chapter iii. csr.docx

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Chapter III

CORPORATE SOCIAL RESPONSIBILITY

INTRODUCTIONCorporate Social Responsibility (CSR) is becoming an increasingly important activity to businesses nationally andinternationally. As globalisation accelerates and large corporations serve as global providers, these corporationshave progressively recognised the benefits of providing CSR programs in their various locations.

CSR activities are now being undertaken throughout the globe. A popular explanation of the term CSR is thecontinuing commitment by businesses to behave ethically and contribute to economic development, whileimproving the quality of life of the workforce and their families as well as of the local community and society atlarge. Over the last few decades, an increasing number of companies worldwide started promoting their businessthrough Corpor ate Social Responsibil ity strategies because the customers, the public and the investors expect themto act sustainable as well as responsible.

In some cases, CSR is a result of a variety of social, environmental and economic pressures while some other casesmany large corporations, it is primarily a strategy to divert attention away from the negative social andenvironmental impacts of their lives. It enables the company to leverage its products, employee strength, networksand profits and up to some extent to create a sustainable change for marginalized communities. Despite certaincriticisms on the CSR activities, more and more companies in the world are inclined towards corporate socialresponsibility.

The CSR Executives have the task of reconciling the various programs, quantifying their benefits, or at leastsketching a logical connection to the business, and securing the support of business line counterparts. CSR can notonly refer to the compliance of human right standards, labor and social security arrangements, but also to the fightagainst climate change, sustainable management of natural resources and consumer protection.

The various practices followed by the corporate in different parts of the world differ significantly. In the Developednations, the basic needs of the population do not need so much support as in the under-developed nations. Thedemographies, literacy rate, poverty ratio and GDP of the country have significant role in determining the directionsof CSR initiatives of an organization.

The social responsibility, as a corporate governance philosophy, should be an outcome of business strategy, socialresponsibilit y has three major dimensions, viz 1. The quality of a companys engagement in dealing with itsemployees, shareholders, other stakeholders and society at large, 2. Systems thinking leading towards going beyondthe pursuit of pure profits is a corporations engagement with society and 3. Managing a broader portfolio of assetsincluding social investments in areas like education, health, community development and conservation ofenvironments.

Importance of CSR

A company has to keep a balance between short-term profitability and long-run social development, which involvesgoing beyond meeting the minimum regulatory standards of pollution control or energy conservation, however, in arapidly changing todays business environment and consequent to the market -friendly economic reforms. Thedominance of the Government has been reduced considerably. It has affected the social sector services, which used

to be provided by the government at zero or subsidized costs. In turn, the pressure to provide such services have been shifted to the companies as the society expects companies to carry some of the social responsibilities ofgovernment.

On the one hand, the social needs and expectations for responsible corporate citizenship have been substantiallygrowing as a consequence of market-friendly reforms. On the other hand, the corporates are caught by the forces ofglobal fierce competition, threatening their survival resulting in continuous pressure to find adequate profitability byany means. In todays corporate wor ld, no company can afford to ignore and abstain itself from discharging itssocial obligations emanating from the trust and faith that society at large and stakeholders in particular, have reposedon it.


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Fortunately, the new organisations, which are growing at a faster pace in the era of economic reforms, have startedreaching out in the areas of education, creation of human capability and upliftment of the society. It has definitelyreflected a new image of self, a new evaluation of responsibilities and a new realization of the fact that socialcommitment need not necessarily go against creating profitability in the long run.

The corporate social responsibility (CSR) is essentially a concept whereby companies integrate social andenvironmental concerns in their business operations and in the interaction with their stakeholders on a voluntary

basis. Through voluntary commitment to CSR, companies send a positive signal of their behavior to their variousstakeholders, viz., shareholders, employees, investors, creditors, suppliers, customers, regulators, government andthe society at large. In doing so, they make an investment towards future and increase their profitability.

In fact, corporate governance and corporate responsibility towards society are inextricably interlinked, intertwinedand inseparable from each other. If a corporate house is expected to provide good governance to its stakeholders andsociety at large, it is because it enjoys so much facilities from the society, in terms of developed infrastructure,trained workforce, peaceful environment, law and order etc. that it is only appropriate that the company gives backto the society at least something in return in the form of good governance.

Therefore, it is a well-conceived fact that good corporate governance itself is part and parcel of corporateresponsibility towards society. There are many factors that have compelled the corporates to recognize and attachtremendous importance to CSR in discharging their day to day activities. Some these are

1. New concerns and expectations from various stakeholders in the context of large-scale industrial change due toglobalization.2. Increased influence of social criteria on the investment decisions of individuals and institutions both asconsumers and as investors3. Increased concern about the damage to the environment caused by economic activities.4. Transparency of business activities brought about by the modern information and communication technologies.5. In the present era of intense competition, it is Imperative for the corporate to generate and sustain goodwill amongtheir stakeholders and the community at large. Therefore, active participation in various social welfare projects issurely going to improve the corporates visibility and place them on a pedestal of high public esteem.6. The business firms should understand the fact that economic goals and social responsibility objectives need not becontradictory to each other rather both can co-exist and both can be achieved simultaneously. Inclusive growth, as a

national policy, is based on the need to diagnose and reduce injustice to marginalized and neglected social strata.Corporate social responsibility, as an inextricable ingredient of good corporate governance, is aimed at using thecorporate power to achieve economic progress together with social justice.

CSR in LawSocial justice is a fundamental Directive Principle of national governance enshrined in the Constitution of India.Discharge of corporate responsibility by an enlightened corporate is supposed to ensure contribution to reduction ofsocial injustice. This, as a matter of course, requires diagnosis of social injustice before corporate policies can beframed alluding to corporates social responsibility and its discharge.

Corporate Social Responsibility (CSR) should be viewed as a way of conducting business, which enables thecreation and distribution of wealth for the betterment of its stakeholders, through the implementation and integrationof ethical systems and sustainable management practices. CSR is the process by which managers of an organization

think about and evolve their relationships with stakeholders for the common good, and demonstrate theircommitment in this regard by adoption of appropriate business processes and strategies.

CSR does not emanate directly from external demands but instead from organizationally embedded processes. These processes prompt the organization to view its relationships with stakeholders in a different perspective, which in turninfluences its engagement with them.

Concept of CSRThe corporate social responsibility (CSR) is essentially a concept whereby companies integrate social andenvironmental concerns in their business operations and in the interaction with their stakeholders on a voluntary


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basis. Through voluntary commitment to CSR, companies send a positive singal of their behavior to their variousstakeholders, viz., shareholders, employees, investors, creditors, suppliers, customers, regulators, government andthe society at large.

The term is often used interchangeably for other terms such as Corporate Citizenship and is also linked to theconcept of Triple Bottom Line Reporting (TBL), which is used as a framework for measuring an organisations

performance against economic, social and environmental parameters. Corporate social responsibility is represented by the contributions undertaken by companies to society through its core business activities, its social investmentand philanthropy programmes and its engagement in public policy. In recent years CSR has become a fundamental

business practice and has gained much attention from chief executives, chairmen, boards of directors and executivemanagement teams of larger international companies.

They understand that a strong CSR program is an essential element in achieving good business practices andeffective leadership. Companies have determined that their impact on the economic, social and environmentallandscape directly affects their relationships with stakeholders, in particular investors, employees, customers,

business partners, governments and communities. A company has to keep a balance between short-term profitabilityand long-run social development, which involves going beyond meeting the minimum regulatory standards of

pollut ion control or energy conservation, however, in a rapidly changing todays business environment andconsequent to the market-friendly economic reforms.

The dominance of the Government has been reduced considerably. It has affected the social sector services, whichused to be provided by the government at zero or subsidized costs. In turn, the pressure to provide such serviceshave been shifted to the companies as the society expects companies to carry some of the social responsibilities ofgovernment. On the one hand, the social needs and expectations for responsible corporate citizenship have beensubstantially growing as a consequence of market-friendly reforms. On the other hand, the corporates are caught bythe forces of global fierce competition, threatening their survival resulting in continuous pressure to find adequate

profitability by any means.

