Corporate Social Responsibility Practices in India

Ritesh Kumar1, Dr. Rajpal Singh2

Assistant Professor1, Professor2

Govt. College for Women, Salaheri (Nuh) 1, Department of Commerce Mdu, Rohtak2

Email Id: rik.chhonkar007@gmail.com

Abstract

Corporate social responsibility (CSR) is gaining more and more importance day by day. CSR
is not only drawing the corporate magnates into its circumference, but is also luring
educationists, social activists, reformists, from all over the world to delve deeper into it.
Changing market scenario, globalization, ethical consumerism all are adding heat to the CSR
concept. More and more organizations are showing their commitments towards CSR either
for enhancing their corporate image or to be in competition. Emergence of different
marketing innovations demands direct linkage of corporate social responsibility practices
with the business corporate strategies. The purpose of this study is to explore the various
definitions and descriptions of Corporate Social Responsibility (CSR); elaborate upon
development of CSR in India.

Keywords: Corporate Social Responsibility, Globalization, Competition.

Introduction

In today’s changing world, Corporate Social Responsibility (CSR) is a growing area of

interest for academics, practitioners and entrepreneurs, in terms of both theory and practice.
Corporate Social Responsibility (CSR) is a concept whereby companies integrate social,
environmental and health concerns in their business strategy (policy) and operations and in
their interactions with stakeholders on a voluntary basis. The social responsibility of business
encompasses the economic, legal, ethical, and discretionary expectations that society has of
organizations at a given point in time (Carroll, 1979). There are many definitional problems
in relation to the Corporate Social Responsibility concept. It is often used in the modern
literature as a summary concept whereby companies integrate social and environmental
concerns in their operations and in their interaction with stakeholders on a voluntary basis.

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According to this definition, for a company to be considered socially responsible means that
its overall performance should be measured on a triple bottom line approach that is to say on
a firm’s combined contribution to economic prosperity, environment quality and social
capital. As the world is shrinking due to globalization the concept of Corporate Social
Responsibility (CSR) has acquired an undeniably high degree of relevance and scope in a
large number of sectors. Many academicians and practitioners are developing theory and
practices of this concept of social responsibility among entrepreneurs. The broad rationale for
a new set of ethics for corporate decision making, which clearly constructs and upholds a
organization’s social responsibility, arises from the fact that a business enterprise derives
several benefits from society, which must, therefore, require the enterprise to provide returns
to society as well. This, therefore, clearly establishes the stake of a business organization in
the good health and well being of a society of which it is a part. More importantly, in this age
of widespread communication and growing emphasis on transparency, the managers should
help their company in development of a CSR management and reporting framework. The
more the concepts of CSR are fostered and integrated into the business process, the easier it
will be to benefit from alternative thinking and perhaps handle the occasional problems that
for certain will occur. The more integrated the business process within the value chain, the
more opportunity there will be for organizations to influence the approaches of others on
whom they depend. The concept of CSR includes the openness or transparency of companies
as well as taking into consideration the will and expectations of their stakeholders. Social
responsibility means a doctrine that claims that an entity whether it is government, Private
Corporation or public organization has a responsibility to society. CSR is a concept that
reduces costs and risks, increases the brand value and reputation, effectiveness and the
efficiency of employees, improves transparency, and clarity in the working environment of
the business house.

Review of Literature

Literature review is an important part of any research. Various studies was conducted in past
on CSR. Here, literature reviews of some studies are as follow:

Enock & Basavaraji (2013) in their study entitled, “Corporate Social Responsibility of Tata
and ITC company: A Comparative Study” explains that CSR has been assuming greater
importance in the corporate world in 21th century. Indian Government has drafted guidelines

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for CSR practices, which of late proposed companies to contribute a percentage share
towards that cause (CSR). This study compares the CSR activities of Tata Company and ITC
Company on different areas i.e. environmental friendliness, social accountability, employee’s
safety, human rights promotion and healthcare etc. The study also focuses on the reporting
methods used by these companies. From this study, it is observed that all the two big private
companies of the country are directly engaged in social responsibility in various areas, from
innovation in agriculture & education to saving the environment. It is concluded that
environment, education, community involvement and health care activities practiced as CSR
by both companies.

