CHAPTER -1

INTRODUCTION

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 CHAPTER 1 : INTRODUCTION
PAGE
OUTLINE OF CHAPTER
NO.

1.1 OVERVIEW OF CORPORATE SOCIAL RESPONSIBILITY 3

1.2 EVOLUTION OF CORPORATE SOCIAL RESPONSIBILITY 8

IMPORTANCE OF CORPORATE SOCIAL

1.3 10
RESPONSIBILITY

1.4 BUSINESS AND SOCIAL RESPONSIBILITY 14

1.5 CONCEPTUAL FRAMEWORK 17

1.6 CORPORATE SOCIAL RESPONSIBILITY IN INDIA 18

DEVELOPMENT DEBACLE AND PRIVATE-SECTOR

1.6.1 20
RESPONSIBILITY
CORPORATE SOCIAL RESPONSIBILITY IN INDIA: THE
1.6.2 22
EVOLUTIONARY PROCESS

1.6.3 PRE-INDUSTRIALIZATION ERA (BEFORE THE 1850s) 23

EMERGENCE OF BUSINESS PHILANTHROPY (1860-

1.6.4 25
1920)

1.6.5 PRINCIPLED BUSINESS PHILANTHROPY (1920-1960) 27

1.6.6 THE GROWTH OF CSR (1960-1980) 30

1.6.7 STRATEGIC CSR: 1990 TO THE PRESENT 33

1.7 LEGAL FRAMEWORK FOR CSR IN INDIA 37

1.8 COMPANY PROFILE 38

1.9 CONCLUSION 40

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 CHAPTER 1 : INTRODUCTION

1.1 OVERVIEW OF CORPORATE SOCIAL RESPONSIBILITY

Like many of management and social science definitions, Corporate Social

Responsibility is fraught with definitional problems, which makes it difficult for a
uniform platform to assess firms’ responsiveness to it.

Defining Corporate Social Responsibility is not easy. First, this is because

Corporate Social Responsibility is an “essentially contested concept,” being
considered as valued “internally complex,” and having relatively opens rules of
application (Moon, Crane, and Matten, 2005:433-434).

Second, Corporate Social Responsibility is an umbrella term overlapping with

some, and being synonymous with other conceptions of business-society relations
(Matten and Crane, 2005). Third, it has clearly been a dynamic phenomenon
(Carroll, 1999).

Definitions were expanded during the 1960s and proliferated during the 1970s. In
the 1980s, there were fewer new definitions, more empirical research, and
alternative themes began to mature. These alternative themes included corporate
social performance, stakeholder theory, and business ethics theory. In the1990s,
Corporate Social Responsibility continues to serve as a core construct but yields
to or is transformed into alternative thematic frameworks (Caroll, 1979). In the early
periods of 2000s and of late Corporate Social Responsibility remain an emerging
and elusive idea for academics and a contested issue for business managers and
their stakeholders.

Owing to the range of contrasting definitions, the notion of Corporate Social

Responsibility has led to the emergence of a variety of practices (Freeman 1984;

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Crane and Matten 2004; Welford 2004; Habisch and Jonker 2005; Fairbrass et al
2005; Moon, Siegel, 2008; Lockett, Moon, and Visser, 2006). In brief, the concept
of Corporate Social Responsibility has evolved considerably since it first emerged
in the 1950s (Carroll 1999; Freeman 1984:38; Carroll and Beiler 1977; Sturdivant
1977). As a result there appears to be disagreement about what the term means,
whether it should be implemented, how or why it should be implemented (Welford
2004; Stigson 2002).

At the core, Corporate Social Responsibility is the idea that reflects the social
imperatives and the social consequences of business success. Thus, Corporate
Social Responsibility empirically consists of clearly articulated and communicated
policies and practices of corporations that reflect business responsibility for some
of the wider societal good. Yet, the precise manifestation and direction of the
responsibility lie at the discretion of the corporation. Corporate Social
Responsibility is therefore differentiated from business fulfilment of core profit-
making responsibility and from the social responsibilities of government
(Friedman, 1970).

Bowen (1953), set forth an initial definition of the social responsibility of

businessmen is one of the early contributors on the concept, conceived Corporate
Social Responsibility as business policies and decisions, which give values to the
society. “It refers to the 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” He argued that social responsibility is
no panacea, but it is an important value that must guide business in the future.

Another early proponent of social responsibility, Frederick (1960), defines social

responsibility as the use of society’s resources; economic and human, in such a
way that the whole society derives maximum benefits beyond the corporate entities
and their owners.

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Keith Davis (1960), set forth his definition of social responsibility by arguing that it
refers to “businessmen’s decisions and actions taken for reasons at least partially
beyond the firm’s direct economic or technical interest”. He asserted that some
socially responsible business decisions can be justified by a long, complicated
process of reasoning as having a good chance of bringing long run economic gain
to the firm, thus paying it back for its socially responsible outlook. His “Iron Law of
Responsibility” held that “social responsibilities of businessmen need to
commensurate with their social power”. He further took the position that if social
responsibility and power were to be relatively equal, then the avoidance of social
responsibility leads to gradual erosion of social power on the part of businesses.

Joseph W. McGuire stated, “the idea of social responsibility supposes that the
corporation has not only economic and legal obligations but also certain
responsibilities to society which extend beyond these obligations”. He later
elaborated by saying that the corporation must take an interest in politics, in
welfare of the community, in education, in the happiness of its employees and in
fact in the whole social world.

A landmark contribution to the concept of Corporate Social Responsibility came

from the Committee for Economic Development (CED), which observed, “a
business functions by public consent and its basic purpose is to serve
constructively the needs of society to the satisfaction of society”. The CED noted
that the social contract between business and society was changing in substantial
and important ways - Business is being asked to assume broader responsibilities
with respect to society than ever before and to serve a wider range of human
values. Business enterprises, in effect, are being asked to contribute to the quality
of life rather than just supplying quantities of goods and services. In as much as
business exists to serve society, its future will depend on the quality of
management’s response to the changing expectations of the public (CED, 1971).
According to Votaw (1972), social responsibility may also refer to an obligation, a

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liability, social consciousness, corporate legitimacy, charitable contributions, “do
goodism”, managerial enlightenment and so on.

Carroll (1979) defines corporate social responsibility as the entire range of

obligations a business owes to society, and it encompasses the economic, legal,
ethical and discretionary expectations that society has of organization at a given
point in time. A good corporation is one, which “Voluntarily shares its market power
and resultant pecuniary gains and thereby yields accountability for its action and
performance with those groups- who have been adversely affected by the power.”

According to the Canadian Center for Philanthropy, Corporate Social

Responsibility is “a set of management practices that ensure the company
minimizes the negative impacts of its operations on society while maximizing its
positive impacts”. This definition provides the link between the decisions tied to the
social responsibility and the business derived from the respect of the lawyer
instruments, the population, the communities, and the environment.

‘The European Commission with the Green Paper -Promoting a European

framework for Corporate Social Responsibility’ (July 2001) better defines the
concept of Corporate Social Responsibility as “a concept whereby companies
integrate social and environmental concerns in their business operations and in
their interaction with their stakeholders on a voluntary basis. Being socially
responsible means not only fulfiling legal expectations, but also going beyond
compliance and investing ‘more’ into human capital, the environment and the
relations with stakeholders”. The word “more” is underlined also in the original
version of the document: in this way the European Commission wants to
emphasize the lack of consideration for the different cooperating actors
highlighting, for the future, the urgency of a severe increase of the sensibility and
the cures and, at the same time, encouraging the enterprises to the investment in
social responsibility as a vehicle for the best competitiveness and enlargement.

