corporate social...

1 | P a g e JOURNAL ON CONTEMPORARY ISSUES OF LAW VOLUME 3 ISSUE 7

CORPORATE SOCIAL RESPONSIBILITY

Pratiksha Gupta1 & Shorya Agarwal2

ABSTRACT

Corporate Social Responsibility as the word suggests means the responsibilities of the corporate

companies towards the society. This is a new concept which is introduced for the companies. It

means that some proportion of amount of profits from the net worth should be distributed or used

by the company for the development of the society. It has been made mandatory for all the

companies that they have to invest a particular amount of money for the society. That work can be

for extradition of poverty from the country, either it can be donating to national and local charities.

Businesses have a lot resources that can benefit charities and local community programs.

Corporate Social Responsibility is necessary as the companies are using the resources of the

society. Therefore, these corporate also have some duties towards their welfare. A sense of

responsibility arises towards the nature and society, to give back what we have taken from it. The

concept of CSR will benefit both the company as well as the society as a whole. It is beneficial for

the company as it will be more organized and more connected to the people of the society and on

the other hand, the adaptation of CSR will benefit the society by getting back the resources that

the society lacks. After analyzing this situation, it is well known that CSR is of an important nature

and companies should work on it.

In the current scenario, companies fail to realize the process, the working and the importance of

this subject. Therefore, the present article analyses the meaning of Corporate Social Responsibility,

its role in community development because the very logic of CSR is towards seeking its impact in

the community; socially, environmentally and economically. Furthermore, the article would also

like to give the reflection on how companies can use this subject matter of Corporate Social

Responsibility.

Keywords: Corporate Social Responsibility, Company, Society

1 3rd Year BBA LLB Student, Amity University Jaipur 2 3rd Year BBA LLB Student, Amity University Jaipur


INTRODUCTION

“We are now, more than ever, aware of the potentially negative impact of business on the

environment, whatever the size of the business. There can be only positive results from developing

sustainability from benefitting your own bottom line to benefitting tomorrow’s industry

environment in which we all live.”

-Tony Blair, UK Prime Minister May 2000

Corporate Social Responsibility is a signal demonstrating the organization's worries and

responsibility towards the general public's maintainability and improvement. CSR is an ethical

behavior of the company towards the society.

Corporate Social Responsibility is an extended version of corporate governance based on the

fiduciary duties owed to all the firm’s shareholders as well as their stake holders. It is posed as a

great challenge that aids the gap between Corporate Governance, Corporate Social Responsibility

and Environmental Responsibilities concerning the business.

Although CSR has various different apprehensions, but it mainly concerns about the wrongful

exploitation and wasteful practices adopted by the industries which are no longer tolerable by the

society. CSR is an essential factor for the companies because they utilize the resources; be it natural

or man forced; from the society for their working and development, therefore, they owe an

obligational duty to serve the society. It is not just sustainability that is an issue- it is survival.

It requires companies to act beyond its legal obligations and to integrated social, environmental

and ethical concerns into company’s business process. Corporate Social Responsibility requires

companies to acknowledge that they should be publicly accountable not only for their financial

performance but also for their social and environmental record.

According to Economic perspective, a business is an institution that exists to produce goods and

services demanded by the society and by engaging in this activity, the business creates jobs, and

wealth that will benefit the community in the near future.

According to UNIDO, Corporate Social Responsibility is generally understood as the way

through which a company achieves a balance of economic environmental, and social imperatives.


Today, the concept of CSR has undergone a radical change. It has blended social, as well as

environmental into their goals, objectives, missions and conclusions. Companies and industries

regard their stake holders and shareholders about the vast information, facts, activities about this

subject matter.

Corporate Social Responsibility deals majorly with the following subjects:

Contribute sustainable economic development

Desirable social changes

Improvement of the social environment

The aforesaid activities when adopted and blended by the companies, it works towards the

enhancement of the business and the society.

DEFINITIONS

CSR are referred not only to the compliance of human rights standards, labor and social security

arrangement, but also to the sustainable management of natural resources, consumer protection,

philanthropy and volunteering.

