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Corporate Social Responsibility

Subject: Business Environment
Submitted By: Ronik Passwala (07)
Jigar Vaghela
Vaibhav Shah (64)
Chirag Rathod
Mayank Patel (13)
Submitted To: Ms Kruti Bhatt
MBA Sem-2, Division-B

Department of Business and Industrial Management (DBIM), VNSGU, Surat.

-1-

Introduction
The 21st century is characterized by unprecedented challenges and opportunities,
arising from globalization, the desire for inclusive development and the imperatives of
climate change. Indian business, which is today viewed globally as a responsible
component of the ascendancy of India, is poised now to take on a leadership role in the
challenges of our times. It is recognized the world over that integrating social,
environmental and ethical responsibilities into the governance of businesses ensures their
long term success, competitiveness and sustainability. This approach also reaffirms the
view that businesses are an integral part of society, and have a critical and active role 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 as companies with effective CSR, have
image of socially responsible companies, achieve sustainable growth in their operations
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 for millennia. India's ancient
wisdom, which is still relevant today, inspires people to work for the larger objective of the
well-being of all stakeholders. These sound and all-encompassing values are even more
relevant in current times, as organizations grapple with the challenges of modern-day
enterprise, the aspirations of stakeholders and of citizens eager to be active participants in
economic growth and development.
The idea of CSR first came up in 1953 when it became an academic topic in
HR Bowens Social Responsibilities of the Business. Since then, there has been
continuous debate on the concept and its implementation. Although the idea has been
around for more than half a century, there is still no clear consensus over its definition.
One of the most contemporary definitions is from the World Bank Group, stating,
"Corporate social responsibility is the commitment of businesses to contribute to
sustainable economic development by working with employees, their families, the local

-2community and society at large, to improve their lives in ways that are good for business
and for development."

Corporate Social Responsibility Voluntary Guidelines 2009

In order to assist the businesses to adopt responsible governance practices, the
Ministry of Corporate Affairs has prepared a set of voluntary guidelines which indicate
some 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 as well as the expectations of the society. The valuable suggestions
received from trade and industry chambers, experts and other stakeholders along with the
internationally prevalent and practiced guidelines, norms and standards in the area 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 aligned with its business goals. The policy should be framed with the
participation of various level executives and should be approved 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. They should develop
mechanism to actively engage with all stakeholders, inform them of inherent risks and
mitigate them where they occur.

-32. Ethical functioning:

Their governance systems should be underpinned by Ethics, Transparency and
Accountability. They should not engage 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 the dignity of employees. They should provide all employees with
access to training and development of necessary skills 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 of labour, have an effective
grievance redressal system, should not employ child or forced labour and provide and
maintain equality of opportunities without any discrimination on any grounds in recruitment
and during employment.
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 manage natural 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, promoting efficient 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 economic and social development of communities and
geographical areas, particularly in the vicinity of their operations. These could include:

-4education, skill building for livelihood of people, health, cultural and social welfare etc.,
particularly targeting at disadvantaged sections of society.

Implementation Guidance:

The CSR policy of the business entity should provide for an implementation strategy

1.

which should include identification of projects/activities, setting measurable physical

targets with timeframe, organizational mechanism and 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 social development.
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.
Companies should allocate specific amount in their budgets for CSR activities. This

2.

amount may be related to profits after tax, cost of planned CSR activities or any other
suitable parameter.
To share experiences and network with other organizations the company should

3.

engage with well established and recognized programmes/platforms which encourage

responsible business practices and CSR activities. This would help companies to
improve on their CSR strategies and effectively project the image of being socially
responsible.
The companies should disseminate information on CSR policy, activities and progress

4.

in a structured manner to all 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 analyse the spending of CSR by various firms
and private companies and such information is not maintained at government level, even

-5among the top 100 firms by revenue, there are many who dont report their CSR spends or
even declare the social causes they support, that is because they are not required to do so
by law and no provisions for CSR exists in the Companies Act, 1956 so currently the
Ministry does 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 company having 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 more Directors,
including at least one Independent Director, to recommend activities for discharging
corporate social responsibilities 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 by companies in their CSR Policies:(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
(ix)

Eradicating extreme hunger and poverty;

Promotion of education;
Promoting gender equality and empowering women;
Reducing child mortality and improving maternal health;
Combating human immunodeficiency virus, acquired immune deficiency syndrome,
malaria and other diseases;
Ensuring environmental sustainability;
Employment enhancing vocational skills;
Social business projects;
Contribution to the Prime Ministers National Relief Fund or any other fund set by the
Central Government or the State Governments for socio-economic development

-6and relief and funds for the welfare of the Scheduled Caste, the Scheduled Tribes,
other backward classes, minorities and women; and
(x)

such other matters as may be prescribed.

