1.

1 Background of the Topic

Corporate social responsibility (CSR) is the obligation by corporates to maintain financial

performance and to ensure quality of life of their employees there for community and
society getting very large value international wise as organizational tool and societal
activity. Organizations are actively engaged in other than focusing on the financial platform
and focus on the business decision that affect the society and environment. Corporate social
responsibility include variety of activities and practices ranging from donating to charitable
trusts to those business strategies that assembling human right and employee problems.
Socially supporting practices of organizations differs based on industry, sector and nation in
which they do business.

Corporate Social Responsibility (CSR) is defined as a operating strategy in doing business

in the model that equate the ethical, legal commercial and public expectation in reference
with business. CSR has become important to Indian corporates because they got to know
that it is important to meet the trustworthy and social relationship with the society while
growing the business to better level. This is treated as one of the key drivers of CSR
initiatives of corporates. Corporates understanding that what is good for society,
environment and employees health is also good for the organization. Therefore CSR is also
refers to as the positive relation between organization and community as a whole. The
standard obligation of CSR is to save and grow the needs of society and international level
operations have supported to enlarge the importance of CSR globally. Now days the
importance of CSR is no more limited to organization itself but it also influence their other
stakeholders as well.

Globalization start influencing the world from nineties onwards since the breaking of the
former soviet union and the ending of the cold war. Globalization give a way economies
world wide and gave the scope of investing in any part of the world and it also offered
developing countries to involve globally in “ socio-economic cultural affairs”. Open up a
larger acces to the developed country’s market and same time transfer of technology helped
for the higher productivity and improved standard of living. But same time the process of
globalization rises the challenges of inequality inside and outside the nations, unhealthy
competition among corporates and other environmental issues , to reduce or overcome these
challenges the globalization emerge the concept and practice of corporate social
responsibility (CSR).
The corporate sector has a important role in ensuring the movement of private investment to
the backword areas looking for the development process so far and also to help for the
sustainable development of rural areas as a whole. The perceptual view of corporates in the
society where it works has been changed due to the consequences and problems arise
because of globalization , corporates starts consider them as a important part of the
community and act in accordance with social responsibility other than financial performance
or results. It gave a way of shift from purely profit to profit with social responsibility.

Origin and History of Corporate Social Responsibility

Origin of CSR Concept

The importance of the concept of CSR has largely identified in the recent decades but its
core idea can be found through history. In the 18 th century organizations identified the need
of having a well efficient workforce and the lack of food availability, shelter and medical
cares made a negative impact on the employees. All those facilities and subsidized food
that viewed as philanthropic development was actually given out of self-interest. Thus it
gave a way to people in the 18th Century to see positive economic aftereffects of CSR
initiatives.

The history of CSR remarks the different stages through which business leaders has come
across to define CSR and they have faced many problems while defining and
conceptualizing the concept of CSR. America and Europe emerged as a result of world war
II and challenged tensions of cold war and started thinking about “business and the future
course of the economic system in the West intensified”.

The history of social and environmental concerns regarding business is old as business and
trade. “Commercial logging operations and law to protect forest ” can be taken as example
and both identified back approximately 5000 years . In the early twentieth century The
“corporate paternalists” made use of some of their savings to help philanthropic activities
in community they belong. In 1920’s one discussion about social responsibility of business
has emerged this is recognized as the beginning of the “modern CSR movement”.