Bhupender & Joshiya (2012) in their study entitled, “Issues and Challenges of Corporate
Social Responsibility in India” defines that over the time, CSR expanded to include both
economic and social interests. Companies have become more transparent in accounting and
display public reporting due to pressures from various stakeholders. In this research paper
CSR status, challenges of CSR, policies for CSR in India are studied. The concept of CSR is
now firmly rooted on the global business agenda. But in order to move from theory to
concrete action, many obstacles need to be overcome. Many positive outcomes can arise
when businesses adopt a policy of social responsibility.

Sharma and Kiran (2012) in their study entitled, “Corporate Social Responsibility
Initiatives of Major Companies of India with Focus on Health, Education and Environment”
elucidates that in India, many firms have taken the initiatives of CSR practices which have
met with varying needs of the society. The present study has made an attempt to understand
the status, progress and initiatives made by large firms of India in context to CSR policy
framing and implementation. Although India has entered or taken a transformational change
by involving into new CSR initiatives, but still a lot has to be done in this area.

Jain (2012) in his research entitled, “Corporate Social Responsibility: An Explorative

Review” Many companies have established a corporate identity using CSR as a core activity
of their business, which has become a focal point of their success and competitive advantage.
The basic objective of this paper is to know the concept of corporate social responsibility and
review existing knowledge available in this area.

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INDIA AND CSR

CSR is not new to India. Development of CSR can be traced back in different phases which
are as follows:

The first phase of CSR was predominantly determined by culture, religion, family tradition
and industrialization. Business operations and CSR engagement were based mainly on
corporate self-regulation. Being the oldest form of CSR, charity and philanthropy still
influence CSR practices, especially in community development. In the pre-industrial period
up to the 1850s, merchants committed themselves for the religious reasons, sharing their
wealth, for instance, by building temples. Moreover, ”the business community occupied a
significant place in ancient India and the merchants provided relief in times of crisis such as
famine or epidemics by opening go-downs of food and treasure chests” (Arora, 2004). Under
colonial rule, Western type of industrialization reached India and changed CSR from the
1850s onwards. The pioneers of industrialization in the 19th century in India were a few
families such as the Tata, Birla, Bajaj, Lalbhai, Sarabhai, Godrej, Shriram, Singhania, Modi,
Mahindra and Annamali, who were strongly devoted to philanthropically motivated CSR
(Mohan, 2001).

The second phase of Indian CSR (1914-1960) was dominated by country’s struggle for
independence and influenced fundamentally by Gandhi’s theory of trusteeship, which aimed
to consolidate and amplify social development. During this period, Indian businesses actively
engaged in the reform process. Not only the companies saw the country’s economic
development as a protest against colonial rule; but also they participated in its institutional
and social development (India Partnership Forum 2002).

The paradigm of the “mixed economy”, with the emergence of PSUs and ample legislation
on labour and environment standards, affected the third phase of Indian CSR (1960-1980).
This phase was also characterized by shift from corporate self-regulation to strict legal and
public regulation of business activities. In this scenario, the public sector was seen as the
prime mover of development. The 1960s was described as an “era of command and control”,
because strict legal regulations determined the activities of the private sector. The
introduction of a regime of high taxes, quota and license system imposed tight restrictions on
the private sector and indirectly triggered corporate malpractices. As a result, corporate
governance, labour and environmental issues rose on the political agenda and quickly became

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the subject of legislation. Furthermore, state authorities established PSUs with the intention
of guaranteeing the appropriate distribution of wealth to the needy (Arora, 2004).

In the fourth phase (1980 until the present) 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 multi-stakeholder 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. Consequently, controls and license system were partly abolished, and
the Indian economy experienced a pronounced boom, which has persisted until today (Arora
& Puranik, 2004).

At present, Indian companies are now expected to discharge their stakeholders‟

responsibilities and societal obligations, along with their shareholders‟ wealth maximization
goal. In India as in the rest of the world there is a growing realization that business cannot
succeed which fails in a society. An ideal CSR has both ethical and philosophical dimensions,
particularly in India where there exists a wide gap between sections of people in terms of
income and standards as well as socio-economic status. Nowadays, India has been named
among the top ten Asian countries paying increasing importance towards Corporate Social
Responsibility (CSR) disclosure norms. Besides the public sector companies, it is the private
sector companies that played dominant role in CSR activities.

Companies Bill, 2012 and CSR

With a view to provide a framework for companies (private and public) to implement need-
based CSR activities, the Government of India has included CSR-related provisions in the
Companies Bill, 2012. The Clause 135 of the Companies Bill 2012 aims at motivating
companies to spend 2% of PAT on CSR. Though spending 2% of the PAT is not mandatory
but Clause 135 of the proposed Companies Bill casts a duty on board to specify the reason for
not spending the specified amount on CSR.

