CRITICAL ANALYSIS OF CORPORATE SOCIAL

RESPONSIBILITY

“CRITICAL ANALYSIS OF
CORPORATE SOCIAL
RESPONSIBILITY”

SUBMITTED TO: Prof. QAZI USMAN

(FACULTY FOR LAW)

SUBMITTED BY:

SAIF ALI

3RD YEAR, 6TH SEMESTER

ROLL NO. – 13-1734

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Acknowledgement
I would like to thank Mr. Qazi Usman for her guidance and support without which it could not
be completed. I would also like to thank my friend and librarian of faculty of law for their
support.
Thanking you,
SAIF ALI

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CONTENTS
INTRODUCTION……………………………...4

MEANING AND ORIGIN……………………..5

APPLICABILITY OF CSR…………………….6

CRITICAL ANALYSIS OF CSR……………...6

CONCERNS WITH CSR……………...……....10

CONCLUSION………………………………..12

BIBLIOGRAPHY……………………………..14

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1. INTRODUCTION
Corporate Social Responsibility is not a new concept in India, however, the Ministry of
Corporate Affairs, Government of India has recently notified the Section 135 of the Companies
Act, 2013 along with Companies (Corporate Social Responsibility Policy) Rules, 2014
"hereinafter CSR Rules" and other notifications related thereto which makes it mandatory (with
effect from 1st April, 2014) for certain companies who fulfill the criteria as mentioned under Sub
Section 1 of Section 135 to comply with the provisions relevant to Corporate Social
Responsibility. As mentioned by United Nations Industrial Development Organization
(UNIDO), 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 the expectations of shareholders and stakeholders.

Corporate social responsibility (CSR), also known as corporate responsibility, corporate

citizenship, responsible business, sustainable responsible business (SRB), or corporate social
performance, is a form of corporate self-regulation integrated into a business
model. Ideally, CSR policy would function as a built-in, self-regulating mechanism whereby
business would monitor and ensure its adherence to law, ethical standards, and
international norms. Business would embrace responsibility for the impact of their activities on
the environment, consumers, employees, communities, stakeholders and all other members of the
public sphere. Furthermore, business would proactively promote the public interest by
encouraging community growth and development, and voluntarily eliminating practices that
harm the public sphere, regardless of legality.

Essentially, CSR is the deliberate inclusion of public interest into corporate decision making,

and the honoring of a triple bottom line: People, Planet, Profit. The practice of CSR is subject to
much debate and criticism. Proponents argue that there is a strong business case for CSR, in that
corporations benefit in multiple ways by operating with a perspective broader and longer than
their own immediate, short term profits. Critics argue that CSR distracts from the fundamental
economic role of businesses; others argue that it is nothing more than superficial window-
dressing; others argue that it is an attempt to pre-empt the role of governments as a watchdog
over powerful multinational corporations. Business ethics is one of the forms of applied ethics
that examines ethical principles and moral or ethical problems that can arise in a business
environment. Business ethics can be both a normative and a descriptive discipline. As a
corporate practice and a career specialization, the field is primarily normative. In academia,
descriptive approaches are also taken. The range and quantity of business ethical issues reflects
the degree to which business is perceived to be at odds with non-economic social values In the
increasingly conscience focused marketplaces of the 21st century, the demand for more Ethical

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business processes and actions (known as ethicism) is increasing. Simultaneously pressure is
applied on industry to improve business ethics through new public initiatives and laws.

2.1 MEANING AND ORIGIN OF CSR:

The term "Corporate Social Responsibility (CSR)" can be referred as corporate initiative to
assess and take responsibility for the company's effects on the environment and impact on social
welfare. The term generally applies to companies efforts that go beyond what may be required by
regulators or environmental protection groups. Corporate social responsibility may also be
referred to as "corporate citizenship" and can involve incurring short-term costs that do not
provide an immediate financial benefit to the company, but instead promote positive social and
environmental change. Moreover, while proposing the Corporate Social Responsibility Rules
under Section 135 of the Companies Act, 2013, the Chairman of the CSR Committee mentioned
the Guiding Principle as follows: "CSR is the process by which an organization thinks about and
evolves its relationships with stakeholders for the common good, and demonstrates its
commitment in this regard by adoption of appropriate business processes and strategies. Thus
CSR is not charity or mere donations. CSR is a way of conducting business, by which corporate
entities visibly contribute to the social good. Socially responsible companies do not limit
themselves to using resources to engage in activities that increase only their profits. They use
CSR to integrate economic, environmental and social objectives with the company's operations
and growth ."