In the words of Archie B Carrolls the evolution of the concept that we known today as
“Corporate social responsibility” came across long and wide history, mostly it is treated as
the output of 20th century, mostly from the beginning of 1950 to present. The present
growth and reach of the term can found for centuries indication of the “business
community’s concern for society” and we can also consider the “Industrial Revolution of
1800s as a staring point for the need of discussion”. We can also consider the changes in
the activities of organizations has taken place to implement these new social responsible
initiatives and it has become completely institutionalized in the present . and many firms
have integrated the term CSR with “strategic management and corporate governance.” It
included development of management and other mechanism to control and coordinate the
“business’s socially conscious policies and practices”. And it will also become important
that the series of stakeholders and issues that significant CSR has extended , Particularly in
the previous numerous decades.
Social responsibility is largely seen a product of 20 th century particularly in the past 50
years and so , it is possible to see the evidence of CSR globally, apparently in developed
countries. In the previous decade, though, Europe has become fascinated with CSR and
there are considerable evidence to prove that professors and experts in Europe considered
the term CSR seriously in the form of writeups, projects etc. recently Asian countries has
increased their attention towards CSR practices and policies. And it is also noted that CSR
and other associated representations have been thought and practice in number of other
countries as well. And background shows that the history of the CSR is primarily focus on
countries like USA and Europe.

History of CSR in India:

many business houses believe that the role of business in society should not be limited to
creation of wealth for its owners and promoters but also for the larger society. The early
pioneers of Indian Industry, whether TATAs, Birlas, or Bajajs, firmly believed in the
concept of social responsibility of business. The founder of TATA Steel, Jamshedji
Nusserwanji Tata expressed in his speak in 1903: “We generate wealth for the Nation.
What comes from the people must, to the extent possible, therefore, get back to the people”.
Gandhiji went on to elaborate this concept further by emphasizing the moral responsibility
of business through his idea of Trusteeship. He viewed owners of capital, as Trustees
holding resources on behalf of the society, which to produce goods and services, will
benefit society, at large. The founder of Bajaj group, Shri Jamnalal Bajaj said: “Our wealth
should be utilised for improving the quality of the society and the nation. We should never
fail to spend at least a portion of our incomes on the social, economic and educational
development of the province where we live.”
Development of CSR in four stages:

development of CSR in India can be divided into four main phases. These phases parallel
to India’s historical development and resulted in different CSR practices must be regarded
as an analytical tool. However, it is not static; rather features of one phase can also be
observed in the others, as is particularly evident from the last phase.
Figure 1.1: Four Phases of CSR Development in India

Source: Tatjana Chahoud et.al, (2007)

First phase: CSR motivated by charity and philanthropy: The first phase of CSR is
predominantly determined by culture, religion, family tradition, and industrialization.
Under colonial rule, Western types of industrialization reached India and changed CSR
from the 1850s onwards. The pioneers of industrialization in the 19th century in India were
a few families such as the Tata, Birla, Bajaj, Lalbhai, Sarabhai, Godrej, Shriram,
Singhania, Modi, Naidu, Mahindra and Annamali, who were strongly devoted to
philanthropically motivated CSR. The early pioneers of industry in India were leaders in
the economic, as also in the social fields. Nevertheless, it has been pointed out that their
engagement was not only altruistic and stimulated by religious motives: It had business
considerations in supporting efforts towards industrial and social development of the nation
and was influenced by caste groups and political objectives
Second phase: CSR for India’s social development: The second phase of Indian CSR
(1914-1960) was dominated by the country’s struggle for independence and influenced
fundamentally by Gandhi’s theory of trusteeship, the aim of which was to consolidate and
amplify social development. During the struggle for independence, Indian businesses
actively engaged in the reform process. Not only did companies see the country’s
economic development as a protest against colonial rule; they also participated in its
institutional and social development (India Partnership Forum 2002). The corporate
sector’s involvement was stimulated by the vision of a modern and free India. Gandhi
introduced the notion of trusteeship in order to make companies the “temples of modern
India”:

Third phase: CSR under the paradigm of mixed economy: The paradigm of the “mixed
economy,” with the emergence of Public Sector Units it and ample legislation on labour
and environmental standards, affected the third phase of Indian CSR (1960- 1980). This
phase is also characterized by a shift from corporate self-regulation to strict legal and
public regulation of business activities. Under the paradigm of the “mixed economy”, the
role of the private sector in advancing India receded. During the Cold War, India decided
to take a third course between capitalism and communism. In this scenario, the public
sector was seen as the prime mover of development. The 1960s have been described as an
“era of command and control”, because strict legal regulations determined the activities of
the private sector.

