Origins: Social

Responsibilities of Business
Corporate Sustainability
Lec 5, December 20, 2022
 Genesis: CSR in Western World- 1800-1914
• Not to ignore social settings
• Corporations as an instrument for social development (were mandated to increase trade and economic prosperity, but were
Roman & English simultaneously expected to provide employment, housing, and medical and educational services in their trading localities)
Laws 15th & 16th
Century

• The Christian religious philosophy and approach to the abiding social context were influential ( Vatican Philanthropy).
• The religious roots of the Victorian social conscience gave Victorian Philanthropists a high level of idealism and humanism,
• Late 1800’s, the philanthropic efforts focused on the working class and the creation of welfare schemes with examples that could be seen in
18th & 19th practice both in Europe as in the United States of America (USA) ( E.g YMCA, YWCA)
Century • SERVICE, CIVIC MINDEDNESS, welfare work, trusteeship. These are a few of the terms by which authors and business people have referred to
corporate social responsibility from the mid-nineteenth century to the First World War

• Creation of welfare schemes took a paternalistic approach aimed at protecting and retaining employees and some companies even looked into
improving their quality of life ( Robert Owen: New Lanark Mill -Refused to hire children less than ten years old. He provided children of
employees with a school, dedicated considerable resources for training his employees, paid higher-than-average wages and provided decent
working conditions. William Hesketh Lever built a company town in the United Kingdom at Port Sunlight, near Liverpool. George and Richard
Cadbury built homes for employees

• The British Society for the Encouragement of Arts, Manufactures, and Commerce was very much at the heart of discussions that examined how to
reduce waste and how to develop by-products from emissions and waste in ways that would be profi table for companies
World War I
• Business men constructed Orphanages/ Alyssums in UK
1914-1918
• In USA the idea of stewardship or trusteeship held that business people should use their wealth either on behalf of God or the public for the
common good. This concept did not differentiate the responsibility of business firms and business people (Andrew Carnegie Foundation
( Education & Scientific research, Rockefeller Foundation (Religious, education and scientific causes)
 • Increased Urbanization & Industrialization- Concerns- Labour welfare, family disorganization, loss of
family and religious values in new industrialized society
• Business managers: Assuming the responsibility of balancing the maximization of profits with creating and
maintaining an equilibrium with the demands of their clients, their labor force, and the community.
1920-30’s • This led to managers being viewed as trustees for the different set of external relations with the company,
which in turn translated into social and economic responsibilities being adopted by corporations.

• Corporations took an active role in defining their place in society after World War II.
• Executives experienced new pressures to serve as a social force for good. ( increasing influence of unions,
threat of communism, growing criticisms of the emerging factory system, working conditions, and the
employment of women and children were being brought to light, especially in the United States.
Impact of World • The consensus among reformers was that current employment practices were contributing to social
War II ( 1939-45) problems, including poverty and labor unrest. However, industrial betterment and welfare movements at
the time were viewed as a combination of humanitarianism and business acumen.

• More corporate leaders began to understand that their businesses

1950’s Adaptation
carried responsibilities beyond their four walls.
& Changing
Attitudes
• Broader discussion of social responsibilities began taking place.
 • Important social, economic and political changes taking place represented a pressure for businessmen to re-
examine their role in society and their social responsibility. New social context marked by a growing protest
culture in USA that revolved mainly around civil rights and anti-war protests. Example: Dow Chemical Company
1960 which produced napalm used in the Vietnam War and as a result faced constant protests and accusations

• Recession in the USA: Marked by a high inflation and very low growth followed by a long energy crisis. As a
response to this context, and as a result of the social movements of the 1960’s and early 1970’s, the federal
1970 government made significant advances with regards to social and environmental regulations.

• The Committee for Economic Development (CED), USA published:

• 1)  A New Rationale for Corporate Social Policy which explored to what extent it is justified for corporations to
get involved in social problems
• 2 ) Social Responsibilities of Business Corporations which explored the new expectations that society begun
placing on the business sector
Est of CED
• These publications advanced the public debate around CSR by acknowledging that “business functions by public
consent, and its basic purpose is to serve constructively the needs of society – to the satisfaction of society”
 1980s
1980’s: Reagan ( USA) and Thatcher (UK)
administrations Important Events
• Brought a new line of thought into politics with a strong • The creation of the European Commission’s
focus on reducing the pressure on corporations and aiming to Environment Directorate-General (1981),
reduce the high levels of inflation.
• the growth and strength of the economies of their countries • Establishment of the World Commission on
depended on their ability to maintain a free market Environment and Development (1983)
environment with as little as possible state intervention • The Chernobyl nuclear disaster (1986),
• Publication of the report Our Common
Governments reduced their role in regulating Future presented by the Brundtland
corporate behavior  Commission which provided a definition of
• Managers were faced with a need to answer to different
sustainable development (1987)
interest groups that still expected corporations to fulfill the • United Nations (UN) adoption of the Montreal
social expectations of the time Protocol (1987)
• Societal concerns and expectations of corporate behavior
revolved around “environmental pollution, employment
• The creation of the Intergovernmental Panel on
discrimination, consumer abuses, employee health and Climate Change (IPCC) (1988).
safety, quality of work life, deterioration of urban life, and
questionable/abusiveness practices of multinational
corporations”
The 1990’s: globalization and CSR