The meaning of Corporate Social Responsibility is further clarified by the following definitions.

“CSR is the commitment of businesses to contribute to sustainable economic development working

with employees, their families, the local community and society at large to improve their quality

of life in ways that are both for business and good international development.”

World Bank, 24th March, 2004

“CSR encompasses the extent to which companies should promote human rights, democracy,

community improvement and sustainable development objectives through word.”

Confederation of Business Industry, 2001

“CSR as a concept whereby companies integrate social and environmental concerns in their

business operations and in their interaction with their stake holders on a voluntary basis.”


EU Commission, 2002

Corporate Social Responsibility in the general sense is a responsibility of corporations to

contribute to a better society and cleaner environment. It is the liability of corporations to go above

and beyond what the law requires them to do.

Corporate Social Responsibility is a gesture of showing the companies concern and commitment

towards the society’s sustainability and development. It is the process by which businesses

negotiate their role in society.

In the corporate world, ethics is the study of morally appropriate behaviors and decisions,

examining what “should be done”.

“It takes 20 years to build a reputation, but only 5 minutes to ruin it.”

Warren Buffet

It implies that businesses should not only be responsible for their shareholders but also for their

stake holders as well, i.e., to the community, environment, and a sustainable planet at large. If in

the current scenario, companies won’t work according to the processes and concept which relates

the strategies of CSR, they will have to leave the market.

HISTORY AND BACKGROUND

The CSR originated in 1953 with the publication of the book Social Responsibilities of the

Businessman by Le Livre d’ Howard Bowen. He suggested that the businessman’s social

conscience must be placed against the business itself. Emergence of CSR is considered to be fall

out of the public hostility towards businesses at that point, as a matter of reform.

History of CSR in India:

India has the world's wealthiest convention of corporate social obligation. In spite of the fact that

the term CSR is similarly new, the idea itself goes back to over a hundred years. CSR in India has

evolved through different phases, like community engagement, socially responsible production


and socially responsible employee relations. Its history and evolution can be divided into four

major phases.3

1) PHASE 1 (1850 TO 1914)

The main period of CSR is known for its philanthropy and humanitarian nature. CSR was affected

by family values, conventions, culture and religion, as likewise industrialization. The abundance

of agents was spent on the welfare of society, by setting up sanctuaries and religious organizations.

With the begin of the colonial period, this way to deal with CSR experienced a critical change. In

pre-Independence times, the colonials of industrialization, names like Tata, Birla, Godrej, Bajaj,

advanced the idea of CSR by setting up beneficent establishments, instructive and social insurance

foundations, and trusts for group improvement. Amid this period social advantages were driven

by political thought processes.

2) PHASE 2 (1910 TO 1960)

The second stage was amid the Independence development. Mahatma Gandhi asked rich

industrialists to share their riches and advantage poor people and minimized in the public eye. His

idea of trusteeship aided financial development. As per Gandhi, organizations and enterprises were

the 'sanctuaries of current India'. He affected industrialists to set up trusts for universities, and

research and preparing establishments. These trusts were likewise required in social change, as

rustic advancement, instruction and strengthening of women.

3) PHASE 3 (1950 TO 1990)

This stage was portrayed by the development of PSUs (Open Sector Undertakings) to guarantee

better circulation of riches in the public arena. The strategy on mechanical authorizing and

expenses, also, confinements on the private segment brought about corporate acts of neglect which

at long last activated appropriate enactment on corporate administration, work and ecological

issues. Since the achievement rate of PSUs was not huge there was a regular move in desires from

open to private segment, with the last getting effectively included in financial improvement. In

1965, academicians, lawmakers and specialists led an across the nation workshop on CSR where

3 Taken from http://www.soulace.htm


real accentuation was given to social responsibility and straightforwardness.

4) PHASE 4 (1990 ONWARDS)

In this last stage CSR moved toward becoming portrayed as a maintainable business procedure.

The influx of advancement, privatization what's more, globalization (LPG), together with a

relatively loose permitting framework, prompted a blast in the nation's financial development. This

further prompted an expanded energy in modern development, making it feasible for organizations

to contribute more towards social duty. What began as philanthropy is presently comprehended

and acknowledged as duty.

