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