1990’s: Significant international events influenced the international

perspective towards social responsibility and the approach to sustainable
development.
• Creation of the European Environment Agency (1990),
• UN summit on the Environment and Development held in Rio de Janeiro which led to the Rio
Declaration on Environment and Development, the adoption of Agenda 21
• United Nations Framework Convention on Climate Change (UNFCCC) (1992),
• Adoption of the Kyoto Protocol (1997).
The creation of these international bodies and the adoption of
international agreements represented international efforts for setting
higher standards with regards to climate-related issues and, indirectly to
corporate behavior 
 Impact of Globalization: Institutionalization of CSR

Globalization process
• Operations of MNCs faced diverse business
environments in host countries, some of them
with weak regulatory frameworks.
• New opportunities, rising global competition,
increased reputational risk and conflicting
pressures, demands, and expectations from
the home and the host countries
• MNCs: Understood that being socially
responsible had the potential to be a safe
pathway to balance the challenges and
opportunities of the globalization process
they were experiencing and as a result, the
institutionalization of CSR became stronger
• Concept of Creating Stakeholder Value & Carroll, A. B. (1979). A three-dimensional conceptual
model of corporate social performance. Academy of
Shareholder Value
Management Review, 4, 497–505.
 2000’s: recognition and implementation of CSR

Strategic approach to CSR WORKPLACE

ENVIRONMENT

Mental Health Support Green Initiatives

Suitable working Recycling facilities
conditions Sustainability
Diversity & Inclusion policies

Recognition and expansion of Supportive

environment
Giving back to the
local environment

CSR and its implementation COMMUNITY

Market place
Supply chain
Supporting local area practices
initiatives Ethical Marketing
Creating internal clubs Ethical Advertising

Concept of Corporate Citizenship

and societies Packaging,
Supportive, Social Labeling
networks
India
 Responsible Factors: Evolution
Foundations of Business
Ethics
Business men were reared in the
Indian ethos of spiritualistic
values for harmony with nature,
larger social good, sharing profits
with stakeholders, practice of
minimum harm to man and
nature
21/03/2023
of Indian CSR
Development of Indian Economy & CSR practices of
Business to address social agenda ,social
upliftment and nation building
Pre-industrial phase ( 1850-1914) CSR driven
by noble deeds & pioneers of industry who
were leaders in economic as well as social
fields
Third Phase ( 1948-1960)
CSR influenced through emergence of public sector and
Second Phase 1915-1947
introduction of legal framework for labourers and
CSR driven by Gandhiji’s environmental standards (Socialism, protectionism,
Trusteeship Theory and aspiration launch own rural initiatives)
for Free India
Fourth phase 1960 to 1990
Licence raj: Development Failures
Growth of Corporate Trusts
.
Fifth phase 1991- 2013
Shift from Philanthropy to strategic philanthropy & integration
of CSR into a sustainable business strategy. Many companies
lacked strategic focus. Global Indian players started connecting
CSR with Sustainable development.
10
April 1, 2014 : Mandatory CSR
• As per as per the provisions (section 135) of the Companies Act, all
the firms having net worth of Rs 500 crore or more, or a turnover of
Rs 1,000 crore or more, or a net profit of Rs 5 crore or more have to
spend 2% of their profit( PBT) on the Corporate Social Responsibility
(CSR) every financial year.
 • India: CSR spending and reporting is
mandatory since 2014
30000

Total Spent (INR Crores) 125955.35

24891.63 24865.46
25000

20172.07
20000

17098.18

15000 14517.21 14344.87

10065.93
10000

5000

0
2014-15 (INR Cr.) 2015-16 (INR Cr.) 2016-17 (INR Cr.) 2017-18 (INR Cr.) 2018-19" (INR 2019-20 (INR Cr.) 2020-21 (INR Cr.)
Cr.)

