Chhattisgarhs new CSR policy only deepens the disconnect between the two.
The Chhattisgarh government,in its quest for a different paradigm for financing social development,has gone beyond the provisions of the new Companies Act. While the act mandates that a defined percentage of profits should be devoted to socially useful activities,it leaves individual companies free to choose which activities,only broadly indicating what is considered socially useful. Chhattisgarhs Corporate Social Responsibility Policy 2013 makes it compulsory for companies to pay CSR contributions into the Chief Ministers Community Development Fund,whose purpose is the holistic development of districts affected by mega industrial projects. The Chhattisgarh State Industrial Development Corporation,which will operate the fund,will pass on the amounts to the concerned district.
Non-compliance is punishable by the withholding of grants or facilities by the state government,albeit after a hearing. Admittedly,companies have not contributed to the welfare of local communities as much as they can and should. Or it has been done in such an ad hoc manner that there is a disconnect between the needs of the community and the local industrys plans for it. The Central enactment and state policies have brought the need for CSR into the corporate consciousness. However,the Chhattisgarh policy is misconceived for a variety of reasons.
Making companies channel their CSR resources into a common pool under state control runs counter to the spirit of CSR,which is to encourage companies to be responsible for the welfare of communities because it is in the interests of both company and community.
Ultimately,the business of business is business,not social development. It will contribute to the latter only when it becomes obvious that the goodwill generated by the CSR contributions adds to the bottom line in the long run,that is,out of enlightened self-interest. A company is interested in doing good,even if out of compulsion,if it can also be seen to be doing good. This means the community must be aware of the identity of the donor company. Moreover,a company would always prefer direct engagement with the community because it provides greater psychological satisfaction. The pooling of CSR resources into a common kitty creates a disconnect between the company and the community,and transfers the credit from the company to the government and politicians who dispense the largesse as part of their own agenda.
The new policy also raises the questions of whether state disposal of wealth is more efficient than private agency,whether the state should directly control the utilisation of private charitable resources (although mandated CSR is not exactly a charitable contribution). The experience of state control of philanthropic funds would suggest that both answers are in the negative. The National Culture Fund (1996) and the Bharat Shiksha Kosh (2003) were set up to mobilise funds from private sources,but both failed to meet their objectives. That they could not attract contributions was partly to do with state control of the funds donated. Even those who did not mind the funds as a mechanism to mobilise resources objected to routing these through government,and withdrew. Though companies have no such option in the present case,the government will lose an opportunity for innovative development with private cooperation.
The idea of creating a large pool of charitable resources to supplement government budgetary provision is not bad in itself. Individual corporate initiatives,while useful in themselves,are often unable to effect sustained change on a large scale because they are not linked to larger national goals and government programmes. The Chhattisgarh fund can perhaps help provide this scale and the linkages,provided the private donors are allowed a say in the operation of the fund.
It might be best for the state to leave CSR funds in private hands,and to indirectly control the flow of funds into the desired fields. One suggestion is to encourage the establishment of community funds out of CSR contributions,owned and run by the people in partnership with the donor companies,in the locations where they are needed. The government could participate as partner instead of ringmaster.
Sundar is the author of Business and Community: The Story of Corporate Social Responsibility in India express@expressindia.com
