Corporate Social Responsibility In India

The public sector has been playing a vital role in the economic development of the country. In fact, the public sector has come to occupy such an important place in our economy that on its effective performance depends largely the achievement of the country’s economic and social goals. The importance of Public Sector Units (PSUs) in the Indian economy can never be over emphasized. The public sector in India was set up with the objective of achieving inclusive growth aimed at ensuring equity and justice to the overall community/society. With growing public awareness and demand for socially responsible businesses, companies are considering corporate social responsibility when planning future socially responsible business operations. For discharging their social responsibilities companies are using CSR Codes, .i.e. self – regulatory instruments. In the absence of statutory regulations, the large companies are increasingly declaring their principles to monitor CSR programs. In India, companies like TATA and Birla are practicing the Corporate Social Responsibility (CSR) for decades, long before CSR become a popular basis. There are many instances where corporate have played a dominant role in addressing issues of education, health, environment and livelihoods through their corporate social responsibility interventions across the country. There are more than 1,000,000 registered companies in India out of which less than 1percent companies are traded on the Indian Stock Exchange. A new Trend has started in Corporate is the establishment of special committees within the board of directors to oversee CSR activities. Groups of corporate are being encouraged to come together to promote CSR. In 2006, Europe created the European Alliance for CSR. It currently consists of 70 multinational corporate houses and 25 national partner organizations and has become a unique resource for building capability in CSR [] . The success of CSR lies in practicing it as a core part of a company’s development strategy. It is important for the corporate sector to identify, promote and implement successful policies and practices that achieve triple bottom-line results [] . The industrial corporations exploit the natural resources of the country, cause incidental damage to the environment and inconvenience to the people of the project area. Therefore, they have a responsibility towards the society to share a part of their profit. CSR can be a means to ease the tension, if any between the corporate entity and the local people. The scope of CSR is conceptually quite unbound at the present times. There are different components of CSR, as there is no single commonly accepted definition of CSR, there is no universally accepted classification of the main components of CSR. CSR is related to Environment protection, Labour Security, Human Rights, Community Involvement, Business Standard, Enterprise and economic development, Health promotion, Education and leadership development Human Disaster relief.

Meaning of CSR

Corporate social responsibility (CSR) is also known by a number of other names. These include corporate responsibility, corporate accountability, corporate ethics, corporate citizenship or stewardship, responsible entrepreneurship, and “triple bottom line,” to name just a few. As CSR issues become increasingly integrated into modern business practices, there is a trend towards referring to it as “responsible competitiveness” or “corporate sustainability.”

“Corporate Social Responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large”. [] 

Corporate social responsibility may also be referred to as “corporate citizenship” and can involve incurring short-term costs that do not provide an immediate financial benefit to the company, but instead promote positive social and environmental change. [] 

Corporate social responsibility (CSR) can be defined as the “economic, legal, ethical, and discretionary expectations that society has of organizations at a given point in time”. [] 

The World Business Council for Sustainable Development has described CSR as the business contribution to sustainable economic development. Building on a base of compliance with legislation and regulations, CSR typically includes “beyond law” commitments and activities pertaining to:

• Corporate governance and ethics;

• Health and safety;

• Environmental stewardship;

• Human rights (including core labour rights);

• Sustainable development;

• Conditions of work (including safety and health, hours of work, wages);

• Industrial relations;

• Community involvement, development and investment;

• Involvement of and respect for diverse cultures and disadvantaged peoples;

• Corporate philanthropy and employee volunteering;

• Customer satisfaction and adherence to principles of fair competition;

• Anti-bribery and anti-corruption measures;

• Accountability, transparency and performance reporting; and

• Supplier relations, for both domestic and international supply chains.

Generally, CSR is understood to be the way firms integrate social, environmental and economic concerns into their values, culture, decision-making, strategy and operations in a transparent and accountable manner, and thereby establish better practices within the firm, create wealth and improve society. [] 

LEGAL POSITION RELATING TO CORPORATE SOCIAL RESPONSIBILITY IN INDIA

In India CSR is in a very much budding stage and there is no such specific Act, Rule or Regulation relating to CSR However, there are voluntary guidelines issued by the Ministry of Corporate Affairs and guidelines issued by Ministry of Public Enterprises and Ministry of Heavy Industries of the Government of India. A. Voluntary Guidelines by Ministry of Corporate Affairs The Fundamental Principle of guidelines says, “Each business entity should formulate a CSR policy to guide its strategic planning and provide a roadmap for its CSR initiatives, which should be an integral part of overall business policy and aligned with its business goals. The policy should be framed with the participation of various level executives and should be approved by the Board.” [] The Guidelines provide certain core elements of CSR Policy, namely –

