MEDS-051

Indira Gandhi National Open University

Fundamentals of CSR
School of Extension and Development Studies

Volume 1
Block /Unit Title Page No.
BLOCK 1 EVOLUTION AND CONCEPT OF CSR 7
Unit 1 CSR: An Overview 9
Unit 2 Perspective in Global Context 30
Unit 3 Perspective in Indian Context 54
BLOCK 2 CSR LEGISLATIONS AND GUIDELINES: 69
GLOBAL AND INDIA
Unit 1 CSR Legislation in Other Countries 71
Unit 2 Companies Act, 2013 93
Unit 3 CSR Policy Guidelines 112
Unit 4 Related Rules and Guidelines 128
PROGRAMME DESIGN COMMITTEE
Prof. Anil Kumar Sharma Mr. Ashwini Kumar Prof. Nehal A. Farooquee
Associate Professor (IIT, Roorkee), Ex General Manager(I/c) SOEDS, IGNOU, New Delhi
Roorkee HSE & CSR - BHEl, Noida
Dr. Pradeep Kumar
Mr. Ashok B. Chakraborty Mr. Parul Soni SOEDS, IGNOU, New Delhi
Chief Sustainability Officer, Thinkthrough Consulting Private
Dr. Grace Don Nemching
NFCSR, Indian Institute of Limited, Vasant Vihar
SOEDS, IGNOU, New Delhi
Corporate Affairs (IICA), Gurugram New Delhi
Prof. P.V.K. Sasidhar
Mr. Ravi Puranik Prof. Kotaru Ravi Sankar,
SOEDS, IGNOU, New Delhi
CEO, Hindustan Unilever SOMS, IGNOU, New Delhi
(Programme Coordinator)
Foundation, Mumbai
Prof. G Subbayamma
Dr. Nisha Varghese
Dr. Debasis Bhattacharya SOMS, IGNOU, New Delhi
SOEDS, IGNOU, New Delhi
Institute of CSR & Management-
Dr. Leena Singh (Programme Coordinator)
Delhi (ICSRM), Narela, Delhi
SOMS, IGNOU, New Delhi
Dr. Mahesh Chander
Prof. B. K. Pattanaik
Principal Scientist & Head, Division
SOEDS, IGNOU, New Delhi
of Extension Education IVRI,
Bareilly

COURSE PREPARATION TEAM

Unit Writing: Content Editing:
Dr. Nisha Varghese Mr. Dinesh Agarwal
SOEDS, IGNOU, New Delhi Ex. GM, NTPC, Delhi;
(Units 1,2,3; Block 1)
Dr. Nisha Varghese
Mr. Kartik Ayer SOEDS, IGNOU
Senior Business Director, InDeed
Dentsu Aegis Network Prof. P.V.K. Sashidar
(Units 1,2,3,4; Block 2) SOEDS, IGNOU, New Delhi

Format Editing: Language Editing

Dr. Nisha Varghese Mr. Praveer Shukla

SOEDS, IGNOU, New Delhi New Delhi

Programme Coordinators : Dr. Nisha Varghese <nishavarghese@ignou.ac.in>

Prof. P.V.K.Sasidhar<pvksasidhar@ignou.ac.in>

Course Coordinator : Dr. Nisha Varghese <nishavarghese@ignou.ac.in>

PRINT PRODUCTION
Mr. Y.N. Sharma Mr. Sudhir Kumar
Asistant Registrar (Pub.) Section Officer (Pub.)
MPDD, IGNOU, New Delhi MPDD, IGNOU, New Delhi

March, 2021
© Indira Gandhi National Open University, 2021
ISBN:
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PGDCSR: POST GRADUATE DIPLOMA IN
CORPORATE SOCIAL
RESPONSIBILITY
Dear Learner,
Welcome to the Programme – Post Graduate Diploma in Corporate Social
Responsibility (PGDCSR). As you know, philanthropy in the form of charity has
been prevalent in India since ancient times. CSR in India has come a long way
from voluntary practices to a regulatory mechanism. The Companies in India are
governed by Clause 135 of the Companies Act 2013 to perform their CSR
activities. The CSR rules have been applicable from the fiscal year 2014-15
onwards and require companies to set up a CSR Committee consisting of their
board members. CSR is a rapidly growing and evolving field of study. Large
Indian companies are now transitioning from philanthropy to a rapidly evolving
strategic engagement in development issues. The process of establishing and
responding to the CSR agenda within an organization will require specialists in
this field. This programme was developed to train people in this area with the
following objectives
i) To impart knowledge and understanding about CSR through Open and
Distance Learning.
ii) To expand the capacity of learners on various theoretical and practical aspects
of CSR.
iii) To develop professional knowledge in formulation, implementation,
monitoring and evaluation of CSR projects and programmes.
Programme Structure
The PGDCSR is a 32-credit programme comprising of four compulsory courses
and one elective which can be a project work or an 8-credit course.

or
MEDS-051 FUNDAMENTALS OF CSR
Dear Learner,

Welcome to the course MEDS – 051 on ‘Fundamentals of CSR’. This is the

introductory course of the programme. In this course you will learn about the
concept, perspectives and evolution of CSR in India and the world. It also covers
the CSR legislations both in India and other countries of the world. You will also
read about the various thematic areas in which CSR intervention can help in
development of those sectors. It also discusses the key outcomes of CSR.

Course Structure

This course has five blocks. The contents covered under each of these blocks are
as follows:

BLOCKS UNITS

CSR: An Overview
Evolution and Concept of Perspective in Global Context
CSR Perspective in Indian Context

CSR Legislation in Other Countries

CSR Legislations and Companies Act, 2013
Guidelines: Global and CSR Policy Guidelines
India Related Rules and Guidelines

Poverty Alleviation
Key Thematic Areas in Quality of Life Improvement
CSR-I Employment Generation and Livelihood
Women Empowerment
Microfinance
Environment Protection and Biodiversity
Key Thematic Areas in
Conservation
CSR-II
Education and Skill Development
Awareness Creation

Key Outcomes of CSR Democratizing Development

Community Ownership
Connecting the Last Mile

Course Objectives
To understand the concept and evolution of CSR and perspective of CSR
both in the Indian and global context.
To understand the legislations and guidelines of CSR both in India and in
other countries across the world.
To identify the various thematic areas in which CSR intervention can be
done.
To be able to identify the key outcomes of various CSR interventions.
Learning Outcomes
After successful completion of this course, the learners are expected to be able
to:
Give various definitions of CSR
List out various provisions related to CSR in the Company’s Act
Discuss the importance of CSR intervention in various thematic areas
Describe key outcomes of CSR interventions

For your convenience and easy handling, the SLM under MEDS-051 is presented
in two volumes with two blocks in the first volume and three blocks in the second
volume. Both the volumes are connected in such a way that after completing all
18 units, you will gain better knowledge and understanding of the fundamentals
of CSR.

Block 1, Evolution and Concept of CSR with three units gives a general
overview and perspectives of CSR in global and Indian context.

Block 2, CSR Legislations and Guidelines: Global and Indian with four units
discusses the CSR legislations in different countries, Companies Act, 2013, CSR
policy guidelines and related rules and guidelines.

Block 3, Key Thematic Areas in CSR - I with four units discusses the role of
CSR in various thematic areas like poverty alleviation, quality of life
improvement, employment generation and livelihood and women empowerment.

Block 4, Key Thematic Areas in CSR - II with four units discusses the role of
CSR in various thematic areas like microfinance, environment protection and
biodiversity conservation, education and skill development and awareness
creation.

Block 5, Key Outcomes of CSR with three units discusses various outcomes of
CSR like democratization of development, community ownership and connecting
the last mile with the benefits of development.
 MEDS-051
Fundamentals of CSR

Block

1
EVOLUTION AND CONCEPT OF CSR
UNIT 1
CSR: An Overview 9

UNIT 2
Perspective in Global Context 30

UNIT 3
Perspective in Indian Context 54
Evolution and Concept of CSR
BLOCK 1 EVOLUTION AND CONCEPT OF
CSR

Block 1 Evolution and Concept of CSR consists of three units.

Unit 1: CSR: An Overview discusses the various definitions of CSR. It also

discusses various benefits of CSR. The drivers of CSR have also been discussed.
It also discusses some of the theories of CSR.

Unit 2: Perspective in Global Context deals with the perspective of CSR in

different regions including Europe, USA, Scandinavian countries, Latin America
and other developing countries. It also discusses various international initiatives
related to CSR.

Unit 3: Perspective in Indian Context discusses about the evolution of CSR in

India and models of CSR operating in India. It also discusses about the evolution
of legislation on CSR. Current trends and practices of CSR in India have also
been discussed. Finally, it gives a few examples of CSR initiatives of Indian
companies.

8
 CSR: An Overview
UNIT 1 CSR: AN OVERVIEW
Structure
1.1 Introduction
1.2 Meaning and Definition of CSR
1.3 Benefits of CSR
1.4 Drivers of CSR
1.5 Theories of CSR
1.6 Let Us Sum Up
1.7 Keywords
1.8 Bibliography and Selected Readings
1.9 Check Your Progress – Possible Answers

1.1 INTRODUCTION
Dear Learners,
The CSR has become one of the standard business practices of our time. For
companies, the overall aim of CSR is to have a positive impact on society as a
whole while it engages in maximizing the creation of shared value for the owners
of the business, its employees, shareholders and stakeholders. “Corporate Social
Responsibility is a management concept whereby companies integrate social
and environmental concerns in their business operations and interactions with
their stakeholders. CSR is generally understood as being the way through which
a company achieves a balance of economic, environmental and social imperatives
(‘Triple-Bottom-Line-Approach’), while at the same time addressing the
expectations of shareholders and stakeholders” (UNIDO).

In this unit we will learn about how the concept of CSR (Corporate Social
Responsibility) has evolved over the years. We will also learn about a few theories
of CSR. After reading this unit you will be able to
List out various definitions of CSR
Explain the need and benefits of CSR
Describe the drivers of CSR
Discuss various theories of CSR

1.2 MEANING AND DEFINITION OF CSR

1.2.1 Historical Evolution of Social Responsibility
Religious philosophies dominated philanthropy during the eighteenth and the
nineteenth century. During 1800s and 1900s, to protect and retain the employees,
companies took steps to improve their quality of life. E.g., Macy’s in USA in
1875 contributed to an orphanage. The charity during those times were accounted
as miscellaneous expenses. With the intention of improving the quality of life of
its employees, the Pullman Palace Car Company created model industrial
community in 1893. These were the times when industrialization and urbanization
9
Evolution and Concept of CSR brought new challenges in labour market, for instance provision of better working
conditions. This led to the formation of labour unions. With the end of World
War II and with growth of business during the1940s, the companies started being
viewed as institutions of social responsibility.

The period after World War II in 1950s was a period when there was a growing
realization of the impact that the actions of large corporations had on the society
and that there was a need to change their decision making to include consideration
of their impact. Hence, this period marked the start of a new approach to
management which emphasised the importance of improving the business
response to its social impact. Thus, the period of 1950s and 1960s saw corporations
as potential contributors to the improvement of social and economic conditions.
Horward R. Bowen, Keith Davis and Joseph W. McGuire were the most famous
supporters of this ideology.

Towards the end of the 60s, anti-war sentiment was on the rise and a growing
sense of awareness that the corporations were not behaving in accordance to the
societal expectations of that time. There were widespread anti-war and
environmental campaigns and protests. In 1969, there was a major oil spill off
the coast of Santa Barbara, California leading to environmental campaigns and
protests which led to the 1st Earth Day Celebration in 1970. These protests called
for a clean and sustainable environment and a check on such activities of the
corporates which led to oil spills, toxic dumps, factories and power plants leading
to environmental hazards. During early 70s, several advances were made towards
environmental regulation, consumer product safety, equal employment
opportunity and occupational safety and health. During the 70s, there were also
several legislations in different countries that assigned broader responsibilities
of various social concerns to the corporations.

During the 1980s, the debate around CSR shifted its focus from conceptualization
of CSR to operationalizing CSR and its implementation. During the 1990s, with
increasing globalization, the MNCs had to work in different environments abroad.
The global visibility and increasing pressures, demands and expectations in the
host countries increased the reputational risk of the corporations. In order to
strike a balance between the challenges and opportunities of globalization, it
became essential to institutionalize CSR. Also, the Rio Declaration on
Environment and Development, the adoption of Agenda 21 and the United Nations
Framework Convention on Climate Change (UNFCCC) (1992), and the adoption
of the Kyoto Protocol (1997) led to setting of higher standards for the corporates
regarding climate related issues. Some of the contributions to CSR during this
decade include model of Corporate Social Performance (CSP) by Donna J. Wood,
Carroll’s ‘Pyramid of Corporate Social Responsibility’, five dimensions
of strategic CSR given by Burke and Logsdon, the concept of ‘The Triple-Bottom-
Line’, by Elkington and some alternative subjects like ‘Stakeholder Theory’,
corporate social performance and corporate citizenship.

In the year 2000, the United Nations Global Compact was launched to fill the
gaps of governance in terms of human rights and social and environmental issues
and to insert universal values into the markets. It was also in the year 2000 that
the United Nations adopted the Millennium Development Goals (MDGs). This
was followed by the adoption of Sustainable Development Goals in 2015.
International certifications like ISO 9001, ISO 14000 and ISO 26000 were also
10 adopted. Also, during this period, strategic considerations were added to the
concept and definition of CSR. It was believed that a strategic approach could CSR: An Overview
result in the creation of shared value in terms of benefits for the society while
improving competitiveness of the companies.

Post 2010, the concept of CSR reflected the belief that corporations need to be
responsive to social expectations and their actions should be motivated by a
drive towards sustainability. Porter and Kramer (2011) called for a change in
business strategies which would focus on creation of shared values as their main
objective. This decade is also marked by the launch of the 2030 Agenda for
Sustainable Development.

1.2.2 Evolution of the Definitions of CSR

The initial definition of CSR was given by Horward R Bowen during 1950s in
his book entitled Social Responsibilities of the Businessman in which he defines
social responsibility as: “Obligations of businessmen to pursue those policies, to
make those decisions, or to follow those lines of action which are desirable in
terms of the objectives and values of our society”.

In the 1960s, one of the most prominent definition of CSR was given by Keith
Davis who defines social responsibility as “businessmen’s decisions and actions
taken for reasons at least partially beyond the firm’s direct economic or technical
interest”.

Joseph W. McGuire is another major contributor to the definition of social

responsibility during 1960s. In his book, Business and Society (1963), he states
that, “The idea of social responsibilities supposes that the corporation has not
only economic and legal obligations but also certain responsibilities to society
which extend beyond these obligations”.

Thus, the definitions of social responsibility in the 1960s emphasized on the

voluntarism of the corporate as an essential ingredient of social responsibility,
and an acceptance of the fact that it involves cost which may not give any direct
or measurable economic returns.

A new construct to the concept of CSR came from the Committee for Economic
Development (CED) in 1971. CED noted that the social contract between the
business and the community is changing. The period during late 1960s and early
1970s, witnessed a change in the status of issues related to environment,
community, employees, work safety etc. from special interest to government
regulation. CED gave a new three concentric circle definition of CSR.

“The inner circle includes the clear-cut basic responsibilities for the efficient
execution of the economic function—products, jobs and economic growth. The
intermediate circle encompasses responsibility to exercise this economic function
with a sensitive awareness of changing social values and priorities: for example,
with respect to environmental conservation; hiring and relations with employees;
and more rigorous expectations of customers for information, fair treatment,
and protection from injury. The outer circle outlines newly emerging and still
amorphous responsibilities that businesses should assume to become more broadly
involved in actively improving the social environment. (For example, poverty
and urban blight).”

11
Evolution and Concept of CSR The 1970s saw increasing mention of the terms Corporate Social Performance
and Corporate Social Responsibility. In 1975, an Economics Professor, Jules
Backman said that the terms social audit, social indicators and social accounting
cover different facets of social performance. S. Prakash Sethi, in his article titled
‘Dimensions of Corporate Social Performance” makes distinction between ‘social
obligation’, ‘social responsibility’ and ‘social responsiveness’. While social
obligation is the response of corporate to market forces or legal obligations,
social responsibility is a notch higher than obligation and brings corporate
behaviour in harmony with the existing social norms or values and expectations.
Sethi describes social responsiveness as the adaptation of corporate behaviour
to social needs.