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Patricia Ditzler (1983) defined Social Responsibility as a voluntary expenditure or
activity by a corporation with charitable intent, for which marginal returns are less
than those available from other alternative activities. According to Donna Wood
(1994) corporate social responsibility means “a business organization’s
configuration of principles of social responsibility, processes of social
responsiveness and observable outcomes as they relate to the firm’s societal
relationships.”Backman (1975) considers social responsibility as other stated
objectives by business, which are not directly related to economic, but rather
address its negative externalities, improve employee’s conditions and the societal
quality life.

The World Business Council for Sustainable Development (WBCSD, 1998, p. 3)

at its first dialogue in 1998 conceived Corporate Social Responsibility as the
continuing commitment by business to behave ethically and contribute to economic
development while improving the quality of life of the work force and their families
as well as of the local community and society at large. More recently (WBSCD,
2000), the working group of the council convened series of global stakeholder
dialogues and modified their earlier definition to include sustainable development.

According to Michael Hopkins (2003), Corporate Social Responsibility is

concerned with treating the stakeholders of the firm ethically or in a responsible
manner. ‘Ethically or responsible’ means treating stakeholders in a manner
deemed acceptable in civilized societies. Social includes economic and
environmental responsibility. Stakeholders exist both within a firm and outside. The
wider aim of social responsibility is to create higher and higher standards of living,
while preserving the profitability of the corporation, for people both within and
outside the corporation.

Jones cites the UK government’s Department of Trade and Industry-sponsored

Corporate Responsibility Group who defined Corporate Social Responsibility as:
the management of an organization’s total impact upon both its immediate

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stakeholders and upon the society within which it operates. Corporate Social
Responsibility is not simply about whatever funds and expertise companies choose
to invest in communities to resolve social problems, it is about the integrity with
which a company governs itself, fulfils its mission, lives by its values, engages with
its stakeholders, measures its impacts and reports on its activities.

Corporate Social Responsibility is about the way businesses take account of their
economic, social and environmental impacts in the way they operate - maximizing
the benefits and minimizing the downsides.

1.2 EVOLUTION OF CORPORATE SOCIAL RESPONSIBILITY

There is an impressive history associated with the evolution of the concept and
definition of Corporate Social Responsibility. The general understanding of the
term, ‘Corporate Social Responsibility’, is that business has an obligation to
society, which extends beyond its narrow obligation to its owners or shareholders.
This idea has been discussed throughout the twentieth century, but it was Howard
R. Bowen’s book ‘Social Responsibilities of Businessman’ published in 1953,
which was the origin of modern debate on the subject. Since then, the topic of
corporate social responsibility has been explored extensively. Bowen reasoned
that there would be general, social and economic benefits that would accrue to
society, if business recognized its broader social goals in its decisions.

DEVELOPMENTAL HISTORY OF CORPORATE SOCIAL RESPONSIBILITY

The developmental history comprises three phases: (1) rise and extension; (2)
decline and absorption; (3) and a revival of the concept. Although responsibility
rhetoric remains, the responsibility construct has tended to evaporate under
criticism of its alleged vagueness and internal inconsistency (Levitt, 1958;
Friedman, 1962, 1970). What Carroll (1999, p. 268) calls ‘alternative themes’ have
succeeded that construct in academic circles, corporate social performance,
stakeholder theory, and business ethics approaches. In managerial circles global

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corporate citizenship and stakeholder stewardship rhetoric focused in practice on
an emerging economic theory of profitable ‘responsibility’. The academic context
of this developmental history is conceptually and empirically disparate. Business
and society studies comprise a very loose affiliation of several research and
teaching streams. While partly overlapping, these streams do not organize around
any widely accepted core paradigm (Preston, 1975). These streams generally
include business ethics, corporate social performance, environmental protection,
global corporate citizenship, international policy regimes, public policy (i.e.,
business-government relations), and stakeholder agreement theory.

THE PROGRESSIVE ERA

Adam Smith (1776, Book 4,Ch.2) pronounced explicitly that economic self-interest
is typically a more reliable path to social welfare improvement than affecting to act
for the public interest. Responsibility and responsiveness emerged out of
Progressivism. The Progressive reform movement emerged in the U.S. at the turn
of the century. Progressivism was more “the common spirit of an age rather than
an organized group or party” (Tindall, 1988, p. 941). While the modern terminology
did not develop until after World War II, business leaders have since the 1920s
widely adhered to some conception of responsibility and responsiveness practices.
However, they did so as both business apologetics and business methods for
defusing conflict with potentially influential interest groups. Drucker (1999) states
that managerial balancing of stakeholder interests dates to the 1920s. Freeman
(1984), in his seminal book founding stakeholder theorizing, conceded that,
despite strictly product-market theories of efficiency and effectiveness, “Business
has always dealt with non-market-place stakeholders” (p. 28).

(Mitchell,1989) “traced the emergence of corporate social responsibility in the

1920s as an ideological movement intended to legitimize the power of large
corporations” (Oberman, 2000), (Carnegie,1900) preached essentially, “riches
oblige” (labeled here in imitation of “noblesse oblige”). But this philanthropy

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occurred after retirement from the competitive race for personal opportunities
played without legal or moral restraints (Chernow, 1999).

MODERN ERA
The modern “mixed economy” is a blend of more and less regulated industries,
leaving a large role for government (Bowen, 1953). Corporate Social Responsibility
had already shown considerable interest in the 1960s and 70s, spawning a broad
range of scholarly contributions (Cheit, 1964; Heald, 1970; Ackermannand Bauer,
1976; Carroll, 1979), and a veritable industry of social auditors and consultants.
Increasingly, up to the 1970s the understanding of Corporate Social Responsibility
focused on companies’ obligation to work for social betterment. However, since
the 1970s focus shifted to social responsivess - in other words, the capacity of
organizations to respond to social pressures. With the change in the managerial
approach, Corporate Social Responsibility has now developed and become more
mainstream and leadership roles for initiating a wide variety of Corporate Social
Responsibility activities have been crystallized and highlighted. However, the topic
vanished from most managers’ minds in the 1980s (Dierkes &Antal, 1986; Vogel,
1986) and only re-emerged in nineties. With a wide range of contributions [(Wood,
Donna J. (1991), Gopalakrishna (1992), Frooman (1997), Reed, Darryl (1999),
Pushpa Sunder (2000), McWilliams and Siegel, (2000), Michael Hopkins (2003),
Donald (2007) Matten and JeremyMoon (2008), Field, David, (2009)] towards
corporate social responsibility.

1.3 IMPORTANCE OF CORPORATE SOCIAL RESPONSIBILITY

Corporates interact with society in many ways. They invest in facilities, produce
and sell products, employ people and subcontract or in-source many activities.
They also have an impact on the environment by the nature of their activities, by
using valuable resources, or creating by-products, which influence the physical
environment. Their interaction with society is through their employees and the

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many facets of society around them. Further, corporates may act explicitly as
responsible, for either emotional reasons or business purposes.

As the organization is a part of the society, it cannot function in isolation. So there

is an obligation and responsibility from the part of the corporate to take action that
protects and improves the welfare of society as a whole along with their own
interest (Keith Davis, 1975. The society plays a pivotal role in the success of any
organization. Hence, no organization can achieve long-term success without
fulfilling the responsibility towards the society. Originally, businesses were seen
strictly as economic entities with the primary responsibility for producing goods and
rendering services required by a society. This is the classical view held by Milton
Friedman and Hayek, Theodore Levitt and others. According to Friedman (1971)
“Corporate social responsibility is beyond the basic purpose of business and
violates the responsibility of business to its owners, the stockholders”. However,
over time, business came to see their role in broader perspectives.

With the business environment being characterized by various developments

including the shift of power from capital to knowledge, increased levels of literacy
and the shrinking of geographical boundaries due to faster means of travel and
communication, people are, by and large, becoming conscious of their rights,
which has led to a rise in the expectations of society from business.

