Journal of Business Law and Ethics, Vol. 1 No.

1, December 2013 27

Corporate Social Responsibility: An Indian Perspective

Premlata1
Anshika Agarwal2

Abstract
Corporate Social Responsibility is now accepted as a means to achieve sustainable
development of an organization. Hence, it needs to be accepted as an organizational
objective. According to New Company Law, 2012 corporates must contribute 2% of
their net profits towards CSR which made Indian companies to consciously work
towards CSR, as it required a prescribed class of companies to spend a portion of their
profits on CSR activities. Any contribution towards welfare of society is called as .
Corporates can no longer limit themselves in using resources of society and they have to
be socially responsible corporate citizens and must also contribute to the social good.
The main aim behind this study is to see why CSR is vital for Corporation? Why should
they contribute for Country's Economic Development? and What are the Important steps
Government should take to improve contribution of corporate for CSR activities? As we
know, today Indian corporates go beyond Philanthropy (Charity) concept and its more
concentrate on all the stakeholder. The present research paper attempts to analyse
several such aspects of the new CSR law in the context of modern corporate philosophy
and also drawing attention of the government authorities towards practical difficulties
in the implementation of the new provisions.

Key words: Corporate Social Responsibility, Philanthropy, Department of Public

Enterprise, Special Purpose Vehicle

Introduction
The evolution of CSR in India refers to changes over time in India of the cultural norms of
coporates engaged in CSR activities. Businesses are managed to bring about an overall positive impact
on the communities, cultures, societies and environments in which they operate. The fundamentals of
CSR rest on the fact that not only public policy but even corporate should be responsible enough to
address social issues. Thus companies should deal with the challenges and issues looked after to a
certain extent by the states.
CSR 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 while at the same time addressing the expectations of shareholders and stakeholders.
Anything that is beneficial for the society can be called CSR and such activity must be shown by
company on their website and company should take approval from board.

1
Assistant Professor, Gargi College, University of Delhi
2
Ph.D Scholar, Department of Commerce,Delhi School of Economics, University of Delhi

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28 Journal of Business Law and Ethics, Vol. 1 No. 1, December 2013

CSR is an important element of development because companies need to look after their
communities, particularly those that are operating in rural areas. But, CSR also has an environmental
aspect that the business might influence based on their operation Many companies might have
motivations for doing CSR such as the genuine care of their environment and society that would
eventually become their source of human capital as well as raw materials that they need to sustain. Also,
some companies will see it as an important element of gaining societal acceptance for their operations.
It is really true for the companies that are operating in remote areas, like mining and oil and gas
companies. They are often encountered by many communities that indigenously live there, and the
companies have to live with these communities. Another aspect on CSR is that companies should see it
as a voluntary action rather than something that is highly regulated. Because it is something that is good
for the company to do, it’s not something that the company has to do because of law or anything else.
On the other hand, companies should not be really forced to do CSR as mandatory action, because
again, the development players are not just companies. It also includes government as well as civil
society and the community itself.
Data and Methodology
The data of this study is secondary data which we have collected from different sources such as
official websites of department Corporate Affair minister, Newspaper Articles, Research Papers and
Magazine Articles. As we know the traditional perspective stressed on Corporate Philanthropy which
means charity for Social, Cultural and Religious purposes and Modern Perspective stressed on long term
interest of stakeholders and sustainable development. The main aim behind this study is to see why is
vital for Corporation? Why should they contribute for Country's Economic Development? and What are
the Important steps Government should take to improve contribution of corporate for CSR activities?
We have examined the data from various sources and analyzed the same. We have not used any
statistical tools and techniques because we are not trying to establish any relationship between different
variables rather through discussions and analytical thinking we tried to see how our country has changed
its policy over the period of time and what are the result of these policies are.
Policy in India
Under the Companies Act, 2013, that replaces the nearly six-decade old legislation governing
the way corporate function and are regulated in India, profitable companies with a sizeable business
would have to spend every year at least 2 per cent of three-year average profit on CSR works. This
would apply to the companies with a turnover of Rs 1,000 crore and or more, or net worth of Rs 500
crore and more, or net profit of Rs 5 crore and more. As per new proposals, from the beginning of 2013-
14, Top earning PSUs like ONGC, BHEL and NTPC may have to double their expenditure on CSR as
per the new draft guidelines being finalised by the Department of Public Enterprises (DPE). PSUs with
net profit between Rs 100-500 crore are required to earmark 2-3% of their income. They have to ensure
that they spend full amount earmarked for , otherwise, they have to disclose why they have not spent
these fund. Public sector companies with a profit of less than Rs 100 crore are required to contribute
3% of their income for undertaking such activities.
The proposed guidelines stated that if Public Sector Units (PSU's) are unable to spend the
earmarked amount for CSR in a particular year, it has to be spent in the next two years. The guidelines
continue to exempt sick and loss-making PSUs from allocation of budget for undertaking CSR
activities.
Stipulation of the Company Bill, 2012
Every company with net worth of Rs 500 crore or more, or turnover of Rs 1,000 crore or more
or a net profit of Rs 5 crore or more during any financial year to constitute a CSR Committee of the
Board consisting of three or more directors, of which at least one director shall be an independent
director. The Board’s report to disclose the composition of the CSR Committee.