The concept of CSR evolved and extended to beyond economic and legal
components to encompass ethical and voluntary aspects as well. Caroll in 1979
gave a definition containing all four components. “The social responsibility of
business encompasses the economic, legal, ethical, and discretionary expectations
that society has of organizations at a given point in time”.

The 1980s saw a quest to widen the concept of CSR and go beyond CSR with
wider acceptance of the concept of Corporate Social Performance. During this
period, the focus was on attempts to measure CSR and to include alternative
thematic frameworks. Thomas M Jones in 1980, extended the concept of CSR as
‘a process’. He argued that CSR should not be seen as a set of outcomes but as a
process. Corporate Social Responsibility is the notion that corporations have an
obligation to constituent groups in society other than stockholders, and beyond
that which is prescribed by law and union contract. In 1985, Steven Wartick and
Philip Cochran presented the Evolution of the Corporate Social Performance
Model, which integrated the concept of responsibility, responsiveness and social
issues.

The 1990s did not see any major contribution to the definition of CSR. During
this period, the main focus was on various related themes like Corporate Social
Performance, the Stakeholder theory, Business Ethics theory and Corporate
Citizenship.

2000 onwards, has been an era of defining the activities that can be embraced as
CSR activities and about regulating CSR.

1.2.3 CSR Perspectives in Selected Countries

CSR activities as a voluntary measure have been carried out in the USA for
decades, and it is prevalent in many other countries like Australia, Canada, UAE
etc.; it is at infancy stage in Africa. At the international level, CSR activities
have been integrated as part of business strategy and corporate policy. In fact,
promoters of large corporates have floated not-for-profit companies/trust, to carry
out CSR activities, for example HCL Technologies Foundation, Hindustan
Unilever Foundation etc.The organizations are adopting CSR as a part of their
policy matters to address the concern of different stakeholders including investors
and to enhance the competition to access the global market and satisfying the
needs of society. The CSR perspectives of different countries are given below.
Definitions for all countries, except India, are sourced from the World Business
Council for Sustainable Development (WBCSD, 2000).
12
USA CSR: An Overview

“CSR is about taking personal responsibility for your actions and the impact that
you have on society. Companies and employees must undergo a personal
transformation, re-examine their roles, their responsibilities and increase their
level of accountability”
THE NETHERLANDS
“CSR is about making a leadership commitment to core values and recognizing
local and cultural differences when implementing global policies. It’s about
companies endorsing the UN Convention on Human Rights and the ILO Rights
at Work”
TAIWAN
“CSR is the contribution to the development of natural and human capital, in
addition to just making a profit”
THAILAND
“CSR must be locally relevant and meaningful only if backed up by action”
THE PHILIPPINES
“CSR is about business giving back to society”
BRAZIL
“CSR is about commitment to strive for the best economic development for the
community, to respect workers and build their capacities, to protect the
environment and to help create frameworks where ethical business can prosper”

ARGENTINA
“CSR is about a corporation’s ability to respond to social challenges. It starts
with developing good relations with neighbours. Companies should make a strong
commitment to education, worker rights, capacity building, and job security.
CSR is stimulating the economic development of a community”

GHANA
“CSR is about capacity building for sustainable livelihoods. It respects cultural
differences and finds the business opportunities in building the skills of employees,
the community and the government”

INDIA
“It urges businesses to embrace the “triple-bottom-line” approach whereby its
financial performance can be harmonized with the expectations of society, the
environment and the many stakeholders it interfaces with in a sustainable manner
(MCA, Government of India, 2011).

1.2.4 Definitions of CSR

In a “free society,” “there is one and only one social responsibility of business –
to use its resources and engage in activities designed to increase its profits so
long as it stays within the rules of the game, which is to say, engages in open and
free competition without deception or fraud” (Friedman, 1970).
13
Evolution and Concept of CSR “Another aspect of any workable definition of corporate social responsibility is
that the behavior of the firms must be voluntary” [Manne &Wallich, 1972, p. 5)
“The social responsibility of business encompasses the economic, legal, ethical,
and discretionary expectations that society has of organizations at a given point
in time” (Carroll, 1979, pp. 500).
“It refers to how business takes account of its economic, social and environmental
impacts in the way it operates. maximizing the benefits and minimizing the
downsides. CSR undertakings are the voluntary actions that business can take,
over and above compliance with minimum legal requirements, to address both
its own competitive interests and the interests of wider society” (World Bank,
2013).
“Corporate Social Responsibility is a management concept whereby companies
integrate social and environmental concerns in their business operations and
interactions with their stakeholders. CSR is generally understood as being the
way through which a company achieves a balance of economic, environmental
and social imperatives (“Triple-Bottom-Line-Approach”), while at the same time
addressing the expectations of shareholders and stakeholders” (UNIDO)
“Corporate social responsibility is the commitment of business to contribute to
sustainable economic development, working with employees, their families, the
local community and society at large to improve their quality of life” (WBCSD,
2000).
Wayne Visser uses CSR in developing countries to represent ‘the formal and
informal ways in which business makes a contribution to improving the
governance, social, ethical, labour and environmental conditions of the developing
countries, while remaining sensitive to the prevailing religious, historical and
cultural contexts in which they operate’ (Visser et al., 2007).
The International Standard Organization brought out international standard on
social responsibilities of organizations (ISO 26000), first published in 2010, which
defines social responsibility as:
“An organization’s responsibility for the impacts of its decisions and activities
on society and the environment, through transparent and ethical behaviour that:
contributes to sustainable development, including health and the welfare of
society;
takes into account the expectations of stakeholders;
is in compliance with applicable law and consistent with international norms
of behaviour;
and is integrated throughout the organization and implemented in its
relations”.
Source of Section 1.2
(Carroll, 2008; Carroll, 1999; Bhaduri and Selarka, 2016)

1.3 BENEFITS OF CSR

Businesses these days can no longer limit their focus to profit maximization and
be satisfied just by creating employment and paying their taxes. They are also
14 required to address the needs of other stakeholders like creditors, employees,
shareholders, consumers, government and public. Companies these days are more CSR: An Overview
vulnerable to consumer boycotts and campaigns. The companies need to be
socially accountable to the communities among whom they operate. Hence,
CSR as a strategy and in fact as a necessary activity, is becoming increasingly
important for businesses due to the following benefits: (CII, 2013)

1) Communities provide the license to operate: The CSR behaviour of

corporate is not just driven by their values but are also influenced by the
stakeholders like government, investors, customers and community. Today’s
corporate understands that the license to operate in any particular area is
not just given by the government but also by the communities that get
impacted by the activities of these companies. A strong CSR programme
provides the companies with the license to operate and to maintain the trust
of the local community.

2) Attracting and retaining employees: CSR interventions that help the

employees to participate give them a sense of belongingness to the company.
Good CSR initiatives can attract employees to the company and give them
the incentive to remain motivated and committed to the company.

3) Communities as suppliers: There are instances wherein as a part of CSR

activities, the communities have been incorporated into the supply chain to
enhance their livelihood. Such initiatives have helped in increasing their
incomes and ensuring the companies with a steady and secure supply chain.

4) Enhancing corporate reputation: When the companies position

themselves as responsible corporate citizens, it creates good will and a
positive image, thereby helping them to enhance their brand image in the
market.

Activity 1
Visit a CSR project of a company in your vicinity. Ask the employees, how
according to them, CSR has benefitted the company. Write down their
responses.
...........................................................................................................................
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1.4 DRIVERS OF CSR

According to the KPMG Survey of Corporate Responsibility Reporting 2011,
around the world, corporate responsibility reporting has become a fundamental
imperative for businesses. According to the KPMG survey, the top ten motivators
driving corporations to engage in CSR for competitive reasons, the following
have emerged:
Economic considerations
15
Evolution and Concept of CSR Ethical considerations
Innovation and learning
Employee motivation
Risk management or risk reduction
Access to capital or increased shareholder value
Reputation or brand
Market position or share
Strengthened supplier relationships
Cost saving
In simple words, the underlying reasons for business organizations to be involved
in CSR are as follows:

i) Public Image: CSR creates a positive brand image in the minds of the
potential consumers. Effective communication of CSR activities, boosts
the purchase intentions of the prospective consumers. Business can earn
goodwill and reputation by performing the activities towards the welfare of
the society. People prefer to purchase products of the company that engage
in various social welfare programs.

For example: Levi Strauss practices CSR in three areas i.e. the masses,
climate, and its products. It’s non-profit Red Tab Foundation provides aid
to its employees and retirees in case of financial emergency. As a part of its
contribution to the environment, it has signed the Climate Declaration and
aims to use 100 percent renewable energy in order to reduce carbon
emissions and other greenhouse gases. In addition, in a bid to save water, it
has started production of its new denim cloth-line which has helped them
save more than 1 billion litres of water since its inception in 2011.

ii) Government Regulation: Most companies prefer to remain a step ahead

of government regulations in identifying the social needs and formulating
policies to address them, out of the fear that if they don’t, the government
may take the responsibility, which might prove costly for the employers.
To avoid government regulations businessmen should discharge their duties
voluntarily. For example:-

a) Coca-Cola, USA continues to make strides towards the alleviation of

environmental issues. After realizing that its fleet of delivery trucks
accounted for 3.7 million metric tons of greenhouse gases (GHGs) in
2014, Coca-Cola made significant changes to its supply chain like
investing in trucks that are powered by alternative fuels. Those changes
should support the company’s goal of reducing its carbon footprint by
25 percent by 2020.

b) Ford, USA is another corporation attempting to improve their

environmental performance. To reduce its GHG emissions, an EcoBoost
engine was developed to increase fuel efficiency and the company hopes
to offer 13 new electric vehicle models in near future. In addition,
American Ford dealerships now use wind sail and solar PV systems as
their primary power source.
16
iii) Survival and Growth: Every business is a part of society. It utilizes the CSR: An Overview
available resources of power, land, water etc. of the society, therefore it
should be the responsibility of every business to spend a part of its profit
for the welfare of the society.

E.g. Amul Dairy has launched a novel scheme “Rural Sanitation Campaign”
for total rural sanitation. The dairy with the support of District Rural
Development Agency (DRDA) will provide interest free loans to its milk
producers in the districts of Anand and Kheda, to set up ‘pucca’ toilet blocks,
which will not only help women milk producers avoid embarrassment but
will ensure hygiene as well. (For more details visit http://
www.amuldairy.com/index.php/component/content/category/13-csr-
initiatives)

iv) Employee Satisfaction: Besides getting good salary and working in healthy
atmosphere employees also expect other facilities like proper
accommodation, transportation, education, and training.

For example, Lemon Tree Hotels Group (‘LTH’) believes that people with
disabilities (whether physical, social or economic disabilities leading to an
opportunity deprivation) must be provided the same opportunities as others
to realize their full potential and live with dignity. Lemon Tree has defined
the goal as mainstreaming ‘Opportunity Deprived Indians’ i.e. ODIs into
its workforce. By creating a supportive environment in the organization
that allows them to deliver their best, LTH helps in bringing social
inclusiveness through livelihood creation. (For more details visit ttps://
www.lemontreehotels.com/factsheet/LTH_CSR_Policy.pdf)

v) Consumer Awareness: Nowadays consumers have become very conscious

about their rights. They protest the supply of inferior and harmful products
by forming different groups. This has made it obligatory for businesses to
protect the interest of the consumers by providing quality products at
competitive prices.

For example, Burberry announced banning fur in its products along with
other ladies’ bag manufacturing companies like Gucci, Versace, Armani,
Stella McCartney and others after a long campaign from the animal rights
group PETA.
Check Your Progress - 1
Notes: a) Write your answers in about 50 words.
b) Check your answer with possible answers given at the end of the unit.
1) Give any one definition of CSR.
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17
Evolution and Concept of CSR 2) List out the various benefits of CSR.
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1.5 THEORIES OF CSR

In this section we will discuss three basic theories of CSR. They are
i) Carroll’s CSR Pyramid
ii) Triple Bottom Line CSR Theory
iii) Stakeholder Theory
i) Carroll’s CSR Pyramid
Carroll talks about four obligations that businesses have towards society.
1) Economic Responsibility: According to Carroll, businesses have an
economic responsibility towards the society that permitted them to be created
and sustained. The society expects business organizations to sustain
themselves to continue producing goods and services that the society needs.
As a reward, the society allows them to take profits. The businesses make
profit by value addition and in doing so, they benefit all the stakeholders of
the business.

Businesses need to make profit not just to reward the owners but also to
reinvest the profit to grow the business further. To fulfil their economic
responsibility, businesses employ several business concepts that are directed
towards financial effectiveness such as attention to revenues, cost-
effectiveness, investments, marketing, strategies, operations, among several
other professional concepts focused on augmenting the long-term financial
success of the organization. According to Carroll, those firms that are not
successful in their economic or financial sphere go out of business and any
other responsibilities that may be incumbent upon them become moot
considerations. Hence economic responsibility is the basic responsibility of
any business and has been placed at the bottom of the CSR pyramid.

2) Legal Responsibilities: The society has established minimum ground rules

under which the businesses are expected to function. The businesses are
expected to follow fair business practices and operate within the rules and
regulations laid down by the lawmakers at local and national levels.
Compliance officers are employed by the Companies to ensure compliance
to these rules. According to Carroll (2016), while meeting these legal
responsibilities, important expectations of business include:

Performing in a manner consistent with expectations of government

and law
Complying with various federal, state, and local regulations
18
 Conducting themselves as law-abiding corporate citizens CSR: An Overview

Fulfilling all their legal obligations to societal stakeholders

Providing goods and services that at least meet minimal legal
requirements.

3) Ethical Responsibilities: Laws are essential but not enough. Society also
expects businesses to operate and function in an ethical fashion. Ethical
responsibilities imply that the activities, norms, standards, and practices
taken up by the businesses need not necessarily be codified in law, but still
the businesses are expected to follow them. The ethical expectations carry
the legal expectations a step further to uphold the norms, values, principles,
and standards considered important by the consumers, employees, owners,
and the community at large. The activities of the businesses should also
abide by the universal principles of moral philosophy such as rights, justice,
and utilitarianism

While meeting these ethical responsibilities, important expectations of

business include: (Carroll 1991)

Performing in a manner consistent with expectations of societal mores

and ethical norms

Recognizing and respecting new or evolving ethical/moral norms

adopted by society

Preventing ethical norms from being compromised in order to achieve

business goals

Being good corporate citizens by doing what is expected morally or

ethically

Recognizing that business integrity and ethical behaviour goes beyond

the mere compliance with laws and regulations.

4) Philanthropic Responsibilities: Business giving is done purely on

voluntary basis. Though philanthropy is not a responsibility, it is what the
public expects the business to give back to society. It is mainly guided by
the desire of businesses to participate in activities that are neither mandated
by law nor expected from ethical point of view. It stems out of the
expectations of the citizens to be good corporate citizens as is expected
from individuals as well. Various philanthropic activities in which the
companies engage include gifts of monetary resources, product and service
donations, volunteerism by employees and management, community
development and any other discretionary contribution to the community.

Companies are also driven by motivation to engage in philanthropy in an

effort to enhance company’s reputation. The philanthropic category of
business giving is different from the ethical category in the sense that
philanthropic giving is not necessarily expected in ethical sense. Companies
will not be called unethical if they don’t practice philanthropic giving. It is
more voluntary in nature and companies practicing philanthropic giving are
considered as practicing good ‘Corporate Citizenship’.
19
Evolution and Concept of CSR

Be a good corporate citizen Desired by society

Philanthropic
Responsibilities
Do what is just and Expected by society
fair avoid harm Ethical
Responsibilities
Obey laws and Required by
regulations society
Legal
Responsibilities Required
Be profit- by
able society
Economic
Responsibilities

Figure 1: Carroll’s Pyramid

Figure 1shows Carroll’s pyramid of CSR. The economic responsibility being the
fundamental requirement in any business is placed at the base of the pyramid.
The infrastructure needed for a sound CSR is based on the economic soundness
and sustainability of any business. The business is expected to operate following
certain laws and regulations which forms the second part of the pyramid. The
existence of legal and regulatory framework in any country significantly affects
the multinational investments in these countries. Thirdly, business is expected to
operate in an ethical way to avoid causing harm to any stakeholder and always
do what is just, fair and right. Finally, a business is expected to be a good corporate
citizen and provide any financial, physical, or human resource contribution to
the communities within which it operates.

ii) Triple-Bottom-Line Theory

John Elkington first coined the term triple-bottom-line in his book “Cannibals
with Forks: The Triple-Bottom-Line of the 21st Century Business”. Triple-bottom-
line theory expands the traditional accounting framework to include three
dimensions i.e. Economic, Social, and Environmental. These three bottom lines
are also referred to as the 3 P’s i.e. People, Planet and Profit. According to
Elkington, all the three dimensions should perform sustainably.

