Written By: Prof. Pragyan Paramita Das || HOD (HR)
Every corporate has its core function or main target of earning profits. A company is considered an entity distinct from its members, therefore it is an artificial person in the eyes of the Law Like a distinct person, a corporate or company is also expected to fulfill its social obligations.
Corporate Social Responsibility (CSR) is a form of social obligation of a Company towards society at large. Corporations take a lot from society in the form of resources for carrying out their functions and earning profits, hence they should also be able to return to society some of the benefits they reaped.
The World Business Council for Sustainable Development explains CSR as A continuing commitment by businesses to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large.
Companies in India have been proactive in taking up CSR initiatives and integrating them into their business processes. A number of Companies are actively engaging themselves in more and more CSR activities. The introduction of voluntary guidelines by the Ministry of Corporate Affairs on CSR is also an indication of the growing importance of CSR in the business environment these days. Further, the Companies Bill also contains provisions with respect to CSR. Therefore, CSR which is considered voluntary on the part of Corporate will soon acquire statutory colors with the coming into effect of the Companies Bill, 2011.
CSR and Companies Bill, 2011
Some of the provisions under the Companies Bill, 2011 incorporating clauses relating to CSR are as follows:
- Constitution of CSR committee:
- As per the Companies Bill, 2011, every company having a net worth of rupees five hundred crores or more, or a turnover of rupees one thousand crores or more, or a net profit of rupees five crores or more during any financial year shall 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.
- Functions of CSR committee:
- Formulate and recommend to the Board, a Corporate Social Responsibility Policy which shall indicate the activities to be undertaken by the company as specified in Schedule VII.
- Recommend the amount of expenditure to be incurred on the activities referred to in clause (a); and monitor the Corporate Social Responsibility Policy of the company from time to time.
Every company should spend, in every financial year, at least two percent of the average net profits of the company made during the three immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy.
For a developing country like India, investment by corporates in CSR activities is a requisite. India is faced with problems like poverty, illiteracy, lack of healthcare, etc. These challenges are still ubiquitous and the government has limited resources to tackle these challenges.
More and more companies are realizing their responsibility towards the community and doing their part for society through donations and charity events. In fact, CSR nowadays has gone beyond mere charity and donations and is approached in a more organized fashion. It has become one of the strategic tools of the companies. Companies form CSR teams, specially dedicated to formulating policies, strategies, and goals for their CSR programs and setting aside budgets to support them.
Corporations are also executing many CSR initiatives in partnership with Non-Governmental organizations (NGOs), thereby taking advantage of the experience and expertise of such NGOs in tackling specific social problems. Now, CSR in India has set a realistic agenda of grassroots development through alliances and partnerships with sustainable development approaches. At the heart of the solution lies the intrinsic coming together of all stakeholders in shaping up a distinct route for an equitable and just social order.
A Glance at The Development of CSR in India
The Four Phases of CSR Development in India:
The history of CSR in India has its four phases which run parallel to India’s historical development and has resulted in different approaches toward CSR. However, the phases are not static and the features of each phase may overlap other phases.
1. The First Phase:
In the first phase charity and philanthropy were the main drivers of CSR. Culture, religion, family values and tradition, and industrialization had an influential effect on CSR. In the pre-industrialization period, which lasted till 1850, wealthy merchants shared a part of their wealth with the wider society by way of setting up temples for religious causes. Moreover, these merchants helped the society in getting over phases of famine and epidemics by providing food from their godowns and money and thus securing an integral position in the society.
With the arrival of colonial rule in India from the 1850s onwards, the approach towards CSR changed. The industrial families of the 19th century such as Tata, Godrej, Bajaj, Modi, Birla, and Singhania were strongly inclined towards economic as well as social considerations. However, it has been observed that their efforts toward social as well as industrial development were not only driven by selfless and religious motives but also influenced by caste groups and political objectives.
2. The Second Phase:
In the second phase, during the independence movement, there was increased stress on Indian Industrialists to demonstrate their dedication toward the progress of the society. This was when Mahatma Gandhi introduced the notion of “trusteeship”, according to which the industry leaders had to manage their wealth so as to benefit the common man. “I desire to end capitalism almost, if not quite, as much as the most advanced socialist. But our methods differ. My theory of trusteeship is no make-shift, certainly no camouflage. I am confident that it will survive all other theories.” This was Gandhi’s words that highlight his argument for his concept of “trusteeship”.
Gandhi’s influence put pressure on various Industrialists to act towards building the nation and its socioeconomic development. According to Gandhi, Indian companies were supposed to be the “temples of modern India”. Under his influence, businesses established trusts for schools and colleges and also helped in setting up training and scientific institutions. The operations of the trusts were largely in line with Gandhi’s reforms which sought to abolish untouchability, encourage the empowerment of women and rural development.
