The Corporate Social Responsibility concept is enrooted in the history of India and is nothing new, India is one of the first countries to legally mandate CSR through Section 135 of the Companies Act 20131 which sets a bar for all companies which has the said profit and income to spend on CSR. The Section is sector-neutral, which makes it less efficient. The paper delves into the operational work of different sectors and the need for tailoring a sector-specific CSR framework to ensure accountability and sustainability to a greater extent. The paper reviews the existing literature and sector-neutral limitations and provides suggestions for collaborative development with a holistic approach in the field of CSR.
KEYWORDS – Corporate Social Responsibility (CSR), Sector-specific, Section 135, accountability, sustainability.
INTRODUCTION
Corporate social responsibility is not a new concept in India, it has been imprinted throughout history dating back to the Vedic philosophy. Section 135 of the Companies Act, 20132 mandates every company having a net worth of 500 crore rupees or an annual turnover of one thousand crore rupees or more, or a net profit of 5 crore rupees or more, to establish a CSR committee and ensure expenditures on societal well beings are followed as per the subjects under schedule 7 of the said act.
Defining Corporate Social Responsibility can be very wide and cannot have a restricted ambit, however, the most accepted version of the definition is given by Caroll which states that CSR encompasses the economic, legal, ethical, and philanthropic expectations that society holds for organizations. This a very sustainable concept that elaborates the idea of companies and corporations beyond mere profit-seeking organizations rather than a social entity that runs
1Companies Act, 2013, s135, Acts of Parliament, 2013 (India).
2Id
towards profit maximization by considering the welfare of its employees and the environment surrounding it to attain ideal long-term stability and profit. We ought to choose between a global market driven only by short-term profit calculation, and one with a human face. Between a world that condemns a quarter of the human race to starvation and squalor, and one that offers everyone at least a chance of prosperity, in a healthy environment3. The ideologies of Mahatma Gandhi such as generosity and trust have deeply influenced the business development post- independence. the statist model set up by Jawaharlal Nehru regulated the CSR set up in India by legal regulations, and labor laws, and emphasized worker relations, community welfare, and principles regarding management.4
The CSR concept under Section 1355is sector-neutral. However not all sectors work the same way, some may exploit nature more to get the desired result while others may not to that limit. the manufacturing, factories, pharmaceuticals, and similar industries face challenges following CSR principles. Nevertheless, considering India’s mixed economy, industries have the authority to responsibly utilize natural resources within the regulated scope. CSR is a beacon for the holistic development of the nation. Considering sustainable development, worker welfare, and such dimensions by the manufacturing sectors, enhancing digital literacy among people, and increasing access to all in the technological industry, maintaining transparency and accountability in government sectors, financial stability initiatives by the banking sector are all striking examples of how this sector neutral provision is undertaken by different sectors. It would be impractical to expect all the sectors to follow the same type of CSR practices since the fundamental nature of the work in each sector is highly varying. This paper delves into the nuances of the sector-specific corporate social responsibility.
RESEARCH METHODOLOGY
This paper provides a comprehensive analysis of the corporate social responsibility specific to each sector. The research relied on secondary sources such as newspapers, websites, and government guidelines for information gathering and thorough examination.
3Press Release, Secretary General, Secretary-General Proposes Global Compact On Human Rights, Labour, Environment, in Address To World Economic Forum In Davos, U.N. Doc. SG/SM/6881 (Jan. 31, 1999)
4 Seema G. Sharma, Corporate Social Responsibility in India: An Overview, 43 INT’l LAW. 1515 (2009).
5Id. at 1
LITERATURE REVIEW
Corporate Social Responsibility in the Banking Sector –
Csaba Lentner − Krisztina Szegedi − Tibor Tatay6
This article devolves into the corporate sector’s ethical norms input, how CSR helps increase financial stability, and how banks incorporate CSR strategies. The paper embarks on the 2008 financial crisis and how ethical values are necessarily instilled in the minds of the corporation. The achievement of the Pareto optimal state by liberalization and unrestricted market practices enhances efficiency and advocates for ethical coordination, boosting economic welfare. The paper analyses the 2008 financial crisis which led to the understanding of societal needs and how in the long run efficiency can be guaranteed by invoking social responsibility and concern for the environment and surrounding fellow beings.
