Corporate Social Responsibility The Next-Gen Governance

Half a decade ago, the concept and premises of Social Responsibility and even so Corporate Social Responsibility (CSR), hung along the tug of ‘to do or not to do’.

Deliberations, discussions and debates encircling the issue had little concern towards the areas in which such expenditure should be incurred and whether CSR was to be qualified as an expense or an investment.

The enactment of Companies Act, 2013 while mandating the corporates attaining certain threshold limits to part with a portion of their profits for the societal or greater good, laid the above discussions to rest. And yet many a questions, new issues and topics of deliberation were brought to the fore.

While, the Indian corporate law has always been classified as dynamic, the dynamism portrayed by Section 135 of the Companies Act, 2013 pertaining to Corporate Social Responsibility has hogged limelight and occupied spaces in print furthermore.

Discussions have been in order, not only in corporate and academic groups but in Regulatory Arenas as well, where Committees have been constituted to chalk out the way forward and redefine the concept of Social Responsibility in the India Inc.

And it is the result of these continuous deliberations that the various issues and challenges are being addressed and amendments being permeated into the law to accord it greater substance.

Interestingly, the ambit of CSR in terms of activities engulfed therein too has expanded over the years gone by. From traditional philanthropic projects, the Indian corporates have begun institutionalising CSR activities far more strategically.

With territorial boundaries fading, corporates have started realigning their priorities into addressing fundamental aspects of their businesses and reaffirming the principles and values guiding them and their operations in different nations.

A common understanding is being reached that CSR goes well beyond writing cheques. And, if the activity of CSR is moving beyond parting with funds into something far more engrossing on the part of corporates, the same is requiring the corporates to pursue brainstorming akin to its various profiteering operations as to what would create the maximum impact.

And while a majority of activities undertaken by corporates may call for collaborations with external parties and agencies, when it comes to Social Responsibility the apprehensions are far greater since the stakeholder is this case is the society at large.

Hence, where on one hand it is imperative that the corporates understand their responsibilities to the hilt, the implementing agencies, too, even without falling within the ambit of Companies Act, 2013 necessitate the putting in place of a suitable structure in place to suffice the governance needs of both, the corporates and their partnering implementing agencies.

Considering the significance gained by this concept and its law apropos, the need for an apt governance mechanism and development of a suitable compliance culture has been felt now more than ever

Although the regulatory deliberations have been centred upon avoiding any over regulation in this area and creating a conducive environment for self regulation by companies engaging in CSR activities, yet with every passing phase, the concept and need for a dedicated CSR Compliance monitoring is gaining ground.

The Annual Reports of companies while being comprehensive documents have been all-inclusive reports of the operations of the companies, CSR included.

And yet, the multifarious aspects of Social Responsibility require detailed analysis, needlessly with an independent approach. It was during the deliberations of the High Level Committee of the Ministry of Corporate Affairs on CSR, that the concept and need for a dedicated CSR Compliance mechanism was put across the who’s who of the Industry and Academia by the Institute of Company Secretaries of India.

While giving necessary comfort to the stakeholders, Regulators and the society at large and meet the basic objectives/intent of CSR, CSR compliance monitoring when conducted by an Independent Professional will provide the existing CSR concept the much needed support.

Not only will such a monitoring mechanism provide for a well chalked out criteria for identification of Implementing Agencies and their unbiased selection, the authenticity of need assessment & impact assessment conducted by the company through its CSR Committee shall be fully scrutinised.

If the regulatory side is to be empathised with, issuing of show cause notice puts burden on the regulators while prosecution puts burden on corporates which leaves room for only one type of regulation, i.e., self-regulation.

A dedicated monitoring mechanism shall provide for detailed reporting of such regulation and once undertaken by an independent professional shall provide sustainable foundation to the cause of ‘CSR governance’.

Technically, the inclusion of CSR under the Companies Act, 2013 has portrayed a legal obligation on the part of companies to ‘be good and do good’ and yet the expectation from corporates is that of diligence and compliance not out of legality but plain and simple ethical morality.

One of the most valuable notes that Mahatma Gandhi left behind is his talisman and the most notable thing about his Talisman is that it simply guides to consider the poorest of poor in times of indecisiveness.

India has come a long way from Gandhi’s age and yet, if anything has not changed then it is the status of the poor who are still as marginalized and vulnerable as they were eons ago. 

The talisman is what shall serve as the perfect guide for the modern day corporates while defining their CSR path, their goals and responsibilities, their partners and preferences and their dedication and accountability.

But what shall prove to be the guiding light on this path is the presence of an independent monitoring mechanism, one which encompasses all the aspects and nuances of CSR in a corporate but most importantly is undertaken by independent professionals, professionals who are capable of handholding the corporates in reaping fruitful yields for both the corporates and the society at large.

For as Confucius puts it, “Consideration for others is the basic of a good society”. It indeed is high time that we all held consideration for others and the nation as our own, for its then that the visions for a new India shall be materialised.

CS Ranjeet Pandey is President, The Institute of Company Secretaries of India (ICSI)