Corporate social responsibility of a company deals with the activities that are of ethical values and principles contributing to sustainable development goals. In this developing world, business and governments understand that their access to capital and competitive positions depend on how well they have been able to achieve global standards at a higher level. CSR spectrum has two ends; at one end it is a cluster of all activities of good citizenship which is engaged by different organizations, the other end is how the business framework works to have an impact so significant on the community to get long term sustainability
CSR fundamentally looks upon how business assesses its social, environmental, and economic impacts and how it functions to maximize benefits and minimize downsides. CSR activities that a company follows goes beyond legal obligations to look after the impact it has on the environment and society. The accomplishment of any company’s CSR is reflected by having good navigating its stakeholders concerns with the implementation of its business model.
The World Economic Forum has defined CSR as the contribution that a company made to society at large from its philanthropy programs, business activities, and engagements in public policy. The contribution that a company makes is determined by how it manages its social, environmental, and economic impacts and how it manages the relationship with different shareholders i.e., customers, employees, partners, government, future generations, and communities.
CSR is termed as Third-Bottom-Line-Approach which is a broader concept from the charity. In charity, it’s more like sponsoring different philanthropic activities that are on surface level or superficial as part of the business model whereas CSR focuses more on deep and longstanding environmental and socio-economic issues.
Many new terms have risen for CSR such as Corporate Citizenship and Corporate Sustainability which define the same thing but the Corporate Social Responsibility is accepted widely. The term Corporate Social Responsibility is used because being a part of the society an individual has the responsibility to function ethically and in compliance to the legal obligations to adhere to practices for minimization of adverse conditions of the environment, human health, and society.
NEED FOR CORPORATE SOCIAL RESPONSIBILITY
Corporate social responsibility has 3 aspects on which a corporate focus upon i.e. Social Responsibility, Environmental Responsibility, and Economic Responsibility. A corporate needs to keep a balance between these 3 factors to have sustainability in the long term business model.
If corporate will focus only on the social aspect, then the corporate will face hampering their emphasis on effective business practices affecting the turnover of the corporate which create corporate standing in the market. If the corporate will focus only on the Environment aspect, then the corporate might deviate from establishing a good working environment for its staff for their well-being which will further affect corporate productivity. If corporate will focus only on the Economic aspect, then the corporate will be looked down upon by society and their activities will look covetous which will hamper their social relation which is necessary for corporate growth.
A corporate is also affected by the Community. In India community is also one of the stakeholders that have an impact over the corporates and apart from the government, community also hold a major part in granting the “license to run” to corporates. The corporates need to adopt efficacious CSR activities for the amelioration of the community so that it can maintain its “license to run.”
The community when being incorporated in the supply chain through investment for enhancement of their livelihood provides monetary benefits to corporate through its supply and demand chain. A corporate working for the community also attracts investors, as many investors that are investing in a corporate look for how well a corporate has worked for the benefit of the society and having a strong sense of CSR gives it constant support of its investors.
A good framework of CSR activities attracts and retains valuable and hardworking employees. The corporate’s commitment to philanthropy generates a sense of belonging in an employee which makes an employee more productive, creative, and commitment to the corporate. Engaging in CSR activities provides a positive work environment which makes the work more enjoyable and engages the employee in activities for the long term which overall benefits the employee in their growth and development and increases productivity.
For a corporate to stand in the market needs to have a good image and for that CSR helps in maintain a good image in the community which helps in increasing social relations and builds a good reputation which helps in developing corporate partnerships.
GLOBAL PERSPECTIVE OF CORPORATE SOCIAL RESPONSIBILITY
Looking at the global perspective of CSR
United Nations Global Compact (UNGC) has laid guidelines regarding Corporate Sustainability which makes the companies follow responsible steps and principles supporting society and pushing sustainability in corporate’s framework by making corporate to report their efforts annually.
International Labour Organisation’s (ILO) perspective of social responsibility of corporates has been one of the major parts of ILO’s effort in promoting social and economic progress. ILO’s emphasis on CSR is important because corporate has adopted activities that support international labor standards. ILO looks forward to implementing the InFocus Initiative which follows the guidelines of the MNE declaration which laid down good CSR practices and policies, it will make ILO’s leadership more advanced in this area.
Organization for Economic Co-operation and Development (OECD) has laid guidelines for multinational enterprises focusing on responsible business practices to be carried out according to standards and principles set by OECD. It contains standards of environmentally and socially responsible corporate behavior.
CORPORATE SOCIAL RESPONSIBILITY IN INDIAN LEGAL FRAMEWORK
CSR from an Indian perspective
National voluntary guidelines
Ministry of Corporate Affairs had presented guidelines that are National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business, various inputs from different groups, and stakeholders have been taken into account. The NVGs are designed in a way that assists enterprises to have a responsible approach through which they formulate the business model while considering the impact on different stakeholders, environment, and society at large.
NVG has laid down 9 principles:
Principle 1: Businesses should conduct and govern themselves with Ethics, Transparency, and Accountability.
Principle 2: Businesses should provide goods and services that are safe and contribute to sustainability throughout their life cycle.
Principle 3: Businesses should promote the well-being of all employees.
Principle 4: Businesses should respect the interests of, and be responsive towards all stakeholders, especially those who are disadvantaged, vulnerable, and marginalized.
Principle 5: Businesses should respect and promote human rights.
Principle 6: Businesses should respect, protect, and make efforts to restore the environment.
Principle 7: Businesses, when engaged in influencing public and regulatory policy, should do so in a responsible manner.
Principle 8: Businesses should support inclusive growth and equitable development.
