Mumbai, Nov. 11 (PTI): Adi Godrej today said the government move to make companies spend on corporate social responsibility is a ploy to “divert money for political purposes”.

“I am very worried that this is a political move to divert money for political purposes. I would be very careful of such mandatory recommendations,” the Godrej Group chairperson and veteran industrialist said at a CII event here.

The government has asked companies to spend 2 per cent of their net profit under CSR and also made it mandatory for them to disclose this in their annual report.

Asked if industry was consulted before corporate affairs ministry made the decision, Godrej said there was “not much of a dialogue”.

Speaking at a panel discussion, Godrej said new “business movements” are making it possible for better valuations for companies with better ethics and values.

“Now, institutional investors are asking companies to perform on issues like environment protection, sustainability, etc. That movement is getting around. I think such movements could help,” he said.

Tata Steel vice-chairperson B. Muthuraman, however, had a different take on the issue and said the CSR is “fundamental to business”.

He said there is a pressing need to change the matrix of measurement for corporations from the present system of profits and margins to the benefit that they give to the society at large.

The current government position is that companies should set aside 2 per cent of their three years’ average profit for CSR and if they don’t, they will have to give the reason to shareholders in the annual report. However, the government will not penalise them.

The suggestion for earmarking a part of a company’s profit for CSR was floated by a parliamentary standing committee on finance, which scrutinised the Companies Bill, 2009.