Corporate Social Responsibility In India

PROJECT ON

CORPORATE SOCIAL RESPONSIBILITY IN INDIA

____________________________________________________

SUBMITTED TO

Mr. Shyamtanu Pal

Faculty, Corporate Law-II

__________________________________________________________

SUBMITTED BY

Faiz Kazi
Roll Number 45
Sociology Major (Sec-C)
Semester VI, Batch XI

HIDAYATULLAH NATIONAL LAW UNIVERSITY

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ACKNOWLEDGEMENTS
This project has not only been a result of earnest research and hard work but also the constant
support and guidance of my teacher, Mr. Shyamtanu Pal, whose efforts and help throughout the
course of my project rightly deserve a mention, for providing me with the opportunity for
exploring a new side of the world public policy making . Sir, I am grateful to you for providing
me with such an interesting topic that has enhanced my knowledge about the subject manifold.

My thanks to the staff and administration of HNLU for the infrastructure in the form of our
library and IT Lab that was a source of great help for the completion of this project.

Faiz Kazi

Semester VI

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TABLE OF CONTENTS

 Acknowledgements Page 2
 Table of Contents Page 3
 Introduction Page 4
 Objectives Page 5
 Research Methodology Page 5

 Meaning of Corporate Social Responsibility Page 6

CSR policies Worldwide
Voluntary Guidelines and Binding Standards
Government Efforts to Raise CSR Awareness
Government Funds for Implementation of CSR Programs

 CSR in India Page 8

The four phases of CSR development in India
Corporate Social Responsibility Voluntary Guidelines 2009
Core Elements of the Voluntary Guidelines
CSR in Government companies
Current State of CSR in India

 CSR Provisions in Companies Act, 2013

Section 135, Companies Act 2013
CSR activities as per Schedule VII
Benefits of a robust CSR programme

 Conclusion Page 21
 References Page 22

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INTRODUCTION

Creating a strong business and building a better world are not conflicting goals – they are
both essential ingredients for long-term success.

– William Clay Ford Jr., Executive Chairman, Ford Motor Company

Through the years, the corporate entities have redefined their role in this multifarious society.
From a raw idea of ‘profit maximization’, its objective was changed to ‘profit optimization’. This
change can mainly be attributed to the identification of challenges posed by the various social
and economic concerns. The viability and sustainability of such enterprises were questioned.
This cynicism could be marked as the beginning of the theory of “Corporate Social
Responsibility”.

Although the contemporary CSR agenda is maturing, the term “CSR” has not yet taken hold
within many public sector agencies, either in industrial or developing countries. Few government
initiatives have been undertaken explicitly as “pro-CSR initiatives” but nonetheless many have
contributed effectively to the promotion of greater social responsibility. Public sector agencies
that do not use the expression “corporate social responsibility” are not necessarily doing any less
than those that do. There is a significant opportunity for public sector bodies in developing
countries to harness current enthusiasm for CSR alongside key public policy goals and priorities
to encourage delivery of results in both respects. The overriding need to deliver sustainable and
equitable development underscores the importance of achieving a better understanding of the
role of public policy in relation to corporate social responsibility and its potential to contribute to
the development agenda.

The challenge is for government bodies to identify priorities and incentives that are meaningful
in the local and national contexts and to build on existing initiatives and capacities. There is now
an excellent opportunity for governments to harness current enthusiasm for CSR alongside key
public policy goals and priorities to encourage delivery of promising results.

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OBJECTIVES

 To understand the concept of corporate social responsibility.

 To analyze the growth and trend of corporate social responsibility policy worldwide.
 To illustrate various guidelines and directions regarding corporate social responsibility as
provided by the Indian Government.
 To enumerate the advantages available to a country on formulation of a corporate social
responsibility.

RESEARCH METHODOLOGY

This project report is an analytical and descriptive study on Public Policy vis-à-vis Corporate
Social Responsibility. Secondary sources have been referred to and electronic sources have been
used at large to gather information about the topic.

Books and other references as guided by the faculty of Company Law have been useful in giving
this project its basic structure and details. Websites, article and dictionaries have also been used.

Footnotes have been provided wherever needed to acknowledge the source of information.

