Corporate Social Responsibility

All Rights Reserved, Athena Infonomics

The information contained in this document is the copyright of Athena Infonomics India Pvt.
Ltd. Any redistribution or reproduction of part or all of the contents in any form is prohibited.
You may not, except with the express and written permission of Athena Infonomics India Pvt.
Ltd., distribute or commercially exploit the content nor may you transmit it or store it in any
other form of retrieval system.
The information set out in this report has been prepared by Athena Infonomics India Pvt. Ltd.
based upon information available to us or made available to us and/or from information
available in the public domain. In no event will Athena Infonomics India Pvt. Ltd. be liable for
any loss of costs, expenses, charges, including notional losses/lost opportunities or damage
including without limitation, indirect or consequential loss or damage, or any loss or damage
whatsoever arising from loss of data or profits arising out of, or in connection with, the use of
any information/material contained in the report
Page | 2

TABLE OF CONTENTS
1.

EXECUTIVE SUMMARY .......................................................................................................... 4

2.

DEFINING CORPORATE SOCIAL RESPONSIBILITY .................................................................. 4

3.

CORPORATE SOCIAL RESPONSIBILITY FOR CENTRAL PUBLIC SECTOR ENTERPRISES .......... 5

4.

NATIONAL VOLUNTARY GUIDELINES ON CSR FOR PRIVATE COMPANIES .......................... 7

5.

CSR LEGISLATION FOR PRIVATE COMPANIES ....................................................................... 9

6.

CASE STUDIES ...................................................................................................................... 10

7.

ISSUES RAISED BY PRIVATE COMPANIES ON CSR REGULATION ........................................ 11

8.

REFERENCES ......................................................................................................................... 12

Page | 3

1. EXECUTIVE SUMMARY
The role of corporates by and large has been understood in terms of a commercial business
thinking that focuses purely on economic parameters of success. Their market position has
traditionally been a function of financial performance and profitability. However, over the past
few years, as a consequence of rising globalisation and pressing ecological and social issues,
the perception of the role of corporates in the broader social context within which it operates,
has been altered.
Corporate social responsibility is a form of corporate self-regulation integrated into a business
model. Essentially, CSR is the deliberate inclusion of public interest into corporate decisionmaking, and the honouring of a triple bottom line: people, planet, profit. A more common
approach of CSR is philanthropy.
The concept of CSR has been evolving for decades. CSR is a multidimensional concept. While
some take CSR as an obligation, others consider it as a strategic tool. CSR focuses on the social,
environmental and financial success of the company. The increasing relevance of CSR in India
has increased from the fact that a business cannot succeed by ignoring the human and social
needs of society.
This paper talks about the definitions of CSR, regulations and laws for public sector and private
sector companies, case studies of selected companies having a CSR initiatives and finally the
report attempts to map out the issues faced by the private sector over the proposed CSR
regulations.
2. DEFINING CORPORATE SOCIAL RESPONSIBILITY
CSR relates to responsibilities corporations have towards society within which they are based
and operate, not denying the fact that the purview of CSR goes much beyond this. CSR is
comprehended differently by different people. Some perceive it to be a commitment of a
company to manage its various roles in society, as producer, employer, customer and citizen in
a responsible manner while for others it is synonymous to Corporate Responsibility (CR) or
Corporate Citizenship.
Definition # 1: Philip Kotler and Nancy Lee in 2005 defined CSR as a commitment to improve
community well being through discretionary business practices and contributions of corporate
resources.
Definition # 2: According to World Business Council for Sustainable Development 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.

