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CORPORATE SOCIAL RESPONSIBILITY [ CONCEPT AND EVOLUTION IN INDIA]

September , 2020

CNLU, PATNA

NYAYA NAGAR, MITHAPUR, PATNA

SUBMITTED TO :-

Ms. NANDITA S. JHA

FACULTY - CORPORATE LAW

SUBMITTED BY:-

Arihant Singh

Roll Number - 1718

Ba-llb

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ACKNOWLEDGEMENT

I would like to take this opportunity to thank Ms. NANDITA S. JHA, for her
invaluable support, guidance and advice. I would also like to thank my parents who
have always been there to support me. I would also like to thank the library staff for
working long hours to facilitate us with required material going a long way in
quenching our thirst for education. I owe the present accomplishment of my project to
my friends, who helped me immensely with sources of research materials throughout
the project and without whom I couldn’t have completed it in the present way. I would
also like to extend my gratitude to my parents and all those unseen hands who helped
me out at every stage of my project.

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CHAPTERIZATION

1. Introduction…………………………………………………………………4-5

2. Evolution of CSR and development of its concept in India………………..6-7

3. CSR and sustainability/Advantages………………………………………..8-9

4. Global principles on CSR …………………………………………………10-11

5. Conclusion……………………………………………………………………12

6. Bibliography…………………………………………………………………..13

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INTRODUCTION

India being a land of ethics has the most opulent tradition of Corporate Social Responsibility as
compared to other countries. CSR is an essential part of the business curriculum but yet in need to be
spread more widely across the nation. This goal can be achieved if company’s adopt fruitful
measures, have objectives clear and undertake potential investments.CSR refers to the idea that
companies need to invest in socially and environmentally pertinent causes in order to interact and
function with concerned parties having a stake in the company’s work. CSR is described as
“Triple-Bottom-Line-Approach”, which signifies helping the company promote its commercial
interests along with the responsibilities it holds towards the society at large. CSR is different and
wider from acts of charities like sponsoring or any other philanthropic activity as the latter is meant
to be a peripheral or surface level action as part of business strategy, but the former tries to go
profound and label longstanding socio-economic and environmental issues. According to the United
Nations Industrial Development Organization (UNIDO)1, CSR based on Triple Bottom Line (TBL)
Approach, can enable countries in developing bracket to accelerate their socio-economic growth and
help them become more competitive. This will benefit countries achieve Sustainable Development
Goals (SDGs) in the long run. Companies should be consistently encouraged to take up
cost-effective CSR programmes that benefits the society and the environment according to UNIDO2.
CSR in India was legislated with the hope that it would bring about a change in the attitude of
corporate institutions, who would give back to the society in a big way as it was the society whose
needs helped them prosper in the first place. Similarly, it was also felt that the society would also get
help as the government has been found to be wanting in its efforts to help local populace in several
instances. The CSR act, in spite of all its good intentions, has failed to cover a lot of ground. It has
given an impetus to companies to give back to the society, however, due to some policy and
procedural inadequacies, it has failed to set up a fool-proof method of imparting CSR. Faulty
criterion's to determine the extent of money spent, fudging of data, selective and self-serving CSR
tasks or short-term money spending are some of the core problems that India’s CSR laws and policy
suffer from. Therefore, the need of the hour is to change the CSR laws and amend it to become
long-term, simple and easier to monitor. CSR laws, with some tweaks, will greatly help the society
in the near future.
1
https://www.unido.org

2
Ibid

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OBJECTIVE OF THE STUDY

1. To describe the evolution of CSR around the world and in the Indian subcontinent.
2. To analyse the current steps taken by corporations to ensure the proper implementation of
CSR principles.
3. To highlight the aims and objectives of the various organizations involved in maintaining
order in the global economy and the obstacles faced by them.
4. To highlight the advantages of CSR and its long term impact on the planet.