In todays corporate world, no company can afford to ignore and abstain itself from discharging its socialobligations emanating from the trust and faith that society at large and stakeholders in particular, have reposed on it.Fortunately, the new organisations, which are growing at a faster pace in the era of economic reforms, have startedreaching out in the areas of education, creation of human capability and upliftment of the society. It has definitelyreflected a new image of self, a new evaluation of responsibilities and a new realization of the fact that social

commitment need not necessarily go against creating profitability in the long run.

EVOLUTION OF THE CSR CONCEPTThe definition of CSR has evolved over the decades, generally becoming more precise as to the types of activitiesand practices that might be subsumed under the concept. Early definitions were often general and ambiguous. Overthe decades, definitions of CSR have reflected concerns such as:

Seriously considering the impact of company actions on others; The obligation of managers to protect and improve the welfare of society; Meeting economic and legal responsibilities and extending beyond these obligations.

A more comprehensive definition of CSR is that it encompasses the economic, legal, ethical, and discretionary or philanthropic expectations that society has of organisations at a given point in time. This definition specifies four

different, but interrelated, categories of responsibilities that business has towards society. This characterisation alsoattempts to place the traditional economic and legal expectations of business in context by combining them withmore socially oriented concerns such as ethics and philanthropy. A brief elaboration of this definition is useful.

First, and foremost, business has a responsibility which is economic in nature or kind. Before anything else, the business institution is the basic economic unit in society. As such it has a responsibility to produce goods andservices that society wants and to sell them at a profit. All other business roles are predicated on this fundamentalassumption. The economic element of the definition suggests that society requires business to produce goods andservices and sell them at a profit. This is how the capitalistic economic system is designed and functions.


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Firms that do not generate economic sustainability go out of business and become irrelevant. Just as society expects business to make a profit (as an incentive and reward) for its efficiency and effectiveness, society expects andrequires business to obey the law. The law, in its most rudimentary form, depicts the basic rules of the game bywhich business is expected to function. Society expects business to fulfil its economic mission within the frameworkof legal requirements set forth by the societys legal system. Law may be thought of as codified ethics. Thus, thelegal responsibility is the second part of this CSR definition.

The next two responsibilities attempt to specify the nature or character of the obligations that extend beyondobedience to the law. The ethical responsibility represents the kinds of behaviours and ethical norms that societyexpects business to follow. These ethical responsibilities extend to actions, decisions and practices which are beyondwhat is required by the law. Though they seem to be always expanding, they nevertheless exist as expectations overand beyond l egal requirements. Finally, there are discretionary or philanthropic responsibilities. These representvoluntary roles, initiatives, and practices that business assumes but for which society does not provide as clear anexpectation as in the ethical responsibility.

ENVIRONMENTAL ISSUES AND CORPORATE GOVERNANCEIt is a well-known fact that the present environmental problems are serious. In recent years, the environmentaldegradation due to different types of pollution occurring in air, water, soil and the biosphere have grown to analarming level. Much of the blame has been laid at the doorstep of industry. The big companies have been targetedas the main culprits and enemies of the environment. The problems like global warming, depletion of ozone layer,increased instances of health problems etc. have arisen due to rapid industrialization without any consideration forenvironment protection. Industry can no longer survive with the damaging image of being responsible forenvironmental damage.

Therefore, companies have to re-examine and refurbish their activities right from the nature of products they produce, technology they employ, raw materials they use and the way they market their products. The environment protection and pollution prevention have been recognized as the essentials for good corporate governance practices.In fact, many international committees on corporate governance have required the companies to publish a detailedreport on the measures taken by them in preventing pollution and environment protection in their annual reports. Asrecommended by these committees, many well governed companies have developed their environmental policy anddisclosed the same in the annual report. In the near future, companies that refuse to go green will definitely perish inan environmentally conscious society.

Therefore, corporate leaders should essentially learn to promote resource preservation by reducing waste andmaximizing resources while improving profitability. The time is ripe for all companies to take a fresh look intoenvironmental issues. The attempts to improve environmental performance should be considered as an opportunityto innovate and not as a burden. Environmental audits can provide an in-depth review of the company processes and

progress in realizing long-term strategic goals.

DEFINITIONS OF CSR IN THE GLOBAL CONTEXTWhile there may be no single universally accepted definition of CSR, each definition that currently exists underpinsthe impact that businesses have on society at large and the societal expectations of them. Although the roots of CSRlie in philanthropic activities (such as donations, charity, relief work, etc.) of corporations, globally, the concept ofCSR has evolved and now encompasses all related concepts such as triple bottom line, corporate citizenship,

philanthropy, strategic philanthropy, shared value, corporate sustainability and business responsibility.

This is evident in some of the definitions presented below:

a) The EC defines CSR as the responsibility of enterprises for their impacts on society. To completely meet theirsocial responsibility, enterprises should have in place a process to integrate social, environmental, ethical humanrights and consumer concerns into their business operations and core strategy in close collaboration with theirstakeholders

b) The WBCSD defines CSR as the continuing commitment by business to contribute to economic developmentwhile improving the quality of life of the workforce and their families as well as of the community and society atlarge.


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c) According to the UNIDO, Corporate social responsibility is a management concept whereby companies integratesocial and environmental concerns in their business operations and interactions with their stakeholders.

CSR is generally understood as being the way through which a company achieves a balance of economic,environmental and social imperatives (Triple-Bottom-Line Approach), while at the same time addressing theexpectations of shareholders and stakeholders.

In this sense it is important to draw a distinction between CSR, which can be a strategic business managementconcept, and charity, sponsorships or philanthropy. Even though the latter can also make a valuable contribution to

poverty reduction, will directly enhance the reputation of a company and strengthen its brand, the concept of CSRclearly goes beyond that.

From the above definitions, it is clear that: The CSR approach is holistic and integrated with the core businessstrategy for addressing social and environmental impacts of businesses. CSR needs to address the well-being of allstakeholders and not just the companys shareholders. Philanthropic activities are only a part of CSR, whichotherwise constitutes a much larger set of activities entailing strategic business benefits.

Global principles and guidelines for CSR A comprehensive guidance for companies pertaining to CSR is available in the form of several globally recognisedguidelines, frameworks, principles and tools, some of which are discussed below.

It must be noted that most of these guidelines relate to the larger concept of sustainability or business responsibility,in keeping with the fact that these concepts are closely aligned globally with the notion of CSR.

UNGCUNGC is worlds largest corporate citizenship initiative with the objective to mainstream the adoption of sustainableand socially responsible policies by businesses around the world.

The 10 principles of the UN Global Compact have been derived from various UN conventions such as the UniversalDeclaration of Human Rights, ILOs Declaration on Fundamental Principles and Rights at Work, the RioDeclaration on environment and development, and the UN Convention Against Corruption. These principles coverfour broad areas:

1. Human rights (support and respect the protection of international human rights and ensure that business isnot complicit with human rights abuses)2. Labour rights (uphold the freedom of association and effective recognition of the right to collective

bargaining, elimination of all forms of forced and compulsory labour, effective abolition of child labour andelimination of description in respect of employment and occupation)3. Environment (support a precautionary approach to environmental challenges, undertake initiatives to

promote greater environmental responsibility and encourage the development of environmental friendly technology)4. Governance (work against corruption in all forms, including bribery and extortion).

The UN Guiding Principles on Business and Human Rights


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The UN guiding principles provide assistance to states and businesses to fulfil their existing obligations towardsrespecting and protecting human rights and fundamental freedoms and comply with the existing laws.

These principles act as global standards for addressing the risk of human rights violation related to business activity.In circumstances when these laws are breached or the guidance is not adhered to, suitable remedies have also beenrecommended.

The primary focus is on the protection of human rights by both, the state and the business enterprises, and the principles broadly outline the manner in which the framework can be implemented.

