Developing a CSR Rating

Matrix for Indian Corporates

Learning from USA
Corporates
CSR REPORT

3/25/2018

Kanakvi Yadav
Sarthak Agarwal
Varnita Rastogi
Vishal Paul
 Declaration of originality
We hereby confirm that the work given is written by the team . All the content that is
provided in the report is our own ,which is done by little bit of brainstorming and with the
help of internet for acts and laws . All the materials and information utilized are from the
reliable published sources and has been acknowledged properly by and has been provided
with clear list of references and bibliography.

We also declare that this work has been done only for Professor Panda’s core subject on Corporate
Governance and has not been previously used for any other purposes.

After clearly checking our work through anti plagiarism software, we declare and can certify that our
work is well under the university regulations of plagiarism

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 Table of content
1.) Cover Page
2.)Declaration of Originality
3.)List of Tables and Charts
4.)Abstract
5.)Details of the case project
6.)Our views and reviews about the case
7.)Bibliography

Abstract
In this project we tried to develop a CSR rating matrix for Indian corporates learning from the
CSR matrix of the USA corporates. We saw at the existing CSR policies and laws of the
Indian corporates and also of the USA corporates. WE saw at the ongoing laws in both the
countries especially in the USA and tried to look deeply how the companies have adopted to
the changes. We also look into both the countries CSR laws and corporate laws and tried to
come up how the Indian Corporates can benefit from the USA corporates.

Details of the case project

Corporate social responsibilities on behalf of the companies to looks about the society and
help give their contribution to the economic growth of the country with their help in the
growth of community and helping the workforce live a better life with their family. The
overall motive of CSR is to promote gender equality, eradicate poverty and improve health
conditions in underdeveloped areas of county. The underdeveloped areas in the country have
unhygienic conditions which attract many diseases. CSR plans on motivating the companies
to help give those individual sustainable lives without nay fear of diseases and a hygienic
place live in. The perception of CSR through consumer mind only talks about the positive
side. They believe that a company engaging in CSR has a positive effect on the customer.
After companies engaging CSR the customer have increased and have become more loyal

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towards the company and are willing to spend more on the company. The company engages
in 6 different types of corporate social responsibility which mainly talks about:-

 Corporates donating money, their goods and service to the society.

 Volunteering in communities
 Ethically produced products which are socially accepted
 Company funding campaign
 Donating money to organizations from the product sales they receive
 Company funding behaviour change campaign for underprivileged society

CSR contains the economic, legal, ethical, discretionary expectations that a society has from
the organizations.it can be further explained by a table:

RESPONSIBILITIES EXAMPLES
Economic To maximize profits, ad sales and try to
minimize the cost for the consumers.
Legal Obey all the rules and regulations set by the
government and even the company.
Ethical Do all the work which is right and accepted
by the society and be fair to the entire
individual inside and outside the company.
Discretionary To be a good citizen to the corporation.

The most important among all is the discretionary responsibility. It is very important to be
good citizen, helping everyone who is in need in the corporate world. Some other CSR
activity includes:

 Environmental Sustainability- Waste management, recycling, reducing the use of

paper, water management etc.
 Community Involvement – volunteering, raising money for charity, help in
employment of local worker, working for local economic growth.

ADVANTAGES OF CORPORATE SOCIAL RESPONSIBILITY

 Help in satisfying customer- the customer who is doing business with company with
CSR activity are more loyal to the company and have a positive attitude towards the

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 company. Hence this will help in economic growth for the company as the customer
will lend to buy more products from that customer.
 Cost reduction – CSR activities help in cost reduction as CSR does not required lot of
money. the way these activities help in cost reduction is by :
 Help in introduction energy saving program
 Help in managing risk more efficiently
 Hiring of employee easily
 More business opportunities – CSR activities requires the company to meet new
people and be and extrovert in the business models. The company has to be up to date
with the customers, suppliers and everyone who affect the organization.
 Satisfied employee- it is very common to have a positive feeling towards an
organization which an individual is working for. If the common is involved in some
social activity, the employee would be proud of the organization and would not want
to leave the company.

