A Need for Uniform Corporate Social Responsibility – National And International Perspective
Author: Sayantika Sengupta & Ankita Das
College: Symbiosis Law School, Hyderabad
Introduction: Corporate Social Responsibility, being the most recent and effective mode of attainment of goodwill coupled with the noble vision of a better tomorrow, needs reflection and attention in today’s world. The concept of CSR varies from time to time and from organization to organization.
In this era of globalization, there is an urging need to have uniform corporate social responsibility norms. Since ancient times the focus of business troops has always been the agenda of profit maximization. The society observed this drastic change when such companies started focusing more on the welfare of the society than profit maximization. This era, as regarded by the experts, was coined as the era of CSR. CSR or Corporate Social Responsibility can be defined as the procedure of bringing corporate behaviour and social norms values, and expectations of performance in alignment with each other. Until the last decade, the world of business only had a single responsibility on their shoulder- the “responsibility” to make money and increase shareholder value. However, with the break of the next decade, the companies started concentrating on a new concept, a concept defining broader responsibilities– for the environment, domestic communities, for better working conditions, and for ethical practices. As described by Zynia L. Rionda, CSR is the “triple bottom line”–the totality of the corporation’s financial, social, and environmental performance in conducting its business. CSR refers not only to the compliance of human rights standards, labour and social security arrangements but also to the fight against climate change, sustainable management of natural resources, consumer protection, philanthropy and volunteering.
CSR in India’s Outlook: India is a country of myriad contradictions. On the one hand, it has grown to be one of the largest economies in the world, and an increasingly important player in the emerging global order; on the other hand, it is still home to the largest number of people living in absolute poverty. What emerges is a picture of the uneven distribution of the benefits of growth which many believe, is the root cause of social unrest. CSR in India has traditionally been seen as a philanthropic activity. And in keeping with the Indian tradition, it was an activity that was performed but not deliberated.
The practice of CSR is not new to companies in India due to the efforts of organizations such as the Tata Group, Mahindra and Mahindra’s focus on the girl child, youth and farmers through programs in the domains of education, public health and environment. Corporate companies like ITC have made farmer development a vital part of its business strategy and made major efforts to improve the livelihood standards of rural communities. Unilever is using micro enterprises to strategically augment the penetration of consumer products in rural markets. IT companies like TCS and Wipro have developed software to help teachers and children in schools across India to further the cause of education. Banks and insurance companies are targeting migrant labourers and street vendors to help them through micro-credits and related schemes.
The Indian subsidiaries of German companies are bound by their parent companies' guidelines for socially responsible behaviour, but how these guidelines are actually implemented is left up to each subsidiary. There is no evidence of CSR activities in the informal sector of the Indian economy. Indeed, workers in this sector are afforded no rights or protections whatsoever, and all indications are that no efforts are being made to fight poverty, promote education or health, protect the environment or encourage employee participation in business development. Not a single services company featured in the Top 10.
According to the Responsible Business Rankings study undertaken by Futurescape the top place for CSR Activities in India for the year, 2017 has been secured by Tata Chemicals, focused on sustainable community development and preserving the ecosystem. The company has a climate change policy that maps its carbon footprint and is creating an abatement strategy for sustainable manufacturing followed by Tata Steel and Tata Power Ltd. The study holds up a mirror to corporate India on their journey towards responsible growth, throughout this years the key players in this field are all handful of top veteran companies, while very few new companies are taking any initiative to comply with the norms of CSR in India. There are eight Indian companies who were marked in the Fortune Global 500 for their CSR Who spent, or 18 percent of their total CSR expenditure on education CSR activities. "The promotion of education and employment-enhancing vocational skills were two key focus areas for Indian companies, especially at primary and secondary levels,"
CSR & International Perspective: Corporate Social responsibility is a term whose meaning varies from continent to continent, country to country and company to company. The concept of CSR rests on the ideology of giving and take.
