Saturday, December 22, 2012

How CSR can boost patient education in India

The amendments of the Indian Companies Act which have been recently passed now make it compulsory for companies to invest two percent of their net profits in CSR or corporate social responsibility . For many observers in the financial sector, this seems to be a retrogressive step . They believe companies are in the business of making money , and their main goal is to be profitable. Once they've made their profits , what they choose to do with this money is a decision which should be left up to the management . They can use the surplus for paying dividends to their shareholders ; or for growing the company , so that it becomes even more profitable . They do not approve of the fact that the government is now mandating that companies invest part of their profits into CSR , because they believe that CSR is not part of a company’s core competence. Doing social good should be best left to people who understand that particular sector, and it's not fair to mix the two together. There are also obvious concerns that companies will then choose to invest in CSR activities which are run by NGOs in which the wife of the CEO is the Trustee ! This could then become another method of providing gratification for people the Board chooses to favour.

While this is a valid criticism , another school of thought is that this is an extremely progressive step. One of the criticisms about capitalism is that it's very market-oriented ; and that because they are so focused on making profits , companies sometimes tend to lose sight of the fact that they are a part of society and social responsibilities . By forcing companies to invest in CSR, we are helping them to become enlightened citizens. Not only is this good for their public image, it’s also good for society as a whole  because successful profitable companies, are presumably better at investing money in socially responsible activities , as compared to the government, which is notoriously inefficient.

For example, rather than have the government invest in activities which promote healthcare for the poor, if healthcare companies ( such as pharmaceutical manufacturers) were forced to invest in nonprofits ( such as HELP, the world's largest free patient education library) which are active in the healthcare space, this would create synergy . These win-win partnerships are likely to be beneficial both for the company , as well as the NGO , and it would be the end user who would benefit as a result of this multiplicative effect.

As usual there will be some companies will use this as a way off siphoning off some of the profits back to the pockets of an NGO which the CEO favors because it is run by a family member. However, just because a particular provision can be misused, this does not mean that it should not be explored at all !  I am quite optimistic that some good will come of this !

1 comment:

  1. this article is interesting and could add new insights, have a nice day


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