Corporate Social Responsibility – How the new

companies’ bill-2013 will affect the lives of people in

India.

JOSHI BABU.PALLI
13SSMA35
Contents
1. Corporate Social Responsibility (CSR)-Definition
2. CSR history in India
3. Role of CSR in society –Indian perspective
4. Indian companies’ achievements as part of CSR so far
5. Companies bill-2013
6. Benefits and challenges to the society
7. Conclusion
1. Corporate Social Responsibility-Definition
There are so many definitions are there which defined the Corporate
social responsibility(CSR) in their own way but most acceptable definition is
given by Lord holme and Richard watts in the book “making good business
sense” i.e. “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” with this definition we can understand
that CSR that corporate companies’ contribution to the betterment of society
by funding and as well as organizing the social works and fighting against the
social evils. Many countries have their own terminology for CSR for example:
USA uses corporate citizenship and some other countries use sustainable
business etc.

The concept of CSR originated in the 1950’s in

the USA and the concept came into prominence in public debate during the
1960’s and 1970’s. At that time US had lots of pressing social problems like
poverty, unemployment, race, urban blight and pollution. Corporate Social
Responsibility became a matter of utmost importance for diverse groups
demanding change in the business. During the 1980’s to 2000, corporations
generally recognized a responsibility towards society and weighed against the
demands of being competitive in a rapidly changing global economy. The Social
Responsibility cannot be understood without an examination of the nature of
corporations and their objectives. In a societal structure ,we have many stake
holders ,one amongst them are companies or corporate houses these
corporate companies are meaningfully contributing from their profits and
funds spending of which can impact their internal stakeholders and also
openhandedly support social initiatives. There are many instances where
corporate have played a dominant role in addressing issues of education,
health, environment and livelihoods through their corporate social
responsibility interventions across the world. As per United Nations and the
European Commission, Corporate Social Responsibility (CSR) leads to triple
bottom-line: profits, protection of environment and fight for social justice. It is
expected that Civil society, activist groups, Government and corporate sectors
should work together to create appropriate means and avenues for the
marginalized, and bring them to the mainstream. The success of CSR lies in
practicing it as a core part of a company’s development strategy. At one side of
the spectrum, CSR can be viewed simply as a collection of good citizenship
activities being engaged by various organizations. At the other side, it can be a
way of doing business that has significant impact on society.

2. CSR history in India:

Changes over time in India of the cultural norms of corporations
engagement of corporate social responsibility (CSR), with CSR referring to way
that businesses are managed to bring about an overall positive impact on the
communities, cultures, societies and environments in which they operate.

The development of CSR in India after independence can be segregated into

four stages to understand. They can be explained as below

a) First Stage: This stage has a large portion in pre independence era. In
this phase Indian companies were so less in number and the rigid
policies were also preventing people to start new companies because it
was too difficult to start a new company. TATA, BIRLA, MUFFATLAL,
SINGHANIA, were some of the main corporate houses at that time. For
companies at that time CSR is nothing but charity and philanthropy.
Even though they contribute money for the betterment of society that
would be limited to their employees’ welfare and education. In that
period the contributions made by the elite companies were mostly
influenced by their caste groups and political objectives.
b) Second stage: This stage also had a major portion in national movement
period and comparatively lesser portion in post independence time. In
this period many companies had been influenced by gandhian
philosophy of wealth i.e. trusteeship. It provides a means by which the
wealthy people would be the trustees of trusts that looked after the
welfare of the people in general .In defining the trusteeship he said that
“Supposing I have come by a fair amount of wealth – either by way of
legacy, or by means of trade and industry – I must know that all that
wealth does not belong to me; what belongs to me is the right to an
 honorable livelihood, no better than that enjoyed by millions of others.
The rest of my wealth belongs to the community and must be used for
the welfare of the community”. Many companies, especially TATA group,
were very much influenced by his thoughts and followed his ways in
giving to the society. The concept of trusteeship was successful to some
extent in abolishment of untouchability, encourage empowerment of
women and rural development. However the concept of trusteeship was
criticized and condemned by socialists and others as being in the favor of
land lords, feudal princes, and capitalists.
c) Third stage: this stage can be called as rise of Indian corporate. In this
period India had achieved the status of mixed economy. The emergence
of public sector undertakings (PSUs) had come into force in this period.
The government had taken many policies in order to encourage the
people to start new companies. The laws relating to labour and
environmental standard had enacted. The corporate contributions to
social works were very much low in this stage because they were
concentrated more on wealth maximization. This period the CSR had
failed to catch the attention of companies as they were indulged in
transparency and competition.
d) Fourth stage: This is the most important stage when compared to the
other stages in terms of CSR. Globalization and economic liberalization
were undertaken in this period only. The economic and financial reforms
that had taken by Indian government had created a peaceful
environment in the Indian corporate culture to start a new companies
and the government had encouraged the existed companies towards
exports. The Indian companies share in the world has increased. Many
companies like Infosys and Ambani group has emerged as new
destination of corporate power. Many charitable trusts had been started
by companies such as Infosys foundation, reliance foundation. Many
companies joined their hands with NGOs and started their CSR activities.
Companies have concentrated more on education to the underprivileged
as well as social evils like mal nutrition and women empowerment.
e) The current stage: the way companies are looking towards the society
has been changed completely when compared to earlier periods of
independence. Nowadays the companies are striving for the brand
 image. They are forced to maximize their overall impact on society and
stakeholders apart from earning profits.