GOALS AND DEVELOPMENTS OF CORPORATE SOCIAL

RESPONSIBILITY

The main aim of the CSR is to eradicate extreme poverty and hunger from the society. There

are many other goals at the heart of the CSR which includes to achieve universal primary

education, promote gender equality and empower women. CSR does not only aim to achieve

social aspects of society but it also ensures for environmental sustainability as well.

CSR aims to develop a global partnership between the company and the society so that it can

help in improving many problems like child mortality, improve maternal health, combat

HIV/AIDS, malaria and other diseases as well. It also focuses to work for the workers’ rights

and about the welfare of their families. The only point is to give socio-economic developments.

CSR empowers community awareness and it helps in the expansion of core community values

as it is feasible, viable and measurable in long lasting relationship with the community. It adds

positive value to the community which helps in fair dealing and collaboration between the

community and the company.

GLOBALIZATION AND CORPORATE SOCIAL RESPONSIBILITY

Globalization is the leading concept which has become the main factor in business life during

last few decades. The phenomenal affects the economy, business life, society and environment

in different ways, and almost all corporations have been affected by these changes.


Globalization means the free movement of goods, services and capital in different companies.

This definition does not cover all aspects of globalization. It should be considered as a process

which would integrate world economies, culture, technology and governance.4

How globalization affects CSR?

The mere answer that describes affecting of CSR by globalization does not come after analyzing

the quarter of 20th century but the answer lies back. John Maynard Keynes calculated that the

standard of living has changed to 100% over 4000 years.

It is clear that there is nothing new about economic growth, development and globalization.

Economic growth brings some consequences for the society. This is becoming the world

phenomenal that they are comparatively less concerned about the ethical, social and moral

aspects of the process.

One more question arises that who attains the responsibility towards it whether the government,

the corporate world, the shareholders or the people. Government is a part of system. And

corporate world is more focused about the economic growth and markets. Increasing

competition make businesses more difficult than before in globalized world.

The good news is that competition is now not at all the bad influence for society. As competition

is not just for making profits; another reason is consumer expectation is not only related to the

cost of product but also related to quality, proper production process and environmental

sensitivity. Moreover, shareholders are interested in long term profits and long-term profits can

only be attained when companies are taking social aspects in account. Shareholders are not

interested in short term profits. As company which have short term goals they only come to

make money. Globalization has had a very sharp effect on company behavior and still we can

see many problems particularly in developing countries.

The challenge for CSR in globalizing world is to engage in a process of political deliberation

which aims setting the standards of global business behavior.

4 Taken from http://epublications.bond.edu.au/cgi/viewcontent.cgi?article=1003&context=cgej


CORPORATE SOCIAL RESPONSIBILITY IN INDIA

Corporate Social Responsibility is not a new term in India. As far back as 1965, the then Prime

Minister of India, Lal Bhahadur Shastri, presided over a national meeting that issued the

following declaration on the Social Responsibility of Business: “Business has responsibility to

itself, to its customers, workers, shareholders and the community, every enterprise, no matter

how large or small, must if it is to enjoy confidence and respect, seek actively to discharge its

responsibilities in all directions, and not to one or two groups, such as shareholders or workers,

at the expense of community and consumer. Business must be just and humane, as well as

efficient and dynamic.”

“Business cannot succeed in a society that fails”, Corporate Social Responsibility is being

considered as an imperative for carrying on business in the society rather than as a charity.