1) Economic Dimension/Profit: According to the theory, the most important

thing for a company, is not to make huge profits but rather, to make continuous
profit on a sustainable basis over a long period of time. Sustainable profits
can be achieved by drawing a strategic plan that takes into account
expenditures and taxes, forecasting business climate factors, evaluate market
benchmark and avoid maximum risk threats. Triple-bottom-line businesses
also recognize that profit is not diametrically opposed to people or planet.

20
 CSR: An Overview
Example: Swedish furniture giant IKEA reported sales of $37.6 billion in
2016. The same year, the company turned a profit by recycling waste into
some of its best-selling products. Before, this waste had cost the company
more than $1 million per year. And the company is well on its way to “zero
waste to landfill” worldwide. According to Joanna Yarrow, IKEA’s head of
sustainability for the UK, “We don’t do this because we’re tree huggers, we
do this because it’s very cost effective.”
Source: https://sustain.wisconsin.edu/sustainability/triple-bottom-line/

2) Social Dimension/People: According to the theory, for businesses to be

sustainable in the long run, they should take up activities that satisfy the
needs of the society in which they operate. According to the triple-bottom-
line CSR framework, it is essential that the corporations achieve social
sustainability. Since societal needs vary from one region to another, the
corporations need to collect data on various social parameters including
unemployment rate, female labour participation, educational services, health
services etc. This will help in prioritizing the community needs and the
corporations then take steps to satisfy the societal needs to the extent
possible. A triple-bottom-line company also pays fair wages to its employees
and provides safe working conditions.

Example: 3M partners with United Way to fund STEM education across the
world. This initiative is an example of “enlightened self-interest”—acting to
further the interests of others, ultimately, to serve one’s own self-interest.
The community benefits, and 3M provides itself a well-educated source of
scientists and innovators for generations to come.
Source: https://sustain.wisconsin.edu/sustainability/triple-bottom-line/

3) Environmental Dimension/Planet: Environment is an important dimension

of the triple bottom line approach. Corporations should pay attention to
maintaining environmental sustainability. The enterprises should try to
reduce ecological footprints as much as possible and the ones that harm the
environment should also bear the cost. Some of the factors which help in
maintaining environmental sustainability include reducing waste, investing
in renewable energy, managing natural resources more efficiently, and
improving their logistics.

Example: Apple has invested heavily in environmental sustainability. Its

massive U.S. data centres are LEED certified. In 2016, the company
announced that 93 percent of its energy comes from renewable sources. These
actions have nudged other tech giants like Facebook and Google as well
toward using more renewable energy sources to power facilities.
Source: https://sustain.wisconsin.edu/sustainability/triple-bottom-line/

iii) Stakeholder Theory

Stakeholder Theory was given by Dr. F. Edward Freeman, a professor at the
University of Virginia, in his book, “Strategic Management: A Stakeholder
Approach” which suggests that, shareholders are just one of the many stakeholders
of a company. Stakeholders are described broadly by Freeman and Reed as any
identifiable group or in­dividual who can affect the achievement of an
organization’s objectives or who are affected by the achievement of an
organization’s objectives. According to Dr. Freeman, the stakeholder may include 21
Evolution and Concept of CSR the consumers, employees, suppliers, political action groups, environmental
groups, local communities, the media, financial institutions, governmental groups
etc. and for a company to be successful in the long run, the concerns of all groups
should be taken into account. If a company ignores the concerns of its stakeholders,
it may gain profits in the short run but in the long run, once the stakeholders
become dissatisfied, the company cannot survive.

According to Freeman, “If you can get all your stakeholders to swim or row in
the same direction, you’ve got a company with momentum and real power.” He
goes on that, “Saying that profits are the only important thing to a company is
like saying, ‘Red blood cells are life.’ You need red blood cells to live, but you
need so much more.” A company needs to be aware not just of the needs of its
shareholders but also of its workers, those who live near its factories, the
competitors etc. He quotes the example of ‘Enron’ as to how the desire to attain
short term gains, led to corruption, and finally brought about the downfall of the
company in 2000.

Let us now understand the functioning of various stakeholders under this theory:
1) Employee: The employees expect to be treated and compensated fairly and
to be given reasonable working hours. Otherwise, there would be bad word
of mouth among potential workforce and the company will be adversely
impacted.

2) Suppliers: Like employees, the expectations of the suppliers in the

stakeholder theory also includes fair treatment and compensation. The
stakeholder theory also expects due diligence on the part of the suppliers
that they will also conduct their business in a fair and ethical manner.

3) Manufacturers: With the opening of the economy, there are instances when
the product or their parts are manufactured at a location away from the
project, sometimes even in a different country. It is expected that the working
conditions and wages should be fair for the manufacturers as well.

4) Environmentalists: People living in vicinity to the project need to be assured

that the environment, power, or water will not be adversely affected due to
the project. These people who are affected by the local ecology are also
considered as stakeholders in the stakeholder theory and need to be apprised
of the plans and developments and their views should also be taken into
account while planning the project.

5) Government Bodies: Government approvals need to be sought for any

project before it starts its operations. Hence government bodies and various
regulating agencies are also one of the stakeholders.

6) Community: People living in the nearby neighbourhoods, are also

stakeholders and the project should consider their concerns of whether it
will enhance or maintain their quality of life and not impact it negatively in
any manner.

22
 CSR: An Overview
Activity 2
Visit a CSR project being implemented in the city of your residence. Identify
and list out the stakeholders of the project.
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iv) Some Other Views on CSR
1) Theodore Levitt’s Dangers of Social Responsibility
Levitt was a critic of inclusion of CSR in the corporate objective function. He
argues that when CSR is incorporated in the corporate objective function, this
leaves the managers of the businesses responsible to make judgements on which
social issue to purse and which not to. Levitt calls CSR a ‘fashion accessory’ of
the self-interested businessmen who have in mind neither the health of the business
nor the welfare of the society but are driven by their own political agenda or self-
realization. He also argues that CSR is seen as a profitable strategy by businesses
and objected to the practice of dressing up profit making objectives as
philanthropic. According to Levitt, an ethical approach to CSR is to pursue CSR
only when it is profitable, and admit that profit is the real motive behind any
CSR activity.

The strongest argument of Levitt is that the responsibilities of public and private
sectors should be kept separate. Levitt argues that it is both undemocratic and
unethical on the part of the managers to assume a role in which they have no
expertise and hence they are not likely to succeed in this role. According to
Levitt, if the managers assume any role other than that of profit makers, they are
bound to fail.

2) Milton Friedman’s Shareholder Theory of Capitalism

According to Friedman, the social responsibility of business is to increase profits.
Friedman originally expressed this thought in his book Capitalism and Freedom
in 1962. Later in his article published in New York times he writes:-

“There is one and only one social responsibility of business — to use its resources
and engage in activities designed to increase its profits so long as it stays within
the rules of the game, which is to say, engages in open and free competition
without deception or fraud.”

According to Friedman, shareholders are the economic engine of an organization

and hence the only group to which the firm is socially responsible. He opines
that a corporate executive is an employee of the owners of the business, and
hence his/her primary responsibility is to them. He says that an executive spending
company money on ‘social cause’ is in fact spending somebody else’s money.
For example, if a business executive refrains from increasing the price of a product
to fulfil the social objective of preventing inflation or if the amount of expenditure
he makes beyond what is required by the law, on reducing pollution to fulfil the 23
Evolution and Concept of CSR social objective of improving the environment, then he acts in a way that is not
in the interest of the employers. Thus, according to Friedman, “Insofar as his
actions are in accord with his “social responsibility” to reduce returns to
stockholders, he is spending their money. Insofar as his actions raise the price to
customers, he is spending the customers’ money. Insofar as his actions lower the
wages of some employees, he is spending their money.”

The customers, stockholders, employees of a firm could separately spend their

money on any social cause they wished to. Friedman goes further to say that if a
corporate executive does this, he in effect imposes taxes on one hand and decides
on how to spend the tax proceeds on the other. This act raises questions at two
levels: principles and consequences. As far as principle is concerned, imposition
of taxes and their expenditure are government functions. However, here the
businessman decides whom to tax, by how much, for what purpose and he spends
the proceeds. On the grounds of consequences, he questions the corporate
executive’s judgement to spend the proceeds. He says that “in practice the doctrine
of social responsibility is frequently a cloak for actions that are justified on other
grounds rather than a reason for those actions.”

3) Ackerman and Bauer’s Social Issues Life Cycle Model

Ackerman and Bauer reworked the product life cycle model to produce a generic
model called the ‘Social Issues Life Cycle Model.’ It comprises of three stages:

Stage 1: At Stage 1, the social issue is felt as a weak signal. At this stage, the
challenges that need to be dealt with include establishing the social issue, assessing
its relevance, and understanding the level of political support it could attract in
the society. There is uncertainty about the nature and impact of the issue. At this
stage, the stakeholders are not properly organized.

Stage 2: During Stage 2, the issue is emerging and unresolved but its importance
amongst the general public increases. The core issues that need to be addressed
at this point include how to identify and resolve the problem, identification of
the stakeholders with vested interest, what new competencies need to be
developed, and how can corporate be made to respond. Stakeholders are more
organized.

Stage 3: In Stage 3, the problem has been characterized and the solutions to the
problem have been identified. The firm is in a condition to measure the economic
impact of the issue. New norms or laws have been established which have
institutionalized stakeholder demands. Accordingly, socially responsible corporate
behaviour has also been established.

Ackerman and Bauer also pointed out three stages involved in achieving the full
integration of social issues within the firm:

In Stage 1, the CEO becomes aware of the importance of social issue and
formulates policy to address the same. As all the dimensions of the issue are not
properly understood, the individual divisions show their reluctance to commit
themselves. The newly formed policy destabilizes the firm’s structural framework
and standard operating procedures. As a result, the departments adopt a wait and
watch policy or there may be stiff resistance from within.

24
Stage 2 is a stage where the social issue has been characterized and a best fit CSR: An Overview
response has been determined. Now the issue is more technical hence the firm
appoints a dedicated executive, a social issue expert, who reports directly to the
top management. This expert gives the necessary technical guidance to handle
the issue and is responsible to push policy at the ground level.

The third and final stage, is when the organizational response is implemented.
Here the CEO calls for demonstration of commitment to policy enforcement.
The problems of this phase center around managerial transformation, resource
allocation within and without divisions. The social issues expert takes a backseat
at this stage and supports division level actions.

4) Gandhi’s Philosophy of Trusteeship

“The idea of trusteeship was propounded by Mahatma Gandhi. It evolves from
the belief that everything belongs to God and hence to everyone and not to any
particular individual. Gandhian philosophy always aims at bringing economic
equality through non-violent social change. Gandhi propounded the doctrine of
trusteeship as a way to realize such change. The peaceful removal of economic
inequalities is possible if the rich, after meeting their reasonable needs, hold the
surplus wealth in trust for society. In this way, the rich man is not dispossessed
of his surplus wealth, but he is required to use this wealth in the broader interest
of the community, and not in his personal interest. The doctrine of trusteeship is
based on the idea that everything is from God, and belongs to God. Therefore, it
is for God’s people as a whole, and not for a particular individual. If an individual
possesses more than his proportionate share, he becomes a trustee of that surplus
amount for God’s people. As to the question of the determination of the successor
of the trustee, Gandhi replied that the original trustee is to be allowed to make
his choice, but that choice is to be finalized by the state. Thus, a check is put on
the state as well as on the individual. A summary of Gandhi’s doctrine of
trusteeship is as follows:

a) Trusteeship provides a means of transforming the present capitalist order

of society into an egalitarian one; it gives no quarter to capitalism, but
gives the present owning class a chance of reforming itself. It is based on
the faith that human nature is never beyond redemption.

b) It does not recognize any right of private ownership of property except in

as much as it may be permitted by society for its own welfare.
c) It does not exclude legislative regulation of the ownership and use of wealth.
d) Thus, under state regulated trusteeship, an individual will not be free to
hold or use his wealth for selfish satisfaction or in disregard of the interest
of society.

e) Just as it is proposed to fix a decent minimum living wage, even so a limit

should be fixed for the maximum income that could be allowed to any
person in the society. The difference between such minimum and maximum
income should be reasonable, equitable and variable from time to time, so
much so that the tendency would be towards obliteration of the difference.

f) Under the Gandhian economic order, the character of production will be

determined by social necessity and not by personal whim or greed” (Pyarelal,
1965). 25
Evolution and Concept of CSR Check Your Progress - 2
Notes: a) Write your answers in about 50 words.
b) Check your answer with possible answers given at the end of the unit.
1) What is the role of Government bodies according to the Stakeholder Theory?
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2) What is Stage 2 of Ackerman and Bauer’s Social Issues Life Cycle Model?
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1.6 LET US SUM UP

In this unit we have discussed about how the concept of CSR has evolved over
the years. You also read about the CSR perspectives in other countries. The unit
also gives different definitions of CSR given by experts. It discusses how CSR
helps in building brand image, attaining competitive advantage and facilitates
long term business interest. We have also discussed about various drivers of
CSR. Finally, we discussed in detail the three basic theories of CSR i.e. Carroll’s
CSR Theory, Triple-Bottom-Line Theory and Stakeholder Theory. We have also
looked into the views on CSR of some of the experts like Levitt, Friedman,
Ackerman, and Gandhi’s Philosophy of Trusteeship.

1.7 KEYWORDS
CSR : Corporate social responsibility is the commitment of
business to contribute to sustainable economic
development, working with employees, their families,
the local community and society at large to improve
their quality of life (WBCSD, 2000).

Stakeholder : A person who impacts or get impacted by the actions

and activities of the business.

Triple Bottom Line : The triple-bottom-line (TBL) is a framework that

recommends that companies commit to focus on social
and environmental concerns along with profits. The
TBL posits that instead of one bottom line, there
26 should be three: profit, people, and the planet.
 CSR: An Overview
1.8 BIBLIOGRAPHY AND SELECTED READINGS
Brin, P. and Nehme, M.S. (2019). Corporate Social Responsibility: Analysis of
Theories And Models. EUREKA: Social and Humanities 5.

Bhaduri, S. N. and Selarka, E. (2016). Corporate Governance and Corporate

Social Responsibility of Indian Companies. XV, 134p, Springer.

Carroll, A.B. (2008). A History of Corporate Social Responsibility: Concepts

and Practices. In Andrew Crane, Abigail McWilliams, Dirk Matten, Jeremy Moon
& Donald Siegel (eds.) The Oxford Handbook of Corporate Social Responsibility.
Oxford University Press,19-46.

Carroll, A. B. (1991). The pyramid of corporate social responsibility: toward the

moral management of organizational stakeholders. Business Horizons, 34(4), 39–
48.

Carroll, A.B. (1999). Corporate Social Responsibility: Evolution of a Definitional

Construct. Business & Society. 38 (3) pp. 268 - 295.

Carroll, A.B. (2016). Carroll’s Pyramid of CSR: Taking Another Look.

International Journal of Corporate Social Responsibility, 1(3).

CII (2013). Handbook of Corporate Social Responsibility in India. PWC Pvt.

Ltd.

Friedman, M. (1970). The Social responsibility of Business is to Increase its

Profits. New York Times Magazine, September 13, 1970

Levitt, T. (1958). Dangers of Social Responsibility. Harvard Business Review

(Sept/Oct).

Kristoffersen, I., Gerrans, P., and Murphy, M.C. (2005). The Corporate Social
Responsibility and The Theory of The Firm. Working Paper Series, School of
Accounting, Finance and Economics & FIMARC, Working Paper 0505.

Vogt, T. (2007). Corporate social responsibility standard – Pros and cons. Munich,
GRIN Verlag, https://www.grin.com/document/91897

Pradhan, A. K. and Nibedita, B. (2019). The determinants of corporate social

responsibility: Evidence from Indian firms. Global Business Review, pp.1-14,
doi:10.1177/0972150918814318
Pyarelal. (1965). https://www.mkgandhi.org/trusteeship/chap13.html
Carroll, A. B., & Shabana, K. M. (2010). The business case for corporate social
responsibility: A review of concepts, research and practice. International Journal
of Management Reviews, 85-105

Manne, H. and Wallich, H. (1987). The Modern Corporation and Social

Responsibility, American Enterprise Institute.

