Ishika Jindal

MODULE 4: Corporate Social Responsibility

1. Meaning, Concept and Relevance

2. Historical Backdrop
3. Position in India
4. Challenges faced in the evolution
5. CSR and Companies Act, 2013
6. CSR in Covid-19 by Tata Group
7. Corporate Philanthropy by Reliance India Foundation
8. CSR Practices by Jindal Group

1. MEANING, CONCEPT AND RELEVANCE

1.1 Meaning of CSR

● As per UN Industrial Development Organization, CSR is -
○ A management concept whereby companies integrate social and environmental concerns in
their business operations and interactions with their stakeholders.
○ The way through which a company achieves a balance of economic, environmental, and social
imperatives (Triple-Bottom-Line Approach), while at the same time addressing the
expectations of shareholders and stakeholders.
○ CSR is more than mere charity, philanthropy, or donations.
○ For an organization to be sustainable, it must be financially secure, minimize (or ideally
eliminate) its negative environmental impacts and act in conformity with societal expectations.
● Collection of works that a body corporate may perform in order to benefit the society as a whole
● A quintessential aspect of Corporate Governance.
● Focus upon contributing towards the society from the profits earned to enhance reputation in the
society and comply with the regulatory requirements.
● Generally, self-regulatory in nature and goodwill and reputation-oriented concepts.
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1.2 Facets of CSR

● Economic: responsibility to earn profits and, at the same time, to look for more eco-friendly and
efficient ways of doing business.
● Legal: compliance with the law of the land & acing with all necessary requirements.
● Ethical: promoting equitable and justified ways of doing business, prohibiting unethical practices.

1.3 Relevance of CSR

● Helps in enhancing reputation and goodwill in society; improves brand value and public image by
publicizing the efforts towards a better society; consumers favor company; positive media visibility
● Adoption of innovation and eventually increasing sustainability in business.
● Attracting a larger section of investors by indulging in value-centered affairs.
● Employee satisfaction leads to high retention rates, motivated workforce, and attracts others.
● Customer satisfaction leads to loyalty, retention, and brand building.
● Enhanced standards of society, environment etc.

1.4 Not just Charity, but a Management Concept

With globalization, the negative aspects of businesses have been intensified and exploitation is
widespread - CSR Policies may work to counter this effect. Boosting profits is no longer the sole business
performance indicator for the corporate and they have to play the role of responsible corporate citizens
as they owe a duty towards society. (can be formulated further + use real life examples)

2. HISTORICAL BACKDROP

● Evolved loosely from the 19th Century – Industrial Revolution

● Concerns towards workers – concerns towards society – global environmental concerns
● CSR – term first used in 1953 by Howard Bowen – came in trend in the late 20th century
worldwide through emphasis shift towards social responsibilities of a business concern
● Evolution of the social obligations to be kept at par with the obligations towards internal
stakeholders.
● Conceptual framework for CSR - development and evolution
● Striking balance amongst the following four aspects/areas – Economic responsibilities, Ethical
responsibilities, Legal responsibilities, and Philanthropic responsibilities.
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3. POSITION IN INDIA

India is the first country in the world to make corporate social responsibility (CSR) mandatory.
(Develop from other info in notes)

4. CHALLENGES FACED IN THE EVOLUTION

4.1 Lack of effective enforcement

Simply mandating them will not be helpful. According to a KPMG report, more than 52 out of the
country’s 100 largest companies failed to spend the required 2% on CSR activities.

4.2 Geographical bias

This discrepancy is because of the simple reason that most companies tend to distribute their funds to
projects, which are located close to where they are based. This eventually leads to the industrialization
of the areas that are already developed or developing.

4.3 Combining Social Obligation with Business

To avoid paying towards CSR many companies across industries have convoluted sustainability with their
business strategy. The idea behind this is not to accelerate the growth of the society but to simply
increase their profit margins. (example - Hindustan Unilever Limited; detail below)

4.4 Dodging Responsibility

A very strong argument used by most companies to justify their underspent towards CSR activities is that
they are not able to identify the right projects or organization to associate with.

