CORPORATE GOVERNANCE
LAW 343
Corporate environmental and Social Responsibility in India
Submitted to: Submitted by:
Ms. Adya Pandey Tanya Singh
Assistant Professor A8156121015
LL.B. 3yrs
Semester -5th
ACKNOWLEDGEMENT
I would like to express my gratitude to Asst. Prof. Adya Pandey ma’am who gave me the
opportunity to do this project. I am highly indebted to Amity Law School for their guidance
and constant supervision as well as for providing information regarding the project and their
support in helping me complete the project.
[TanyaSingh]
Abstract
Custom Duty is an indirect tax, imposed under the Customs Act formulated in 1962. The power
to enact the law is provided under the Constitution of India under the Article 265, which states
that ―no tax shall be levied or collected except by authority of law. The Act, 1962 is the basic
statute which governs entry or exit of different categories of vessels, aircrafts, goods,
passengers etc., into or outside the country. The Act extends to the whole of India. While
revenue is a paramount consideration, Customs duties may also be levied to protect the
domestic industry from foreign competition.
Introduction
Society and Environment have mutual relationship. Nature and society are interdependent and
duty of man to protect them is inherent. This basic percept envisages the protection of
environment. However, rapid economic development, technological and scientific advancement
have increased their impact on the natural environment. They have added environmental
degradation and ecological imbalances. Hence, there is variety of specific legislations are
passed to protect the environment and ecology. Apart from these legislations, a comprehensive
legislation i.e., Environment (Protection) Act, 1986 and various Rules under this Act have been
made to prevent, control and abate all types of pollutions. But due to unwillingness on the part
of corporations to comply with, the applicability of these laws is at stake.On the other hand, the
companies are asking for Corporate Social Responsibility (CSR). They are arguing that it is
their social responsibility to protect and care the environment and human resources. For these
corporations are creating or have been created code of conduct. Corporate Social Responsibility
is a phenomenon which states that companies have to do right things, beyond legal requirement.
The concept is based on the idea that not only public policy but companies, too, should take for
social and environment issues. In more particular, CSR is seen as a concept in which companies
voluntarily integrate social and environment concerns into their business and into the interaction
with their stakeholders. The idea of being socially responsible company means doing more than
comply with the law for environment and Human Resources
Environmental protection
o Environmental protection is the practice of protecting the natural environment by
individuals, organisations and governments.
o Its objectives are to conserve natural resources and the existing natural environment and,
where possible, to repair damage and reverse trends.
o The Environment (Protection) Act was enacted in the year 1986. It was enacted with the
main objective to provide the protection and improvement of the environment and for
matters connected therewith
o Environmental protection has seen a dramatic change, especially through
environmental laws. These laws call for reducing pollution and environmental
degradation.
Environmental Regulations in India
o There are multiple legal instruments dealing with the environment, the most notable of
which are mentioned below:
o The Environment (Protection) Act, 1986 (EPA) is the umbrella legislation for
environmental protection in India. It empowers the union government to initiate various
steps for environmental protection and improvement, some of which include the
determination of standards for emissions and effluents from industries, regulation of the
location of industries, assessment of the environmental impact of projects before they
commence operations and, most importantly, framing rules and regulations on various
aspects relating to environmental protection across the country. In exercising the powers
provided under this Act, the union government has introduced multiple rules, regulations
and policies. Some of these include the Coastal Zone Regulation Notification, 2019
(CRZ Notification); Environmental Impact Assessment Notification, 2006 (ElA
Notification); Solid Waste Management Rules, 2016; E- Waste (Management) Rules,
2016; Plastic Waste (Management) Rules, 2016; and Hazardous and Other Wastes
(Management) Rules, 2016.
The Water (Prevention and Control of Pollution) Act, 1974 (Water Act) lays down the
framework for the prevention and control of water pollution.
o The Air (Prevention and Control of Pollution) Act, 1981 (Air Act) lays down the
framework for the prevention, control and abatement of air pollution.
o The Forest (Conservation) Act 1980 (Forest Act) provides the framework for the
conservation of forests in India and the requirement to obtain prior clearance for
diversion of forest land for non-forest purposes.
o The Biological Diversity Act, 2002 (Biodiversity Act) provides for the conservation and
sustainable use of biological resources and the fair and equitable sharing of the benefits
arising out of their use.
o The Wildlife (Protection) Act, 1972 (Wildlife Act) is the legislation focussing on the
conservation of wildlife species and their habitats in India.
o The Public Liability Insurance Act, 1991 lays down the requirement to obtain public
liability insurance for providing immediate relief to persons affected by accidents while
handling any hazardous substance.