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MEANING OF CORPORATE SOCIAL RESPONSIBILITY

What is Corporate Social Responsibility?

Corporate Social Responsibility (CSR) is the commitment of business to contribute to
sustainable economic development, working with employees, their families, the local community
and society at large to improve quality of life, in ways that are both good for business and good
for development. Also called corporate conscience, corporate citizenship, social performance, or
sustainable responsible business, CSR is a form of corporate self-regulation integrated into a
business model. CSR policy functions as a built-in, self-regulating mechanism whereby a
business monitors and ensures its active compliance with the spirit of the law, ethical standards,
and international norms. CSR is a process with the aim to embrace responsibility for the
company's actions and encourage a positive impact through its activities on the environment,
consumers, employees, communities, stakeholders and all other members of the public sphere
who may also be considered as stakeholders. The term "corporate social responsibility" came
into common use in the late 1960s and early 1970s after many multinational corporations formed
the term stakeholder, meaning those on whom an organization's activities have an impact.
Corporate social responsibility is an umbrella term used to describe voluntary corporate
initiatives concerned with community development, the environment and human rights. CSR
policies and programs seek to benefit society while simultaneously improving a corporation’s
public image and profitability. CSR covers a wide range of issues relating to business conduct,
from corporate governance and environmental protection, to issues of social inclusion, human
rights and national economic development.

CSR Policies Worldwide

Countries’ diverse policies reflect each region’s unique social, political, and economic
composition. However, several trends in national policy are observed across countries. These
trends include:

o Voluntary guidelines or binding standards that guide or require companies to implement

socially responsible practices.
o National campaigns that raise awareness about CSR issues.

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o Government funds made available to the private sector for the implementation of CSR
programs.

Voluntary Guidelines & Binding Standards

Voluntary guidelines are prescriptions for action on responsible labor issues to the private sector,
government agencies, or government-owned companies. Binding standards are contractual in
nature and usually contain an enforcement mechanism for cases of noncompliance. Often, both
the voluntary guidelines and binding standards are the result of ongoing stakeholder dialogues
among the government, the private sector, and civil society organizations that result in the
publication of agreed-upon principles for the implementation of CSR. In countries like Brazil
and Mexico, the government has created certification mechanisms that can be awarded to
companies that implement the government’s guidelines.

Both voluntary guidelines and binding standards tend to focus on transparency, accountability,
and labor rights, as well as the promotion of community involvement practices. A number of
standards also require reporting and the public disclosure of social and environmental practices,
while several guidelines recommend that companies contribute to newly created community
development funds. Additionally, some governments have developed issue-specific guidelines,
targeting problems such as gender equality and the investment of occupational pension funds.

Examples of binding standards include the Swedish government’s reporting policy, which seeks
to influence the private sector’s behavior through its state-owned companies. As part of this law,
in 2007, the government began to require that all state-owned companies report on social issues
using the Global Reporting Initiative as a framework. Another example of a binding contract is
found in China, where the Communist Party enacted the Labor Contract Law in 2008, requiring
companies to provide minimum protections to workers.

Government Efforts to Raise CSR Awareness

While the efforts are led by different agencies in each country, they all seek to promote CSR as a
means to increasing trade and competitiveness. For example, the Brazilian Service of Support for
Micro and Small Enterprises (SEBRAE) seeks to encourage the growth of small and medium
enterprises by encouraging the adoption of responsible business practices. Likewise, the Chinese
Communist Party has adopted the Harmonious Society doctrine on the federal level to emphasize

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social equity and responsible business practices as important principles in the quest for long-term
economic growth.

Government Funds for Implementation of CSR Programs

Several researched countries enact policies allocating government funds for the implementation
of CSR programs, and various government agencies also rely on ethical guidelines as part of
their resource allocation decisions. These policies distribute funds based on a screening of
companies’ CSR programs. The policies are championed by various sectors of the government,
including the ministries of labour, agencies of international development, and national banks.
Policies such as these include the Brazilian National Economic Development Bank’s ruling
ethical code, which requires that all funded entities comply with national labor codes. Another
example is in Sweden, where the Business Development Agency has disbursed funds to 50 small
and medium enterprises to promote CSR through the creation of business development tools,
case studies, and regional incubators.

