Open Access Research Article
CORPORATE SOCIAL RESPONSIBILITY: A VIEWPOINT FROM INDIA
Published Paper
Article Details
CORPORATE SOCIAL RESPONSIBILITY: A
VIEWPOINT FROM INDIA
AUTHORED BY
- VARUN KAUSHAL AND RITIKA DATTA
ABSTRACT
Corporate social responsibility is
now recognised as a tool for organisational sustainability. As a result, it
must be acknowledged as an organisational goal. New Company Law mandated that
corporations give 2% of their net income to CSR in 2012. This requirement
forced Indian businesses to intentionally work towards CSR because it obliged a
specific class of businesses to allocate a percentage of their revenues to CSR
operations. Any effort
to improve society is referred to as. Corporate entities must act as socially
responsible corporate citizens and contribute to the common good. They can no
longer restrict how they use societal resources. This study's major goal is to
determine why CSR is important for corporations. Why should they support the
economic development of the nation? What crucial actions could the government
take to increase business support for CSR initiatives? As is well known, modern Indian
corporations focus more on all stakeholders and move beyond the concept of
philanthropy (charity). The current research study makes an effort to assess a
number of these new CSR law provisions in the perspective of contemporary
corporate philosophy and to call attention to the practical challenges
associated with putting the new rules into practise.
INTRODUCTION
The evolution of CSR in India refers
to changes in cultural norms of corporations involved in CSR efforts over time
in India. Businesses are run to have a beneficial overall impact on the
surroundings, communities, cultures, and societies in which they operate. The
foundation of CSR is based on the idea that business behaviour as well as
governmental policy should be responsible enough to address social challenges.
Therefore, businesses should handle the difficulties and problems that, to some
part, the states handle.
CSR is a concept in management that
encourages businesses to include social and environmental issues into their
everyday operations and relationships with stakeholders. Generally speaking,
CSR refers to a company's efforts to reconcile its commitments to economic,
environmental, and social goals while also meeting stakeholder and shareholder
expectations. Anything that benefits society can be categorised as CSR, and
businesses must display such activities on their websites and obtain board
clearance before engaging in them.
CSR is a crucial component of
development since businesses, especially those operating in rural regions, need
to care for their communities. However, CSR also has an environmental component
that the company may influence depending on how they operate. Many companies
may have motivations for engaging in CSR, such as a sincere concern for their
environment and society, which will eventually serve as a source of both the
raw materials and human capital they require to survive. Additionally, some
businesses will view it as a crucial component of winning public support for
their business practises. It is especially true for businesses like mining and oil and gas firms
that operate in far-flung locales. Many of the local indigenous people meet
them frequently, and the businesses are forced to coexist with them. Companies
should view CSR as a voluntary endeavour rather than something that is heavily
regulated, according to a different CSR component. It is not something that the
firm must do because of the law or anything else ; it is something that the
corporation should do. However, as not only businesses are involved in development,
firms shouldn't be obliged to perform CSR as a requirement.
DATA AND METHODOLOGY
The information for this study
includes secondary data that we have gathered from a variety of sources,
including the department of corporate affairs minister's official websites,
newspaper articles, research papers, and magazine articles. As is well known,
while the conventional approach placed emphasis on corporate philanthropy—that
is, charitable giving for social, cultural, and religious purposes—the modern
perspective places emphasis on stakeholders' long-term interests and
sustainable development. The major purpose of this study is to determine why is
important for corporations. Why should they contribute to the economic growth
of the nation? How can the government improve corporate participation in CSR
initiatives? What are the crucial steps that need to be taken?
We have looked over and analysed the
data from numerous sources. We have not used any statistical tools or
techniques because we are not attempting to determine a relationship between
various variables; rather, we are attempting to determine how our nation has
changed its policies over time and what the outcomes of these changes have
been.