An organization receives inputs from society in the form of skilled / unskilled labor,
raw material and natural resources, and, in turn, offers goods and services to
society. Thus, businesses depend on society further existence and it is in their
interest to take care of society. Businesses cannot operate or in vacuum. Like
individuals, businesses also need to live in the real world, i.e., in society.

Corporate Social Responsibility involves a commitment by a company towards the

sustainable economic development of the society. It means engaging directly with
local communities, identifying their basic needs, and integrating their needs with

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business goals and strategic intend. The government perceives CSR as the
business contribution to the nation’s sustainable development goals. Essentially,
it is about how business takes into account the economic, social and environmental
impact of the way in which it operates. Simply stated, CSR is a concept, which
suggests that commercial corporations must fulfill their duties of providing care to
the society.

According to Goyder (1951), industry in the twentieth century can no longer be

regarded as private arrangement for enriching shareholders. It has become a joint
enterprise in which workers, management, consumers, the local government and
trade union officials, all play a part. Goyder pleaded that business has to be
accountable to the public at large and he sought to equate the suggestion of a
responsible company with the trusteeship concept advocated by Gandhiji, the aim
of which is to ensure that private property is used for the common good.

Business today is realizing that the world is not made up of strangers. There is a
human bondage. There are customers, employees, suppliers of goods,
shareholders and the competitors. Most firms today recognize and realize that they
have obligations to the society that extend beyond economic performance. This
concept came to be known as “corporate social responsibility”. Thus, the business
has an obligation to consider the impact of its activities on all stakeholders who
constitute broader segments of society.

The managers of large corporations and smaller businesses came to realize that
they have responsibilities that extend beyond their own stockholders to a wide
range of parties dependent on or affected by corporate performance. These parties
are known as stakeholders. Freeman’s (1984) classic definition of stakeholders,
arguably the most popular definition cited in the literature (Kolk and Pinske 2006),
proposed that stakeholders are ‘any group or individual who can affect or is
affected by the achievement of a corporation’s purpose’. In addition to a company’s
shareholders, its stakeholders include its employees, the communities in which it

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operates, suppliers, customers, government and society at large. In the opinion of
Davis Blomstorm (1975), it is the obligation of decision makers to take actions that
protect and improve the welfare of society as a whole along with their own interest.
Protecting and improving are two aspects of social responsibility. “To protect”
implies avoiding negative impact on society, whereas “to improve” implies creating
positive benefits for society.

The business class should render their support to the general people. If they will
be uplifted socially and economically, the productivity of the corporate is also
bound to increase. The Corporates are to act according to the environmental
factors given in below Figure like social, legal and ethical environment.

Chart 1. 1 : Corporates and Environmental Factors

Source: Sethi (1991)

As per the above figure Corporate Social Responsibility is an obligation of the
organization to act in a way that serves both its own interests and interests of its
many external communities and environmental factors such as social environment
including customers, employees, creditors, suppliers of goods, society and legal

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environment comprises of state and local governments. To get successful results
the corporate should hold moral values and judgments and ethical standards.

Corporate is not merely profit making institution. They have a responsibility to help
society to overcome problems of the business. One of the areas in which corporate
social responsibility has to be practiced by corporate are health, - environmental
issues, education, community, and promotion of art and culture and climate
change. The following figure shows clearly some of the practices expected from
corporates as their social responsibility towards society at large.

Chart 1. 2 : Corporate Social Responsibility towards the society at large

Source : Adapted from Kamatchi. P, 2002

1.4 BUSINESS AND SOCIAL RESPONSIBILITY

Business plays a significant role in economic, social, political and technological

affairs. So business owes responsibilities to all segments of society. Wealth of a
country is to a great extent controlled by business. This gives business and its

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executives “enormous power” to affect the lives of employees, consumers,
shareholders, etc.

Business is a part of the total environment in which we live, being influenced by it,
while being a force in influencing it. The relationship between business and its
environment is one of mutual benefits - as explained below in figure 1.3 both take
from and give to various segments. Only through such a relationship can a
business survive and prosper.

Chart 1. 3 : Business and the total environment

Source : Porter and Kramer 2006

Business and its Stakeholders
The concept of stakeholder highlights the fact that corporate activity is not solely a
set of market transactions, and also incorporates a cooperative and competitive
endeavor that involves a large number of people organized in various ways. The
corporation is an entity through which many individuals or groups of people try to
achieve their ends (Boatright 2003). Freeman and Reed (1983) distinguish two

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senses of the word stakeholder. The ‘narrow definition’ includes group that are vital
to the survival and success of the corporate, while the ‘wide definition’ includes
any group or individual that it can affect, or be affected by (according to
Beaauchamp and Norman 2001). Freeman (1984) presented a stakeholder map
of the organization as shown in below Figure

Chart 1. 4 : The Stakeholder map of an organization

Source : Freeman 1984

The business is to restore its reputation as a friend, not as an enemy of progress

around the world. Doing no harm goes beyond the meeting of legal requirements
regarding the environment, conditions in community relations and ethics. The law
always lies behind the best practice. Business needs to take the lead of areas such
as environmental and social sustainability instead of forever letting it be pushed
into the defensive.

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1.5 CONCEPTUAL FRAMEWORK

Chart 1. 5 : Conceptual Corporate Social Responsibility - Organizational culture -Business Ethics Linkage
model

The Conceptual Frame Work shown in the Figure explains the linkage between
the dependent variable Corporate social Responsibility and the independent
variables Organization Culture, Business Ethics and Socio Economic variables.
Corporate social Responsibility the dependent variable comprises of nine
dimensions such as Stakeholder value, Priority areas, Implementation structure,
Organizational benefit, Prompted initiation, Problem emphasis ,Decision makers,
Review activities and Future plans. The independent variable Organization Culture

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highlights eight dimensions such as Ability Utilization, Growth and Innovation,
Helping Behavior, Low Stress, Personalized Relationship, Individual Dignity and
Goal Achievement, Bureaucracy and Shared Outlook. Similarly Business Ethics
analysis through two dimensions such as Business ethics attitude and Business
ethics practice. The framework also establishes relationships between the Socio
Economic variables such as duration of establishment, age, gender, marital status,
education, total experience, experience with present organization, monthly self
income and total family income of the respondents with the variables of Corporate
social Responsibility, Organization Culture and Business Ethics.

1.6 CORPORATE SOCIAL RESPONSIBILITY IN INDIA

The post-independence governments in India, in the last six decades, have under-
taken many development initiatives. Still the problems of poverty, environmental
degradation, lopsided access to wealth, or a lack of basic amenities have
necessitated a multi-pronged approach to social development in India. Although
the government continues to improve the conditions of the socially and
economically deprived sections of society through various development programs,
the business and voluntary sectors are expected to complement the government’s
efforts. In addition, civil society organizations, such as consumer action groups or
advocacy groups, have placed much pressure on companies to adopt better
business practices and be more responsive to society’s misery. The good news is
that many Indian companies traditionally have accepted a social obligation beyond
the creation of wealth for shareholders.

Company involvement in social-development projects in India can be traced back

to the pre-industrialization era when traders and merchants contributed large sums
of money for the betterment of their communities and the needy. Merchants,
traders, and wealthy businessmen historically have responded to the problems of
the society in their own way. Even after independence, when India faced the
challenge of ensuring equitable socio-economic development across the country,

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many business houses—such as the Tatas, Birlas, and Bajajs—became involved
in social-welfare programs and helped the community grow. Due to the initiation of
economic reforms and the failure of the state, the responsibility of social welfare
shifted to the corporate sector (Shrivastava and Venkateswaran 2000; Bhat 2000;
Moodithaya 2002).