2.2 ORIGIN1
Evolution in India has a long tradition of paternalistic philanthropy. The process, though
acclaimed recently, has been followed since ancient times albeit informally. Philosophers such as
Kautilya from India and pre-Christian era philosophers in the West preached and promoted
ethical principles while doing business. The concept of helping the poor and disadvantaged was
cited in several ancient literatures. In the pre-industrialized period philanthropy, religion and
charity were the key drivers of CSR. The industrial families of the 19th century had a strong
inclination toward charity and other social considerations. However, the donations, either
monetary or otherwise, were sporadic activities of charity or philanthropy that were taken out of
personal savings, which neither belonged to the shareholders nor did it constitute an integral part
of business. During this period, the industrial families also established temples, schools, higher
education institutions and other infrastructure of public use. The term CSR itself came into
common use in the early 1970s. The last decade of the twentieth century witnessed a shift in
focus from charity and traditional philanthropy toward more direct engagement of business in

1
http://www.indiacsr.in/en/concept-of-csr/

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mainstream development and concern for disadvantaged groups in the society. In India, there is a
growing realization that business cannot succeed in isolation and social progress is necessary for
sustainable growth. An ideal CSR practice has both ethical and philosophical dimensions,
particularly in India where there exists a wide gap between sections of people in terms of income
and standards as well socio-economic status (Bajpai, 2001).7 Currently, there is an increased
focus and a changing policy environment to enable sustainable practices and increased
participation in the socially inclusive practices. Some of these enabling measures have been
illustrated in the next section of this report.

3. APPLICABILITY OF CSR:2
The companies on whom the provisions of the CSR shall be applicable are contained in Sub
Section 1 of Section 135 of the Companies Act, 2013. As per the said section, the companies
having Net worth of INR 500 crore or more; or Turnover of INR 1000 crore or more; or Net
Profit of INR 5 crore or more during any financial year shall be required to constitute a
Corporate Social Responsibility Committee of the Board "hereinafter CSR Committee" with
effect from 1st April, 2014. The pictorial representation below gives the representation of
Section 135 (1). The above provision requires every company having such prescribed Net worth
or Turnover or Net Profit shall be covered within the ambit of CSR provisions. The section has
used the word "companies" which connotes a wider meaning and shall include the foreign
companies having branch or project offices in India

4. CRITICAL ANALYSIS OF CSR:3

CSR is supposed to be win-win. The companies make profits and society benefits. But who
really wins? If there is a benefit to society, which in many cases is doubtful, is this outweighed
by losses to society in other areas of the company's operation and by gains the corporation is able
to make as a result? CSR has ulterior motives. One study showed that over 80% of corporate
CSR decision-makers were very confident in the ability of good CSR practice to deliver branding
and employee benefits77. To take the example of simple corporate philanthropy, when
corporations make donations to charity they are giving away their shareholders’ money, which
they can only do if they see potential profit in it. This may be because they want to improve their
image by associating themselves with a cause, to exploit a cheap vehicle for advertising, or to
counter the claims of pressure groups, but there is always an underlying financial motive, so the
company benefits more than the charity.

This section explores how CSR diverts attention from real issues, helping corporations to: avoid
regulation, gain legitimacy and access to markets and decision makers, and shift the ground
2
http://finance.bih.nic.in/Documents/CSR-Policy.pdf

3
ibid

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towards privatisation of public functions. CSR enables business to pose ineffective market-based
solutions to social and environmental crises, deflecting blame or problems caused by corporate
operations onto the consumer and protecting their interests while hampering efforts to find just
and sustainable solutions.

4.1 CSR as Public relation:

CSR sells. By appealing to customers' consciences and desires CSR helps companies to build
brand loyalty and develop a personal connection with their customers. Many corporate charity
tie-ins gain companies access to target markets and the involvement of the charity gives the
company's message much greater power. In our media saturated culture, companies are looking
for ever more innovative ways to get across their message, and CSR offers up many potential
avenues, such as word of mouth or guerilla marketing, for subtly reaching consumers.

CSR also helps to green wash the company's image, to cover up negative impacts by saturating
the media with positive images of the company's CSR credentials. As Deborah Doane points out
in 'From Red Tape to Road Signs', CSR enables business to claim progress despite the lack of
evidence of verifiable change. Since much of the business case for CSR depends on corporations
being seen to be socially responsible, CSR will continue to be little more than PR for as long as it
is easier and cheaper to spin than to change.