Principle 9: Businesses should engage with and provide value to their customers and consumers in a responsible manner.
COMPANIES ACT 2013
To give a systematic framework for corporates including both private and public entities for the implementation of CSR activities, the government of India has made provisions related to CSR activities in Companies Bill 2012.
Clause 135 laid down in Companies Bill 2012 was passed by both the houses of parliament and received the approval of the President on 29/8/2013. The CSR provisions of the act are applied to the companies having annual turnover of One Thousand Crore rupees and more, or having a net worth of Five Hundred Crore rupees and more, or having a profit of Five Crore rupees or more. The rule is applicable from the year 2014-15, it requires companies to have a set-up of CSR committee, the committee should consist of their board members and it must include at least one independent director.
The report of the board under section 134(3) shall disclose the compositions of the CSR committee. The CSR committee shall recommend the policies of Corporate Social Responsibility which should indicate the activities that are mentioned in Schedule VII which are to be undertaken by the company and recommendation of expenditure amount that should be incurred by the company on the activities has to be made by CSR committee and also look after the Corporate Social Responsibility policy at regular intervals of time.
After taking into consideration the recommendations of the CSR committee the board of every company shall approve the Corporate Social Responsibility Policy and should disclose the same with its contents in a report and the same is to be put up on the company’s website, the board has to keep a check on the company that they adhere to the activities of Corporate Social Responsibility Policy.
The board also has to ensure that in pursuance of Corporate Social Responsibility policy every financial year the company spends at least 2% of the average of net profits that the company has made during 3 immediately preceding financial year.
Schedule VII of Companies Act 2013 lays down the activities that a company can include in Corporate Social Responsibility Policy Activities, that is:
- 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 socio-economic development and relief and funds for the welfare of the Scheduled Castes, the Scheduled Tribes, other backward classes, minorities and women; and
- Such other matters as may be prescribed.
SURVEYS ON CSR
Gujarat CSR Outlook Report 2017
This Gujarat CSR Outlook report provides in depth-analysis of Corporate Social Responsibility expenditure by big companies of the financial year 2015-16. This report considers 160 companies.
Sectors covered under the report:
Pie chart of the division of sectors (In %)
The actual expenditure of CSR in Gujarat was 375.66 crore INR out of which 63.86 crore INR was the share of PSUs in a total of CSR expenditure.
PSU shares 17% out of the total expenditure of CSR in Gujarat. (PSU is known as Public Sector Undertaking. They are a State-Owned Enterprise. The major portion of the share is owned by the government)
TOP 3 COMPANIES IN CSR EXPENDITURE IN EACH SECTOR
Torrent Pharmaceuticals Ltd. – 16.01 Cr.
Cadila Healthcare Ltd. – 14.45 Cr.
Dishman Pharmaceuticals – 2.10 Cr.
- Oil, Drilling, And Refineries
Tata Consultancy Services Ltd. – 9.89 Cr.
Financial Technologies Ltd. – 5.54 Cr.
Infosys – 5 Cr.
- Auto And Auto Ancillaries
Maruti Suzuki India Ltd. – 13.58 Cr.
SetcoAutomatives ltd. – 0.82 Cr.
Atul Auto Ltd. 0.45 Cr.
- Banking And Finance
Axis Bank – 7.55Cr.
ICICI Bank Ltd. – 6.27 Cr.
HDFC Bank Ltd. – 1.75 Cr.
- Steel and Aluminium
Ratnamani Metals and Tubes Ltd. – 3.67 Cr.
Hindalco – 2.95 Cr.
Atul Auto – 0.23 Cr.
NUMBER OF PROJECTS IN DIFFERENT AREAS
EXPENDITURE IN DIFFERENT AREAS (IN CR. INR)
Companies have spent more in the Education and Healthcare sectors for implementing different CSR projects. The new area i.e. Environmental Sustainability that is becoming more popular among companies for the implementation of CSR projects. Sectors like Technology Incubators in institutes of Academia and Urban area have not received much attention from companies in CSR projects.
Corporate social responsibility is the activities that a company works upon are those which aims to the welfare of society. As for a company to stand in the market, it has to look for the development of the society also. The society helps the company to grow in various ways as it is a major stakeholder in the company’s progress. There is a worldwide demand for CSR practices to be achieved and for the same various guidelines, initiatives and projects have been laid down. CSR has now worldwide attention and the trend tries to move in a direction where CSR is achievable in high response.
In India, CSR is mandatory for companies to follow. Section 135 of the Companies Act 2013 makes it mandatory for companies to spend on CSR activities annually. The activities included in CSR are enlisted in Schedule VII of the Companies Act 2013.
The survey conducted of companies of Gujarat shows that in which sector companies tend to invest more and which areas are needed to be looked after. It also shows whether CSR is being achieved overall and where the attention is required. The survey of companies shows how much a company spends on CSR activities and whether they can achieve that tend to, whether CSR goals that are set are being achieved it also shows in which sector a company invests more. It shows the relation between the company’s frame and its sector of investment. The amount spent by the companies shows the company’s focus on the development of society, it shows the philanthropic ideology of the company which makes them stand in the market with a better reputation.
The CSR is an essential feature as the county’s development is based on the overall development of society as well as the economy. The development of the country can’t rely upon the development of the only economy it has to look for the welfare of society as society makes possible the economic standards to be achieved. The companies should have effective control over the CSR activities, it should look after the implementation, whether the money spent is being utilized properly. The companies have to develop the philanthropy ideology to have better standing, to have a good reputation in the market, and for their own development.
Vinisha Jain, Institute of Law, Nirma University