CII (2013). Handbook on Corporate Social Responsibility in India. PWC Pvt.

Ltd.
27
Evolution and Concept of CSR Davis, K. (1960). Can Business Afford to Ignore Social Responsibilities?
California Management Review, 2(Spring), 70-76.

KPMG (2011). KPMG International Survey of Corporate Responsibility

Reporting 2011. KPMG International.

Carroll, A. B. (1979). A Three-Dimensional Conceptual Model of Corporate Social

Performance. Academy of Management Review, 4, 497–505.

Owen, D.P. (2013). Beyond Corporate Social Responsibility: The Scope for
Corporate Investment in Community Driven Development. World Bank Report
No. 37379-GLB.

https://www.unido.org/our-focus/advancing-economic-competitiveness/
competitive-trade-capacities-and-corporate-responsibility/corporate-social-
responsibility-m KPMG International Survey of Corporate Responsibility
Reporting 2011arket-integration/what-csr

World Business Council for Sustainable Development (1999), CSR definition,

http://www.wbcsd.org/workprogram/business-role/previous-work/corporate-
social-responsibility.aspx

Visser, W., Matten, D., Pohl, M., and Tolhurst, N. (2007). The A to Z of Corporate
Social Responsibility. London:Wiley.

Ministry of Corporate Affairs (2011). National Voluntary Guidelines on Social,

Environmental & Economic Responsibilities of Business. Ministry of Corporate
Affairs, Government of India.

Weblinks
https://www.smartsheet.com/what-stakeholder-theory-and-how-does-it-impact-
organization
https://sustain.wisconsin.edu/sustainability/triple-bottom-line/
Wayne Visser (2010) https://www.researchgate.net/publication/242596632 _
The_World_Guide_to_CSR_A_Country-by-Country _ Analysis _ of _ Corporate
_ Sustainability_and_Responsibility

1.9 CHECK YOUR PROGRESS – POSSIBLE

ANSWERS
Check Your Progress - 1

Answer 1: Corporate social responsibility is the commitment of business to

contribute to sustainable economic development, working with employees, their
families, the local community and society at large to improve their quality of life
(WBCSD, 2000).
Answer 2: Some of the benefits of CSR are
1) Communities provide the license to operate
2) Attracting and retaining employees

28 3) Communities as suppliers
4) Enhancing corporate reputation CSR: An Overview

Check Your Progress – 2

Answer 1: According to the Stakeholder’s Theory, Government approvals need
to be sought for any project before it starts its operations. Hence, government
bodies and various regulating agencies are also one of the stakeholders.

Answer 2: Stage 2 of Ackerman and Bauer’s Social Issues Life Cycle Model,
include how to resolve the problems, identification of the stakeholders with vested
interest, what new competencies need to be developed and how can corporates
be made to respond. Stakeholders are more organized.

29
Evolution and Concept of CSR
UNIT 2 PERSPECTIVE IN GLOBAL
CONTEXT
Structure
2.1 Introduction
2.2 CSR in Europe
2.3 CSR in USA
2.4 CSR in Scandinavian Countries
2.5 CSR in Latin America
2.6 CSR in Developing Countries
2.7 International Initiatives Related to CSR
2.8 Let Us Sum Up
2.9 Keywords
2.10 Bibliography and Selected Readings
2.11 Check Your Progress – Possible Answers

2.1 INTRODUCTION
In the previous unit you have read about the concepts and definitions of CSR.
You also read about various theories of CSR. We know that over the years, the
understanding of CSR has undergone several changes. One of the reasons for the
shift in the understanding from voluntarism to due diligence is the number of
disasters that have happened at the production sites of Western companies mostly
in the developing countries. The meaning of CSR varies substantially from country
to country. It would be relevant here to look at the perspective of CSR from the
view point of different countries and regions. In this unit you will learn about the
Perspectives and drivers of CSR for different regions of the world.

After reading this unit you will be able to

Discuss about approaches to CSR of different countries in Europe and
Scandinavian Countries
Discuss the perspective of CSR in US and Latin America
Describe the drivers for CSR in developing countries
Discuss various international initiatives related to CSR

2.2 CSR IN EUROPE

The European Commission in its 2011-14 strategy on CSR has defined CSR as
‘the responsibility of enterprises for their impact on society’. The Commission
believes in CSR being company led with public authorities playing a supportive
role through a mix of voluntary policy measures and regulations.

CSR has been a subject of interest among both businessmen and governments in
Europe. However, there has been contrasting positions taken by European
Commission (EC) and NGO’s and trade unions. While EC has been rejecting
regulation and emphasizing on CSR being a voluntary initiative for business to
30
practice, the European parliament along with NGOs and trade unions have been Perspective in Global Context
demanding for regulations and compulsory reporting of the social and
environmental impacts of the businesses.

The Commission promotes CSR and encourages countries to follow international

guidelines and principles. The EU policy on CSR is based on various actions to
support this approach. They include:
1) Enhancing the visibility of CSR and disseminating good practices
2) Improving and tracking levels of trust in business
3) Improving self and co-regulation processes
4) Enhancing market rewards for CSR
5) Improving company disclosure of social and environmental information
6) Further integrating CSR into education, training, and research
7) Emphasizing the importance of national and sub-national CSR policies
8) Better aligning European and global approaches to CSR.
A Public Consultation of CSR 2011-14 was launched by the Commission to
evaluate the CSR strategy.
Some core components of the EU’s 2011 CSR strategy include:
The development of CSR should be led by enterprises themselves.
But public authorities should play a supporting role through a smart mix of
voluntary policy measures and, where necessary, complementary regulation,
for example to promote transparency, create market incentives for
responsible business conduct, and ensure corporate accountability.

Enterprises must be given the flexibility to innovate and to develop an

approach to CSR that is appropriate to their circumstances.

2.2.1 Approaches of various countries in Europe

1) Austria
Austria is a very regulated country with its Company’s Act dating back to 1966.
The Sustainable Strategy adopted by the Austrian government in 2002 aims at
integrating economic, social, and environmental spheres. The strategy emphasizes
on sustainable public procurement and concerns with ecological, social, and
ethical aspects of supply chain. CSR reporting is recommended in the CSR guiding
vision since 2009. Eco-efficiency and sustainable consumption are the key drivers
of CSR in Austria.

2) UK
UK is considered as a leader in CSR, particularly because UK houses world’s
greatest thinkers, practitioners, and campaigners in this field. The amount of
finances given by the companies to the society is considered as the key indicator
of CSR in UK which generally is ½ to 1 percent of their pre-tax profits. UK also
has a Minister of CSR, appointed by the government. To encourage CSR, UK
has passed several regulations to complement the voluntary initiatives taken by
companies. e.g.
31
Evolution and Concept of CSR Amendment to the Pensions Act, 2000 which requires the occupational
pension funds to disclose the extent of CSR issues taken into consideration
while making investments.

Companies Act, 2000 requires the companies to take into account the wider
interest of the stakeholders while acting on the interest of the shareholders.
It also directs the companies to disclose the policies related to environment,
workplace, social and community matters and about the effectiveness of
these policies.

Modern Slavery Act, 2015 which require the companies to combat modern
slavery in its business and supply chain.

3) France
In France there has been a moderate development of CSR. The labour relations
in France are governed by a system of state regulations and agreements. There
are also several initiatives that go beyond the legal requirements. Certain laws
affecting CSR were passed in the beginning of 21st century.

“The Law on Employment and Saving Plan of 19 February 2001, which

asks fund managers to take into account social, environmental and ethical
considerations in the choice of investments.

The Law on New Economic Regulations of 15 May 2001, which requires

listed companies to introduce environmental and social information within
their yearly reports to shareholders.

The Law on Retirement Reserve Funds of 17 July 2001, which requires

environmental and social information to be introduced in the yearly reports
of retirement funds.” (Mullerat, 2013)

In the year 2007, the ‘Diversity Charter’ was signed by 1700 companies. It
is a business initiative which was launched to fight discrimination.

To address environmental issues through a five-way dialogue between

business, local authorities, government, NGOs and trade unions, the Grenelle
Environment Forum was initiated in 2007.

Several actions have also been launched to support the CSR initiatives of
Small and Medium Enterprises in France. e.g. A group of 3300 SME
managers called the “Centre des Jeunes Dirigeants” developed a
methodology for “Global Performance Standard” in 2008.

4) CSR in Germany
In Germany, the Federal Ministry for Labour and Social Affairs is the lead ministry
for CSR in the Federal Government of Germany. The ministry has established
National CSR Forum to bring together the stakeholders to work towards social
responsibility and to provide needed support to the government to develop the
national CSR strategy.

32
 Perspective in Global Context
2.3 CSR IN USA
According to Milton Friedman, the social responsibility of business is to increase
its profit. Traditionally, the companies looked at CSR from the view point of
business footprint where the companies were concerned only with making a
positive impact. However, the consumers in US now expect the companies to go
beyond the issues that impact their operations and take up larger societal
challenges. A recent survey by Cone communication says that 87 percent of the
consumers said that they purchased a product because the company advocated
for an issue they care about and 76% of the consumers said that they would
refuse to purchase a product if they found out that the company supported an
issue contrary to their beliefs (Cone Communications, 2017). Thus, consumer
expectations and behaviour in support of CSR can be called as the key driver to
CSR in USA. Given similar price and quality of any product, the consumers in
US are more likely to switch brands in favour of those which are associated with
good causes.

The labour and capital markets in US being unregulated, the state provisions for
welfare is very low. Hence, education, health and other such community issues
are taken up under Corporate Social Responsibility. Both CSR activities and
reporting are not considered as a regulatory compliance issue in USA. As there
is no obligation to undertake social and environmentally responsible practices,
CSR is usually characterized by voluntary societal engagements by businesses.
Such responsible behaviour by the businesses which goes beyond financial
reporting requirements is known as corporate citizenship. Businesses are obliged
to engage in economic, legal, ethical, and philanthropic activities.

In US, the U.S. Bureau of Economic and Business Affairs (EB) leads a corporate
social responsibility team with the primary objective of promoting responsible
business, encouraging sustainable development, and building economic security.
It provides the companies and the stakeholders with the needed guidance to engage
in corporate citizenship. The CSR team of EB provides support on various issues
including corporate citizenship, human rights, supply chains, anticorruption,
health and social welfare, employment and industrial relations, environment
protection, natural resource management, intellectual property, women’s
empowerment etc. The EB’s policies are drawn majorly from OECD’s ‘Guidelines
for Multinational Enterprises.’

Let us discuss in brief some of the EB’s corporate policies (Camilleri, 2017):

1) Corporate Citizenship and Human Rights

In US, the Bureau of Democracy, Human Rights and Labour (DRL) has a mandate
of promoting and monitoring human rights. For this purpose, it has set up a
Human Rights Democratic Fund (HRDF) which is used in the promotion of
democratic principles. Such efforts by DRL have helped US to minimize human
rights abuses and bring a positive change across the globe.

Similarly, the Office to Monitor and Combat Trafficking in Persons (TIP) focuses
on corporate policy, planning, public awareness and tracing of supply chain and
transparency to reduce forced labour in supply chain. The office also funds an
emergency global assistance project that helps people identified as trafficked
persons.
33
Evolution and Concept of CSR 2) Labour Supply Chains

Human trafficking was made illegal in US in the year 2000. The law requires
manufacturers earning revenue of more than $100 million to list out their efforts
towards bringing down slavery and human trafficking in their supply chains.
DRL also promotes labour rights in the supply chain by enforcing labour laws
and providing due diligence.

For example: EB, in cooperation with DRL and other stakeholders, has
coordinated the U.S. Department of State’s participation in the Kimberley
Process to stem the flow of conflict diamonds and to address their traceability
across supply chains (Camilleri, 2017).

The Kimberly Process is a commitment to remove conflict diamonds from

the global supply chain. The Kimberley Process (KP) is a multilateral trade
regime established in 2003 with the goal of preventing the flow of conflict
diamonds. The core of this regime is the Kimberley Process Certification
Scheme (KPCS) under which States implement safeguards on shipments of
rough diamonds and certify them as “conflict free”. Kimberley Process (KP)
defines conflict diamonds as: ‘rough diamonds used to finance wars against
governments’ - around the world.
Source: https://www.kimberleyprocess.com/en/what-kp Accessed on 12/04/2019

3) Anticorruption
You are all aware of the ill effects of corruption. It is not just bad for economic
growth and sustainable development of any country, it also deters the foreign
investors from investing in many countries. The Foreign Corrupt Practices Act
was brought into effect in US in 1977. This law penalizes the US nationals and
companies who indulge in bribing foreign officials in commercial transactions.
The Presidential Proclamation 7750 of January 2004 also denies refuge to corrupt
officials. US has also been an active participant in the United Nations Convention
Against Corruption (UNCAC) and member of the OECD’s Anti-Bribery
Convention.

4) Health and Social Welfare

There were several exploitative practices being followed by the insurance
companies in the US. Some of these practices include screening of pre-existing
condition and charging higher premium in case a person has any ailment at the
time of buying a policy, cancellation of insurance policy on various technicalities
when illness is imminent, imposing annual or lifetime limits on the health coverage
benefits that can be claimed by individuals etc. In 2010, reform on the Patient
Protection and Affordable Care Act (PPACA), also known as Obamacare and
the Health Care and Education Reconciliation Act (HCERA) were passed which
were designed to remove the exploitative practices of the insurance companies.

5) Environmental Sustainability
US has a long tradition of environmental leadership from 1969 when the National
Environmental Policy Act (NEPA) was passed with the intention of maintaining
productive harmony between the requirements of present and future generations.
The Environmental Protection Agency (EPA) formulates policies and instruments
that would promote sustainable use of resources. Similarly, the Bureau of Energy
34 Resources (ENR) promotes the use of secure, reliable, and clean energy in US. It
is also responsible for maintaining good governance and transparency in the Perspective in Global Context
energy sector.

The first National Action Plan on Responsible Business Conduct was launched
by the US Government on December 16, 2016. The National Action Plan is a
reflection of Government’s commitment to fight corruption and promote human
rights by partnering with domestic and international stakeholders. It encourages
companies to follow high standards of responsible business conduct.

Activity 1
Write a comparative analysis of approaches to CSR in Europe and US.
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2.4 CSR IN SCANDINAVIAN COUNTRIES

Scandinavia is considered as the global leader in CSR and sustainability.
Historically, Scandinavia referred to the countries of Denmark, Norway, and
Sweden. However, in recent years, Finland is also included as a part of Scandinavia
by many people. The CSR in Scandinavia stems from the notion that companies
sometimes must pursue a social issue not based on the risk or cost involved or on
the feasibility but for the simple reason that it is the right thing to do. The key
driver of CSR in the Scandinavian countries is the long-term vision of shared
value creation. Scandinavian firms like Novo Nordisk, Ikea, H&M, Norsk Hydrom
Novozymes and Statoil have long demonstrated effective value creation for the
company and its stakeholders (Strand, 2014).

The Scandinavian companies also perform very well in various CSR and
sustainability performance measurements including Dow Jones Sustainability
Index (DJSI) and the Global 100 Index. The Scandinavian countries have also
figured out in the top 10 rank of the Adjusted Global Competitiveness Index
published by the World Economic Forum in 2013. These countries have also
consistently topped the annual Transparency International Corruption Perceptions
Index. Thus, the Scandinavian countries lead in most of the CSR and sustainability
performance indicators.

Let us now discuss some of the factors influencing CSR in the Scandinavian
countries (Strand et. al., 2015)

1) Stakeholder Engagement and Corporate Reputation: Studies have shown

that there is a strong relation between the CSR performance of a firm and
the level of stakeholder support and corporate reputation enjoyed by it. The
impact of CSR performance has been so much so that it overshadows other
considerations like financial performance, quality of goods and services
and innovations. The CSR performance is directly linked to the stakeholder
engagement as it is the center of effective CSR and sustainability.
35
Evolution and Concept of CSR 2) Creating Shared Value: Creating shared value means creation of economic
value by creating value for the society by addressing the needs and
challenges of the society. This concept of creating shared value has a
Scandinavian origin. The firms of Scandinavian origin have always
demonstrated a shared value strategy.

