CONCEPT OF CSR IS NOT NEW TO INDIAN

COMPANIES

A report submitted for internal assessment of

Company Law

Under the guidance of

Prof. S N Ghosh

Deepa Chandrasekar

IIPM
IIPM TOWER,
GURGAON.
 ACKNOWLEDGEMENT

We thank Prof. S N Ghosh in particular for assigning us this topic and encouraging us to write
in the first place. We owe much to Prof. S N Ghosh for his helpful comments.

We are indebted to all those who have been helpful throughout the process of writing this
Report– Mrs.DeepaChandrasekar, Ms.Ekta Yadav and Mr. but as the cliché goes, we are
solely responsible for any remaining errors of fact or judgment.

CONCEPT OF CSR IS NOT NEW TO INDIAN COMPANIES 2

 Contents
Acknowledgement
1. Abstract 4
2. Introduction 5
3. Definition 6
4. Difference between Charity & CSR 7
5. Forerunners in corporate social responsibility 8
6. Government Support & Potential Benefits 11
7. Conclusion 14

CONCEPT OF CSR IS NOT NEW TO INDIAN COMPANIES 3

 Abstract

CSR is not new to India; companies like TATA and BIRLA have been imbibing
the case for social good in their operations for decades long before CSR become
a popular cause. In spite 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 realizing
that ‘what is good for workers - their community, health, and environment is
also good for the businesses.

CONCEPT OF CSR IS NOT NEW TO INDIAN COMPANIES 4

 CONCEPT OF CSR IS NOT NEW TO INDIAN
COMPANIES

Introduction

Corporate social responsibility (CSR) is a form of corporate self-regulation

integrated into a business model. Ideally, CSR policy would function as a built-
in, self-regulating mechanism whereby business would monitor and ensure
their adherence to law, ethical standards, and international norms. Business
would embrace responsibility for the impact of their activities on the
environment, consumers, employees, communities, stakeholders and all other
members of the public sphere. Furthermore, business would proactively
promote the public interest by encouraging community growth and
development, and voluntarily eliminating practices that harm the public
sphere, regardless of legality. Essentially, CSR is the deliberate inclusion of
public interest into corporate decision-making, and the honoring of a triple
bottom line: People, Planet, and Profit.

CONCEPT OF CSR IS NOT NEW TO INDIAN COMPANIES 5

CONCEPT OF CSR IS NOT NEW TO INDIA

„ Corporate – means organized business

„ Social – meaning every thing dealing with the people

„ Responsibility – means accountability between the two

Corporate Social Responsibility

“Corporate Social Responsibility is the continuing commitment by business

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”.
ƒ Exhibits the ethical behavior that an organization exhibits towards its
internal and external stakeholders
ƒ Denotes the responsibility of an organization towards the environment
and society in which it operates.
CSR involves various voluntary efforts

ƒ It involves providing innovative solutions to societal and environmental

challenges.
ƒ Organizations generally believe that acting in a socially responsible
manner will create value for them.
ƒ an organization is committed to social causes, also gives employees a
sense that the company would also be committed to the welfare of its
employees as well.
“Corporate social responsibility must not be defined by tax
planning strategies alone. Rather, it should be defined within the
framework of a corporate philosophy, which factors the needs of
the community and the regions in which a corporate entity
functions.”
Prime Minister -Dr. Manmohan Singh

CONCEPT OF CSR IS NOT NEW TO INDIAN COMPANIES 6

Difference between Charity & CSR

„ CHARITY
ƒ Means donating money, goods, time or effort
ƒ For poor and needy cause
ƒ It is selfless giving toward any kind of social need

„ CSR
ƒ It is how company align their value to social cause
ƒ It can be people centric or planet centric
ƒ It is not self less act, company derive long term benefit from CSR

For and against argument

The practice of CSR is subject to much debate and criticism. Proponents argue
that there is a strong business case for CSR, in that corporations benefit in
multiple ways by operating with a perspective broader and longer than their
own immediate, short-term profits. Critics argue that CSR distracts from the
fundamental economic role of businesses; others argue that it is nothing more
than superficial window-dressing; others argue that it is an attempt to pre-
empt the role of governments as a watchdog over powerful multinational
corporations. Critics of CSR as well as proponents debate a number of
concerns related to it. These include CSR's relationship to the fundamental
purpose and nature of business and questionable motives for engaging in CSR,
including concerns about insincerity and hypocrisy.

