Can CSR Be Mandated? India Takes on the Challenge - The Minute
An unprecedented experiment in corporate social responsibility is now underway in India. That country has become the first in the world to mandate corporate social responsibility. A new law requires companies to spend two percent of their net profit on social development. The potential sums involved are as big as the country.
The Indian Institute of Corporate Affairs estimates that 6,000 Indian and multi-national companies fall under the new regulation. It projects that CSR spending in India could rise to over $3 billion annually, triple the current rate. But since its adoption, questions have been raised as to the new law’s implementation. A conference held in India in June by the Global Reporting Initiative issued the Mumbai Declaration, a statement that while the bill was good news, it could lead to problems such as forced philanthropy, tick-the-box behavior, corruption, and masking of data to avoid compliance. Many companies will be undertaking CSR initiatives for the first time, and many small- to medium-sized businesses without dedicated CSR teams will have to form new partnerships so that their CSR-designated funds can be effectively applied.
On the plus side, there’s been a boom in NGOs in India to help businesses carry out the new law’s provisions: there are now an estimated two million NGOs at work in the country. Mandated CSR in a country the size of India is bound to raise equally large challenges. The solutions to those issues will no doubt develop as they are played out in real business practices.
I’m John Howell for 3BL Media.
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