UN GLOBAL COMPACT PRINCIPLESThe Ten Pri nciples

The UN Global Compacts ten principles in the areas of human rights, labour, the environment and anti -corruption,related with corporate social responsibility enjoy universal consensus and are derived from:

t and Development

The UN Global Compact asks companies to embrace, support and enact, within their sphere of influence, a set ofcore values in the areas of human rights, labour standards, the environment and anti-corruption:

Human rightsPrinciple 1 : Businesses should support and respect the protection of internationally proclaimed human rights; andPrinciple 2 : Make sure that they are not complicit in human rights abuses.

Labour standardsPrinciple 3 : Businesses should uphold the freedom of association and the effective recognition of the right to

collective bargaining;Principle 4 : the elimination of all forms of forced and compulsory labour;Principle 5 : the effective abolition of child labour, and

Principle 6 : the elimination of discrimination in respect of employment and occupation.

EnvironmentPrinciple 7 : Businesses should support a precautionary approach to environmental challenges;Principle 8 : undertake initiatives to promote greater environmental responsibility; andPrinciple 9 : encourage the development and diffusion of environmentally friendly technology.

Anti-corruptionPrinciple 10 : Businesses should work against corruption in all its forms, including extortion and bribery.

The goals (MDGs) are:1. Eradicate Extreme Hunger and Poverty2. Achieve Universal Primary Education

3. Promote Gender Equality and Empower Women4. Reduce Child Mortality5. Improve Maternal Health6. Combat HIV/AIDS, Malaria and other diseases7. Ensure Environmental Sustainability8. Develop a Global Partnership for Development

All above said have to be taken by corporates into thier consideration while framing their corporate policies.

ILOs tripartite declaration of principles on multinational enterprises and social policy


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This is another voluntary declaration whose adoption by governments, employers and multinational organisations isencouraged, with the intention of further ensuring labour and social standards.

This is particularly for organisations that operate across multiple countries. Focus is on core labour standards such as(i) freedom of association and the right to collective bargaining (prohibition of discrimination, bonded and forcedlabour) (ii) industrial relations (no trade union restrictions, regular discussions between management and labour, andthe provision of a forum to lodge complaints in case of labour standard violation) (iii) employment opportunities(creation of job security, improved living and working conditions and ensuring that wages are on par with those ofother enterprises in the same country).

OECD Guidelines: Multinational enterprisesA OECD Guidelines for multinational enterprises elaborate on the principles and standards for responsible businessconduct for multinational corporations.

B These guidelines were recently updated in 2011. They cover areas such as employment, human rights,environment, information disclosure, combating bribery, consumer interests, science and technology, competitionand taxation.

C They contain defined standards for socially and environmentally responsible corporate behaviour, and also pro-vide procedures for resolving disputes between corporations and communities or individuals adversely impacted by

business activities.

D The OECD Guidelines for Multinational Enterprises are non-binding recommendations covering all major areasof business ethics addressed by governments to multinational enterprises operating in or from adhering countries.

E The Guidelines were adopted on 21 June 1976 by OECD member states. The last update of the OECD Guidelineswas adopted in May 2011. The new text introduces provisions on human rights, workers and wages, and climatechange.

F It establishes that enterprises should avoid causing or contributing to adverse impacts through their own activitiesor through business relationships, and it recommends that companies exercise due diligence to ensure they live up totheir responsibilities.

ContentThe OECD Guidelines provide voluntary principles and standards for responsible business conduct in the followingareas:- Information disclosure- Human Rights- Employment- Combating bribery, bribe solicitation, and extortion- Consumer interests- Science and technology- Competition and- Taxation

Core issues include:

- Respect for labour standards- Contribution to sustainable development- Respect for human rights- Environment protection- Combating Bribery and corruption- Whistle-blower protection- Supply chain responsibility

Social Accountability International (SAI) SA 8000 Standard


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A This is one of the worlds first auditable social certification sta ndard. It is based on ILO, UN and national lawconventions, and adopts a management system approach in order to ensure that companies that adopt this approachalso comply with it.

B This standard ensures the protection of basic human rights of workers. The nine basic elements of this standard in-clude (i) child labour (ii) forced and compulsory labour (iii) health and safety (iv) freedom of association and theright to collective bargaining (v) discrimination (vi) disciplinary practices (vii) working hours (viii) remuneration(ix) management systems.

C According to SAAS, there are 695 facilities in India that have been accredited with this standard. Out of these,Aditya Birla Chemicals (India) Limited, Bhilai Steel Plant Steel Authority of India Limite d, Birla tyres, Dr ReddysLaboratories Limited and Reliance Infrastructure Limited figure prominently in the list of certified facilities withinIndia

Responsible Business Enterprise:A Corporations around the world are responsibly struggling with a new role, which is to meet the needs of the

present generation without compromising the ability of the next generations to meet their own needs.

B Organizations are being called upon to take responsibility for the ways their operations impact societies and thenatural environment. They are also being asked to apply sustainability principles to the ways in which they conducttheir business.

C Sustainability refers to an organizations act ivities, typically considered voluntary, that demonstrate the inclusionof social and environmental concerns in business operations and in interactions with stakeholders (van Marrewijk &Verre, 2003).

D It is no longer acceptable for a corporation to experience economic prosperity in isolation from those agentsimpacted by its actions. A firm must now focus its attention on both increasing its bottom line and being a goodcorporate citizen.

E Keeping abreast of global trends and remaining committed to financial obligations to deliver both private and public benefits have forced organizations to reshape their frameworks, rules, and business models.

The key drivers for CSR: Enlightened self-interest - Creating a synergy of ethics, a cohesive society and a sustainable global economy

where markets, labour and communities are able to function well together.

Social investment - contributing to physical infrastructure and social capital is increasingly seen as a necessary part of doing business.

Transparency and trust - business has low ratings of trust in public perception. There is increasing expectationthat companies will be more open, more accountable and be prepared to report publicly on their performance insocial and environmental arenas

Increased public expectations of business - globally companies are expected to do more than merely provide jobs and contribute to the economy through taxes and employment.

World Economic Forum & CSRA The World Economic Forum has recognised the importance of corporate social responsibility by establishing theGlobal Corporate Citizenship Initiative.

B The Initiative hopes to increase businesses' engagement in and support for corporate social responsibility as a business strategy with long-term benefits both for the companies themselves as well as society in general.

C At the Forum's Annual Meeting 2002, the Initiative launched a joint CEO statement, Global CorporateCitizenship: The Leadership Challenges for CEOs and Boards .


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D This joint statement recommends a framework for action that business executives can use to develop a strategy formanaging their company's impact on society and its relationships with stakeholders.

This statement was endorsed by the CEOs of over 40 multinational companies, including the CEOs of Accenture,Deloitte Touche Tohmatsu, Deutsche Bank, Rio Tinto, Siemens, Renault, McDonalds, Infosys Technologies, Coca -Cola, DHL and PricewaterhouseCoopers.

CSR and Accountability

A Accountability is one of the processes whereby a leader, company, or organization seeks to ensure integrity. In aglobal stakeholder society, accountability is among the key challenges of organizations.

B Responsible leaders are concerned with reconciling and aligning the demands, needs, interests, and values ofemployees, customers, suppliers, communities, shareholders, nongovernmental organizations (NGOs), theenvironment, and society at large.

C A companys track record in terms of CSR accounting will be effective when appropriate CSR measures areincluded in its internal as well as its supply-chain activities. Furthermore, the literature reflects a growing need fordissemination of good practice in CSR accountability and a need for more pressure to be exerted on NGOs to provethemselves as ethical, transparent, and accountable as those they seek to influence (Frame, 2005).

D A relevant point raised in some literature has to do with the effectiveness of strategies undertaken by communitiesto demand corporate accountability (Garvy & Newell, 2005).

E This literature argues that the success of community-based strategies for corporate accountability is conditionalupon the right combination of state, civil, societal, and corporate factors.Frynas (2005) makes the point thataccountability is more than making false promises.

F In the oil, gas, and mining sectors, despite the promise of CSR and the spending of over US $500 million in 2001alone on a long list of community development programs and other CSR initiatives, the effectiveness of theinitiatives has been increasingly questioned.