Companies can be regarded as socially responsible only if they provide greater

benefit for all stakeholders, in particular, take measures for the welfare of their
employees as well as the larger society. The corporate sector in India has
accepted social responsibility as a part of their business principle (Moodbidri
2011). Many business managers in India, being very much in favor of corporate
social responsibility, have made philanthropic practices part of their organizational
culture (Gopalakrishna 1992). This is compared with developed countries, where
because of strong and resourceful governments and their social-security
programs, the corporate concern is not much on the under-privileged but rather on
limiting the negative environmental impacts of the industrial activities (Hoekstra
2003).

Given the continuous changes in the economic sector as well as societal forces,
the nature of corporate participation in welfare activities has also witnessed a major
transformation in India. The companies’ response to societal needs, which started
as a charity, has taken a more organized form today to strengthen the competitive
advantage of an organization. This process of transformation of corporate social
responsibility (CSR) from charity to strategic philanthropy has passed through
several stages along with the social changes in India. This chapter is an attempt
to understand the future of CSR in India considering its growth and historical
perspectives.

A major portion of the discussion in this chapter is dedicated to the evolution of

CSR in India. Culture, religion, and society each had a major affect on the practice
of charity in India. The evolutionary process of corporate giving, starting from the

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times of merchants and traders during the industrialization era and during the
freedom struggle, is presented in various sub-sections of this chapter. The
influences of Mahatma Gandhi and various businessmen—such as Jamsetji Tata,
G. D. Birla, Jamnalal Bajaj and others—on the CSR practices of companies from
the 1940s to the 1980s are also narrated in this chapter as appropriate. The era of
liberalization and globalization, coupled with the creation of modern companies—
such as Infosys, Wipro, and some other multi-national corporations—affected the
social-developmental scenario in the country. The study identifies major era of
growth, their respective characteristics, and business social-responsibility
outcomes.

1.6.1 DEVELOPMENT DEBACLE AND PRIVATE-SECTOR RESPONSIBILITY

In the last two decades, the world has come to recognise India not only as the
largest democracy however also as one of the fastest-growing economies in the
world. India, with 2.4% of the world’s surface area, accounts for 17.5% of its
people. Of the 1.2 billion population in India, 69% of them are living in rural areas
(Census 2011). World history has been a witness to India’s economic supremacy
as well as its rich contribution to literature, medicine, education, and art. Until
approximately the twelfth century, the Indian economy contributed approximately
33% to the world’s GDP (Bhattacharya 2008). India, with its major focus on
agriculture and textiles, dominated the world economy even during the eighteenth
century under the Moghal rule by accounting for approximately 20% share of the
world’s GDP (Maddison 1995). Since its independence in 1947, India took >60
years of planned economic development to regain the lost position of its economic
super power. The economic reforms in the early 1990s through liberalisation and
privatisation gave a boost to the country’s economic growth, thus making it one of
the fastest-growing economies in the world. The Indian economy has been
registering a >8% annual growth since 2005. As per the India Development Update
of the World Bank (World Bank 2016) country’s GDP growth rate in 2015 was 7.6
percent and it is expected to accelerate to 7.7 percent in 2017-18. This

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impressive growth will result from continuous improvement in the manufacturing
and services sectors, which contributes nearly 83% to the Indian GDP, thus
decreasing dependence on the agriculture sector.

Despite better economic growth, a large section of the population continues to

experience poverty, illiteracy, declining crop yields, and a gradually decreasing
share of income. Although the country is hailed as the second fastest-growing
economy in the world, its human-development ranking is not impressive: In 2013,
the United Nations Development Program’s (UNDP) Human Development Report
ranked India in the 136th position on various parameters of human development;
in 2014 it was placed in the 135th position among the 187 countries (UNDP 2014).
The HDR report also highlights that 32.7% of the Indian population lives below the
income poverty line, thus creating wide economic disparity. The income disparity
is so wide that the richest 1% of Indians today owns nearly half (49%) of India’s
personal wealth, and the remaining 99% shares the rest (Shorrocks et al. 2014).
Along with the micro micro-problems like income inequality, lack of basic
amenities, illiteracy, and regional disparities, etc., have also increased, e.g., 62.8%
adults in India still lack functional literacy (UNDP 2014).

Although the government is still the major provider of social welfare in the country,
private businesses are expected to play a major role by sharing the responsibility
of community welfare. This has led to the corporate-sector intervention in various
areas ranging from poverty alleviation, rural development, and environmental
protection. Because companies have the capacity and competency to contribute
to socio-economic development, they are expected to play an active role in
bringing about social change. Participation in social development is not a new
phenomenon to Indian companies. Traders, merchants, and businessmen have
always responded in the past to the society’s requirements. The next section
traces the emergence of business involvement in social change.

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1.6.2 CORPORATE SOCIAL RESPONSIBILITY IN INDIA: THE
EVOLUTIONARY PROCESS

Voluntary effort has always been a part of the Indian culture and tradition. It has
been there since the earliest times, going back to an age when society itself was
in its formative phase (Gulati 2005). “Giving,” being interwoven in the respective
codes, is supported by various religions. Charity inspired by religious beliefs and
values continued to remain popular and fairly widespread in pre-colonial India.
Zakaat by the Muslims is a donation from one’s earnings, which is specifically
given to the poor and the disadvantaged. Similarly, Hindus follow the principle of
Dharmada (setting aside a portion of sale proceeds or profit for community charity)
and the Sikhs Dashaant (one tenth of profit goes to charity). This practice of helping
the needy and the less privileged was ingrained in the society from the very
beginning. It was, however, with Buddhism, through the order of the monks
(sanghas) and later with the Christians, that serving the needy first became an
organized institutional concern (Dadrawala and Viswanath 2004). The gospel of
service was practiced through the establishment of schools, hospitals, and homes
for the aged and needy. The central theme of teaching of Christianity was also the
“act of giving” and the donation of personal service to the needy. As in several
other societies, the relationships between individuals and groups were established
to ensure that care for the underprivileged and vulnerable members of the society
was built into social institutions. Later on, these individuals went on to form
organizations and pursued the same activities.

The practice of giving donations by businessmen continued through the ages with
the changes in the socio-economic and political field. Initially, the merchant’s
charity, which began in the third decade of the nineteenth century, was purely
motivated by religious and individual principles and remained confined to one’s
community. However, with the emergence of large industrial houses—such as
Birla, Tata, and Bajaj—charity became more secular and more inclusive in terms
of caste, creed, and community (Dayal 2001). Many social, economic, and political

22
changes, such as the freedom struggle under the leadership of Mahatma Gandhi,
the planned economic development after the independence, the liberalization and
globalization programs in the early 1990s, and the emergence of new generation
companies—such as Infosys, Wipro, etc.—have had a tremendous influence on
the way the business houses in India practice charity by accepting social
responsibility.

The growth of CSR practices in India is traced in this section relating the discussion
to the changes in society and political conditions in the country during each period
of the evolutionary process. Based on the changes in the nature of CSR practices
and its purposes, the evolution of CSR is categorized into five stages: (1) the pre-
industrialization era (before the 1850s); (2) the business-philanthropy stage (1850-
1920); (3) the principled-business philanthropy stage (1920-1960); (4) the
transformation toward CSR (1960-1980); and strategic CSR (1980-present). The
narration of the evolutionary process depends heavily on the historical data as
available in publications on the emergence of business houses in India, the
freedom struggle, the process of industrialization, and the philanthropy practices
of the business houses. It also uses industry as well as business-related
legislations of the Government of India including the Companies Act of 2013.

