Friday, January 4, 2013

CSR in Public Sector Enterprises

The provisions relating to corporate social responsibility (CSR) in the Companies Bill, 2011 have garnered sufficient attention on the topic. Those provisions are largely in the nature of CSR spending. While the Bill is pending in Parliament, the Department of Public Enterprises has proceeded to issue a revised set of “Guidelines on Corporate Social Responsibility and Sustainability for Central Public Sector Enterprises” that would become effective from April 1, 2013.

Unlike the Companies Bill and also the previous version of the guidelines applicable to central public sector enterprises (CPSEs) which focused largely on external stakeholders and CSR spending, the new version of the guidelines emphasizes CSR as a way of life and as an integral part of the operations and business of the company. While the current debate in India equates CSR with corporate philanthropy, the new guidelines for CPSEs does more than that and requires companies to follow ethical systems and sustainable management practices.

The guidelines contain detailed provisions on the manner in which CPSEs can carry out their CSR practices, which also mandate every CPSE to carry out a minimum number of external projects “for development of a backward district” that “has the potential of contributing significantly in the long run to socio-economic growth in all the backward regions of the country”.

It is not clear whether there is adequate data to determine the success of implementation of these efforts by CPSEs in the past, but by imposing higher standards of social responsibility and sustainability on public enterprises, the Government is sending a strong signal to the private sector regarding the importance of CSR in India.

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