DISADVANTAGE OF CORPORATE SOCIAL RESPONSIBILITY

 Some individual believe that the companies don’t start some business to do social
work; they should just work on their business and economic growth of the country.
 CSR just diverts the company from their main motive and main aim for the country.
People argue that companies waste their time in social work and don’t concentrate on
their work.
 It restricts the company to compete in the international market.
 It restricts the company on working on profit maximization.

CORPORATE SOCIAL RESPONSIBILITY IN INDIA

The introduction of new dimension of the India’s company act has helped bring a new
revolution in the Indian corporate business. One of the major dimensions of this dimension is
the concept of Corporate Social Responsibility (CSR). In the dimension of CSR the ministry
of corporate affair has introduced section 135of companies’ act, which came into force on 1
April 2014.

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The section 135 talks about that it is mandatory for the Indian companies who have a
turnover of one thousand crore and the net worth of five crore or more in that current
financial year has to contribute some of it to the society and has to have a Corporate Social
Responsibility Committee in their organization . The committee should consist of at least 3
directors. This is not only for the companies in India but also if that company has any branch
and project office outside India as well. The company has to donate at least 3% of its net
profit on the CSR activities. The net profit refers to the average net profit made by the
company during the last 3 years. But what is not included in the net profit is the profit gained
by the overseas branch of the company, and even the dividend received by the CSR
compliant companies. The committee which has to be formed in all the organization will look
after the overall financial expenditure which has to be spend on the activities, and also be up
to date with the CSR activities happening in the company. The committee has to update some
activities even on their official website.

The committee is also responsible to make sure that the activities they have incorporated in
the policy of Corporate Social Responsibility policy of the company has been undertaken by
the company and everyone follows the policy well. One of the important rules of the
company policy on CSR is that the areas where the company is resided or the local area
should be given priority over the other areas in the city. The company has to take help from 2
or more companies in the area and tie up with them in helping the society and fulfills the
given CSR activities but by the end the companies have to present the report individually.
The company should choose other companies who are capable of helping the society and can
present the report individually. The CSR committee has to prepare a report on what all
activities are they going to do and also plan all the projects they are going to work upon in the
current working year. They also have to prepare a model for the company which is socially
and environmentally sustainable.

If the company fails to spend a minimum amount of their net worth on the society and CSR
activities they have in their report specify the reason why they couldn’t spend the specific
amount. They have to do so to make sure there are no penal provisions involved later.

The introduction of this new act has received a positive feedback and all the companies
which are satisfying the criteria of CSR have to undertake the activities in that current
financial year. This whole act motivates other companies of the private sector to help in some
social work.

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Company law for Indian corporates

Indian company law is for those corporations that are formed under companies act 2013.
Corporate affairs are regulated through it and the laws and regulations are administered by
the ministry of corporate affairs. Companies can integrate through the rules of Indian
company act. A company becomes a separate legal entity when it comes under law.

The companies act, 1956 which was approved with the object to integrate and amend the law
relating to companies and certain other objectives . Considering the changes in the national
and international economic environment and expansion and growth of economy of the
country , the central government decided to withdraw the companies act 1956, and introduce
companies bill 2009 but there were large amendments to the company bill 2009 so the
government decided to withdraw it and introduce new bill named as companies bill 2011.

After introducing the last bill , the company came up with “ ithe companies act 2013 , an act
to consolidate and amend the law relating to companies” . This act is for whole India

The provision of this act was applicable to –

1. Companies which are under 2013 act or any other previous company law .

2. Insurance companies

3. Banking companies

4. Companies engaged in the generation or supply of electricity.

Types of company that occur in India

Based on the activity or the requirement of the promoters different types of company can be
incorporated under the companies act 2013.