1.6.3 PRE-INDUSTRIALIZATION ERA (BEFORE THE 1850s)

Before industrialization, economic activities in India were dominated by merchants

and traders. They were engaged not only in external and domestic trading activities
however also in lending for farming activities and providing monetary assistance
to craftsmen and artisans in the villages. Irrespective of the community they
belonged to, merchants shared a similar motivation for charity. During this era,
many merchants, from Gujarat and Rajasthan, embraced new religions, such as
Buddhism and Jainism, which promoted egalitarianism and non-hierarchic society
(Ellis 1991).

23
These religious values determined the merchants’ code of business and charitable
activities. The merchants at that time enjoyed a very good status and reputation in
society and supported local rulers by funding their trading and military activities.
Being conscious of their power and importance, the merchants on their part had a
positive attitude toward the society (Ambirajan 1991). Many rulers, such as the
Rajputs (a warrior clan from Rajasthan) and the Marathas (natives of Maharashtra)
had provided special treatments—such as free trade and duty-free trading—to
these merchant communities in their respective geographic jurisdictions (Gadgil
1959).

A distinctive characteristic of these merchant communities was that every

individual merchant had a series of financial obligations, starting with the family,
that radiated outward to the community and finally to the society (Sundar 2000).

These trading classes were deeply religious and traditional in their outlook except,
perhaps, for the Parsis who were more modern and rich among the merchants.
Charity, prompted by the respective religion, was an integral part of the lifestyle of
almost all merchant families. Merchant “giving” could be categorized under two
main headings: One is purely for religious purpose, and the other for secular
purposes. Merchants provided many endowments and donations for the
construction, renovation, and operation of temples and other places of worship.
There are many evidences of Taravadi, a wealthy family of Brahmin bankers,
building temples in Surat and Jhaveri—a Jain jeweler from Surat—building
Dharma chathras (rest houses) for pilgrims and hostels for Jain students in North
India (Haynes 1987).

Charities also took a secular form on the principle of “noblesse oblige.” Many
merchant families had a practice of setting aside a certain percentage of their
profits for the purpose of charity, especially to support education. In addition to
individual charity, collective charities were also in practice in many towns. Although
the community in most cases was the major beneficiary, the village, the town, or

24
the city also received benefits of charity. The practice of charity during this period
was confined to the donation of money and other resources. Most traditional
charity was ameliorative in nature, meeting immediate welfare needs or relief in
times of natural calamity. However, with the beginning of industrialization, several
changes began to appear in the existing format of charity as discussed in the next
section.

1.6.4 EMERGENCE OF BUSINESS PHILANTHROPY (1860-1920)

The industrialization that began in the mid-nineteenth century marks the transition
from merchant charity to industrial philanthropy in India (Gadgil 1959). Socio-
economic changes in the society, as well as encouragement of the colonial state,
accelerated the philanthropic trend in the country. More broadly, with the spread
of industrialization, changes were also evident due to the transformation of the
nature of economic activities. Agriculture-based rural self-sufficiency was
disturbed because of the shift toward manufacturing and the resultant urbanization,
which in turn widened the gap between the rich and the poor. Urbanization created
more social problems. Lack of basic civic amenities—such as water, sanitation,
food, shelters, hospitals, schools, etc.—became too much to tackle through
traditional charity. This created the need for more organized social welfare services
or, at least, private funds (Dadrawala and Viswanath 2004).

In the beginning of the nineteenth century, many merchant communities, who had
amassed massive wealth through trading activities, found opportunities in setting
up their own industries. The society came to witness the emergence of a new class
of people called “industrialists” who were liberal and westernized through
education. They were rich in resources and more professional in their business
approaches. Although the industrialists were more open to diversifying their
donations, the old form of giving was still practiced by many. With a shift in the
pattern of business, even the merchant charity began to change from being
religious, short-term, and community-centric to more secular and inclusive in terms

25
of caste and community. Hence, the changes in the nature and structure of
business activities converted merchant charity to business contributions.

Indian society witnessed many notable changes during this time. The spread of
Christian missionaries and their activities as well as western education exposed
the Indian society to new trends and new thinking. Western education and
exposure to western culture brought in a new set of values, such as rationalism
and unorthodox thinking, and created new dimensions by which to view the
society, religion, or community. The country witnessed a social transformation
coinciding with the initial phase of freedom struggle. The social reform movements
and organizations —such as the Arya Samaj, Ramakrishna Mission, Brahma
Samaj—shifted the focus toward morality, social justice, equality, and the welfare
of humanity.

The state has also played an active role in opening new frontiers of corporate
philanthropy by giving informal encouragement or by conferring formal awards that
created special social status (Haynes 1987). The British rulers of the nineteenth
century encouraged many socially relevant projects to bring progress in India;
however, they needed the wealthy people to contribute their resources to these
projects to become allies in nation building. Haynes (1987) highlighted the
instances where the British rulers urged local merchants to donate money to social
causes such as opening up schools, libraries, and rest houses.

Another major factor that changed charity to philanthropy is the regulation of

charity by British rulers. The state intervened in the field of charity by regulating
the activities of religious institutions as well as the use of the charity funds. Many
laws were passed to formalize, legalise, and regulate the activities of voluntary and
philanthropic organizations, e.g., the Societies Registrations Act of 1860, the
Religious Endowment Act of 1863, the Charitable Endowment Act of 1890, etc.
These regulations played a major role not only in regulating and rationalizing
charitable giving but also in creating a clear distinction between religious social

26
service and public welfare (Bornstein 2012). However, despite the regulations,
unregulated and unofficial donations to religious activities continued in many parts
of the country.

The establishment of factories, and an increase in exports and trading activities, in

the middle of the nineteenth century changed the economic landscape of the
country to give rise to a new breed of industrialists and industrial groups who were
more liberal and westernized. This period also saw a change in the way charity
was dispensed. The donations started flowing beyond a particular community, city,
and religion. Industrialists—such as Jamsetji Nusserwanji Tata, who is considered
as the father of modern philanthropy in India, Ardeshir Godrej, and Nowrojee
Wadia, among many others—pioneered the modern way of giving by supporting
causes such as science and technology, research and development, building and
maintenance of hospitals, skill-enhancement training for the poor, education, and
animal welfare, etc.
The newly rich business families began to set up and use trusts for their charitable
programs. As early as 1892, Sir Jamsetji Tata, founder of the Tata Group of
companies, set up the JN Tata Endowment Scheme to encourage young people
to take up higher studies at some of the best universities in the world (Shah and
Ramamoorthy 2013). His brainchild is the Indian Institute of Science in Bangalore,
which is comparable with Johns Hopkins University in Baltimore, MD, USA. This
institute pioneered advanced scientific education in India. One of the first
foundations in India, pre-dating most modern western foundations, was the N.M.
Wadia Foundation, which was set up in 1909 for the benefit of all. Hence, corporate
giving in India during this period became secular, inclusive, and more systematic,
thus focusing on philanthropy above mere charity.

1.6.5 PRINCIPLED BUSINESS PHILANTHROPY (1920-1960)

The years from 1920 to 1960 can be considered as the most eventful years that
had a major effect on the country. Two World Wars, the advent of Gandhian

27
principles, freedom movement and later independence in 1947, partition of the
country, communal problems, planned economic-development programs, etc., had
major effects not only on the Indian economy but also on the social environment
in the country. After independence, the desire for rapid progress of all levels of
government, the people, and the business community acted as a spur for business
to contribute more for social development. Consequently, a positive state attitude
toward businesses encouraged business philanthropy.