The paper analysed the working of the banking sector specifically with the Carols CSR pyramid
Source: Carrol,1991
The economic responsibility was held to increase profitability mitigate losses and mediate resources the best way it is usually the primary goal of all sectors to maximize profit and reduce loss, the legal responsibility placed in the next stage is to oblige to the regulations made by bodies like the UK Bribery Act, FATCA, etc and to increase the belief of the people in the financial system and reduce corruption and misuse of power. The lawful obligation and failure to
6 Csaba Lentner, Krisztina Szegedi and Tibor Tatay, Corporate Social Responsibility in the Banking Sector, Public Finance quarterly, 2015, vol. 60, issue 1, 95-103
attract penal provisions fall under the legal responsibility.
The philanthropic responsibility under the discretion of the sector makes a difference in the work outputs, these volunteer works may differ from sector to sector and differ even within these institutes amidst a single sector. The banking sector cordially carries out these responsibilities to fulfill societal expectations such as a safe workplace, fair competition, and sustainable development with environmental protection.it is the voluntary urger to work for betterment.
Banks are involved in various CSR activities, such as creating policies for financially disadvantaged groups, funding NGOs, helping clients, providing financial literacy and saving people from scams, reduction of corruption, encouraging culture, arts and sports, providing a safe workplace, etc.
The paper on the whole in the notion of mitigating the financial losses and national debts post the 2008 financial crisis spotlights the need and responsibility of all banks to maintain financial stability and regulate both micro and macro activities of the sector.
Corporate Social Responsibility in India: Issues and Challenges
– Rabinarayan Samantara and Shivangi Dhawan7
The paper opens by stating that dodging one’s responsibility is plausible but dodging the consequence of the same is not possible, hence CSR is a crucial aspect in the business since it’s not just the product quality that attracts people but the workspace environment, employee- employer relationship and all this affects the outcome and reliability.
India is the first country to regulate CSR through law provisions under Section 135 of the Companies Act 2013, earlier the companies needed to allocate 2% of their profit towards CSR activities upon failure have to provide reasonable excuse but the new amendment mandates the specified categorical companies to spend 2% of their profit in CSR activities within the stipulated time and if not turn this amount to funds run by the government such as the Prime Minister’s National Relief Fund. Through this amendment, the working of CSR principles has now been regulated and supervised by the Corporate Social Responsibility Committee.
Factors driving CSR as established in this paper include; cost management, tax relief, customer demand, value shift, brand building, staff retention/recruitment issues, government pressure,
7Samantara, R. and Dhawan, S. (2020) ‘Corporate Social Responsibility in India: Issues and Challenges’, IIMS Journal of Management Science, Vol. 11, No. 2, pp. 91-103
public pressure, investor pressure, ecological sustainability, social media, etc.
Majumdar et al. (2008) understand we are in a globalized world and advocate for the legal, ethical, sustainable, philanthropic, and environmental domains of CSR practices which bridge the gap between developed and developing countries. Prieto-Carrón et al. (2016) contributed to the governance and assessment of CSR and the importance of CSR research and evaluation.
Saxena (2016) and Arevalo and Aravind (2011) focussed on CSR models in India inclusive of the stakeholders model, ethical responsibility, and transparency model. This transparency increases the trust of people in these sectors. Du et al. (2010) discuss the role of media and other reports in checking CSR stakeholder perspectives and the positive output of social responsibility. Dubbink et al. (2014) explore the positives and negatives of transparency in CSR activities with how it increases the efficiency and challenges it faces. Dhawan (2019) analyses the green HR workings adopted by companies integrating environmental sustainability into their goals.
The paper analyzes the working of companies like TATA, Reliance Group, ITC, etc. the committees these companies hold to check their CSR domains of health, environment, education, and skill-building, the paper further deals with limitations and suggestions for the same.
HISTORY OF CSR IN INDIA
The management principles are highly influenced by Western literature & ideologies. However, the progress of CSR in India depends on the application of indigenous concepts that have existed in India for ages. Kautilyas Arthasastra written 2500 years ago held the Indian treatise in management, he had laid down three responsibilities of a king (the Vedic literature held the King as an accumulator of wealth and responsible for all of is subjects i.e how the CSR was anciently introduced) which were Raksha, Palan, and Yogakshma which means security, growth, and welfare respectively. CSR principles were further enhanced in Bhagavathgitha where Sri Krishna accentuates the selfless welfare of others, in Indian philosophy ethics is enrooted through the concept of dharma and has goals beyond this world and prides itself on virtues distinct from the Western concept of corporate social responsibility. These ideas are also a part of various Indian literature like Shanti Parva of the Mahabharata, thirukkural, etc.
Corporate social responsibility has widened its frontiers in recent years. The earlier notion of
CSR was a mere relation between corporations and society during the 1950s’s, later post-1990’s it became inclusive of stakeholder’s demands & ethical values.
