Emerging Developments in CSR and Its Implications: An Overview

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International Journal of Advanced Scientific

e-ISSN: 2395-6089
Research & Development
Vol. 03, Spl. Iss. 03, Ver. I, Sep 2016, pp. 88 96
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Emerging Developments in CSR and Its Implications: An

Overview
E. AJITHA
Asst. Prof., Dept. of Bank Management (SS), Ethiraj College for Women (Autonomous), Chennai.
ARTICLE INFO
ABSTRACT
Article History:
There is an increased realisation world over in the recent

years for the need for sustainable development. Business
enterprises as an integral part of modern society have also
come to realise the importance of contributing to the
sustainable development. With the advent of globalisation
and the increase of operations of multinational enterprises,
there has been a growing thrust on CSR initiatives by
businesses. CSR activities are significant not only as a
business strategy but also as a vehicle of fulfilling the
commitments of business to the community at large.
Internationally CSR instruments have been drawn up to
encourage MNEs to commit to responsible business. In
India with the amendment to the Companies Act in 2013,
CSR has become a compulsory legal requirement of the
companies. This paper looks into the developments in CSR
and its implications.
Received: 23 Sep 2016;

Accepted: 23 Sep 2016;
Published online: 28 Sep 2016.
Key words:
CSR,
International instruments,
Companies Act 2013
JEC Classification:
Copyright 2016 IJASRD. This is an open access article distributed under the Creative Common Attibution
License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original
work is properly cited.
INTRODUCTION
If you light a lamp for somebody, it will also brighten your own path.
A Buddhist Saying
Business is an integral part of modern society. One of the manifested challenges
of this century is to ensure sustainable development in all spheres by the present
generation without compromising the right of future generations to develop. In this
effort to ensure sustainable development, the businesses world over have a significant
role to play. Basically for any business to prosper the existence of communities and
ecosystems is essential. These enterprises which through their activities also create
wealth in the society have come to realise their accountability towards the society in
which they function. And all the stakeholders in business have in the recent times
shown an increased understanding that a responsible business is not only good business
How to cite this article: Ajitha, E., (2016). Emerging Developments in CSR and Its Implications: An Overview.
International Journal of Advanced Scientific Research & Development (IJASRD), 03 (03/I), [Special Issue Sep 2016], pp.
88 96.
Emerging Developments in CSR and Its Implications: An Overview
strategy but also evidence of good management as it serves the purpose of attracting
good customers and employees. Furthermore, acting responsibly towards workers and
society in general can help build value for firms and their shareholders.
The concept of Corporate Social Responsibility (CSR) became popular only in the
1990s and all over the world the triple bottom line of people, planet, profit has gained
acceptance. The World Business Council for Sustainable Development has defined CSR
as Corporate Social Responsibility is the continuing commitment by business to
contribute to economic development while improving the quality of life of the workforce
and their families as well as of the community and society at large.[1] CSR includes
commitments and activities of businesses pertaining to corporate governance;
accountability, transparency; conditions of work; corporate philanthropy; customer
satisfaction; community development; among other things. [2]
1.1 Review of Literature
Uvais and Cholasseri (2013)[3] found that CSR policy functions as a in- built
regulatory mechanism for the businesses to monitor and ensure its effective
participation in the society. It is difficult to quantify the benefits of CSR as it varies
with the size and nature of a business enterprise. The link between social performance
and financial performance begins with CSR. The crux is to plough back into society from
which businesses gain their success. Khanna, Parul (2011)[4] held that ultimate motive
of any business is to help society at large. CSR is not just the responsibility of a business
enterprise alone but of the regulating authorities and finally of individuals also. CSR
plays a significant role in fulfilling the development agenda world over. It is important
that these CSR initiatives are in line with the business priorities of an enterprise. CSR
in India is yet to evolve from the basics of corporate philanthropy. Ahmed, (2016) [5].
Business sustainability is evolving as a process .World over CSR has been recognised as
tool to be used by business enterprises not only to achieve success but also fulfil their
commitments to the society. The companies have to determine the best CSR initiative
that not only the challenge for the companies is to determine a strong and innovative
CSR strategy which can provide the desired results. Urmila Moon, (2016) [6]. CSR has
been recognised world over in both developed countries and emerging markets. In India
the CSR is still in its nascent stage. Ghose, (2012)[7]. But it worth highlighting that CSR
has come a long way in India. From being reactionary activities to sustainable
initiatives, corporates have demonstrated their capability to make noteworthy
contributions to the society. In the present social condition, it is impossible for any
single body to cause a desirable change. Businesses have the expertise and money to act
as a catalyst to cause the desired change in the society. Functional partnerships
between Corporates, NGOs and the government will bring about social growth and
development in India. (Usha, 2012)[8].
1.2 Objectives of the Study
1. To examine the principles embodied in the international instruments relating to
CSR
2. To trace the evolution of CSR practices in India
89
Volume 03, Special Issue 03, Version I | 28th September 2016
Emerging Innovative Strategies in Business Creating a Competitive Edge | Organized by PG