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Journal of Business Law and Ethics, Vol. 1 No. 1, December 2013 29

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.
After the CSR Committee makes it recommendations, Board of the company shall approve the
CSR Policy and disclose contents of such policy in its report and also place it on the company's website.
Further, details about the policy developed and implemented by the company on CSR initiatives during
the year to be included in the Board's report every year.
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 company fails to provide or
spend such amount, Board to specify reasons in its report for that failure. Companies required to comply
with CSR shall give additional Information by way of notes to the Statement of Profit and Loss about
the aggregate expenditure on CSR activities. Schedule VII of the Companies Bill 2012 prescribes
activities that may be included by companies in their CSR policies:
• 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.
Sachin pilot, Corporate Affair Minister has said there would also be a national level CSR body
to monitor the activities. So that Central Govt is planning to have a Special Purpose Vehicle to monitor
spending of CSR Fund and Projects. Govt want that there should be full utilisation of CSR fund.
Effects of CSR
• The contribution of CSR is not to contribute in one sector of society only rather to help
businesses and to nurture the society over a period of time. Company can contribute under CSR
in any of the sector (Education, Health, Environment, Upliftment for the society etc.) which
they like most and which is beneficial for the organization point of view.
• Corporations should participate effectively and efficiently for CSR contribution as
corporations are involved with numbers' of stakeholders like customers, employees, suppliers,
government, creditor, financial institutions, etc. so they have the responsibility to take care of
the interest of all the stakeholders for their own sustainable growth.
• Every Corporation must take initiatives for CSR practices to make this planet a better place to
live and not just this, it will also help corporations to build their goodwill.
• Corporations can differentiate themselves from their rivals by taking CSR initiatives.
• Company can take CSR as an opportunity and a platform for growth and survive.

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• A properly implemented CSR concept can bring along a variety of competitive advantages,
such as enhanced access to capital and markets, increased sales and profits, operational cost
savings, improved productivity and quality, efficient human resource base, improved brand
image and reputation, enhanced customer loyalty, better decision making and risk management
processes.
• Neither central government nor state government can tell corporate how to spend money
towards welfare for society. The decision rest on board how money spend in various CSR
activity.

Limitation of CSR Policy

• No incentive if company pay more than 2% of net profit.
• Carry forward of such an contribution not being mentioned under the provision of CSR. It
means if any of the company not able to spend 2% of average profit in any financial year so
that expenditure not being carry forward for next year.
• Company does not have adequate profits or is not in a position to spend prescribed amount on
CSR activities, the directors would be required to give suitable disclosure/reasons in their
report to the members.
• It is not clear whether the Section 25 companies or charitable organisations set up by them
would be included 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 suggested that CSR is an important part of corporate strategy in
sectors where inconsistencies arise between corporate profit and social goals, or discord can
arise over fairness issues. There are number of social sectors where corporate can play a
valuable role under CSR and can produce social goods for its society. According to him CSR
program can be profitable element for company strategy, reducing risk management,
Generating brand equity, improving relations with regulators, lower cost of capital, improved
human relation and employee productivity and to the maintenance of relationship that are
important to long term profitability.
• According to Anupam Sharma And Ravi Kiran, them CSR is emerging as a new field in the
management research. In India, many firms have taken the initiatives of CSR practices which
have met with varying needs of society. According to him number of IT and Auto industry is
more going for taking up CSR initiatives while FMCG sector. Authors said that India has
entered or taken a transformational change by involving into new CSR initiatives.
• According to Kishor Neelakantan, the enactment of the company act 2013 will create a big
regulatory push for CSR activities and this is mandatory for all company operating in India. so
it is good for economic development but how Shareholder think about it while evaluating
company? So according to author suggests that framework for investors to evaluate
companies’ CSR efforts which is based on four key parameters- Integrity, strategic orientation,
efficiency and transparency.