Environment Protection Act (EPA)
India’s original Constitution did not contain any provision for the protection of the natural
environment. However, the Fundamental Duties, which were added by the 42nd Amendment to
the Constitution, prescribed the protection of the environment including forests, lakes, rivers
and wildlife as a duty of the citizens of the country.
This amendment also added new Directive Principles of State Policy, one of which was Article
48A, which directed the State to protect and improve the environment and to safeguard forests
and wildlife.
These developments were a result of the United Nations Conference on Human Environment,
held in Stockholm in 1972. First, the 1972 was enacted. Then, the Water (Prevention and
Control of Pollution) Act, 1974 was passed, followed by the Air (Prevention and Control of
Pollution) Act 1981. Then in 1986, the EPA was passed by the Parliament, in the wake of the
Bhopal Gas Tragedy, which occurred on Dec 2, 1984
Aims and Objectives of the EPA
The chief aims and objectives of the Environment Protection Act, 1986 are listed below.
1. Implementing the decisions made at the United Nations Conference on Human
Environment held in Stockholm.
2. Creation of a government authority to regulate industry that can issue direct orders
including closure orders.
3. Coordinating activities of different agencies that are operating under the existing laws.
4. Enacting regular laws for the protection of the environment.
5. Imposing punishments and penalties on those who endanger the environment, safety and
health. For each failure or contravention, the punishment includes a prison term of up to
five years or a fine of up to Rs. 1 lakh, or both. This can also be extended for up to seven
years in cases.
6. Engaging in the sustainable development of the environment.
7. Attaining protection of the right to life under Article 21 of the Constitution.
Main Provisions of Environment Protection Act
The EPA empowers the Centre to “take all such measures as it deems necessary” in the domain
of environmental protection.
Under the law, it can coordinate and execute nationwide programmes and plans to
further environmental protection.
It can mandate environmental quality standards, particularly those concerning the
emission or discharge of environmental pollutants.
This law can impose restrictions on the location of industries.
The law gives the government the power of entry for examination, testing of equipment
and other purposes and power to analyse the sample of air, water, soil or any other
substance from any place.
The EPA explicitly bars the discharge of environmental pollutants in excess of
prescribed regulatory standards.
There is also in place a specific provision for handling hazardous substances, which is
prohibited unless in compliance with regulatory requirements.
The Act empowers any person, apart from authorised government officers, to file a
complaint in a court regarding any contravention of the provisions of the Act.
Impact of corporate sector on environment
o In the long and tortuous evolution of human race on this planet, a stage has been reached
when; throw the rapid acceleration of science and technology, man has acquired the
power to transform his environment in countless ways and on an unprecedented scale.
Thus, the natural environment, i.e., air, water, land, trees, plants, animals,
microorganism, rivers, lakes, mountains etc, is adversely affected by manmade
environment- by scientific and technological advancements. Corporate houses-
particularly chemical corporate industries-development in the field of atomic energy,
excessive use of fossil fuel had badly affected the natural environment.
o Further more it is said that corporate houses are the axis to gear up the economy of
nation, but on the other side it has been identified as a major source of environmental
degradation and pollution.
Indian business houses have a major responsibility to behave responsibly and to ensure
that their exploitation of the environment does not lead to reduced well-being for people.
This means that the use of resources that industry makes should be highly efficient so
that unnecessary exploitation does not take place; pollution is minimised to the
maximum extent possible; affected people, if indeed an adverse impact is inevitable, are
properly compensated; and consumers of both raw materials and manufactured products
pay a price that includes the costs of ecological restoration".
Corporations produce just about everything we buy, use, and throw away and play
an outsized role in driving global climate change. A report identified that 100
energy companies have been responsible for 71% of all industrial emissions since
human-driven climate change was officially recognized.
Though Big Industry, with its high level of emissions, waste generation, and fossil
fuel consumption has traditionally been viewed as the chief villain in the fight
against climate change, CSR programmes being undertaken by several large
companies in India suggest that they have started thinking about their impact on
the environment and are striving to become responsible corporations.
Corporate Social Responsibility
CSR is described by World Bank as a company's obligation to be accountable to all of its
stakeholders in all its operations activities. Socially responsible companies consider the full
scope of their impact on communities and the environment when making decisions, balancing
the needs of stakeholders with their need to make a profit.