• Care for all Stakeholders,

• Ethical functioning,

• Respect for Workers’ Rights and Welfare,

• Respect for Human Rights,

• Respect for Environment and

• Activities for Social and Inclusive Development

Government initiatives in CSR:

Several major CSR initiatives have been launched in India since the mid-1990s. Among these is the first voluntary code of corporate governance, “Desirable Corporate Governance: A Code”, established in April 1998. This was an initiative by the Confederation of Indian Industry (CII), India’s largest industry and business association.

The Ministry of Corporate Affairs has established a National Foundation for Corporate Governance (NFCG). This is a partnership with the Confederation of Indian Industry (CII), the Institute of Company Secretaries of India (ICSI) and the Institute of Chartered Accountants of India (ICAI). The purpose of the National Foundation for Corporate Governanceis to promote better corporate governance practices and raise the standard of corporate governance in India towards achieving stability and growth.

Further the Guidelines provides for the implementation guidance for business and Industrial entities:

1. The CSR policy of the business entity should provide for an implementation strategy;

2. Companies should allocate specific amount in their budgets for CSR activities and

3. The companies should disseminate information on CSR policy, activities and progress in a structured manner to all their stakeholders and the public at large through their websites, annual reports, and other communication media.

Guideline for Corporate Social Responsibility for Central Public Sector Enterprises (CPSEs) by Ministry of Public Enterprises and Ministry of Heavy Industries [] 

This guideline on Corporate Social Responsibility (CSR) was issued by Ministry of Public Enterprises on 9th April 2010.The Salient Features of Guideline:

1. Planning of CSR Action Plan: The planning for Corporate Social Responsibility should start with the identification of the activities/projects to be undertaken. Company specific Corporate Social Responsibility strategies should be developed that mandate the design of Corporate Social Responsibility Action Plan (Long-term, mediumterm and short-term), with a shift from the casual approach to the project based accountability approach. Each of these plans should clearly specify requirements relating to baseline survey; activities to be undertaken, budgets allocated, time-lines prescribed, responsibilities and authorities defined and major results expected.

2. Implementation of CSR Action Plan: CSR initiatives of Central Public Sector Enterprises (CPSEs) should consider the following parameters for identification/selection of schemes/projects:

• The time-frame and periodic milestones should be finalized at the outset;

• CSR activities should help in building a positive image of the company in the public perception;

• CSR projects may be closely linked with the principles of sustainable development, ensure gender sensitivity, skill enhancement, entrepreneurship development and employment generation by co-creating value with local institutions/people;

• Public-Private Partnership between Government and the Central Public Sector Enterprise could also be encouraged to leverage the strengths of the latter in Disaster management;

• CSR is to be implemented by Specialized Agencies and generally NOT by staff of the CPSE concerned and,

• Activities related to Sustainable Development will form a significant element of the total initiatives of CSR.

3. National CSR Hub: The Department Of Public Enterprises, in conjunction with Standing Conference of Public Enterprises (SCOPE) and the CPSEs will create a National CSR Hub, which will undertake/facilitate the activities like Nation-wide compilation, documentation, and creation of database; Advocacy; Research; Conferences, Seminars, Workshops – both national and international etc.

4. Monitoring

• Monitoring of the CSR projects is very crucial and needs to be a periodic activity of the Enterprise.

• The Boards of CPSEs should discuss the implementation of CSR activities in their Board meetings.

• CSR projects should also be evaluated by an independent external agency.

Amendment in Companies Act

The Companies Bill 2011 provide that Every company having net worth of rupees five hundred crore or more, or turnover of rupees one thousand crore or more or a net profit of rupees five crore or more during any financial year shall constitute a Corporate Social Responsibility Committee of the Borad consisting of three or more directors, out of which at least one director shall be an independent director.

Such Corporate Social Responsibility Committee shall,-

(a) formulate and recommend to the Board, a Corporate Social Responsibility Policy which shall indicate the activities to be undertaken by the compay as specified in Schedule VII;

(b) recommend the amount of expenditure to be incurred on the activities referred to in clause (a); and

(c) monitor the Corporate Social Responsibility Policy of the company from time to time.