CSR MEASURES IN INDIA

`

Although we have seen a period of sustained economic growth in the current decade, we still
continue to face major challenges on the human side in India. The problems like poverty,
illiteracy, malnutrition etc. have resulted in a large section of the population remaining as “un-
included” from the mainstream. We need to address these challenges through suitable efforts and
interventions in which all the state and non-state actors need to partner together to find and
implement innovative solutions. In order to assist the businesses to adopt responsible governance
practices, the Ministry of Corporate Affairs has prepared a set of voluntary guidelines which
indicate some of the core elements that businesses need to focus on while conducting their
affairs. These guidelines have been prepared after taking into account the governance
challenges faced in our country as well as the expectations of the society.

CSR is not philanthropy and CSR activities are purely voluntary- what companies will like to do
beyond any statutory requirement or obligation. To provide companies with guidance in dealing
with the above mentioned expectations, while working closely within the framework of national

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aspirations and policies, following Voluntary Guidelines for Corporate Social Responsibility
have been developed. While the guidelines have been prepared for the Indian context,
enterprises that have a trans-national presence would benefit from using these guidelines for
their overseas operations as well.

The four phases of CSR development in India:

To understand the current state and future prospects of CSR and the role of the UNGC in India,
the country’s political and economic history must be taken into account. Against this
background, the development of CSR in India can be divided into four main phases.
According to Sundar (2000), the following four phases of CSR development can be identified.
These phases parallel India’s historical development and resulted in different CSR practices. The
division into four phases must be regarded as an analytical tool. However, it is not static, and
features of one phase can also be observed in the others, as is particularly evident from the last
phase.

First phase (CSR motivated by charity and philanthropy)

The first phase of CSR1 is 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
today, especially in community development.

In the pre-industrial period up to the 1850s, merchants committed themselves to society for
religious reasons, sharing their wealth, for instances, by building temples. Moreover, “the
business community occupied a significant place in ancient Indian society and the merchants
provided relief in times of crisis such as famine or epidemics throwing open godowns of food
and treasure chests”.2 Under colonial rule, Western types 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, Naidu, Mahindra and Annamali, who were strongly devoted to

1
The term ‘Corporate Social Responsibility’ did not exist at that time, being coined only in the 20 th Century. A
company’s engagement in social aspects was seen rather as philanthropy.
2
Arora 2004,24

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philanthropically motivated CSR.3 “The early pioneers of industry in India were leaders in the
economic, as also in the social fields”.4 Nevertheless, it has been pointed out that their
engagement was not only altruistic and stimulated by religious motives: “It had business
considerations in supporting efforts towards industrial and social development of the nation and
was influenced by caste groups and political objectives”. The underlying pattern of charity and
philanthropy5 means that entrepreneurs sporadically donate money without any concrete or long-
term engagement. Charitable and philanthropic CSR is practiced outside the company, focusing
on such external stakeholders as communities and general social welfare bodies.

Second phase: CSR for India’s social development

The second phase of Indian CSR (1914-1960) was dominated by the country’s struggle for
independence and influenced fundamentally by Gandhi’s theory of trusteeship, the aim of which
was to consolidate and amplify social development. During the struggle for independence, India
businesses actively engaged in the reform process. Not only did companies see the country’s
economic development as a protest against colonial rule; they also participated in its institutional
and social development. The corporate sector’s involvement was stimulated by the vision of a
modern and free India. Gandhi introduced the notion of trusteeship in order to make companies
the “temples of Modern India”; businesses up trusts for schools and colleges; they also
established training and scientific institutes. The heads of the companies largely aligned the
activities of their trusts with Gandhi’s reform programs. These programs included activities that
sought in particular the abolition of untouchability, women’s empowerment and rural
development.

Third phase: CSR under the paradigm of the ‘mixed economy’

The paradigm of the ‘mixed economy’, with the emergence of PSUs and ample legislation on
labour and environmental standards, affected the third phase of Indian CSR (1960-1980). This
phase is also characterized by a shift from corporate self-regulation to strict legal and public
regulation of business activities. Under the paradigm of ‘mixed economy’, the role of the private

3
Mohan 2001, 109
4
Arora 2004, 25
5
Both charity and philanthropy can be regarded as sponsoring. Charity is understood as consisting solely of
donations of money, whereas philanthropy includes the practical involvement of business.