Department of Banking & Insurance Management and Department of Bank Management,
Ethiraj College for Women (Autonomous), Chennai 600 008.
3. To study the current mandatory provisions of CSR in Companies Act 2013 and
its implications
METHODOLOGY
The research is exploratory and the study is based on secondary data collected
from books, articles, journals and blogs and web sources on CSR.
2.1 International Instruments Relating To CSR
The international instruments are the culmination of efforts by various
government and inter governmental bodies to ensure that standard practices are
implemented and followed by companies world over in integrating CSR into their
business strategy.[9]
2.1.1 United Nations Global Compact
It is a voluntary programme propelled by commitments of businesses to adhere to
principles of sustainable development. The UN Global Compact is recognised by United
Nations General Assembly and other inter-governmental bodies. The UN Global
Compact encourages companies to do business responsibly by aligning their strategies
and operations with Ten Principles on human rights, labour, environment and anticorruption; and take deliberate actions to further goals such as the UN Sustainable
Development Goals. The UN Global Compacts Ten Principles are derived from the
international instruments such as:
Universal Declaration of Human Rights,
International Labour Organizations Declaration on Fundamental Principles and Rights
at Work, Rio Declaration on Environment and Development, and United Nations
Convention against Corruption.[10]
2.1.2 OECD Guidelines for Multinational Enterprises
OECD (Organisation for Economic Co-operation and Development) Guidelines for
Multinational Enterprises: Recommendations for Responsible Business Conduct in a
Global Context[11] are recommendations addressed by governments to multinational
enterprises. They are based on international standards and provide basic principles and
standards to the business enterprises to operate globally in a responsible way adhering
to laws applicable to them. The Guidelines provide a complete code to run a responsible
business and is agreed by countries whose governments promote the codes. The
Guidelines recommendations express the shared values of the governments of countries
from which a major share of international direct investment originate. The purpose of
the Guidelines is to promote significant contributions by enterprises to economic,
environmental and social progress globally. They are supported by a unique
implementation mechanism of National Contact Points (NCPs), agencies which are
established by the governments to promote and implement the Guidelines. The NCPs
support the enterprises and their stakeholders to take suitable measures to further the
implementation of the Guidelines. They also provide for mediation and conciliation
platform to resolve any difficulties that may arise.
90
2.1.3 International Labour Organization - Tripartite declaration of Principles

Concerning Multinational Enterprises and Social Policy (MNE Declaration)
The principles embodied in this universal instrument offer guidelines to MNEs,
governments, and employers and workers organisations in such areas as employment,
training, conditions of work and life, and industrial relations. Its provisions are
strengthened by International Labour Conventions and Recommendations which the
social partners are encouraged to adhere to as much as possible. The important role of
MNEs in the era of social and economic globalisation accords the applicability of the
principles of the MNE Declaration in the present day circumstances for enhancing the
positive social and labour effects of the operations of MNEs.[12] But it has to be
remembered that it is not an international treaty or convention and therefore remains
as only international soft law.
2.1.4 Sustainable Development Goals
The UN 2030 Agenda for Sustainable Development constitutes the 17 goals and
169 targets to wipe out poverty, overcome distinctions and tackle climate change over
the next 15 years starting from the year 2016. The Agenda focuses on the three facets of
development that is sustainable in the social, economic and environmental spheres. The
marshalling of modes of implementation, including financial resources, technology
development and transfer and capacity-building, are all recognised as crucial. The 17
SDGs build on the eight MDGs (Millennium Development Goals), which specifically
sought to eradicate poverty and hunger; achieve universal primary education; promote
gender equality and empower women; reduce child mortality; improve maternal health;
combat HIV/AIDS, malaria and other diseases; ensure environmental sustainability;
and develop a global partnership for development.[13]
2.1.5 Equator Principles
The Equator Principles (EP) is a risk management support structure, adopted by
financial institutions, for determining, assessing and managing environmental and
social risk in projects. It is primarily intended to provide a minimum standard for due
diligence to support responsible risk decision-making. They are a voluntary set of
environmental and social screening criteria and guidelines that provide a framework for
banks to manage environmental and social issues in project financing. The principles
are based on the shared environmental and social standards of the International
Finance Corporation and the World Bank, and apply globally to development projects in
all industry sectors with a capital cost of US$50 million or more. Currently 84 Equator
Principles Financial Institutions (EPFIs) in 35 countries have officially adopted the EP,
covering over 70 percent of international Project Finance debt in emerging markets.[14]
2.1.6 International Standards of Accounting and Reporting (ISAR)
The Intergovernmental Working Group of Experts on International Standards of
Accounting and Reporting, assists developing countries and economies in transition in
the implementation of best practices for accounting and corporate governance. The
objective of such initiatives is to enhance the investment climate and promote
sustainable development through an integrated process of research, intergovernmental
91

