Corporate Social Responsibility In India

Introduction: Corporate Social Responsibility (CSR) as a concept over recent years has been the primary epicentre for numerous deliberations and research. It has evolved and developed both at the academic as well as the business world. A wide and detailed definition of the term CSR was given by the European Union (EU). The definition reads “ the concept that an enterprise is accountable for it’s impact on relevant stakeholders. It is the continuing commitment by business to behave fairly and responsibly, and contribute to economic development while improving the quality of life of the work force and their families as well as the local community and society at large…..”. [1] On simpler terms CSR refers to ensuring the success of the business by inclusion of environmental and social deliberations into company matters. It basically means meeting out to the expected demands of the shareholders and customers, simultaneously managing the expectations and demands of other stakeholders including employees, suppliers and the public at large. It also implies positive contribution to society and controlling organisation’s environmental impact.[2] Therefore, CSR poses as a contributor to sustainable development, indicating the way a company balances it’s environmental, social and economic objectives, simultaneously satisfying stakeholder expectations and improving shareholder value. The concept of CSR, is inclusive of not only activities undertaken by a company to utilize their profits for social and environmental development but also inclusive of methods employed by a company in order to improve earnings including socially responsible funding and transparency to stakeholders. Therefore, the ultimate objective of CSR is to epitomise the company’s overall impact on society and people concerned while considering environment sustainability.   Evolution In India : Paternalistic philosophy is something India is associated with traditionally. The CSR philosophy, although acclaimed to have been a contemporary philosophy, has been informally in practice since the ancient era. Indian philosophers like Kautilya and western philosophers belonging to the pre- Christian era have emphasised on ethical principles during the course of business practices. The concepts of helping the poor, needy and the disadvantaged have been cited in numerous ancient literary texts even in the pre – industrialised age, wherein, philanthropy and charity emerged as the key drivers of CSR. The 19^th century, saw industrialised families getting inclined towards social considerations and charitable initiatives, although such initiatives were drawn out of personal savings and not funds allocated under business heads. The prominence of the term CSR came in the early 1970’s. The later part of the 19^th century saw the focus from charity and philanthropy shift to direct interaction of business in development of disadvantaged groups of the society. The growing market realisation in India that business without social progress cannot flourish, has led to a much necessitated practice of CSR, particularly as there exists extensive gap between various sections of society in terms of income, and socio – economic living standards.[3] In the current scenario, there seem to be an increased focus and changing environmental policy to promote sustainable activities and improved participation in socially developed practices. Policy framework for CSR in         India: In the developing era of today, governments and business houses are well aware that their competitive standings and access to capital funds largely depend on matching up to and respecting the global standards. A widened view of CSR, can be analysed as a bundled collection of mature citizenship ethics engaged in various organisations. Another view could be, CSR can be a mechanism of carrying out business resulting in effective impact on society and sustainability. In the preceding decade, CSR has rapidly developed in India with companies narrowing down on strategic CSR initiatives, contributing towards nation development. Moderately, Indian companies have started concentrating on need – based initiatives, affiliated with national priorities like public health, education and sustainable development. High scale national level deliberations on potential role and responsibility of the corporate wing, in contributions towards addressing social aspects were largely witnessed in the preceding decade. The previous five –years has also witnessed, the Indian government enhancing it’s focus towards encouraging companies to participate social and developmental issues of national importance, not only as an aspect of social responsibility but also business practices. To promote CSR among private sector companies in India, expenditure guidelines on CSR activities for Central Public Sector Enterprises were laid by the Department of Public Enterprises. Based on these guidelines laid down by the Department of Public Enterprises, the Ministry of Heavy Industries and Public Sector Enterprises  puts forward budgetary allocations to Board of Directors for sustainable projects throughout the year. The guidelines on Corporate Social Responsibility for Central Public Sector Enterprises by the Department of Public Enterprises (DPE) came into appropriate effect from 1^st April, 2013. The preceding guidelines for CSR activities included guidelines for external stakeholders, however the revised guidelines included activity guidelines for internal stakeholders like employees as well.[4] The renewed CSR guidelines also included specialised section for sustainability reporting. National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business:[5] There are majorly nine principles followed as National Voluntary Guidelines on social, environmental and economic responsibilities of business. The principles as they are as follows:

1. Business should conduct and govern themselves with ethics, transparency and accountability.
2. Businesses should provide goods and services that are safe and contribute to sustainability throughout their life – cycle.
3. Businesses should promote well – being of employees.
4. Businesses should respect interest of stakeholders, especially those who are marginalised, disadvantaged or vulnerable.
5. Businesses should promote human rights.
6. Businesses should took necessitated measures to preserve and protect the environment.
7. Businesses involved in affecting public and regulatory policy, should do so in a responsible manner.
8. Businesses should be inclusive of growth and equitable development.
9. Businesses should engage with and provide valuable services to their customers and consumers.

  The Companies Act, 2013 and Corporate Social Responsibility: The legislature by implementing “The Companies Act, 2013”  have introduced multiple new provisions which has changed the face corporate businesses in India. Provisions relating to CSR has been one such change. It is based on the give – and – take ideology, wherein resources in the form of raw materials etc. are extracted from the society, and facilities are rinsed out to the people by carrying out CSR activities.   Section 135 of the Companies Act, 2013 provides for the jurisdiction limit applicability of CSR to a company, i.e.

1. Net worth of the company to be Rs.500 crore or more.
2. Turnover of the company to be Rs.1000 crore or more.
3. Net profit of the company to be Rs.5 crore or more.

  Further as per Companies (Corporate Social Responsibility Policy) Rules, 2014 which came into effect from 1^st April, 2014, the provisions of CSR are applicable not only to Indian companies but also to branches and franchises of  foreign companies in India. As per Section 135 of the Companies Act, 2013, all companies falling within the qualification provision of this section, are required to allocate 2 per cent of their average net profit for immediately preceding 3 financial years on CSR activities. The companies falling under the qualifying criteria are also to formulate CSR Committee of the Board of Directors of the company consisting of 3 or more directors, and it is this committee that shall formulate and monitor the CSR activities of the Board. The term CSR has been explicitly defined under the CSR Rules which are not limited to: [6]

1. Projects or programmes relating to activities specified under the schedule
2. Projects or programmes undertaken by the Board in pursuance of recommendations of the CSR committee as per declared CSR policy decisions enumerated in the schedule.

  The definition of CSR is of significance as it permits companies to indulge in projects or programmes relatable activities listed under the schedule. The steps that can be undertaken by the companies to achieve their CSR duties consist of eradication of extreme hunger and poverty, promotion of education, promotion of gender equality, empowerment of women, reduction in child mortality, ensuring sustainable development, enhancing vocational training etc. As per Company law guidelines, preferences are to be provided to locals where the company actually functions. Two or more companies can collectively also meet out their CSR objectives provided they are able to report individually.   The companies are also required to formulate an annual report consisting of their CSR activities, wherein mentioning their average net profit for three financial years and the prescribed CSR expenditure. If a company is unable to drain out the minimum required expenditure, the company is required to furnish appropriate reasons in their Board report for non- compliance with the necessitated requirements, such that no penal provisions are lured. The initiation of the CSR provisions in the Companies Act has been a bold step wherein all companies are required to satisfy their CSR criterion within the financial year, ultimately boosting social projects with high – scale management by the private sector.   Conclusion:   Thus we can see that the key to maximise returns for all stakeholders, is to emphasize on developing effective and need based CSR measures, such that the investments can yield more profitable results. Alignment of CSR initiatives, with business objectives indirectly benefitting their own incentive, leads to effective exercising of CSR activities. The CSR initiatives therefore are required to be designed in such a manner that, it is of sustainable nature and is result oriented. [1] http://ec.europa.eu/growth/industry/corporate-social-responsibility_en [2] European Commission, Directorate General of Enterprise [3] G.N. Bajpai – Corporate Social Responsibility in India and Europe : Cross Cultural Perspective, 2001. [4] New CSR Guidelines for Indian Public Sector Enterprises focus on Sustainability Reporting – 24^th April, 2013 [5] http://www.mca.gov.in/Ministry/latestnews/National_Voluntary_Guidelines_2011_12jul2011.pdf [6] http://finance.bih.nic.in/documents/csr-policy.pdf