Page | 4

Definition # 3: Archie Carroll in 1991 describes CSR as a multi layered concept that can be
differentiated into four interrelated aspects economic, legal, ethical and philanthropic
responsibilities.
Definition # 4: According to KPMG and ASSOCHAM, in their White Paper on CSR, there is an
emerging consensus on some common principles that underline CSR:

CSR is a business imperative: Whether pursued as a voluntary corporate initiative or for

legal compliance reasons, CSR will achieve its intended objectives only if businesses
truly believe that CSR is beneficial to them.
CSR is a link to sustainable development: businesses feel that there is a need to
integrate social, economic and environmental impact in their operation; and
CSR is a way to manage business: CSR is not an optional add on to business, but it is
about the way in which businesses are managed.

3. CORPORATE SOCIAL RESPONSIBILITY FOR CENTRAL PUBLIC SECTOR ENTERPRISES

Entities Covered
All central PSUs will be covered by the CSR guidelines issued by the Department of Public
Enterprises in April 2010.
Compliance Structure
-

The CSR budget to be mandatorily created through a Board Resolution as a percentage

of net profit (previous year) in the following manner:-

CSR Budget (%)

If Net Profit Less than Rs.

100 crore
3% 5%

If Net Profit of Rs. 100

crore to Rs. 500 crore
2% 3%
(Subject to a Min. of 3 cr)

If Net Profit of Rs. 500

crore and above
0.5% 2%

CSR budget for each year has to be utilized completely.

In case it is not used completely, reasons have to be provided & the amount cannot be
carried forward.

Page | 5

Eligible Activities (Indicative list)

The following are the eligible activities that will be considered under the CSR norm:
Energy
Non-conventional Energy Sources
Solar Lighting System
Electricity Facility

Health
Hygienic Drinking Water Facility
Sanitation and Public Health
Supplementing development programmes of the Government.

Social and Economic Development

Irrigation Facilities
Adoption of villages
Promotion of livelihood for economically weaker sections through forward and backward linkages
Construction of Community Centres/Night Shelters/Old Age Homes
Building of Roads, Pathways and Bridges
Entrepreneurship Development Programme (EDP)

Environment Preservation
Animal Care
Pollution Control
Environment friendly technologies
Taking action on points suggested by Ministry of Forest and Environment pertaining to Charter on
Corporate Responsibility for Environment Protection
Activities related to the preservation of the Environment/Ecology and to Sustainable Development

Education
Setting up of skill development centres
Imparting Vocational Training
Scholarships to meritorious students belonging backward and disabled categories
Adoption/Construction of Hostels (especially those for SC/ST and girls),
Skill training, entrepreneurship development and placement assistance programmes for youth

Disaster Management
Disaster Management Activities including those related to amelioration/ mitigation
Relief to victims of Natural Calamities like earthquake, cyclone, drought & flood situation in any part
of the country

Promotion of Sports and Games

Promotion of Art and Culture

Page | 6

4. NATIONAL VOLUNTARY GUIDELINES ON CSR FOR PRIVATE COMPANIES

The Ministry of Corporate Affairs in July, 2011 issued the National Voluntary Guidelines on
Social, Environmental & Economic Responsibilities of Business, for the companies intending on
having CSR activities for their company.
The Guidelines are designed to be used by all businesses irrespective of size, sector or location
and it is expected that all businesses in India, including multi-national companies that operate
in the country, would consciously work towards following the Guidelines. The Guidelines also
provide a framework for responsible business action for Indian MNCs planning to invest or
already operating in other parts of the world.
The Guidelines have been articulated in the form of nine (9) Principles, as follows:
Principle 1: Businesses should conduct and govern themselves with Ethics,
Transparency and Accountability

Principle 2: Businesses should provide goods and services that are safe and contribute
to sustainability throughout their life cycle

Principle 3: Businesses should promote the wellbeing of all employees

Principle 4: Businesses should respect the interests of, and be responsive towards all
stakeholders, especially those who are disadvantaged, vulnerable and marginalised.

