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  • Legis Scriptor

Corporate Social Responsibility: An Ex plainer


Authored by Shubhangi Sahu


Keywords: Corporate Social Responsibility, CSR, Companies Act 2013, Business organizations, Companies, Ethical, Philanthropic.


Abstract

Corporate Social Responsibility refers to an obligation on business organizations to protect and preserve the environment, promote human welfare, and work within the framework of the laws. The idea and values of CSR can be traced back to ancient India. However, with the motive of profit maximization, these ideas started losing their values which required its codification under the law to make it a legal duty and abiding on all business organizations.


Introduction

Corporate Social Responsibility may be defined as an obligation of companies and businessmen to protect and preserve the value and norms of the society in which they operate. Society makes a business successful as from the production to distribution to the consumption of goods and services, nothing can be done in isolation and every aspect and process of the business requires the involvement of individuals from the society, it also requires goods and resources from the environment, thus it becomes a duty of every businessman to give back to the society and environment. This ethical duty may be termed as Corporate Social Responsibility.


The World Business Council for Sustainable Development in its publication Making Good Business Sense by Lord Home and Richard Watts, says:

“CSR is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the community and society at large.”[i]


Scope of Corporate Social Responsibility

CSR is often understood as a responsibility towards environment protection and philanthropic activities but can it be extended beyond these two types, this has been answered by Carroll Archie in “The Pyramid of Corporate Social Responsibility”, where responsibilities have been divided into four kinds, namely, legal, economic, ethical and philanthropic.[ii]


Legal Responsibility: Society has sanctioned businesses to earn profits but along with that it is the responsibility of companies and businessmen to operate their business within the framework of laws and regulations promulgated by different tiers of the government.


Economic Responsibility: Historically, the business organizations were designed as economic entities to provide for goods and services with a primary objective of profit earning. The idea of profit earning was later transformed to maximized profit, thus, economic objective or responsibility is one of the major responsibilities of these organizations.


Ethical Responsibility: This includes standards, norms, values which are regarded as just, fair, and moral by the consumers, stakeholders, employees, and the whole community.


Philanthropic Responsibility: These include all those activities which are done for human welfare or goodwill. All acts, programs, and initiatives taken for the welfare of the community are part of philanthropic responsibilities, obliging these responsibilities makes business organizations good corporate citizens.

History of CSR

The concept of Corporate Social Responsibility may be new to India but the ideas or values imbibed in it can be traced long back in Indian history. The business was viewed as a legitimate and crucial part of Vedic philosophy. The good of others has always been considered as ethical behavior. Also, the Vedic period worshiped trees, sun, and the environment had great importance, protecting and preserving the environment was a duty of people.


But the concept was very well emphasized during the Mauryan empire, through the book on administration, Arthashastra written by Chanakya or Kautilya. He talked about the duties of King, the conduct of business, and duty to protect weaker sections of society. The king's duty to protect and promote welfare, the way of doing effective administration were all talked about. This book even emphasized about the welfare of prisoners and also showed concern of Kautilya towards animals. Thus, it is evident from the history that the idea of CSR has always been followed by Indian culture. [iii]


Corporate Social Responsibility in Indian Laws

Section 135 of the Companies Act, 2013 deals with Corporate Social Responsibility and encapsulates various guidelines that will regulate this responsibility, who all are entrusted with this responsibility as well as the formation and activities of the committee.


The section provides for three categories, which includes companies having

The net worth of 500 crores or more;

Turnover of 1000 crore or more or;

Net profit of 5 crores or more during the immediately preceding financial year.


All these companies shall constitute a committee of the Board consisting of 3 or more directors where at least one shall be an independent director. Activities of the committee {Section 135(3)} would include formulating and recommending Corporate Social Responsibility Policy indicating activities to be undertaken by the company, recommending the amount of expenditure to be incurred on the Policy, and monitoring the Company' Policy from time to time.

The second proviso of Section 135(5) specifies that any failure on spending the amount should be given in the report along with the reasons for not spending.[iv]


CSR Initiatives in India

Tata Chemicals Ltd: The company spent 25.68 crores for improving quality of life and fostering sustainable and integrated development of the communities.[v]


Infosys Ltd: The company spent 342 crores on various schemes of Corporate Social Responsibility. he major works of the Foundation included the introduction of Aarohan Social Innovation Awards, restoration of water bodies in Karnataka, supporting the construction of a metro station in partnership with Bangalore Metro Rail Corporation Limited, and so on.[vi]


Reliance Industries Ltd: Reliance spent 904 crores on CSR programs, in the areas of rural transformation, health, education, sports for development, disaster response, urban renewal, etc.[vii] [viii]


Conclusion

CSR is social responsibility or an ethical duty that is endowed on business organizations as they are sanctioned by society which makes it a duty to pay back to society. However, many organizations have tried to ignore these responsibilities to make more money without spending it for social good. Thus, the inclusion of CSR in legislation is a good step. As we all know that we have already done enough harm to nature and industries and factories are responsible for a larger amount of pollution, thus it is the need of the hour that these business organizations understand the seriousness of the situation and contribute to protect and preserve the environment.

Reference:

[i] Sushma Bareja, “Corporate Social Responsibility — A Key for Better Corporate Governance” (2005) 4 Chartered Secretary 374. [ii] Carroll Archie, “The Pyramid of Corporate Social Responsibility: Toward the Moral Management of Organizational Stakeholders”, in Andrew Crane, Dirk Matten and Laura J Spence (Eds.), Corporate Social Responsibility: Readings and Cases in a Global Context, (Routledge, London 2008) [iii] www.soulace.in [iv] Section 135 of Companies Act, 2013 [v] www.tatachemicals.com [vi] www.infosys.org [vii] www.ril.com [viii] thecsrjournal.in