POLICY IN INDIA
According to the 2013 Companies Act,
which reforms the almost six-decade-old legislation controlling how
corporations operate and are governed in India, profitable businesses with
sizable businesses will be required to spend at least 2% of their three-year
average profit on CSR initiatives each year. This would apply to businesses
having a revenue of $1 billion or more, a net worth of $500 billion or more, or
a net profit of $5 billion or more. According to current plans, top-earning
PSUs like ONGC, BHEL, and NTPC may have to double their CSR spending starting
in 2013–14 in accordance with the new draught rules being completed by the
Department of Public Enterprises (DPE). PSUs with net profits of between Rs 100 and Rs 500 crore must
set aside 2 to 3 percent of their earnings. They must make sure that they use
the entire amount designated; otherwise, they must explain why they have not.
Public sector businesses that make less than Rs 100 crore in profit are
obligated to contribute 3% of their earnings to support such initiatives.
According to the proposed criteria,
if Public Sector Units (PSUs) are unable to spend the money set aside for CSR
in a given year, it must be spent within the next two years. The regulations
continue to exempt sick and losing PSUs from budgetary allocation for carrying
out CSR activities.
STIPULATION OF THE COMPANY BILL, 2012
Every company that has a net worth of
at least Rs. 500 crore, a revenue of at least Rs. 1,000 crore, or a net profit
of at least Rs. 5 crore in any fiscal year is required to form a CSR Committee
of the Board made up of at least three directors, one of whom must be an
independent director. The Board's report detailing the CSR Committee's
membership.
The main functions of the CSR
Committee are:
·
Formulate
and recommend to the board, a CSR policy indicating the activity or activities
to be undertaken by the company as specified in Schedule VII of the Act.
·
Recommend
the amount to be spent on these activities.
·
Monitor
the company's CSR policy periodically.
Following the suggestions of the CSR
Committee, the company's board must approve the CSR Policy, reveal its details
in its report, and post it online. Additionally, information on the company's
CSR initiatives during the year will be included in the annual report to the
Board.
Board to ensure that the activities
listed in the CSR Policy are undertaken by the company. Board to ensure that at
least 2% of average net profits of the company in the three immediately
preceding financial years are spent in every financial year on such activity.
Preference to be given to the local area and areas around the company operates
for CSR spending. If a
corporation doesn't give or spend that amount, the board must explain why in
its report. Companies that must comply with CSR requirements must add notes to
the Statement of Profit and Loss detailing the total amount spent on
CSR-related activities. Activities that firms may incorporate in their CSR
policy are outlined in Schedule VII of the firms Bill 2012:
·
Eradicating
extreme hunger and poverty;
·
Promotion
of education;
·
Promoting
gender equality and empowering women
·
Reducing
child mortality and improving maternal health;
·
Combating
human immunodeficiency virus, acquired immune
·
deficiency
syndrome, malaria and other diseases;
·
Ensuring
environmental sustainability;
·
Employment
enhancing vocational skills;
·
Social
business projects;
·
Contribution
to the Prime Minister's National Relief Fund or any other fund set up by the
Central Government or the State Governments for socioeconomic development and
relief and funds for the welfare of the Scheduled Castes, the Scheduled Tribes,
other backward classes, minorities and women; and;
·
Other
matters as may be prescribed.
A national level CSR organisation
would be in place to oversee the initiatives, according to Corporate Affairs
Minister Sachin Pilot. In order to track the use of CSR funds and projects, the
Central Government is seeking to create a Special Purpose Vehicle. The
government wants the CSR cash to be fully utilised.
EFFECTS OF CSR
·
The
goal of CSR is to help businesses and gradually improve society as a whole
rather than just making a contribution to one area of society. Companies can
participate in CSR programmes in any area they find most appealing from an
organisational point of view, including education, health, the environment, and
societal uplift.
·
Corporations
should participate effectively and efficiently in CSR initiatives because they
are involved with a variety of stakeholders, including customers, employees,
suppliers, the government, creditors, and financial institutions. As a result,
they have a duty to protect the interests of all of these parties in order to
sustain their own long-term success.
·
Every
organisation needs to implement CSR efforts in order to improve the quality of
life on Earth. This will also help businesses increase their goodwill.
·
By
implementing CSR efforts, businesses can set themselves apart from their
competitors.
·
Businesses
can use CSR as a platform for expansion and survival.