 Private limited company –

Companies which have minimum of two member and maximum of 200 members. There is a
private ownership. There are lot of legal formalities which are expensive and time
consuming. Under this there comes three types

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Company limited by shares – It is most common type, the company is liable to its members to
the amount mentioned in the memorandum .

Company limited by guarantee – this type of company does not have capital or shareholders,
but has members who act as guarantors. Liability of its members is limited to the amount
each one of them undertakes .

Unlimited company – In this the company does not have any limit to liability of its members .

 One person company –

It is a new type of company introduce in 2013 companies act , for the people who are capable
of starting their own venture .

 Limited company –

This type of company requires a minimum of three members and has no limit to maximum
number of members . limited company has more of strict and extensive compliance
requirements as compared to private limited company .

 Section 8 company –

This company comes under section 25 of companies act 1956 , it is one of the most popular
form of non-profit organization in India . This company can be establish for promotion of art,
social welfare, sports, education, science , research, religion, charity , protection of
environment or any other type of objective . This is applicable only if it applies its profit or
any other source of income in promotion of these objects .

Allotment of securities-

Under the section 23 of companies act 2013, a public company may issue securities to public
through prospectus, by joining with the provision , through private placement, through right
issue or bonus issue .In case of private company it can issue securities by private placement ,
bonus issue or right issue .

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Any person who deliberately or unintentionally makes any kind of statement or promise
which is not true and is illusive or confusing or deliberately conceals any material facts , to
influence another person to enter into shall be liable for action .

Any kind of punishment related to fraud , false statement , false evidence , repeated default or
wrongfully withholding of property comes under section from 447 to 452 of companies act
2013. Under these sections the central government states that ant person who is found guilty
of fraud (involving a scam of at least ten lakh rupees ) shall be punished for imprisonment for
not less than six months but it may get extended in addition with the fine depending upon
how much big the fraud is , if the fraud involves public interest the imprisonment shall be
extended to not less than three years . In case false evidence if the person gives false evidence
related to the company under the companies act he shall be punished to imprisonment for not
less than three years and can also be extended to ten years plus the fine which can go up to
ten lakh rupees . In case of repeated default if a company commits a small mistake it is
covered with a fine or imprisonment for a smaller period but if the same mistake is done
within a period of three years then the company or the person whoever is at default shall be
punished with twice the amount for the offence done . And last in the case of wrongfully
withholding of property if a person is found in the possession of a property which is
wrongfully taken or even has the cash of the company which the members are not aware of ,
he shall be on the complaint of the company and therefore be punishable with a fine of not
less than one lakh which may get extended to five lakh plus expelled from the job .

Under section 127 of companies act 2013 when the company declares the dividend but is not
able to pay its shareholders within the period of thirty days form the date of declaration shall
be at default , punishable to imprisonment with fine and if the companies stays at default then
it will liable to pay simple interest at the rate of 18 percent per annum during the period for
such default continues .

Company constitution

Governance of the board-

Under the companies act 2013 , section 169 a company may , by ordinary resolution , remove
a director before the expiry of the period of his office after giving him a reasonable
opportunity of being heard . A special notice is required ,to remove the director under this
section .

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The government keeps on working on the companies act according to changes in Indian
economy . In the above work I have discussed some of the important sections of companies
act 2013 . The central government keeps on adding amends to the companies act keeping in
mind the changes that take place in the internal and external factors of economy . Recently
the central government has come up with new amends in companies act 2013 which will now
be termed as companies act 2017 .

The mission of CSR of USA are the following:

1.) The main objective is to promote a hostilic approach to CSR, so that the Bureau of
Economic and Business Affairs mission of building economic security and also fostering
sustainable development at both in the home and abroad the country can be achieved.

2.) The CSR team of USA also focus on providing proper guidance and support for all the
MNC of USA in engaging socially responsible, forward-thinking corporate activities. It also
helps in focusing on the U.S foreign policy and relations with other countries all over the
world.

