The onus of planning and executing a good CSR (Corporate Social Responsibility) strategy lies completely on the board of directors of an organisation. If the board members don’t have the right mindset and direction, it becomes quite difficult to run programs that will provide good returns while satisfying the basic criteria any CSR program should have.
Role And Responsibilities Of The Board
Since the passing of the Companies Act 2013, the board has a well-defined set of CSR duties to perform. Some of these duties include:
- Forming a CSR committee – The board is responsible for curating members and establishing a CSR committee according to the guidelines put forward by the government in the Companies Act.
- Approving The CSR Policy – Once the committee comes up with a tangible CSR strategy, the board has to review it and suggest changes (if needed), before giving them the greenlight to go ahead and implement the policy.
- Implementing The Policy – Just approving the activities finalised by the committee isn’t enough. The board needs to ensure that the plan is being implemented and that all the CSR activities are actually happening.
- Enforcing The ‘2% of profits’ Rule – According to new government regulations, any organisation which is liable to undertake CSR activities has to spend at least 2% of its net profit on them. So even if the committee has drawn up an impeccable CSR strategy, the board needs to make sure that it uses at least the minimum amount required.
Why The Board Matters
According to the 2011 Public Governance study conducted by the National Association Of Corporate Directors, only 1.5% of all board members who were surveyed put CSR in the top priorities of the board. Fortunately, over the last few years, CSR has become an extremely important part of running a business.
The biggest advantage of the Companies Act is that it has transformed CSR by making it compliance, rather than choice. As a result of this, organisations have started to approach CSR in a more serious way. CEOs and CFOs have welcomed the solid set of guidelines and rules as it gives them an easy way to go about handling their CSR duties.
Before 2013, many organisations in India were not sure exactly how and why they should go about a CSR strategy. Many were under the impression that CSR has little to no returns. However, major organisations like Tata, Infosys, and Coca Cola have run successful CSR programs, which not only helped to boost their brand image, but also generated sizeable returns. With the benefits clear for all to see, other companies have followed also suit.
A Question Of Specificity
So if the government has already laid down all the requirements, why does the board need to spend time on CSR?
Despite being a comprehensive document, the Companies Act of 2003 only gives a general idea of how organisations should go about their CSR programs and where they can spend their CSR budget. It’s falls to the board to make sure that they put together a committee that thinks out of the box and designs CSR programs that are unique and engaging.
With CSR, there’s a massive scope for innovation and the board should make it a point to encourage progressive ideas. Ideally, businesses should work on sectors which have not received enough attention from other organisations. They should also play to their strengths for maximum impact.
At the end of the day, they need to make sure that society stands to gain as much from their CSR activities as their organisation does.