G Frynas points out that there is mounting evidence of a gap between the stated intentions of business leaders andtheir actual behavior and impact in the real world of financial funding.

H CSR requires accountability by all leaders, individuals, organizations, stakeholders, customers, and communitymembers, and yet accountability is complex. The factors which influence the effectiveness of corporate ac-countability are multiple and tightly interconnected.

This interconnectedness and its relationship to accountability are represented in the work of Dolan (2004), whichuses the example of his own company to illustrate the idea of considering a business as an interconnected web ofrelationships, with the consequences of every action the company takes having an impact on both the world and thecompanys long -term business.

PARTNERING WITH STAKEHOLDERSCSR is strictly embedded with a multitude of business actors. With the call for sustainability and the new role of

business in society (Blowfield & Googins, 2006), and with increased expectations and new rules and tactics (Burke,2005), leadership is bound to come into contact and conflict with key stakeholders in the arena of responsible

business, global versus regional and local needs, and different national cultures.

The concept of stakeholder engagement and communication with stakeholders looks like a catch-22 of leadership practices for CSR (Morsing, Schultz, & Nielsen, 2008).


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Although companies strive to engage in CSR together with their stakeholders, they are simultaneously struggling tounderstand the true relationship behind this marriage and first of all, who their stakeholders are. In both the

business and academic literature, the shareholders are now renamed as one of many key stakeholders, and they areseen as competing for influence with employees, customers, consumers, suppliers, competitors, trade unions, theenvironment, the local communities, and the society at large, to name a few and the most recurrent ones.

Two basic relationship models may help to explain how leaders can best interact with multiple and diversestakeholders. The inside-out approach suggests that leaders can manage their CSR activities and achieve favorablereputations with their stakeholders by building CSR activities across Business boundaries and in a framework wherethe decision-making point resides inside the organization and where communication with stakeholders is a means todeliver information already developed and perhaps even implemented. CSR reporting for stakeholders can be onesuch practice and has sometimes been used as a tool in the marketing communicators toolbox (Sweeney &Coughlan, 2008). The literature also shows this can backfire, feeding skepticism toward CSR and its terminologyfrom trade unions as well as from the activist opposition (Burke, 2005; David, Bloom, & Hillman, 2007).

An alternative approach is based on substantial attention and engagement with the stakeholders to reach CSR goals(Morsing et al., 2008). Communication is not just a device for alignment; the decision-making process is negotiatedand concepts or key actions developed. The stakeholders in this model are actors, together with the company, inachieving sustainable development. This differentiation is similar to that seen in other literature that focuses on thedifference between stakeholder identity the extent to which the corporations and their stakeho lders interests arelinked and stakeholder management the incorporation of stakeholders interests into operational decision making(Black & Hartel, 2003; Boutilier, 2007; Shropshire & Hillman, 2007).

Despite the debate, real stakeholder engagement ultimately leads to a combination of organizational and sociallearning, which is a basis for long-term change based on trust, but which is not always clearly quantifiable or

predictable in the short term (Roome & Wijen, 2006; Van Kleef & Roome, 2001). Whatever the approach tostakeholders, well-intentioned efforts sometimes produce disappointing results, or conflicting stakeholder demandscause problems (Boutilier, 2007). Nevertheless, leadership efforts to deal rationally with stakeholders, withuncertainty, and with constraints lead to greater potential for sustainability in terms of culture, structure, and output.Corporations need to engage with stakeholders to develop valuable CSR-related actions.

Stakeholders that face challenges and threats are more likely to partner with corporations on CSR-related issues andcorporations and stakeholders are more likely to succeed when a long-term vision is embraced. The literature shows

that corporate leadership should have a holistic approach to engage with stakeholders and that the vital link between business and stakeholder management is leadership (Chow Hoi Hee, 2007).

Organizational Challenges and Limitations on implementation of CSR

Companies face challenges and limitations as they implement CSR. These usually relate either to 1) political issues2) organizational-level concerns and are often embedded in culture. The complexity of operating in a global society

places new demands on organizations and their leadership. As the roles and responsibilities of government are beingredefined and the boundaries between business and government become less clear, the literature shows that businessleaders are facing a daunting array of challenges such as,

A The business imageB The legal background

C The job-market situationD The corruption and the correlates of economic stagnation and social declineE The socialist associations

In the new age of CSR, the needs of the stakeholders, consumers, employees, national as well as internationalregulators, watchdogs, NGOs, and activist groups have to be satisfied (Hatcher, 2002). Lewicka-Stralecka (2006)identifies the opportunities and limitations of CSR in the so-called countries of transformation, or Central andEastern European countries:


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The CSR rhetoric including the blurred boundaries of CSR, the under-development of the civic society, theeconomic reality, the ethical standards, and the attempts at self-regulation of business considers the biggestchallenge in the field of CSR implementation to be the development of leaders for a sustainable global society,asking what kind of leader is needed for building a sustainable global society and how we can best developindividuals with these leadership capabilities. According to this author, the task and challenge will be to developleaders for a sustainable global society by encouraging imagination and the accomplishment of a positive change.

According to Howell and Avolio (1992), responsible leadership is the art of building and sustaining relationshipswith all relevant stakeholders, and it requires socialized, not personalized, leaders. Here, the challenge is to developleaders who can relate in different ways, who are able to align different values into a common vision, who can listento and care for others and ultimately serve them. Meeting these challenges requires the joint efforts of a globalsociety and responsible leadership committed to diversity, ethics, and values.

According to the emergent literature, there is a growing awareness that business needs to manage its relationshipwith the wider society. Corporate lead ers are responsible for their corporations impact on society and the naturalenvironment beyond legal compliance and the liability of individuals. To the novice, this annotated bibliographyoffers a short but nevertheless deep introduction to the field. More experienced leaders can gain new perspectives onhow to grow in their approach to sustainability and how to develop innovative business models in accord with thetriple bottom line.

CSR is becoming a leading principle of top management and of entrepreneurs. The number of observations inresearch in this field clearly delineated models, leadership competencies, accountability, and structure of

partnerships as well as organizational challenges and limitations and ethics. Organizations can reexamine their pattern of behaviors in the TBL framework and begin their journey toward a sustainable approach that is integratedinto their business strategy.

CORPORATE CULTURECulture is the way of life, especially the general customs and beliefs, of a particular group of people at a particulartime. According to Institute of Corporate Culture Affairs (ICCA), Corporate culture can be defined as anorganizations unique body of kno wledge that is nurtured over a long period of time resulting in commonly heldassumptions, values, norms, paradigms and world views.

These shape the behaviour and thinking of the people within the organization and thus form the organisations core

identi ty characterising the organisations way of doing business with qualities distinct from others. In theorganisational behaviour literature, corporate culture has been defined by E. H. Schein, a leading theorist onorganizational behaviour, as a pattern of shared basic assumptions that a group learns in dealing with its problems ofexternal adaptation and internal integration.

Organisations communicate the spirit of their corporate culture in several visible and invisible manifestations whichmay include formal and informal management structures, statements of values and aspirations, rewards andrecognition systems, staffing and selection procedures, training and development activities, company ceremoniesand rituals as well as stories and physical symbols.

More recently, CSR, branding and corporate culture have become entwined as a way of increasing the identificationof employees with a c ompanys values, mission and practices. This has become increasingly important as employersnow rate the corporate culture and image of a company as a key determinant in attracting, motivating and retaining

key staff.

CORPORATE ENVIRONMENTAL MANAGEMENTEco-efficiency, Environmental auditing, Environmental management systems (EMS) Corporate environmentalmanagement (CEM) is an umbrella term that encompasses policies, tools, systems and strategies that can be put in

place to enhance the environmental performance of a company.

It is closely associated with the concept of eco-efficiency that argues that a company can simultaneously improve both its environmental performance and its economic competitiveness by adopting CEM practices. This has come to be known as a win win situation. It is now widely recognised that businesses, through environmentally sound


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management practices, have a major role to play in contributing to mitigating environmental problems at a local,national and global level. Many CEM practices can save companies money.

