Mandatory CSR: A Brave New World for India
In April 2014, India mandated a new CSR (corporate social responsibility) law within their 2013 Companies Act, stating that companies with a net worth greater than 500 crore ($83 million USD) turnover greater than 1000 crore ($160 million), or profits greater than 5 crore ($830,000) in any of the previous three years must form a CSR committee and then spend 2% of the average net profits of the past three years on CSR.
And it’s worth noting that the legislature doesn’t recognize one-off events such as large donations as CSR--a nice incentive to encourage companies to create CSR ventures integrated into their business models.
While the CSR law is new, India’s CSR efforts actually trace back even prior to Indian industrialization and colonization. Before 1850, wealthy merchants contributed to their communities by building temples and providing food during famine. And don’t forget Gandhi who brought a socialist perspective during the Indian Independence Movement in the 40s. He was key in pressuring many industrialists to embrace the social development of India as they grew their businesses.
In the 80s, however, the forces of globalization and neoliberalism created a different atmosphere in India. While businesses grew and shiny cities developed, the wealth gap swelled under the guise of economic and social development for all. But even as many social issues still plague India, the new CSR initiative is a brave attempt by the Indian government to encourage corporations to care beyond just their own needs.
Whether the bill is successful in creating real change is yet to be seen, but the government’s attempt to involve business in the social sphere shows a step in the right direction. The US can learn from India. Neoliberal opposition in the US might cite Adam Smith’s theory that business’s sole focus should be profits, but that notion has been challenged lately by consumers and Fortune 500 executives.
The Indian government stepping in and pushing large corporations to embed CSR into their business structure sends a message that businesses may not focus only on their bottom line; they must improve society too. India’s CSR law is a bold step forward for government and business working together to benefit society as a whole.
Let’s see what countries have the courage to follow suit