consensus building, information dissemination and technical cooperation.[15] The United

Nations Conference on Trade and Development (UNCTADs) ISAR, meets annually and
more than 200 representatives from more than 80 UN member states participate.
Representatives at ISAR sessions include policy-makers, regulators, experts on
corporate governance, corporate responsibility, accounting and auditing and various
national, regional and international accountancy organizations.
2.2 CSR in India Tracing the Roots
The concept of CSR has been prevalent since ancient times in India. Studies
reveal the principles of CSR are embedded in ancient religious texts. According to Vedic
philosophy business is viewed as an essential part of society but essentially it should
create wealth for the society through the right means of action. Sarva Loka Hitam in
the Vedic literature referred to well-being of stakeholders. This means an ethical and
social responsibility system must are fundamental to business. Vedic literature on
business reiterates this idea as is evident from the following quote :
May we together shield each other and may we not be envious towards each
other. Wealth is essentially a tool and its continuous flow must serve the welfare
of the society to achieve the common good of the society[16]
Manu Smirti stresses that companies should ensure that they are not just
thoughtful about profit but they should also take care of the means used to earn that
profit. Wealth earned by violations of principle of drama is not a good wealth and should
be rejected [CH-II-224 and CH-IV-176][17] (Jois 2002). In his Arthashatra, Kautilya
maintained that a king (to be interpreted as CEO in the context of organisation) should
have no self-interest, happiness and joy for himself, his satisfaction must solely lie in
the welfare (happiness) of his people. Bahujana sukhaya bahujana hitayacha the
welfare of the many and the happiness of the many. In fact, this concept of the
happiness of the many is integrated into the area of business management as a
fundamental principle. This ancient wisdom is also reflected in Thirukkural which also
dealt with the characteristics of a well-managed organisations. For instance, when
talking about the responsibility of a king (again to be interpreted as CEO in the context
of organisation), Thiruvalluvar says: Murai saithu kapatrum mannavan makkalkku
iraiyentru vaikkapadum (the king who administers justice and protects his people will
be considered of divine quality (Vittal, 2004)[18]. The same idea is found in Shanti Parva
of the Mahabharata, wherein the public interest (welfare) is to be accorded precedence
over the leaders interest[19]. So, if we look at business organisations as a leader or a
king, then they are endowed with the responsibility of helping others and engage in
activities for the welfare of the society.
In the pre independence era, the businesses which pioneered industrialisation also
were committed to public welfare and started charitable foundations, educational and
healthcare institutions, and trusts for community development. According to Sundar
(2000), four phases of CSR initiatives can be identified.[20] These phases are parallel
Indias historical development and resulted in different CSR practices[21]. The first phase
of CSR is predominantly determined by culture, religion, family tradition, and
92
industrialization. Being the oldest form of CSR, charity and philanthropy influence CSR
practices today, especially in community development. In the pre-industrial period up to
the 1850s, merchants made generous donations towards by building temples. Moreover,
the business community occupied a significant place in ancient Indian society and the
merchants provided relief in times of crisis such as famine or epidemics throwing open
godowns of food and treasure chests (Arora 2004)[22]. After the advent of
industrialisation in India in the 19th century the pioneers like the Tata, Birla, Bajaj,
Lalbhai, Sarabhai, Godrej, Shriram, Singhania, Modi, Naidu, Mahindra and Annamali,
were devoted to philanthropically motivated CSR (Mohan 2001)[23].
The second phase of Indian CSR (1914-1960) was characterised by Gandhis
theory of trusteeship in an attempt to augment social development. Gandhi introduced
the concept of trusteeship in order to make companies the temples of modern India.
Consequently, businesses set up trusts for schools and colleges; they also established
training and scientific institutes (Mohan 2001)[23]. The companies aligned the activities
of their trusts with Gandhis reform programmes namely, the abolition of
untouchability, womens empowerment and rural development (Arora 2004)[22].
The emergence of PSUs and legislation on labour and environmental standards,
characterised the third phase of Indian CSR (1960-1980). This phase is also marked by a
shift from corporate self-regulation to strict legal and public regulation of business
activities. Corporate governance, labour and environmental issues rose on the political
agenda and quickly became the subject of legislation. Furthermore, state authorities
established PSUs with the intention of guaranteeing the appropriate distribution of
wealth to the needy (Arora 2004)[22].
In the fourth phase (from 1980 onwards) Indian companies and stakeholders
began abandoning traditional philanthropic engagement and, to some extent, integrated
CSR into a coherent and sustainable business strategy, partly adopting the multistakeholder approach. In the 1990s, the Indian government initiated reforms to
liberalize and deregulate the Indian economy by tackling the shortcomings of the mixed
economy and tried to integrate India into the global market. (Arora and Puranik
2004)[24]. The resultant growth witnessed an increased business willingness as well as
ability to give, spurred by public and government expectations of businesses (Arora
2004)[22]. India in the recent years has emerged as an important economic and political
player in the process of globalization and has become an attractive and important
production and manufacturing site.
2.4 Mandatory CSR Regulation Companies Act 2013
In India from the financial year 2014-15, it has been made a mandatory legal
requirement for the companies to comply with corporate social responsibility. It is
worth highlightingat this juncture, that India is the first and only country in the world
to make CSR a mandatory requirement. The Companies Act as amended in 2013
requires companies with a networth of 500 crores or more, or a turnover of 100 crores or
more, or a net profit of 5 crore or more to spend 2% of average profit of immediate
preceding three years on CSR activities. It should also constitute a Corporate Social
Responsibility Committee of the Board consisting of three or more directors, out of
which at least one director shall be an independent director.[25] Corporate Social
93

