The first exercise of its kind in India, the idea is to incentivise CSR programmes to strengthen companies' ability to bargain for tax breaks and create a better image with consumers and stakeholders.
"There is virtually no incentive in India for companies that work towards creating jobs, following sustainable environmental practices or supporting developmental projects," said ITC chairman Y C Deveshwar.
Deveshwar was speaking on the sidelines of the second Sustainability Summit: Asia 2007 in New Delhi on Tuesday. The summit was organised by the Centre for Excellence and Development Alternatives, an NGO.
Preliminary work on the index, which is being done in association with the International Finance Corporation, has begun and rating agency Crisil is likely to come up with a rating system by January 2008.
The Centre for Excellence will then fine-tune it to enable measuring CSR in specific sectors. This is expected to be ready for use by the end of next year.
"The index will provide, for the first time, a public domain benchmark on sustainability for measuring companies," a Crisil official said.
Deveshwar has proposed that companies should first make voluntary disclosures of their CSR projects. These disclosures would then be cross-checked and audited by an independent authority, after which ratings would be assigned.
Saying that a body like the Comptroller and Auditor General of India would not be acceptable for such a role, Deveshwar has proposed a public-private partnership with government, industry and NGOs to conduct the audits.