Social Responsibility of Business

th
B.Tech 4 Year

By: Dr. Geeta Sachdeva

Asst. Prof.
Dept. of Hum. & S.S.
NIT Kurukshetra
 Introduction
The concept of Corporate Social Responsibility (CSR) is underpinned by the idea that
corporations can no longer act as isolated economic entities operating in detachment
from broader society. Traditional views about competitiveness, survival and profitability
are being swept away.
Corporate Social Responsibility (CSR) is a concept whereby companies not only consider
their profitability and growth, but also the interests of society and the environment by
taking responsibility for the impact of their activities on stakeholders, environment,
consumers, employees, communities, and all other members of the public sphere.
 Why CSR
Business cannot exist in isolation; business cannot be oblivious to societal
development.
• CSR creates a favourable public image, which attracts customers. Reputation
or brand equity of the products of a company which understands and
demonstrates its social responsibilities is very high. Customers trust the
products of such a company and are willing to pay a premium on its
products. Organizations that perform well with regard to CSR can build
reputation, while those that perform poorly can damage brand and company
value when exposed. Brand equity, is founded on values such as trust,
credibility, reliability, quality and consistency. build a positive synergy
between the two.
 Why CSR contd..

• Corporate Social Responsibility (CSR) activities have its advantages. It

builds up a positive image encouraging social involvement of employees,
which in turn develops a sense of loyalty towards the organization, helping in
creating a dedicated workforce proud of its company. Employees like to
contribute to the cause of creating a better society. Employees become
champions of a company for which they are proud to work.
 Why CSR contd..

• Society gains through better neighbourhoods and employment

opportunities, while the organization benefits from a better community,
which is the main source of its workforce and the consumer of its products.
• Public needs have changed leading to changed expectations from consumers.
The industry/ business owes its very existence to society and has to respond
to needs of the society.
 Why CSR contd..
• The company's social involvement discourages excessive regulation or
intervention from the Government or statutory bodies, and hence gives
greater freedom and flexibility in decision-making.
• The internal activities of the organisation have an impact on the external
environment, since the society is an interdependent system.
 Why CSR contd..
• The good public image secured by one organisation by their social
responsiveness encourages other organizations in the neighbourhood or in
the professional group to adapt themselves to achieve their social
responsiveness.
• The atmosphere of social responsiveness encourages co-operative attitude
between groups of companies. One company can advise or solve social
problems that other organizations could not solve.
• Companies can better address the grievances of its employees and create
employment opportunities for the unemployed.
Responsibility towards Different Interest Groups

After getting some idea about the concept and importance of social
responsibility of business let us look into the various responsibilities that a
business has towards different groups with whom it interacts.
The business generally interacts with owners, investors, employees,
suppliers, customers, competitors, government and society.
They are called interest groups because, by every activity of a business, the
interest of these groups is affected directly or indirectly.
 Responsibility Towards Owners
Owners are the persons who own the business. They contribute capital and bear the
business risks. The primary responsibilities of business towards its owners are to:
• Run the business efficiently.
• To earn sufficient profit through proper means.
• To enhance his ability through training and experience
• To enter into new markets.
• Proper utilization of capital and other resources.
 Responsibility Towards Investors
Investors are those who provide finance by way of investment in debentures, bonds,
deposits, etc. Banks, financial institutions, and investing public are all included in this
category. The responsibilities of business towards its investors are:
• Ensuring the safety of their investment,
• Regular payment of interest & dividend.
• Timely repayment of the principal amount.
• To inform about progress of the organization by presenting correct accounts
 Responsibility Towards Employees
Business needs employees or workers to work for it. These employees put their best
effort for the benefit of the business. So it is the prime responsibility of every business
to take care of the interest of its employees. If the employees are satisfied and efficient,
then the only business can be successful. The responsibilities of business towards its
employees include:
• Timely and regular payment of wages and salaries.
• Proper working conditions and welfare amenities.
• Opportunity for better career prospects.
• Job security as well as social security like facilities of provident fund, group
insurance, pension, retirement benefits, etc.
 Responsibility Towards Employees contd..
• Better living conditions like housing, transport, canteen, crèches, etc.
• Timely training and development.
• Solving labour problems in time.
• Proper recognition, appreciation and encouragement
• Giving participation in management.
• Providing opportunities for promotion and development.
 Responsibility Towards Suppliers
Suppliers are businessmen who supply raw materials and other items required by
manufacturers and traders.
Certain suppliers, called distributors, supply finished products to the consumers. The
responsibilities of business towards these suppliers are:
• Timely payment of dues.
• Giving appropriate price for the materials supplied.
• Giving regular orders for the purchase of goods.
• Dealing with fair terms and conditions.
• Informing them about the future plans.
 Responsibility Towards Customers
• Products and services must be able to take care of the needs of the customers.
• Products and services must be qualitative.
• There must be regularity in the supply of goods and services.
• To make available goods & services as per the taste of customers.
• The price of goods and services should be reasonable and affordable.
• All the advantages and disadvantages of the product, as well as the procedure to use the
products, must be informed do the customers.
• To make available goods & services to customers at the nearest point.
• There must be proper after-sales service.
• Grievances of the consumers, if any, must be settled quickly.
• Unfair means like under weighing the product, adulteration, etc. must be avoided.
• Avoid misleading the customers by improper advertisements.
 Responsibility Towards Competitors
Competitors are the other businessmen or organizations involved in a similar type of
business.
The existence of competition helps the business in becoming more dynamic and
innovative to make itself better than its competitors.
It also sometimes encourages the business to indulge in negative activities like
resorting to unfair trade practices. The responsibilities of business towards its
competitors are:
• not to offer exceptionally high sales commission to distributors, agents, etc.
• not to offer to customers heavy discounts and /or free products in every sale.
• not to defame competitors through false or ambiguous advertisements.
 Responsibility Towards Government
Business activities are governed by the rules and regulations framed by the
government. The various responsibilities of business towards government are:
• Setting up units as per guidelines of the government.
• Payment of fees, duties, and taxes regularly as well as honestly.
• Not to indulge in monopolistic and restrictive trade practice.
• Conforming to pollution control norms set up by the government.
• Not to indulge in corruption through bribing and other unlawful activities.
 Responsibility Towards Society
A society consists of individuals, groups, organizations, families, etc.