The post-independence era stressed Public sector undertakings and higher restrictions which focussed mostly on Indian industries that did not reap the expected benefits hence the LPG
( Liberalisation, Privatisation, and Globalization) effect took place leading to the reduction of barriers and allowing more private ownership and acceptance foreign entries into the local markets, though the LPG effect proved to increase income and GDP it, however, brought along the corruptions and exploitations of MNCs. The apt solution for these was enforcing the long- lived CSR ideologies of India into a modern workspace.
THE 3 P’s OF CSR
People – they are the social variables who acquire the service and benefit through educational, health, and labor schemes. Companies ensure all the stakeholders, employees, investors, purchasers, and service providers are treated well and enhance the human rights and labor laws.
Planet– The environmental variable inclusive of land, water, soil, air, and other natural resources. environment and sustainability is necessary to be taken into account in parallel to the business productivity, Rahman (2011) emphasizes the necessity of balancing both business goals and SDGs.
Profit– it the the economic variable. the whole aim of running a business is to gain profit and have a claim over it, but to retain profit over a longer period the business should sustain along with social responsibility.
SECTOR-SPECIFIC CSR
Source:https://assets.kpmg.com/content/dam/kpmg/in/pdf/2020/02/india-s-csr-reporting- survey-2019.pdf
CSR though mandated by law to all sectors the approach that each sector takes towards CSR activities varies highly with the nature of work carried out, for example, an extractive industry inclusive of mining activities has its environmental challenges in comparison to tech industries, yet there are some CSR works that all the sectors may equally invest in such as funding government and Non Governmental organizations, inculcating culture and heritage in their work, awareness creating and environment protection schemes, etc.
Expenditures of each sector on CSR activities differ as per the nature of the activity and the fundamental goal of the company.
Companies like the TATA group indulge in CSR programs such as providing scholarships to numerous educational institutions, women empowerment through SHGs, helping the rural class of people to develop through education, healthcare projects, infrastructure development for hospitals, research centers, agricultural programs, etc. Though the TATA group of companies is a conglomerate of nearly 100 companies involved in various primary business activities from chemicals, to energy production and material manufacturing it adopts various CSR practices unrelated to its sectors nevertheless it has also adopted green growth aspirations by TCS investing 50 billion dollars in revenue with a net zero carbon footprint the same year. These are the ways how a large conglomerate can be involved in CSR activities. Even companies like Mahindra & Mahindra, ITC, and Ultratech Cements have adopted similar CSR practices to uplift
the downtrodden and sustainably boost India’s economy. The K. C. Mahindra Education Trust and Mahindra Foundation, have developed education with programs like Nanhi Kali and Mahindra Pride Schools, providing scholarships to the needy, furnishing healthcare provisions, and providing access to all the.
The e-Choupal program an initiative of the ITC group of companies is used to develop the agricultural sector by connecting farmers and digitalization, helping convert wastelands to plantations, and fostering the farm foestry. Ultratech Cement is extensively involved in the development of the rural sector and the upliftment of villages.8
The industrial setup in India is very vast and includes manufacturing healthcare IT, etc.
The manufacturing industry has an everlasting environmental footprint and hence must reduce carbon emissions, improve waste management, and adopt renewable energy sources. Fair wages, a safe working environment, and employee protection must also be included in the industrial regulation.
The healthcare industry is actively involved in following CSR activities by setting up free medical camps and providing free check-ups, spreading awareness of diseases, and enhancing precaution is better than cure. the legal industry provides free legal aid which is even a part of the Indian constitution Article 39A which states the necessity for pro Bono legal aid.
The IT sector develops digital literacy and protects robust digital privacy, creates digital awareness, and evolves cyber security as a way of following Corporate Social responsibility principles.
The agricultural sector balances the development of this industry by using fertilizers and pesticides at a very minimal level, adopting organic farming, and developing irrigation systems and other infrastructure to reap maximum benefits by exploiting and degrading the ground minimally.
The energy sector focuses on renewable and clean energy sources so that the goal remains long-
8Dezan Shira & Associates,Corporate Social Responsibility in India, India Briefing,March 23,2020
https://www.india-briefing.com/news/corporate-social-responsibility-india-5511.html
term oriented, while the financial sector such as banks focuses on financial literacy, ethical lending practices, and microfinance initiatives and maintains transparency.
JUDICIAL PRONOUNCEMENTS
Corporate social responsibility, though explicit under the Companies Act 2013, is also regulated by labor laws, disaster management, redressal mechanisms, environment tribunals, consumer courts, etc.
There are many cases where the failure of the industries has caused a huge loss to the environment, people living in the surroundings, and the overall economy.
