The corporate affairs ministry has initiated a healthy debate on corporate social responsibility that has thrown up several ideas. The latest among them is that companies with a turnover of Rs 1,000 crore or more (or net profit of Rs 5 crore or more) should set aside two percent of the net profit for CSR. The parliamentary standing committee on finance headed by former finance minister Yashwant Sinha has made this recommendation and the ministry has agreed to incorporate it in the companies bill, according to media reports.

India Inc. has, predictably, opposed the move. Many established industrial houses have been known for their exemplary charitable works. Of late, new economy players too have woken up to the charms of CSR for the right branding. It makes business sense to spend on causes like climate change for which a degree of awareness has built up. What the companies resent is being forced to spend a substantial amount on the kind of activities that the law will define as CSR.

While corporates, like everybody else, have responsibility towards society, they are after all in the business of business. If they do their business ethically and in a socially responsible manner, that should be sufficient. It would be better to have a non-polluting unit that does not spend on CSR rather than a highly polluting one that allocates a large sum of money to some NGO to plant trees in some faraway region.

If it is a question of generating resources for socially responsible initiatives, then taxes are supposed to be doing precisely that job. It would be better to let companies earn more and pay more taxes, which the state can put to the best use. The proposed scheme of things will only create a market for CSR work, in which players with varying degrees of credibility will provide services.

The two-percent proposal also invites comparisons with the Posco case. The environment ministry has asked the steel major to spend two percent of its profits on CSR to offset any adverse impact its plant may have in the region. This is quite common in the coal and mining sector. But generalising it for all companies across sectors would be tantamount to treating, say, Infosys as a Posco of sorts. That will be unfair. In any case, donation should not buy you atonement for your sins.