LAW MANTRA THINK BEYOND OTHERS

(National Monthly Journal, I.S.S.N 23216417)

Emerging Trends of Corporate Social responsibility in 21st Century


They alone live who live for others, the rest are more dead than alive


-Swami Vivekananda
This quote aptly highlights the basis of Corporate Social Responsibility, responsibility
towards our society, our country, our environment. The 'Development Versus
Environment' controversy has caught the popular imagination because nobody can remain
completely untouched by either the economic development or its environmental
implications A large section of the society who are involved mining and infrastructure
projects, argue that deforestation and large scale human displacement are collateral
damages that one has to pay for development. Rapid industrial development, expansion of
civilizations by eradicating more and more natural life and the basic callousness towards
natural resources, have led the world to the current situations, striking at the very heart of
humanity. But corporate need to play their part in the protection of the environment and
their activities should be so aligned that it does not in any way compromise with the
environment.
In this paper we analyze the fundamental changes in paradigm of CSR through the way
of triple bottom line and the new innovative practices being applied for its
implementation. A firm privately decides whether to invest in CSR and then to publicly
communicate about it, with the opportunity to green-wash by doing the later and not the
former. Communication about CSR is not credible and leads to green- babbling, hence
truly responsible firms may fail to collect the benefits of CSR. This paper is an attempt to
find a solution to all these unsettled issues involved in this raging controversy.




Introduction-
The environmental challenges the world faces today have the potential to significantly alter
how society functions and require a coordinated global effort. Climate change alone, even
under best- case scenarios, could cause geo-political instability, mass migration, destabilization
of global food and energy markets and the depletion of natural resources, particularly water.
1

By a glance at history, we see that environmental responsibility has stretched to involve
more than just sustainable compliance with all applicable laws and governmental regulations.
Presently, a lot of corporations explain environmental responsibility as a process of
involvement and dialog with their community and non- governmental organizations. It can be
seen that with increasing aid for environmental initiatives from the government and societal
groups, companies in the 21
st
century have started use of eco friendly mode of production.
This includes business process focused on environmental preservation, along with renewal and
re-use of material. Initially, companies that were on the cutting edge of environmental
responsibility were able to get leverage in marketing.
However, as more companies accepted in to the importance and expectations of
sustainability, CSR- complaint companies are more involved to avoid the negative reaction that
comes from polluting or damaging the environment. Companies must keep in mind the impact
of their operations on the environment, i.e. companies process and functions, initiatives for
maximizing the efficiency and productivity of all assets and resources, products and services
should be in compliance with environment law regime.
2
Due importance should be given to
minimizing practices of negative effect on the natural resources and thereby focus on
sustainable development concept.
3


Development V. Environment: The Global Debate-
One of the biggest challenges facing governments as the new century unfolds is how to
balance environmental protection with the demands of powerful multinational corporations

1
Cisco Systems Inc., Corporate Social Responsibility Report, 2009,
<http://www.cisco.com/web/about/ac227/csr2009/pdfs/CSR_09.pdf>

2
Michael G. Faure and A.V. Raja, effectiveness of Environmental Public Interest Litigation in India:
Determining the Key Variables, 21 Fordham Environmental Law Review 239 (2010)

3
Ved P. Nanda and WilliamR. Ris Jr., Public Trust Doctrine: A Viable approach to International Environmental
Protection, 5 Ecology Law Quest 291 (1975-1976)


-Danielle Knight
The corporate, who are involved in mining and infrastructure project, argue that deforestation
and large scale human displacement are collateral damages that one has to pay in the course of
development. The Vedanata Aluminia Refinery at Lanjigarh has sought to acquire 1070
Hectares of land, of which about 700 Hectares is owned by poor farmers. Same is the case with
Singur where Bengal Government approved 997 Acres of farmland to Tata Nano to build its
factory.
On the other side of the picture are the green activists who believe that there needs to be
a fine balance between the two. Development and environment should not be seen as mutually
exclusive, opposed terms but rather as complimentary to each other. Development can take
place only if the planet survives.
4
Therefore, environment is a pressing issue and every
individual. Organization has an obligation to prevent the environment from getting further
damaged.
The authors are of the view that today it is the age of integration, and sustainable
management should be the new mantra for new companies.

