India's CSR law, will it mean much?

(05/03/13 Update: I may have made a factual error in the below post, see the comments at the end. I am looking into this)
 


The BBC is reporting that India's CSR law is set to pass a parliamentary vote any day now.


In brief, the new law, if it passes, will say that companies making more than $250,000 per year in net profits must spend 2% of that on "Corporate Social Responsibility", whatever that means.
  
I met the senior civil servant who is pushing this through in Delhi last year. He seemed sure it will pass. He indicated that when he and his colleagues wrote the relevant financial section of the new companies bill as “should”, a parliamentary group of MP’schanged it to “must”.

So some influential MP's are keen on the idea. (Whether they are charged with crimes, or have been convicted of some, as so many MP's at a state and national level are, is not clear)

What impact it will have though, remains to be seen. 

It may well be just another law to be broken or fudged, I would suspect. It won't be hard to find a way around it, and I cannot see it being enforced in any way. 

India has bigger governance challenges than enforcing a CSR law.

It’s quite nihilistic over there in a legal sense. Money = power.

Accountability-related institutions seem quite weak. We've all seen the corruption news. This is not new.

However, this law will at least raise awareness of the notion of social responsibility among some companies.

The larger firms are already quite active in many ways though, so I doubt this new law will really have a lot of impact on them. They are no doubt already compliant, or can be easily. 

Then there's the rest of the companies in India making more than $250,000 per year. Most will no doubt simply view this as a compliance issue and at best, most will just create a small philanthropy programme and call it CSR. 

I can't see this causing any "road to Damascus" moments in India's CEO community. Laws don't tend to do that.

You can't legislate effectively for ethics and social responsibility, beyond minimum standards (which of course, must be rigourously enforced and updated with the times, and so often are not)

Active business membership groups, better journalism, savvy NGOs, civil society groups and institutions, and technical training for suppliers by big companies will make more of a difference than this law will. 

It does raise an interesting question of what constitutes an effective catalyst for further business action on CSR where that is currently lacking. But the answer to that is far more complex than passing yet another law.

More on this in a separate post. Here's a report on the subject which I co-authored a few years ago.

Here's also a post I wrote last year after a trip to India, where I met 50 odd business folk and others to discuss the subject of CSR in India:


Perhaps what's really interesting about all this is not this law or its enforcement per se.

It's what it represents: A major step towards business being told forcefully to chip in and help solve social and environmental problems in a large emerging economy.

We may look back on this period one day as one during which business had much less social and environmental pressure than is coming in the near future.
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