HYPOTHESIS
This paper would focus on understanding how CSR has become the need of the hour with
various organizations going under scrutiny with audit failures, sudden exit of Independent
directors, heavy debt burdens and how an effective implementation of CSR principles can help
sustain the company in the long run.

RESEARCH METHODOLOGY
Doctrinal method :- Books, internet, journals, judgments etc.
The researcher would like to follow doctrinal research methodology.

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Evolution of CSR and development of its concept in India

History of CSR in India runs parallel to the historical development of India. CSR in India has
traditionally been seen as a philanthropic activity3. The concept dates back to Mauryan history,
where philosophers like Kautilya emphasized on ethical practices and principles while conducting
business. Religion also played a major role in promoting the concept of CSR. Islam had a law called
Zakaat, which rules that a portion of one’s earning must be shared with the poor in form of donations.
Merchants belonging to Hindu religion gave alms, got temples and night shelters made for the poorer
class. Hindus followed Dharmada where the manufacturer or seller charged a specific amount from
the purchaser, which was used for charity. The amount was known as charity amount or Dharmada.
In the same fashion, Sikhs followed Daashaant. Till 1850, the wealthy businessmen shared their
riches with the society by either setting up temples or religious institutions. In times of famines, they
opened their granaries for the poor and hungry. The approach towards CSR changed with the arrival
of colonial rule in 1850. In the Pre-independence era, the pioneers or propagators of industrialization
also supported the concept of CSR. In 1900s, the industrialist families like Tatas, Birlas, Modis,
Godrej, Bajajs and Singhanias promoted this concept by setting up charitable foundations,
educational and healthcare institutions, and trusts for community development. Although their efforts
for social benefit were also driven by political motives. 1980 onwards, Indian companies integrated
CSR into a sustainable business strategy. With globalization and economic liberalization in 1990s,
and partial withdrawal of controls and licensing systems there was a boom in the economic growth
of the country. This led to the increased momentum in industrial growth, making it possible for the
companies to contribute more towards social responsibility. What started as charity is now
understood and accepted as responsibility. In the current scenario the new Companies Act,20134
amended in December 2012 mandates the corporate to spend 2% of their average net profits of the
last three financial years towards CSR. The new bill replaces the Companies act 1956 and
emphasizes carrying forward the agenda of Corporate Social Responsibility. India is one of the few
countries in the world to have a dedicated efforts for CSR act. In fact, it is the first to have brought
about a legislation to implement CSR activities, followed by United Kingdom..

3
www.pwc.in/assets-corporate-social-responsibility-in-india.

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www.mca.gov.in

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 Current steps taken by corporations for effective implementation of CSR principles

The Companies Act, 2013 has introduced the idea of CSR to the forefront and through its
disclose-or-explain mandate, is promoting greater transparency and disclosure. Schedule VII of the
Act, which lists out the CSR activities, suggests communities to be the focal point. On the other hand,
by discussing a company’s relationship to its stakeholders and integrating CSR into its core
operations, the draft rules suggest that CSR needs to go beyond communities and beyond the concept
of philanthropy.The combination of regulatory as well as societal pressure has meant that companies
have to pursue their CSR activities more professionally. Clause 1355 of the Act lays down the fiscal
year 2014-15 onwards, also require companies to set-up a CSR committee consisting of their board
members, including at least one independent director. The Act encourages companies to spend at
least 2% of their average net profit in the previous three years on CSR activities. This is applicable
for companies with a turnover of 1000 Cr/ PAT of 5 Cr/ or net worth of 500 cr. The ministry’s draft
rules, that have been put up for public comment, define net profit as the profit before tax as per the
books of accounts, excluding profits arising from branches outside India. Promotion of education
Gender equity and women empowerment Eradication of extreme hunger and poverty Reducing child
mortality and improving maternal health Combating HIV-AIDS, malaria and other diseases
Environmental sustainability Employment enhancing vocational skills Contribution to Prime
Minister’s relief fund and other such state and central funds Social business projects and such other
matters as may be prescribed List of activities under Schedule VII Handbook on Corporate Social
Responsibility in India 13 guidelines to be followed by companies while developing their CSR
programme. The CSR committee will be responsible for preparing a detailed plan on CSR activities,
including the expenditure, the type of activities, roles and responsibilities of various stakeholders and
a monitoring mechanism for such activities. The CSR committee can also ensure that all the kinds of
income accrued to the company by way of CSR activities should be credited back to the community
or CSR corpus.The new Act requires that the board of the company shall, after taking into account
the recommendations made by the CSR committee, approve the CSR policy for the company and
disclose its contents in their report and also publish the details on the company’s official website, if
any, in such manner as may be prescribed. If the company fails to spend the prescribed amount, the
board, in its report, shall specify the reasons.