Like the iceberg, most CSR activity is invisible...It is often an active attempt to increase
corporate domination rather than simply a defensive 'image management' operation.

4.2 CSR is a strategy for avoiding regulation

CSR is a corporate reaction to public mistrust and calls for regulation. In an Echo research poll,
most financial executives interviewed strongly resisted binding regulation of companies.
Companies argue: that setting minimum standards stops innovation; that you can't regulate for
ethics, you either have them or you don't; and that unless they are able to gain competitive
advantage from CSR, companies cannot justify the cost.

Companies are essentially holding the government to ransom on the issue of regulation, saying
that regulation will threaten the positive work they are doing. CSR consultancy Business in the
Community supports corporate lobbying against regulation, arguing that 'regulation can only
defend against bad practice - it can never promote best practice.' These arguments, however,
simply serve to expose the sham of CSR. Why would a 'socially responsible company' take issue
with government regulation to tackle bad corporate practice? Why would this prevent companies
from going beyond the legal minimum? Perhaps the explanation is that companies want to be
selective about which areas of 'bad practice' they eliminate and want to use their 'best practice' to

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divert attention away from the bad, or that 'socially responsible' companies need the bad practice
of other companies to be a counterpoint to their own 'best practice'.

If regulation distracts from best practice, then companies cannot be acting 'responsibly' because
they believe it to be morally right to do so only because they are trying to get an advantage over
their competitors.

Regulation, including rules on: how corporations can be structured, as well as on the impacts
they can have on the environment and society, and their dealings with their workforce and other
stakeholders, is the only way that a democratic society can control what is acceptable and
unacceptable in corporate behaviour. Should corporations be able to decide for themselves what
is an acceptable level of emissions or what rights workers should be afforded? Leaving
corporations to act voluntarily is a dereliction of the duties of government. If the corporation is
left to regulate itself then far from curbing it, the corporation gains power.

As Joel Bakan puts it, 'no one would seriously suggest that individuals should regulate
themselves, that laws against murder, assault and theft are unnecessary because people are
socially responsible. Yet oddly we are asked to believe that corporate persons institutional
psychopaths who lack any sense of moral conviction and who have the power and motivation to
cause harm and devastation in the world should be left free to govern themselves.'4

4.3 The market has no morality:

'Can we expect every decision made in one's self interest, through market mechanisms, to result
in the good for all?' Deborah Doane, Core Coalition Hand in hand with pushing for further
deregulation or pushing for favourable regulation (as above), companies are effectively capturing
the issue space around major social and environmental problems and seeking to propose
solutions which fit within a market-centred worldview.

CSR asserts the classic free market line that the market will solve social problems through each
actor acting selfishly in its own best interests. But since this is the dominant paradigm, shouldn't
we then be seeing a society with greater equality and less environmental destruction? Instead, as
the New Economics Foundation argues 'in everything from the massive corporate scandals to
anti-trust cases to serious environmental degradation we see all around us, it is obvious that
Adam Smith's famous 'invisible hand' cannot be relied upon to bring us successful or sustainable
outcomes'.104 What has instead been created is massive concentration of wealth, entrenched
divides between rich and poor globally and irreversible damage to the ecosystems our future
depends on. Many pressing social and environmental problems have very clear, though complex,

4
https://www.unisa.edu.au/Global/business/centres/cags/docs/apcea/APCEA_2007_13(4)_Carter_Burritt.pdf

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solutions such as reducing consumption, paying a price that reflects true costs and extending
regulation.

Market-based 'solutions' distract us from this. If society's primary approach to tackling major
social and environmental problems is to enable the powerful interests that caused the problems to
profit from their resolution, then the very intention of solving these problems is subsumed to the
interest of profit.

4.4. CSR as Public Private Partnerships:5

Many CSR activities can be defined as public-private partnerships (PPP). PPPs encompass a
variety of arrangements where companies pool their resources with governmental,
intergovernmental and / or civil society organizations. Examples relevant to CSR include
running community development projects, sponsoring school playgrounds or providing
healthcare. These projects blur the boundary between the role of governments and the role of
companies. CSR is in itself a privatization of a public function, since deciding what is
appropriate behavior for companies and regulating that should be the responsibility of a
democracy and not of the companies themselves. CSR has shifted the ground towards
privatization. As Nigel Twose from the World Bank Group put it, 'with the private sector
increasingly centre stage, questions are being raised around prior assumptions that global public
goods can only be tackled (ethically and practically) by the public sector.'119 CSR makes
government/corporate relationships acceptable, generates contacts and builds trust and reputation
to smooth the transition towards private ownership and control.