Measures to reduce energy, minimise waste and reduce water consumption, for example, will directly reduce costsand add to profitability. But companies are increasingly becoming aware that even where CEM becomes moreexpensi ve, it can still help a companys competitiveness by differentiating a company from its competitors andenhancing image, brands and reputation.

However, companies are also increasingly being influenced by a variety of external pressures and a companysstakeholders often expect environmentally responsible behaviour. Increasingly therefore CEM is becoming part of acompanys so -called social licence to operate.Given the internal and external demands to improve the environmental

performance of a company, those companies that achieve high standards of environmental performance will benefitin a number of ways.

In order to realise this competitive advantage, companies must seek to develop policies, management systems,strategies and assessment and communications tools which will improve their environmental performance andaddress the environmental demands placed upon them by their stakeholders. By incorporating the increasinglyimportant environmental dimension into the decision-making processes of the firm, managers can seek to reducecosts and exploit the opportunities offered by increased public environmental concern within a dynamicmarketplace.

Industry, particularly in the developed world, must increasingly take into account the costs of the effect of itsoperations on the environment, rather than regarding the planet as a free resource. In the past, few companiescounted the costs of the pollution which they discharged into the atmosphere, and the debate has now turned tolegislation aimed at forcing companies to comply with certain standards and taxing firms which pollute.

CORPORATE RESPONSIBILITY INDEXBusiness in the Communitys (BITC) Corporate Responsibility Index (CR Index) is one of the UKs leading

benchmarks of responsible business, helping companies to integrate and improve responsible practice across theiroperations. It provides a systematic approach to managing, measuring and reporting their impact on society and onthe environment. The survey covers practice in four key areas: marketplace, workplace, community andenvironment.

Originating in BITCs Business in the Environment Index, it is the result of a major collaborative effort by BITCmember companies to articulate a comprehensive measurement tool. From completing the survey to receiving theirfeedback reports, CR participants undertake a process of internal gap analysis and action planning for continuousimprovement. In addition to detaining impact performance in the four key areas, the Index can also be used as anindicator of management quality, clearly of interest to the investment community.

CORPORATE SOCIAL ENTREPRENEURA corporate social entrepreneur is a person who innovatively employs market forces, including new businessventures, to address or solve social or environmental problems. A social entrepreneur may be independent or anemployee of a business firm. Social entrepreneurs may be motivated by personal values, a desire to profit from a

previously unidentified market opportunity, a desire to leverage business practices to solve social problems, or somecombination of these. Independent social entrepreneurs can operate in a variety of ways.

They may build traditional businesses in a socially responsible manner; create or develop new products, services, ormarket segments suggested by social issues; innovate in processes or technologies that are less harmful; or identify business opportunities to profit while addressing a serious social problem. An example of independent socialentrepreneurship is the work of Maria Teresa Leal, founder of Coopa-Roca sewing cooperative in the slums of Riode Janeiro.

Within large organisations, social entrepreneurs are likely to be the champions for socially responsible practices andfor profitmaking ventures derived from or suggested by social problems. They may develop skills at recognising andcapitalising on corporate social opportunity. An example of corporate social entrepreneurship is the spearheading ofaluminium recycling by Reynolds Aluminium Co. in the early 1970s, based on both environmental concerns and a


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desire to stabilise raw materials sources. A more recent example from the US is the work of Ray Anderson atInterface, Inc., where process and product innovations are aimed at reducing th e companys ecological footprintto zero.

CORPORATE SOCIAL INVESTMENT AND SOCIAL OPPORTUNITY

A corporate social opportunity is a potentially profitable market oriented venture that derives from or is suggested by a companys social responsibilities or by social or environmental problems. As the definition implies, corporatesocial opportunity exists at the interface between business processes and market forces, on the one hand, and socialor environmental issues and problems, on the other. The concept does not assume that government is the necessaryarbiter of societal problems; nor does it assume that government has no role to play.

Instead, the idea of corporate social opportunity is that members of any social institution including business canlegitimately work to solve complex, intransigent issues such as poverty, disease, illiteracy, species extinction,

pollution, and more. Cairos privately held chain of daycare centres, The Baby Academy, is an outgrowth of itsfounders identifying a corporat e social opportunity to provide quality daycare for special needs children. The verysuccessful micro- lending organisation, Grameen Bank of Bangladesh, resulted from its founders belief that the very

poor would repay the small loans needed to improve their economic situations.

Ciudad Saludable, an enterprise that employs the poor to recycle wastes that Peruvian cities cannot handle, was bornof a double need for employment opportunities and waste management.

Taking advantage of corporate social opportunities generally requires innovative perception and high tolerance forrisk. The potential rewards include typical business goals such as profits, new markets, and process improvements,as well as social goals such as the alleviation of human suffering and improvements to the quality of human life.

CORPORATE SOCIAL PERFORMANCE (CSP)Corporate social performance (CSP) is defined as a business organisations configuration of principles of socialresponsibility, processes of social responsiveness, and observable outcomes as they relate to the firms human,stakeholder, and societal relationships.

The CSP concept recognises that business is a powerful social institution with responsibilities to use that powerwisely on behalf of societies, stakeholders, and peoples. Every business firm exists and operates within a dense

social network, and CSP provides a way of assessing every firms inputs, processes, and out comes with respect tothat network. It does not focus narrowly on maximizing shareholder wealth, but instead emphasises self-regulation.

Business cases for corporate social responsibilityAfter weighing the pros and cons of CSR, most businesses today embrace the idea. For last few years, the businesscase for CSR has been unfolding. Before buying in to the idea of CSR, many business executives have insisted thatthe business case for it be further developed. The business case embraces arguments or ration ales as to why

businesspeople believe these concepts bring distinct benefits or advantages to companies specifically, and the business community generally. Even the astute business strategy expert, Michael Porter, who for a long time hasextolled the virtues of competitive advantage, has embraced the belief that corporate and social initiatives areintertwined.

Porter has argued that companies today ought to invest in CSR as part of their business strategy to become more

competitive. Of course, prior to Porter, many CSR academics had been presenting this same argument. SimonZadek, a European, has presented four different business rationales for being a civil (socially responsible)corporation. These reasons form a composite justification for business adopting a CSR strategy. First, is thedefensive approach. This approach to CSR is designed to alleviate pain. That is, companies should pursue CSR toavoid the pressures that create costs for them. Second, is the cost benefit approach. This traditional approach holdsthat firms will undertake those activities that yield a greater benefit than cost.

Third, is the strategic approach. In this rationale, firms will recognise the changing environment and engage in CSRas part of a deliberate corporate strategy. Finally, the innovation and learning approach is proposed. Here, an activeengagement with CSR provides new opportunities to understand the marketplace and enhance organisational


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learning, which leads to competitive advantage. Most of these rationales have been around for years, but Zadek has presented them as an excellent, composite set of business reasons for pursuing CSR.

Putting forth the business case for CSR requires a careful and comprehensive elucidation of the reasons whycompanies increasingly understand that CSR is in their best interests to pursue. Two particular studies havecontributed towards building this case. A study by Price water house Coopers, presented in their 2002 SustainabilitySurvey Report, identifies the following top 10 reasons why companies are deciding to be more sociallyresponsible :

Enhanced reputation Competitive advantage Cost savings Industry trends CEO/board commitment Customer demand SRI demand Top-line growth Shareholder demand Access to capital

Second, a survey conducted by The Aspen Institute, in their Business and Society Program, queried MBA studentattitudes regarding the question of how companies will benefit from fulfilling their social responsibilities. Theirresponses, in sequence of importance, included:

A better public image/reputation Greater customer loyalty A more satisfied/productive workforce Fewer regulatory or legal problems Long-term viability in the marketplace A stronger/healthier community Increased revenues Lower cost of capital Easier access to foreign markets

Between these two lists, a comprehensive case for business interest in CSR/CSP is documented. It can be seen howCSR/CSP not only benefits society and stakeholders, but how it provides specific, business-related benefits for

business as well.

