Regulation

The issues surrounding corporate regulation pose several problems. The concept of regulation is inherently difficult to address because of the numerous corporations that exist are vastly dissimilar in terms of corporate behavior and nature. Thus, regulation in itself is unable to cover every aspect in detail of a corporation’s operations. For example, this leads to burdensome legal processes bogged down in interpretations of the law and debatable grey areas (Sacconi 2004). For example, General Electric failed to clean up the Hudson River after contaminating it with organic pollutants. The company continues to argue via the legal process on assignment of liability, while the cleanup remains stagnant. (Sullivan & Schiafo 2005) Government regulation or public institutional regulation is difficult to achieve. Depending on the political regime and form of government – democracy, parliamentary, presidential – issues of governmental ineffectiveness may transpire. As a result, attempts at CSR policy development and implementation may be unattainable.

The second issue is the financial burden that regulation can place on a nation’s economy. This view shared by Bulkeley, who cites the Australian federal government’s actions to avoid compliance with the Kyoto Protocol in 1997, on the concerns of economic loss and national interest. The Australian government took the position that signing the Kyoto Pact would have caused more significant economic losses for Australia than for any other OECD nation (Bulkeley 2001, pg 436). On the change of government following the election in November 2007, Prime Minister Kevin Rudd signed the ratification immediately after assuming office on 3 December 2007, just before the meeting of the UN Framework Convention on Climate Change.

In India, the concept of CSR is governed by clause 135 of the Companies Act, 2013, which is applicable to companies with an annual turnover of 1,000 crore INR and more, or a net worth of 500 crore INR and more, or a net profit of five crore INR and more. The Act encourages companies to spend at least 2% of their average net profit in the previous three years on CSR activities. The Act lists out a set of activities eligible under CSR. Companies may implement these activities taking into account the local conditions. The indicative activities which can be undertaken by a company under CSR have been specified under Schedule VII of the Act. The draft rules as of September 2013 provide a number of clarifications:

• Surplus arising out of CSR activities will have to be reinvested into CSR initiatives, and this will be over and above the 2% figure
• The company can implement its CSR activities through the following methods: – Directly on its own – Through its own non-profit foundation set- up so as to facilitate this initiative – Through independently registered non-profit organisations that have a record of at least three years in similar such related activities – Collaborating or pooling their resources with other companies
• Only CSR activities undertaken in India will be taken into consideration
• Activities meant exclusively for employees and their families will not qualify
• A format for the board report on CSR has been provided which includes amongst others, activity-wise ,reasons for spends under 2% of the average net profits of the previous three years and a responsibility statement that the CSR policy, implementation and monitoring process is in compliance with the CSR objectives, in letter and in spirit. This has to be signed by either the CEO, or the MD or a director of the company