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sector in advancing India receded. During the cold war, India decided to take a third course
between capitalism and communism. In this scenario, the public sector was seen as the prime
mover of development. The 1960s have been 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 and a quota and licence system imposed tight restrictions on the private
sector and indirectly triggered corporate malpractices.6 As a result, corporate governance, labour
and environmental issues rose on the political agenda and quickly became the subject of
legislation. Furthermore, state authorities established PSUs with the intention of guaranteeing the
appropriate distribution of wealth to the needy.

However, the assumption and anticipation that the public sector could tackle developmental
challenges effectively materialized to only a limited extent. Consequently, what was expected of
the private sector grew, and the need for its involvement in socio-economic development became
in-dispensable. An initial and cautious attempt at reconciliation was made by Indian academics,
politicians and businessmen at a national workshop on CSR in 1965. According to this agenda,
businesses were to play their part as respectable corporate citizens, and the call went out for
regular stakeholder dialogues, social accountability and transparency. Despite these progressive
acknowledgements, this CSR approach did not materialize at that time.

Fourth phase: CSR at the interface between philanthropic and business approaches

In the fourth phase (1980 until the present) Indian companies and stake-holders 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 systems were partly abolished, and the
Indian economy experienced a pronounced boom, which has persisted until today. This rapid
growth did not lead to a reduction in philanthropic donations; on the contrary, “the increased

6
The controls and regulations pertained to industrial licensing, capital issues, loans, import licensing, allocation of
resources, prices, and concentration of economic power and growth monopolies”.

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profitability also increased business willingness as well as ability to give, along with a surge in
public and government expectations of businesses”.

Against this background, India has meanwhile become an important economic and political actor
in the process of globalization. This new situation has also affected the Indian CSR agenda. With
more TNCs resorting to global sourcing, India has become an attractive and important
production and manufacturing site. As Western consumer markets are becoming more responsive
to labour and environmental standards in developing countries, Indian companies producing for
the global market need to comply with international standards.

Corporate Social Responsibility Voluntary Guidelines 2009:

In order to assist the businesses to adopt responsible governance practices, the Ministry of
Corporate Affairs has prepared a set of voluntary guidelines which indicate some of the core
elements that businesses need to focus on while conducting their affairs.

These guidelines have been prepared after taking into account the governance challenges faced
in our country as well as the expectations of the society. The valuable suggestions received from
trade and industry chambers, experts and other stakeholders along with the internationally
prevalent and practiced guidelines, norms and standards in the area of Corporate Social
Responsibility have also been taken into account while drafting these guidelines.7

Fundamental Principle:

Each business entity should formulate a CSR policy to guide its strategic planning and provide a
roadmap for its CSR initiatives, which should be an integral part of overall business policy and
aligned with its business goals. The policy should be framed with the participation of various
level executives and should be approved by the Board.

7
India, Ministry of Corporate Affairs, Corporate Social Responsibility Voluntary Guidelines 2009

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Core Elements of the Voluntary Guidelines for Corporate Social Responsibility

 Care for all Stakeholders

The companies should respect the interests of, and be responsive towards all
stakeholders, including shareholders, employees, customers, suppliers, project affected
people, society at large etc. and create value for all of them. They should develop
mechanism to actively engage with all stakeholders, inform them of inherent risks and
mitigate them where they occur.

 Ethical functioning

Their governance systems should be underpinned by Ethics, Transparency and

Accountability. They should not engage in business practices that are abusive, unfair,
corrupt or anti-competitive.

 Respect for Workers' Rights and Welfare

Companies should provide a workplace environment that is safe, hygienic and

humane and which upholds the dignity of employees. They should provide all
employees with access to training and development of necessary skills for career
advancement, on an equal and non-discriminatory basis. They should uphold the
freedom of association and the effective recognition of the right to collective
bargaining of labour, have an effective grievance redressal system, should not employ
child or forced labour and provide and maintain equality of opportunities without any
discrimination on any grounds in recruitment and during employment.

 Respect for Human Rights

Companies should respect human rights for all and avoid complicity with human rights
abuses by them or by third party.