Responsibility Committee has to recommend the activity to be undertaken by the

company and resources to be spent and also monitor the implementation of CSR activity
of the company. Schedule VII of Companies Act specifies the activities that a company
may choose to involve in for the CSR initiatives which include eradicating hunger,
poverty and malnutrition, promoting preventive health care and 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;
ensuring environmental sustainability, ecological balance, protection of flora and fauna,
animal welfare, agro-forestry, conservation of natural resources and maintaining
quality of soil, air and water; 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 and handicrafts: (vi)
measures for the benefit of armed forces veterans, war widows and their dependents;
(vii) training to promote rural sports, nationally recognised sports, Paralympic sports
and Olympic sports; (viii) contribution to the P me Minister's National Relief Fund or
any other fund set up by the Central Government for socio-economic development and
relief and welfare of the Scheduled Caste, the Scheduled Tribes, other backward classes,
minorities and women; (ix) contributions or funds provided to technology incubators
located within academic institutions which are approved by the Central Government (x)
rural development project.[26] The amount which is estimated to be made available
through CSR funds every year is more than Rs.20,000 crores. The year 2014-15 was the
first year of implementation of CSR by companies under the legislation. During this
year, a total of 460 listed companies which have placed annual CSR returns on their
websites, have spent about Rs. 6337 crores on CSR according to Press Information
Bureau report, Ministry of Corporate Affairs, Government of India.[27] This regulatory
mandate makes available huge resources that can be utilised in addressing a range of
development needs, in furthering the goals based on social justice and equity while
ensuring that businesses operate in a manner that would augment sustainable
development.
CONCLUSION
CSR has come to be regarded internationally as an ideal tool for business
enterprises to give expression to their commitment to further the cause of sustainable
development. In India the legal requirement of mandatory CSR compliance by
companies creates a conducive environment to usher in social and economic justice. The
Corporate expertise and also the financial resources made available as a result of the
regulation if channelized in the proper direction would help to address the problem of
economic and social inequities in the Indian society and would well serve as a harbinger
of a truly egalitarian society as envisioned by the architects of modern India.
94
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