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Ibid

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CSR and sustainability

Sustainability (corporate sustainability) is derived from the concept of sustainable development

which is defined by the Brundtland Commission as “development that meets the needs of the present
without compromising the ability of future generations to meet their own needs” 4 . Corporate
sustainability essentially refers to the role that companies can play in meeting the agenda of
sustainable development and entails a balanced approach to economic progress, social progress and
environmental stewardship. CSR in India tends to focus on what is done with profits after they are
made. On the other hand, sustainability is about factoring the social and environmental impacts of
conducting business, that is, how profits are made. Hence, much of the Indian practice of CSR is an
important component of sustainability or responsible business, which is a larger idea, a fact that is
evident from various sustainability frameworks. An interesting case in point is the NVGs for social,
environmental and economic responsibilities of business issued by the Ministry of Corporate Affairs
in June 2011. Principle eight relating to inclusive development encompasses most of the aspects
covered by the CSR clause of the Companies Act, 2013. However, the remaining eight principles
relate to other aspects of the business. The UN Global Compact, a widely used sustainability
framework has 10 principles covering social, environmental, human rights and governance issues,
and what is described as CSR is implicit rather than explicit in these principles.

 Advantage of a robust CSR programme

As the business environment gets increasingly complex and stakeholders become vocal about their
expectations, good CSR practices can only bring in greater benefits, some of which are as follows:

Communities provide the licence to operate: Apart from internal drivers such as values and ethos,
some of the key stakeholders that influence corporate behaviour include governments (through laws
and regulations), investors and customers. In India, a fourth and increasingly important stakeholder
is the community, and many companies have started realising that the ‘licence to operate’ is no
longer given by governments alone, but communities that are impacted by a company’s business
operations. Thus, a robust CSR programme that meets the aspirations of these communities not only
provides them with the licence to operate, but also to maintain the licence, thereby precluding the
‘trust deficit’.

Attracting and retaining employees: Several human resource studies have linked a company’s
ability to attract, retain and motivate employees with their CSR commitments. Interventions that

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encourage and enable employees to participate are shown to increase employee morale and a sense
of belonging to the company.

Communities as suppliers: There are certain innovative CSR initiatives emerging, wherein
companies have invested in enhancing community livelihood by incorporating them into their supply
chain. This has benefitted communities and increased their income levels, while providing these
companies with an additional and secure supply chain.

Enhancing corporate reputation: The traditional benefit of generating goodwill, creating a positive
image and branding benefits continue to exist for companies that operate effective CSR programmes.
This allows companies to position themselves as responsible corporate citizens.

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Global principles and guidelines on CSR

 The UN Guiding Principles on Business and Human Rights - The UN guiding principles
provide assistance to states and businesses to fulfil their existing obligations towards respecting
and protecting human rights and fundamental freedoms and comply with the existing laws.
These principles act as global standards for addressing the risk of human rights violation related
to business activity. In circumstances when these laws are breached or the guidance is not
adhered to, suitable remedies have also been recommended. The primary focus is on the
protection of human rights by both, the state and the business enterprises, and the principles
broadly outline the manner in which the framework can be implemented. For more details refer
the website of Office of the High Commissioner for Human Rights6