In the early years of the freedom movement, most business activities were
concentrated around Bombay and Kolkata (Calcutta). The nationalist movement
affected the nature and scope of business involvement in the community programs
with focus, beyond the political activities, on education, development of women,
revival of art and culture, supporting technological advancement, etc. Some
families from traditional merchant communities—such as the Birlas, Bajajs, and
Wadias —pioneered indigenous industrialization in India in the late nineteenth
century and participated not only in freedom struggle but also in the nation-building
process thereafter (Mohan 2001). A number of educational and cultural institutions
with national ethos, such as the Banaras Hindu University, Aligarh Muslim
University, Shantiniketan, and Indian National Theater and Museums, were
established with generous contributions of many businessmen.

Mahatma Gandhi and his ideologies of social development were the strongest
factor that influenced business philanthropy before independence. During the
freedom struggle, many business leaders were inspired by Mahatma Gandhi and
his principles of sarvadaya (progress for all) and Trusteeship of Wealth where he
envisaged that business organizations must act as the trustees of the nation’s
wealth and that part of their profit will must be donated to the benefit of the society
(Alagh 2000). The practice of Mahatma Gandhi’s principles brought many weaker
and suppressed sections of the society to the mainstream. Many of his
experiments —much as rural reconstruction, self-reliance, education for all,
abolishment of the caste system, etc.—gained much support from businessmen.

28
Two prominent industrialists of that time, Jamnalal Bajaj and Ghanshyam Das
Birla, placed themselves and their wealth at the disposal of Gandhi not only for the
freedom movement but also for his constructive program of removal of
“untouchability,” popularization of Khadi (hand-woven cotton fabric) and village
industries, promotion of basic education, and Hindu-Muslim unity. Furthermore,
prominent businessmen—such as G.D. Birla, Kasturbhai Lalbhai, and Lala
Shriram of the DCM Group of companies—were also at the forefront in establishing
some of the key educational institutions in India. For example, there is Birla
Institute of Technology (now a university), Benaras Hindu University, Aligarh
Muslim University, Physical Research Laboratory, Indian Institute of Management,
Ahmedabad, Shri Ram College of Commerce, New Delhi, and the Lady Shri Ram
College for Girls in New Delhi (Sundar 2013a, b).

After gaining its independence, India adopted a mixed-economy model

characterized by a strong role for the state with a focus on economic self-
sufficiency sought through extensive regulation, protectionism, and public
ownership. The country’s institutional and social development process, influenced
by the Gandhian philosophy of “trusteeship” and the reform movement focused on
rural development, abolition of untouchability, and women‘s empowerment (Mohan
2001). As a result of the first two 5-year plans of the government of India (1950-
1955 and 1955-1960), there was a remarkable growth in industrial activities. With
the entry of new players in the Indian industrial scenario, the size of the business
sector also grew. By the 1960s, as macro-forces were changing the industrial
sector, changes were visible in the management style and shareholding pattern.
The new generation of inheriting business leaders, being far more educated and
westernized in their outlook, brought a fresh new approach to business and its
involvement in the social-development process. Many companies began to realize
that fair business practices may help fulfill their commitment to society. Hence,
philanthropic activities of the organizations gained a wider presence to include
meaningful and socially responsible activities of firms for the progress of all.

29
1.6.6 THE GROWTH OF CSR (1960-1980)

India experienced economic decline during the 1960s. Successive failures due to
monsoons, two wars with China and Pakistan, a food shortage, and price
increases all had adverse effects on the entire nation. This also had a negative
affect on the industrial growth in the country. Furthermore, after independence
there was a deterioration of the image of the private sector in the minds of the
general public as well as the government; this continued into the 1960s. To make
the situation worse, there was a widespread hoarding of the basic necessities,
black marketing, and other unfair trade practices. Many industrialists became
involved in fraud, adopting unethical practices to obtain industrial licenses, the
manipulation of funds, and the creation of monopolies (Khanna and Palepu 2005).
To curb such practices, the government introduced many measures—such as the
Industries (Development and Regulation) Act of 1952, the Industrial Licensing
Enquiry Committee 1969, and the Monopolies Inquiry Commission 1965. In
addition, the government also reformed the tax policy, by steeply increasing the
tax rate for the priority sector by approximately 47.3%, between 1960 and 1961
and again in 1972-1973. The higher tax rates decreased industrial growth, and the
new strict regulations had a negative affect on the morale of business houses: Both
resulted in the decrease of business contributions to philanthropic activities
(Sundar 2013a, b). Slowly, direct business donations to charitable programs
diminished, and the government, by default, became the largest donor through the
Central and State Welfare Boards.

During this period, the private sector was forced to take a backseat, and the public
sector became the primary player in the field of social development (Vajpeyi and
Rai, n.d.). Although many public sector companies were set up by the government
to ensure equitable distribution of resources to the needy, there were concerns
about the consequences of economic growth with an innate tendency toward
creating inequality or furthering the distribution gap (Mohan 2001).

30
The importance of business social responsibility to multi-stakeholders was
emphasized at a high-profile international seminar organized in Delhi under the
leadership of a noted socialist, Jaya Prakash Narain, in 1965. One of the outcomes
of the conference was the Declaration of the Social Responsibility of Business,
spelling out the need for it and pointing out that the concept was broader than
charitable giving (Upadhyaya 1976). Many Indian industrialists, such as J.R.D.

Tata, Ramakrishna Bajaj, and others, launched the Fair Trade Practices
Association in 1966 to codify and implement fair business practices. By 1968, the
association had 200 members. The objective of the association was to envisage
self-discipline and adopt responsible behavior (Kochanek 1974). The association
prescribed certain guidelines for members to avoid unfair pricing, misleading
advertising, spurious products, black marketing, hoarding, and smuggling. The
guidelines on fair-trade practices envisaged the importance attached to the socially
responsible behavior of the traders and the corporations.

The advent of international aid agencies during the 1950s influenced not only the
voluntary sector in India but also the company philanthropy both in terms of funds
and their techniques of funding (Murray 2002). In a contrasting development, some
business houses consolidated charitable activities for “demonstration effect” by
establishing trusts and foundations. Due to the 50% tax exemption to individual
charitable contributions, under the Finance Act of 1948 company owners either set
up their own trusts or donated generously to other established trusts and
foundations. Some of the new foundations set up during that time were Pirojsha
Godrej Foundation, Mahindra Foundation, Bhoruka Charitable Trust, and
Lakshmipat Singhania Medical Foundation (Sundar 2000).

Furthermore, the Indian government during this era realized that the business
sector can contribute to and complement the good works of the voluntary sector.
The government offered incentives to the corporate sector and exerted pressure
through the apex chambers, such as the FICCI (Federation of Indian Chambers of

31
Commerce and industry), for their social-development activities. For example, the
government announced tax concessions to motivate the business sector to get
involved in social projects. In 1975, section 35CC was incorporated into the Income
Tax Act to provide a 100% tax deduction to the companies for the expense incurred
on projects such as rural development, construction and maintenance of roads,
and providing rural infrastructural facilities, hospitals, dispensaries, etc. (Sundar
2013a).

The tax incentive motivated many companies to get involved in community

development. Thus, rural development became the major thrust area for the
corporate sector in India.

Many companies undertook rural development projects; however, the work

performed by the Tata Group in Jamshedpur is the most notable. The community-
development and social-welfare programs implemented through the Tata Iron and
Steel Co. and Tata Engineering and Locomotive Company (TELCO) ensured an
overall development in the Adivasi (indigenous inhabitants) Bustee (neighborhood)
near Jamshedpur. The program began in 1979 with an initial annual budget of INR
850 (USD$103,281) in 32 villages and now has an annual outlay of approximately
INR 40 million (USD$650,000) for works in 650 villages in the states of Madhya
Pradesh, Bihar, and Orissa (Srivastava et al. 2012).

During the period from 1960 to 1980, the Indian economy witnessed the impact of
a mixed economy and the emergence of many public-sector undertakings. This
era was also characterized by many regulations and legislations by the
government. The tax incentive motivated many companies to get involved in
community development. Many trusts and foundations were created, and business
entities organized many rural-development programs. CSR took off albeit at a slow
pace.