3. Role of CSR in society –Indian perspective:

In this modern age of living, the corporate companies have become
corporate citizens in the society. They are also treated as artificial judicial
person. All leading corporate in India are involved in corporate social
responsibility (CSR) programs in areas like education, health, livelihood
creation, skill development, and empowerment of weaker sections of the
society. Notable efforts have come from the Tata Group, Infosys, Bharti
Enterprises, ITC Welcome group, Indian Oil Corporation among others. From
responsive activities to sustainable initiatives, corporate 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. Corporate
have the expertise, strategic thinking, manpower and money to facilitate
extensive social change. Effective partnerships between corporate, NGOs and
the government will place India’s social development on a faster pace. Indian
companies are framing their objectives and policies in order to achieve
sustainable development. By participating in the CSR activities companies are
not only achieving their goal of social concern but also the gain many other
advantages like public image, environmental concern, as their by products.
Many companies has been adopting villages around them and trying to
develop the infrastructural facilities in that area. The companies are doing CSR
activities not only by themselves but also they are encouraging their
employees to come together and contribute their portion for building the
better society.

4. Indian companies’ achievements as part of CSR so far:

When we talk about the CSR of Indian companies first we need to take
into consideration of the contributions of public sector undertakings. Notable
efforts have come from the Tata Group, Infosys, Bharti Enterprises, ITC
Welcome group, Indian Oil Corporation among others. The 2010 list of Forbes
Asia’s ‘48 Heroes of Philanthropy’ contains four Indians. The 2009 list also
featured four Indians. India has been named among the top ten Asian
countries paying increasing importance towards corporate social responsibility
(CSR) disclosure norms. India was ranked fourth in the list, according to social
enterprise CSR Asia's Asian Sustainability Ranking (ASR), released in October
2009.Although corporate India is involved in CSR activities, the central
government is working on a framework for quantifying the CSR initiatives of
companies to promote them further. Moreover, in 2009, the government
made it mandatory for all public sector oil companies to spend 2 per cent of
their net profits on corporate social responsibility. Besides the private sector,
the government is also ensuring that the public sector companies participate
actively in CSR initiatives. The Department of Public Enterprises (DPE) has
prepared guidelines for central public sector enterprises to take up important
corporate social responsibility projects to be funded by 2-5 per cent of the
company's net profits CSR in India has gone beyond merely charity and
donations, and is approached in a more organized fashion. It has become an
integral part of the corporate strategy. Companies have CSR teams that devise
specific policies, strategies and goals for their CSR programs and set aside
budgets to support them. These programs, in many cases, are based on a
clearly defined social philosophy or are closely aligned with the companies’
business expertise. There are more than 1,000,000 registered companies in
India out of which less than 1percent companies are traded on the Indian Stock
Exchange. A new Trend has started in Corporate is the establishment of special
committees within the board of directors to oversee CSR activities. Groups of
corporate are being encouraged to come together to promote CSR. CSR is not a
new concept in India. Corporates like the Tata Group, the Aditya Birla Group,
and Indian Oil Corporation, to name a few, have been involved in serving the
community ever since their inception. Many other organizations have been
doing their part for the society through donations and charity events. CSR
Programs could range from overall development of a community to supporting
specific causes like education, environment, healthcare etc. For example,
organizations like Bharath Petroleum Corporation Limited, Maruti Suzuki India
Limited, and Hindustan Unilever Limited, adopt villages where they focus on
holistic development. They provide better medical and sanitation facilities,
build schools and houses, and help the villagers become self-reliant by
teaching them vocational and business skills. On the other hand
pharmaceutical companies like Dr.Reddy’s, Hetero, and GlaxoSmithKline
Pharmaceuticals’ CSR programs primarily focus on health and healthy living.
They work in tribal villages where they provide medical check-up and
treatment, health camps and health awareness programs. They also provide
money, medicines and equipment to non-profit organizations that work
towards improving health and education in under-served communities. Many
CSR initiatives are executed by corporates in partnership with Non-
governmental organizations (NGOs) who are well versed in working with the
local communities and are experts in tackling specific social problems. For
example, SAP India in partnership with Hope Foundation, an NGO that works
for the betterment of the poor and the needy throughout India, has been
working on short and long-term rebuilding initiatives for the tsunami victims.
Together, they also started The SAP Labs Center of HOPE in Bangalore, a home
for street children, where they provide food, clothing, shelter, medical care
and education. And Vodafone foundation, Microsoft foundation, Infosys
foundation, and other trusts that are incorporated by corporate giants are
involved in social works. NTPC and ONGC like public sector enterprises involved
in promoting energy conversation practices to develop committed Human
Resources 0.5% of profits set aside for community development. BPCL Adopted
37 villages in India Programme for vocational training and agricultural
innovations ACC Setting up schools, colleges, health centres and co-operative
societies to improve the quality of life in rural areas.