3.) The CSR team also focuses on other aspects also like working with multinational
companies ( all over the world) , civil society , labor groups, environmental advocates and
others to encourage the adoption of corporation policies.

In USA , the American Government acknowledges the ethical and social obligations in the
US business. The US companies openly accept the fact that business bear all the economical,
legal ethical and discretionary responsibilities. In USA , majority of the companies CSR team
gives focus on the fight against hunger. The US Sentencing Commission Guidelines for
Organizations helps to achieve this goal. All the major aspects of the business are covered.
Starting rom union labor to partnerships, joint stock, stake holders, non profits organization to
pension funds, everything is covered and explained in detail.

In USA all the corporate firms are willing to address the CSR principles in their own official
websites. They are very much independent and free to talk about their corporate CSR values
to public. The US firms presented their social movement as a part of their company CSR as
one of their core values of the company. From the beginning USA always preferred

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performance driven CSR. Basically the performance driven approach was led in the USA.
According to many philosopher and researchers, USA were like to state their code of ethics
as the main part of the company’s CSR. The CSR of USA wanted to potray a socially
responsible image. The US companies wanted to reach the basic promotions and production
activities ( as a part of their CSR ) and gradually with time , they were able to do so.
In 2010 Waye Visser stated that USA’S CSR should follow 5 principles stated below :

namely, creativity, scalability, responsiveness, glocality and circularity.

According to Visser 1st point creativity and onnovation are the backbone of USA’s CSR.
Without innovation and creativity a company’s CSR can not outstand from others.
Example : Apple is extremely creativity but Apple’s iphone contributes little benefit to the
society. But on the other hand Walt Disney contributes a lot to the society rather than just
providing entertainment to the people. In 2009 Walt Disney was stated as the leader of CSR,
they planted more then # million trees all over the world and helped to conserve wildlife in
Africa.

2nd is scalability. According to Visser the major scalability problems are climate change and
poverty. And many USA companies are trying their level best to tackle these situations.
Example: Walmart in the near future decided that all their cotton products will be organic and
all their fish products will be MSC- certificated.

Visser’s third principle is responsiveness. He stated that climate changes threaten the
sustainability within the fuel industry and the automobile industry. So many automobiles
company are focusing on reducing waste, pollution, global warming and energy.

Example: Tesla is only focused on producing electric cars and developing houses powered by
solar panels. It only focuses on reducing all the polutions that are done by fuel cars and
reducing global warming and climate changes.

The 4th point discusses about global localization. Major companies who are outsourcing their
products must refer to the local standards. Their solutions must fullfil the local standards but
they should remain true to their universal principles.
Example: MacD in order to fulfill the local demand in India, they have introduced veg and
potato burgers in India because majority of the public in India are veg. So MacD in order to
tackle the local standards of India, they have introduced new different types of burgers but

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they remained constant in their actual principles i.e, servicing the best burgers or fast food
chain all over the world.

Visser’s 5th point discusses about circularity. It mainly focuses on the social and human
capital i.e, educating and training the employees.
The best example for this is the Microsoft company. Microsoft in India has many CSR
projects epically in the rural araes which mainly focuses on the educating and finding jobs for
people who are unemployed but capable of earning on their own.

