India's Government Issues Voluntary CSR Guidelines

For the first time in its history, the government of India, through its Ministry of Corporate Affairs, issued a set of voluntary CSR guidelines at the end of 2009. Salman Khurshid, the minister of state for corporate affairs, provides context for the guidelines when he writes, "We have seen the business sector generating wealth and value for the shareholders in the last sixty years, but simultaneously we also have the problems of poverty, unemployment, illiteracy, malnutrition etc., facing the nation. The corporate growth is sometimes seen as widening the gap between the India and Bharat through its income - skewing capability. This gap needs to be bridged. While the Government undertakes extensive developmental initiatives through a series of sectoral programmes, the business sector also needs to take the responsibility of exhibiting socially responsible business practices that ensures the distribution of wealth and well-being of the communities in which the business operates." The intent of the guidelines, he says, is to add company value, focus on long-term sustainability contributions and provide benefit to stakeholders and society.

CSR executives in India will find three particular sections in the 16-page report. A fundamental principle, six core elements that a company's CSR policy ought to include and an implementation guideline. Covered in the core elements are areas related to 1. Care for all statekholders; 2. Ethical functioning; 3. Respect for workers' rights and welfare; 4. Respect for human rights; 5. Respect for the environment; and 6. Activities for social and inclusive development.

In addition, companies are being encouraged by the Ministry of Corporate Affairs to develop a separate fund for their organization's CSR activities. The fund should designate a specific amount of money that is set aside in the yearly corporate budget that is tied to profit after tax or some other appropriate metric or outlined in terms of expected CSR activity cots. A key driver behind this suggestion is to engender greater transparency in corporate social responsibility efforts. This fund recommendation issued in February 2010, is part of the CSR voluntary guidelines and seems to be particularly aimed at companies that are listed on the stock markets.

It will be interesting to keep an eye out for the number and types of companies in India that incorporate CSR initiatives based on the Ministry's guidelines, how that information is tracked and how the government will measure the impact of its campaign to promote adherence to the voluntary corporate social responsibility guidelines.