Corporate Social Responsibility (CSR)

-Prof. Vikram S. Tyagi

What is Corporate Social Responsibility (CSR)

In the United States, CSR has been defined traditionally much more in terms of a philanthropic model. Companies make profits and fulfilling their duty to pay taxes. Then they donate a certain share of the profits to charitable causes. It is seen as a noble act of giving by the company to receive no direct benefit from the giving. The European model is much more focused on operating the core business in a socially responsible way, complemented by investment in communities for solid business case reasons. It is believed that European model is more sustainable because of the following reasons:
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What is Corporate Social Responsibility (CSR)-European Model

1-Social responsibility becomes an integral part of the wealth creation process which, if managed properly, should enhance the competitiveness of business and maximize the value of wealth creation to society. 2-When times get hard, there is the incentive to practice CSR more and better if it is a philanthropic exercise which is peripheral to the main business, it will always be the first thing to go in difficult times.

Conflicting Perspectives on CSR

Economists like Adam Smith and Milton Friedman were of the opinion that the only responsibility of business was to perform its economic functions efficiently and provide goods and services to society and earn for itself maximum profit The business pays tax to Government and it was better to leave social functions to other institutions of the society like the government
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Corporate Social Responsibility and the Stakeholder

CSR is essentially a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis CSR presently is mainly driven by large companies that benefit from their public opinion. The systematic implementation of CSR involves the use of the following features:
Adoption of strong organizational values and norms justifying as to which behaviors are appropriate toward a variety of stakeholders. Continuous generation of intelligence about stakeholder issues, along with positive responses to these issues.
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A Growing Global Role

Over the last 10 years, those institutions which have grown il power and influence have been those which can operate effectively within a global sphere of operations. These are effectively the corporate and the NGOs. Those institutions which are predominantly tied to the nation state have been finding themselves increasingly frustrated at their lack of ability to shape and manage events. These include national governments, police, judiciary and others. There is a growing interest, therefore, in business taking a lead in addressing those issues in which they have an interest where national governments have failed to come up with a solution. That is not to say businesses will necessarily provide the answersbut awareness is growing that they are occasionally better placed to do so than any other actors . 6 taking an interest.

Justification of CSR
Trusteeship Model- draws from the continental European
concept of the corporation as a social institution with a corporate personality.

The Social Entity

Theory-public association constituted through political and legal process and as a social entity for perusing collective goal with public objective all stake holders rather than share holders alone

Populist Model- This model supports idea of multiple interests of What are Corporate expected to do?-In support of
the view that corporate have a moral and social obligation towards society for a number of facilities they enjoy. The corporations have a moral responsibility to take a long and hard look at their values, practices and assumptions to give in return what they got

Private Sector Needs Goodwill of the Society

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The Scope of Social Responsibility

The scope of social responsibility is wide and could be considered in terms of different viewpoints, some of which are given below:
1. Protecting and promoting stakeholders' interests 2. Social concern and promotion of common welfare programs 3. As an act of philanthropy 4. Good corporate governance itself is a social responsibility 5. Corporate in the vanguard of rendering social service:
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The Scope of Social Responsibility

6. Sponsoring social and charitable causes 7. Corporations should supplement state efforts 8. Social responsibility of corporate also lies in abiding by rules and regulations 9. Ensuring ecological balance 10. By focusing on human elements

(c) Dr. Azhar Kazmi 2008

The Companies Act, 2013 and SCR

Section 135 of the 2013 Act states that every company having - net worth of Rs 500 crore or more, or turnover of Rs 1000 crore or more ,or net profit of Rs 5 crore or more during any financial year shall constitute a Corporate Social Responsibility Committee of the Board The committee would comprise of three or more directors, out of which at least one director shall be an independent director.

(c) Dr. Azhar Kazmi 2008

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The Companies Act, 2013 and SCR

The mandate of the said CSR committee shall be responsible for:
to formulate and recommend to the Board, a Corporate Social Responsibility Policy, which shall indicate the activities to be undertaken by the company as specified in Schedule VII; to recommend the amount of expenditure to be incurred on the activities referred to above; to monitor the Corporate Social Responsibility Policy of the company from time to time

(c) Dr. Azhar Kazmi 2008

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The Companies Act, 2013 and SCR

The Board of every company referred to above shall after taking into account the recommendations made by CSR Committee:
approve the CSR Policy for the company and disclose contents of such Policy in its report and also place it on the companys website, and ensure that the activities as are included in CSR Policy of the company are undertaken by the company, and ensure that the company spends, in every financial year, at leas two per cent of the average net profits.

If the Company fails to spend such amount, the Board shall, in its report specify the reasons for not spending the amount Average net profit shall be calculated in accordance with the provisions of section 198 of the 2013 Act
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Social Responsibility and Indian Corporations

Philanthropy is no longer limited to signing cheques for social causes and welfare programs. The corporate world is now reaching out to the community. The commitment is getting much deeper as a large section of employees, including members of the top management, are now doing their bit for CSR. A large number of Indian companies discharge their social responsibilities quite satisfactorily. Here are a few illustrations of the different social responsibility functions that Indian companies typically perform: Asian Paints funded a large-scale community development project to
enable farmers to use local resources effectively

BHEL

has contributed to the development of the quality of life in rural areas, health care and family welfare, adult education, etc
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Examples of good CSR work

Brooke Bond
has been interested in animal welfare, providing veterinary services, and improvements in animal breeding.

Colgate Palmolive Escorts Ltd.

health care, etc.

did pioneering work in the promotion of sports, dental health, and small industry development. has worked for farm mechanization, agricultural development,

Infosys Technologies ITC Ltd. SAIL

has helped through its Infosys Foundation schools in rural areas acquire classrooms, libraries and buildings. It has also helped higher education and research. It has promoted several public health programs. is socially active in the areas of agriculture, culture, sports and pollution control. contributes to the sectors of agriculture, industry, education, health care, dairy, poultry, fisheries, and drinking water supply.

Tata Steel

has been a pioneer in discharging social responsibility and has made several contributions in areas such as community development, social welfare, tribal area development, agriculture and related activities, rural industrialization, etc.

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(c) Dr. Azhar Kazmi 2008

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