CSK essentially involves a shift in the focus of the corporate responsibility from profit
maximisation for shareholders within the obligation of law to responsibility to a broader range
of stakeholders, including communal concerns such as protection of the environment and
accountability on ethical as well as legal obligation.
• CSR policies involves commitment by corporations, usually expressed in their statements of
business principles or corporate specific codes of conduct, to enhanced concern for the
environment, human rights and fairness to suppliers and consumers.
Corporate social responsibility (CSR) is a self-regulating business model that helps a company
be socially accountable to itself, its stakeholders, and the public. By practicing corporate social
responsibility, also called corporate citizenship, companies can be conscious of the kind of
impact they are having on all aspects of society, including economic, social, and
environmental.
Engaging in CSR means that, in the ordinary course of business, a company is operating in
ways that enhance society and the environmentinstead of contributing negatively to them.
Corporate social responsibility is a broad concept that can take many forms depending on the
company and industry. Through CSR programs, philanthropy, and volunteer efforts, businesses
can benefit society while boosting their brands.
For a company to be socially responsible, it first needs to be accountable to itself and its
shareholders. Companies that adopt CSR programs have often grown their business to the
point where they can give back to society. Thus, CSR is typically a strategy that's implemented
by large corporations. After all, the more visible and successful a corporation is, the more
responsibility it has to set standards of ethical behaviour for its peers, competition,
and industry.
o Corporate social responsibility is a concept whereby companies integrate social and
environmental concerns in their business operations and in their interaction with the
stakeholders on a voluntary basis.
o CSR is the responsibility of corporations to contribute to a better society and cleaner
environment.
o India is the first country in the world to make corporate social responsibility (CSR)
mandatory, following an amendment to The Company Act, 2013 in April 2014.
Businesses can invest their profits in areas such as education, poverty, gender equality,
and hunger and environmental protection.
APPLICABILITY OF CORPORATE SOCIAL RESPONSIBILITY -
COMPANIES ACT 2013
o Section 135 of Companies Act, 2013 provides for provisions regarding Corporate Social
Responsibility (CSR) requirements for companies. Every company falling within the
prescribed threshold of paid up capital and net profits is required to comply with the
provisions of CSR stated under the above mentioned section.
o Applicability: The CSR provisions are applicable to the following companies:Every
company, its holding company, its subsidiary company and foreign company having in
the preceding financial year:Net Worth > 500 Crore Turnover > 1000 Crore Net Profit >
5 CroreRequired Compliances.
CSR Committee: The Board of directors shall form a committee dedicated to CSR.
The committee shall have minimum 3 directors of which one shall be an independent director.
However, if the company is an unlisted public company or a private company (not required to
appoint an independent director), it shall have two or more directors in its CSR Committee. In
case of a foreign company, the CSR committee shall comprise of at least 2 persons of which
one shall be a resident of India. Where the amount to be spent by a company under these
provisions does not exceed fifty lakh rupees, the requirement for constitution of the Corporate
Social Responsibility Committee shall not be applicable and the functions of such Committee,
in such cases, be discharged by the Board of Directors of such company.
CSR Policy: The CSR committee shall formulate a policy stating the CSR activities that
shall be taken by the company. The committee shall also monitor the policy and make
amendments as per the requirement of the company. The policy shall elaborate the
activities to be undertaken by the Company as stated under Schedule VII to the
Companies Act. The CSR activities should be different from the activities of the
companies done in its normal course of business.
CSR expenditure: The Board of every company to which CSR is applicable shall
ensure that the company spends, in every financial year, at least two per cent of the
average net profits of the company made during the three immediately preceding
financial years or where the company has not completed the period of three financial
years since its incorporation, during such immediately preceding financial years, in
pursuance of its Corporate Social Responsibility Policy.If the company spends an
amount in excess of the requirements provided in a financial year, such company may
set off such excess amount against the requirement to spend for three immediately
succeeding financial years and in such manner, as prescribed under Companies Act,
2013.
Transfer of Unspent Amount: If the company fails to spend such amount, the Board
shall, in its report specify the reasons for not spending the amount and, unless the
unspent amount relates to any ongoing project, transfer such unspent amount to a Fund
specified in Schedule VII, within a period of six months of the expiry of the financial
year.