3. The Third Phase:
The third phase of CSR (1960–80) had its relation to the element of a “mixed economy“, the emergence of Public Sector Undertakings (PSUs), and laws relating to labor and environmental standards. During this period the private sector was forced to take a backseat. The public sector was seen as the prime mover of development because of the stringent legal rules and regulations surrounding the activities of the private sector, the period was described as an “era of command and control”. The policy of industrial licensing, high taxes, and restrictions on the private sector led to corporate malpracticesThis led to the enactment of legislation regarding corporate governance, labor, and environmental issues.
PSUs were set up by the state to ensure the suitable distribution of resources (wealth, food, etc.) to the needy. However, the public sector was effective only to a certain limited extent. This led to a shift of expectation from the public to the private sector and their active involvement in the socio-economic development of the country became absolutely necessaryIn 1965 Indian academicians, politicians, and businessmen set up a national workshop on CSR aimed at reconciliation. They emphasized transparency, social accountability, and regular stakeholder dialogues. In spite of such attempts, the CSR failed to catch steam.
4. The Fourth Phase:
In the fourth phase (1980 until the present) Indian companies started abandoning their traditional engagement with CSR and integrated it into a sustainable business strategy. In the 1990s the first initiation towards globalization and economic liberalization were undertaken. Controls and licensing systems were partly done away with which gave a boost to the economy the signs of which are very evident today. The increased growth momentum of the economy helped Indian companies grow rapidly and this made them more willing and able to contribute towards social causes.
Globalization has transformed India into an important destination in terms of production and manufacturing bases for TNCs are concerned. As Western markets are becoming more and more concerned about labour and environmental standards in developing countries, Indian companies that export and produce goods for the developed world need to pay close attention to compliance with international standards.
Current State of CSR in India: (Some Examples of Corporates)
Corporates like the Tata Group, the Aditya Birla Group, and Indian Oil Corporation have been involved in serving the community through donations and charity events. Many other organizations have been doing their part for the society. The basic objective of CSR these days is to maximize the company’s overall impact on society and stakeholders.
CSR policies, practices, and programs are being comprehensively integrated by an increasing number of companies throughout their business operations and processes. A growing number of corporates feel that CSR is not just another form of indirect expense but is important for protecting goodwill and reputation, defending against attacks, and increasing business competitiveness.
Companies have specialized CSR teams that formulate policies, strategies, and goals for their CSR programs and set aside budgets to fund them. These programs are often determined by social philosophy which has clear objectives and are well defined and aligned with the mainstream business. The programs are put into practice by the employees who are crucial to this process. CSR programs range from community development to development in education, environment, healthcare, etc.
Corporations such as Bharat Petroleum Corporation Limited, Maruti Suzuki India Limited, and Hindustan Unilever Limited are involved in the Provision of improved medical and sanitation facilities, building schools and houses, and empowering the villagers and in the process making them more self-reliant by providing vocational training and knowledge of business operations are the facilities that these corporations focus on. Many companies are helping other people by providing them with a good standard of living.
On the other hand, the CSR programs of corporations like GlaxoSmithKline Pharmaceuticals focus on the health aspect of the community. They set up health camps in tribal villages that offer medical check-ups and treatment and undertake health awareness programs. Some of the non-profit organizations which carry out health and education programs in backward areas are to a certain extent funded by such corporations.
Also, Corporates increasingly join hands with Non-governmental organizations (NGOs) and use their expertise in devising programs that address wider social problems.
For example, a lot of work is being undertaken to rebuild the lives of the Tsunami affected victims. This is exclusively undertaken by SAP India in partnership with Hope Foundation, an NGO that focuses mainly on bringing about improvement in the lives of the poor and needy. The SAP Labs Center of HOPE in Bangalore was started by this venture which looks after the food, clothing, shelter, and medical care of street children.
Examples of Corporates Joining Hands With NGOs For CSR:
Bringing Changes in India:
1. Alstom Foundation
(A foundation for the environment)
1. A unique initiative to electrify rural India through the Dry Gasification system:
Alstom Foundation collaborated with Husk Power Systems (HPS) to fund the Dry Gasification process for low-cost manufacturing and retrofitting of the gasifiers at the existing 65 power plant sites of HPS in Bihar.
2. Green Orphanage for Disadvantaged Children inaugurated in Karnataka:
To support the local community and preserve the environment, Alstom Foundation inaugurated an eco-friendly structure in Chamarajnagar, Karnataka using solar heating, solar lighting, fly ash bricks, and natural stones. The Project christened as ‘Green Orphanage’, aims to educate, rehabilitate and socially integrate 40 disadvantaged children by providing them shelter and vocational skills. This project is in sync with Alstom Foundation’s ambition to become a key contributor to sustainable development around the world.
3. The Kumaun Spring Recharge Initiative:
Launched under the aegis of Alstom Foundation, the initiative will recharge 30 springs in the Kumaun region of the Himalayas for a period of over two years by basing it on the principles of hydrogeology.
4. Restoring farming in Gujarat, India:
Alstom Foundation is actively involved in restoring the soil to increase agricultural productivity in remote areas of Gujarat, which has suffered years of erosion from monsoons.
5. Windmills for salt farmers:
Alstom Foundation also proposes to erect 50 windmills over a period of one year in an effort to help farmers switch from fossil fuel to renewable sources of energy.
