Expectations of Humanities from Corporates World
The basic existence of the Corporates is to satisfy the essential of the society by suppling goods and services as per the various consumer need. But the Corporates should also be allowed to make profit for their very being and sustainability. The Corporates drew a lot from the society in the face of developed infrastructure, peaceful environment, trained workers and employees. The Corporates also depend on the society for the maintenance of law and order for their healthy growth and continuity.
When the Corporates are drawing so much from the society, it is also their responsibility to enhance the picture of society by contributing adequately for the welfare measures. Being a good corporate citizen, they should abide with the existence law and order and also pay their taxes in due times. Beside they should maintain a healthy and clean environment not only of their workplaces but also of the extended local areas. Maintenance of operational efficiency, product safety and quality, conservation of energy and natural resources are the crucial areas where the corporates are expected to work ethically.
In the world of constant change, it is indispensable for the corporates to generate and sustain “goodwill” among the stakeholders and community at large. CSR should be about empowerment of the community. Therefore, active participation in various social measures is surely going to improve the corporates image in the society. Even the employee’s morale will be on high esteem to be a part of such philanthropic organization. The business firms should understand the fact that economic goals and social responsibility objectives need not be contradictory to each other. Rather both can coexist and both can be achieved and sustained as inclusive growth simultaneously.
The concept of benefitting society by business tycoons through social measures as we named as “CSR” is not a new phenomenon. Many business organizations even much before the concept of CSR has been brought down under the umbrella of codified law i.e. the Companies Act, 2013 had contributed voluntarily towards CSR projects. CSR in India has traditionally been seen as a philanthropic activity. But the Companies Act, 2013 is the game changer and entirely bought CSR under the new dimension. The recent amendments of the CSR provisions and allied CSR rules has changed the very nature of CSR provisions from “comply or explain” to “comply or suffer”.
Many Indian Companies such as Tata Steel, NTPC, Reliance Industries and ITC etc. have been working remarkably on various corporate social activities and embarking their contribution to uplift the status of the society. While on the other page the mind set of many corporates even some of top listed companies is to only comply with the provisions of Companies Act, 2013 and willfully ignoring the very essence of the CSR i.e. adding value to the society. Some of the reasons behind the failure of the Companies to comply CSR is highlighted below:
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5 reasons behind the failure of the Companies to comply CSR
1. Identification of the suitable CSR projects
One of the reasons provided by the Companies of their failure to spent the CSR Fund as per the provisions of the Companies Act, 2013 in their Board’s report is identification of suitable CSR project till the end of the Financial year. The Companies set up their own parameters and the implementing agencies and the NGOs approaching the company with a project may not fit in their criteria and gets rejected on the very first step. Besides Companies spends CSR funds after examining the pros and cons of the project at various level. It is also evident that the funds were not disbursed in the financial year due to projects were on examining stage and the unspent amount is carried forward to the next year.
The CSR provisions has undergone massive changes after the amendment in the CSR provisions and rules. As per Companies (Amendment) Act, 2019 on and from 22.01.2021, if the CSR amount is not spent during a financial year, the Board report shall state reasons for not spending that amount, and unless the unspent amount relates to an ongoing project referred to in section 135(6), the amount shall be transferred to any Fund specified in Schedule VII of Companies Act, 2013 within 6 months from expiry of financial year. For example Schedule VII fund means contribution to the Prime Minister’s national relief fund or any other fund set up by the central government for socio economic development and relief and welfare of the schedule caste, tribes, other backward classes, minorities and women etc.
Now the Companies has no choice left rather than spending the CSR fund on their identified projects or to the funds specified in Schedule VII of the act.
2. Mindset of the Organizations
There is no denial of the facts that many corporate divulge themselves to do CSR is only because they falls under the benchmark as specified under sub-section (1) of section 135 of the Companies Act, 2013. They are disinclined to allocate their human resources exclusive for the evaluation and monitoring of the CSR projects. Basically the mid-sized companies do not have any separate CSR departments and the same is attached with the secretarial dept. who are already loaded with compliances under various statutory provisions. The mindset of the incumbent performing CSR duties of the Corporate is also important. They needed to appreciate that they are doing good for the society even with the corporates money and needed to accomplish their duties with their heart and soul.
3. Difference in school of thoughts
Sometime a project got rejected because of different of opinions of the Board of Members or CSR Committee. When the project is put up before the Committee for recommendation, after evaluation of the same by the CSR team, there are differences of opinion among the CSR members. Some members being traditionalist in nature did not give their recommendation to a CSR through a small NGOs/implementing agencies as in their opinion, there is chances of misappropriation of fund by such agencies. On the other hand some feels that since big NGOS received funds from various sources, small NGOs must needed more support from the society in their welfare measures. Even sometimes the Board did not consider the recommendation of CSR Committee and reject the project without approval.
4. Lack of proper monitoring and evaluation of projects
Many mid – size companies were not keen in investing their resources in proper evaluation of the projects to be placed before the CSR and Board members. A detailed project report should be there to check the viability of the project, background of the NGOs, identifying the beneficiaries etc. Even after the project get it’s sanctioned by the Board, there is no structure of proper monitoring to ensure that the CSR funds reaches to the ultimate beneficiaries. Even in the direct CSR, the participation of the employees were not so much there and it is merely performed as a burden rather than a responsibility. Mostly companies close the project file after receiving the utilization certificate and documents relating to the CSR project sponsored.
5. The spirit of CSR is missing
Corporate Social Responsibility (CSR) is essentially Corporation’s Connectivity with Society. And this connectivity is through its Responsibility towards Society e.g. helping the weaker sections of the society in their empowerment and development. But many companies are more inclined to comply it as an formalities, since there is no escape and the stringent provisions of the Act compel the companies either to ensure compliances as per Sec 135 of the Companies Act and CSR rules or to suffer the penal consequences. To maximize the positive impact of the Corporates on the social and environmental systems in which they operate, companies must develop coherent CSR strategies.
Conclusion
Corporate Social Responsibility is the comprehensive responsibility of corporates towards society and its goes beyond statutory provisions and mandatory regulations. It is a constant responsibility of Corporates to act ethically and contribute to economic growth while elevating the quality of life of the employees and their families as well as local community and society at large.
The Corporates have to be more serious while doing CSR and must ensure that the money reaches to the ultimate beneficiaries. CSR is a platform for doing something good for the society and in return improving the image of Corporate in the outside world. CSR must be made out of heart rather than head.
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