CSR spending: focus on outcome, corporates told

Corporates in India should focus on the outcomes they have achieved in their area of operations by totally involving themselves in CSR activities and it is not merely enough to concentrate on outputs, according to Prof A Rajendra Prasad, professor of Law (Andhra University) and former head of the school of corporate law under the Union Ministry of Corporate Affairs.

He was delivering a lecture on CSR activities of corporates in the university on Tuesday evening. He said it was good that India had adopted the mandatory CSR model unlike the USA and Europe. “There is a penalty if they do not spend the amount and they fail to explain why they had not spent it. However, there is no penalty for not spending the amount. It is a gap which has to be bridged,” he explained.

He said the corporates were obliged to spend 2 per cent of the net profits (the average profit of the preceding three financial years taken into account) and they should spend the amount “preferably in their area of operations.”

However, he said, it may also be necessary for corporates sometimes to go out of their area of operations. “For instance, there is a national disaster like the current floods in Jammu and Kashmir. Even a company in Kanyakumari can contribute to mitigate the hardship of the affected. In general, however, a corporate is obliged to spend for the welfare of stakeholders in its area of operations,” he said.

He said the number of companies was estimated to be 13 lakh in India, of which only 6,000 or so will have to spend under the CSR head in accordance with stipulations. But the others should also contribute their mite to the development of the region. “The ambit of CSR spending is being gradually widened, and now even slum improvement is included in the list,” he said.