In the case of MC MEHTA V. UOI 19869, the Hon’ble SC set up a high-powered authority to check the working of hazardous industries and directed to formulate a national policy on the placement of such issues, the court directed to set up ecological science research groups and regional environment courts to monitor the working of such issues. The court induced a new principle of absolute liability in this case, according to which if any person or industry is involved in harmful work affecting the environment another fellow being is liable. Establishing the Public Insurance Liability act.10 These principles were also applied in the 2020 national green tribunal judgment of In Re: Gas Leak at LG Polymers Chemical Plant in RR Venkatapuram Village11 where the company was directed to pay a 50 crore rupees fine. These stand as an example where if the industries are not following a socially responsible output of work they will be monitored and incur penalties for the same.
In the case of Bandhua Mukti Morcha vs Union Of India & Others12 the bonded labor system was abolished strengthening the labor laws and further enabling the principles of CSR, regulating rules and regulations for the best interests of the workers.
Through the above-discussed cases, the judiciary’s role in highlighting the CSR principles even
9M.C. Mehta And Anr vs Union Of India & Ors,1987 AIR 1086
10Public Insurance Liablity Act,1991, Acts of Parliament, 1991 (India)
11Re: Gas Leak at LG Polymers Chemical Plant in RR Venkatapuram Village in Andhra Pradesh,
12Bandhua Mukti Morcha vs Union Of India & Others, 1984 AIR 802
before Section 135 of the Companies Act 2013 was established serves as a reminder that CSR is beyond corporate ethos and is a legal and moral obligation. These landmark judgments have established policies and penalties and the concept of absolute liability which holds the business environment accountable for all their actions and consequences. The work of the judiciary ensures a positive impact on all sectors of the environment and holds them liable for all detrimental actions.
LIMITATIONS
Understandably, the nature of work in every sector is highly varying and some industries need a stricter and higher regulatory framework whereas for some industries minimal CSR regulation will work, since in a diverse country like India sector-neutral CSR has challenges of its own.
Section 135 of the Companies Act 2013, is very generic and not sector-specific, though it categorically demands certain companies to show their expenditure on CSR activities, the division is based on income and not sector specific leading to ambiguity and inconsistency since it will be difficult for the enterprises to decide the more relevant and impactful work due to inefficient regulatory mechanism.
The socio-economic condition of India poses a threat for small and medium enterprises to follow CSR principles due to lack of funds but on the other hand, large enterprises suffer from inculcating these principles alone with their profit maximization goals.
The issues such as poverty, inequality, trafficking, labor harassment, lack of education, and lack of access to proper livelihood differ from area to area and sector to sector, having a sector- specific guideline would develop a better understanding of the contemporary issues and a more responsive CSR activity.
The diversity in the sectors calls for a more sector-specific CSR regulation to increase efficiency holistically.
SUGGESTIONS
It is highly recommended to bring in sector-specific CSR mandates in India to increase efficiency. It is suggested that the Ministry of Corporate Affairs along with stakeholders, industry experts, civil societies, and other relevant agencies draft a sector-specific CSR law to extract the best out of every company understand CSR priority in that sector, and co-create sustainable development. Initiatives to conduct CSR workshops and create awareness among the companies about how CSR is the need of the hour for sustainable development and provide incentives like reduction in tax payments or award distribution for companies adhering to CSR principles may encourage companies under all sectors to adapt the same.
Addressing metrics, benchmarks, and assessment frameworks amidst the sectors to calculate their position in CSR and stimulate partnerships between companies, NGOs, and international bodies to develop CSR works can be fruitful.
Promotion of transparency by establishing sector-specific CSR reports inclusive of tasks and achievements so that similar industries can draw inspiration and vicariously develop their projects holistically. All sectors are dynamic and regular updates should be modified based on contemporary scenarios, The setting up of a national-level CSR monitory commission and committee would help monitor all sectors and how each sector can develop without disturbing the environment & surroundings and the help they need. Inculcating AI & technology in the execution may help increase the scalability of the CSR setup in India.
CONCLUSION
While CSR has been in India through eras the concept of sector-specific CSR is not widely propagated. The judicial precedents and legal framework in India provide a perfect ground for boosting CSR-oriented developments, however, the sector-neutral approach of Section 135 of the Companies Act 2013 poses obstacles due to the socio-economic disparities amidst the different sectors, and differences in the vocational performances of each sector create an ambiguity. The multiple sectors such as manufacturing, technology, education, finance, agriculture, etc have different methods of CSR application as established in this paper. Fund allocation, strategic planning, and monetary constraints can all be faced with proper collaboration among stakeholders, technological integration, transparency, and alignment with sustainable goals that prove effective.