Coupon Accepted Successfully!


A Note on Corporate Social Responsibility

Learning objectives

In this chapter, you will learn the following:

  • Background and history of CSR
  • Companies which are mandatorily required to undertake CSR
  • Activities which qualify as CSR
  • Compliance requirements for CSR – CSR Committees and CSR Policy
  • Challenges around interpretation of CSR provisions
  • Tax treatment of mandatory CSR initiatives required to be undertaken by law
  • Tax treatment of voluntary CSR initiatives by companies

Corporate social responsibility, corporate social responsiveness, corporate social performance, corporate citizenship, business citizenship, stake holding company, business ethics, sustainable company, triple bottom-line reporting- these are some of the jargons coined to describe altruistic approach of doing business that has been much advocated. Corporate social responsibility or CSR in particular, is a buzzword. While it is not the goal of this course to teach or examine morality of business, CSR is a practical necessity of businesses. CSR has some legal aspects to it as well especially after the Companies Act 2013, which would be the main focus this discussion. In this chapter, you will learn about how CSR grew to be a popular concept globally, and the policy of the Indian government towards CSR in India.

CSR is relevant for:

  • Entrepreneurs, managers and working professionals – CSR is not merely a measure of charity which should be implemented by a large corporation, but a critical part of the business strategy today, even for startups.
  • Consultants – There is tremendous scope for consultants to provide consultancy services and guidance on business responsibility reporting to both small and large scale commercial ventures.
  • Lawyers – The CSR regime is gradually evolving in India, and ‘soft’ policy measures of the Indian government may subsequently be translated into ‘legal’ obligations. The proposal in the Companies Bill requiring companies to contribute 2% of their profits to CSR initiatives is one such measure.
  1. A brief background to CSR

The CSR originated in 1953 with the publication of a book Social Responsibilities of the Businessman by Le Livre d' Howard Bowen. He suggested that businessmen’s social conscience must be placed above the business itself. Emergence of CSR is considered to be a fall out of public hostility towards businesses at that point, as a matter of reform. Many responsibilities that were considered to be corporate social responsibilities were incorporated into regulation in the UK and the US for instance, giving rise to a new approach: the public policy approach. 

Since independence, the Indian government adopted a pro-socialist and planned economy approach, which was a fortified version of the public policy approach - where businesses were treated as tools in government planning. This phase was marked by state monopolies, subsidization of priority sectors (e.g. agriculture and related sectors such as dairy, fishery, animal husbandry, poultry, bee-keeping and sericulture) and government companies as well as forced nationalization of various industries. It was very clear to Indian business class that companies have to abide by the law and most importantly government planning and policies.

Combined with high rates of taxation (at one point, India taxed income at 97% in the 1970s), this left little room to develop a voluntary culture of CSR. Philanthropy was more individual driven (the Tatas, Birlas, Godrej and other industrialists are well known for their social, charitable and educational projects).

This situation drastically changed in the '90s as the economy liberalized and income tax rates were reduced. Indian corporate sector has become much stronger and a growing number of corporates are integrating CSR as a part of their business strategy, as an important factor for protecting the goodwill and reputation, defending attacks and increasing business competitiveness.

Corporate Social Responsibility (CSR) is now accepted as a means to achieve sustainable development of an organization. Hence, it needs to be accepted as an organizational objective.

Much of what is corporate social responsibility in other countries, such as good labour practices, environment friends processes and efficient corporate governance - are already binding laws in India that businesses must follow. For instance, India has extensive labour laws covering a large number of issues.

Some economists and researchers strongly argue that CSR is not in best interest of the society. You may want to read an article published in Wall Street Journal over here.
  1. How is CSR relevant to you?

We will cover the development of the CSR guidelines in India and their features. In future the government may choose to make some of these mandatory. In any case, modern businesses do not consider CSR as charity, but as an important part of their business strategy. CSR is more a matter of developing policies within the company and integrating social objectives into the business model that ensures that all stakeholders are fairly treated and the community perceives the business entity as an agent enriching their lives and environment.

CSR in India - The need for CSR in India was appropriately summed up by the Prime Minister Manmohan Singh in 2007 in a landmark speech which later came to be known as the Prime Minister's Ten Point Charter. It sets out the basis of the CSR guidelines that came were issued by the government later on. The charter is concise and provides effective guidance on the basics of developing a CSR policy.

The purpose of the CSR policies is to encourage businesses to contribute towards helping the society meeting its broader goals. Further, the policies encourage the business to develop a culture of responsibility towards its immediate surroundings and the general ecosystem. Broadly speaking, the content of the policies relates to treatment of labourers, employment of persons from under-privileged and backward sections, relationship of the business with the environment (e.g. discharge of wastes, pollutants, recycling, etc.), discouragement of corruption and anti-competitive practices, protection of human rights, etc. The principles are addressed in detail below. For some companies, CSR practices have been translated into binding provisions of law under the Companies Act 2013 – let us study these provisions first.

Test Your Skills Now!
Take a Quiz now
Reviewer Name