For example: Novo Nordisk, a Danish pharmaceutical company initiated

a strategy to grow its market in China by improving diabetes care. The
strategy was to increase the demand for the insulin products manufactured
by the company by improving diagnosis of diabetes. For this, the company
invested in physical training, patient education and local production. This
would not just improve company sales but also improve the lives of
Chinese citizens by improving diabetes diagnosis, care, and treatment.

3) Institutional Influence: The political parties in the Scandinavian countries

have promoted the egalitarian policies and given due consideration to the
welfare of present and future generations thus backing the virtues of
stakeholder engagement. These countries have in place the institutions that
would facilitate socially responsible behaviour of the companies. Some of
the important influencers include mandatory representation of employees
on the Boards of Directors. Also, they have a flatter pay structure in which
the CEO to average worker pay ratios are very modest. Such policies lead
to greater likelihood of stakeholder engagements.

4) Cultural Influence: Scandinavian culture is very much reflected in the

Scandinavian management and is depicted in the form of consideration of
well-being of stakeholders and not just shareholders, power sharing,
participation, cooperation, consensus building etc. The Scandinavian
countries are said to have the most feminine cultures in the world where
gender roles overlap. Both men and women are supposed to display the
finer qualities of being modest, tender and being concerned with the quality
of life. The CSR agenda of stakeholder engagement and being concerned
with the needs of the future generation aligns well with the Scandinavian
feminine culture.

2.5 CSR IN LATIN AMERICA

2.5.1 What Drives CSR in Latin America?
The drivers to CSR can be classified into two:
i) Altruism: Selfless concern for the wellbeing of others
ii) Utilitarianism: Considers best action to be one that maximizes utility
In Latin America, the philanthropic traditions in the past have been rooted in
religious beliefs. A large part of the regions tradition of charity has been derived
from the region’s catholic background. Thus, altruism and solidarity have been
significant drivers of CSR in Latin America’s private sector. Most of the business
leaders, particularly from the family owned firms, speak of their commitment to
the society as doing the right thing from ethical point of view

Two important utilitarian motives driving CSR in Latin America include (i)
managing risks and (ii) gaining competitive advantage through image building.
36
Corporates may engage with the community in order to avert any identified risk. Perspective in Global Context
For example, Ausol, a multinational corporation in Argentina, involved in
construction and maintenance of highways, works with local communities and
this helps them gain community goodwill which is important as highways have
several disruptive features. Improvement in the firm’s image or market share is
another utilitarian motive which drives its social commitments. For example,
Posada Amazonas, an eco-tourism project in the Peruvian Amazon basin, invited
an indigenous community to work and eventually become owners. Their
participation makes it a unique experience for travellers (Pérez and Taboada,
2003). A strong blend of altruistic and utilitarian drives is most sustainable for
business as a purely altruistic motive may not be favourable during economic
downturns and a purely utilitarian motive may fail to establish the needed connect
with the social partners.

2.5.2 How has CSR Evolved in Latin America?

There are two ways in which CSR has evolved in different countries:-
i) Through responsible business operations which is generally governed by
regulations
ii) Community investment
In US, CSR has grown through regulations and hence is driven by responsible
business operation. The details of which will be discussed in the next section. In
Latin America however, regulation of responsible business operations is less
common. This is mainly because Latin America does not have strong worker’s
organizations like trade unions or social groups like women and ethnic groups.
Without pressure from society and such organized groups, the government is
less likely to create standards which imply extra cost to the business organizations.
In light of the lack of government framework for responsible business practices,
the corporations interested in creating a common baseline for responsible business
practices took it on themselves to create the standards.

For example

Abrinq Foundation, a non-profit in Brazil, offers a logo (or a special seal) to

companies committed to fighting the use of child labour. Corporations are
certified through Arbinq’s Child Friendly Companies Programme once they
pass a series of social audits from unions, employees, and NGOs. Companies
use the logo to market their corporate value to youths (Grayson and Hodges
2002).

CSR in Latin America has evolved more through community investment. The
corporations in Latin America are investing in communities to create a stable
society. Community investments improve the bottom line or the net earnings of
the corporate as it improves the life of the communities which are the consumers
of their products. There have also been incidences where the corporations have
influenced government regulations to enhance the impact of CSR activities.

For Example

In 1990, after a flood devastated the state of Chihuahua in Mexico, the business
community approached the state government with a plan to give assistance
37
Evolution and Concept of CSR
to those most in need: a special tax of 0.2 percent on earnings to be paid by
each of the 29,000 business enterprises in the region with the condition that
members of the business community themselves would manage the funds
generated. The overwhelming success in providing disaster relief and
rebuilding the community prompted the business community to make this
“Community Investment” tax permanent under state law. In 1994, the
Chihuahuan Business Foundation was established to administer these funds
(Gutierrez and Jones, 2007).

2.5.3 Recent Trends of CSR in Latin America

1) The firms are working towards deepening the CSR model so that the
corporate responsiveness of the firms is effectively mirrored in dealings
between their subsidiary units and the ultimate stakeholders.
2) Large corporations are extending their CSR practices to suppliers.
3) Another important trend is the rapid increase in cross sector alliances. For
example, Federation of Brazilian Banks, Febraban, collaborated with a
network of NGOs called the Brazilian Semi-Arid Articulation to provide
cisterns for the dry northeast region of the country. In this collaboration,
the bank provided the funds and the NGOs provided the required training,
low cost methodologies and local management. The entire dialogue between
the two was facilitated by the government.

4) Another trend that is catching up is the building up of relational capital

with the grass root organizations. This begins with helping the communities
to organize and take collective action, helping the organizations to work
together and scaling up the local operations.
Check Your Progress - 1
Notes: a) Write your answers in about 50 words.
b) Check your answer with possible answers given at the end of the unit.
1) What are the various actions on which the EU policy on CSR is based?
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2) List out the factors influencing CSR in Scandinavian countries.

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38 .......................................................................................................................
 Perspective in Global Context
2.6 CSR IN DEVELOPING COUNTRIES
To understand how CSR is conceived, incentivized, and practiced in developing
countries, let us understand what are the various drivers for CSR in these countries.
In this section we will discuss the 10 drivers for CSR in developing countries as
discussed by Wayne Visser (2008).

1) Cultural Traditions: CSR in developing countries draws its roots from

the traditions of philanthropy, business ethics and community push. Kautilya,
the great Indian statesman and philosopher advocated moral principles-
based business practices. In the African continent, the philosophy of
‘Ubuntu’ or African humanism is the foundation upon which rests the modern
inclusive approaches to CSR. Similarly, CSR in Nigeria is based on the
religious beliefs, charitable traditions, and communalism.

2) Political Reform: The socio-political reform process also had a great bearing
on CSR activities in the developing countries. For example, in South Africa,
CSR has been driven to a great extent by the move towards democracy and
reforms towards justice.

3) Socio-economic Priorities: A good business will always have its CSR

guided by the socio-economic needs of a country. e.g. In Nigeria, the CSR
is guided by the country’s socio-economic challenges like poverty
alleviation, education, infrastructure development, health care etc. On the
other hand, the CSR in Western countries is guided by issues like climate
change, fair trade, consumer protection, socially responsible production,
green marketing etc.

4) Governance Gaps: Good governance requires a government to provide

for the basic needs of the citizens like housing, education, health care, roads,
electricity, etc. Many a times, in developing countries, the governments
fail to provide for these basic services and in such cases, CSR is seen as a
way to fill in these governance gaps. However, there are several criticisms
to this approach as businesses are primarily responsible towards their
shareholders. Also depending on profitability, the multinationals would
disinvest from a region to invest in regions that would be more profitable.
Hence the local governance should be more proactive to ensure
accountability and inclusiveness and not depend on CSR to fill in the
governance gaps as is the trend in many developing countries.

5) Crisis Response: Different crisis in the developing countries also act as a

catalyst to CSR response. These crises could be natural, industrial,
environmental, social, health related or economic. Catastrophic events like
natural disasters also bring into play immediate CSR responses. The
corporate response to tsunami in Asia is a classic example.

For example: Unilever (Sri Lanka) is one of the largest and oldest
multinational companies in Sri Lanka. The Asian tsunami in 2004 had
resulted in mass launch of CSR programmes in Sri Lanka. Unilever played
to its strength while shaping its tsunami CSR response. It used its
organizational strength of wide distributional network which was made
available to emergency relief operations working with the local agencies
to distribute food and other necessary products. There were also employee 39
Evolution and Concept of CSR
donations to the central relief fund. After the initial relief work, Unilever
started with its rehabilitation and reconstruction projects under which it
undertook rebuilding of 150 homes in Sri Lanka.
6) Market Access: Another important driver of CSR is to gain market access
by viewing unfulfilled needs of those at the bottom of the pyramid as an
untapped market. Besides, CSR also helps the companies of the developing
countries to access the markets of the developed countries. There is a strong
relationship between CSR reporting and international sales and the
companies from developing countries need to comply with the international
stock market listing requirements in order to globalize.
7) International Standardization: Growing adoption of ISO 14001 and the
Global Reporting Initiative’s Sustainability Reporting Guidelines shows
that CSR codes and standards are also important drivers of CSR in
developing countries. CSR is also driven by standardization imposed by
multinationals on their subsidiaries and operations in developing countries
in their bid to achieve global consistency and to deal with social issues in
developing countries like child labour and role of women in workplace.
8) Investment Incentives: Another important driver of CSR is Socially
Responsible Investment (SRI) which involves investing in companies that
promote environmental stewardship, consumer protection and human rights.
9) Stakeholder Activism: In developing countries where the government does
not have strong control over the environmental, ethical, and social operations
of companies, activism by stakeholder groups becomes an important driver
for CSR. The development agencies, trade unions, international NGOs and
business associations are the four major stakeholders which emerge as major
activists for CSR in developing countries. This activism could be in the
form of civil regulation, litigation against companies and international legal
instruments.
10) Supply Chain: The ethical requirements imposed by multinationals on their
supply chains acts as another significant driver for CSR in developing
countries. This began with fair trade auditing and labelling of agricultural
products produced in developing countries. Multinational supply chains in
the developing countries especially those in sporting and clothing sector
are marred with poor labour conditions and human right abuse issues. To
deal with such conditions, standards like SA 8000 were developed which
are used by multinationals in selecting their suppliers in developing
countries.
Activity 2
Visit a CSR project being implemented in the city of your residence and
discuss with the CSR project head about the key driver for the company to
take up that project. Write their response.
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40
 Perspective in Global Context
2.7 INTERNATIONAL INITIATIVES RELATED
TO CSR
In this section we will discuss some of the international initiatives related to
CSR on which the guidelines of CSR strategies of various countries have been
built. Some of these initiatives are as follows:
i) United Nations Global Compact
ii) United Nations Guiding Principles on Business and Human Rights
iii) ISO 26000 Guidance Standard on Social Responsibility
iv) International Labour Organization Tripartite Declaration of Principles
Concerning Multinational Enterprises on Social Policy
v) OECD Guidelines for Multinational Enterprises
i) United Nations Global Compact
UN Secretary General Kofi Annan announced the UN Global Compact in January,
1999 and it was officially launched in July, 2000 at the UN Headquarters in New
York. It was established as an organization which would work on the mandate
set by the UN General Assembly to “promotes responsible business practices
and UN values among the global business community and the UN System”. UN
Global Compact is one of the largest international corporate sustainability
initiatives. It aims to mobilize sustainable companies to take up shared
responsibility to create a better world. It helps the companies to align their
strategies to the ten basic principles of the UN Global Compact and to take
strategic action towards attaining developmental goals like the Sustainable
Development Goals. It also acts as driver of change across various aspects of
corporate sustainability including 12 social issues like child labour, children’s
right, education, forced labour, human rights, indigenous people, labour, migrant
workers, persons with disabilities, poverty, gender equality, women’s
empowerment; five environmental issues like biodiversity, climate change,
energy, food and agriculture, water and sanitation and three issues related to
governance like anti-corruption, peace and rule of law. The UN Global Compact
inspires guides and supports companies to do responsible business.
The ten principles of the United Nations Global Compact are:
Human Rights
Principle 1: Businesses should support and respect the protection of
internationally proclaimed human rights; and
Principle 2: make sure that they are not complicit in human rights abuses.
Labour
Principle 3: Businesses should uphold the freedom of association and the
effective recognition of the right to collective bargaining;
Principle 4: the elimination of all forms of forced and compulsory labour;
Principle 5: the effective abolition of child labour; and
Principle 6: the elimination of discrimination in respect of employment and
occupation.
41
Evolution and Concept of CSR
Environment
Principle 7: Businesses should support a precautionary approach to
environmental challenges;
Principle 8: undertake initiatives to promote greater environmental
responsibility; and
Principle 9: encourage the development and diffusion of environmentally
friendly technologies.
Anti-Corruption
Principle 10: Businesses should work against corruption in all its forms,
including extortion and bribery.
Source: https://www.unglobalcompact.org/what-is-gc/mission/principles

Case Study UN Global Compact Initiative

Empowering Refugee Women Project Brazil is receiving increasing numbers
of refugees from African and Middle Eastern countries. In response, Global
Compact Network Brazil, in partnership with UNHCR and UN Women, has
teamed up with local and foreign companies and NGOs to help women refugees
navigate the job market. Over the course of the project, the partnership has
succeeded in raising awareness about the issues women refugees face in Brazil,
with more than 10 companies having offered employment and training
opportunities to over 80 women refugees. As an example of the WEPs in action,
this project is demonstrative of the collective action that can be taken to build
an employment pipeline for marginalized women.
Source: Women’s Empowerment Principles Global Trends Report, 2018

ii) United Nations Guiding Principles on Business and Human Rights:

Commonly known as the UNGPs it is a list of 31 principles implementing the
‘Protect, Respect and Remedy’ framework. These principles provided the first
global standards to address the issue of adverse impact of business activity on
human rights. It was developed by the Special Representative of the Secretary
General, John Ruggie and was unanimously endorsed by the United Nations
Human Rights Council, making it the first corporate human rights responsibility
initiative to be endorsed by the United Nations.

The UN Guiding Principles help the businesses to fulfil their obligations towards
respecting human rights and complying with the existing laws. It helps prevent
risks of human rights violation in business activities. It also lays down remedies
for any breach of the existing laws.

These principles are based on three pillars:

a) The State’s duty to protect human rights: It is the duty of the state to protect
the human rights of its subjects through various mechanisms like policy
making, regulation and enforcement.

b) The corporate responsibility to respect human rights: The guiding principles

states that the private sector has an important role in protecting and upholding
the human rights. In order to avoid infringing on the rights of the individuals,
the corporate must act with due diligence.
42
c) Access to remedies when the rights are breached: The third pillar states that Perspective in Global Context
it is the state’s responsibility to provide access to remedy to the individuals
whose human rights have been infringed upon. For this, the state may use
judicial, administrative, and legislative means. It is also the responsibility
of the corporates to prevent and remediate any infringement of human rights
for which they are responsible.

In this unit we will restrict to the principles related to corporate responsibility to

respect human rights. Out of the total 31 principles, a total of 14 principles are
related to the corporate responsibility to respect human rights. The principles
under this head are classified as foundational and operational principles. Let us
look at each of them:

Foundational Principles

1) Business enterprises should respect human rights. This means that they
should avoid infringing on the human rights of others and should address
adverse human rights impacts with which they are involved.

2) The responsibility of business enterprises to respect human rights refers

to internationally recognized human rights – understood, at a minimum,
as those expressed in the International Bill of Human Rights and the
principles concerning fundamental rights set out in the International
Labour Organization’s Declaration on Fundamental Principles and Rights
at Work.

3) The responsibility to respect human rights requires that business

enterprises: a) Avoid causing or contributing to adverse human rights
impacts through their own activities, and address such impacts when they
occur; b) Seek to prevent or mitigate adverse human rights impacts that
are directly linked to their operations, products or services by their business
relationships, even if they have not contributed to those impacts.

4) The responsibility of business enterprises to respect human rights applies

to all enterprises regardless of their size, sector, operational context,
ownership, and structure. Nevertheless, the scale and complexity of the
means through which enterprises meet that responsibility may vary
according to these factors and with the severity of the enterprise’s adverse
human rights impacts.

5) In order to meet their responsibility to respect human rights, business

enterprises should have in place policies and processes appropriate to
their size and circumstances, including: a) A policy commitment to meet
their responsibility to respect human rights; b) A human rights due
diligence process to identify, prevent, mitigate and account for how they
address their impacts on human rights; c) Processes to enable the
remediation of any adverse human rights impacts they cause or to which
they contribute.