Understanding Corporate Social Responsibility-
CSR as a concept was first defined by William J . Bowen in 1953 as:
Corporate Social Responsibility is the continuing commitment by businesses to contribute to
economic development while including the quality of life of the workforce and their families as
well as of the community and society at large
Today there is an urgent need for conservation of environment because of the ruthless
exploitation of resources by big corporate giants which has led to irreparable damage being
done to the environment. CSR as a philosophy is based in the premise that everyone who
derives benefits from the society must give something back. This stands true for corporates as
well. Corporate thrive on the societys needs and appetite for new things. Their profits are,
from earnings of you and me who buy their products. Thus needless to say, when these vary

4
S.K. Agarwal, Corporate Social Responsibility in India (New Delhi: SAGE Publications Ltd., 1
st
Ed. 2008)



same corporate exploits the resources and take so much from the environment, it becomes their
primary duty to replenish the same.
5

The Companies today realizing this, have come a step forward and have tried to
integrate social, environmental and economic concerns into their strategy, operations and
decisions making process so as to able to cater to the needs of the all people, environment and
world as a whole. They realize that if their current scale of activities continues, then perhaps
within the next few years, all the natural resources that had taken millennia to develop will get
exhausted. In such a scenario not only will they be harming their own future prospects and
existence but also the existence of their very consumers, society and a planet as a whole. In this
direction, there have been ways international environmental treaties like Copenhagen Summit,
UN Convention on Biological Diversity, the Kyoto Protocol on Climate Change, the Basel
Convention etc. that have stressed on the harmony between the development and the
environment. With this backdrop, CSR as a concept evolved when some of the top notch
companies relies the latent need of protecting the environment without compromising on their
future targets.
6


Triple Bottom Line and CSR: A Need for Dynamic Environment-
The notion of Triple Bottom Line is gaining significance the corporate houses within the
broader concept of CSR. Triple Bottom Line is a kind of management tool which takes into
account social and environmental responsibilities and with financial responsibility.
7
The
underlying thought behind the TBL concept is that a corporations status or success should be
measured not only by financial bottom line, but also by the social and environmental activities/
performance. It is relevant to note that the responsibility of the company is not only to make
profit but also to protect the environment and the societal interest. Now, the debatable question
is that how the firm renders its positive impact on individual or society at large. The adoption
of TBL in the business strategy gives a positive signal in the market that the corporation has
done an impressive work of maintaining environment and public interest; It adds importance to
transparency and accountability of the corporation. It can be said that TBL provides a

5
S. Arjoon, Corporate Governance: An Ethical Perspective, 4 Journal of Business Ethics 61 (November, 2005)

6
C.V. Prasad, Ed., Corporate Social Responsibility- Concepts and Cases: The Indian Experience (New Delhi;
Excel Books 2009)

7
W.N. MacDonald, Getting to the Bottom of Triple Bottom Line, Business Ethics Quarterly, (April, 2004), 14
(2), 245-247



framework within which a corporate performance and social responsibilities are measured an
evaluated.
8
CSR has expenses. Giving back to communities and operating with environmental
responsibilities have associated cost. David Vogel argues in his 2008 Forbes Article CSR
doesnt pay that there is no proof of tangible business gains from CSR compliance.
9
He does
agree with the general perception, though that these expenses of CSR are investments that
appear to produce indirect returns through better customer relationships overtime. As
importantly, he concurs that companies that are not socially and environmentally responsible
going forward, face significance public backlash.
10


BENEFITS OF CSR-
Adopting green strategies not only helps the cause of environment but also helps the
companies create value for themselves in the mind of consumers. Following are some of the
ways in which the organization benefits by adopting sustainable practices:
A-Entry into new markets:
When companies engage in environment friendly practices in developing or under developing
countries and developed countries, it gives them access to the new markets in these areas
which they might have overlooked in the past. Although these markets are much smaller than
those in developed countries but nevertheless they provide a brand new consumer way to the
company from which they can profit.
B-Better access to capital:
CSR acts as a significant tool for companies to attract investors and financiers. An increasing
no. of financiers nowadays looks through the CSR aspect of a company in their selection
procedure and screen out companies who are not environmentally conscious. Creation of funds
such as socially responsible investment funds are all efforts in this direction.
C-Improved reputation and branding:

