With the ‘Companies Bill’ expected to be passed in the coming monsoon session of Parliament, discussions on its impact on corporate India are gathering steam again. Building on the corporate social responsibility, or CSR, guidelines for public-sector units, the push for companies to spend at least 2 per cent of profit on CSR could be viewed as counter-intuitive to the current ‘common sense’ view of a private company’s role in society. However, with changing production systems and geographic outreach, made possible through new technologies and transfer of knowledge, this view is evolving rapidly. It is giving way to new models of addressing interlinked development challenges in India and globally — eradicating poverty, achieving economic equity, environmental sustainability, gender equality, tackling climate change, equitable distribution of natural resources, and health and diseases control.
The new CSR model has moved away from simple social concerns to one in which generating value for society and for the corporation go hand in hand. The Companies Bill is an opportunity for corporates to use 2 per cent of their profits in helping design a brighter environment for the corporate entity while uplifting society, especially the marginalised population, in a sustainable manner.
It is important to remember that society has always looked at the ‘corporation’ as a social organ for wealth creation. Peter F. Drucker had in the 1950s eloquently said that “even the most private of business enterprise is an organ of society and serves a social function… the very nature of the modern business enterprise imposes responsibilities on the manager… it can no longer be based on the assumptions that the self-interest of the owner of property will lead to public good, or that the self-interest and public good can be kept apart and be considered to have nothing to do with the other.”
The Companies Bill will propel macro-level CSR to turn into a core business function that is central to the corporation’s overall strategy and success. At the micro level, corporates will need to formulate a robust governance structure for their CSR programmes. This will require professionals, internal and external, who can design and implement programmes that have a long-term vision, are mutually beneficial for the corporate and the local community in which it operates, and are in tune with the country’s priority for inclusive growth.
Having a model for sustainable annual contribution towards CSR also calls for robust monitoring and evaluation. Like for any business investment, monitoring the accountability and performance of CSR activities is the key to measuring impact and outcomes. For example, when building a classroom in a village school, one should assess if the investment has translated into an increase in enrolment and improvement in learning. Also, without a robust monitoring system it will be difficult to ascertain where further investments are needed, whether there is value for money and value creation for the communities supported, and, most importantly, whether the 2 per cent hard-earned contribution is leading to the larger inclusive development agenda of the nation.
This is an opportunity for leaders of corporations to step up and become catalysts for the inclusive development of society — through a professional approach, outcome-oriented solutions and sustainable partnerships.
(Sudhir Singh Dungarpurkar is Partner, KPMG)