4.5. Through privatisation to government by corporations:

'Governments are a fundamental actor in governance, but increasingly non-state actors from
business and civil society are seen to play key roles.'

The old adage from Milton Friedman that 'the business of business is business' is proving untrue.
Increasingly the business of business is power and control. While this has always been the case,
the means and reach are now greater. As social commentator Leslie Sklair put it, 'global
capitalism has to be politically active to maintain its project'. CSR is taking us on a trajectory
towards increased private takeover of government functions. It is not simply a form of PPP but a
progression towards corporations taking on the role of governance. Sustainability argues that
CSR has evolved as a 'pragmatic response where government has failed or been weak'. But CSR
has been a mechanism in the weakening of government. It is a strategy borne out of the
Thatcher/Reagan era of minimising government intervention and of policies driven by and on
behalf of the corporations. CSR both weakens and sidelines democratic decision making. It
5
https://corporatewatch.org/content/whats-wrong-corporate-social-responsibility-arguments-against-csr

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announces that democratic decision making in the form of regulation is unnecessary, and
replaces the (dis)enfranchised citizen with the 'stakeholder'.

SustainAbility's report, 'Gearing Up: From Corporate Responsibility to Good Governance and
Scalable Solutions', argues that a window of opportunity is opening up for corporations, through
their corporate responsibility initiatives, to take on a governance role in achieving sustainable
development. The report claims to 'assess examples of private sector leadership in preparing the
ground or timely and effective public policy responses' and envisages greater corporate
involvement in decision-making at the international level. According to the report, we can expect
to see a shift from specific CSR projects to wider governance impacts and a change in the
relationships between government, business and civil society. Case studies include carbon
trading and Anglo American's programme of providing anti-retroviral treatment to staff.

These examples show how, in the context of emasculated state power, unaccountable
corporations are gradually gaining influence over governance and decision-making, as well as
taking over of the delivery of services. The authors of the report see a turning point where
business will either embrace this opportunity, or suffer the backlash against corporate
globalisation.

Campaigners should be aware of the role CSR plays in positioning companies to capitalise on
this. 'The gap between the market and the community will be closed. The only question is how
and in which direction... rollback, a shift away from globalisation, is the more likely outcome
unless we manage to strengthen the fabric of global community. Ironically nobody is better
positioned or has better capacity to play the lead role today than business itself.'

4.6. Access to 'emerging markets:6’

'Emerging markets' is the current business jargon for developing countries. The terminology
betrays the fact that they view these countries purely in terms of economics. Corporate
partnerships with both Northern and Southern governments represent an opportunity for both
policy influence and market penetration, with companies that lead in CSR gaining preferential
access to developing country markets. The term 'corporate social innovation' has been coined to
describe business practices aimed at 'supporting' sustainable development.

5. Concerns with CSR:

6
https://www.scribd.com/doc/247933298/Cooperate-social-responsibilty

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Notwithstanding the lack of a single universally acceptable definition, there are arguments
against the very concept of CSR. In a United Nations Industrial Development Organization
(UNIDO) report on CSR4 prepared by Peter Raynard and Maya Forstater, the case against
corporate social responsibility is discussed:

"CSR is a pragmatic response to balancing the negative and positive effects of modern
capitalism, it is an attempt to counter the ‘there is no alternative' school of thought through
innovation and new alliances. It attracts critics (as well as advocates) from across the political
spectrum. What lies at the heart of the debate is a definition of the parameters of a company's
responsibility.

"For neo-liberal economists, CSR is an aberration from efficient market economics, introducing
barriers inimical to choice and enterprise and therefore to wealth creation. They believe in
Milton Friedman's doctrine that "there is one and only one responsibility of business - to use its
resources and engage in activities designed to increase its profits so long as it stays within the
rules of the game." They contrast the ‘nebulous' concepts of sustainable development, fair trade
and environmentalism with the science of economics in which the ‘invisible hand' of the market
ensures that what is good for business is good for society.