Examples of CSR in practiceThere are many ways in which companies may manifest their CSR in their communities and abroad. Most of theseinitiatives would fall in the category of discretionary, or philanthropic activities, but some border on improvingsome ethical situation for the stakeholders with whom they come into contact. Common types of CSR initiativesinclude corporate contributions, or philanthropy, employee volunteerism, community relations, becoming anoutstanding employer for specific employee groups (such as women, older workers, or minorities), makingenvironmental improvements that exceed what is required by law, designing and using codes of conduct, and so on.

Among the 100 Best Corporate Citizens selected in 2006 by Business Ethics magazine, a number of illuminatingexamples of CSR in practice are provided. Green Mountain Coffee Roasters of Waterbury, Vermont, was recognisedfor its meticulous attention to CSR including its pioneering work in the fair trade movement, which pays coffeegrowers stable, fair prices.

Another example of CSR in practice is the Chick-fil-A restaurant chain based in Atlanta, Georgia. Founder and CEOTruett Cathy has earned an outstanding reputation as a business executive deeply concerned with his employees andcommunities. Through the WinShape Center Foundation, funded by Chick-fil-A, the company operates foster homesfor more than 120 children, sponsors a summer camp, and has hosted more than 21 000 children since 1985. Chick-fil-A has also sponsored major charity golf tournaments.


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In the immediate after math of Hurricane Katrina in 2005, judged to be the worst and most expensive ever in termsof destruction, hundreds of companies made significant contributions to the victims and cities of New Orleans,Biloxi, Gulfport and the entire Gulf Coast of the US. These CSR efforts have been noted as one of the importantways by which business can help people and communities in need. As seen in the examples presented, there are amultitude of ways that companies have manifested their corporate social responsibilities with respect tocommunities, employees, consumers, competitors, and the natural environment.

CSR in the futureWhat is the future for corporate social responsibility? The most optimistic perspective seems dominant and it isdepicted well by Steven D. Lydenberg in his book Corporations and the Public Interest: Guiding the Invisible

Hand . Lydenberg sees CSR as a major secular development, driven by a long -term reevaluation of the role ofcorporations in society. Lydenberg says this re -evaluation is more evident in Europe, where the stakeholderresponsibility notion is more readily assumed, but that US business people are more sceptical of this assumption. Hegoes on to argue, however, that the European influence will be very hard to resist over the long run.

By contrast with the optimistic perspective, David Vogel is genuinely sceptical of CSR and he develops thisargument in his book The Market for Virtue: The Potential and Limits of Corporate Social Responsibility , in whichhe critiques CSRs influence and success. Vogel is very much of the mind that CSR will not be successful untilmainstream companies begin reporting some aspect of CSR as being critical to the companys past or future

performance. In other words, CSR is successful only to the extent that it adds to the bottom line and can bespecifically delineated as having made such an impact.

In reacting to Vogels scepticism, it must be observed that this convergence of financial and social obje ctivescharacterises the trajectory that CSR has taken in the past two decades. It is evident by CSR practices and trends,that social responsibility has both a social component as well as a business component. In todays world of intenseglobal competition, it is clear that CSR can be sustainable only so long as it continues to add value to corporate

bottom lines.

It must be observed, moreover, that it is that conglomerate of stakeholders known as society, or the public, not just business executives alone, that plays an increasing role in what constitutes business success and for that reason, CSRhas an upbeat future in the global business arena. The pressures of global competition will continue to intensify,however, and this will dictate that the business case for CSR will always be at the centre of discussions.

CORPORATE VOLUNTEERING & CORRUPTIONBusiness ethics, Corporate governance, UN Global Compact, Transparency International, UN Declaration againstCorruption and Bribery in International Commercial Transactions Corruption can be defined as the misuse ofentrusted power for private gain, which is also the definition used by Transparency International (TI).

Corruption occurs where people collude to improperly benefit themselves or others with whom they are associated, by misusing the authority and trust which they have been given. Individuals can act corruptly on their own withoutinvolving another party, but TIs definition is confined to where there are two parties to the act of corruption,namely the person who offers or provides the inducement and the party influenced by or acting on it.

Though this is a simple definition it encompasses a complex topic with many forms of corr uption which include: Fraud

Bribery Conflict of interest Defalcation Embezzlement Nepotism and favouritism Trading in influence Collusive bidding Extortion Illegal information brokering Insider trading


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Money laundering, although not corruption in itself, is an associated activity to corruption as proceeds from corruptactivity often need to be laundered to gain a veneer of legitimacy. The terms grand and petty corruption are oftenused to distinguish between corruption involving large amounts, and corruption involving small payments. A classicexample of grand corruption is private sector bribery of public officials for large contracts.

Correspondingly, petty corruption describes small payments, commonly known as facilitation payments, paid tosecure or expedite services to which the briber is legally entitled, such as installing a telephone; or to avoid beingsubject to illegitimate harassment, for instance by the police. Grand and petty corruption are part of a continuum ofcorruption, and so tolerating or ignoring petty corruption confuses the boundaries and provides an adverse signal,thereby feeding widespread corruption.

The relevance to CSR is that corruption is widespread and damages societies, economies, enterprises and the lives of people. Enterprises can make a contribution to countering corruption through CSR. The word corruption comes fromthe Latin corruptus , meaning to destroy, and this characterises the severity of change and damage that can be caused

by a corrupt act.

The trust given to the individual is destroyed, and the effects can be highly damaging. Corrupt behaviour candamage the rule of law, democratic rights and human rights. It can act as a tax on the poor, be the cause ofenvironmental damage such as deforestation, provide funds for terrorism, facilitate smuggling, counterfeiting,money laundering and numerous other criminal activities. For enterprises it presents a risk to reputation, businesssuccess and sustainability and may also lead to civil and criminal sanctions.

Countering corr uption i s carri ed out through a range of approaches incl uding:

Legislation the USA was first to introduce national legislation in 1976 with the Foreign Corrupt Practices Act. Anumber of international conventions have been introduced in recent years to require states to implement nationallegislation.

These conventions include the OECD Convention on Countering Bribery of Foreign Public Officials in InternationalTransactions, and the United Nations Convention against Corruption.

Building national integrity systems this involves strengthening the key institutions which between them uphold

integrity in a country, such as the executive, judiciary or the media.

Encouraging good governance and anti-corruption measures through international aid and development.

Enterprises adopting no-corruption polices and implementing codes of conduct and systems enterprises can alsodemand anti-corruption performance from key business partners such as suppliers.

Sectoral initiatives such as the Extractive Industries Transparency Initiative and the Wolfsberg Principles.

Civil society advocacy and action by organisations such as Transparency International, the global coalition againstcorruption,

Media investigating and exposing corruption.

Socially responsible investment anti-corruption criteria being included in SRI indices such as has been done withthe FTSE4Good Index.

International instruments setting standards and providing implementation tools, such as the UN Global Compactand its 10 th Principle against Corruption, and the Business Principles for Countering Bribery.

Increased transparency transparent procurement and tendering processes, freedom of information legislation, useof information technology to make available information to citizens or parties to a contract tender, use of the TIIntegrity Pact.


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Enhanced reporting and credibility greater clarity and range of public reporting from all forms of organisation,and the use of independent verification.

Greater expression of expectations and action by societies collectively and through individual action.

Most forms of corruption are illegal in countries around the world and therefore it could be assumed that the scope islimited for CSR which is beyond compliance. In fact, while laws tend to proscribe or sanction, they are ofteninsufficiently enforced and even if so, do not usually provide for the depth and range of activity needed toimplement anti-corruption policies. The CSR opportunity for enterprises is to build a culture of no-corruption intheir organisations and encourage this in their business partners and in the communities in which they operate.

