The Confederation of Indian Industry (CII) has reportedly pitched for an additional 1% corporate social responsibility (CSR) levy in the upcoming budget to encourage companies to spend on providing Covid booster shots. The purpose is to supplement GoI’s efforts to provide the ‘precautionary dose’. This is fine. But how much companies want to spend on CSR must be left entirely to them. Today, companies are mandated to spend 2% of their average profit over the past three years on CSR. After the outbreak of the pandemic, GoI allowed companies engaged in R&D of new vaccines and drugs to include such expenditure as CSR. Money spent on building infrastructure such as makeshift Covid facilities also qualifies. Rightly, companies can count vaccination for persons, other than employees and their families, too as CSR spends.
Reportedly, 40% of the spending over the last two years has been on account of companies counting Covid relief measures as CSR. That companies are working in tandem with the Centre and states for Covid relief measures is reassuring. But mandated CSR can be wasteful. Many entities try to do the same job, leading to inefficiencies including lack of economies of scale. It should be scrapped. In any case, every company spreads the collective good by creating jobs and incomes and bettering the conditions of human existence through products and services. Some advance the frontiers of knowledge and convert society’s pooled savings into productive capital.
Companies effective at CSR activities would do these by themselves. Even now, investment that factors in environmental, social and governance (ESG) practices creates an incentive for many companies to carry out voluntary CSR. It is less wasteful than mandated CSR.
Article Credits: Economic Times