 Respect for Environment

Companies should take measures to check and prevent pollution; recycle, manage
and reduce waste, should manage natural resources in a sustainable manner and ensure
optimal use of resources like land and water, should proactively respond to the
challenges of climate change by adopting cleaner production methods, promoting
efficient use of energy and environment friendly technologies.

 Activities for Social and Inclusive Development

Depending upon their core competency and business interest, companies should
undertake activities for economic and social development of communities and
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geographical areas, particularly in the vicinity of their operations. These could include:
education, skill building for livelihood of people, health, cultural and social welfare
etc., particularly targeting at disadvantaged sections of society.

CSR in Government Companies:

The high level of public accountability attached to Public Sector Undertakings (PSUs) as a result
of their public ownership makes socially responsible reporting by PSUs particularly important.
The Committee of Public Undertakings (COPU) in 1992 examined the issue relating to social
obligation of Central Public Sector Enterprises and observed that “being part of the ‘State’, every
Public Sector Enterprise (PSE) has a moral responsibility to play an active role in discharging the
social obligations endowed on a welfare state, subject to the financial health of the enterprise”.
Based on the recommendation of the COPU, Department of Public Enterprises (DPE) issued
general guidelines in November 1994. These guidelines basically left it to the Board of Directors
of the PSEs to devise socially responsible business practices in accordance with their Articles of
Association, under the general guidance of their respective Administrative Ministry/Department.

Keeping in view the importance of PSUs in discharging social obligation, a limited review on the
initiatives taken by the PSUs in selected sectors viz. Oil and Natural Gas Sector, Coal and Power
Sector towards CSR was conducted. The main focus of the review was on the following aspects:

 CSR Policy
 System of planning for CSR activities
 System of fixation of targets for CSR activities
 Budget allocation and budget utilization for CSR activities
 Monitoring mechanism for implementation of CSR activities

Out of the total 28 companies in Coal Sector, Power sector and Oil and Natural Gas Sector
selected for examination, it was observed that 19 companies (5 companies in Power Sector, 8
companies in Coal Sector and 6 Companies in Oil and Natural Gas Sector) had approved CSR
policy during 2007-08.

Current State of CSR in India:

As discussed above, CSR is not a new concept in India. Ever since their inception, corporates
like the Tata Group, the Aditya Birla Group and Indian Oil Corporation, to name a few, have

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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 in these days
is to maximize the company's overall impact on the 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 the
goodwill and reputation, defending attacks and increasing business competitiveness.8

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 have clear objectives and are well defined and are aligned with the
mainstream business. The programs are put into practice by the employees who are crucial to this
process. CSR programs ranges from community development to development in education,
environment and healthcare etc.

For example, a more comprehensive method of development is adopted by some corporations

such as Bharat Petroleum Corporation Limited, Maruti Suzuki India Limited, and Hindustan
Unilever Limited. Provision of improved medical and sanitation facilities, building schools and
houses, and empowering the villagers and in process making them more self-reliant by providing
vocational training and a knowledge of business operations are the facilities that these
corporations focus on. Many of the companies are helping other peoples by providing them 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 which
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 which address
wider social problems.

8
state of CSR in India Executive summary and recommendations in India-perspectives for business. 1 May 2007.

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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.

CSR has gone through many phases in India. The ability to make a significant difference in the
society and improve the overall quality of life has clearly been proven by the corporates. Not one
but all corporates should try and bring about a change in the current social situation in India in
order to have an effective and lasting solution to the social woes . Partnerships between
companies, NGOs and the government should be facilitated so that a combination of their skills
such as expertise, strategic thinking, manpower and money to initiate extensive social change
will put the socio-economic development of India on a fast track.9

9
Sathish, Ramya. "Corporate Social Responsibility in India - Putting Social-Economic Development on a Fast Track"

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CSR PROVISIONS IN COMPANIES ACT, 2013

The CSR measures are a part of the new Companies Act that has been in work for several years.
The Companies Act of 1956, which was the rule of law till the enactment of the current
Companies Act, 2013, had several clauses inappropriate to the current business and economic
environment. A revision process was started in October 2003 and a Companies Bill 2008 was
tabled in Parliament. That legislation lapsed with the dissolution of the Lok Sabha in 2009. A
new bill, the Companies Bill 2009 was then tabled.