The Companies Bill, 2012, Clause 135 also provides for constitution of a CSR

Committee of the Board. The CSR Committee is required to;

(a)

Formulate and recommend to the Board, a CSR Policy which shall indicate the
activities to be undertaken by the company as specified in Schedule VII;

(b)

Recommend the amount of expenditure to be incurred on the activities referred to in

clause (a); and

(c)

Monitor the Corporate Social Responsibility Policy of the company from time to
time.
The data pack compiled by CSR identity.com together with Forbes India is revealing

to some extent how much each company will have to fork out on CSR when they will
bound by law and their actual spending for the financial year 2012. The data is given in
Annexure -I.
Guidelines on CSR for Public Enterprises
The Department of Public Enterprises had issued Guidelines on Corporate Social
Responsibility (CSR) for CPSEs in April, 2010 which have been issued formally to the
Ministries/Departments for compliance in the Central Public Sector Enterprises (CPSEs)
under their administrative control. Following are the salient features of guidelines on CSR
& Sustainability:
(i)

Corporate Social Responsibility and Sustainability is a companys commitment to its

stakeholders to conduct business in an economically, socially and environmentally
sustainable manner that is transparent and ethical.

-7(ii) In the revised guidelines, CSR and Sustainability agenda is perceived to be equally
applicable to external and internal stakeholders, including the employees of a
company, and a companys corporate social responsibility is expected to cover even
its routine business operations and activities. CPSEs are expected to formulate
their policies with a balanced emphasis on all aspects of CSR and Sustainability equally with regard to their internal operations, activities and processes, as well as
in their response to externalities.
(iii) In the revised guidelines CSR and Sustainable Development have been clubbed
together in one set of guidelines for CSR and Sustainability because of close
linkage between the two concepts.
(iv)

Public Sector enterprises are required to have a CSR and Sustainability policy
approved by their respective Boards of Directors. The CSR and Sustainability
activities undertaken by them under such a policy should also have the
approval/ratification of their Boards. Within the ambit of these guidelines, it is the
discretion of the Board of Directors of CPSEs to decide on the CSR and
Sustainability activities to be undertaken.

(v) The financial component/budgetary spend on CSR and Sustainability will be based
on the profitability of the company and shall be determined by the Profit After Tax
(PAT) on the company in the previous year.
PAT of CPSES in the Previous year
(i)

Less than Rs. 100 crore

Range of the Budgetary allocation

for CSR and Sustainability activities
(as % of PAT in previous year)
3%-5%

(ii) Rs. 100 crore to Rs. 500 crore

2%-3% (iii)

Rs. 500 crore and above

1%-2%

All CPSEs shall strive to maximize their spending on CSR and Sustainability
activities and move towards the higher end of their slabs of budget allocation.

-8(vi) Loss making companies are not mandated to earmark specific funding for CSR and
Sustainability activities. However, they must pursue CSR and Sustainability policies
by integrating them with their business plans, strategies and processes, which do
not involve any financial expenditure. They may also collaborate with the profit
making CPSEs and assist them in ingenious ways without financial support in CSR
and Sustainability activities.
(vii) Mandatory compliance with legal requirement/rules/regulations/laws in letter and in
spirit will be covered under CSR and Sustainability activity. However, expenditure
on such activities would not be covered by CSRs financial component and would
be considered as mainstream business spend.
(viii) The unutilized budget for CSR activities planned for a year will not lapse and will,
instead, be carried forward to the next year. However, the CPSEs will have to
disclose the reasons for not fully utilising the budget allocated for CSR and
Sustainability activities planned for each year. The unspent amount will have to be
spend within the next two financial years, failing which, it would be transferred to a
Sustainability Fund to be created separately for CSR and Sustainability activities.
(ix) From amongst these beneficiaries of CSR and Sustainability spend (financial
component) of a company, the stakeholders directly impacted by its operations and
activities can rightfully stake a claim for attention before others. Such stakeholders
are generally located in the periphery of commercial operations of a company. The
corporate social responsibility of a company towards these stakeholders extends
beyond its legal obligation to compensate for, and ameliorate the impact of its
commercial activities.