·
If
implemented correctly, a CSR concept can provide a number of competitive
advantages, including improved access to capital and markets, increased sales
and profits, operational cost savings, improved productivity and quality, an
efficient human resource base, improved brand image and reputation, increased
customer loyalty, and improved decision-making and risk management processes.
·
Neither
the federal government nor any state government has the authority to direct
business on how to allocate funds for societal benefit. The choice is dependent
on how much money is invested in different CSR activities.
LIMITATION OF CSR POLICY
·
If
a corporation pays more than 2% of net profit, there is no incentive;
·
The
carryover of such a contribution is not stated under the CSR provisions. It means
that if any corporation is unable to spend 2% of its average profit in a given
fiscal year, that spending will not be carried over to the following year.
·
If
the company does not have sufficient earnings or is unable to spend the
appropriate amount on CSR initiatives, the directors must provide the members
with proper disclosure and justification in their report.
·
It's
unclear if the Section 25 businesses or the nonprofits they established would
count towards CSR.
·
According
to the proposed rules, activities relating to eradicating extreme hunger and
poverty; promotion of education, gender equality and empowerment of women;
reducing child mortality and improving maternal health; combating HIV-AIDS,
malaria and other diseases; ensuring environmental sustainability, employment
enhancing vocational skills; and contribution to the Prime Minister’s National
Relief Fund or any other Central or state fund would be considered as CSR
activity under the Act.
REVIEW OF LITERATURE
·
According
to Geoffrey Heal, CSR is a crucial component of company strategy in industries
where conflict might occur over fairness issues or between corporate profit and
social goals. There are a variety of social sectors where corporations can
contribute significantly to CSR and generate social goods for their society.
According to him, a CSR programme can be a beneficial component of a company's
overall strategy, lowering risk management, generating brand equity, improving
relationships with regulators, lowering capital costs, improving human
relations and employee productivity, and maintaining relationships that are
crucial to long-term profitability.
·
CSR
is developing as a new area of management research, according to Anupam Sharma
and Ravi Kiran. Numerous businesses in India have implemented CSR programmes to
address a range of social concerns. He claims that the FMCG sector is not as
likely as the IT and auto industries to engage in CSR efforts. According to
authors, India has had or undergone a shift through investing itself in new CSR
projects.
·
According
to Kishor Neelakantan, the company act of 2013 will give CSR operations a
significant regulatory push and make them required for all companies doing
business in India. Therefore, it is beneficial for economic growth, but how can
shareholders consider this while appraising the company? Therefore, the author
provides a methodology based on four essential criteria: Integrity, strategic
focus, efficiency, and transparency, for investors to evaluate companies' CSR
initiatives.
·
Rahul
Hakhu contends that organisations should establish a forward-thinking corporate
policy and take the initiative to implement it in their operations in order to
gain a competitive edge and generate profits in the context of a liberalised
world. He emphasises that the government wants businesses to play a bigger role
in the nation's economic progress, and that the expansion of CSR will help the
agrarian economy transition to an industrial one. He proposed that CSR offers
useful information to Indian businesses and other stakeholders regarding
potential growth and reputation.
EXISTING CSR ACTIVITIES OF SOME COMPANIES
• ONGC CSR
projects prioritise higher education, providing aid and scholarships to
deserving young students from underprivileged socioeconomic groups, and
providing resources for building schools, among other things.
• SAIL has successfully implemented initiatives in a variety
of fields, including sports, gaming, education, health, and medical care.
• The vision statement for BHEL's CSR programme is "Be a
committed Corporate Citizen, alive towards its CSR." BHEL implements
community and socioeconomic development activities to advance education, better
rural living conditions, and improved hygiene.
• "Project- Drishti" was started by Reliance
Industries to restore the eyesight of visually impaired Indians from the
economically underprivileged parts of society. Over 5000 people have already
had their lives improved by our programme. Additionally, this endeavour is
raising awareness of the urgent need for eye donation.
• Mahindra & Mahindra introduced an innovative ESOP called
the Employee Social Option to provide Mahindra employees the freedom to
participate in socially conscious endeavours of their choosing. Additionally,
it makes contributions through the Mahindra Education Trust, Mahindra Pride
School, and Mahindra Hariyali. More than a million trees have been planted
nationwide under Mahindra Hariyali to boost the country's green cover.