The Clause 135 will be applicable to all companies that have either of the following:

 Net worth of INR 500 crores or more

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  Turnover of INR 1000 crores or more
 Net profit of 5 crore or more

An average of last 5 year PAT will be considered for calculating the 2% for CSR.

The Bill mandates companies to form a board-level CSR Committee comprising three or
more directors with at least one independent director. The composition of the CSR
Committee has to be disclosed in the annual board of director’s report. The CSR Committee
will be responsible for formulating and recommending a CSR policy and implementation
plan. The Committee will also be responsible for regular monitoring of CSR activities.
Company’s board will be responsible for approving and disclosing CSR Policy in the annual
Director’s Report and on company’s website. The Board will also be responsible for ensuring
implementation of CSR activities according to the Policy. The annual Director’s Report has
to specify reasons in case the specific amount has not been utilised adequately.

CSR Initiatives

1. Industry Association Initiative: Leading Chambers of Commerce and Industry of India

are traditionally active in social and environmental norms. Federation of Indian
Chambers of Commerce and Industry (FICCI), CII works closely in partnership with
Government. CII in partnership with UNDP set up India Partnership Forum to
promote multi stakeholders approach to CSR. Social Development Council (SDC) set
up by CII, ensures corporate participation in social development and provides an
institutional base for social activities of the corporate sector. Progress, Harmony and
Development chambers of commerce and Industry (PHDCCI) has major interventions
in family welfare and rural development. Associated Chambers of Commerce and
Industry of India (ASSOCHAM) through their members provided drinking water in
110 villages by 1996 on occasion of its platinum Jubilee. Bombay Chambers of
Commerce and Industry (BCCI) have been consistently on issues of populations and
civic conditions in Mumbai.
2. Company Initiatives: An internet-based survey was conducted to understand the
philosophy & deployment of CSR as practiced (innovatively and in a sustained
manner) for National and International organizations.

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3. Roundtables and Networks in India: Corporate Roundtable on Development of
Strategies for the Environment and Sustainable Development - Business Council for
Sustainable Development (CoRE-BCSD) of India is a grouping of Indian corporate
trying collectively and individually to build in sustainable development concepts into
their operations. The British Council’s CSR Network: Towards promoting CSR and
generating awareness and interest amongst young future business leaders.
4. CSR Surveys: In the context of India, CSR studies were few and limited. Singh and
Ahuja 1983 conducted the first study in India on CSR of 40 Indian public sector
companies for the years 1975-76 and found that 40 percent of the companies
disclosed more than 30 percent of total disclosure items included in their survey.
Raman (2006) used content analysis technique to examine the chairman’s message
section in the annual reports of the top 50 companies in India to identify the extent
and nature of social reporting. This study concluded that the Indian companies placed
emphasis on product improvements and development of human resources (Raman,
2006). According to a survey done by Partners in Change 2000, which covered 600
companies and 20 CEOs for judging Corporate Involvement in Social Development in
India 85 percent agreed that companies need to be socially responsible; only 11
percent companies had a written policy; over 60 percent of the companies were
making monetary donations; health, education and infrastructure were most supported
issues. From 2000 onwards, 4 important surveys have been conducted, which give
significant macro level conclusions about Indian corporate. The first and second
surveys were carried out in 2001 and 2002 by Business Community Foundation for
TERI-Europe. The survey sought to explore the perception of workers, company
executives and general public about social, economic and environmental
responsibilities. It was found that all companies irrespective of size or sector have
awareness of CSR and its potential benefits. Many companies were collaborating with
NGOs, have labor and environmental policy guidelines in place. A third survey was
jointly conducted in 2002 by CII, United Nations Development Program (UNDP),
British Council (BC) and Price Water Coopers (PWC). The most striking features of
the responses to the survey is that the respondents are in near unanimity that CSR is
very much a part of the domain of corporate action and the passive philanthropy is no
longer sufficient. A significant proportion of respondents, recognize CSR as the mean
to enhance long-term stake holder value. The fourth survey, the Karmyog CSR rating
2007-08 is for the largest 500 companies. Karmayogis a platform for the Indian non-
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 profit sector providing research on CSR activities of Indian companies. It rated the
500 largest Indian Companies based on their CSR activities. The companies were
rated on 0 to 5 levels based on criteria’s like products & services, reach of CSR
activities, expenditure on CSR, harmful processes etc.