Operational Principles

6) As the basis for embedding their responsibility to respect human rights,

business enterprises should express their commitment to meet this
responsibility through a statement of policy that: (a) Is approved at the 43
Evolution and Concept of CSR
most senior level of the business enterprise; (b) Is informed by relevant
internal and/or external expertise; (c) Stipulates the enterprise’s human
rights expectations of personnel, business partners and other parties
directly linked to its operations, products or services; (d) Is publicly
available and communicated internally and externally to all personnel,
business partners and other relevant parties; (e) Is reflected in operational
policies and procedures necessary to embed it throughout the business
enterprise.

7) To identify, prevent, mitigate, and account for how they address their
adverse human rights impacts, business enterprises should carry out human
rights’ due diligence. The process should include assessing actual and
potential human rights impacts, integrating, and acting upon the findings,
tracking responses, and communicating how impacts are addressed.
Human rights due diligence: (a) Should cover adverse human rights
impacts that the business enterprise may cause or contribute to through
its own activities, or which may be directly linked to its operations,
products or services by its business relationships; (b) Will vary in
complexity with the size of the business enterprise, the risk of severe
human rights impacts, and the nature and context of its operations; (c)
Should be ongoing, recognizing that the human rights risks may change
over time as the business enterprise’s operations and operating context
evolve.

8) To gauge human rights risks, business enterprises should identify and

assess any actual or potential adverse human rights impacts with which
they may be involved either through their own activities or as a result of
their business relationships. This process should: (a) Draw on internal
and/or independent external human rights expertise; (b) Involve
meaningful consultation with potentially affected groups and other relevant
stakeholders, as appropriate to the size of the business enterprise and the
nature and context of the operation.

9) In order to prevent and mitigate adverse human rights impacts, business

enterprises should integrate the findings from their impact assessments
across relevant internal functions and processes, and take appropriate
action. (a) Effective integration requires that: (i) Responsibility for
addressing such impacts is assigned to the appropriate level and function
within the business enterprise; (ii) Internal decision-making, budget
allocations and oversight processes enable effective responses to such
impacts. (b) Appropriate action will vary according to: (i) Whether the
business enterprise causes or contributes to an adverse impact, or whether
it is involved solely because the impact is directly linked to its operations,
products, or services by a business relationship; (ii) The extent of its
leverage in addressing the adverse impact.

10) In order to verify whether adverse human rights impacts are being
addressed, business enterprises should track the effectiveness of their
response. Tracking should: (a) Be based on appropriate qualitative and
quantitative indicators; (b) Draw on feedback from both internal and
external sources, including affected stakeholders.

44
 Perspective in Global Context
11) In order to account for how they address their human rights impacts,
business enterprises should be prepared to communicate this externally,
particularly when concerns are raised by or on behalf of affected
stakeholders. Business enterprises whose operations or operating contexts
pose risks of severe human rights impacts should report formally on how
they address them. In all instances, communications should: (a) Be of a
form and frequency that reflect an enterprise’s human rights impacts and
that are accessible to its intended audiences; (b) Provide information that
is sufficient to evaluate the adequacy of an enterprise’s response to the
particular human rights impact involved; (c) In turn not pose risks to
affected stakeholders, personnel or to legitimate requirements of
commercial confidentiality

12) Where business enterprises identify that they have caused or contributed
to adverse impacts, they should provide for or cooperate in their
remediation through legitimate processes.

13) In all contexts, business enterprises should: (a) Comply with all applicable
laws and respect internationally recognized human rights, wherever they
operate; (b) Seek ways to honour the principles of internationally
recognized human rights when faced with conflicting requirements; (c)
Treat the risk of causing or contributing to gross human rights abuses as
a legal compliance issue wherever they operate.

14) Where it is necessary to prioritize actions to address actual and potential

adverse human rights impacts, business enterprises should first seek to
prevent and mitigate those that are most severe or where delayed response
would make them irremediable.

iii) ISO 26000 Guidance Standard on Social Responsibility

The ISO Committee on Consumer Policy was the first to identify the need to
work on social responsibility standards in 2001. ISO 26000 provides guidance
on how businesses can operate in a socially responsible way. It is concerned
with the issues organizations need to address in order to function in a socially
responsible way and with the best practices in social responsibility. ISO 26000
cannot be used as a certification standard as the provisions in it are only voluntary
guidance and not requirements.

The guidance in ISO 26000 is based on the best practices developed by existing
private and public sector social responsibility initiatives. It is consistent with
various international conventions and declarations including International Labour
Organization (ILO), United Nations Global Compact Office (UNGCO),
Organization for Economic Co-operation and Development (OECD).
The core subjects on which guidance is given are:
i) Organizational Governance
ii) Human Rights
iii) Labour Practices
iv) The Environment
v) Fair Operating Practices
45
Evolution and Concept of CSR vi) Consumer Issues
vii) Community Involvement and Development
iv) International Labour Organization Tripartite Declaration of Principles
Concerning Multinational Enterprises on Social Policy (MNE
Declaration)

The MNE Declaration provides guidance to enterprises on responsible and

inclusive workplace practices. It facilitates outreach and understanding of Decent
Work Agenda in the private sector. It is the only instrument that has been widely
adopted by governments, employers, and workers around the world. It was
adopted 40 years ago and has been amended twice in 2000 and 2006 and revised
in 2017. Its principles are based on international labour standards and cover
areas such as employment, training, conditions at work, industrial relations etc.

The MNE Declaration lays down principles in the fields of employment, training,
conditions of work and life, and industrial relations which governments,
employers’ organizations, workers’ organizations, and multinational enterprises
are recommended to observe on a voluntary basis.

What Does MNE Declaration Contain

The MNE Declaration consists of General Policies laid down for all the parties
concerned with the declaration including guidelines for multinational enterprises
and governments of hosts countries. It also contains guidelines related to various
aspects of Employment, Training, Conditions of Work and Life and Industrial
Relations.

1) Employment
Under this section, the declaration sets guidelines on various aspects. We
will be looking at some of the key points under each section

i) Employment Promotion: These are a set of instructions or guidelines to

multinational enterprises for employment promotion in the host
countries. It says that

“Multinational enterprises, particularly when operating in developing

countries, should endeavour to increase employment opportunities and
standards, taking into consideration the employment policies and
objectives of the governments, as well as security of employment and
the long-term development of the enterprise.” (ILO, 2017).

It instructs the MNEs to work in harmony with the national social

development policies. It also instructs them to give priority to the
employment of nationals of the host country.

ii) Social Security: It instructs the governments to establish social security

as a fundamental element of national security systems. It instructs
Multinational Enterprises to complement the public social security
systems through their employer sponsored programmes.

iii) Elimination of forced or compulsory labour: It instructs the Governments

to take steps to eliminate forced labour and protect the victims of forced
labour and help them get compensation and rehabilitation and sanction
46
 the perpetrators of forced labour. The governments should provide Perspective in Global Context
support to the employers to take measures to identify, prevent and
mitigate forced labour. It also instructs enterprises to take measures to
prohibit and eliminate forced labour in their operations.

iv) Effective abolition of child labour- minimum age and worst forms: It
instructs the governments to have national policies in place to prohibit
and eliminate child labour and raise the minimum age for employment
to a level consistent with complete physical and mental development
of young persons. It also instructs multinational enterprises to abide by
the minimum age for employment and prohibit and eliminate child
labour in their operations.

v) Equality of opportunity and treatment: Government policies should

promote equality of opportunity and treatment in employment and
eliminate any discrimination based on race, colour, sex, religion, social
origin etc. Government should promote equal pay for both men and
women. Multinational enterprises should also be guided by the principle
of non-discrimination in their operations.

vi) Security of Employment: It instructs the governments to study the impact

of multinational enterprises on employment in various industrial sectors.
It also instructs the multinational enterprises to make efforts to provide
stable employment for workers employed by them. It also instructs
them to notify to the concerned government authorities about changes
in operations that may have major employment effects like mass layoffs
in case of closure of the operation.

2) Training
It instructs the governments to develop national policies for employment
linked vocational training and guidance. It also instructs multinationals to
provide relevant training to workers at all levels to develop useful skills,
promote lifelong learning and development. It also instructs the multinational
enterprises to provide services of the expertise of their skilled personnel for
training programme organized by governments.

3) Conditions of Work and Life

i) Wages, benefits, and conditions of work
The wages, benefits and conditions of work provided to the workers by
the MNEs should be comparable to those provided by comparable
employers in the host country. It instructs the MNEs to take into
consideration the needs of workers and their families, cost of living,
living standards of various social groups, social security benefits and
other economic factors. It also instructs the governments to ensure that
the activities of MNEs provide as much benefit as possible to lower
income groups and less developed areas.

ii) Safety and Health

It instructs the Governments to ensure that MNEs provide adequate
safety and health standards and provide safe and healthy working
environments to their employees. International labour standards and
ILO codes of practices and guidelines on occupational safety and health 47
Evolution and Concept of CSR should be taken into account. They should provide information on safety
and health standards relevant to their operations to all concerned
including workers, worker organizations and other competent authority
in the countries they operate.

4) Industrial Relations
MNEs should observe standards of industrial relations
i) Freedom of association and right to organize
It instructs the MNEs to uphold the right of their employees to join
organizations of their choice, subject to the rules of the organizations
concerned and protect them against acts of anti-union discrimination.
It also instructs the governments of the host countries that when they
offer special incentives to attract foreign investment these incentives
should not limit worker’s freedom of association and right to organize
and bargain collectively. It instructs that the representatives of workers
should have the freedom to hold meetings for consultation or exchange
of views.
ii) Collective Bargaining
The workers of MNEs should have the freedom to form representative
organizations for collective bargaining. It instructs the MNEs to
authorize representative of workers to conduct negotiations with the
representatives of management who are authorized to take decisions of
the issues under negotiation. It instructs the governments to provide
the worker’s organizations with the information on the industries in
which the enterprise operates which would help them in laying down
objective criteria in the collective bargaining process.
iii) Consultation
It instructs MNEs to allow mutual consultations on matters of mutual
concern between employers, workers, and their representatives.
iv) Access to remedy and examination of grievances
It instructs the governments to protect the workers in their territory
against business related human rights abuses. MNEs should use their
leverage to encourage their business partners to provide effective means
to enable remediation of human rights abuses. It also instructs the MNEs
to respect the rights of the workers and have a proper grievance redressal
mechanism in place.
v) Settlement of industrial disputes
It instructs the governments and the MNEs to make available a
conciliation machinery to assist in settlement of industrial disputes
between the employers and workers.
5) OECD Guidelines for Multinational Enterprises
The OECD Guidelines for Multinational Enterprises are a set of
recommendations for responsible business conduct addressed by
Governments adhering to the guidelines to the multinational enterprises
operating in and from these adhering countries. The guidelines were first
adopted in 1976 and have been revised 5 times since then, the latest being
48 in 2011.
What Do the Guidelines Contain? Perspective in Global Context

There are 11 chapters to the guidelines. The first chapter on Concepts and
Principles deals with the concepts and principles which are the backbone of
these guidelines. The second chapter on General Policies contains a set of
recommendations in the form of policies which are the basis for various principles.
This chapter deals with various provisions like dealing with adverse impacts,
implementing due diligence, stakeholder engagement etc. The third chapter in
Disclosures contains recommendations to the enterprises to be transparent in
their operations and responsive to the increasing demand for information. The
fourth chapter on Human Rights deals with the recommendations for the
enterprises to meet their responsibilities towards various internationally
recognized human rights. This chapter is aligned with the UN “Protect, Respect
and Remedy” Framework and ‘Guiding Principles on Business and Human
Rights.’ The fifth chapter on Employment and Industrial Relations deals with
the role of the Guidelines in promoting the observance of International Labour
Standards as set by the ILO by the enterprises. The sixth chapter on Environment
reflects on the ‘Rio Declaration on Environment and Development’ and ‘Agenda
21’. It provides recommendations for the enterprises to contribute towards
environment protection through better planning and management. Chapter Seven
on Combating Bribery, Bribe Solicitations and Extortion provides
recommendations for enterprises to fight and eliminate bribery from the system.
The eighth chapter on Consumer Interests draws its recommendations from the
OECD Committee on Consumer Policy and Committee on Financial Markets
and other international organizations. It calls on enterprises to ensure quality
and reliability of the products produced by them by following fair trade, marketing,
and advertising practices. The ninth chapter on Science and Technology aims to
promote transfer of technology to the host countries. The tenth chapter on
Competition focuses on the importance of enterprises carrying out their activities
in consonance with the competition laws and regulations and refraining from
anti-competitive activities and agreements. The eleventh chapter on Taxation
covers recommendations on fundamental taxation.

The policies on which the guidelines are based focus on two aspects: (i) Positive
contribution of multinational enterprises to sustainable development and (ii)
avoiding adverse impacts. Let us discuss some of the important policies on which
the guidelines are based:

1) Adverse Impacts: Enterprises should avoid causing adverse impacts on

matters covered by the guidelines either through their own activities or
through activities linked to the enterprise by business relationships like
business partners, supply chain or other entities linked to the business
operations.

2) Due Diligence: This means to make identification and prevention of adverse

impacts an integral part of business decision making and risk management
systems of an enterprise. The enterprises with large supply chains are
expected to identify the general areas where there is a risk of adverse impacts
and prioritize suppliers for due diligence.

3) Stakeholder Engagement: During planning and decision making of the

projects, the enterprises should engage the stakeholders specially when the
project is going to impact them. For example, if the project involves
49
Evolution and Concept of CSR extensive use of land or water or any such resource which could adversely
impact the local community, their views need to be taken into account.

4) Fostering Confidence and Trust: Enterprises should develop a relationship

of mutual trust and confidence with the communities in which they work.
They are also required to work within the statutory frameworks of human
rights, environment, health and safety, taxation etc. and not seek undue
exemptions.

5) Human Capital Formation and Capacity-building: Enterprises should work

closely with the local community and create employment opportunities for
the locals. To build their capacities, it should also provide training to the
employees. Promoting awareness and compliance with the company policies
and Guidelines is also encouraged.

6) Corporate Governance: Supporting and upholding good corporate

governance principles is recommended. The practices of good corporate
governance are drawn from the OECD Principles of Corporate Governance
and OECD Guidelines of State-Owned Enterprises.

Implementing the Guidelines

The guidelines are implemented in different countries through the National
Contact Points. During instances of conflict the interested party could submit a
‘Specific Instance’ to the NCP regarding the non-observance of the Guidelines.

National Contact Points: The governments adhering to the Guidelines are

obliged to set up National Contact Points (NCPs) whose main role is to undertake
promotional activities, handle inquiries and resolve issues arising out of non-
compliance to the Guidelines. The NCPs report to the OECD investment
committee and meet on a regular basis and share their experiences.

Specific Instances: The NCPs are not judicial bodies but focus on problem solving
by mediation. In case of any non-observance of guidelines, the interested party
can submit a specific instance to the NCP. Once a specific instance has been
submitted, it is subjected to three phases.

Phase 1: Initial Assessment: This phase involves initial analysis of the issue and
to determine if it requires further examination.

Phase 2: Offer of Good Offices: If the matter requires further investigation, the
NCPs facilitate access to consensual means to resolve the issues. For this matter,
it consults with the parties and if necessary, it asks for advice from the relevant
stakeholders. It also offers mediation whereever relevant to help resolve the issue.

Phase 3: Conclusion: Finally it issues a report if the agreement is reached, a

statement if the party is not willing to participate in the procedures or if no
agreement is reached or if the specific instance does not require any further
examination after the initial assessment . The UN initiative for CSR specially
also include the Sustainable Development Goals adopted in 2015. This has been
discussed in detail in Block 4 of Course 2.

50
Check Your Progress - 2 Perspective in Global Context

Notes: a) Write your answers in about 50 words.

b) Check your answer with possible answers given at the end of the unit.
1) Write any two principles of UNGC.
.......................................................................................................................
.......................................................................................................................
.......................................................................................................................
.......................................................................................................................
.......................................................................................................................

2) What are the core subjects on which guidance is given under ISO 26000?
.......................................................................................................................
.......................................................................................................................
.......................................................................................................................
.......................................................................................................................
.......................................................................................................................