• Tata Consultancy Services, the biggest software service
provider in India, received the Asian CSR award for its leadership and
sincerity in promoting ethical ideals throughout the implementation of numerous
programmes and work on community development. The organisation places a lot of
emphasis on the education sector. The company is working on a computer-based
literacy model for teaching adults that it devised. This programme is known as
an adult literacy programme. The company has been creating environmentally
friendly products and services while also working on environmental policies.
• Infosys: A well-known software provider, Infosys also offers
computer and language training. The company runs a specific programme for
underprivileged kids through which it teaches them a variety of skills and
modifies their mindset as well. The company also provides chess sets, carom
sets, and other items to those in need.The Infosys Foundation has been active
in the areas of health care, education, environmental protection, and social
rehabilitation. CSR activities include blood donation camps.
• At its numerous locations, the well-known coffee shop Cafe
Coffee Day employs 50 persons with speech and hearing impairments as staff. In
an effort to promote equal employment, they do this as a part of their CSR
activity. The 'Silent Brew-masters' were the name given to them. To help people
with disabilities, CCD collaborates with the NGO Enable India. Their largest
CSR project is the Chikmagalur, Karnataka-based SVGH Vocational Training
College.
• Wipro: The company has launched a number of programmes aimed
at empowering women. Environment, education, and energy conservation are the
three fundamental pillars of CSR.
• ITC: With a diverse portfolio of businesses, ITC Limited
(ITC) is one of India's top private sector enterprises. ITC is utilising the
idea of the "Triple Bottom Line," which will aid in the advancement
of the economic, environment, and social development. The company's primary
areas of interest are increasing agricultural production and promoting greater
social inclusion in the rural economy.
• Maruti Suzuki, a company in the automotive sector, seeks to
address global warming and challenges including climate change. The company has
made significant investments in producing items that are good for the
environment and the community. Maruti Suzuki is working to protect the
environment and the natural world. The corporation has pushed the idea of
"reduce, reuse, and recycle" in all of its manufacturing facilities.
• The major state-owned enterprise for the processing and
distribution of natural gas is Gail Ltd. It contributes to the GAIL Charitable
and Education Trust's corpus, minorities in SC/ST, and natural disasters. Its
goal is to please every stakeholder. It engages in an activity that benefits communities
either directly or indirectly. It improves the local population's quality of
life and financial stability.
• IBM is a provider of software. The business is dedicated to
putting its environmental policy into practise, as well as providing its employees
with hygienic and safe working conditions.
CONCLUSION
Nevertheless, certain lessons can be
drawn from the scant experience of recent years. Government institutes CSR
because it wants business to assume greater responsibility for its stakeholders
or for society as a whole. As we all know, CSR gives businesses the chance to
participate in a variety of initiatives that either directly or indirectly
advance social welfare. Since businesses are social entities, they have a
responsibility to all parties involved. It is crucial that they handle this
duty effectively to ensure that everyone involved in the business is happy.
As is well known, corporations cannot
function effectively on their own; they require the help of their whole
society, which is crucial for their growth and reputation. Through the use of
voluntary initiatives including codes of conduct, environmental certification
and reporting, social audits, fair trading schemes, and social investment
programmes, many multinational firms are now taking steps to enhance their
environmental and social performance. Government and business must collaborate
in order to make significant improvements to the social welfare programmes of
the country.
Article Information
CORPORATE SOCIAL RESPONSIBILITY: A VIEWPOINT FROM INDIA
Authors: VARUN KAUSHAL, RITIKA DATTA
- Journal IJLRA
- ISSN 2582-6433
- Published 2023/10/04
- Issue 7
About Journal
International Journal for Legal Research and Analysis
- Abbreviation IJLRA
- ISSN 2582-6433
- Access Open Access
- License CC 4.0
All research articles published in International Journal for Legal Research and Analysis are open access and available to read, download and share, subject to proper citation of the original work.
Disclaimer: The opinions expressed in this publication are those of the authors and do not necessarily reflect the views of International Journal for Legal Research and Analysis.