8
S.K. Agarwal, Corporate Social Responsibility in India (New Delhi: SAGE Publications Ltd., 1
st
Ed. 2008)

9
David Vogel, CSR Doesnt Pay, (October 16, 2010),<http://www.forbes.com/2008/10/16/csr-doesnt-pay-
lead-corprespons08-cx_dv_1016vogel.html>

10
Neil Kokemuller, How is Corporate Social Responsibility Beneficial to Companies?,
http://www.ehow.com/info_8390901_corporate-social-responsibilit-beneficial-companies.html



One of the greatest benefits that CSR renders is the effect it has on the reputation and brand
equity of the company. Companies realize that adopting green practices will help them directly
appeal to the mindsets of their customers as consumers today are becoming more and more
environmentally conscious. They thus value companies which incorporate green concerns in
their working and functioning.
11

D-Asset retention:
The most important asset of any organizations is its employees research
12
has shown that
company working towards CSR manage to attract and retain a strong and committed workforce
which is highly dedicated and devoted towards the organization.
E-Competitive Advantage:
The most important advantage that a company can have by going green is of getting a first
movers advantage. This is because companies are aware that the law will ultimately compel
them to adopt environmental friendly technologies. So, if they are the first one to initiate such
programs, it gives them edge over their competitors. So if they are the first one to employ such
innovative, green technologies it makes them market leaders and gives them significant cost
advantage.
13

WHY CSR? RATIONALE FOR CORPORATIONS TO GET INVOLVED AND ITS
CONSEQUENTIAL BENEFITS-
Today, more and more companies are realizing that in order to stay productive. Competitive
and relevant in a rapidly changing business world, they have to become socially responsible.
Since the last decade, globalization has blurred national borders; technology has accelerated
time and masked distance. Given this sea change in the corporate environment, companies
want to increase their ability to manage their profits and risks, and to protect the reputation of
their brands. Because of globalization there is also fierce competition for skilled employees,
investors, and consumer loyalty. How a company relates with its workers, its host
communities, its host communities, and the market place can greatly contribute to their

11
Id

12
Research on the 50 Best Employers In Canada Survey, conducted by Hewitt Associates, Canada (Hr
Outsourcing and consulting Firm) in conjunction with the Gole and Mails Report on Business in 2009.

13
Michael E. Porter and Mark R. Kramer, Strategy and Society: the Link between Competitive Advantage and
Corporate Social Responsibility (December, 2006) Harvard Business Review, <http:// hbr.org/2006/12/strategy-
and-society-the-link-between-competitive-advantageand-corporate-social-responsibility/ar/1>



sustainability of its business success.
14
Companies nowadays are using a more client approach
in their CSR efforts. Significant research and preparation goes into planning CSR planning,
determining where a company can make the most effective impact. A win-win situation has
been created by CSR between the corporate sector and society. The companies get free of
charge publicity for their efforts. Research has proven that there is a cost reduction in their
operations of companies especially engaged in environment friendly initiatives. Ex- CISCO.
15

The Emergence of Corporate Green Washing: The New Deception Practiced On
Consumers-
In recent times, a new phenomenon of Corporate green washing is fats gaining popularity
wherein corporate are fooling the consumers in the name of green practices employed by
them, when actually they practice none. The term corporate green washing find its origins in
the amalgamation of two terms, corporate and brainwashing. It refers to the practice of
corporate deceiving the consumers by employing such marketing or PR policies that promote
the perception that they are environment friendly. There have been several instances worldwide
of corporate making false claims about green practices that they never actually adopt in order
to garner maximum popular support for their products and thus maximize their profits. For
instance, several complaints were filed against leading car manufactures like Suzuki and
Toyota in the UK for making false claims about their vehicles. Similarly in 2010 Amazon
watch declared the campaign by Chevron as a hoax to mislead the customers.
16
The clear Skies
Initiatives undertook by the Bush Government was found to actually pollute the environment
more than protecting it.
17

Successful Strategies of Implementing CSR-
Here are some of the important mechanisms that many of the most successful industries follow
today in their pursuance to adhere to the environmental norms:
A-Green Management

14
ConsortiumCatalyst, What is CSR,<http://www.rhcatalyst.org/site/DocServer/CSRQ_A.pdf?docID=103>

15
N. Sinha, Indian Corporates Ethics. Governance And Social Responsibility (Hyderabad: ICFAI University
Press, 2007)
16
Massive Chevron Ad Campaign Derailed. Media Slapstick follows, Urbana Campaign Independent Media
Center (Urbana Campaign Independent Media Center, October 19, 2010) <http:// www.ucmic.org/content/
massive-chevron-a- campaign-derailed-media-slapstick-follows>