Fourth phase: CSR at the interface between business and society: In the fourth phase
from 1980 until the present) Indian companies and stakeholders began abandoning
traditional philanthropic engagement and, to some extent, integrated CSR into a coherent
and sustainable business strategy, partly adopting the multi- stakeholder approach. In the
1990s, the Indian government initiated reforms to liberalize and deregulate the Indian
economy by tackling the shortcomings of the “mixed economy” and tried to integrate India
into the global market. Consequently, controls and license systems were partly abolished,
and the Indian economy experienced a pronounced boom, which has persisted until today.

1.2 Need and Importance of the Topic

This research study is significant as it enable to find the employees perception about CSR
activity and to find the factors influence them to participate in those activity. It also helps
companies to identify the factors which influence employees to participate in CSR
activities and to know about employees perception toward CSR activity. This study also
contribute important knowledge to society by creating a awareness among the respondents.

The importance of corporate social responsibility has been on the increase, making it a
must for companies to have corporate social responsibility activities in order to sustain
their business . Corporate social responsibility can be of strategic importance as well. A
company can use CSR as a strategy to build brand image and raise its profile in the
customers’ mind. To do this effectively, the activity done should work closely with the
company’s core competencies and core values. Environmental policies are also included as
part the CSR activity as well. This means that these firms contribute in saving and
preserving the environment by performing green operations in their firms . Another
importance of CSR will be its relationship with customers. Recent research studies suggest
that there are positive relationships between a firm's CSR actions and the consumers'
attitudes towards the particular company and its products. CSR activities can bring
numerous benefits to the firms. These benefits can go beyond the reputation-building stage
where the CSR activities can allow the development of valuable organizational capabilities
in the firms. Firstly, CSR created the benefit by increasing customers' identification
relationship with the corporation, which is also known as customer-corporate (C-C)
identification. C-C identification is a degree of overlapping in a consumer's self-concept
and his perception of the company . Cause-related efforts can also be another CSR effort
that can allow firms earn profits, at the same time doing good to the society. This can be
achieved by creating cause-related projects frequently, which will then build long term
customer relationships such as customer loyalty, brand equity and trust from the customers.

1.3 Theoretical Implication

CSR can also be refers to as the willingness of the organization to use the resources for the
broad interests of the society and not for accomplishing private and firm goals alone and
the protection and development of public wealth besides meeting the organization’s
interest is included in the responsibilities of the decision makers. When we look into a
comprehensive way CSR did not limit the responsibilities of business to profit earning and
compliance to state laws but included economic, legal, ethical and unrestricted
expectations of society which it has from the organization at a given point in time. While
concept of CSR is that business and society are not self-governing entities but are
connected with each other and it is the participation of the organization with the public
through its practices and delivery of corporate resources to achieve their well-being.
1.3.1 Theories of Corporate Social Responsibility
Corporate social responsibility is a multidimensional concept with various meanings,
suggestions and applications. The thought of CSR has been approached by researchers
across the sphere with differing ideas which has bestowed to the literature on the
connection of business and society. The literature has grown significantly and today
contains a great propagation of theories, approaches and jargons
Neo-Classical Theory of Corporate Social Responsibility

A conservative view of the part of company is that it is a highly adapted economic entity
intended to make profits and legitimatized by the laws leading incorporated business . It is an
approach which reinforces the view that the only duty of business is to exploit shareholder
value. Also discussed to as an instrumental theory is an style based on the neo classical
economic theory which defines social responsibility of business in a limited sense of making
profits for the owners. Friedman (1970) declared that the only responsibility of business is to
use its resources and involve in those activities which increase its profits employed within the
norms laid down by the society. According to him managers are agents of the owners and are
required to conduct business in ways which are dependable with their curiosity and it would
be unprincipled on part of the managers to spend shareholders money on socially responsible
activities. Thus the social concerns should be left to the care of the governments .