Lego tops this year's roster of top CSR companies; its Build the Change and Sustainable Materials Center initiatives - and its partnership with the World Wildlife Fund - are part of the Danish toy company's push for sustainability. It has been followed by Microsoft Corp. and Google Inc.
Amnesty International advocates for mandatory “global standards on business and human rights that will apply across borders to all companies ... (which) ... will provide governments with clear, common guidelines on how to address corporate behaviour on human rights”. A more specific call for action is made by the Corporate Responsibility Coalition (CORE), which argues that voluntary CSR efforts are insufficient and calls for “mandatory social and environmental reporting, enhanced directors’ duties, and access to justice for affected communities”.
Events around the world over the last few decades have emphasized the need for corporate entities, their stakeholders, governments and International Organizations to take the issue of CSR seriously. Incidents such as the explosion at the Union Carbide Bhopal, India in 1984, the oil spillage at Prince William Sound, Alaska USA in 1989, Corporate scandals; for example the World Com USA 2002, Parmal at Italy 2003, Satyam India 2010 remain fresh and indelible in our minds.
CSR in the United States has primarily been approached through the initiatives of its corporations, rather than through the legal developments or government actions are seen in other jurisdictions.
As in the United States, the corporate law of Canada has a tradition of shareholder primacy. However, it also has a greater tendency to recognize stakeholder interests to a greater degree through the regulatory actions of the Federal Government. In 2008, the Danish Parliament adopted the "Act amending the Danish Financial Statements Act (Accounting for CSR in large businesses)".
However, the Act does not mandate that any specific activities need to be undertaken by corporations in respect of CSR, instead of leaving it “up to the businesses to decide how it makes sense for them to work on corporate social responsibility”.
The European Commission, the executive body of the European Union, has stated that the incorporation of social and environmental concerns into a corporation’s operations is “fundamentally about voluntary business behaviour”.
The International Standards Association (The ISO) has finalized ISO 26000, a voluntary guidance document regarding social responsibility which is intended to “distil a globally relevant understanding of what Social Responsibility is and what organizations need to do to operate in a socially responsible way”. The CSR has seven core elements, organizational governance, human rights, labour practices, the environment, fair operating practices, consumer issues and community involvement and development, and provides detailed guidance in respect of each. ISO 26000 is designed for use by all organizations, not only businesses and corporations. Organizations, such as hospitals and schools, charities (not-for-profits) etc. are also included. ISO 26000 makes particular efforts to show that its flexibility means that it can be applied by small businesses and other groups as well. So far, many of the earliest users of ISO 26000 have been multi-national corporations, especially those based in Europe, and East Asia, particularly Japan.
Another CSR incentive called the World Summit on Sustainable Development focuses on implementation and execution that is synchronous with the finance and trade negotiations of Monterey and Doha. On the corporate responsibility side, the OECD Guidelines for Multinational Enterprises provide guidance for international business.
India- A Torch-Bearer: India is the first country to have corporate social responsibility legislation, mandating that companies give 2% of their net profits to charitable causes. The Ministry of Corporate Affairs, Government of India has notified the Section 135 of the Companies Act, 2013 along with Companies (Corporate Social Responsibility Policy) Rules, 2014 and other notifications related thereto which makes it mandatory for certain companies who comply with the provisions relevant to CSR and it applies to companies registered in India: those with net worth of 5 billion; turnover of 10 billion; or net profit that exceeds 50 million. According to the Economic Times, about 8,000 Indian companies meet this definition, which would equate to 12,000 -15,000 crore Rs. annually in giving (or nearly $2 billion). Now that the CSR clause in the Companies Act, 2013 covers companies that have a net profit of five crore INR and above, it is expected that while micro-enterprises will not qualify, many small and medium enterprises will.