Critics concerned with corporate hypocrisy and insincerity generally suggest

that better governmental and international regulation and enforcement, rather
than voluntary measures, are necessary to ensure that companies behave in a
socially responsible manner. CSR could prove to be a valuable asset in an age
of Mergers & Acquisitions, as it helps firms spread their brand name.

CONCEPT OF CSR IS NOT NEW TO INDIAN COMPANIES 7

Forerunners in corporate social responsibility

TATA

Considered as pioneers in the area of CSR, the Tata group has played an
active role in nation building and socio-economic development since the early
1900s. From its inception, the Tata group has taken up a number of initiatives
for the development of society. A unique feature of the group is that 63 percent
of the equity capital of the parent firm - Tata Sons Limited - is held by Tata
trusts, which are philanthropic in nature.

Explains the chairman of the Tata Group, Ratan N. Tata, “We do not do
it for propaganda. We do not do it for publicity. We do it for the satisfaction of
having really achieved something worthwhile.” The Tata Business Excellence
Model integrates social responsibility into the framework of corporate
management wherein social responsibility is encapsulated as Key Business
Process. In fact all social service departments in Tata companies have annual
programmes and budgets… and all this is aligned to the MD’s Balanced Score
Card.

"The Tata credo is that 'give back to the people what you have earned from them'.
Moreover for any business to sustain in the long run they have to look beyond
business. - Jamshetji Tata

CONCEPT OF CSR IS NOT NEW TO INDIAN COMPANIES 8

 About 7000 villages around Jamshedpur and Orissa benefit from
development programmes run by the Tata Steel Rural Development Society
(TSRDS). Programmes of TSRDS cover issues like education, irrigation,
afforestation, adult literacy, vocational training, handicrafts and rehabilitation
of the handicapped persons.

The Community Development and Social Welfare Department (CDSW) at

Tata steel carries out medical and health programmes, blood donation drives,
mass screening of Tuberculosis patients immunization camps and drug de-
addiction. In 1999, Tata Steel embarked on an AIDS awareness programme,
which has now become an integral part of all training programmes.

Routine activities like immunization programmes, sterilization operations

and mother and child health care programmes are conducted through 9 family
welfare centres, 9 child clinics and 6 community-based clinics. In fact, Tata
Steel’s Centre for Family Initiatives (CFI) was successful in influencing 59 per
cent of Jamshedpur’s eligible couples practicing family planning, compared to
the national figure of 35 per cent.

A commitment to the welfare of the community has long been central to

the value system of companies in the Tata Group. To build upon this heritage
the Tata Council for Community Initiatives (TCCI) has created the Tata
Guidelines on Community Development, an effort of over three years from the
field evolved into a framework of best practices.

CONCEPT OF CSR IS NOT NEW TO INDIAN COMPANIES 9

BIRLA

The Birla groups of companies are also among the pioneers in the field of
corporate social responsibility in India. As part of the Aditya Vikram Birla
Group’s Social Reach, the Birla group runs as many as 15 hospitals in India;
includes Adult education and schools conducting as many as 78 schools all
over India; rehabilitates Handicapped persons having touched more than 5000
physically challenged individuals. More than 1,00,000 patients have been
examined under the Group’s medical programmes. Over 15,000 children along
with 2000 pregnant women have been immunized, over 500 cataract patients
operated, 2000 TB patients provided medical care, 100 leprosy-afflicted
attended to, free of cost.

It also provides Vocational Training, having provided training to over 3000

women and having distributed over 1400 tool kits in a variety of areas like
electrical, auto repair, electronic equipment maintenance and repair and
tailoring. It has adopted several villages under its Village Infrastructure
Development programme and has provided extensive training to over 10,000
villagers in its Carpet Weaving Center.xiii

MAHINDRA

Among corporates who have displayed deep commitment to Corporate

Social responsibility over long years is Mahindra & Mahindra. The late Mr. K.
C. Mahindra for promoting education among Indians at all levels established
the K. C. Mahindra Education Trust in 1953. Every year the Trust offers up to
30-40 interest-free loan scholarships to post-graduate students going abroad
for higher studies.