4.5 Poor Disclosure Standards

In order to spend less than what is required on CSR initiatives, the companies are not very forthcoming
when it comes to sharing the details of their CSR spending.

4.6 Laundering of CSR Money

Embezzlement of CSR funds becomes easier as there is very little oversight on CSR spending.
Governmental officials and senior staff in PSUs have constantly been engaged in laundering of CSR
money for their own benefit.
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Example of Hindustan Unilever Limited

HUL spent a lot of money in the underdeveloped rural areas to create awareness amongst them about
sanitation and the need for good hygiene. At face value this activity done by them would constitute to be
an act that complied with the CSR laws but in reality, it’s a façade. The CSR rules of the Companies Act,
2013 would not take such activities under the purview of CSR. The society outreach activities by HUL
were considered to be activities undertaken in their normal course of business and not as CSR activities.
It was more of a marketing strategy. The sole driving force behind such activities was profit making. This
was because HUL derived direct monetary benefit from such an activity. By creating awareness amongst
the targeted consumers, they were indirectly increasing the demand of the products they primarily dealt
with – toiletries and detergents. All such expenses would be counted as business promotion
expenditure. They would not amount to CSR expenses.

5. CSR AND COMPANIES ACT, 2013

5.1 Section 135

Every Company including its holding or subsidiary whose:
1. Net worth is Rs 500 crore or more OR
2. Is having a turnover of Rs 1000 crore or more OR
3. Whose Net Profit is Rs 5 crore or more,
during the immediately preceding financial year, have to contribute towards CSR activities mandatorily.

5.2 CSR Policy - Schedule VII

CSR Policy elaborates the activities to be undertaken by the company according to Schedule VII.
● The activities should not the same which are done by the company in its normal course of business
● Contents of CSR Policy should be placed on the company’s website by the Board.
● The activities mentioned in the policy must be undertaken by the company.
● The Company can join hands with other companies for undertaking projects or programs or CSR
activities and report separately on such programs or projects.

5.3 Composition of CSR Committee

As per the CSR Rules, each and every Company on which CSR provisions are applicable needs to form a
CSR committee of the Board which:
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● Shall constitute 3 or more Directors, at least one should be an Independent Director.

● An unlisted public company or a private company can have its CSR Committee which is not
required to appoint any independent director shall have 2 or more directors.
● In case of a foreign company, at least 2 persons; one person shall be an authorized person,
resident in India and the second one should be nominated by the Company itself.
● In the case of a Private Company having only two directors, the committee shall also be
constituted having 2 Directors.

5.4 Role of CSR Committee

● Plan and recommend CSR strategies and policies to the BoD.
● Recommend the budget (amount of expenditure to be incurred) for CSR activities.
● Monitor the performance of the CSR policy of the Company.
● Establish transparency controlling mechanisms for the implementation of CSR projects in a more
transparent manner and efficient way.

5.5 Role of Board of Directors

● Approve the CSR policy as per the recommendations of the CSR Committee.
● Ensure only those activities must be undertaken which are mentioned in the policy.
● Ensure that the company spends in every financial year, minimum of 2% of the average net profits
made during the 3 immediately preceding financial years as per CSR policy.
○ In case a company has not completed 3 financial years since its incorporation, the average net
profits shall be calculated for the financial years since its incorporation.
● Disclose the contents of the CSR policy in its report which shall also be displayed on the website of
the Company. The Board’s Report shall disclose:
○ CSR Committee’s composition
○ The contents of CSR Policy
○ In case CSR spending does not meet 2% as per CSR Policy, the reasons for the unspent amount,
and other necessary details

6. CSR IN COVID-19 BY TATA GROUP

With the mind-sets of ‘One Tata’, the TATA group collaborated under the leadership of Mr. Ratan N Tata
and committed Rs 1500 crores as a group to Covid-19 relief. Besides, the Tata employees contributed in
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crores towards various response projects. The TATA conglomerate worked in unison and the contribution
by some of its corporates nationally and internationally are denoted below:

6.1 Tata Motors

● Served cooked meals in lacs and distributed grocery kits in thousands.
● Operated helpline numbers for food associated requirements from temporary and contractual
workers.
● Provided food and shelter to the stranded truck drivers and their khalasis.
● Disinfected lacs of private vehicles, public buses, rickshaws and partnered with the Delhi Transport
Corporation on this mission.
● Piloted mindfulness movements and awareness campaigns through social media, posters, notices
and other awareness tools.
● The International business of Tata Motors reached out overseas with funds, meals, medical
supplies to Sri Lanka, Bangladesh, Malaysia, the Philippines, Thailand, Nepal, Vietnam and Uganda.

