Auditing and Corporate Governance

Topic: Corporate Social Responsibility

Course: B.Com(H), Sec C
Semester: VI
Ms. Nidhi Bansal
 Corporate Social Responsibility

The term Corporate Social Responsibility consists of three words, each one
carrying a significant importance.

➢ Corporate- refers to the companies/organizations/ firms;

➢ Social- refers to society at large;

➢ Responsibility- meaning the duty.

So the term corporate social responsibility refers to the responsibility of

corporates/companies towards the society.
 Now lets understand this term further by looking at the evolution of
the term.
The business or companies have been in existence since eternal times. Business is the one
which employs human, financial and physical resources to produce the products or services
which the people/society needs. Since all the resources be it physical, human or financial,
they all are in scarcity, so initially the primary objective of the business was considered to be
best/ optimum utilization of resources for an economic activity that yields the maximum
profits.

But soon this objective was started to be criticized and focus shifted to wealth-maximization.

It was argued that business is not only about shareholders rather stakeholders.
Stakeholders are diverse and many but companies being the privileged section owe a
responsibility towards the society.
 Understanding the Meaning of Corporate Social Responsibility

Bowen (1953) defined Social Responsibilities of business as “ it(social

responsibility) refers to the obligations of businessmen to pursue those
policies, to make those decisions, or to follow those lines of action
which are desirable in terms of objectives and values of our society”.
Understanding the Meaning of Corporate Social Responsibility

The United Nations Industrial Development Organization defines CSR as a “

management concept whereby companies integrate social and environmental
concerns in their business operations and interactions with their stakeholders”.

Thus, CSR is very broad term concerning economic, social and environmental
concerns of stakeholders. Various stakeholders are customers, suppliers,
employees, shareholders, government, tax agencies, debtors, creditors and
society in general.
 Arguments Extended in Favour of Corporate Social Responsibility

1. Builds good corporate image

2. Easy availability of finance for the company

3. Good reputation in the society

4. Better hiring possible

Arguments Extended Against Corporate Social Responsibility

1) The basic argument extended by the corporates is that it is the

responsibility of government.

2) The businesses argue if they focus on society they will have no time
to focus on their primary objective.

3) The businesses further argued that society is very large and it’s
difficult to look after concern of all.
Corporate Social Responsibility and Corporate Philanthropy

• The literal meaning of the term Philanthropy is charity. Corporate

philanthropy refers to the work done by corporate philanthropist for the
underprivileged sections of the society like providing better sanitation in
schools or providing fans or watercoolers in charitable hospitals/ schools.
Corporate social responsibility is a wider term. CSR also takes care of
environmental and economic aspect unlike corporate philanthropy.
Corporate philanthropy is a subset of corporate social responsibility.
Corporate Social Responsibility and Business Ethics

• Business Ethics refers to morally and socially acceptable business practices being
undertaken by the business. Business ethics is a again a subset of corporate
social responsibility. A business cannot be socially responsible in the true sense
unless and until its is ethical. Only a company with strong business ethics will be
genuinely concerned about its societal role.
Corporate Sustainability and Corporate Social Responsibility

• Corporate sustainability focusses only on the environmental aspect

unlike CSR which also concerns societal and economic aspect. So CSR
is a broader concept than corporate sustainability.
The Companies Act 2013, and Corporate Spending

Beginning Financial Year 2014-15, CSR spending has been mandatory for all
companies incorporated in India and having either of the following:
• Net worth of INR 500 crores or more
• Turnover of INR 1000 crores or more or
• Net Profit of INR 5 crores or more
The companies have to mandatorily spend 2% of the average net profits
made by the company every block of three years. If any company fails to do
so, it has to report it along with the reasons.
References

1. Bowen, H. R. (2013). Social Responsibilities of the Businessman. University of

Iowa Press.
2. nido.org/our-focus/advancing-economic-competitiveness/competitive-trade-
capacities-and-corporate-responsibility/corporate-social-responsibility-market-
integration/what-csr