6. Kanya Kelawani Project:
Alstom contributed towards the cause of ‘Kanya Kelawani’ – meaning providing Education to the Girl Child, to ensure girl child education in Gujarat. It was done on the occasion of dedicating the first GT26 based combined cycle power plant project to the Nation.
7. Education Initiatives:
As a part of the education initiative, Alstom facilities in Durgapur and Shahabad have constructed a school building and provided it with the infrastructure along with financial assistance for the children residing in those areas.
8. Aviva Street to School Programme & Great Wall of Education
Aviva Life Insurance supports the Street to School program to mainstream out-of-school street children into school and also supports our Mobile learning centers in Delhi & West Bengal. Aviva also launched a Book Donation drive across Delhi & NCR region in 2010. In 2011, the book will expand its footprints to 3 more cities & managed to collect around 9,50,000 books to help thousands of underprivileged children supported by the Save The Children drive.
Some Features of the Program:
Aviva Street to School:
- India has the largest number of street children in the world, with Delhi and Kolkata being home to most of these children.
- Their life on the streets without parental care or adult supervision makes them highly vulnerable to abuse and exploitation.
- Many street children are employed in wayside eateries, rag picking, and begging, and are subjected to large-scale wage exploitation by employers and buyers, mental torture and physical harassment by police and passers-by, and sexual violence by adults and peers.
Street To School:
To provide a better chance at childhood to these children, Save the Children and Aviva Life Insurance are together running the Street to School program in Delhi and Kolkata.
With this program, they are providing street children with a safe and sustainable route out of work and into school.
Under the project:
- They have set up nine educational activity centers for street and working children in Delhi and They provide food, alternative education, recreational activities, arts & crafts, music, and life life-skill workshops, medical care, and counseling in Kolkata.
- They provide education for one year before mainstreaming them into nearby Government schools.
- They are improving attitudes and increasing awareness amongst the trade unions and shop keepers towards street children.
- They are also working to increase sensitivity being demonstrated by the police and positive recognition of the initiative by government officials.
1. Mothercare “Born to Care” Campaign:
Mothercare group has formed a 3-year partnership with Save The Children, with a promise to donate 1.75 million GB pound to the underprivileged children through a co-branded fund raising campaign called Born to Care. Mother Care is also hosting various campaigns to save the new born lives with proper nutritions.
2. P&G Shiksha:
P& G is supporting Save the Children to empower marginalized girls through quality education in 12 Kasturba Gandhi Balika Vidyalaya (KGBV) in Rajasthan & Jharkhand.They are targetting 900 girls attending KGBVs,600 out-of-school children, 150 teachers,300 scjhool management members & 3,000 community people.They are determined to build a world in which every child attains the right to survival, protection, development of his childhood. in partnership with corporates and organisations across the spectrum
Problems in Implementing CSR in India
Inspite of having such life size successful examples, CSR in India is in a very nascent stage. It is still one of the least understood initiatives in the Indian development sector. It is followed by a handful of public companies as dictated by the very basis of their existence, and by a few private companies, with international shareholding as this is the practice followed by them in their respective foreign country. Thus the situation is far from perfect as the emphasis is not on social good but rather on a policy that needs to be implemented.
A lack of understanding, inadequately trained personnel, non availability of authentic data and specific information on the kinds of CSR activities, coverage, policy etc. further adds to the reach and effectiveness of CSR programmes. But the situation is changing. And CSR is coming out of the purview of ‘doing social good’ and is fast becoming a ‘business necessity’. The ‘business case’ for CSR is gaining ground and corporate houses are realising that ‘what is good for workers – their community, health, and environment is also good for the business’.
For a developing country like India, investment by corporates in CSR activities is a requisite. India is faced with problems like poverty, illiteracy, lack of healthcare etc. These challenges are still ubiquitous and the government has limited resources to tackle these challenges.
More and more companies are realizing their responsibility towards the community and doing their part for the society through donations and charity events. In fact CSR nowadays has gone beyond mere charity and donations, and is approached in a more organized fashion. It has become one of the strategic tools of the companies. Companies form CSR teams, especially dedicated to formulating policies, strategies and goals for their CSR programs and set aside budgets to support them.
Engaging in various CSR activities is a win-win situation for both corporate and society. Corporates can save a lot in front of taxation and also contribute in upliftment of society by indulging in such CSR activities.
CSR has come a long way in India, from responsive activities to sustainable initiatives, corporates have included CSR as part of their practice area.
Today, most of the corporate groups spend some part of their profit towards society in different ways like Organizing Medical/Health Camps, providing Educational Scholarship Schemes etc. This helps in development of community and enhancement of the reputation of the company. CSR also cultivates a sense of loyalty and trust amongst the employees in the organizational ethics.
It improves operational efficiency of the company and is often accompanied by increase in quality and productivity. So, at last we can say that CSR is in a developing condition in Indian corporate sector benefitting both the society and the company as well.We have started a leap forward & our best foot forward for CSR activities in India, but still we have many miles to go & many milestones to achieve