In USA companies are not regulated heavily when compared to other developing countries
and their CSR is addressed as a social and morale responsibility rather as a regulatory
compliance. USA government has not made it mandatory to follow the triple bottom line
approach. Hence the company has a choice to choose between people, planet and profit which
makes it very clear choice of planet and people with profit. Therefore, the companies chose to
maximize profits and are not that concerned about how the society works or is improved.
Generally in the USA it has been seen that the corporate activities sometimes goes beyond
their environmental, legal and workplace issues in order to enhance a company’s external
reputation. Philanthropy and employee voluntarism are the major areas of a company’s
platform. US companies have high clarity in their public statement on a commitment to CSR
when compared to their peers epically in Europe. Due to lack of definition there is much
confusion on terminology, ranging from social responsibility to sustainability. For some USA
companies, CSR is a approach to help and work for the benefit of people giving while others
include business activities starting from raw materials to sourcing to employment practices.
Previously it has been seen that the CSR activities within the USA companies were led by a
single department who were responsible for reporting, implementing initiatives,
sustainability, philanthropy, volunteerism and environmental affairs. But now the scenario
has changed drastically. CSR responsibility is now found within the core areas of the USA
companies such as supply chain, engineering, marketing, transportation etc. Companies have
realized that the CSR must start at research and development phase. a US chain of quick
serve Mexican-style support, Chipotle Mexican Grill, set out in 2001 to express that sensibly
and proficiently sourced sustenance could be given in a negligible exertion, fast-food
condition. Nowadays Chipotle serves more regularly raised meat compared to any restaurant
on the planet, and was the essential national US attach to serve dairy things from animals

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treated without recombinant bull like advancement hormone. Customers responded. In spite
of the way that Chipotle raised expenses on a couple of things following the change to
ordinarily raised meat things, bargains for them increased. Chipotle has conveyed two fold
digit advantage grabs in each one of the past nine years, not in any way like various inside the
forceful quick organization diner industry within the focused snappy administration eatery
industry.
CHANGES IN INDIAN CSR LAW

The company’s act of 2013 came into the effect in 2015 but the csr obligation had been
included in the bill in the July 2011 which was passed by the lower house of the parliament in
2012 and by upper house in 2013. As initially there was a negative effect of this policy on
certain firms. Before the enactment of section 135 the firms were not disclosing their csr
activities into the books or by any manner. Section 135 also provides the limited viability to
be applicable for csr activities. First is the net worth of the company should be more than 500
crores. Secondly the turnover of the company should be more than 1000 crores. Thirdly the
net profit of the company should be more than 5 crore.

The law also states that these are not only for the Indian companies but also for the foreign
companies in India. The companies are further required to constitute a csr committee of the
board of directors and this committee would formulate the policies or the activities that are it
be undertaken as well as also stating the amount of the expenditure.

As the csr law says that all the qualifying companies are required to spend 2% of its average
net profit on the csr activities for the preceding 3 financial years so under the company’s law
the Indian government has made certain changes that are governing the expense on the
corporate social responsibility. As the companies are divided into a particular class so the
certain class of companies are making provision for the csr activities, it is stated in the law
that the companies are allowed to build the provision for their own personnel but through the
other institutions. The expense of this should not even exceed the total expense of five years
which is incurred on the social welfare activities in a financial year.

The corporate affairs ministry had applied the five percent of cap on the expenditure on the
administrative overhead. There are certain types of activities that are permitted under the csr
law that are:- reducing the child mortality, promotion of education, ensuring that environment
should be sustainable, the vocational skills of the employees should be enhanced, the bunger

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and poverty should be eradicated. For the welfare of the schedule class the reliefs and funds
has been passed.

In the new company law the preference has also been given to the local areas and where the
operations of the company takes place. There has also been provision for the linkage of
the two or more companies for the fulfilment of the csr activities in they given local area. The
csr committee had made certain policies which had included the projects that are to be
undertaken and there is also prime focus on the business models which prioritise the
environment and social activities. If the company would not be able to fulfil all these norms
then the company would have to report to the Board report for the non-fulfilment of the task
which would led to incur certain penalties to the company.

CHANGES IN US CSR LAW

The liberal model of the European Union and us is based on the individual equity and liberty
as well as the nationalist models had included the economic activities that has been
subordinated to the goals of the state. The US also provides the protective legislative devices
for csr. As the Americans are generally worried about their environment and other social
factors which are harming their culture. So as to protect the constituencies against the social
ad environmental harm US has alleged certain csr regulations. The benefits and business
impacts of the shareholder value, customer attention and retention, creation of brand value,
risk management and innovation.