Corporate Social Responsibility in India:

Though India is one of the fastest growing economies, socio-economic problems like poverty, illiteracy, lack of healthcare etc. are still ever-present and the government has limited

resources to tackle these challenges. This situation has opened up several areas for businesses to contribute towards social development. CSR in India has gone beyond merely charity and donations, and has been approached in a more organized fashion. It has become an integral part of the corporate strategy. Companies have CSR teams that formulate specific policies, strategies and goals for their CSR programs and set aside budgets to support them.

Many factors and influences have led to increasing attention being devoted to the role of companies and CSR. These include:

• Sustainable development: United Nations’ (UN) studies and many others have underlined the fact that humankind is using natural resources at a faster rate than they are being replaced. If this continues, future generations will not have the resources they need for their development. In this sense, much of current development is unsustainable-it can’t be continued for both practical and moral reasons. Related issues include the need for greater attention to poverty alleviation and respect for human rights. CSR is an entry point for understanding sustainable development issues and responding to them in a firm’s business strategy.

• Globalization: With its attendant focus on cross-border trade, multinational enterprises and global supply chains-economic globalization is increasingly raising CSR concerns related to human resource management practices, environmental protection, and health and safety, among other things. CSR can play a vital role in detecting how business impacts labour conditions, local communities and economies, and what steps can be taken to ensure business helps to maintain and build the public good. This can be especially important for export-oriented firms in emerging economies.

• Governance: Governments and intergovernmental bodies, such as the UN, the Organisation for Economic Co-operation and Development (OECD) and the International Labour Organization (ILO) have developed various compacts, declarations, guidelines, principles and other instruments that outline norms for what they consider to be acceptable business conduct. CSR instruments often reflect internationally agreed goals and laws regarding human rights, the environment and anti-corruption.

• Corporate sector impact: The sheer size and number of corporations, and their potential to impact political, social and environmental systems relative to governments and civil society, raise questions about influence and accountability. Even small and medium size enterprises (SMEs), which collectively represent the largest single employer, have a significant impact. Companies are global ambassadors of change and values.

• Communications: Advances in communications technology, such as the Internet and mobile phones, are making it easier to track and discuss corporate activities. Internally, this can facilitate management, reporting and change. Externally, NGOs, the media and others can quickly assess and profile business practices they view as either problematic or exemplary. In the CSR context, modern communications technology offers opportunities to improve dialogue and partnerships.

• Finance: Consumers and investors are showing increasing interest in supporting responsible business practices and are demanding more information on how companies are addressing risks and opportunities related to social and environmental issues. A sound CSR approach can help build share value, lower the cost of capital, and ensure better responsiveness to markets.

• Ethics: A number of serious and high-profile breaches of corporate ethics resulting in damage to employees, shareholders, communities or the envi-ronment-as well as share price-have contributed to elevated public mistrust of corporations. A CSR approach can help improve corporate governance, transparency, accountability and ethical standards.

• Consistency and Community: Citizens in many countries are making it clear that corporations should meet the same high standards of social and environmental care, no matter where they operate. In the CSR context, firms can help build a sense of community and shared approach to common problems.

• Leadership: At the same time, there is increasing awareness of the limits of government legislative and regulatory initiatives to effectively capture all the issues that CSR address. CSR can offer the flexibility and incentive for firms to act in advance of regulations, or in areas where regulations seem unlikely.

• Business Tool: Businesses are recognizing that adopting an effective approach to CSR can reduce the risk of business disruptions, open up new opportunities, drive innovation, enhance brand and company reputation and even improve efficiency. [] 

