The Lok Shabha approved the new Companies Bill and now it is pending with Rajya Sabha. After approval, companies will need to implement the new Sec 135 on Corporate Social Responsibility. The section applies to companies having:
a) A net worth of Rs 500 crore or more, or
b) A turnover of Rs 1000 crore or more, or
c) A net profit of Rs 5 crore or more, during the financial year.
The company needs to form a Corporate Social Responsibility (CSR) Committee at board level of three or more directors, of which at least one should be independent. The board has to ensure that the company spends at least 2% of net profits on CSR. The clause specifies the requirement of “comply or explain”. If the company does not adhere to the requirement, it has to explain the reason for doing so.
With the last quarter of the Indian companies, they need to plan the activities for the next financial year. Here are a few of the things that they can do now:
1. Hire a dedicated team
Most Indian corporates do CSR activities in an arbitrary manner with responsibility either falling in Communications department or Administration department. CSR is a specialised line that requires people with altruistic temperament well versed with the problems of the society.
2. Develop a CSR policy
The organization requires a CSR policy approved by the board along with the budgets. Reports suggest that social responsibility adds to the brand value of the company and improves customer perceptions about the products. In view of this, the CSR policy should be long-term and aligned to the business objectives. For example, financial services sector has high risk of fraud. Hence, it can think of sponsoring fraud prevention and business ethics training, which is in short supply in India.
3. Identify the right partners
Corruption has influenced non-profit organizations also. As per media reports, a number of organizations opened prima facie for doing social work are actually acting as fronts to collect illicit money and route it into different areas. Hence, choosing the right partners who are actually committed to doing social good is important.
Besides the external benefits, CSR improves employee engagements. Employees feel good when their companies act in a socially responsible manner. Moreover, with the mad rush to achieve targets this acts as a great stress buster while giving meaning to live. Getting a bigger pay packet can be an objective but never the purpose of life. Hence, this law is a win-win situation for all involved – the customers, employees and public. It is up to us how we leverage it.