2.8 LET US SUM UP

The perspective on CSR varies from country to country. In this unit you have
read about the perspectives of some of the European countries including Austria,
Germany, France, and UK. You have also read about the CSR initiatives in US,
Latin America, and Scandinavian countries. This unit also discusses about various
drivers for CSR in developing countries. There are several international initiatives
which are key expressions of the broader systems of public and private governance
from which the private initiatives emerge. In this unit you have also read about
such initiatives like United Nations Global Compact, United Nations Guiding
Principles on Business and Human Rights, ISO 26000 Guidance Standard on
Social Responsibility, International Labour Organization Tripartite Declaration
of Principles Concerning Multinational Enterprises on Social Policy and OECD
Guidelines for Multinational Enterprises.

2.9 KEYWORDS
Drivers of CSR : Drivers are the factors that encourage companies to
be more socially responsible.
Shared Value : Shared Value is based on the idea that companies
can increase profits and enhance competitiveness by
solving societal problems.
Collective Bargaining : Collective bargaining is a process of negotiation
between employers and a group of employees aimed
at agreements to regulate working salaries, working
conditions, benefits, and other aspects of workers’
compensation and rights for workers. 51
Evolution and Concept of CSR
2.10 BIBLIOGRAPHY AND SELECTED READINGS
Business for Social Responsibility, Inter-American Development Bank, United
Nations Global Compact, UN Women (2018). Women’s Empowerment Principles
Global Trends Report, 2018.
Camilleri, M. (2017). Corporate Citizenship and Social Responsibility Policies
in the United States of America. Sustainability Accounting, Management and
Policy Journal 8(1)
Grayson, D. and Hodges, A. (2002). Every body’s Business: Managing Risks
and Opportunities in Today’s Global society. New York: DK Publishing, Inc.
Gutierrez, R. and Jones, A. (2007). Effects of Corporate Social Responsibility in
Latin American Communities: A comparison of Experiences. International
Corporate Social Responsibility Series, October, 2007.
ILO (2017). Tripartite Declaration of Principles Concerning Multinational
Enterprises, 2017, 5 edition.
Mullerat, R. (2013). Corporate Social Responsibility: A European Perspective.
The Jean Monnet/Robert Schuman Paper Series. European Commission.

OECD (2014). Responsible Business Conduct Matters. OECD Guidelines for

Multinational Enterprises, OECD.
Perez, F.P. and Taboada, J. (2003). Posada Amazonas. Research Report on the
State of Sustainability of SMEs in Latin America.

Strand, R. (2014). Scandinavia Can be an Inspiration for Creating Shared Value.

Financial Times Dated 25th April, 2014.

Strand, R.; Freeman, R. E. and Hockerts, K. (2015). Corporate Social

Responsibility and Sustainability in Scandinavia: An Overview. Journal of
Business Ethics 127: 1-15

Visser, W. (2008). Corporate Social Responsibility in Developing Countries. In

Andrew C., Dirk M., Abagail McW., Jeremy M., and Donald S. S. (Eds). The
Oxford Handbook of Corporate Social Responsibility, pp. 473 – 499.
Websites:
https://www.un globalcompact.org/what-is-gc/mission/principles
http://www.conecomm.com/2017-cone-communications-csr-study-pdf accessed
on 11/1/2019
https://www.ohchr.org/documents/publications/guidingprinciplesbusinesshr_en.

2.11 CHECK YOUR PROGRESS – POSSIBLE

ANSWERS
Check Your Progress – 1
Answer 1: The EU policy on CSR is based on various actions to support this
approach. They include:

52
1) Enhancing the visibility of CSR and disseminating good practices Perspective in Global Context

2) Improving and tracking levels of trust in business

3) Improving self and co-regulation processes
4) Enhancing market rewards for CSR
5) Improving company disclosure of social and environmental information
6) Further integrating CSR into education, training, and research
7) Emphasizing the importance of national and sub-national CSR policies
8) Better aligning European and global approaches to CSR.
Answer 2: Factors influencing CSR in the Scandinavian countries:
5) Stakeholder Engagement and Corporate Reputation
6) Creating Shared Value
7) Institutional Influence
8) Cultural Influence
Check Your Progress-2
Answer 1: Two principles of UNGC are:
Principle 1: Businesses should support and respect the protection of internationally
proclaimed human rights; and

Principle 2: make sure that they are not complicit in human rights abuses.

Answer 2: The core subjects on which guidance is given are:

viii) Organizational Governance
ix) Human Rights
x) Labour Practices
xi) The Environment
xii) Fair Operating Practices
xiii) Consumer Issues
xiv) Community Involvement and Development

53
Evolution and Concept of CSR
UNIT 3 PERSPECTIVE IN INDIAN
CONTEXT
Structure
3.1 Introduction
3.2 CSR in India: Historical Background
3.3 Models of Social Responsibility Operating in India
3.4 Evolution of a Legislation on CSR: Voluntary Practices to Regulatory
Mechanism
3.5 Current Trends and Practices of CSR in India
3.6 CSR Initiatives of Indian Companies
3.7 Let Us Sum Up
3.8 Keywords
3.9 Bibliography and Selected Readings
3.10 Check Your Progress – Possible Answers

3.1 INTRODUCTION
In this unit we will read about the evolution of CSR in India over time. India has
a long tradition of philanthropy since ancient times. During the preindustrial
period, philanthropy was largely motivated by religion. The merchants also used
to help the society to get over various natural calamities like famines and floods.
During the colonial rule, the industrial families used to contribute to social causes.
During independence movement, the notion of ‘Trusteeship’ introduced by
Mahatma Gandhi put pressure on the industrialists to contribute towards nation
building and social development. Post-independence, with the coming up of Public
Sector Undertakings (PSUs), private sector took a backseat and public sector
became a key driver of development. However, the limited effectiveness of the
public sector, shifted the expectation back to the private sector for socio-economic
development of the country. The economic liberalization in the 1990s helped the
Indian companies to grow rapidly. This increased their willingness to contribute
towards social causes. The companies started getting involved in various CSR
programmes like building schools and hospitals, empowering rural youth by
providing vocational trainings, organizing health camps etc. Corporates also
started joining hands with NGOs to use their expertise in bringing about a positive
change in the lives of the people. With the passing of the Company’s Act 2013
and the New CSR Rules 2014 which have come into effect since April 2014,
CSR has become binding under legislation.

This unit aims to help you to understand the evolution of CSR in different stages
of India’s development. After reading this unit you will be able to:
Discuss the evolution of CSR in India
Explain the models of CSR operating in India
Discuss the current trends and practices of CSR in India

54
 Perspective in Indian Context
3.2 CSR IN INDIA: HISTORICAL BACKGROUND
3.2.1 The Phases of Development of CSR in India
The mention of the concept of CSR in India dates to the Vedic period. Rigveda
mentions about sharing of wealth by the rich with the poor. Ancient texts like
Manu Smriti also talks of the nature of business done which should be for the
good of the society and for the good of the business in the long run. It also
instructs that the means of wealth that is acquired should be in line with the
principles of dharma. One form of giving is through the religious institutions.
Prior to the evolution of modern philanthropy, religious institutions were the
most important sources serving the poor either through temple trusts, waqfs,
gurudwaras and churches. For instance, schools were established by Tirumala
Tirupati Devasthanams (TTD), the trust managing Tirumala Venkateshwara
Temple in Andhra Pradesh, way back in 1876.

The book ‘Beyond Business: From Merchant Charity to Corporate Citizenship’

gives an account of philanthropic practices in India. This section draws on that
book. According to Sundar (2000), the development of CSR in India can be
divided into four phases.

Phase 1 (CSR driven by Charity and Philanthropy): This phase is from 1850
to 1914. CSR in the initial phase was driven by culture, traditions, family values,
industrialization, and religion. Religious obligations and traditions based on
charity and philanthropy like dan, seva and zakat have been followed in India
since ancient times. In 1850s, the merchants, driven by the purpose of committing
themselves to the society for religious purposes made huge donations for
construction of temples. During times of famines and epidemics, the merchants
also helped the society in overcoming these calamities by donating food and
money.

Industrialization was pioneered in India in the 19th century by a few families

like Tatas, Birlas, Godrej, Shriram, Singhania, Lalbhai, Sarabhai, Mahindra, Modi,
Bajaj and Annamali. These business houses were committed to CSR, however,
while doing so they also had motives such as business considerations, supporting
of specific communities and political objectives. During this phase, all the
donations were done for the construction of schools, hospitals, temples etc. without
any consideration of the long-term impact of these donations.

Phase 2 (CSR driven by Social Development): The second phase of CSR in

India is from 1914 to 1960. This period was dominated by India’s struggle for
independence. The CSR during this period was greatly influenced by Gandhi’s
theory of trusteeship. Established family businesses had trusts for building of
schools, colleges, scientific and training institutions etc. These trusts also involved
themselves in various social causes initiated by Mahatma Gandhi like abolition
of untouchability, women’s empowerment, and rural development. During this
phase, the business houses were drawn to the political fight for independence.
Not only did they participate in the economic and social development of the
country, they perceived the economic development of the country as the fight
against the British rule. The vision of living in a free country was the driving
force which led to involvement of corporate sector in the development of the
country.
55
Evolution and Concept of CSR Phase 3 (CSR in the Mixed Economy): The third phase of CSR in India is from
1960 to 1980. The role of state in development increased greatly after
independence. This phase was characterized by emergence of several public
enterprises. Several legislations on corporate governance, labour and
environmental standards also came into existence during this phase. Heavy
regulations and License Raj replaced the self-regulatory activities of the corporate.
However, the state failed to eradicate poverty and support economic development.
The expectation shifted back to private sector and their involvement in the socio-
economic development of the country became very essential. Businesses were
expected to be more transparent, socially accountable and have regular stakeholder
dialogues. Inspite of all these efforts, the CSR failed to match the expectations in
its contribution to development.

Phase 4 (Interface between Philanthropic and Business Approaches): This

phase starts from 1980s till the present day. During this phase, the companies
started viewing CSR as a sustainable business strategy and started adopting multi-
stakeholder approach. With the liberalization of the economy in 1990s, India
became integrated with the global markets. With the abolition of the license
systems, there was a boom in the economy. The growth in the economy has
helped the Indian companies to grow rapidly which has increased their willingness
to participate more actively in the socio-economic development of the country.
India has now become an important production and manufacturing base for many
of the transnational companies as a result of which, the Indian companies involved
in production and export of goods to developed countries are required to comply
with various international standards of labour, environment etc.

3.3 MODELS OF SOCIAL RESPONSIBILITY

OPERATING IN INDIA
A report by The Energy and Resource Institute (TERI) (Kumar et al., 2001)
mentions four models of CSR that are present in India.

1) The Ethical Model: This is based on the Gandhian Model of Trusteeship.

The philosophy of Trusteeship propounded by Mahatma Gandhi believes
that the rich should use their wealth for the welfare of the poor and the
underprivileged. In India, poverty and inequality still is a structural problem
and unless businesses come forward to strengthen the society, these problems
will continue to create conflict of interest among different segments of the
society. The Gandhian model of Trusteeship is based on the principle that
the surplus wealth should be kept in trusts for the greater good of the society.
The business while being economically viable should also uphold their
ethical values to create sustainable livelihoods for all. The Gandhian model
provides directions for transforming an unequal society into an egalitarian
society. Some corporate are huge in terms of their size and the number of
lives they impact and hence can be instrumental in bringing about structural
changes in the society. When the corporate governance and finance are in
order, they can generate social reforms.

2) The Statist Model: This model came into being with the adoption of socialist
and mixed economy by Jawahar Lal Nehru. In this model, the corporate
responsibilities were governed by state ownership and legal requirements.
The Labour Laws and Management Principles had in them the basic elements
56
 of corporate responsibility, particularly those related to community and Perspective in Indian Context
worker relationships. Most of the public sector companies even today follow
the statist model of state sponsored corporate philosophy.

3) The Liberal Model: This model was propounded by Milton Friedman.

According to Friedman, the social responsibility taken up by the corporate
distorts economic freedom of the shareholders as they have no say in
deciding how their money will be spent in these activities. He argued that
corporations should engage in activities that would generate revenue and
profit. However, in doing so they should abide by the law and follow ethical
customs. Friedman in his article in New York Times in 1970 titled The
Social Responsibility of business is to increase its profits says that “… there
is one and only one social responsibility of business to use its resources
and engage in activities designed to increase its profits so long as it stays in
the rules of the game, which is to say, engages in open and free competition,
without deception or fraud.”

In his argument he says that the Directors of corporation or other executives

should not take up socially responsible programmes as they do not have
any incentive for prudent spending of the shareholder’s money.

4) The Stakeholder Model: The Stakeholder Model was propounded by

Edward Freeman. The theory argues that the company should be driven by
the welfare of the stakeholder and not stockholders alone. Stakeholders
include shareholders, employees, consumers, suppliers, competitors, related
government agencies and local communities. This model considers itself
with not just profit earning but also the impact upon major stakeholders. In
support of this model Freeman argues that when a firm is responsive towards
the concerns of the stakeholders, they become more resilient themselves. It
also results in better long- term performance of both the firm as well as the
society.

Activity 1
Discuss with elderly members in your family/society about how philanthropy
was carried out during their times. Ask if they had contributed to any of the
philanthropic/charity activities. Write about it.
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Evolution and Concept of CSR Check Your Progress 1
Notes: a) Write your answers in about 50 words.
b) Check your answer with possible answers given at the end of the unit.
1) What are the characteristics of the third phase of development of CSR in
India?
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2) Discuss the statist model of social responsibility.

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3.4 EVOLUTION OF A LEGISLATION ON CSR:

VOLUNTARY PRACTICES TO
REGULATORY MECHANISM
The corporation in India, have a long tradition of philanthropy and have been
engaged in social activities. CSR started becoming a topic of interest for the
policy makers and corporate in the late 1990s. At policy level, CSR was first
formalized in India with the issuance of Corporate Social Responsibility Voluntary
Guidelines in 2009 by the Ministry of Corporate Affairs. It included the basic
elements of CSR like ethical functioning, human rights, worker’s right,
environmental considerations, stakeholder welfare etc. This was followed by
another guidelines called the National Voluntary guidelines of Social,
Environmental and Economic Responsibilities of Business, issued in 2011 by
the Ministry of Corporate Affairs. These guidelines urged the corporate to adhere
to the nine principles of CSR and the adherence to the guidelines was based on
the ‘apply or explain’ approach. With the enactment of Section 135 of the
Companies Act 2013, India became the first country to make CSR spending and
disclosure mandatory for large companies with specific turnovers.

The Department of Public Enterprises (DPE) has also been issuing guidelines on
CSR for Central Public Sector Enterprises (CPSE) from time to time. The
guidelines on Corporate Governance for CPSEs was given in 2010 to bring more
transparency and accountability in the functioning of CPSEs. These guidelines
pertain to both listed and unlisted CPSEs and give clear directions in terms of
the composition, functional roles of Board of Directors, Audit Committee,
58 Remuneration Committee, Subsidiary Companies, Disclosures, Report,
Compliance and Schedule of implementation. DPE also issued the guidelines on Perspective in Indian Context
Corporate Social Responsibility and Sustainability for CPSEs. These guidelines
spell out the sustainability initiatives the CPSEs are expected to take. The CPSEs
Conclave held in April, 2018 recommended utilization of CSR funds in a focused
manner by adopting a theme based approach. It was proposed that a common
theme be identified each year for undertaking CSR by CPSEs. School education
and health care were identified as the theme for focused intervention for the year
2018-19. Sixty percent of the annual CSR expenditure of the CPSEs was required
to be for the thematic program. A list of 112 aspirational districts was identified
by NITI Aayog which were to be given preference.

3.4.1 The National Voluntary Guidelines on Social,

Environmental and Economic Responsibilities of Business
The National Voluntary Guidelines (NVGs) were laid down by the Ministry of
Corporate Affairs to provide guidance to the companies to work in accordance
with the national policies of inclusive growth and climate change. The guidelines
help the corporate to formulate objectives keeping in consideration their impact
on stakeholders and environment.

The NVGs are based on nine principles which are as under

The Nine Principles of National Voluntary Guidelines

1) Businesses should conduct and govern themselves with ethics, transparency,
and accountability.