CONCEPT OF CSR IS NOT NEW TO INDIAN COMPANIES 10

 The Mahindra Search for Talent Scholarships is a scheme established in
34 schools in India to enthuse and reward students who have achieved
excellence in their academic pursuits. The Mahindra All India Talent
Scholarships are awarded every year from all over India to over 300 students
from lower income group families with good scholastic record pursuing job-
oriented diploma courses in various polytechnics.

Others

Similar commitment to CSR has been displayed by several corporates in India.

The list, which at best can be far from complete, includes Arvind Mills, Escorts,
Dabur, Bajaj, Godrej, Hero Honda, DCM Sriram, Ashok Leyland, Ballarpur
Industries, Eicher, Kinetic Group, Kirloskar, Infosys, Reliance, Ranbaxy, Wipro,
each of which has been deeply committed to their communities engaging in
programmes encompassing education, health, education, integrated rural
development.
Beyond the private sector, corporate players in India’s public sector too have
been actively involved in corporate social responsibility initiatives.

Most public sector units in the heavy engineering industry have not only set up
a township around the plant, but also established a school, a hospital and
several other civic facilities for its employees and those that live in that area.

CONCEPT OF CSR IS NOT NEW TO INDIAN COMPANIES 11

Government Support

Private sector companies have been encouraged to undertake rural

development programmes down the years through fiscal incentives by the
government. For instance, special benefits are offered in the industrial policy to
companies that set up industries in backward areas and tax incentives are also
offered to companies that set up water purification projects.

Potential business benefits

The scale and nature of the benefits of CSR for an organization can vary
depending on the nature of the enterprise, and are difficult to quantify, though
there is a large body of literature exhorting business to adopt measures beyond
financial ones at it is found that a correlation exist between
social/environmental performance and financial performance. However,
businesses may not be looking at short-run financial returns when developing
their CSR strategy.

The business case for CSR within a company will likely rest on one or more of
these arguments:

Human resources

A CSR programme can be an aid to recruitment and retention, particularly

within the competitive graduate student market. Potential recruits often ask
about a firm's CSR policy during an interview, and having a comprehensive
policy can give an advantage. CSR can also help to improve the perception of a
company among its staff, particularly when staff can become involved through
payroll giving, fundraising activities or community volunteering.

CONCEPT OF CSR IS NOT NEW TO INDIAN COMPANIES 12

Risk management

Managing risk is a central part of many corporate strategies. Reputations that

take decades to build up can be ruined in hours through incidents such as
corruption scandals or environmental accidents. These can also draw
unwanted attention from regulators, courts, governments and media. Building
a genuine culture of 'doing the right thing' within a corporation can offset these
risks.

Brand differentiation

In crowded marketplaces, companies strive for a unique selling proposition that

can separate them from the competition in the minds of consumers. CSR can
play a role in building customer loyalty based on distinctive ethical values.
Several major brands, such as TATA, BIRLA are built on ethical values.
Business service organizations can benefit too from building a reputation for
integrity and best practice.

License to operate

Corporations are keen to avoid interference in their business through taxation

or regulations. By taking substantive voluntary steps, they can persuade
governments and the wider public that they are taking issues such as health
and safety, diversity or the environment good corporate citizens with respect to
labour standards and impacts on the environment.

CONCEPT OF CSR IS NOT NEW TO INDIAN COMPANIES 13

Conclusion

Today, CSR talks about responsibility across all stakeholders in terms the
‘Triple Bottom-line’; people, planet & profits.

CSR has come a long way in India. From responsive activities to sustainable
initiatives, corporates have clearly exhibited their ability to make a significant
difference in the society and improve the overall quality of life. In the current
social situation in India, it is difficult for one single entity to bring about
change, as the scale is enormous. Corporates have the expertise, strategic
thinking, manpower and money to facilitate extensive social change. Effective
partnerships between corporates, NGOs and the government will place India’s
social development on a faster track.

References
1. http://www.indianmba.com/
2. http://www.teriin.org/
3. www.naukrihub.com/
4. http://www.tata.com
5. http://www.icmrindia.org/

CONCEPT OF CSR IS NOT NEW TO INDIAN COMPANIES 14