Analysis and Conclusion: Much of the policy debates around the world are with respect to whether CSR reporting should be voluntary or mandatory i.e., whether firms should be required by laws and regulations to report their CSR activities. The issue of mandating CSR essentially pertains to the question of whether corporations are required by laws and regulations to report/disclose its CSR activities or whether the decision to report is to be left to the business judgment of the corporation. The issue of mandatory CSR reporting has gained prominence in recent years following the global financial and economic crisis in the 2000s, a string of corporate misconduct and failures, and growing threats from business operations to environmental sustainability from business operations, all of which have created a ‘trust deficit’ between Corporates and their stakeholders. Under voluntary reporting, if all firms engaging in CSR report in equilibrium, making CSR reporting mandatory will add to regulatory burden without adding any additional information. Further, mandatory CSR reporting could have a perverse effect on corporate accountability if it leads to useless and biased information. From a public policy perspective, the need for mandatory reporting arises in all probability when corporations do not view CSR as a paying proposition where social performance does not translate into financial performance at least in the short run. In countries with weak institutions and enforcement, mandatory CSR reporting can prevent several social bads that are not internalized by existing laws and regulations. To examine further the strategic motives of Indian companies in engaging in CSR, the data is analyzed to probe for evidence on ‘greenwashing,’ a practice by which companies whose business operations negatively impact the community, compensate for such consequences by undertaking CSR. With regard to developing countries, the number of empirical studies is too few to derive any definitive conclusions. A couple of existing studies with respect to Thailand and India does, however, show that CSR has a positive effect on firm valuation. CSR activities may lead to the temporary reduction in short-term accounting profit but may create market value in the long run. The stock market may reward companies with virtue and ethics leading to lowering the cost of capital and ultimately to higher valuation of the company. In the past few decades, no uniform norms as such regarding CSR has been noticed. However, as a final future consideration, the International Standards Association (The ISO) has currently finalized ISO 26000.
International Business Regulatory organizations should initiate appropriate policy for the CSR initiatives which not only makes every firm responsible but also brings uniformity in interventions across the trading countries. There should be appropriate incentives for the firms to implement CSR initiatives. Separate guidelines are to be provided for different size group of firms, viz, small, medium and large firms. New research should be in the direction of developing an appropriate methodology for measuring CSR and evaluating the impact of CSR.
 D Wood, 'Corporate Social Performance Revisited' (1991) 16(4) The Academy of Management Review
 Amit Mohan Meharia, Evolution of Corporate Social Responsibility, (Sept. 25,2016), http://www.mcolegals.in/Evolution%20of%20Corporate%20Social%20Responsibility%20in%20India.pdf.
 Amnesty International, “Address by Irene Khan, Secretary General of Amnesty International to the Opening Plenary of the Global Compact Leadership Summit 2007” (Public Statement presented to the Global Compact Leadership Summit 2007, July 5, 2007).
 The Corporate Responsibility Coalition, and Save the Children UK, D. Doane and A. Holder, “Why Corporate Social Responsibility is failing children”, 2007.
 United Nations, “CSR and Developing Countries- What scope for government action?”, Sustainable Development Innovation Briefs, Issue 1 February 2007.
 Canadian Democracy and Corporate Accountability Commission, Final Report, “The New Balance Sheet Corporate Profits and Responsibility In The 21st Century”, January 2002, at pg. 5, [The CDCAC Report].
 Proposal for an Act amending the Danish Financial Statements Act. (Report on social responsibility for large businesses)., 8 October 2008.
 The European Commission, Communication From The Commission To The European Parliament, The Council And The European Economic And Social Committee, “Implementing The Partnership For Growth And Jobs: Making Europe A Pole Of Excellence On Corporate Social Responsibility”, COM(2006)
 The ISO Central Secretariat, “ISO and Social Responsibility”, 2006.
 Section 135 (1): Every company having net worth of rupees five hundred crore or more, or
turnover of rupees one thousand crore or more or a net profit of rupees five crore or more
during any financial year shall constitute a Corporate Social Responsibility Committee of the
Board consisting of three or more directors, out of which at least one director shall be an
 Section 135 (5): The Board of every company referred to in sub-section (1), shall ensure that the
company spends, in every financial year, at least two per cent. of the average net profits of
the company made during the three immediately preceding financial years, in pursuance of
its Corporate Social Responsibility Policy:
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