But this theory of corporate responsibility is not free from limits and is thin in its approach as
it eliminates important stakeholders—including workers, contractors, customers and society
from the purview of business responsibility. Adam Smith, the pioneer of the shareholder
oriented responsibility theory has highlighted that though the main thought in business
decision making should be shareholder value maximization, the interest of other stakeholder
must not be adversely affected. As satisfying the interest of other stakeholders contributes to
maximising shareholder value. Hence shareholders interest should not be the only concern of
business.

Stakeholder Theory of Corporate Social Responsibility

The term stakeholder states to those individuals or groups that have an attention in the
organization and are exaggerated by its activities. These stakeholders include “customers,
employees, suppliers, and shareholders” which are categorised as primary stakeholders while
secondary stakeholder groups include “government, competitors, regulatory agencies, trade
unions, NGOs and political activists”. These stakeholders are initiate to be having a
substantial effect on the survival of an organization. Managers have a ethical responsibility to
consider and suitably equate the comforts of all stakeholders. An alternative to the
shareholder theory, “this approach makes it explicit that the firm has material and/or moral
reasons to consider its relationship with more than just investors”

The theory provides a basis which explains that how managing stakeholder concerns
effectively can have a positive influence on the firms profitability . The theory is based on the
properties that the business should act reliable with the ethical and lawful rights of the
stakeholders and this basis is observed as the moral principal of business responsibility. And
business which do not act reliable with this moral principal face great consequences and other
difficulties such as “deterioration of relationship, damage to reputation, declining
productivity, creativity, loyalty, ineffective information flow throughout the organisation and
absenteeism”. In this sense the stakeholder approach is conflicting to the shareholder oriented
approach which is a narrow approach as it concentrated only the tasks business has towards
the stockholders, while stakeholder approach is wider in sense as it is worried with the active
management of business setting, relationships and promotion of shared interest in the
promotion of business strategies. Corporates which fail to include the apprehensions of their
primary stakeholders within their strategy put their long-term survival at risk. Hence
organisations must work to achieve its economic motives while simultaneously satisfying
effectively legitimate claims of the stakeholders.

The stakeholder theories classified into three groups: “descriptive, instrumental and
normative”. Descriptive theories are those which define and explain specific corporate
features and behaviour. Instrumental theories establish a framework for evaluating the
connection if there exists any between the practice of stakeholder management and corporate
performance goal of profitability primarily. While normative are concerned with decisive the
responsibilities of the businesses to their stakeholders. The instrumental approach to
responsibilities look upon companies as an instrument for wealth formation alone and the
social performance is regarded as a means to achieve this end. This approach does not need
without the interest of the stakeholders from business attention but declares that satisfaction
of stakeholder interests contribute to the shareholder value maximization. Normative
approach on the other hand is observed as the premises on which the stakeholder theory is
based. The emphasis of this approach is on the moral necessities which strengthen the
business and society relationship. The fundamental acceptance of this theory is that all
stakeholders have intrinsic value and no stakeholder has priority of interest over other
stakeholders.

1.3.2 Approaches to CSR

Based on Carroll’s conceptualisation of CSR, there are three approaches to CSR: Ethical,
Altruistic and Strategic.

 Ethical CSR:
Includes those morally mandatory obligations which go beyond economic and legal
responsibilities of business. These responsibilities are not mandated by law but expected by
society from business such as respecting people, avoiding social harm and preventing social
injury even if it might not benefit business. This approach requires from business to solve
problems they create or avoid harms they can potentially cause .

 Altruistic CSR:
It refers to the philanthropic or discretionary responsibilities of the business and involves
contributing to the good of the society even if it entails sacrifice on part of business. These
obligations go beyond ethical ones and require sacrifice of time and resources to alleviate ills
within a community or society. These responsibilities reflect on the social contract that exists
between business and society whereby firms agree to be good stewards of the society’s
resources .

 Strategic CSR:
Strategic CSR involves those community related initiatives of the company which have
implications for the long term success of business. It includes fulfilling those philanthropic
responsibilities which benefits the firm through publicity and goodwill. In strategic CSR,
companies contribute to their constituencies not only because it is a right thing to do but also
in their best financial interest which is the ultimate responsibility to the stockholders .