The problem with corporate social responsibility is that nobody is very clear about what exactly
it encompasses. The Indian government has been trying to make it mandatory for companies to
spend at least 2% of net profits on CSR. Today, CSR to some companies means providing lunch
to employees. To others, it's about tackling global warming and environmental issues. India in
the global level has emerged as a global leader with regards to knowledge and in creating an
intellectually high and socially sound society even on a limited basis. This development can be
mainly attributed to highly qualified research foundations and their deep commitment towards
problems in the system.

Till date it is very difficult exercise to analyze the spending of CSR by various firms and private
companies and such information is not maintained at government level, even among the top 100
firms by revenue, there are many who don’t report their CSR spends or even declare the social
causes they support, that is because they are not required to do so by law and no provisions for
CSR exists in the Companies Act, 1956 so currently the Ministry does not maintain such details.
But all that will change when the new Companies Bill, 2012 (which has already been passed by
the Lok Sabha) becomes a law.10

The Companies Bill, 2012 incorporates a provision of CSR under Clause 135 which states that
every company having net worth Rs. 500 crore or more, or a turnover of Rs. 1000 crore or more
or a net profit of rupees five crore or more during any financial year, shall constitute a CSR
Committee of the Board consisting of three or more Directors, including at least one Independent
Director, to recommend activities for discharging corporate social responsibilities in such a

10
CSR Report Card: Where Companies Stand - Forbes India Magazine dated 18.3.2013

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manner that the company would spend at least 2 per cent of its average net profits of the previous
three years on specified CSR activities. It is proposed to have detailed rules after passing of
Companies Bill 2012 by Rajya Sabha to give effect to this provision.

Section 135, Companies Act 2013:

(1) Every company having net worth of rupees five hundred crore or more, or turnover of rupees
one thousand crore or more or a net profit of rupees five crore 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.

(2) The Board's report under sub-section (3) of section 134 shall disclose the composition of the
Corporate Social Responsibility Committee.

(3) The Corporate Social Responsibility Committee shall,—

(a) 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;

(b) recommend the amount of expenditure to be incurred on the activities referred to in clause
(a); and

(c) monitor the Corporate Social Responsibility Policy of the company from time to time.

(4) The Board of every company referred to in sub-section (1) shall,—

(a) after taking into account the recommendations made by the Corporate Social Responsibility
Committee, approve the Corporate Social Responsibility Policy for the company and disclose
contents of such Policy in its report and also place it on the company's website, if any, in such
manner as may be prescribed; and

(b) ensure that the activities as are included in Corporate Social Responsibility Policy of the
company are undertaken by the company.

(5) The Board of every company referred to in sub-section (1), shall ensure that the company
spends, in every financial year, at least two per cent. of the average net profits of the company

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made during the three immediately preceding financial years, in pursuance of its Corporate
Social Responsibility Policy:

Provided that the company shall give preference to the local area and areas around it where it
operates, for spending the amount earmarked for Corporate Social Responsibility activities:

Provided further that if the company fails to spend such amount, the Board shall, in its report
made under clause (o) of sub-section (3) of section 134, specify the reasons for not spending the
amount.

Explanation.—For the purposes of this section “average net profit” shall be calculated in
accordance with the provisions of section 198.

CSR activities as per Schedule VII:

CSR activities to include-

o eradicating extreme hunger and poverty

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

The Companies Act, 2014, Clause 135 also provides for constitution of a CSR Committee of the
Board. The CSR Committee is required to;

o formulate and recommend to the Board, a CSR Policy which shall indicate the activities
to be undertaken by the company as specified in Schedule VII;
o recommend the amount of expenditure to be incurred on the activities referred to in
clause (a); and

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o monitor the Corporate Social Responsibility Policy of the company from time to time.
o The format for disclosure of CSR policy and the activities therein as part of Board’s
report will be prescribed in the rules once the Bill is enacted.

