This article was written by Strategic Sustainability Consultants, one of our proud corporate partners.
In 2014, the Indian government passed a law under section 135 of the Companies Act that businesses with annual revenues over 10 billion rupees (approx AU$204 million) must give away 2% of their net profit to charity each year.
This law has sparked some debate. While company contributions to charity have increased by over 7-fold since the law was introduced, there are many companies who are not adhering to the requirements set by the government.
Bimal Arora, chairperson of the Centre for Responsible Business, has praised this law, saying, “The so-called 2% law has brought CSR [corporate social responsibility] from the finger to the boardroom. Companies now have to think seriously about the resources, timelines and strategies needed to meet their legal obligations.”
But not all the effects of this law are beneficial. What have we learned from India’s actions?
Sustainability and CSR are not the same
Sustainability is a core value and principle to which businesses adhere. CSR, on the other hand, is the act of checking a box. While some businesses may need encouragement in their CSR practices, it takes a shift in values for businesses to begin working towards and eventually achieve sustainability.
Actions cannot be valued less than money
Let’s say it costs a business $5,000 to pay staff for a day of work, including on-costs. If this business’ management team decides that these staff members will be spending the day working at a charity instead of working in the business, does this action mean less than a cheque for $5,000? When governments analyse company contributions to sustainability or CSR, it is necessary to look at actions and donations of goods, not just cash donations.
Small businesses is vital for sustainability
The laws in India only apply to large businesses. It is important to understand, however, the role small business has to play in sustainability. In Australia, small-to-medium-sized enterprises (SMEs) made-up almost 50% of donations from businesses to not-for-profits. For more information about what sustainability means for an SME, have a read of our informative article on the topic.
Larger businesses sometimes forget community engagement
While there has been an incredible increase in the amount of money donated to not-for-profits in India, most of this money has gone to the larger not-for-profits, leaving the smaller organisations behind and creating a somewhat hostile environment in the sector. Large businesses can often forget the importance of working with smaller communities and the immediate local community and the organisations working to improve these. For Australian businesses, it is important that there is some level of focus on the immediate community as the immediate community often makes up a business’ consumer base.
Education is Key
It is fundamental for the continuation of our economy, our society and our planet that sustainability in business is discussed more often and in a wider variety of venues. Educating business owners and business executives on the importance of sustainability and how to become involved in sustainability will allow a more meaningful and a more effective engagement with the topic and subsequent actions.
Where to go from here?
Strategic Sustainability Consultants is working with our partners at the Global Goals Australia Campaign to encourage the Australian Government to take positive action towards encouraging businesses to engage in sustainability practices in order to ultimately achieve the United Nations’ 17 Global Goals for Sustainable Development by 2030.