Action Research-CSR

Special Articles / Ramkumar Sethupathy / Social Work Foot Prints, Vol.V, Issue.4

Abstract
The purpose of this article is to provide a general summary of the CSR perception and operation in the Indian context. This article focuses in exploring the understanding of the various CSR operations in India. The article reviews the current operational challenges of corporates and in particular after the CSR bill implementation process. The article also focuses on the key stakeholders within the organization responsible for CSR implementation, role clarity and social development understanding. Need-based community issues and duplication of projects are also explored in detail. The responsibilities of industry organizations like CII, NASSCOM, FICCI & IICA are also highlighted in advocating for CSR. NGO partnership issues were also explored along with the government stakeholders’ participation in the social development issue. This article is purely based on the secondary data and tries to focus on the findings and reviewing of the issues and challenges faced by all the stakeholders involved in CSR. 

Preamble
Sustainability is a key component issue for sustainable social development goals from 2015-2030. Government of India has mandated for private sector engagement, already advocating for private sector participation in active CSR for a meaningful engagement and ownership with contributions upto 2% of the profits for CSR. The total number of corporate engagement in CSR was projected to be around 15,000 with all the organizations large, medium, small and micro enterprises funding over 20,000 crores. According to the bill, for profit companies have to mandatorily participate in CSR for not for profit social initiatives. The bill which was proposed in 2009 was finally passed in the parliament and all companies are expected to spend 2% of their profits on CSR. 

What is CSR?
Corporate social responsibility (CSR), defined as “the ethical behavior of a company towards the society,” manifests itself in the form of  noble programmes initiated by for-profit organizations. CSR has become increasingly prominent in the Indian corporate scenario because organizations have realized that besides growing their businesses it is also vital to build trustworthy and sustainable relationships with the community at large. This is one of the key drivers of CSR programmes.

CSR is all about how companies run their business to produce an overall positive impact on society on a continuous basis to contribute for the economic development and betterment of the quality of life of all stakeholders. Many companies have realized that if they want to survive or be sustainable in the long run, they have to adapt themselves to play an active role in the welfare of the community and care for environment. Tatas, Birlas, ITC, Hind Lever, and public sector companies such as ONGC have made a name for themselves in CSR activities by adopting villages, running institutions or extending help in the field of education, health care, etc. Thus many companies have been taking CSR activities seriously. 

CSR Evolution
First Phase
In the first phase charity and philanthropy were the main drivers of CSR. Culture, religion, family values and tradition had an influential effect on CSR. In the pre-industrialization period, which lasted till 1850, wealthy merchants shared a part of their wealth with the wider society by way of setting up temples for a religious cause. Moreover, these merchants helped the society in getting over phases of famine and epidemics by providing food from their godowns and money, and thus securing an integral position in the society.

Second Phase
In the second phase, during the independence movement, there was increased stress on Indian industrialists to demonstrate their dedication towards the progress of the society. This was when Mahatma Gandhi introduced the notion of “trusteeship”, according to which the industry leaders had to manage their wealth so as to benefit the common man. According to Gandhi, Indian companies were supposed to be the “temples of modern India”. Under his influence businesses established trusts for schools and colleges, and also helped in setting up training and scientific institutions.

Third Phase
The third phase of CSR (1960–80) had its relation to the element of “mixed economy”, emergence of Public Sector Undertakings (PSUs), and laws relating to labour and environmental standards. During this period the private sector was forced to take a back seat. In 1965 Indian academicians, politicians and businessmen set up a national workshop on CSR aimed at reconciliation. They had emphasized upon transparency, social accountability and regular stakeholder dialogues. In spite of such attempts, the CSR failed to catch steam.

Fourth Phase
In the fourth phase (1980 until the present) Indian companies started abandoning their traditional engagement with CSR and integrated it into a sustainable business strategy. In 1990s the first initiation towards globalization and economic liberalization were undertaken (Bajpai, 2001). Many companies run their businesses for earning profits for its owners/shareholders. Although profit earning is the main objective, companies cannot ignore interest of other stakeholders such as employees, suppliers, customers, society and surroundings. All companies have to pay attention to the welfare of employees and their families to retain good talent. Similarly by producing good quality of products at reasonable prices interests of both company and its consumers can be balanced. By contributing to the government in the form of taxes on its sales/profits and caring for the environment, it takes care of the society directly or indirectly. 

Current State of CSR in India
Companies have specialised CSR teams that formulate policies, strategies and goals for their CSR programmes and set aside budgets to fund them. These programmes are often determined by social philosophy which have clear objectives and are well defined and are aligned with the mainstream business. The programmes are put into practice by the employees who are crucial to this process. CSR programmes range from community development to development in education, environment and health care.

