must be aware of the identity of the donor company. Moreover, a company would always prefer direct engagement with the community because it provides greater psychological satisfaction. The pooling of CSR resources into a common kitty creates a disconnect between the company and the community, and transfers the credit from the company to the government and politicians who dispense the largesse as part of their own agenda.

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