17
US Senator Patrick Leahy, The Green Washing of the Bush Anti- environmental Record on the Presidents
Earth Day Visits to Maine and Florida (April 26, 2004)
<http://web.archive.org/web/20100203121457/http://leahy.senate.gove/press/200404/042604a.html



This concept is practiced by the organizations that apply green concepts to the project
management disciplines i.e. working to get their products, manufacturing process, facilities
green and convert sustainable business practices into a competitive advantage over their
competitors. This includes developing environment-friendly products, reducing the
environmental impact on production sites, designing green products and promoting product
recycling. According to AEBN Inc.
18
, by adopting green management program and providing
environmentally and socially responsible product or services, businesses can benefit in the
following ways:
1- Resource efficiency and Cost Reduction:
By conserving resources a company can reduce costs in the following ways:
i. Reducing energy use- improvements in energy and manufacturing efficiency go
straight to the bottom-line because there are no direct costs factors.
ii. Reducing emissions discharges and waste- many manufacturing companies benefit
through return on assets sales and equity by reducing emissions.
iii. Recycling or reusing waste- closing the loops in terms of resource use
(transforming waste into raw materials) saves waste bills as well as the purchase
of new raw materials.

2- Raising competitiveness through innovation
19
:
With globalization, the business houses have to compete with low cost inputs made from many
parts of the world. Innovative design and technology are critical to avoid the competition with
low labor cost for mass production around the world. The companies need to innovate rapidly
and regularly. There needs to be:
i. Eco- efficiency
ii. Eco-design
iii. Design for Environmental Sustainability


18
Green Office Guide, Understanding the Issues and Business Case for the transformation of your office (New
Zealand: Auckland Environmental Business Network Inc., 1
st
Ed. , 2002), 27
www.greenoffice.org.nz/docs/greenmanagement.doc

19
Massive Chevron Ad Campaign Derailed. Media Slapstick follows, Urbana Campaign Independent Media
Center (Urbana Campaign Independent Media Center, October 19, 2010) <http:// www.ucmic.org/content/
massive-chevron-a- campaign-derailed-media-slapstick-follows>



3- Gaining Market Share
20
:
By maximizing the environmental attributes of products (e.g. energy efficient, fuel efficient,
organically produced, etc.) companies can benefit from increased sales in a market that is
looking for additional benefits from their purchases.

4- Staying ahead of legislation and adding value to national and local policy:
21

Today the governments are committed to the green cause and therefore they are coming up
with new and innovative green legislations. The successful companies today are not just
complying with environmental, health and safety legislations in the respective countries which
helps them in protecting their brand name from bad publicity but are also taking up proactive
steps which help them stay ahead from environmental regulations and also in creating a better
brand confidence in the market.
22

B- Green Manufacturing
It is a corporate strategy whereby the manufacturing of the product involves minimization of
wastes and pollution. This reduces energy usage and cuts across every aspect of manufacturing
including product development, process technologies, etc.
23


Suggestions and Recommendations-
A-Legal Mandate:
Mr. Murli Deora, the Former Minister of Corporate Affairs, Government of India has aptly
remarked that:
Only a legal provision can make the companies comply with their social responsibility

20
Id

21
Id

22
N. Sinha, Indian Corporates Ethics. Governance And Social Responsibility (Hyderabad: ICFAI University
Press, 2007)

23
Id



As per the existing law, only the public sector enterprises are under a government mandate to
act in a socially responsible manner by way of spending 2% of their profits on CSR activities.
24

