Wow! So sorry - it has been a while. But I'm back! With a focus on International Business practices. For those MBA students who plan to be corporate jet-setters - you better know a thing or two about the countries you plan to visit. So today's focus: India.
The Ministry of Corporate Affairs (MCA) has made it mandatory for all companies to disclose to shareholders whether they have made a contribution of 2% of net profit toward corporate social responsibility efforts. In 2009 MCA released the voluntary guidelines on Social, Environmental, and Economic Responsibilities of Business, but with this new mandate – the guidelines have been updated.
According to the latest minister of company affairs, M Veerappa Molly, CSR is a “Western” idea. It hasn’t taken off in India but Molly believes that companies need to start thinking about it. Especially since, according to my research, India has just become a major economic player and needs to position itself as an inviting and friendly country in and with which to do business. However, Molly realizes that he cannot force these CSR guidelines on companies who may be international and are in India in order to escape regulations, or – on the other hand – are home-grown companies who have grown so rapidly and economically strong that they don’t want to rock the boat.
So - by requiring the companies to report their CSR efforts on financial statements, at least the stakeholders know what’s happening. By releasing these guidelines – MCA hopes that the companies will look to the guidelines for reference, and over time, that these guidelines will become more refined and specific to certain sectors. This is as close as the companies can get to hiring their very own CSO (Chief Sustainability Officer) saving the company millions of dollars in research and salary.
Do people care? Will top investors pull out of a company due to the lack of CSR efforts? I am sure they realize that eventually the company will have to get on the bandwagon but for now a gentle urge toward those efforts will suffice. However, especially with the recession still fresh in my mind – if a company is profitable - why rock the boat? Of course, if CSR is a Western notion and is making its way around the globe – then it stands to reason that those companies may lose their hold and be less profitable (although- I feel that’s a long way off for some of the companies that make the cheapest products in their industry). So if the idea of decline is merely looming in the distance – what’s the rush? And that may be what the new minister is doing by passing this new law. He’s merely placing the thought in people’s minds – before it becomes mandatory. It’s akin to setting your alarm clock 10 minutes before you actually have to wake up. Therefore, when you press the snooze button, you don’t feel so bad. Unfortunately, I think the world’s alarm clock for sustainable business practices and triple bottom line operations went off 40 years ago. I guess we’re now just waking up - better late than never…?