Various CSR Models

The socioeconomic view and the classical view are two approaches that shape and influence the way managers (especially in large organizations) prioritize and do things. The socioeconomic view is “the view that management’s social responsibility goes beyond making profits to include protecting and improving society’s welfare” [] . According to Carroll (1991), the four fundamentals to corporate social responsibilities – economic, legal, ethical, and philanthropic – can be linked to corporate social processes such as environmental assessment, stakeholder management, and issues management (Wood, 1991 Results of studies carried out have shown a positive relationship between corporate social responsibility and corporate financial performance [] . Hence, corporate social responsibility incorporates both policy and practice with corporate social outcomes such as social impacts, programs and policies. Being socially responsible is not only the right thing to do, it also aids corporations that are socially responsible to create a favorable public image, improve share price in the long run, and have more secured long-run profits. Simon Zedek (2001) further explains that when corporations have a greater sense of corporate social responsibility, they will take greater account on their actions for repercussions they may cause – the impact on environmental and social issues [] . Moreover, it would be in a corporation’s best interest to pursue corporate social responsibility as public opinion now supports businesses that do so, and those who do so can expect less government regulation. Social responsibility also includes the balance of responsibility and power; the case of Enron (Managing 401(k) Plans 2006 [] would be a good example of a corporation that failed to implement corporate social responsibility. The classical view, on the other hand “says that management’s only social responsibility is to maximize profits” [] . Milton Friedman [] maintains, “There is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.” In addition, Friedman [] argued that managers’ main responsibility is to operate the organization in the interest of the shareholders by increasing financial returns. If socially responsible actions add to the cost of a business, it would hurt the return on profits. He also mention that those opposed to social responsibility fear that pursue of social goals may dilute economic productivity, and of the costs incurred as many socially responsible actions do not cover their costs.

World Business Council for Sustainable Development (WBCSD): www.wbcsd.org

The WBCSD is a Geneva-based business association with a membership of some180 international companies from 35 countries, covering more than 20 industrial sectors. Its mission is to promote sustainable development through economic growth, ecological balance and social progress. WBCSD’s free “Corporate Social Responsibility: Making good business sense” publication provides a process for addressing CSR, including a self-assessment questionnaire. The WBCSD Chronos e-learning tool (mentioned above) is also relevant.

Business for Social Responcibility (BSR): www.bsr.org Business for Social BSR is a non-profit business association headquartered in San Francisco with offices in Europe and Asia. Established in 1992, it offers advisory, research and conferences on CSR. “Designing a CSR Structure tool is a low cost aid for helping identify the steps necessary for a company to consider and set up an internal management system integrating CSR into the entire company’s organization and culture.”

Global Environmental Management Initiative (GEMI): www.gemi.org GEMI is a U.S.-based organization of companies dedicated to fostering global environmental, health and safety (EHS) excellence through the sharing of tools and information to help business achieve EHS excellence. Since 1990, GEMI has created tools and provided a forum to help business foster global environmental, healthy and safety excellence and economic success. GEMI’s SD Plannerâ„¢ is a free self-assessment and planning tool that can be customized to suit the needs of individual companies.

Caux Round Table Self Assessment and Improvement Tool (CRTSAIT) www.cauxroundtable.org Founded in 1986, the Caux Round Table is a network of senior business leaders from industrialized and developing nations who recognize that business must take a leadership role in developing a more fair, free and transparent society. In addition to its Principles for Business, the group has developed the Self Assessment and Improvement Tool to help senior executives and boards of directors address growing expectations for responsible business conduct. Modelled after the Malcolm Baldrige National Quality Program, it translates seven general principles for business into seven assessment categories, and considers company performance within each from seven perspectives.

CSR Practices in India:

The Shiksha initiative by Procter and Gamble (P&G) and CRY partnership for educating children in India is a perfect example of such a partnership between a corporate and an NGO. CRY’s goal and P&G’s altruism to reach out to illiterate children in India and provide them with the basic right to education resulted in the launch of Shiksha. Shiksha is a part of P&G’s global philanthropy programme ‘Live, Learn and Thrive’ that focuses on the development of children in need across the globe, specifically in terms of education. Strategically, P&G has incorporated a part of their contribution to this initiative in the selling price of its products. In 2008, through this initiative, P&G was able to contribute Rs 3.2 crores to CRY and other social partners and influence the lives of almost 87,000 children across India.

In the FMCG industry, Hindustan Unilever’s Limited’s (HUL) Project Shakti is a classic case of CSR beyond philanthropy. Project Shakti was initiated by HUL in 2001 to empower and create sustainable livelihoods for the marginalised women in rural India by providing them income-generating opportunities. By collaborating with NGOs and Self Help Groups, these women have not only been able to increase the sales of products and outreach in the economically poor regions of India, which otherwise is a mundane task, but also generate income and empowerment for the underprivileged women. Today, HUL’s rural sales contribute towards a major chunk of their total sales, making this a highly successful business model, which is in tune with the triple bottom line approach. Such has been the success that the global arm of HUL now plans to replicate this successful business model at an international level.