Most large enterprises have in place codes of conduct but fewer have comprehensive implementation systems suchas providing leadership, communication, training, HR policies and procedures, internal controls and sanctions.Fewer enterprises carry out activities that contribute to strengthening the anti-corruption structures in the societies inwhich they operate such as supporting or encouraging local business associations and NGOs. Corruption while

behind so many of the major societal issues such as poverty, deforestation, earthquake damage, deaths fromcounterfeit drugs does not yet receive the same attention on the CSR agenda as environment, human rights,community needs or medical causes. CSR provides a framework within which enterprises can enhance theirmanagement of preventing corruption, have greater chance of competing on a level playing field for contracts, buildgreater trust among stakeholders and make a significant contribution to people in countries most vulnerable tocorruption.

CSR IN INDIAN SCENARIOCorporate Social Responsibility

India is a country of myriad contradictions. On the one hand, it has grown to be one of the largest economies in theworld, and an increasingly important player in the emerging global order, on the other hand, it is still home to thelargest number of people living in absolute poverty (even if the proportion of poor people has decreased) and thelargest number of undernourished children. What emerges is a picture of uneven distribution of the benefits ofgrowth which many believe, is the root cause of social unrest. Companies too have been the target of those perturbed

by this uneven development and as a result, their contributions to society are under severe scrutiny. With increasingawareness of this gap between the haves and the have-nots, this scrutiny will only increase over time and societal

expectations will be on the rise. Many companies have been quick to sense this development, and have responded proactively while others have done so only when pushed.

Governments as well as regulators have responded to this unrest and the National Voluntary Guidelines for Social,Environmental and Economic Responsibilities of Business or the NVGs (accompanied by the BusinessResponsibility Reports mandated by the SEBI for the top 100 companies) and the CSR clause within the CompaniesAct, 2013 are two such instances of the steps taken. According to Indian Institute of Corporate Affairs, a minimumof 6,000 Indian companies will be required to undertake CSR projects in order to comply with the provisions of theCompanies Act, 2013 with many companies undertaking these initiatives for the first time. Further, some estimatesindicate that CSR commitments from companies can amount to as much as Rs. 20,000 crores. This combination ofregulatory as well as societal pressure has meant that companies have to pursue their CSR activities more

professionally.

That attempts to bring together good practices of companies and grant-making foundations so as to assist companies pursue their CSR activities effectively, while remaining aligned with the requirements of the Companies Act, 2013.The 21st century is characterized by unprecedented challenges and opportunities, arising from globalization, thedesire for inclusive development and the imperatives of climate change. Indian business, which is today viewedglobally as a responsible component of the ascendancy of India, is poised now to take on a leadership role in thechallenges of our times. It is recognized the world over that integrating social, environmental and ethicalresponsibilities into the governance of businesses ensures their long term success, competitiveness andsustainability.


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This approach also reaffirms the view that businesses are an integral part of society, and have a critical and activerole to play in the sustenance and improvement of healthy ecosystems, in fostering social inclusiveness and equity,and in upholding the essentials of ethical practices and good governance. This also makes business sense ascompanies with effective CSR, have image of socially responsible companies, achieve sustainable growth in theiroperations in the long run and their products and services are preferred by the customers. Indian entrepreneurs and

business enterprises have a long tradition of working within the values that have defined our nation's character formillennia. India's ancient wisdom, which is still relevant today, inspires people to work for the larger objective ofthe well-being of all stakeholders.

These sound and all-encompassing values are even more relevant in current times, as organizations grapple with thechallenges of modern-day enterprise, the aspirations of stakeholders and of citizens eager to be active participants ineconomic growth and development. The idea of CSR first came up in 1953 when it became an academic topic in HRBowens Social Responsibilities of the Business. Since then, there has been continuous debate on the concept andits implementation. Although the idea has been around for more than half a century, there is still no clear consensusover its definition.

One of the most contemporary definitions is from the World Bank Group, stating, Corporate social responsibility isthe commitment of businesses to contribute to sustainable economic development by working with employees, theirfamilies, the local community and society at large, to improve their lives in ways that are good for business and fordevelopment.The CSR in India has traditionally been seen as a philanthropic activity. And in kee ping with theIndian tradition, it was an activity that was performed but not deliberated. As a result, there is limited documentationon specific activities related to this concept. However, what was clearly evident that much of this had a nationalcharac ter encapsulated within it, whether it was endowing institutions to actively participating in Indias freedommovement, and embedded in the idea of trusteeship.

As some observers have pointed out, the practice of CSR in India still remains within the philanthropic space, buthas moved from institutional building (educational, research and cultural) to community development throughvarious projects. Also, with global influences and with communities becoming more active and demanding, thereappears to be a discernible trend, that while CSR remains largely restricted to community development, it is gettingmore strategic in nature (that is, getting linked with business) than philanthropic, and a large number of companiesare reporting the activities they are undertaking in this space in their official websites, annual reports, sustainabilityreports and even publishing CSR reports.

The Companies Act, 2013 has introduced the idea of CSR to the forefront and through its disclose-or-explainmandate, is promoting greater transparency and disclosure. Schedule VII of the Act, which lists out the CSRactivities, suggests communities to be the focal point. On the other hand, by discussing a companys relationship toits stakeholders and integrating CSR into its core operations, the draft rules suggest that CSR needs to go beyondcommunities and beyond the concept of philanthropy. It will be interesting to observe the ways in which this willtranslate into action at the ground level, and how the understanding of CSR is set to undergo a change.

CORPORATE SOCIAL RESPONSIBILITY VOLUNTARY GUIDELINES 2009

Voluntary compliance is one of possible ways of practicing corporate social responsibility. It is seen as analternative to the state-imposed regulations on company's behavior. Proponents of voluntary compliance argue that itis in company's own interest to behave socially responsibly and that in pursuit of good public image, company willwithdraw from doing actions, which could damage its perception by public. Thus there is no need for state

regulations.On the other hand, opponents deem that companies may claim to voluntary adhere to self-imposed regulations but in

practice they often follow profit maximizing behavior often violating stakeholders' interests. However, such behavior may be problematic not only morally or ethically but also legally: corporate codes of conduct may give riseto legal obligations pursuant to national laws of European Union member states implementing the UnfairCommercial Practices Directive or pursuant to consumer protection laws in other jurisdictions, including (subject tothe effect of the Federal and State constitutions) the States of the United States of America.


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In the United States, voluntary compliance may also refer to an argument made by tax protesters, who suggest that payment of income tax is voluntary, and not legally enforceable. However, this argument is rejected by the InternalRevenue Service, and has not been accepted by the U.S. courts. In order to assist the businesses to adopt responsiblegovernance practices, the Ministry of Corporate Affairs has prepared a set of voluntary guidelines which indicatesome 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 aswell as the expectations of the society. The valuable suggestions received from trade and industry chambers, expertsand other stakeholders along with the internationally prevalent and practiced guidelines, norms and standards in thearea of Corporate Social Responsibility have also been taken into account while drafting these guidelines.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 alignedwith its business goals. The policy should be framed with the participation of various level executives and should beapproved by the Board.

Core Elements:The CSR Policy should normally cover following core elements:

1. 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. Theyshould develop mechanism to actively engage with all stakeholders, inform them of inherent risks and mitigate themwhere they occur.

2. Ethical functioning:Their governance systems should be underpinned by Ethics, Transparency and Accountability. They should notengage in business practices that are abusive, unfair, corrupt or anti-competitive.

3. Respect for Workers' Rights and Welfare:Companies should provide a workplace environment that is safe, hygienic and humane and which upholds thedignity of employees. They should provide all employees with access to training and development of necessaryskills 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 oflabour, have an effective grievance redressal system, should not employ child or forced labour and provide andmaintain equality of opportunities without any discrimination on any grounds in recruitment and duringemployment.

4. Respect for Human Rights:Companies should respect human rights for all and avoid complicity with human rights abuses by them or by third

party.

5. Respect for Environment:Companies should take measures to check and prevent pollution; recycle, manage and reduce waste, should managenatural 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, promotingefficient use of energy and environment friendly technologies.