For this reason, CPSEs must accord priority to these

stakeholders and undertake CSR and Sustainability projects in the periphery of its
commercial operations on priority.
(x) CPSEs are expected to take initiative to promote welfare of employees and labour
by addressing their concerns of safety, security, professional enrichment and

-9healthy working conditions, whether mandated or otherwise. However, expenditure

on mandated activities cannot qualify for CSRs financial components.
(xi) Although CPSEs may select their CSR and Sustainability projects from a vast range
of available options, priority should be accorded to activities pertaining to (i)
inclusive growth of society, with special attention to the development of weaker
sections of society and the backward districts of the country, and (ii) environment
sustainability. CSR and Sustainability initiatives should focus on capacity building,
skill development and infrastructural development for the benefit of the marginalised
and under privileged sections of the local communities and also in the backward
regions so that avenues are created for their employment and income generation,
and they also experience empowerment and inclusion in the economic mainstream.
Weaker sections would include SC, ST, OBC, minorities, women and children, BPL
families, old and aged, physically challenged, etc.
(xii) It is mandatory for CPSEs to take up at least one major project for development of a
backward district as identified by the Planning Commission for its Backward Region
Grand Fund (BRGF) Scheme, and one major project for environment sustainability.
For Maharatna CPSEs, it is mandatory to take up one more major project in either
of the two categories.
(xiii) A Board level committee headed by either the Chairman and / or Managing
Director, on an Independent Director would assist the Board of Directors to
formulate CSR and Sustainability policies and oversee the implementation of CSR
and Sustainability projects/activities by the CPSE.
(xiv) There is emphasis on internalizing the philosophy and spirit of CSR and
Sustainability within the organizational culture and ethos. The philosophy and spirit
of corporate social responsibility and sustainability should get embedded in the core
values of all the CPSEs, be imbibed by the employees at all levels and it should
permeate into all the activities, processes, operations and transactions of the
enterprise. Corporate enterprises professing to behave responsibly are expected to

-10produce goods and services that are safe and healthy for the consumers and the
environment, with reduced cost to the company in the long run.
(xv) 5 per cent of the annual budget for CSR and Sustainability activities has to be
earmarked for Emergency needs, which would include relief work undertaken during
natural calamities/disasters, and contributions towards Prime Ministers / Chief
Ministers Relief Funds.
(xvi) Ethical conduct of business lies at the core of responsible business. To promote
organizational integrity it is essential that premium is placed on individual probity of
employees; transparency in all activities, dealing and transactions is encouraged;
unethical, corrupt and anti-competition practices are discouraged temptation of
quick returns and marginal gains in business through questionable means is
resisted; and, position and situations that give rise to possible conflict of interest are
avoided.
(xvii) Sustainability reporting and disclosure of all CSR and Sustainability activities
undertaken by a CPSE is mandatory.

By reporting transparently and with

accountability, public sector companies can gain and reinforce the thrust of the
stakeholders. This, in turn, would provide a powerful stimulus to their CSR and
Sustainability policies and agenda, and motivate them to pursue them with greater
vigour.
As per the above guidelines on CSR issued by the Department of Public
Enterprises (DPE) in April, 2010, all profit making Central Public Sector Enterprises
(CPSEs), including Maharatna CPSEs are required to select CSR activities which are
aligned with their Business strategy and to undertake them in a project mode. CPSEs are
mandated to spend their funds on CSR projects selected by them with the approval of their
respective Boards. All profit making CPSEs are required to allocate budget mandatorily
through a Board Resolution as percentage of net profit (previous year) in the following
manner:

-11PAT of CPSES in the Previous year

(i)

Less than Rs. 100 crore

Expenditure range of CSR in a Financial

Year (% of profit)
3%-5%

(ii) Rs. 100 crore to Rs. 500 crore

2%-3% (subject to a Minimum of Rs. 3 Crore )

(iii) Rs. 500 crore and above

0.5%-2%

Loss making CPSEs are not mandated to earmark specific funding for CSR
activities. CSR Budget is fixed for each financial year and this fund does not lapse. It is
transferred to a CSR funds in which it accumulates. Implementation of CSR activities of
CPSEs is monitored by the administrative Ministries/Departments of concerned CPSEs.
States/UT/PSU-wise information of CSR work undertaken by the CPSEs, including
Maharatna CPSEs and the number of persons benefited therefrom, is not maintained
centrally in the Department of Public Enterprises. Information furnished by Maharatna and
Navratna CPSEs on total funds allocated for CSR and the funds utilized for the year 201011 and 2011-12 is given in the Annexure-II. CPSEs are free to take up CSR Projects for
upliftment of weaker sections and backward districts.

Conclusion
The exact provisions of the Companies Bill, 2012 are still being debated. Once the
Bill is passed in Rajya Sabha, detailed rules would give effect to the provisions of voluntary
guidelines issued in 2009 to Corporate Sector (Private Companies), then Companies
would be bound by legal provisions to implement Corporate Social Responsibilities. In
case of public sectors, revised guidelines on CSR and sustainability are being
implemented from 1 April 2013,

as a commitment of the CPSEs to their stakeholders to

conduct business in an economically, socially and environmentally sustainable manner.

-12-

Notable Work by Some Companies

Ashok Leyland
Operates a FunBus in Chennai and New Delhi. This bus, equipped with a hydraulic lift,
takes differently abled children and those from orphanages and corporation primary
schools on a days picnic. The company also runs AIDS awareness and prevention
programmes in its Hosur factories for about 3.5 lakh drivers.
Axis Bank
The Axis Bank Foundation runs Balwadis which are learning places for children living in
large urban slum clusters. It also conducts skill development programmes (PREMA and
Yuva Parivartan) in motor driving, welding, mobile repairing, tailoring etc., for the youth in
backward districts.
Bharat Petroleum Corporation
Its rain water harvesting project Boond, in association with the Oil Industries Development
Board, selects draught-stricken villages to turn them from water-scarce to water-positive.
Some of BPCLs other social programmes include adoption of villages, prevention and
care for HIV/AIDS and rural health care.

Indian Oil Corporation

It runs the Indian Oil Foundation (IOF), a non-profit trust, which works for the preservation
and promotion of the countrys heritage. IOCL also offers 150 sports scholarships every
year to promising youngsters. Some of its other initiatives lie in the domains of clean
drinking water, education, hospitals and health care.

-13Infosys
The Infosys Science Foundation, set up in 2009, gives away the annual Infosys Prize to
honour outstanding achievements in the fields of science and engineering. The company
supports causes in health care, culture and rural development. In an interesting initiative
undertaken by it, 100 school teachers in Karnataka, who were suffering from arthritis,
underwent free surgery as a part of a week-long programme.
Mahindra & Mahindra
Nanhi Kali, a programme run by the KC Mahindra Education Trust, supports education of
over 75,000 underprivileged girls. The trust has awarded grants and scholarships to
83,245 students so far. In vocational training, the Mahindra Pride School provides
livelihood training to youth from socially and economically disadvantaged communities.
M&M also works for causes related to environment, health care, sports and culture.
Oil & Natural Gas Corporation
It offers community-based health care services in rural areas through 30 Mobile Medicare
Units (MMUs). The ONGC-Eastern Swamp Deer Conservation Project works to protect the
rare species of Easter Swamp Deer at the Kaziranga National Park in Assam. ONGC also
supports education and women empowerment.
Tata Steel
It comes out with the Human Development Index (HDI), a composite index of health,
education and income levels, to assess the impact of its work in rural areas. Health care is
one of its main concerns. The Tata Steel Rural Development Society aims to improve
agricultural productivity and raise farmers standard of living.