THREE words, much ado. Corporate Social Responsibility ( CSR) has proved quite the bone of contention these past few months. The 2% levy on profits announced during the last budget did not go down very well with the private sector, which strongly believes that CSR should be conducted on a voluntary basis. In the coming weeks, the committee entrusted with the task of establishing the guidelines for CSR funds. Many firms have put their CSR activities on hold until these are made public in order to be sure of their eligibility under new legislation. The question remains though, should CSR be voluntary or does the government have a point in imposing a levy? In the last budgetary exercise, the minister of Finance, Rama Sithanen, explained that these funds were to be “ used in the fight against poverty” . The weapons in this fight against want were indentified by the Finance Bill 2009.

“ Every company shall, in every year, set up a CSR Fund equivalent to 2 per cent of its book profit derived during the preceding year to – ( a) implement an approved programme by the company; ( b) implement an approved programme under the National Empowerment Foundation; or ( c) finance an approved NGO.” Literacy, social housing, assistance to abused women and children as well as AIDS prevention and support are some of the issues that these funds will be used to tackle.

Unsurprisingly this move, which effectively made CSR mandatory, prompted its fair share of criticism from the private sector. The Mauritius Employers’ Federation ( MEF) responded to the budget almost immediately by publishing a one- page document entitled, “ CSR Ten Fundamentals”, in which it fiercely reaffirmed its conviction that CSR is a “ voluntary enterprise- driven initiative” . In particular, the last two “ fundamentals” were unequivocally against the sort of diktat imposed by Rama Sithanen: “ CSR cannot be subject to a tax imposed on enterprise” and “ CSR cannot be regulated and enforced by legislation”. Unfortunately for the MEF, the minister of Finance evidently holds a very different opinion of the dos and don’ts of CSR.

“ Friend or foe of business”

Although this might look like a habitual private sector knee- jerk reaction against any form of regulation, the MEF does actually have a point. Strictly speaking, CSR must be voluntary. Slapping the CSR label on a compulsory 2% levy on profits is a bit misleading, semantically at least. There’s also the fear that the imposition will push firms to eschew an active involvement in social and environmental projects. Indeed, CSR is a very broad concept that is used to describe contributions for everything ranging from employee benefits to environmental protection.

By forcing companies to stick to a narrow list of programmes or NGOs, the authorities might be sacrificing certain valid causes that could’ve done with private sector assistance.

Yet the resistance to the compulsory CSR levies seems to have a deeper, even ideological dimension. If certain commentators are to be believed, the whole capitalist system is at stake. In an ominously named article ( CSR: Friend or foe of business ) published in The African executive , the director of Pluriconseil, Eric Ng Ping Cheun, claimed that this imposition would have a dastardly effect business everywhere.

“ In so far as firms are denied the freedom to choose, because of their legal obligations, their performance will instead be weakened, market opportunities curtailed, and competitive pressures reduced. Adoption of the CSR approach by businesses everywhere rather than just by vanguard firms will have an economy- wide impact”, he wrote. If this is true then the question that begs is, why is the government being so mean to the poor, downtrodden private sector? Its motivation is actually threefold.

Firstly, the legislation was deemed necessary because many companies were simply not pulling their weight when it came to contributing to the “ fight against poverty”. This is made clear in Review of CSR actions and policies in Mauritius and Rodrigues , a report compiled by Deloitte and the European centre for not- for- profit law ( ECNL) last year. Apparently better use had to be made of the “ stick” to make the carrot more effective. “ It can be strongly argued that the extent to which such laws and regulations are actually being applied in order to sustain and enhance corporate social responsibility is not enough.” An adviser to the Finance ministry, Benu Servansingh, confirmed the existence of this shortcoming in l’express a couple of weeks back. Certain companies, he said, engage in CSR “ just because they have to include it in their annual report. This kind of CSR is usually not well thought- out and in most cases does not have the desired impact on the beneficiaries.” Secondly, it could be argued that by centralizing funds and efforts, the authorities and the private sector would have a far better shot at significantly denting national scourges, such as poverty. Even though there have been some incredibly worthy CSR projects in the recent past, in general efforts are rather scattershot. Thirdly, the levy ( or “ gesture of compassion and solidarity” , as Rama Sithanen poetically put it) was a political move aimed at defusing criticism of the government being soft on big business. Indeed, a bit of pre- election “ democratization” of the economy can go a long way.

And the mandatory CSR levy might not lead to the imminent demise of the private sector as some people would like to believe. In its review of CSR, Deloitte and ECNL revealed that there is “ an established link between engagement in CSR endeavours and competitive advantage.

Most organizations ( 69%) in the Republic of Mauritius acknowledge having benefited from CSR activities”. Still, some questions persist. How will the funds be allocated? What sort of projects will it sponsor? What are the guarantees that the funds will be used “ in the fight against poverty” ? Doubtless, the CSR committee’s guidelines will go a long way to dispel these grey areas.

Like everything else in this country however, the success of the regulation depends on the people and processes meant to implement it.

Yet there is hope that if the public and private sectors can work together in a constructive way, the country as a whole will benefit. Indeed, if the private sector can inject its vim and efficiency into proceedings, and if the public sector can fight for the welfare of the population, then this revised form of CSR could actually be quite a find, especially for those who need it most.

Nicholas RAINER