6. Activities for Social and Inclusive Development:Depending upon their core competency and business interest, companies should undertake activities for economicand social development of communities and 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.


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Implementation Guidance:1. The CSR policy of the business entity should provide for an implementation strategy which should includeidentification of projects/activities, setting measurable physical targets with timeframe, organizational mechanismand responsibilities, time schedules and monitoring.

Companies may partner with local authorities, business associations and civil society/non-government organizations.They may influence the supply chain for CSR initiative and motivate employees for voluntary effort for socialdevelopment.

They may evolve a system of need assessment and impact assessment while undertaking CSR activities in a particular area. Independent evaluation may also be undertaken for selected projects/activities from time to time.

2. Companies should allocate specific amount in their budgets for CSR activities. This amount may be related to profits after tax, cost of planned CSR activities or any other suitable parameter.

3. To share experiences and network with other organizations the company should engage with well- established andrecognized programmes/platforms which encourage responsible business practices and CSR activities. This wouldhelp companies to improve on their CSR strategies and effectively project the image of being socially responsible.

4. The companies should disseminate information on CSR policy, activities and progress in a structured manner toall their stakeholders and the public at large through their website, annual reports, and other communication media.

Provision for CSR in Companies Bill 2012

Till date it is very difficult exercise to analyze the spending of CSR by various firms and private companies andsuch information is not maintained at government level, even -5- among the top 100 firms by revenue, there aremany who dont report their CSR spen ds or even declare the social causes they support, that is because they are notrequired to do so by law and no provisions for CSR exists in the Companies Act, 1956 so currently the Ministrydoes 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.

The Companies Bill, 2012 incorporates a provision of CSR under Clause 135 which states that every companyhaving 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 moreDirectors, including at least one Independent Director, to recommend activities for discharging corporate socialresponsibilities in such a 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. According to Schedule-VII of Companies Bill, 2012 the following activities can be included bycompanies in their CSR Policies:-

(i) eradicating extreme hunger and poverty;(ii) promotion of education;(iii) promoting gender equality and empowering women;(iv) reducing child mortality and improving maternal health;

(v) combating human immunodeficiency virus, acquired immune deficiency syndrome, malaria and other diseases;(vi) ensuring environmental sustainability;(vii) employment enhancing vocational skills;(viii) social business projects;(ix) contribution to the Prime Ministers National Relief Fund or any other fund set by the Central Government orthe State Governments for socio-economic development and relief and funds for the welfare of the Scheduled Caste,the Scheduled Tribes, other backward classes, minorities and women;(x) such other matters as may be prescribed8.


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The Companies Bill, 2012, Clause 135 also provides for constitution of a CSR Committee of the Board that TheCSR Commi ttee is requir ed to;

(a) formulate and recommend to the Board, a CSR Policy which shall indicate the activities to be undertaken by thecompany 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.(d) The format for d isclosure of CSR policy and the activities therein as part of Boards report will be prescribed inthe rules once the Bill is enacted.

The data pack compiled by CSR identity.com together with Forbes India is revealing to some extent how much eachcompany will have to fork out on CSR when they will bound by law and their actual spending for the financial year2012.

The Companies Act, 2013

A In India, the concept of CSR is governed by clause 135 of the Companies Act, 2013, which was passed by bothHouses of the Parliament, and had received the assent of the President of India on 29 August 2013.

B The CSR provisions within the Act is applicable to companies with an annual turnover of 1,000 crore INR andmore, or a net worth of 500 crore INR and more, or a net profit of five crore INR and more.

C The new rules, which will be applicable from the fiscal year 2014-15 onwards, also require companies to set-up aCSR committee consisting of their board members, including at least one independent director.

D The Act encourages companies to spend at least 2% of their average net profit in the previous three years on CSRactivities. The ministrys draft rules, that have been put up for public comment, define net profit as the profit beforetax as per the books of accounts, excluding profits arising from branches outside India.

E The Act lists out a set of activities eligible under CSR. Companies may implement these activities taking intoaccount the local conditions after seeking board approval. The indicative activities which can be undertaken by a

company under CSR have been specified under Schedule VII of the Act.

The draft rules (as of September 2013) provide a number of clarifications. Some of i ts hi ghl igh ts are as fol lows:

Surplus arising out of CSR activities will have to be reinvested into CSR initiatives, and this will be over and abovethe 2% figure,

Th e company can implement i ts CSR activi ties thr ough the fol lowi ng methods:

A Directly on its own, Through its own non-profit foundation set- up so as to facilitate this initiative, Throughindependently registered non-profit organisations that have a record of at least three years in similar such relatedactivities, Collaborating or pooling their resources with other companies Only CSR activities undertaken in Indiawill be taken into consideration, Activities meant exclusively for employees and their families will not qualify.

B A format for the board report on CSR has been provided which includes amongst others, activity-wise , reasonsfor spends under 2% of the average net profits of the previous three years and a responsibility statement that theCSR policy, implementation and monitoring process is in compliance with the CSR objectives, in letter and in spirit.This has to be signed by either the CEO, or the MD or a director of the company

GovernanceClause 135 of the Act lays down the guidelines to be followed by companies while developing their CSR

programme. The CSR committee will be responsible for preparing a detailed plan on CSR activities, including theexpenditure, the type of activities, roles and responsibilities of various stakeholders and a monitoring mechanism for


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such activities. The CSR committee can also ensure that all the kinds of income accrued to the company by way ofCSR activities should be credited back to the community or CSR corpus.

A set of such enabling processes, their inter-relationships and the sequence in which they need to be developed have been identified below:

ReportingThe new Act requires that the board of the company shall, after taking into account the recommendations made bythe CSR committee, approve the CSR policy for the company and disclose its contents in their report and also

publish the details on the companys official website, if any, in such manner as may be prescribed. If the companyfails to spend the prescribed amount, the board, in its report, shall specify the reasons.

Business responsibility reporting on CSR The other reporting requirement mandated by the government of India, including CSR is by the SEBI which issued acircular on 13 August 2012 mandating the top 100 listed companies to report their ESG initiatives.

These are to be reported in the form of a BRR as a part of the annual report. SEBI has provided a template for filingthe BRR. Business responsibility reporting is in line with the NVG published by the Ministry of Corporate Affairs inJuly 2011.

Provisions have also been made in the listing agreement to incorporate the submission of BRR by the relevantcompanies. The listing agreement also provides the format of the BRR. The BRR requires companies to report their

performance on the nine NVG principles. Other listed companies have also been encouraged by SEBI to voluntarilydisclose information on their ESG performance in the BRR format.

Companies Act, 2013, Clause 135: CSR committee requirementsA CSR committee of the board should be constituted. It should consist of at least three directors out of whom at leastone is an independent director. This composition will be disclosed in the boards report as per sub -section (3) ofsection 134.

The CSR committee shall: formulate and recommend a CSR policy to the board, indicating the activities as specifiedin Schedule VII of the Act

a. To Recommend the amount of expenditure to be incurred on the activities indicated in the policy


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b. To Monitor the CSR policy regularly

While developing these processes, no standard set of recommendations exist for all companies. However, anoverview of the required details, the activities required to be completed for each of these processes along with someadditional guidance on critical issues has been provided below:

A CSR strategy refers to what the company expects to achieve in the next three to five years and incorporates thevision, mission and goals on a broader level. It also entails how it plans to achieve these in terms of organisation andapproach.

B CSR policy refers to what the company expects to achieve over the next year. This is aligned with therequirements of the Companies Act, 2013. Programme refers to a sector or an issue that the company proposes toaddress through its CSR. This can, for instance, be education of the girl child or agriculture development.

C Programmes will be clearly outlined in the companys CSR strategy. Programme goals will be achieved through aseries of individual projects and, a project refers to a set of interventions, typically in a specific geography andaddressing a specific stakeholder group, with a definite set of goals, beginning and end and a budget attached to it.Each project in turn will consist of a number of activities. All of which contribute towards the project goals.

CSR: Planning and strategisingThe first step towards formalising CSR projects in a corporate st

chapter iii. csr.docx

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