Benefits of a robust CSR programme:

As the business environment gets increasingly complex and stakeholders become vocal about
their expectations, good CSR practices can only bring in greater benefits, some of which are as
follows:

Communities provide the licence to operate: Apart from internal drivers such as values and
ethos, some of the key stakeholders that influence corporate behaviour include governments
(through laws and regulations), investors and customers. In India, a fourth and increasingly
important stakeholder is the community, and many companies have started realising that the
‘licence to operate’ is no longer given by governments alone, but communities that are impacted
by a company’s business operations. Thus, a robust CSR programme that meets the aspirations
of these communities not only provides them with the licence to operate, but also to maintain the
licence, thereby precluding the ‘trust deficit’.

Attracting and retaining employees: Several human resource studies have linked a company’s
ability to attract, retain and motivate employees with their CSR commitments. Interventions that
encourage and enable employees to participate are shown to increase employee morale and a
sense of belonging to the company.

Enhancing corporate reputation: The traditional benefit of generating goodwill, creating a

positive image and branding benefits continue to exist for companies that operate effective CSR
programmes. This allows companies to position themselves as responsible corporate citizens.

Communities as suppliers: There are certain innovative CSR initiatives emerging, wherein
companies have invested in enhancing community livelihood by incorporating them into their
supply chain. This has benefitted communities and increased their income levels, while
providing these companies with an additional and secure supply chain

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CONCLUSION

A concern for social and environmental development should be made a part of every corporate
entity through its inclusion in the annual agenda backed by strong and genuine programs. It’s up
to the lobbying groups and governmental agencies to convince the corporate power houses to
come forward and take up the challenge by making them aware of the associated advantages that
these companies stand to gain from Corporate Social Responsibility.

Too often, the private sector is unaware of government policies promoting CSR or simply does
not take advantage of them. However, these policies are ubiquitous; developed and developing
countries alike have laws that can bolster companies’ CSR efforts. Companies should investigate
and make use of national policies in all the countries in which they operate. By supporting
existing government programs, companies can leverage their investments and potentially
increase the impact and sustainability of their efforts. Many governments already have incentive
programs in place, and those that do not may be open to dialogue if the initiatives would lead to
increased investment or productivity in the country. By advocating for policies that promote
CSR, companies can help a country or region develop a comparative advantage as a socially and
environmentally responsible country. This advantage can help ensure the long-term success of an
industry’s operations within the country, which would benefit both sectors.

The argument that Corporate Social Responsibility is not the area of concern of business
corporations, and that it is only for individuals and governments does not stand in the modern
world. This microscopic view needs to be altered as gone are those days where a sector was
depend on a single enterprise limited to the borders of that country. The holistic objective must
be to achieve the macro-economic goals such as achieving public welfare and sustainability. The
theory behind the origin of CSR is growth oriented. It says that the income is earned only
from the society and therefore it should be given back; thus wealth is meant for use by
self and the public; the basic motive behind all types of business is to quench the hunger of
the mankind as a whole, not specific to a particular geographical area. The fundamental
objective of all business is only to help people.

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 Corporate Social Responsibility In India

REFERENCES

Bibliography
o Aggarwal, Sanjay. Corporate Social Responsibility in India. 1st Ed. New Delhi: Sage
Publications, 2008.
o Beale, H.G. Chitty on Contracts. 28th Ed. London: Sweet & Maxwell, 1999.

Webliography
o http://www.jstor.org/discover/10.2307/258977?uid=3738256&uid=2&uid=4&sid=21101
301911357
o http://www.mightylaws.in/773/corporate-social-responsibility-lessons-corporate-world
o http://knowledge.wharton.upenn.edu/india/article.cfm?articleid=4636
o http://en.wikipedia.org/wiki/Public_policy
o http://drcafta.bsr.org/images/partners/Public_Policy_Promotion_of_CSR_final.pdf
o http://info.worldbank.org/etools/docs/library/57434/publicpolicy_econference.pdf
o http://www.macktrucks.com/default.aspx?pageid=5622
o http://www.adbi.org/files/session4_01_kanji_tanimoto_presentation.pdf
o http://www.cbe.wwu.edu/dunn/rprnts.institutionalstakeholderperspective.pdf
o http://www.unido.org/index.php?id=5649
o http://www.corostrandberg.com/pdfs/Future_of_CSR.pdf
o http://www.cag.gov.in/html/reports/commercial/2009_22CA/chap_3.pdf
o http://www.mca.gov.in/Ministry/latestnews/CSR_Voluntary_Guidelines_24dec2009.pdf

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