"In essence therefore, neo-liberal economists believe that CSR is both bad for companies and
society, while those more antipathetic towards capitalism believe it to be good for companies but
bad for society. Those on the right believe that the power of business is overstated while those on
the left believe it is out of control. Critics on both side rally against what they see as the
illegitimate influence of unaccountable organizations in what should be the role of
democratically elected government. "The criticisms of CSR are not simply the product of
conflicting ideologies but help to illuminate the twin pitfalls for CSR:

 Imposing inappropriate standards which constrain the value creation role of business and
lead to job losses, under-investment, lack of services and an ever widening gap between
developed and developing countries.

 Distracting criticism and pressure for change away from human rights abuse, economic
exploitation, environmental destruction and cultural imperialism while doing little to
improve things.

"It is crucial that CSR supporters focus resources in these areas, e.g. by influencing consumer
choice in order to strengthen the business case and addressing the weaknesses in participation so
far rather than simply focusing on CSR boosterism based on wishful thinking.

Corporations do not have social responsibilities, or where these do exist, are limited to the
payment of taxes and provision of employment. This approach is typified by Friedman (1970).
Friedman states that … [social] responsibility is to conduct the business in accordance with their

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[owners or shareholders] desires, which generally will be to make as much money as possible
while conforming to the basic rules of society, both those embodied in law and those embodied
in ethical custom. The basic rules of society are those of the general economic environment(s) in
which the business operates: free-market, geographical regions, and relevant legislation.
Friedman argues that any ethical or social responsibilities are implicit in these environment(s)
and special consideration of social responsibilities is neither needed nor warranted; the free-
market will punish corporations not adhering to its rules. Friedman views CSR as a tool for
intellectual socialists to undermine free society. In this respect, the fundamentalist approach is in
direct opposition to criticalism, which sees reformation of capitalist society and the free market
as a necessary requirement for real accountability of business. Prior to Friedman (1970), Carr
highlights the rules of the business game which, like poker, includes ‗the bluff‘. Carr is adamant
that the idea of business being guided by the ethical position adopted in private life was
unaffordable. Indeed, he notes the adoption of any ethical position is a ‗self-serving calculation
in disguise‘. Ultimately, the adoption of an openly-stated ethical position is about profit and, like
Friedman (1970), the business‘s responsibility is to create profit. The pivotal element in the
fundamentalist approach is the portrayal of the corporation as a purely legal creation and not as a
social institution. The purpose of corporations is solely economic with no associated moral
imperative or social obligation. Only a natural person is capable of having social responsibilities.
Friedman is not alone in supporting the fundamentalist approach, with Levitt (1983) and Den
Uyl (1984) as strong proponents. However, since 1991 the fundamentalist approach has received
little attention, except as a method for contrasting with other approaches. For those resisting the
voluntary adoption of CSR or the imposition of regulation requiring recognition of non share
holder stakeholder interests, fundamentalism is an attractive and persuasive approach.

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6. CONCLUSION:
CSR is a part of corporate activity that lies between business and community. The need to
behave in a socially responsible way has received the society’s high attention (Coles, Fenclova &
Dinan, 2011). This concept will always be an important part of business language and operations
while it has been supported by many theories and continually consistent with the expectations of
the society. It also addresses and captures the most vital concerns of the community related to
business and society relations (Carroll, 1999). When this approach is given serious consideration
either voluntarily or due to legal requirements, it provides a unique competitive advantage.
Additionally, such advantages will give greater benefits to hotels that are operating in a highly
competitive environment because it helps to differentiate from other lodging service providers.
Furthermore, green based practices will be an added advantage for hotels to achieve superior
financial and market performance in ensuring a balance between development and environmental
sustainability. The reason behind this is mainly due to the high pressure and concern given to 
green marketing issues in which it has become increasingly evident in both  academic and real
industries.  At the same time, just by claiming that the hoteliers have initiated CSR by embracing
green practices is not sufficient. Their initiatives need to be clearly demonstrated to the public to
avoid green washing. Together, they must understand that they have to spend a sufficient amount
of time in embarking on promotional and communication efforts and educating the public to
reach the full support of the community, media groups and societal groups.

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7. BIBLIOGRAPHY
 http://www.indiacsr.in/en/concept-of-csr/
 http://finance.bih.nic.in/Documents/CSR-Policy.pdf
 https://www.scribd.com/doc/247933298/Cooperate-social-responsibilty
 https://corporatewatch.org/content/whats-wrong-corporate-social-responsibility-arguments-
against-csr
 https://www.unisa.edu.au/Global/business/centres/cags/docs/apcea/APCEA_2007_13(4)_Carte
r_Burritt.pdf

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