Mandatory CSR Is Reshaping Corporate India, Making Business A Partner In National Development: BJF Chief

Charity and service have always been integral parts of Indian culture, where helping the vulnerable and contributing to the greater good are viewed as vital aspects of one's dharma. Historically, India has been home to some of the world's most prominent philanthropists. The legacy of Jamsetji Tata, the world’s biggest donor, is a powerful testament to the nation’s commitment to societal welfare. Over time, these philanthropic efforts have evolved into formal initiatives, and in modern times, Corporate Social Responsibility (CSR) has emerged as a vital force that drives businesses to give back to society. The integration of CSR into the Indian business landscape has not only helped improve lives but has also driven long-term, sustainable change in communities.

One of the most notable players in this evolving scenario is the Buddh Jyoti Foundation (BJF), a non-governmental organization that has been making a tangible difference in the lives of marginalized communities in India. Founded in 2010, BJF has focused on areas like healthcare, education, and empowerment, working at the grassroots level to address critical societal challenges. Through its various initiatives, BJF has contributed to social equity and sustainable development, enabling people to break the cycle of poverty. Such organizations, in collaboration with the corporate sector, are vital partners in leveraging CSR for the greater good of society.

The introduction of mandatory CSR under the Companies Act of 2013 marked a significant turning point for corporate philanthropy in India. The legislation requires companies with an average net worth of Rs 500 crore or more, a turnover of Rs 1,000 crore, or a net profit of Rs 5 crore or more to allocate 2 per cent of their average net profits over the last three years toward CSR activities. This mandate formalized the practice of corporate philanthropy, ensuring that companies did not merely engage in charity but made a real, measurable contribution to the country's social development. Before the mandate, CSR in India was largely voluntary, and many companies had ad hoc philanthropic programs. While some businesses were making significant contributions, many others lacked structured initiatives to create a lasting impact. With the introduction of the CSR mandate, corporate philanthropy became more strategic, and companies were now expected to incorporate social responsibility into their overall business plans. This provided companies with a clear framework to follow, ensuring that their contributions had a lasting impact on the communities they were trying to help.

For businesses, the CSR mandate has proven to be a powerful tool for building long-term relationships with stakeholders, fostering goodwill, and differentiating themselves in an increasingly competitive market. “It has also encouraged a deeper level of engagement with societal issues, forcing companies to think beyond their financial bottom line and consider the impact of their actions on the environment, communities, and employees,” says Kapeel Barsaiyan, President, BJF in an exclusive interaction with Bizz Buzz

What is the impact of mandatory CSR on corporate spending?

The impact of the CSR mandate on corporate spending has been significant. Over the years, businesses in India have committed substantial financial resources to CSR, helping fund projects in critical sectors such as education, healthcare, and environmental sustainability. According to the Economic Survey, CSR spending has consistently increased over the years:

From 2017-18 to 2021-22, CSR spending rose by an impressive 53 per cent, highlighting the growing commitment of businesses to social causes. Despite this growth, it is important to note that in 2023, CSR spending slightly fell below the mandated 2 per cent of net profits, suggesting that the system still faces challenges in terms of consistent implementation. However, the overall trend is clear: CSR spending is on the rise, and companies are increasingly allocating significant resources to address societal issues.

What are the multifaceted benefits of CSR?

While CSR has undeniable benefits for society, it also provides numerous advantages to businesses themselves. These benefits extend beyond financial gains, contributing to a company’s long-term sustainability, reputation, and overall success.

One of the most immediate and visible benefits of CSR is the positive impact it has on a company’s reputation. Active participation in CSR initiatives helps businesses build trust among stakeholders, including customers, employees, investors, and local communities. Companies that are seen as responsible corporate citizens are perceived as ethical and dependable, which improves their brand image and customer loyalty.

As environmental concerns continue to gain traction globally, businesses are increasingly focusing their CSR initiatives on sustainability. Whether it is reducing carbon emissions, conserving water, promoting renewable energy, or reducing waste, companies that adopt environmentally sustainable practices can make a significant difference. In addition to contributing to the protection of the planet, these initiatives align with the growing consumer demand for eco-friendly products and services, thus driving business growth.

Employees are increasingly looking for companies that align with their values and offer more than just financial compensation. A business that prioritizes social responsibility and sustainability enhances employee morale, loyalty, and satisfaction. Employees who feel that their company is making a meaningful contribution to society are more likely to stay with the company, leading to reduced turnover, higher productivity, and an overall positive workplace culture.

Modern consumers are becoming more conscientious about the companies they support. They prefer businesses that share their values and demonstrate a commitment to social and environmental issues. Companies with robust CSR initiatives often attract a loyal customer base that is willing to pay a premium for products and services they believe are ethically produced. This not only boosts sales but also builds a strong, values-driven relationship with customers.

CSR can have a direct and transformative effect on community development. Companies that invest in education, healthcare, and infrastructure development can help address critical issues such as poverty, unemployment, and inequality. Through targeted initiatives, CSR can empower marginalized communities, providing them with opportunities for employment, better healthcare, and improved living conditions. Moreover, the collaboration between businesses, non-governmental organizations (NGOs), and government agencies can amplify these efforts, creating sustainable programs that benefit entire communities.

What is your view on CSR as a catalyst for social change through leadership?

Corporate Social Responsibility (CSR) has emerged as a powerful force for social change in India. The mandatory implementation of CSR under the Companies Act of 2013 has given corporate philanthropy a more structured and impactful approach. As companies increasingly embrace CSR, they are making significant contributions to addressing societal challenges, driving sustainable development, and improving the lives of marginalized communities.

Organizations like the Buddh Jyoti Foundation, with their focus on grassroots empowerment, healthcare, and education, are invaluable partners in this endeavour. Through strategic CSR initiatives, businesses can create meaningful change that goes beyond profits, aligning corporate success with social good. As CSR continues to evolve, it will remain a vital tool in shaping a better and more equitable future for all.