 OECD Guidelines: Multinational enterprises - OECD Guidelines for multinational

enterprises elaborate on the principles and standards for responsible business conduct for
multinational corporations. These guidelines were recently updated in 2011. They cover areas
such as employment, human rights, environment, information disclosure, combating bribery,
consumer interests, science and technology, competition and taxation. They contain defined
standards for socially and environmentally responsible corporate behaviour, and also provide
procedures for resolving disputes between corporations and communities or individuals
adversely impacted by business activities. For more details refer the website of OECD7

 UNGC - UNGC is world’s largest corporate citizenship initiative with the objective to
mainstream the adoption of sustainable and socially responsible policies by businesses around
the world. The 10 principles of the UN Global Compact have been derived from various UN
conventions such as the Universal Declaration of Human Rights, ILO’s Declaration on
Fundamental Principles and Rights at Work, the Rio Declaration on environment and
development, and the UN Convention Against Corruption. These principles cover four broad
areas: • Human rights (support and respect the protection of international human rights and
ensure that business is not complicit with human rights abuses) • Labour rights (uphold the
freedom of association and effective recognition of the right to collective bargaining, elimination
of all forms of forced and compulsory labour, effective abolition of child labour and elimination
of description in respect of employment and occupation) • Environment (support a precautionary

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http://www.ohchr.org/Documents/Publications/GuidingPrinciplesBusinessHR_EN.pdf
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http://oecdwatch.org/about-oecd/guidelines

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approach to environmental challenges, undertake initiatives to promote greater environmental

responsibility and encourage the development of environmental friendly technology) •
Governance (work against corruption in all forms, including bribery and extortion). For more
details refer the website of UNGC.8

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www.unglobalcompact.org/

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CONCLUSION

"When the wind blows there are those that build walls and then there are those that build
windmills." 9

The constitutional structure of the country was laid with an objective of one man equals one vote,
equals one value. However the socio-economic realities of the country still have a long way to go to
match this vision of independent India where today there are many first among equals. The country
presently is under intense debate of developmental growth versus welfare based development. Our
political realities and our economic senses are at cross-roads. How do we strike a balance between
the two? The choices we make today are going to influence our generations to come.
Every single major policy initiative in this country has been driven with a perspective that an
overwhelming concern for the disadvantaged and marginalized, a multidimensional view of poverty
and human deprivation, the focus on our fundamental rights and the need to expand opportunities
while ensuring its equal distribution are fundamental for achieving strong human development. But
disparity, inequality and the growing divide in our societies define our existence today. The inclusion
of the CSR mandate under the Companies Act, 2013 is an attempt to supplement the governments
efforts of equitably delivering the benefits of growth and to engage the Corporate World with the
country’s development agenda. Philanthropy and CSR is not a novel concept for Indian companies,
however a few organisations are likely to struggle. The role of civil society in fuelling this change is
bound to be extremely important. With the new corporate resources in their tool bag much will
depend on their ability to innovate and adapt.
Businesses cannot be successful when the society around them fails. Leaders need to be given the
time, space and resources to think if they want their business to drive sustainability transformation.
Business has come to believe the solution to problems lie within their own resources rather than in
collaboration. CSR can be very hard for employees to relate to if corporations don't make it tangible
to their everyday working lives. CSR isn't a particular programme, it's what the companies do every
day, maximizing positive impact and minimizing negative impact.

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www.hrzone.com/engage/managers-quotes-on-csr-from-the-responsible-business-summit-2013

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BIBLIOGRAPHY
 Books Referred -
 ebook.mca.gov.in
 COMPANY LAW Paperback – 2016 by Dr. Avtar Singh (Author)

 Companies Act with Rules (Paperback Pocket Edition) (January 2018 Edition) Paperback –
2018 by Taxmann (Author)

 Websites Referred -
 www.mca.gov.in

 https://www.unido.org

 www.//blog.ipleaders.in

 www.un.org

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