32
1.6.7 STRATEGIC CSR: 1990 TO THE PRESENT

Because India embraced policies of liberalisation and privatisation in the early

1990s, a fresh breed of entrepreneurs—such as Narayan Murthy, Mittal brothers,
Azim Premji, and many others—entered the business arena. During this time, large
multi-national corporations, such as IBM, GE, Ford Motors, and HP, also started
their operations in India. The new generation companies, e.g., Wipro, GE, Bharti
Enterprises, and Infosys, etc., started redefining the scope of CSR activities with
their innovative programs and new focus. For example, Infosys Technologies Ltd
advocates and participates in a wide array of activities aimed at enhancing
business-community relations. The company set aside INR 2.4 billion (approxi-
mately USD$39 million) for CSR activities during the fiscal year 2014 to 2015.

The involvement of the company, the Infosys Foundation, and the employees at
various locations have made the CSR an integral part of Infosys culture. Infosys
was one of the early signatories to the United Nations Global Compact and the
pioneer in sustainability reporting in India. With their commitment for sustainable
developmental programs, Infosys has set highest standards for social-
responsibility measures in India (see Appendix for details of Infosys’s CSR
activities as one of the best examples).

The CSR practices of Indian companies during this era showed signs of further
maturity by going beyond institution building (educational, research, and cultural)
to community development through various projects. There have also been efforts
to integrate CSR activities with the main line of business to derive strategic
benefits. The environmental lobby, as well as the government’s strict guidelines
and pressure to comply with the global standards, has also necessitated
companies to widen their area of operations in the sphere of social development.
The protection of human rights, global warming, pollution prevention, and
conservation of energy became new areas of concern to companies in India, all of
which are much beyond the traditional focus of business philanthropy.

33
The growing interest of business houses in CSR activities are highlighted in some
studies performed by trade associations such as the Federation of Indian Chamber
of Commerce and Industry (FICCI), Confederation of Indian Industry (CII), or by
nongovernmental organizations such as Action Aid, Partners in Change, and Tata
Energy Research Institute (TERI). At a time when the concept of corporate social
responsibility was making rounds in the industry circle, Action Aid, an international
NGO, in 1999 surveyed the perception of philanthropy among Indian companies.
The survey showed that 69% of the 600 companies surveyed were involved in
social development. It brought to light that 50% of companies supported the
development activity for purely philanthropic reasons (this paragraph is based on
Sundar 2002).

In 2003, a comprehensive survey was performed by the Partners in Change along

with a research agency, IMRB (Daftari 2003). The study included 536 private and
public companies in India and showed that 84% of the companies are involved in
social development, 64% for purely philanthropic reasons. Full ownership of or
support for these social-development projects was a rare phenomenon for these
companies; however 81% restricted their philanthropic activities to donate money
only for social-development projects (Daftari 2003).

In June 2008, TNS India (a research organization) and the Times Foundation
surveyed the role of companies in CSR (Jain 2008). The findings showed that
>90% of all major Indian business organizations surveyed were involved in CSR
activities and that private companies were more involved in CSR activities than
public companies. These business organizations were involved in livelihood
promotion, education, health, environment, and women’s empowerment mostly as
internal projects, whereas direct financial support was provided to some voluntary
organizations or communities. The Confederation of Indian Industry’s (CII’s) along
with the ITC Centre of Exellence for Sustainable Development (CESD) performed
a survey of top 200 companies in India called the Business Responsibility-India
Survey 2013. The prime objective of this survey was to provide statistical evidence

34
of CSR practices of the top 200 listed companies in India to its various
stakeholders. The report showed that approximately 25% of companies surveyed
spend at least 2% of their profit after tax (PAT) on CSR activities (Indian Institute
of Corporate Affairs 2014).

In recent years, many initiatives have been taken to integrate CSR with the
business process of the companies. Programs, such as the United Nations Global
Compact Program (UNGCP) and the Global Reporting Initiative (GRI), have
affected CSR activities and influenced the nature of CSR reporting by the Indian
companies. Although efforts are being made to strategize CSR activities, Indian
companies have made little progress in reporting the development projects (Cropp
2010). Only 245 Indian companies so far have committed to the United Nations
Global Compact Program (UNGCP), a charter for improving the global business
environment (UNGCP 2015).

Although the incidences of corporate participation in social-welfare projects have

increased over the years, integrating such activities with the main line of business
and reporting them is in its nascent stage. In a KPMG study of CSR practices of
Indian Companies in 2008, of 217 Indian companies, a mere 8% mentioned their
social expenditures in their annual reports, and only 25% filed CSR reports (Prasad
2008). According to a study performed by the Federation of Indian Chamber of
Commerce and Industry, in association with Ernst and Young, >70% of the
respondent companies have a well-planned policy on sustainability and
environmental-management programs. In many of these companies, the vision of
the top management was driving sustainability practices (FICCI—E&Y 2011).

A survey by Grant Thornton found that 68% of businesses in India in 2013 issued
corporate social-responsibility (CSR) and sustainability information (up from 32%
2 years ago) either in the financial report or in separate reports, and that a clear
majority believes it should be reported (Thornton 2013).

35
With the changing times there is a growing interest among the companies to be
more socially responsible and to share the burden of development. Due to
increased civil activism, proactive industry associations, government interventions,
and international persuasion, CSR practices in India are becoming more
formalized, streamlined, and publicized. Currently it has become a practice for
companies to report their CSR activities on their official Web sites, and in annual
reports, and in sustainability reports, or even in exclusive CSR reports, to ensure
transparency and accountability in the near future. Many companies, especially
ones involved in international trade, have realized that social responsibility and its
appropriate reporting has strategic value of gaining better acceptance, greater
goodwill and better retention level of superior employees.

Another key trend that signified the practice of CSR during this time is the entry of
multi-national corporations into India. Many global multi-national corporations —
(MNCs) such as Google, IBM, Intel, HP Microsoft, General Electric, and others —
not only changed the landscape of the Indian industrial sector but also added new
approaches to CSR practices in the country. With the kinds of financial and non-
financial resources at their disposal, these MNCs were expected to play a key role
in the process of social development (Sharma 2009). Although operating in a new
country, the MNCs remain under tremendous pressure to build a good image and
ensure their long-term success in the market (Bantekas 2004). Many of the MNCs
operating in India are today responding to the requirements of the society either
by direct involvement in social causes or through partnerships with various
government and non-governmental organizations. Intel Technologies India Pvt.
Ltd, a subsidiary of Intel Inc., USA, partnered with central government and various
state governments to improve the quality of the education system and thereby
ensure socio-economic development. The company tries to reach out to teachers,
students, research scholars, and educational institutions and advocate excellence
in curricula, research, and training. Intel is also providing basic computer education
to adult learners in various villages and small towns across the country through
their Digital-Learning initiative, the Learn Easy Steps Program. In the financial year

36
2014-2015, the company spent INR 61 million (approximately USD$9.2 million) on
their CSR programs (Intel India 2015). Similarly, Microsoft brings together its
resources and perspective from around the world to help Indian youth succeed in
a new digital economy under a program called YouthSpark. YouthSpark brings
together technology, training, investments, and experiences to help the youth
change the world. The company closely works with the government, academic
institutions, and NGOs to ensure good skill development of the youth and improve
their career prospects. Microsoft, which has been operating in India since 1990,
has benefitted >50 million people through its CSR programs, and its total
investment has more than INR 6.5 billion (approximately USD$96 million) in non-
profit initiatives (Microsoft 2014). In addition to achieving digital inclusion, the
company also works in the area of women’s empowerment and disaster response.
Many villages in India have been the beneficiaries of the Bill & Melinda Gates
Foundation, especially in the area of healthcare. Per the survey performed by the
global auditing firm KPMG, foreign-based companies spent INR 4.06 billion
(approximately USD$60 million) for their CSR programs in India during the year
2015 (KPMG 2015). Many MNCs today have successfully integrated their CSR
activities with their main business strategy.