5.Companies bill-2013 –CSR mandatory

Companies bill 2013 which is soon going to be the companies act -2013
says that “all companies whether it be a public company or private company
with a net worth of Rs 500 crore ($100 million) or more, or turnover of Rs
1,000 crore ($200 million) or more, or a net profit of Rs 5 crore ($1 million) or
more during the past three financial years must spend at least 2 percent of
their average net profits from the three preceding years on CSR, or corporate
social responsibility initiatives”. So we can understand that spending the CSR
amount has become mandatory for all major companies who are earning a lot
of profits and as well as whose market share is bigger than the others. This
companies bill is surely going be enacted in near future the expected amount
which all the companies have to spend on CSR related activities would be
amounted to Rs.27000 crores approximately which is a huge amount .If they
spend the amount for the upliftment of society the face of rural India might get
changed.

6. Benefits and challenges to the society:

Benefits to the Community and the General Public
• Charitable contributions;
• Employee volunteer programs;
• Corporate involvement in community education, employment and
homelessness programs;
• Product safety and quality.

Environmental Benefits
• Greater material recyclability;
• Better product durability and functionality;
• Greater use of renewable resources;
• Integration of environmental management tools into business plans,
including life-cycle assessment and costing, environmental
management standards, and eco-labeling.

Challenges in implementing the CSR

• Issues of Transparency
• Non-availability of Well Organized Non-governmental Organizations
• Narrow Perception towards CSR Initiatives
• Lack of Consensus on Implementing CSR Issues
• Only medium and large scale companies will participate

Conclusion:
The concept of corporate social responsibility is now firmly rooted on
the global business environment. But in order to move from theory/law to
visible action, many obstacles need to be overcome. A key challenge facing
business is the need for more reliable indicators of progress in the field of CSR,
along with the dissemination of CSR strategies. Transparency and dialogue can
help to make a business appear more trustworthy, and push up the standards
of other organizations at the same time. Unless otherwise concern for the
sustainable development arise in the thinking of corporate minds apart from
profit maximization the implementation will not be done as expected and they
try to find the loopholes in every act. Any kind of development should be done
without harming the people and harmony of environment.

References:

1. www.forbes.com

2. http://www.slideshare.net/AngelinDafni/social-responsibilities-2

3. www.indiacsr.in/

4. Robert watts, making good business sense

5. Ministry of company affairs –official website

6. www.indiastat.com