2) Businesses should provide goods and services that are safe and contribute
to sustainability throughout their life cycles.
3) Businesses should promote the wellbeing of all the employees.
4) Businesses should respect the interests of and be responsive towards all
stakeholders, especially those who are disadvantaged, vulnerable and
marginalized.
5) Businesses should respect and promote human rights.
6) Business should respect, protect, and make efforts to restore the environment.
7) Businesses when engaged in influencing public and regulatory policy should
do so in a responsible manner.
8) Businesses should support inclusive growth and equitable development.
9) Businesses should engage with and provide value to their customers and
consumers in a responsible manner.
(Source: Khandelwal, 2011)

3.4.2 The Companies Act 2013 and CSR

(Source: mca.gov.in)
The Act
The inclusion of the CSR mandate under the Companies Act, 2013 is an attempt
to supplement the government’s efforts of equitably delivering the benefits of
59
Evolution and Concept of CSR growth and to engage the Corporate World with the country’s development agenda.
The Companies in India are governed by Clause 135 of the Companies Act 2013
for performing their CSR activities.
Section 135
Section 135 of the Companies Act 2013 lays down that:
The companies with an annual turnover of 1,000 crore INR and more, or a
net worth of 500 crore INR and more, or a net profit of 5 crore INR and
more shall constitute a CSR Committee of the Board consisting of 3 or
more directors of which one will be an independent director.
The CSR Committee will be responsible to
i) 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;

ii) recommend the amount of expenditure to be incurred on the activities

referred to in (i); and

iii) monitor the Corporate Social Responsibility Policy of the company from
time to time.
The Board of every company shall
i) 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 place it on the company’s website, if any, in
such manner as may be prescribed; and

ii) ensure that the activities as are included in Corporate Social

Responsibility Policy of the company are undertaken by the company.

It is also the duty of the Board to ensure that the company spends two
percent of the average net profits made by the company in the preceding
three financial years and while spending the CSR amount, giving preference
to local areas where it operates.

If the company fails to spend the amount, the Board in its report shall specify
the reasons for not spending the same.

Though section 135 makes CSR spending and reporting mandatory, it gives
flexibility to the companies to choose the CSR activities from the list of activities
that the corporate can potentially undertake.
The CSR Rule, 2014
Source: mca.gov.in Companies Act Notification 2014, Ministry of Corporate
Affairs
A set of rules framed under section 135 of the Act, came into force on 1st April,
2014. It lays down rule for the following:

60
CSR Activities Perspective in Indian Context

The CSR activities taken up by the companies will be as per the stated CSR
policy and activities taken up by the company under its normal course of
business will be excluded from CSR activities. A company can implement
the CSR activities approved by the CSR committee either on its own or
through a non-profit foundation set up by the company to facilitate this
initiative or through an independently registered non-profit organization
that has a record of being into such activities for at least three years or in
collaboration with other companies.

The activities undertaken in India will only be considered under the CSR
activities.

Spending on activities that benefit only the employees of the company, also
known as self-serving expenditure will not be considered as CSR spending.
The companies are free to spend on capacity building of their employees
but the expenditure should not be more than 5 percent of the total CSR
expenditure in any particular year.

Contribution to political parties will also not be considered as CSR activity.

The income generated from the CSR activities should be credited back to
the community or CSR corpus and this would be over and above the
mandatory 2% of profit.
CSR Committee
The companies which are bound by the CSR clause are required to constitute
a CSR Committee of the Board consisting of 3 or more directors of which
one will be an independent director. A private company with only two
directors on its Board will have only two directors in the CSR Committee
and in case of foreign company, the Committee will have at least two persons
of which one will be an authorized person residing in India and the other
will be nominated by the foreign company.
CSR Policy
The CSR policy of a company will include

– List of projects or programmes within the Schedule VII of the Act which
the company will undertake, along with the implementation schedules
and other modalities.
– Monitoring process of these programmes.
The policy will also specify that the surplus generated from the CSR
programmes will not be a part of the business profit of the company.
CSR Expenditure
All expenses including contribution to the corpus for programmes relating
to CSR activities approved by the board will be included as CSR activities
provided, they are in conformity with the activities which fall within the
purview of Schedule VII of the Act.

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Evolution and Concept of CSR CSR Reporting
The rules also provide a format for the board report on CSR which includes
reasons for spending of less than 2 % of the average net profits of previous
three years and a responsibility statement stating that the company’s CSR
policy, implementation and monitoring mechanism are in accordance with
the CSR objectives. The report is signed by the CEO, MD, or Director of
the company.

Display of CSR Activities on its Website

The Board of Directors shall disclose the content of the CSR policy in its
report as well as on the company’s website as per the particulars specified.
Schedule VII
Source: www.mca.gov.in
The Schedule VII of the Companies Act provides a list of activities which can be
included by companies in their CSR policies where the CSR spending can be
done. These activities relate to:
i) Eradicating extreme hunger and poverty;
ii) Promotion of education;
iii) Promoting gender equality and empowering women;
iv) Reducing child mortality and improving maternal health;
v) Combating human immunodeficiency virus, acquired immune deficiency
syndrome, malaria, and other diseases;
vi) Ensuring environmental sustainability;
vii) Employment enhancing vocational skills;
viii) Social business projects;
ix) Contribution to the Prime Minister’s National Relief Fund or any other
fund set up by the Central Government or the State Governments for socio-
economic development and relief and funds for the welfare of the Scheduled
Castes, the Scheduled Tribes, other backward classes, minorities, and
women; and
x) Such other matters as may be prescribed.
Activity 2
Visit a CSR office of a company in the city of your residence. Find out the
various CSR projects undertaken by the company. Identify which of the
activities mentioned in Schedule VII do these projects correspond to.
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 Perspective in Indian Context
3.5 CURRENT TRENDS AND PRACTICES OF CSR
IN INDIA
Prior to Companies Act 2013, CSR clause was voluntary for companies, they
were however required to disclose their CSR spending to their shareholders.
After the amendment to Companies Act 2013, made in April 2014, India became
the first country in the world to make CSR mandatory.
Some of the emerging trends that the CSR in India is expected to witness are:
(Sharma and Gupta, 2019)
1) NGOs Will Adapt and Get Better at Working with the New Type of
Funders – Corporates

Traditionally, the NGOs have been collaborating with government agencies and
the international aid agencies. However, in recent years NGOs have found new
collaborators in the large Indian companies and multinational corporations. There
is an increasing trend of MNCs partnering with the NGOs to execute their social
responsibility initiatives in areas like education, sanitation, sustainability, health,
water etc. This partnership with corporates has better equipped the NGOs not
just in terms of higher funds but also with the required technological and
intellectual resources required in implementing the projects. The role of NGOs
has become more focused on aspects like impact, deliverables, adhering to
timelines, doing diligent reporting etc. Now the focus is more on measurable
outcomes.

2) Corporates Will Start Thinking of CSR as Another Pillar of Their

Corporate Strategy, Instead of as Philanthropy

Sustainability issues and social responsibility have become a key consideration

for business leaders and decision-makers in the corporate sector, in the last couple
of years. Companies these days think of CSR as an integral part of their managerial
process, decision making and overall strategy with an aim to position themselves
not just as philanthropic but also as socially responsible organizations. Companies
view CSR as an investment to build sustainable societies which have a significant
positive impact on the societies. Companies have seen a shift from having a
separate CSR strategy to having a corporate strategy which incorporates CSR.

3) More Companies Will Comply and Engage in Long-term Partnerships

with NGOs

NGOs have the expertise and experience in working in a variety of development

sectors like environment, education, health, gender issues etc. Each of these
sectors is different from the other and needs a different approach to deal with its
set of challenges and issues. Also, measurable impacts of various interventions
take a long time to achieve. With companies having very little or no knowledge
of working in the development sector, they seek to engage in long term
collaborations with NGOs to be able to make a greater on-ground impact.
4) For-Profit Social Ventures Will Emerge as a Major Force of Social Good
Other than the non-profit organizations working in the social sector, there are
several for-profit ventures that have emerged in the past few years that are tackling
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Evolution and Concept of CSR social issues through innovative products and services. One such example is of
women entrepreneurs manufacturing low cost sanitary napkins which are made
accessible to semi-rural and urban areas. For-profit ventures are also equipped
with better managerial and technical skills needed to address some major issues
in the social sector. They are also helping corporate sector to build effective
organizational and governance models.

5) Technology and Innovation Will Play a Major Role in Addressing

Structural Issues in the Social Sector and Building NGOs’
Organizational Capabilities

Technology has proven to be useful to both social sector as well as the corporates.
Technology has helped the social sector to move away from the traditional mode
of operating to a more efficient and transparent way by digitizing and automating
workflows and streamlining the way the organizations interact with each other.
Technology can also help corporate to assess the consistency between the ethical
value the company endorses and their actions supporting the same by collating,
accessing and analysing relevant data.

3.6 CSR INITIATIVES OF INDIAN COMPANIES

Some of the CSR initiatives of Indian companies are listed below:

1) Tata Chemicals Ltd.

Tata Chemicals Ltd. has spent 25.68 crores for CSR in 2018-2019 which was
much higher than the prescribed amount of 19.86 crores. Improving the quality
of life and fostering sustainable and integrated development in the communities
where it operates is central to Tata Chemicals’ corporate philosophy. In order to
do so Tata Chemicals established Tata Chemicals Society for Rural Development
(TCSRD) in 1980 as a society and trust. It lays emphasis on the spirit of
participatory development by involving the beneficiaries at each stage of the
development process which ensures viability and sustainability of the programmes
(Fernandes, 2019). Around 30 percent of the TCSRD funds are spent of wildlife
conservation. The amount is distributed over three places the company operates
- Mithapur in Gujarat, Haldia in West Bengal and Babrala in Uttar Pradesh.

2) Infosys Ltd.
Infosys Limited had established the Infosys foundation in 1996 to implement its
social development projects. During 2019, the company had spent INR 342 crores
against the prescribed 340 crores towards various CSR schemes. The major works
of the Foundation included the introduction of Aarohan Social Innovation Awards,
restoration of water bodies in Karnataka, supporting the construction of a metro
station in partnership with Bangalore Metro Rail Corporation Limited, enabling
the pursuit of access and excellence in sports through the GoSports Foundation,
and relief efforts in Tamil Nadu, Karnataka, and Kerala (Fernandes, 2019).

3) Bharat Petroleum Corporation Ltd.

BPCL as a part of its CSR initiatives, focuses on imparting holistic education by

facilitating usage of technology and infrastructural facilities. Additionally, BPCL’s
CSR philosophy also includes participation in projects of national importance
like the Swachh Bharat Abhiyan involving creation and maintenance of toilets,
64
associated sanitation facilities, waste management initiatives leading to overall Perspective in Indian Context
health and hygiene for the communities.

4) Mahindra & Mahindra Ltd.

Among the various development programmes supported by Mahindra and
Mahindra Ltd. are Nanhi Kali programme to provide educational support to
underprivileged girls in India. It sponsors Lifeline Express (hospital on train) to
provide medical care, treatment, and surgical intervention to individuals. Through
Mahindra Hariyali 0.95 million trees were planted which contributed to improving
green cover and protecting bio-diversity in the country.

5) Vedanta Ltd.
The CSR portfolio of Vedanta Ltd. has diverse projects based on 10 broad thematic
areas running across various locations. The Nandghar project is the flagship
initiative which aims at rebuilding Anganwadis to ensure health and learning of
children in rural areas and for skilling and empowering women.

6) Indian Oil Corporation Ltd.

Indian Oil Co. Ltd. has been involved in various social development activities
across the nation. Most of these projects are for improving the quality of life of
the marginalized and underprivileged sections of the society. The key thrust areas
of the company include Safe drinking water and protection of water resources,
Healthcare and sanitation, Education and employment-enhancing vocational
skills, Empowerment of women and socially/economically backward groups.

7) Hindustan Unilever Ltd.

Hindustan Unilever Limited (HUL), believes in long term sustainable growth
achieved by reducing environmental footprints and increasing its positive social
impact. The various CSR programmes of the company include Handwashing
Behaviour Change Programme, Plastic Waste Management, Project Prabhat,
Water Conservation Project, Swachh Aadat Swachh Bharat, Project Shakti,
Domex Toilet Academy, Asha Daan, Sanjeevani and Supporting Healthcare.
Check Your Progress - 2
Notes: a) Write your answers in about 50 words.
b) Check your answer with possible answers given at the end of the unit.
1) What does Section 135 of Companies Act, 2013 lay down?
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Evolution and Concept of CSR 2) List out the emerging trends of CSR in India.
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3.7 LET US SUM UP

In this unit you read about the evolution of CSR in India. You read about how
CSR evolved from being driven by charity and philanthropy in the 19th Century
to CSR being a sustainable corporate strategy. You have also read about the four
models of CSR present in India – The Ethical Model, the Statist Model, Liberal
Model and Stakeholder Model. You have also read about how Indian CSR shifted
from voluntary practices to a regulatory mechanism with the inclusion of CSR
mandate in the Companies Act 2013. Further, the unit discusses some of the
emerging trends that the CSR in India is expected to witness. Finally, the unit
briefs about some of the CSR initiatives by few leading companies.

3.8 KEYWORDS
Philanthropy : The desire to promote the welfare of others,
expressed especially by the generous donation
of money to good causes.

Schedule VII : The Schedule VII of the Companies Act

provides a list of activities which can be
included by companies in their CSR policies
where the CSR spending can be done.

National Voluntary : The National Voluntary guidelines were laid

Guidelines down by the Ministry of Corporate Affairs to
provide guidance to the companies to work in
accordance with the national policies of
inclusive growth and climate change.

3.9 BIBLIOGRAPHY AND SELECTED READINGS

Arora, B. & Puranik, R. (2004). A Review of Corporate Social Responsibility in
India. Development. 47. 93-100. 10.1057/palgrave.development.1100057

Fernandes, K. (2019). Top 20 Indian Companies for CSR in 2019.https://

thecsrjournal.in/top-indian-companies-for-csr-2019/
Khandelwal, A. (2011). National Voluntary Guidelines for India Inc.: from CSR
to Responsible Business. Sustainability Outlook.
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Kumar, R. Murphy, D. F. and Balsari, V. (2001). Altered Images – The 2001 Perspective in Indian Context
State of Corporate Responsibility in India Poll. TERI.
Sood, A. and Arora, B. (2006). The Political Economy of Corporate Responsibility
in India. UNRISD

Sundar, P. (2000). Beyond Business: From Merchant Charity to Corporate

Citizenship. Indian Business Philanthropy through the Ages. Tata McGraw-Hill
Publishing Company, New Delhi.

Sharma, J. and Gupta, S. (2019). 5 Trends that will Redefine CSR Sector in
2019. https://www.entrepreneur.com/article/327657
Weblink
www.mca.gov.in

3.10 CHECK YOUR PROGRESS - POSSIBLE

ANSWERS
Check Your Progress 1
Answer 1: The third phase of CSR in India is from 1960 to 1980. The role of
state in development increased greatly after independence. This phase was
characterized by emergence of several public enterprises. Several legislations
on corporate governance, labour and environmental standards also came into
existence during this phase. Heavy regulations and License Raj replaced the
self-regulatory activities of the corporate. However, the state failed to eradicate
poverty and support economic development. The expectation shifted back to
private sector and their involvement in the socio-economic development of the
country became very essential. Businesses were expected to be more transparent,
socially accountable and have regular stakeholder dialogues. Inspite of all these
efforts, the CSR failed to match the expectations in its contribution to
development.

Answer 2: The statist model came into being with the adoption of socialist and
mixed economy by Jawahar Lal Nehru. In this model, the corporate
responsibilities were governed by state ownership and legal requirements. The
Labour Laws and Management Principles had in them the basic elements of
corporate responsibility, particularly those related to community and worker
relationships. Most of the public sector companies even today follow the static
model of state sponsored corporate philosophy.
Check Your Progress 2
Answer 1: Section 135 of the Companies Act 2013 lays down that:
The companies with an annual turnover of 1,000 crore INR and more, or a
net worth of 500 crore INR and more, or a net profit of 5 crore INR and
more shall constitute a CSR Committee of the Board consisting of 3 or
more directors of which one will be an independent director.

Answer 2: Some of the emerging trends that the CSR in India is expected to
witness are:

67
Evolution and Concept of CSR 1) NGOs will adapt and get better at working with the new type of funders –
corporates
2) Corporates will start thinking of CSR as another pillar of their corporate
strategy, instead of as philanthropy
3) More companies will comply and engage in long-term partnerships with
NGOs
4) For-profit social ventures will emerge as a major force of social good
5) Technology and innovation will play a major role in addressing structural
issues in the social sector and building NGOs’ organizational capabilities

68