Principle 5: Businesses should respect and promote human rights

Principle 6: Business should respect, protect, and make efforts to restore the
environment

Principle 7: Businesses, when engaged in influencing public and regulatory policy,

should do so in a responsible manner

Principle 8: Businesses should support inclusive growth and equitable development

Principle 9: Businesses should engage with and provide value to theircustomers and
consumers in a responsible manner

Page | 7

The Business Case for following the above Principles as outlined below:

Principle

Revenue growth
and market
access

Cost savings and

productivity

Risk
management/
license to
operate

Human
capital

Ethics,
transparency
accountability

New customers

Reduced cost of
ambiguity

Positively seen by
communities, NGOs,
local governments,
regulators
Reduced risk of action
from regulators and
NGOs

Attract and retain

employees

Improved labour
relations leading to
less disruptions

Attract and retain

employees

Safe and
sustainable
goods and
services
Well-being of
employee

Responsiveness
to all
stakeholders

Promoting
Human rights

Protecting the
Environment

Responsible
policy advocacy

Supporting
inclusive
development

Business partner of
choice
New customers
Customer loyalty

Business partner of
choice

Reduced litigation
Efficiency gains across
the value chain
procurement,
production
distribution, aftersales
Increased productivity
High morale

Responsive to
customer
demands/needs/
wants
leads to increase in
market share;
The ability to function
in the long term is
improved to being
responsiveness.
Business partner of
choice

Less absenteeism
Efficiency gains across
the value chain
procurement,
production
distribution, aftersales

Minimized litigation

Business partner of
choice

Lower operating
costs in the long term

Sustainability oriented
buyers will prefer to
deal with organization

Less danger of
externalities
emerging as liabilities

Growth stimulated
due to openness and
trust
New customers

Blunt the possibility of

others using policy to
stymie business
New models will
emerge to impact cost
savings

Market expansion
Innovative thinking
stimulated

Providing value
to customer

New customers

New markets brought

into fold

Positively seen by
communities, NGOs,
local governments,
regulators

Positively seen by
communities and
NGOs
Lower risk of
noncompliance
Positively seen by
communities, NGOs,
local governments,
regulators
Lower risk of
noncompliance
Positively seen by civil
society
Enhanced
governmental
support to initiatives
-cordial relations with
stakeholders
conducive for
business growth.
Lower risk of
consumer action

Employee morale is
high due to working to
improve the quality of
life of customers/
community

Reduced tardiness &

absenteeism
People drawn to work
for a sensitive
employer

Employees/talent
attracted by firm that
is
committed to the
dignity of all.
Talent is drawn to the
firm due to its
commitment to the
wellbeing of the
planet.

People drawn to work

for an open firm.
Potential source of
trained employees

Talent will be drawn

towards growing firm

Customer loyalty

Page | 8

5. CSR LEGISLATION FOR PRIVATE COMPANIES

The CSR regulations for private companies were introduced in the Companies Bill, 2011 which
was tabled in the Parliament, pending passing of the Bill.
Compliant Entities if the company falls under any of the 3 categories mentioned below, then
a Private Company should comply with CSR guidelines.

Obligated Private
Companies

Net Profit of Rs. 5 crore or

Net Worth of Rs. 500 crore
Turnover of Rs. 1000 crore
(OR)
more during any financial
(OR)
or more
or more
year

Compliance by Obligated Entities

Obligated entities 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.

Duties of the CSR Committee

Formulate and
recommend to the
Board, a CSR Policy

Recommend the
amount of
expenditure to be
incurred

Monitor the CSR

Policy

CSR Budget
The CSR Budget of the company should be at least 2% of the average net profits of the
company made during the three immediately preceding financial years, in pursuance of its
Corporate Social Responsibility Policy as recommended by the CSR Committee.