6.2 Tata Consultancy Services (TCS)

● Produced advisories, audio communications and placards in different Indian languages on physical
and emotional welfare advisories, delivered virtually to lakhs of people in rural areas.
● With three crores Americans filing for unemployment assistance, the company presented
pro-bono amenities to advance the performance and dimensions of the benefits systems in 18
states throughout the US.
● With the help of digital awareness, the campaign reached out to thousands of students in the
developing areas of South Africa.
● As an aggregator of more than 200 food banks, helped provide meals to America by building a
system for allocation of food, services and donations.

6.3 Tata Chemicals

● Produced Lacs of masks through the self-help groups.
● Reached dry ration necessaries and sanitation kits and held awareness drives across India.

6.4 Tata Power

● Stitched face masks in lacs through ‘Dhaaga’, a women's enablement ingenuity.
● Supported people with food grains and supported farmers in marketing 68,000kg+ of vegetables.
● Enabled supply of green feedstuff for 3,600 cattle daily.
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● Connected 4 lakh+ people with public distribution systems to get dry ration and meals.

6.5 Tata Consumer Products Limited

● Tata Coffee donated about 4 tons of food grains, tea and coffee, disinfectants and sterilizers.
● Tata Coffee ensured safeguarding 4000+ migrant contract workers to safe journeys back to their
home.
● Provided sustenance kits to the aging through Tata Cha and in connection with Help age India.
● Partnered with the Khichdi Project to offer constituents like salt and pulses for meals for migrant
laborers and their relations in Mumbai, aiding them by providing 30,000 meals a day for 10 days.
● Sustained hospitals and emergency services across the United Kingdom, the United States, Poland,
Australia and Canada with donations and care packages.

6.6 Tata Communications

● Delivered meals and ration to 58,000 people in Delhi, Maharashtra (Mumbai, Pune and Nan
durbar) and Karnataka (Bengaluru).
● Conducted sensitization sessions on Covid-19 well-being measures in Odisha and Jharkhand.
● Collaborated with Tata Power Delhi Distribution Ltd in Delhi for backing 1,000 travelers/migrants.

6.7 Tata Realty and Infrastructure

Distributed food and sanitation kits to 9,400 migrant casual workers.

6.8 Titan Company

Made provision and distributed meals to 12,200 casual workers/migrants in Hosur and Bengaluru.

6.9 Tata Projects

Provided meals to 4,000 migrants in Bihar, Arunachal Pradesh, Odisha and Telangana.

6.10 Tata Advanced Systems Ltd

Provided 1,500 meal packets daily for 30 days to labour and daily wagers near Tata Advanced System
Ltd.’s production units in Bengaluru.

6.11 Jaguar and Land Rover

370+ vehicles were positioned in service of Red Cross and other crisis response groups worldwide.
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Analysis
● As it is evident from above, Tata Company expansively uses corporate communication and CSR as
their strategic public relation approach.
● Besides branding their product and positioning corporate image in national and international
market, the group is reaching out to the entire fabric of the society with a mission and zeal to
serve exemplified during Covid-19 times.
● Tata gives immense weightage to maintaining good relations with their employees by providing
them numerous amenities and uphold their goodwill in the marketplace with their customers and
society at large. Tata has for time immemorial been working with the public.
● Tata has the involvement of working in different regions, different circumstances, and using
different methodologies to realize their objectives.
● Tata has a full-bodied Public Relations mechanism that always benefits the company to eradicate
adverse news and focus on positive media reporting.
● Tata as a multinational has succeeded to get a lot of esteem for its social welfare programs, since it
has consideration for its employees. This distinguishing employer characteristic has helped the
company to earn trust, goodwill and allegiance.