Penalty for Non-compliance: company can attract penal actions in case it does not
comply with the CSR provisions.If the company fails to spent the required amount or
transfer the unspent amount to the respective account as stated above, it shall be
punishable with a penalty of twice the amount required to be transferred by the
company of such Fund specified in Schedule VII, or the Unspent Corporate Social
Responsibility Account, as the case may be, or one crore rupees, whichever is
less.Further every officer of the company who is in default shall be liable to a penalty
of one-tenth of the amount required to be transferred by the company to such Fund
specified in Schedule VII, or the Unspent Corporate Social Responsibility Account, as
the case may be, or two lakh rupees, whichever is less.
CSR initiatives by Indian Companies
• TATA Steel
: TATA Steel along with the State of Odisha incorporated the target.
"Mission 2020 for Agricultural Development" which aimed at improving the lives of poor
farmers by increasing employment opportunities and food security. 344 farmers benefited by
the development of ponds and irrigational facilities. 60-acre wasteland under the National
Horticulture Mission were converted for the cultivation of cashew, mango, and lemon
plantations.
Coca Cola
Coca Cola, a leading beverage company, took the mission "Alag Karo Har Teen Din Bin"
which aimed at easy disposal management and segregation of wet and dry garbage. Gurugram
produces 600 tonnes of waste which was not disposed of in an effective way to segregate the
waste at the source itself like homes and offices the Municipal Corporation gave guidelines on
the proper disposal of waste in three categories i.e., wet, dry and rejecting waste.
Reliance Industries Limited
Reliance Industries Limited (RIL) spent Rs. 922 crores on CSR initiatives in FY 20 -21.
The company has been undertaking most of its CSR initiatives through Reliance
Foundation only.
ITC Limited
ITC has a belief that a company's performance must be measured by its Triple Bottom
Line contribution to building economic, social, and environmental capital towards
enhancing societal sustainability.
In the last financial year, the company constructed 640 Individual Household Toilets
(IHHTs) in 28 districts of 15 states in collaboration with the respective State
Governments/District sanitation departments taking the total to 38,153 IHHTs
constructed so far in the Company’s catchment areas.
Infosys Limited
In FY 20-21, Infosys limited spent Rs. 325.32 crores on its CSR initiatives. The
company has been undertaking its CSR initiatives mostly through Infosys Foundation
only.
The company is not just limited to philanthropy, but it includes holistic community
development, heritage conservation, armed forces support, and sustainability
development.
Hindustan Zinc Limited
Hindustan Zinc Limited, a subsidiary of Vedanta Limited, is the world’s 6th largest
producer of silver and India’s only integrated producer of silver, lead, and zinc. It has
spent Rs. 214.03 crores in FY 20-21 for its CSR initiatives.
Environment Protection And CSR: Reality
Always arguments are made by the corporations that they are making their industries
environment friendly, but it always becomes only to say, never comply with. The corporate
houses claim that they are incorporating the CSR agenda for making their corporations
environment and human friendly, but the reality is somewhat different.
Actually, corporations want their shareholders benefited. There are various reports which shows
that main source of environment pollution is made by the industries.
Industries for maximising their profits, degrade the environment and pollute it, in the following
way.
(a) Use of natural resources by industries, as it destroys nature and affects the natural
environment. Cotton, textile, paper, iron, coal, oil, fodder, plywood, food processing, etc all
need natural products as raw materials. Thus increasing needs of industries have resulted in
over exploitation and stress on natural resources.
o Residues of industries known as effluents are released in water and land without any
treatment which pollutes the water and land, effecting the aquatic life and underground
water.
o Fossil fuel used by industries like coal, kerosene, diesel, and atomic energy also pollutes
the air in the form of smoke and radioactive particles.
(d)) Noise, also a major by-product of industries and industrial products causes noise pollution.
(e) Industrial wastes - particularly hazardous waste and radioactive waste- have also become a
major environment pollution problem.
There are variety of cases has been occurred which shows that due to overexploitation of natural
resources and industrial wastes, the human generation was in danger. The Bhopal Holocaust
(1984), where more than 3000 people died and about 2 lakh were affected by the leakage of
MIC gas, Love Canal Incident of USA (1978) where residents of an area were evacuated and
the US Government spent more than $30 million in a clean up operation, Seveso Incident in
North Italy (1976) where contaminated debris, contained in steel drums, were disposed of
innocuously with barrels of vinegar in a pickle factory and it played havoc later on. Methyl-
mercury poisoning in the Minamata Bay (Japan, 1956-80) caused by the industrial release of
Methyl and Mercury compounds resulted in several deaths and several types of diseases
including pre-natal brain damage, nuclear accidents at The Three Mile Island, nuclear power
station of the USA in 1979 and Chernobyl in the then USSR are representative sample of the
works kind of threat to the present generation and to posterity by the industrialisation. Studies
of these incidents reveal various kinds of short-term and long-term effects on human beings,
flora and fauna. A complete list of the various kinds of ailments and reversible and non-
reversible effects is still to be drawn up. Some ill effects have been identified and evaluated and
some have not been realised. The evaluation is not easy.