However this approach needs to be relooked and the law should be modified so as to impose an
obligation on the private sector as well to adopt sustainable practices. The government cannot
have a discriminatory approach by excluding the private companies from the purview of
compulsory adhere3nce to CSR.
B-Establishment of National Regulatory Bodies:
At present, there are no national bodies to assess and monitor the CSR performance of the
companies. There needs to be a national regulatory body to continuously and frequently
monitor the CSR initiatives of the company and check whether they are actually adhering to
the policies that they have adopted on paper. This is because the companies avail a lot of
benefits while branding themselves as a socially responsible company in the form of tax
exemption, access to resources, increased consumer loyalty, etc. So it becomes necessary to
regularly keep a check on these companies and see that they are actually practicing what they
preach and thus truly deserving of all the benefits that they are getting.
C-Establishment of Green Departments:
There is a need to have separate green departments within an organization to look into the
implementation and operation of CSR practices. These departments will comprise of experts
having all the technical, scientific and legal knowledge to aid the organization in implementing
environment friendly practices in their working. They will also serve as a think-tank to guide
the organization at all levels of their operations by advising them on how to convert each and
every of their projects into sustainable ones which do not cause any damage to the
environment.
D-Increasing transparency and accountability:
There is need to impose an obligation on the companies to increase transparencies in their
processes an disclose more information to the public. This is because most of the times
companies merely boast but rarely implement their promises at the ground level. Thus there
needs to be an obligation on the companies to divulge all information related to their activities
in a public forum to prevent the consumers from being mislead.

24
Guidelines on Corporate Social Responsibility for Central Public Sector Enterprises 2010, Department of Public
Enterprises, Ministry of Heavy Industries and Public Enterprises.
<http://dpe.nic.in/sites/default/files/glch1224.pdf>


E-Making the product manufacturing process eco-friendly at all levels:
There is an urgent need to ensure that all the steps involved in the product manufacturing
processes right from the ground level to the very end are in compliance with environmental
norms. This is because most of the so called green- products that are floated by the
companies in the market nowadays might appear to be green but are in fact merely the end
products which are green but the entire manufacturing process of the product including its
development, assemble and manufacturing process, product design, product life cycle,
management are not necessarily environment friendly. Therefore companies should ensure that
the product at all stages from its inception till its very end does not damage the environment in
any manner.
F-Introducing Green Credits:
The government should introduce a system of green credits to reward the companies who adopt
environment friendly practices. This will serve as an incentive to attract corporate to take up
green initiatives on a more voluntary, proactive basis instead of being compelled to do so under
pressure from governmental norms or in order to achieve increased customer loyalty. Green
credits will serve as a parallel remuneration for these organizations by having a cash or tax
reduction value.
G-Investment in research and development:
There is a need for companies to invest more in this field so that they can come out with better
and more innovative products which aid in the organizations goal of ensuring sustainability in
all their products and practices. It has to be kept in mind that the companies responsibility
doesnt end with taking up or coming up with certain green practices but rather it is their duty
to constantly put in efforts to improvise, develop and innovate so that they can come up with
further advanced, superior models of sustainability.
CONCLUSION-
The principles of CSR embodied in almost all international legal instruments and organizations
(like the UN, ILO and OECD conventions), and now it has also a place in the new Companies
Act 2013. The Companies Act, 1956 did not find a mention about CSR this is indicative
enough of the ignorant and lax attitude of our legal system towards CSR. But the reformative
measures in the new Companies Act suffer from certain discrepancies which need to be
resolved in order to make it completely effective.


Most importantly the new act fails to impose any mandate upon companies to adhere CSR
policies, which is the most significant need of the day. Although companies continue to
oppose such a proposition saying that any such mandate defeats the very purpose of CSR by
imposing it as a burden on them, rather than allowing them to act out of their own free will and
sense of responsibility but the authors feel that in a country like India which has seen the
accidents of the highest order being inflicted upon the environment ranging from the Bhopal
Gas Tragedy to the most recent Vedanta controversy the objects of CSR cannot be realized
without the imposition of such a mandate.
It goes without saying that it is upon the corporate they to realize that they cannot ever possibly
exist without taking into account the concerns of all the other stake holders namely the
customers, society and the environment. Only by incorporating sustainability into its practices
can it truly fulfil its role as a responsible, conscientious entity of the society. The adoption of
TBL in the business strategy gives a positive signal in the market that the corporation has done
an impressive work or maintaining environment and public interest. As rightly put forward by
Shri Lal Bahadur Shastri:
Too often the community views the businessmens aims as selfish gain rather than
advancement of the general welfare. This impression can be removed only if business is fully
alive to its social responsibilities and helps our society to function in harmony as one organic
whole.


By:- By Priyam Ratnamand and Aditi Nidhi, Dr.R.M National Law University,
Lucknow, Uttar Pradesh