7. CORPORATE PHILANTHROPY BY RELIANCE INDIA FOUNDATION

● Reliance Foundation was set up in 2010 to provide impetus to various philanthropic initiatives of
Reliance Industries Limited (RIL). Over the years, Reliance Foundation’s initiatives have continued
to evolve, while remaining responsive to the ever-changing needs of society.
● Reliance has strategically chosen the company’s CSR initiatives with a focus on improving the
quality of life. The initiatives focus on seven areas: Rural Transformation, Health, Education, Sports
for Development, Disaster Response, Arts, Culture and Heritage and Urban Renewal.
● The key philosophy of all the social development initiatives of RIL is based on three core
commitments of Scale, Impact and Sustainability.
● Reliance Foundation focuses on its social initiatives with a three-pronged strategy:
○ direct engagement with the community,
○ forging partnerships and collaborations, and
○ leveraging the power of information technology.
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● Reliance Foundation forms strategic partnerships with organizations to bring in synergy to its
development initiatives. These partnerships include state and local governments and
non-government organizations working at the grassroots level. Reliance collaborates with the
organizations for sharing technical know-how, human resources and infrastructure.
● In addition to Reliance Foundation’s interventions, the Company also encourages its employees to
voluntarily contribute to social causes. Periodic inputs are obtained from employees on their
interest to contribute to a particular cause.
● RIL spent a record Rs 1,184.93 crore in FY22 on CSR initiatives that spanned oxygen delivery during
the second wave of the pandemic, education and healthcare. Over 8.5 crore free meals were
distributed to frontline workers and vulnerable communities. Reliance produced 1,000 tonnes of
oxygen every day during the second wave and provided it free to states for over 1 lakh patients.
Besides, it set up 2000+ beds hospital for Covid care.
● Mission Oxygen and Mission Vaccine Suraksha were rolled out to meet the needs of the nation.
The other missions include Mission Anna Seva, Mission COVID Infra and Mission Employee Care.
● This went beyond supporting employees as well as their extended families and was aimed at caring
for the most-at-need across India. The initiatives were spearheaded by Reliance Foundation, the
philanthropic arm of the company led by Nita M. Ambani.

8. CSR PRACTICES BY JINDAL GROUP

● Shri O.P. Jindal founded Jindal Steel and Power Limited (JSPL) 30 years ago and made the Jindal
Group synonymous with mining and Industrialization in India.
● He also ensured that JSPL used its profits and resources for the betterment of the society through
the CSR initiatives of JSPL Foundation. JSPL Foundation has been spending on social development
projects through CSR initiatives before it became mandatory for companies in India to spend 2% of
their net profits on Corporate Social Responsibility.
● The Foundation addresses some of India’s most pressing development challenges in the fields of
Healthcare & Nutrition (OP Jindal Hospital and Research Centre), Skill Development & Education
(OP Jindal Universities and Colleges), Sanitation & Hygiene, Women Empowerment, promoting Art
& Culture and Sports (Jindal Art Institute).
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● JSPL follows a location-centric approach and works in partnership with the community around its
plants and offices. Its CSR initiatives are operated on the basis of “The Triple Bottom Line”
principle and focus not only on profit but also on the people, and the planet.
● JSPL Foundation uses techniques to get a grip on the real need of the community and formulates
its CSR policy accordingly.
● The Sustainability Division at JSPL monitors different functions in the company which are related to
long term growth of JSPL’s business. It focuses on the following goals:
○ Ensuring compliance and raw material security
○ Establishing sustainable steel and power production processes
○ Building an authentic corporate identity and brand
○ Enabling innovation
○ Attracting and nurturing leaders
○ Maintaining robust internal management processes
○ Motivating employees to innovate, be dynamic and provide leadership on issues critical to
the state of the world
● According to the guidelines of MCA, the Company has constituted a Board-level CSR Committee to
monitor the implementation of the CSR Policy of the Company from time to time.
● Since the company incurred losses in the last four FYs 2016-20, JSPL was not obligated to spend on
CSR as per section 135 of the Companies Act, 2013. However, the company has voluntarily spent
funds for ongoing CSR initiatives of the company.