ITC against mandatory CSR spend

Cigarette-to-hotels major ITC, which believes in co-creation of societal value, is against the proposal to prescribe mandatory spends of net profits on corporate social responsibility (CSR).

“Though well-intentioned, such a proposition is not merely unimaginative in terms of its capacity to unleash corporate energies, but also one with potentially undesirable consequences. Prescribing outlays is akin to an additional tax on a corporate that seeks ‘compliance’ rather than ‘commitment’ in making social investments. In unscrupulous hands, such an expenditure obligation will only encourage creative accounting to channelise funds for partisan purpose,” ITC chairman Y C Deveshwar said at the company’s annual general meeting.

The government is looking to make CSR mandatory, as it feels voluntary CSR is not working. The new Companies Bill provides for a mandatory spend of two per cent of net profit on CSR.

“If the focus on outlays persists rather on outcomes, it is a matter of time before large investments are necessitated to create an enforcement machinery to ensure that funds are not diverted away from desired outcomes, rendering it a zero-sum game,” Deveshwar said.

He, however, said limits to future growth would be defined more by vulnerabilities flowing from social inequities, environmental degradation and climate change.