In an unpublished report of NEERI, it is estimated by NEERI that 60 percent of Calcutta's
residents suffer from some kind of respiratory disease due to air pollution done by industries
and factories. The burning of coal as an industrial and domestic fuel accounts for a significant
proportion of pollutant emissions, especially SPM. Suspended particulate matter from coal
combustion is clearly a major problem throughout Calcutta and should be the main focus of
immediate control efforts. Surprisingly, S02, concentrations are relatively low (within WHO
guidelines) which is due to the low sulphur content (0.3 percent) of the local coal.
Judicial Pronouncements
There are variety of cases have been come before the Apex Court of India and before various
State High Courts, where corporate houses are made liable for environment pollution and is
degradation.
In M.C. Mehta vs. Union of India (1988)1 SCC 471, which is famous as Ganga
Pollution Case, an industry (tannery) was found to made holy river Ganga toxic. In this
case, tanneries used to discharge untreated effluents in the rivers water and near
Kanpur, the water of river Ganga was found highly toxic. The court ordered that
tanneries should stop functioning aM.C. Mehta vs. Union of India, and before
restarting, must install pre-treatment plants for trade effluents. Further it was held that
statutory must be strictly enforced and obeyed.
In M.C. Mehta vs. Union of India, (Taj Trapezium Case) yellowing of a historical
Monuments - the Taj Mahal at Agra — was also found to be due to foundries, chemical
and Hazardous industries and an oil refinery. The sulphur dioxide emitted by the
Mathura Refinery combined with oxygen - with the aid of moisture - in the
atmosphere, forms sulphuric acid called 'acid rain' affecting the marble of the Taj
Mahal. Therefore, the Supreme Court issued orders for shifting of 292 industries from
the Taj Trapezium or to close them.
The leakage of MIC gas from the Union Carbide Corporation, Bhopal gave impetus to
the development of environment-law and principles of quantum of compensation.
(Union Carbide Corp. vs. Union of India). Again, leakage of oleum gas from Shri Ram
Food and Fertilizer Corp. gave an opportunity to propound the principle of 'no-fault
liability' and 'absolute liability and non-delegable duty of the industry dealing in
inherently dangerous and hazardous activity. (M.C. Mehta vs. Union of India)
In the case of M.C. Mehta vs. Union of India, the court had to direct the administration
of Delhi to set up sixteen plants in June 2000, it had been four years, but the authorities
failed to set up the sewage treatment plants nearly 50 percent of which is generated is
now flowing into the Yamuna River directly. It was directed to the authorities to raise
the capacity of sewage treatment plant up to 502 mg, in the year 1996, the Delhi Jal
Board did not take up the necessary action and again it was directed by the court to
raise the capacity to 764 mg by 2005, the action to construct the treatment plant was
taken and they constructed 11 plants out of which another was underway. The traffic
police ensured the arrangement of work can take place unhindered.
Conclusion
The dynamic environment brings new culture which is adopted by the industries, government,
state bodies, and municipalities. Industries have changed their path to philanthropy and are
more sensitive towards the society and working for the betterment of the society and the
environment.
CSR is the best policy incorporated by businesses both large and small where everyone can
benefit from them. The increasing recognition and developing policies for the economic
stability and sustainable development has proven the philosophy of CSR which benefited the
country, due to the pressures of technology and population, the environment is being degraded
slowly which is why corporate responsibility comes into play and puts a restraint on the activity
of the people and promoting more eco-friendly methods that must be adopted.
Environmental programs of firms mainly derive from the guidelines established by the
government agencies. As CSR is a new profession business ethics, environmental management
and community development are valuable.
In India, there are variety of specific environment laws and an umbrella legislation i.e.
Environment (Protection) Act, 1986 have been passed for protection of the environment, but the
corporations are evolving or have evolved a new agenda of CSR, for protecting the environment
from going beyond the law
Bibliography
Research paper on Environment Protection and Corporate Social Responsibility: A
Critique from Legal Perspective
https://www.investopedia.com/terms/c/corp-social-responsibility.asp
www.forbesindia.com/blog/business-strategy/csr-and-sustainable-development-do-
indian-companies-care-about-the-environment