While Corporate Social Responsibility is relevant for business in all societies, it is particularly

significant for developing countries like India, where limited resources for meeting the ever-

growing aspirations and diversity of a pluralistic society, make the process of sustainable

development more challenging (Sanjay Kumar Panda, 2008). Although many companies,

NGOs and trade unions were aware of corporate responsibility practices, the concepts are yet

to become part of core business strategy in most companies in India. Almost all companies,

irrespective of size and sector had some awareness of corporate 28 responsibilities and its

potential benefits. While most companies also had policies in place related to labor issues,

community relations and environmental practices, they were for the most part not backed up by

comprehensive implementation and monitoring systems. Community programmes or social

development initiatives, in most cases, were philanthropic and/or ad hoc in nature and not

integrated into core business activities. Indian Corporate Social Responsibility has traditionally

been a matter of classical paternalistic philanthropy, financially supporting schools, hospitals

and culture institutions. However, far from being an add-on motivated by altruism and personal

glory, the philanthropic drive has been driven by business necessity. With minimal state welfare

and infrastructure provision in many areas, companies had to ensure that their workforce had

adequate housing, healthcare and education and simultaneously the country grows at a fast pace.

According to a report by the Centre for Social Markets for the International Finance

Corporation (IFC), many leading foreign Multinational Companies and domestic titans, pre-


eminently members of the Tata Group, have been standard-setters on core Corporate Social

Responsibility issues such as labor conditions, health and safety, environmental management,

corporate governance and integrity. India has a venerable tradition of philanthropy, both

individual and business, and Indian legend and history is replete with instances of generosity

from both sources. But, unlike individual and religious charity which has gone mostly towards

immediate relief of distress, business philanthropy has provided secular funds on a significant

scale to bring progress to society. Modern India owes much to the vision of the founding fathers

of India’s business and industry who endowed many educational and welfare institutions and

funded many a worthy cause, including social reform.

Indian families such as Tata and Godrej have a significant industry presence and reputation for

social responsibility. One of the Tata Group of companies, Tata Steel, is the first in the country

to produce a corporate sustainability report and it administers the only industry town in the

world, Jamshedpur, which has received the ISO14001 environmental quality certification

(Michael Hopling (2008). Other companies have followed Tata’s lead, such as Infosys,

Ballarpur industries Limited, Paharpur Business Park, Ford India, Samsung India Electronics

and Cadbury’s India. They have all produced environmental and social reports. Corporate social

responsibility is one such niche area of Corporate Behavior and Governance that needs to get

aggressively addressed and implemented tactfully in the organizations. At the same time,

Corporate Social Responsibility is one such effective tool that synergize the efforts of corporate

and the social sector agencies towards sustainable growth and development of societal

objectives at large. India is a fast-growing economy and is booming with national and

multinational firms. At the same time, the Indian land also faces social challenges like poverty,

population, growth, corruption, and illiteracy just to name a few. Therefore, it is all the more

imperative for the Indian companies to be sensitized to Corporate Social Responsibility in the

right perspective in order to facilitate and create an enabling environment for the partnership

between the civil society and business.


CORPORATE SOCIAL RESPONSIBILITY AND LAW

Corporate Social Responsibility was added as an amendment bill in the Parliament after the

recommendation of the Standing Committee in the year 2011. This clause enumerates the

companies who are legally bounded to follow the strategies of CSR in their organization.

Section 135 of the Companies Act Amendment Bill of 2011

Sec.135 r/w Schedule VII of the proposed Companies Bill of 2011 enumerates the following5;

“(1) Every company having net worth of rupees five hundred crore or more, or turnover of

rupees one thousand crore or more or a net profit of rupees five crore or more during any

financial year shall constitute a Corporate Social Responsibility Committee of the Board

consisting of three or more directors, out of which at least one director shall be an independent

director

(2) The Board's report under sub-section (3) of section 134 shall disclose the composition of

the Corporate Social Responsibility Committee.

(3) The Corporate Social Responsibility Committee shall, —

a) formulate and recommend to the Board, a Corporate Social Responsibility Policy which shall

indicate the activities to be undertaken by the company as specified in Schedule VII;

b) Recommend the amount of expenditure to be incurred on the activities referred to in clause

(a); and

Monitor the Corporate Social Responsibility Policy of the company from time to time.

(4) The Board of every company referred to in sub-section (1) shall, —

a) after taking into account the recommendations made by the Corporate Social Responsibility

Committee, approve the Corporate Social Responsibility Policy for the company and disclose

contents of such Policy in its report and also place it on the company's website, if any, in such

manner as may be prescribed; and

a) Ensure that the activities as are included in Corporate Social Responsibility Policy of the

company are undertaken by the company.