1.3.3 CSR amendments under the Companies (Amendment) Act, 2019

Until now, if a company was unable to fully spend its CSR funds in a given year, it could
carry the amount forward and spend it in the next fiscal, in addition to the money allotted for
that year.

The CSR amendments introduced under the Act now require companies to deposit the
unspent CSR funds into a fund prescribed under Schedule VII of the Act within the end of the
fiscal year. This amount must be utilized within three years from the date of transfer, failing
which the fund must be deposited in to one of the specified funds. The new law prescribes for
a monetary penalty as well as imprisonment in case of non-compliance. The penalty ranges
from INR 50,000 (US$700)  to INR 2.5 million (US$35,000) whereas the defaulting officer
of the company may be liable to imprisonment for up to three years, or a fine up to
INR 500,000 (US $7,023), or both.
The government, however, is reviewing these rules after the industry objected to the strict
provisions,  especially with respect to the jail terms for CSR violations, and is yet to
operationalize them.

1.4 Recent trends related to the topic

Corporate Social Responsibility (CSR) has become an important buzz word in the business
world. The practice of CSR has evolved and matured over time. CSR now includes strategic
philanthropy, employee volunteerism, cause marketing, disaster response, peer-to-peer
fundraising, non-profit board service, and even incorporating social responsibility into core
business practices and offerings.

2019 was an action-packed year in terms of CSR. With the companies taking a proactive
interest in improving their CSR practices, and the government encouraging them by bringing
in various amendments in the CSR Act, it is being predicted that 2020 will be even more
dynamic for CSR. Following are five trends that can be expected in CSR in 2020

Focus on ESG (Environmental, Social and Governance)

More and more people are getting aware of their carbon and social footprint. And while they
themselves may not be able to indulge themselves completely in activism, they are certainly
preferring to associate with brands that have a good ethical standing in terms of their ESG
impact. ESG investment thus is no more only a philanthropic activity. It is more of a business
feature that is a must-have for the brands if they want to sustain in the competitive market.
Thus, in the year 2020, the rise in ESG investments is certain.

Increase in the use of Renewables

Climate change crisis is at its peak at present. The global community, especially the
millennials, are calling for serious climate action from the businesses. In 2019, we saw
several climate action movements including the Climate Strike at the UN.

Such movements have compelled the business community as well as the governments to
embrace renewable energy and reduce emissions. For example, in India, Cochin
Airport became the world’s first completely solar-powered airport. Japan is leading in
producing cars that use hydrogen fuel, which leaves behind only water vapour in the form of
emissions. In the USA, the state of California has passed a solar mandate, according to which
new construction homes are required to have a solar Photovoltaic system as an electricity
source from January 1, 2020. Such examples and policies across the world are set to inspire
more investment in developing, adopting and promoting renewable energy.

Transparency in Processes

Digitalisation has reduced the cases of corruption and increased transparency in the
processes. This includes processes in CSR. The rising awareness among consumers will
create a demand for more transparency in the CSR projects of a company. Thus, there will be
introspection on how 5G, AI, Blockchain Technology, etc. can be used to improve
transparency in systems. Therefore, the companies will need to provide a transparent
roadmap of activities and progress. All this will help drive collective impact.

Employees Activism

Various studies have shown that employees prefer to work for companies that believe in a
cause or has a purpose. Various other studies have also shown that indulging employees in
volunteer work for a social cause helps in getting job satisfaction and improve their retention.
In 2019, we saw that employees of popular brands such as amazon, lush, etc., participating in
Climate Strike, Pride Week, and so on. In 2020, this trend is set to increase as more number
of young people enter the workforce.

Focus on Impact

Actions speak louder than words. This is why, the consequences of the actions count more
than the intent behind it, especially in the eyes of the critical young generation. This is why
the investors in the coming year will focus more on the impact of their CSR project than on
the intent. Thus, instead of just doing philanthropic work, the companies will step forward to
have a holistic CSR strategy which will be impactful and sustainable.