GN Bureau | August 31, 2015
The amount is going to be many times more than some of the states’ public debt and equivalent to many big welfare schemes of the government. And there is a real danger of Rs 25,000 crore being spent on non-priority sectors.
The Companies Act, 2013 was amended to bring CSR (corporate social responsibility) under section 135 of the act from April 1 last year. Companies falling in the ambit of the new rules were mandated to spend two percent of their net profit (average of last three years) on CSR activities. It is estimated that nearly Rs 25,000 crore could be spent by companies in CSR activities in the first year (2014-15) itself. Nearly 14,000 to 16,000 companies are likely to come under the ambit of the CSR legislation.
Earlier, the companies, both public and private, used to spend on activities that they considered as social commitment. But with the law there is a definite list of activities that the government considers as coming under the CSR.
Private companies would like to spend their budget for CSR on activities that will benefit their brand and the image of the company.
But at industry level there are very few who understand how to align CSR with the brand. However, those who have managed to bring brand and CSR together enjoy great levels of preference, loyalty, word of mouth recommendations and enhanced marketing effectiveness leading to higher profitability due to consumers' willingness to engage with them.
The companies should ask about the strategic direction of CSR? From the area of competence, what's the best can be done for society? A change in the rules should have led to some strategic questions on CSR in companies. However, various corporate are not asking relevant questions.
The CSR should ideally be aligned with the business. This means using ingenuity to serve both society and business needs at the same time.
Companies that do CSR are seen as having character and strong values. Studies indicate that consumers trust brands that do CSR more than brands that don't.
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