There has been certain principles so as to brighten the future of the csr activities in the future.
The principles are creativity, scalability, responsiveness, locality, and circularity. After the
csr law has been legalised in US. As out of every nine dollar one dollar is to be spent as the
socials responsible investment. In the conjugation with the corporate social responsibility law
task force there has been introduction of the practice area of the corporate responsibility law
which cover various fields such as csr disclosure, csr engagement, labour workers’ rights,
start-up csr, social enterpenureship.

GREEN STRATEGIES

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There has also been the implementation of the green strategies for the csr such as green
buildings i.e. the LEED certification by the US green building council is the cause of the
growth of the movement of the green building. There has also been the initiative on the green
products so as to reduce the toxic chemicals. There has also been an emphasis on the green
manufacturing so as to reduce the emotions of the green house effects. There has also been
the product stewardship which encourages each one in the value chain to contribute to the
product sustainability from the producers to the regulators by achieving zero waste and
sustainable production.

SOCIAL CONTRACT

The new social contract states the

relationship between the individual and
the society and its government. The
individuals gave the rights voluntary for
the good of all the citizens

There are also some of the externalising

costs that are incurred which are of two
types such as spatially and temporary.

In the spatial cost the cost are transferred

to the other entities in the current time
period and in the temporary one the costs are transferred from current time period to the
enables the value creation for e.g., the pollution must be cleared in the future.

SOME OF IRRESPONSIBLE BUSINESS CORPORATIONS

 The explosion at union carbide ltd. Bhopal has been a case of thousands of people deaths
due to the leakage of gas.
 The Nike factories in Asia were appointing the young child at work.
 James hardie criticism for the failure to provide compensation to people which were
affected by asbestos related disease.

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 There was also the collapse of Enron due to the lack of csr as the employees and investors
at Enron were put to loss.

SOME OF THE RESPONSIBLE BUSINESS CORPORATIONS.

 Hindustan Construction Corporation is a perfect example for the responsible business as

where ever the company opens its factories the local areas are always taken care of. There
has also been development of those areas.
 Coca cola also which is a leading manufacturer of the beverages emphasised the
sustainable development, climate protection and waste as well as energy management.
 There are many companies such as IBM, Staples which are purchasing renewable energy
credits so as to support the clean energy projects.
 The companies like the body shop, Ben are promoting the biodiversity conservation,
organic farming and fair trade so as to make the perfect balance between the business and
the social and environment cause
 ITC group has also been a perfect example of csr activities as initially it has been a
tobacco company which has been now indulged into the FMCG, hotels and lots more so
as to make a balance between the business and the environment.
 Tata group has also been indulged in the csr programmes as they primarily focus on the
women empowerment and also the formulation of the self-help groups. It is also indulged
in other welfare programs. There are also many health care projects and also the facility if
child education as well as immunization. It also focuses on the economic empowerment
such as protection of the environment and also providing scholarships

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17
 Our views and reviews
According to me csr is a mechanism to increase the corporate accountability as well as
profitability with the environment sustainability. In many years there has also been change in
the csr laws and its nature. As the companies spend a lot more in csr programmes such as
education and skill development, health care.

Review of the csr in India and usa

According to me the CSR of USA is better than the CSR of India. The CSR policy of India
only talks about a mandatory CSR committee in each company and the company’s 2% profit
will go for social purpose. The law does not have any specify agenda for its existence. But in
case of the CSR policy of USA there are proper guidelines and motive set by the government
mainly the bureau of Economic and Business Affair. The main agenda for the CSR office is
to promote CSR and make it come to such a level of EB bureau’s agenda of sustainable
development in the USA and in other countries as well and helping build an economic
security for the country. And working with the social groups, labor groups, and multinational
companies to promote the concept of CSR.

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BOOK - Universal's law publishing - The companies Act, 2013 amended by The Companies
(Amendment) Act, 2017 ( 1 of 2018) and The Finance Act, 2017

7970-Article Text-31775-1-10-20130716.pdf

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