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Journal of Business Law and Ethics, Vol. 1 No. 1, December 2013 31

• According to Rahul Hakhu company should be forward looking to adopt in their corporate
policy and take initiative for applying this in the business so that they can achieve competitive
advantage, profitability in the light of liberalized world. He emphasis that government want
that corporation should be more responsible for the economic development of country, and
growth of CSR lead to transformation of agrarian economy to the path of industrialization. He
suggested that CSR provides valuable information to companies of India and other
stakeholders about the prospect of development, reputation.
Existing CSR Activities of some companies
• ONGC CSR projects focus on higher education, grant of scholarship and aid to deserving
young pupils of less privileged sections of society, facilities for constructing schools etc.
• SAIL has taken successful actions in environment conservation, health and medical care,
education, self employment programmers, sports and games etc.
• BHEL has developed a CSR scheme and its mission statement on CSR is "Be a committed
Corporate Citizen, alive towards its CSR". BHEL undertakes socio economic and community
development programmes to promote education, improvement of living conditions and hygiene
in villages .
• Reliance Industries initiated a project named as “Project- Drishti” to bring back the eyesight of
visually challenged Indians from the economically weaker sections of the society. This project
has brightened up the lives of over 5000 people so far. this project has also creating awareness
about the compelling need for eye donation
• Mahindra & Mahindra launched a unique kind of ESOPs- Employee Social Option in order to
enable Mahindra employees to involve themselves in socially responsible activities of their
choice. It also contribute under Mahindra Hariyali, Mahindra pride school, Mahindra
Education Trust. under Mahindra Hariyali, over one million trees have been planted across the
country, to increase the country green cover.
• Tata consultancy services is India’s largest software service company and has won the Asian
CSR award for initiating community development work and implementing various programs
and devoting leadership and sincerity as ongoing commitment in incorporating ethical values.
Major focus of the company is on education sector. Company is working upon literacy program
that cares TCS designed computer based literacy model to teach adults and this program is
known as a adult literacy program. Company also working upon environment policy and has
been developing environment friendly products and services.
• Infosys: As a leading software company Infosys is into the providing language and computer
education. Company has special program for unprivileged children by which company teaches
them various skills and change their outlook too. Company also donates carom, chess board,
chocolates etc. to the needy ones.CSR activity includes Blood donation camp and infosys
foundation has been working in the sectors of health care, education, environment preservation
and social rehabilitation.
• Wipro : Company has taken various initiatives to women empowerment. Three main CSR
activities include environment sector, education sector and energy conservation.
• ITC: ITC Limited (ITC) is among one of India's leading private sector companies having a
assorted portfolio of businesses. ITC is working with the concept of ‘Triple bottom line’ that
will contribute to the growth of economy, environment and social development. Major focus
area of the company is on raising agricultural productivity and helping the rural economy to be
more socially inclusive.
• Maruti Suzuki a automobile industry works upon global warming and global issues like climate
change Company has been strongly investing on environmental friendly products and
manufacturing best products for the society. Maruti Suzuki is working upon conserving
environment and preserving natural environment. Concept of reduce, reuse and recycle has
been promoted by company in all the manufacturing units.

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32 Journal of Business Law and Ethics, Vol. 1 No. 1, December 2013

• Gail ltd is largest state owned natural gas processing and distribution company. It contribute
towards corpus of GAIL charitable and education trust, natural calamities or disaster, sc/st
minorities population. Its objective to satisfy all of its stakeholder. It participate in an activity
which is directly or indirectly benefit the communities. it enhance the quality of life and
economic well being of local population.
• IBM is a software company. Company is committed towards the implementation of its
environment policy, health services, provide hygiene and safety work place to its employee.
Conclusion
From the limited experience over the last few years, some lessons nonetheless emerge.
Government introduce CSR because they wants corporation to become more responsible for the society
or for its stakeholders itself. As we know, CSR offer real opportunities for the corporations to contribute
in various activities which directly or indirectly help welfare of the society. Corporations are social
entity so they must take care of all stakeholders, it is vital for them to take charge of this responsibility
in efficient way so that all participant of corporation feel satisfied. As we know corporates can't stand
alone they also needs the support of their society at large which is important for their development and
goodwill. Many large corporations now taking steps to improve their environmental and social
performance through the use of voluntary initiatives such as codes of conduct, environmental
certification and reporting, social audits, fair trading schemes and social investment programmes.
Corporates and government must work together and through this, they can bring dramatical changes in
the welfare schemes of society.
References
http://www.indiacsr.in/en/?p=13220: Govt Can’t Tell Companies How to Spend
CSR money: Sachin Pilot
Initiative of major companies of India with focus on Health, Education and Environment. ISSN
2079_2034.
http://en.wikipedia.org/wiki/Corporate_social_responsibility
http://www.unrisd.org/unrisd/website/newsview.nsf/0/B163470112831808C1256DA90041ECC5?Open
Documen
http://knowledge.wharton.upenn.edu/article/corporate-social-responsibility-in-india-no-clear-definition-
but-plenty-of-debate/

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