1.7 LEGAL FRAMEWORK FOR CSR IN INDIA

In the Indian context, most CSR programs are characterized by donations in

monetary and/or non-monetary forms to schools, hospitals, temples, construction
of roads, and activities relating to community development. When such programs
are systematic and continual, the society gains real benefits. Efforts are being
made by the government, regulatory bodies (e.g., the Securities and Exchange
Board of India [SEBI]), and trade associations (e.g., the Confederation of Indian
Industries [CII]) to streamline CSR activities. The National Voluntary Guidelines
(NVGs) for Social, Environmental and Economic Responsibilities of Business (or
the NVGs), 2011 (accompanied by the Business Responsibility Reports mandated
by the SEBI for the top 100 companies), as well as the CSR clause in the

37
 Companies Act of 2013 are two major initiatives by the government of India to
provide a better framework and direction for the growth and continuity of CSR
activities in India.

INDIA MANDATES CORPORATE SOCIAL RESPONSIBILITY: THE 2

PERCENT BILL

The CSR provision requires organizations to spend at 2% of average net profits

made in the preceding three years on CSR. Organizations must set up a "CSR
Committee," including one independent director who will be delegated to the
organization's board. They should likewise incorporate a report inside the
organization's yearly report which subtleties CSR exercises, the measure of
funding reserved for CSR, the composition of the CSR panel, and, on the off
chance that they have failed to spend the CSR amount, point by point reasons
disclosing the failure to comply.

The law, which specifies that CSR exercises ought to be attempted in

"project/program" mode, gives nitty gritty rules about what kinds of social activities
are qualified over a several categories. This incorporates skill development,
education, health-wellbeing, gender orientation fairness and women
strengthening, poverty, environmental development, social endeavor activities and
promotions of rural and national games. An organisation may likewise work
together with different organizations for undertaking tasks or projects or CSR
exercises in such a way, that the CSR Committees of particular organizations are
in a situation to report independently on such projects as per the CSR Rules, 2014.

1.8 COMPANY PROFILE

Note : Market Capital Value is in Lakhs as of 31st March, 2020

SR MARKET
COMPANY NAME INDUSTRY HEADQUARTER
NO. CAPITAL
1 Reliance Industries Ltd OIL AND GAS Mumbai 70603579.31
2 Tata Consultancy Services Ltd SOFTWARE Mumbai 68522297.12

38
SR MARKET
COMPANY NAME INDUSTRY HEADQUARTER
NO. CAPITAL
3 Oil and Natural Gas Corporation Ltd OIL AND GAS New Delhi 8592330.70
4 HDFC Bank Ltd BANK/FINANCE Mumbai 47248231.53
5 Indian Oil Corporation Ltd OIL AND GAS Mumbai 7686660.76
6 Infosys Ltd SOFTWARE Bengaluru 27320750.08
7 ITC Ltd OTHER Kolkata 21105761.04
8 NTPC Ltd POWER New Delhi 8331217.23
9 Tata Steel Ltd STEEL Mumbai 3037015.74
10 Coal India Ltd COAL MINING Kolkata 8630901.02
11 Power Grid Corporation of India Ltd POWER New Delhi 8323459.13
Housing Development Finance
12 BANK/FINANCE Mumbai 28235707.61
Corporation Ltd
13 JSW Steel Ltd STEEL Mumbai 3535184.89
14 HCL Technologies Ltd SOFTWARE New Delhi 11842434.48
15 Hindustan Zinc Ltd COAL MINING Udaipur 6566145.73
16 Wipro Ltd SOFTWARE Bengaluru 11237966.27
17 Maruti Suzuki India Ltd AUTOMOBILE New Delhi 12954099.21
18 Bharat Petroleum Corporation Ltd OIL AND GAS Mumbai 6874361.95
19 Power Finance Corporation Ltd POWER New Delhi 2427554.85
20 Larsen & Toubro Ltd INFRA Mumbai 11349262.61
21 Hindustan Unilever Ltd OTHER Mumbai 49758412.09
22 Hindustan Petroleum Corporation Ltd OIL AND GAS Mumbai 2896786.81
23 GAIL India Ltd OIL AND GAS New Delhi 3452513.60
24 REC Ltd BANK/FINANCE New Delhi 1752739.73
25 Vedanta Ltd COAL MINING Panaji 2405026.23
26 Kotak Mahindra Bank Ltd BANK/FINANCE Mumbai 24786521.84
27 Mahindra and Mahindra Ltd AUTOMOBILE Mumbai 3542477.15
28 Axis Bank Ltd BANK/FINANCE Ahmedabad 10691224.70
29 Bajaj Auto Ltd AUTOMOBILE Pune 5852013.93
30 NMDC Ltd COAL MINING Hyderabad 2449479.73
31 Tech Mahindra Ltd SOFTWARE Mumbai 5461323.50
32 Bajaj Finance Ltd BANK/FINANCE Pune 13332226.39
33 Indiabulls Housing Finance Ltd BANK/FINANCE Gurugram 413677.93
34 Hero Motocorp Ltd AUTOMOBILE New Delhi 3188739.14
35 ICICI Bank Ltd BANK/FINANCE Vadodara 20954333.46
36 IndusInd Bank Ltd BANK/FINANCE Pune 2436375.46
37 Graphite India Ltd OTHER Kolkata 248615.44
38 Bharti Infratel Ltd OTHER New Delhi 2959373.19

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SR MARKET
COMPANY NAME INDUSTRY HEADQUARTER
NO. CAPITAL
Adani Ports and Special Economic Zone
39 INFRA Ahmedabad 5105792.18
Ltd
40 NHPC Ltd POWER Faridabad 2003984.44
41 Oil India Ltd OIL AND GAS Dibrugarh Dist 896260.89
Shriram Transport Finance Corporation
42 BANK/FINANCE Chennai 1498900.80
Ltd
43 UltraTech Cement Ltd INFRA Mumbai 9365398.73
44 Hindustan Aeronautics Ltd OTHER Bengaluru 1739818.16
45 Steel Authority Of India Ltd STEEL New Delhi 952086.08
46 Petronet LNG Ltd OIL AND GAS New Delhi 2995500.18
47 Asian Paints Ltd OTHER Mumbai 15985031.17
48 Tata Motors Ltd AUTOMOBILE Mumbai 2194715.95
49 Ashok Leyland Limited AUTOMOBILE Chennai 1263744.49
50 Muthoot Finance Ltd BANK/FINANCE Ernakulam 2457900.57

1.9 CONCLUSION

From this chapter it can be Like many of management and social science
definitions, Corporate Social Responsibility is fraught with definitional problems,
which makes it difficult for a uniform platform to assess firms’ responsiveness to it.
Corporates interact with society in many ways. They invest in facilities, produce
and sell products, employ people and subcontract or in-source many activities.
They also have an impact on the environment by the nature of their activities, by
using valuable resources, or creating by-products, which influence the physical
environment. Their interaction with society is through their employees and the
many facets of society around them. The CSR provision requires organizations to
spend at 2% of average net profits made in the preceding three years on CSR.
Organizations must set up a "CSR Committee," including one independent director
who will be delegated to the organization's board. They should likewise incorporate
a report inside the organization's yearly report which subtleties CSR exercises, the
measure of funding reserved for CSR, the composition of the CSR panel, and, on
the off chance that they have failed to spend the CSR amount, point by point
reasons disclosing the failure to comply.

40