They all are members of the society. They interact with each other and are also
dependent on each other in almost all activities. There exists a relationship between
them, which may be direct or indirect.
Business, being a part of the society, also maintains its relationship with all other
members of the society. Thus, it has certain responsibilities towards society, which
may be as follows:
 Responsibility Towards Society contd..

•to help the weaker and backward sections of the society

•to preserve and promote social and cultural values
•to generate employment
•to protect the environment
•to conserve natural resources and wildlife
•to promote sports and culture
•to assist in the field of developmental research on education, medical science, technology, etc.
 CSR ACT 2013 India
The rules, effective April 2014, embrace both private and public firms, and spell
out a range of activities for companies to undertake in order to meet their
obligations. The Ministry of Corporate Affairs has notified Section 135 and Schedule
VII of the Companies Act 2013 as well as the provisions of the Companies (Corporate
Social Responsibility Policy) Rules, 2014 to come into effect from April 1, 2014.
Applicability of CSR Provisions:
With effect from April 1, 2014, every company, private limited or public limited, which
either has a net worth of Rs 500 crore or a turnover of Rs 1,000 crore or net profit of
Rs 5 crore, needs to spend at least 2% of its average net profit for the immediately
preceding three financial years on corporate social responsibility activities.
 CSR ACT 2013 India contd..
The CSR activities should not be undertaken in the normal course of business and
must be with respect to any of the activities mentioned in Schedule VII of the 2013
Act. Contribution to any political party is not considered to be a CSR activity and only
activities in India would be considered for computing CSR expenditure.
CSR Committee:
To formulate and monitor the CSR policy of a company, a CSR Committee of the
Board needs to be constituted. Section 135 of the 2013 Act requires the CSR
Committee to consist of at least three directors, including an independent director.
 CSR ACT 2013 India contd..
Companies can also collaborate with each other for jointly undertaking CSR activities,
provided that each of the companies are able individually report on such projects.
A company can build CSR capabilities of its personnel or implementation agencies
through institutions with established track records of at least three years, provided that
the expenditure for such activities does not exceed 5% of the total CSR expenditure of
the company in a single financial year.
Activities which may be included by companies in their
CSR Policies relating to:
• Eradicating hunger, poverty and malnutrition, promoting health care including
preventive health care and sanitation including contribution to the Swatch Bharat
Kosh set-up by the Central Government for the promotion of sanitation and
making available safe drinking water.
• Promoting education, including special education and employment enhancing
vocation skills especially among children, women, elderly and the differently abled
and livelihood enhancement projects.
• Promoting gender equality, empowering women, setting up homes and hostels for
women and orphans; setting up old age homes, day care centres and such other
facilities for senior citizens and measures for reducing inequalities faced by socially
and economically backward groups.
Activities which may be included by companies in their
CSR Policies relating to contd.:
• Ensuring environmental sustainability, ecological balance, protection of flora and
fauna, animal welfare, agroforestry, conservation of natural resources and
maintaining quality of soil, air and water including contribution to the Clean Ganga
Fund set-up by the Central Government for rejuvenation of river Ganga.
• Protection of national heritage, art and culture including restoration of buildings and
sites of historical importance and works of art; setting up public libraries; promotion
and development of traditional art and handicrafts;
• Measures for the benefit of armed forces veterans, war widows and their
dependents;
• Training to promote rural sports, nationally recognised sports, paralympic sports
and Olympic sports
Activities which may be included by companies in their
CSR Policies relating to contd.:

• Training to promote rural sports, nationally recognised sports, Paralympic sports

and Olympic sports
• Contribution to the Prime Minister’s national relief fund or any other fund set up by
the central govt. for socio economic development and relief and welfare of the
schedule caste, tribes, other backward classes, minorities and women;
• Contributions or funds provided to technology incubators located within academic
institutions which are approved by the central govt.
• Rural development projects
• Slum area development.
Eligible CSR spends
• The following activities cannot be included as part of a company’s eligible CSR
spend:
• Activities which are undertaken in the normal course of business of a company, or
those benefitting only its employees.
• Political contributions.
• Sponsorship activities.
• Fulfilment of statutory obligations and activities undertaken outside India (except
for training of sports personnel representing a state or country at the national or
international level).
 New Amendments in CSR Act
Activities that can now be included as CSR
COVID-19-related activity in the normal course of business: This covers
companies undertaking research and development into vaccines, medical devices, and
drugs related to COVID-19, even if such activity is in their normal course of business.
This exemption is allowed up to the financial year 2022-2023.