Reimagining CSR

Business Standard     20th July 2020     Save    

Context: Reimagining CSR is necessary to present a better society for future generations. The current trend creates the hope that the change is coming.

Significance of Corporate Social Responsibility:

  • In the best interest of all stakeholders: Section 166 of the Indian Companies Act 2013 stipulates:
        •  “A director of a company shall act in good faith to promote the objects of the company for the benefit of its members as a whole, and in the best interests of the company, its employees, the shareholders, the community, and for the protection of the environment.”
  • Responsibilities of the Directors:
  • Evaluate the impact: of strategies on employees, neighbourhood communities, and social culture:
  • For E.g. Public pressure on Facebook to stop political advertisements before the presidential election in the US.
        • Ensure minimum negative externalities and minimum negative impact on the environment.
  • Support to local neighbouring communities:
        • This is reflected in Section 135 of the Indian Companies Act 2013 which mandates 2% of their average net profit in the past 3 years to be used for CSR activities.
        • The company should give preference to the local area and areas around it where it operates.
  • Improves ‘Meaningfulness’ of jobs:
      • Recent research shows that the “meaningfulness” quotient of jobs increases when employees see top management’s sincerity in fulfilling CSR and adopting ethical practices.

The emergence of Corporate Irresponsibility

  • Unethical Practices: Companies that fail to fulfill CSR and adopt unethical practices in dealing with customers, vendors, and other stakeholders are labeled as irresponsible companies.
  • Failure to retain talent and image of the company:
      • Empty rhetoric: Unless the company demonstrates sincerity in eradicating social evils, the company remains in suspicion in the eyes of employees and other stakeholders.