National Thermal Power Corporation (NTPC) has been a socially committed organization since inception. NTPC’s mission statement includes “being a responsible corporate citizen with thrust on environment protection, rehabilitation and ash utilisation.” In pursuance of the vision and mission, NTPC had a specific corporate objective towards sustainable power development as follows:-

To contribute to sustainable power development by functioning as a responsible corporate citizen and discharge social responsibilities in the areas of environment protection and rehabilitation.

The corporation will strive to utilize the ash produced at its stations to the maximum extent possible.

For achieving its mission and objective, NTPC formulated specific policies, as delineated in subsequent paras of this note. The policies were formulated to address the issue of corporate social responsibility in a comprehensive and systematic manner. The Corporate Human Resources Department also formulated the policies on “Facilities to be given to land oustees” whose land is expropriated for setting up the power project; policy on educational facilities for the children of employees as early as 1980. Further, institutional mechanism like participative forums for employees and environment group were established as early as 1980 itself. Specific guidelines were formulated on Engagement of Contractors workers and staff.

Some other initiatives:

IBM- Upliftment of tribals in SASAN.

INDIAN PAINT INDUSTRY: Making green more environment friendly.

FINANCIAL SERVICES-Neasing of carbon footprints-renewable energy etc- HSBC, MAX NEWYORK LIFE,SCB

E Chaupal

ADOBE, KPMG, Promoting entrepreneurship.

RELIANCE- Project DRISHTI

NDTV-GREENATHON

AIRCEL-SAVE THE TIGER

COPENHAGEN- Environment issues.

E WASTE MANAGEMENT

Benefits of CSR

Based on a two-year study, the World Business Council for Sustainable Development has drawn several conclusions about the benefits of CSR to companies”

• A coherent CSR strategy, based on integrity, sound values and a longterm approach, offers clear business benefits to companies and helps a firm make a positive contribution to society;

• A CSR strategy provides businesses with the opportunity to show their human face;

• Such a strategy requires engagement in open dialogue and constructive partnerships with governments at various levels, intergovernmental organizations, non-governmental organizations, other elements of civil society and, in particular, local communities;

• When implementing a CSR strategy, companies should recognize and respect local and cultural differences, while maintaining high and consistent global standards and policies; and

• Being responsive to local differences means taking specific initiatives.

The full report is available at www.wbcsd.org [] .

CONCLUSION:

Finally we can conclude that concept of corporate social responsibility is now firmly rooted on the global business agenda. Transparency and dialogue can help to make a business appear more trustworthy, and push up the standards of other organizations at the same time. selected PSUs are trying to manage their CSR department in a very good manner. As discussed above PSUs are expecting huge amount of support from government for implementing CSR policies and in return government is also trying to facilitate them by launching various Guidelines, norms and procedures. The government while formulation its guidelines have made provisions for 0.5% to 2% net profits to be allocated to social , environmental and economic sectors. Various positives have been seen in different abovementioned sectors, such as:

In environmental field, somr benefits such as greater material recyclability; Better product durability and functionality; Greater use of renewable resources; Integration of environmental management tools into business plans, including life-cycle assessment and costing, environmental management standards, and eco-labeling.

At community leavel some benefits to society and the General Public are Charitable contributions; Employee volunteer programs; Corporate involvement in community education, employment and homelessness programs; Product safety and quality. While at company level itself it enjoys the benefits of Improved financial performance; Lower operating costs; Enhanced brand image and reputation; Increased sales and customer loyalty; Greater productivity and quality; More ability to attract and retain employees; Reduced regulatory oversight; Access to capital; Workforce diversity; Product safety and decreased liability.

Government is playing a very significant role in facilitating the formulation and implementation of CSR policies and practices, but when it comes to monitor the activities of CSR by government the companies are against it. They think that the role of government in regulating their CSR activities should be limited. Proper observing and assessment of such practices can give better results as it will help in finding out the loopholes where the companies are deficient. CSR holds a very important place in the development scenario of the world today and can pose as an alternative tool for sustainable development.

With increasing and widespread commitment of corporate resources to CSR, attention is now shifting to the strategic formulation, implementation, and measurement of the market returns to CSR initiatives. But still a concern to companies is whether their focus on “doing good,” will provide positive returns to their CSR actions. This emphasize the need for better measurement models of CSR that capture and estimate clearly the effects of a company’s CSR actions on its stakeholders as well as the nations in which they are operating.