Page | 9

Eligible Activities
Activities which may be included by companies in their Corporate Social Responsibility Policies
are:
i.
ii.
iii.
iv.
v.
vi.
vii.
viii.
ix.

x.

eradicating extreme hunger and poverty;

promotion of education;
promoting gender equality and empowering women;
reducing child mortality and improving maternal health;
combating human immunodeficiency virus (HIV), acquired immune deficiency
syndrome (AIDS), malaria and other diseases;
ensuring environmental sustainability;
employment enhancing vocational skills;
social business projects;
contribution to the Prime Minister's National Relief Fund or any other fund set up
by the Central Government or the State Governments for socioeconomic
development and relief and funds for the welfare of the Scheduled Castes, the
Scheduled Tribes, other backward classes, minorities and women; and
Such other matters as may be prescribed.

6. CASE STUDIES
CSR at Microsoft
Microsoft has been right in the forefront when it comes to programmes that address the semiurban, rural, non-English speaking people in the country. And not just as a charity provider.
Apart from the grants that Microsoft has made, to the tune of more than $1.15 million in the
country, Microsoft is frequently coming up with software that addresses the needs of this
section. Recently, as part of its efforts at bringing an affordable local language computing
solution for India the company launched its Windows XP starter edition exclusively developed
for India.
CSR at HUL
Hindustan Unilever is involved in number of CSR initiatives in India. The main objective of
Project Shakti of Unilever is creating rural entrepreneurs. It trained 13,000 underprivileged
Indian women distribute the companys products to 70 million rural consumers. The company
is working with womens self-help groups to teach selling and book-keeping skills and build
commercial knowledge. The women who participate in this programme are, by and large, able
to double their household income. Shakti has also allowed Unilever to increase its reach to 30%
more of Indias rural population since its inception in 2000. The company is joined in its efforts
by some 300 groups, NGOs, banks and various government entities allowing it to take part in
strategic public-private partnerships
Page | 10

CSR at Coca-cola
Coca-cola India worked hard towards water conservation and community development has
been given Golden Peacock Global award 2008 for CSR. The award has been conferred to CocaCola India for its efforts in water conservation and management and community development
initiatives. The soft drink major now has 320 rain water harvesting implements across 17 states
in India, and it has also been successful in restoring water conservation programme. Side by
side, the company is running the Elixir of Life project that provides drinking water to 30,000
children in 100 primary and Panchayat schools in around Chennai. Coca-Cola India undertakes
a diverse range of activities for the benefit of the community across the country.
CSR at Intel
Intel managed to build a synergy between growing its business and spreading computer
education amongst communities in India. Intel uses its CSR programme to spread computer
usage and scientific temper among the larger population in the countries it has a presence in.
For the spread of computer education alone, the company spends as much as $100 million
every year.
One of Intels key programmes, called Intel - Teach to the future, targets teachers in schools,
colleges and teacher training institutes to make them adept at handling technology in the
classroom and importing digital learning to future generations. Corporate responsibility for
Intel is also about innovation since it applies resources to address global challenges.

7. ISSUES RAISED BY PRIVATE COMPANIES ON CSR REGULATION

1. Making CSR mandatory for private companies will divert a substantial amount of
time from their core business, in order to comply with statutory regulations.
2. Making it mandatory for companies having net profit of Rs. 5 crore will cover most
of the companies even in the MSME sector.
3. Provide incentives for CSR funds to be spent on community and national capability
building causes and not simply backing PR generating projects.
4. Companies may use CSR as a method to avoid payment of tax. So there has to be
an upper cap on how much companies can spend on CSR activities.
5. The definition of CSR activities has to be clearly mentioned in the regulation, so
that there is no room for subjectivity.

Page | 11

8. REFERENCES
1. Corporate Social Responsibility Towards a Sustainable Future A White Paper, KPMG
India, 2008.
2. Guidelines on Corporate Social Responsibility for Central Public Sector Enterprises
issued by Department of Public Enterprises in April, 2010.
3. National Voluntary Guidelines on Socio-Economic and Environmental Responsibilities
of Business, 2011
4. Companies Bill, 2011
5. Case study on Corporate Social Responsibility of MNCs in India, Dr. G.
Muruganantham, International Trade & Academic Research Conference (ITARC) London 2010.

Page | 12