21/03/2023 Source: National CSR Portal Available at https://www.csr.gov.in/content/csr/global/master/home/ExploreCsrData/dynamic-csr-report-search.html

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 CSR Spent: 2014-2021
0 2000 4000 6000 8000 10000 12000 14000 16000 18000 20000
Maharashtra 18472.23
Pan India (Centralised Funds) 9435.87
Karnataka 7097.27
Gujarat 6156.04
Tamil Nadu 5370.57
Andhra Pradesh 5044.91
Delhi 3966.94
Odisha 3642.02
Rajasthan 3523.75
Uttar Pradesh 3245.25
Haryana 2745.95
Telangana 2455.63
West Bengal 2447.19
North East Region 1769.03
Kerala 1501.03
Madhya Pradesh 1440.83 55 per cent of the aspirational districts’
Jharkhand
Punjab
874.42
792.68
concentration across India, have
Uttarakhand 784.26 received only 9 per cent of the total
Chhattisgarh
Bihar
722.76
693
expenditure towards CSR.
Himachal Pradesh 417.22
Jammu And Kashmir 336.51
Goa 273.88
Chandigarh 89.73
Dadra And Nagar Haveli 80.69
Daman And Diu 66.33
Puducherry 54.15
Andaman And Nicobar 6.5
Lakshadweep 2.97

Source: National CSR Portal Available at https://www.csr.gov.in/content/csr/global/master/home/ExploreCsrData/dynamic-csr-report-search.html 13

 CSR Spent: Sector
Total Schedule VII of the Companies Act 2013 and subsequent
0 5000 10000 15000 20000 25000 30000 35000 40000 Amendments: Expanded and clarified activities for which
Education
Health Care 25133.22
36564.98
the two per cent funding can be used.
Rural Development Projects 12254.98
Environmental Sustainability 7763.31
Poverty, Eradicating Hunger, Malnutrition 6520.38 Conscious attempt to keep Schedule VII aligned with
Livelihood Enhancement Projects
Other Central Government Funds
4802.52
4527.55
India’s commitment UN-SDGs
Vocational Skills 4135.6
Nec/ Not Mentioned 3667.38
Prime Minister'S National Relief Fund 3579.54 Companies execute CSR through: a) Their own
Sanitation
Art And Culture
3168.23
2575.35
Foundations; b) Through NGOs; c) CSR
Training To Promote Sports 1515.37 Departments, d) Employee volunteers
Safe Drinking Water 1332.82
Women Empowerment 1272.3
Swachh Bharat Kosh 1204.06
Special Education 1057.55
Socio-Economic Inequalities 922.78
Conservation Of Natural Resources 859.5
Animal Welfare 618.23
Gender Equality 395.68
Slum Area Development 374.48
Agro Forestry 337.21
Armed Forces, Veterans, War Widows/ Dependants 318.22
Setting Up Homes And Hostels For Women 316.25
Senior Citizens Welfare 250.93
Technology Incubators 218.7
Setting Up Orphanage 143.48
Clean Ganga Fund 124.72

21/03/2023 Source: National CSR Portal Available at https://www.csr.gov.in/content/csr/global/master/home/ExploreCsrData/dynamic-csr-report-search.html 14

Conceptual Clarity of Key
Terms
Philanthropy Strategic CSR Corporate Sustainability Triple bottom line ESG
Philanthropy

Altruistic Mixed Essential way of Corporate sustainability
Motives doing business. It encompasses the business
Win-Win is a self-regulating practices that keep a business
Situation business model alive and perpetuate its success.
that aims to More specifically, it involves the
improve society coordination and management of
and the environmental, social and
financial demands to ensure a
environment. business is responsible, ethical
and continually successful.
Sustainability lets businesses
meet present needs without
compromising the ability of the
business to meet its needs in the
future.
The triple bottom line is ESG is a quantifiable
a business concept that assessment of sustainability.
posits firms should ESG strategy focuses on
commit to measuring reaching certain performance
their social and metrics, setting measurable
environmental impact— goals and conducting audits.
in addition to their Investors use these to value
financial performance— businesses and, ultimately,
rather than solely inform their investment
focusing on generating choices. Businesses create ESG
profit, or the standard reports to appeal to investors
“bottom line.” It can be and other compliance
broken down into “three requirements.
Ps”: profit, people, and
the planet. ( Economic,
Social & Environmental)

HUL giving Mahindra Embedding Consciously embeds SDGs in its

its & responsible business model – Corporate
warehouse Mahindra practices in doing Citizenship
to Mother helping business example Example: Create Water Positive
Teresa for poor water recycling, Status, develop eco-system in
housing farmers to waste management, which business will sustain
destitute at improve supplier training,
community
no cost soil quality development etc