(5) The Board of every company referred to in sub-section (1), shall make every endeavor to

ensure that the company spends, in every financial year, at least two per cent of the average net

5 Companies Act, 2013


profits of the company made during the three immediately preceding financial years, in

pursuance of its Corporate Social Responsibility Policy:

Provided that if the company fails to spend such amount, the Board shall, in its report made

under clause (o) of sub-section (3) of section 134, specify the reasons for not spending the

amount.” 6

WHAT INITIATIVES QUALIFY AS CSR INITIATIVES?

Schedule VII of the Companies Act, 2013 enumerates the following initiatives which

companies have to keep in mind while driving their CSR policies.

Eradication of hunger, poverty, and malnutrition, promoting prevention of health care and

sanitation and making the availability of safe drinking water in the rural areas

Promoting education including special education and employment enhancing vocation skills

specially among children, women, elderly and differently abled and livelihood enhancement

projects;

Promoting the equality for gender, removal of discrimination, empowering women, setting of

homes and hostels for women and orphans;

Setting of old age homes, day care centers and such other facilities for senior citizens and

measures for reducing inequalities faced by socially and economically backward groups

Insuring environmental sustainability, ecological balance, protection of flora and fauna, animal

welfare, agro-forestry, conservation of natural resources and maintaining quality of soil, air and

water;

Protection of national heritage, art and culture, including restoration of buildings and sites

of historical importance and works of arts;

Setting up of public libraries, promotion and development of traditional arts and handicrafts;

Measures for benefits of armed forces, veterans, war widows and their dependents;

Training to promote rural sports and nationally recognized sports, Para- Olympic sports and

Olympic sports;

6 Bill No. 121 of 2011, S.135 of THE COMPANIES BILL, 2011 Section 135 was not present in the Companies Bill

of 2009 but was inserted in the Bill of 2011 after the recommendation of the Standing Committee.


Contribution to the Prime Minister’s National Relief Fund or any other fund set up by the

Central Government for socio-economic development and relief and welfare of the Scheduled

caste, Scheduled tribes and other backward classes, minorities and women;

Rural development projects;

Slum areas development

The extent of the above recorded activities by the organizations must be deciphered generously,

considering the wide pith of the above recorded activities.

In what capacity ought to an organization which is required to make CSR contributions

consent to its commitments under the law?

The organization ought to set up a CSR Committee of the Board of Directors. the board ought

to prescribe the add up to be spent on CSR sum.

The company should create a CSR policy specifying the following:

List of activities 7

A monitoring processor such activities

The above two requirements are mandatorily required under a CSR Policy as per the rules. In

addition, further details also be required. It is suggested that detailed criteria for identification

and evaluation of prospective CSR projects are identified. The company may also consider only

such CSR activities which are strategically aligned with its business.

Preparation of Annual Report on CSR activities and inclusion on the CSR policy

An annual report should be prepared by the Board explaining the CSR activities undertaken

from 1st April to 31st March and presented as part of the Board’s report as per the format

provided in the annexure. The CSR policy of the company should also be disclosed in the report.

In case the company has a website, the CSR policy of the company should be disclosed on the

website.

7 From amongst those specified in Schedule VII of The Companies Act, 2013


CONCLUSION

Corporate Social Responsibility is the heart and soul of modern corporations and is an important

standard for corporate governance. CSR is an indispensable mechanism for both increased

corporate accountability, profitability and environmental sustainability.

It is the pole star of the modern corporations in order to maintain the integrity of moral fabrics

both inside and outside the corporation while conducting the social responsible business.

It is inferred that CSR is about business, government and common society. The main concern

is the accomplishment of win-win circumstance among the three elements. From the social

perspective, CSR ought to profit group on the grounds that the last has an exceptionally complex

structure as it comprises of people with different levels of control of assets physically and

elusively.

It is additionally reasoned that aptitudes required by CSR administrators do shift because of the

assorted orders included and furthermore the multifaceted nature of the parts and duties of a

CSR activity.

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