Can CSR Be Mandated? India Adopts New Law.
As of April 1, India is the only country in the world with legislated CSR. The Companies Act 2013 mandates that companies—including foreign firms—with a minimum net worth of $500 million and net profit of at least $5 million spend two percent of their profit on CSR. An estimated 8,000 companies are affected. Projections are that over $2 billion could be spent on CSR under the new law; there are penalties for failing to comply. There is one sticking point: the tax deductibility of the CSR spend. Business associations argue that as CSR is now integrated into business practices and strategy, CSR expenses should be treated as an integral cost of responsible business, and therefore be tax-deductible. Mandating CSR is a singular step. Watching this mandate play out over the coming months should be an enlightening exercise.
John Howell, Editorial Director