The Key Drivers for CSR

Many companies think that corporate social responsibility is a peripheral issue for their
business and customer satisfaction is more important for them. Some of the drivers pushing
business towards CSR include:

a) Direct Economic value/Brand Reputation: Although the prime goal of a company is to

generate profits, companies can at the same time contribute to social and environmental
objectives by integrating CSR as a strategic investment in to their business strategy as they
become increasingly aware that Corporate Social Responsibility can be of direct economic
value. They can increase their reputation with the public and government by adopting CSR.

b) Laws and Regulations: Another driver of CSR is the role of independent mediators,
particularly the government, in ensuring that corporations are prevented from harming the
broader social well, including people and environment. Governments should set the agenda
for social responsibility by way of laws and regulations that will allow a business to conduct
them responsibly.

c) Competitive Labor Markets: Employees are increasingly looking beyond paychecks &
benefits and seeking out employers whose philosophies and operating practices match their
own principles. In order to hire and retain skilled employees, companies are being forced to
improve working conditions.

d) Philanthropy: It is the historical driver which means sense of ethics or welfare. After the
Second World War, a variety of national and international regulations arose through bodies
such as International Labor Organization (ILO) emphasizing the need for an active social
policy for transnational companies.

e) Ethical Consumerism: The rise in popularity of ethical consumerism over the last two
decades can be linked to the rise of CSR. As global population increases, so does the pressure
on limited natural resources required to meet rising consumer demand. There is evidence that

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the ethical conduct of companies exert a growing influence on the purchasing decisions of
consumers.

f) Globalization and Market forces: Corporations have to face many challenges i.e.
government regulations and tariffs, environmental restrictions etc. that can cost organizations
very much. Organizations can sustain a competitive advantage by using their social
contributions.

g) Social Awareness and Education: Corporate stakeholders are exerting pressure on

corporations to behave responsibly. Non-governmental organizations are also taking an
increasing role, leveraging the power of the media and the internet to increase their scrutiny
and collective activism around corporate behavior.

h) Supplier Relations: As stakeholders are becoming increasingly interested in business

affairs, many companies are taking steps to ensure that their partners conduct themselves in a
socially responsible manner. Some are introducing codes of conduct for their suppliers to
ensure that other companies‟ policies or practices do not tarnish their reputation.

Conclusion

Business houses all over the world are realizing their stake in the society and engaging in
various social and environmental activities. The need of the hour is to formulate effective
strategic policies and adopt various instruments according to the company history, its content,
peculiarity in relationship with its different stakeholders so that CSR can be best
implemented towards its goals – sustained environmental, social and economic growth. As
of now, the trends have changed and CSR affects not only the company’s reputation and
goodwill but also govern the financial performance. India’s markets continue to exhibit a
profusion of negative externalities where the costs of resource use, environmental
degradation, or community disruption are neither paid by those who incur them nor are
reflected in actual prices. Today’s economic framework gives little encouragement for
companies to consider the long-term – the essence of true sustainable development. There
are several companies in India involved in diverse issues such as healthcare, education, rural
development, sanitation, microcredit, and women empowerment. Analysis of several surveys
in India suggest that though many companies in India have taken on board the universal
language of CSR, CSR seem to be in a confused state. Individual companies define CSR in

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their own limited ways and contexts. The end result being that all activities undertaken in the
name of CSR are mainly philanthropy, or an extension of philanthropy. It seems that CSR in
India has been evolving in domain of profit distribution. There is a need to increase the
understanding and active participation of business in equitable social development as an
integral part of good business practice.

References:

1. Omweno Nyameyio Enock and Dr. Kundan Basavaraji (2013) “Corporate Social
Responsibility of Tata company and ITC company: A comparative study”,
International Journal of Business and Management Tomorrow (IJBMT), Vol.3, No.3,
March, pp. 1-12.
2. Anupam Sharma and Ravi Kiran(2012) “Corporate Social Responsibility Initiatives
of Major Companies of India with focus on health, education and environment”,
African Journal of Basic & Applied Sciences 4(3): pp. 95-105.
3. Bhupender and Vikas Kumar Joshiya (2012) “Issues and Challenges of Corporate
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4. Arvind Jain (2012) “Corporate Social Responsibility: An Explorative Review”,
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13-19.
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development”, Vol.47 No.3,pp.93-100.

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9. Carroll, A. B. (1991), “The pyramid of corporate social responsibility: toward the
moral management of organizational stakeholders”, Business Horizons, Vol. 34,
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