Mandating CSR: Indian Government Demands Full Disclosure From Companies

by Aman Singh Das | August 12, 2010

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As the US markets continue to debate whether we arestill in a recession, on the road to recovery, or headed for a doublerecession, the Indian government is busy imposing regulations to boostcorporate philanthropy and social responsibility. In an economy that continuesto post steady growth despite upheavals across Europe and the U.S., India Inc.is increasingly facing scrutiny for their role—or their notable absence—in thesocial and environmental growth of the country.

In early March, corporations were surprised with anannouncement from the government's Corporate Affairs Minister Salman Khurshid: Corporate SocialResponsibility could become written law if companies did not step uptheir social responsibility footprint. He said, "You can't hope that everything will work without a basic legislativeline drawn. But where that line should be drawn must come by way of consensusfrom industry."

The Bombay Stock Exchange is pictured. The Indian government is considering setting up a CSR stock exchange where companies can trade credits. The challenge is quantifying social good

This jab at corporate India came days after Khurshid recommendedsetting up a CSR stock exchange, where companies could buy andsell credits for "doing good," and hopefully boost accounting. Initially,the business community lauded the proposal. But this cheer quickly died down.

Now the issue is back on the table: the ministry has asked all companies"to provide details of their investments made as part of their CSRinitiative during the last fiscal year."

The aim: Mandatory social obligation for theprivate sector. The ministry, according to a report in The Economic Times,hopes that the submitted data forms basis for a review of its CSR policy incoming months. Mandatory disclosures are never welcome and India Inc. isn'thappy. Since December's initial announcement, few companies have ramped up theirsocial initiatives. And some, according to a ministry official, have even misusedthe liberty of being able to decide where and how to allocate money.

R Bandyopadhyay, a secretary in the ministry ofcorporate affairs, even alluded to the possibility of imposing rules oncompanies dictating how they spend on CSR. Calling out the private sector, he recentlysaid that "in case companies fail to take voluntary initiatives, thegovernment in consultation with the Planning Commission will consider makingCSR spending a 'mandatory exercise'."

Let's be clear. While Indian companies have cheeredaction from the government on giving back to their communities and promotingsocial growth along with economic, they aren't exactly welcoming governmentcontrol of their finances. In March, when the initial proposal had been setforth, I was skeptical of this attempt to put India Inc. on a pedestal by makingan example out of them and binding them to report their corporate philanthropyinitiatives. I wrote:

"…Putting the private sector and itscorporate governance on a pedestal might not serve the community well. Anddeclaring it the beacon of good and a possible 'laboratory for good politicalgovernance in India,' takes the effort too far…this declaration of mandatory reporting in an economy that remainsdependent on small business and mom-and-pop shops, might just end up soundinghollow, provincial and fail to prove the point."

And while the idea of reporting on CSR initiatives and housing all the reportson one online portal has the dual promise of benchmarking progress by providingtransparent and comparative data, as well as spurring competitive participation,making the exercise mandatory simply pushes reluctant conglomerates into anumbers game.

Filed Under: CSR

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