CSR Bill

1. It was a rocky road for the Companies Bill 2012. Being one of the voluminous Acts containing 658 sections and 14 schedules, aligning Companies Act with current economic scenario and global changes is a huge task. 
2. Companies Bill 2008 was introduced in 2008. But due to dissolution of the Lok Sabha, it had to be reintroduced as Companies Bill 2009. 
3. This bill was referred to the standing committee for its recommendations and in view of suggested changes, it was reintroduced as a fresh Companies Bill 2011. 
4. Finally it took the form of Companies Bill 2012. After incorporating the recommendation of the standing committee, the Companies Bill 2012 was passed by the Lok Sabha on 18.12.2012 and by Rajya Sabha on 08.08.2013.

The thrust of the new companies Bill was to enhance corporate governance, accountability and responsibility of directors; and ensuring independence of independent directors and auditors. Further it introduced new concepts such as One Man Company and dormant company, and mandatory corporate social responsibility (CSR) in the interest of stakeholders. It also provided for establishment of Serious Fraud Investigation Office, for investor protection, and special courts for dealing with frauds in a quick and efficient manner.

Clause 135:
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 the 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 made during the three immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy. The company should give preference to the local area and areas around it where it operates for spending the amount earmarked for corporate social responsibility activities.

Status of CSR Projects 

1. Majority of the private companies started focusing on the Swach Bharat Mission contribution to WASH projects, toilet construction in schools, households and community. Majority of the PSUs are actively engaged in Swach Bharat Mission.
2. Established companies have set up foundations and trusts, and started engaging in CSR projects around their neighboring communities and schools in particular. While majority of the companies are engaged a lot of duplication is identified; 20 companies are actively engaged in 5 Schools in the Old Mahabalipuram area in the IT corridor.
3. Slum development projects were established and actively engaged with the existing NGO participation.
4. Corporates engaged in CSR projects are managed by the HR, Administration, marketing or communication department. According to the bandwidth the corporate CSR funding was planned and executed.
5. Marketing department-handled CSR projects focused on brand building in a direct way and also promoted livelihood to the unemployed youth with their own marketing team.
6. Communication department-handled projects were more on brand building and feel good factor; majority of the projects were not need-based to the community.
7. Established corporate groups with their own foundations had utilized the opportunities for brand building with the a active participation of the corporate heads.
8. One organization was found to be engaging the unemployed youth to market their own products as a social development model. The NGOs had issues with regard to PF for the agents, as they were paid as honorariums.
9. Majority of the supply chains were also focused as key stakeholders and they were trying to utilize this opportunity to strengthen their stake with the supply chain team.
10. Many companies who did not have a team to manage were forced to pay a cheque to the NGOs which were already funded for particular projects. The activites were duplicated and resources were not optimally utilized to address the issues.
11. 90% of the companies had issues in initiating projects,
12. Partnership management was a major stake for organizations.
13. Marginalized groups were focused but not professionally managed. 
14. Lots of duplication were identified in environment cleanup drive, and tree plantation. All these projects were utilized for effective employee engagement programmes.

Challenges:

• Majority of the projects do not have a clearly defined vision statement for their CSR.
• The board is utilized for CSR and business targets. CSR is always treated as a charity.
• Duplication of project was a major issue in all urban-based CSR projects.
• NGOs known to the key people in the companies were always utilized for CSR projects. Equal opportunities and need-based action were major challenges.
• Corporate finance team doubles up as the finance team for the CSR projects leading to bandwidth issues. They do not understand process-based approach.
• CII, FICCI and NASSCOM have created their own foundations to engage in active CSR.

Corrective Strategies 
CSR is a form of corporate self-regulation integrated into a business model. The goal of CSR is to embrace responsibility for the company’s actions and to encourage a positive impact through its activities on the environment, consumers, employees, communities and stakeholders. CSR initiatives can be focused in eradicating poverty and hunger for improving human development index and improving standard of living. CSR can play a major role in nation building, sustainable development action, and vocational training for unemployed youth. Successful corporate bodies can define sustainable action for social development and actively engage in sustainable CSR action with effective partnerships and programme development. Effective finance and HR management could be strengthened among the CSR projects.

Conclusion 
Though the requirement of mandatory spend on CSR activities is a matter to be left to shareholders and Board of Directors, if CSR is seen as a philanthropic act, this argument sounds good. Corporate organizations can focus on social sustainability including the people, planet and business. Neglecting environment may expose the company to the risk of business challenges and closure. The company which takes CSR as an inevitable part of its business process not only earns a goodwill and image but also attracts all stakeholders. Let us hope our companies act responsibly to address all social issues along with the Government initiatives. CSR should lead Companies to the slogan “Live and let others Live”. 

Reference
Bajpai, G.N. (2001). Corporate Social Responsibilty in India and Europe: Cross Cultural Perspective. Retrieved from http://www.ficci.com on September 12,2015.

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