CSR (Corporate Social Responsibility)

In 1990s, the concept of Corporate Social Responsibility underwent a change with the advent of new economic order. The definition by The World Business Council for Sustainable Development brings out the tact that CSR is "The continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large."

Thus in the present scenario, there has been a movement from reactive postures to proactive, but unilateral boundary spanning functions to interactive engagements with the stakeholders. There has also been an important shift towards a more systematic understanding of the relationships that exist between the organizations and their stakeholders in the society. Why should corporates have social responsibility?

The reason is that corporates have immense resources and tremendous potential to impact their surrounding through the policies and their business conduct.

Every decision of corporates from extraction of raw materials to employment of labour, from sale of a product to a policy decision of starting business in an area and that of winding up has the potential to tremendously impact lives of thousands of people directly or indirectly.

Therefore there is a need to hold them accountable as their nature and scale causes innumerable risk to the society

-Sri Justice Madan Lokur of the Supreme Court said


Corporate Social Responsibility (CSR) is typically described as self-regulation that is part of a corporation's business model and strategic plan. In a perfect world, CSR means that a business monitors itself to make sure it adheres to legal, ethical, environmental, and international standards across its operations.

Corporate Social Responsibility is titled to aid an organization's mission as well as a guide to what the company stands for and will uphold to its consumers. Development 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.

ISO 26000 is the recognized international standard for Corporate Social Responsibility(currently a Draft International Standard). The concept of business responsibility has moved from the narrow concept of maximizing the shareholder's return to a broader concept where corporate social responsibility is embedded in the very practices involved in doing the business.

A business is untrue to its social responsibilities if it concerns itself only with producing goods and services which the customers want and generating profits needed to form the capital for tomorrow's risk, investment and growth. It can be assumed that business enterprises are independent of each other and taken as a whole are dependent on the society from which they draw their resources and supply products and services.

The traditional way of looking at business was to produce a product or provide a service and to make a profit at any cost and by any means. Maximization of profit was the only guiding force. There was one and only one responsibility of business and that was to use its resources and engage its activities to increase its profits. The basic responsibility was to produce wealth for its own survival.

Bowen's book Social Responsibilities of the Businessman in 1953 is the beginning of modem period of literature about corporate social responsibility. Bowen defines Corporate Social Responsibility as "The obligation of businessmen to pursue those policies, to make those decisions, or to follow those lines of action which are desirable in terms of objective and values of our society"

(Bowen 1953, p.6). Bowen's definition emphasizes the values and objectives of the society. He further discusses saying that Corporate Social Responsibility rests on two fundamental premises. Firstly as a form of social contracting, it exists at the pleasure of the society. Secondly it acts as a moral agent within the society. These two ideas provided the basic premises about the evolution of the thinking about Corporate Social Responsibility.

India's new Companies Act 2013 (Companies Act) has introduced several new provisions which change the face of Indian corporate business" Companies Act 2013 (Companies Act) has introduced several new provisions which change the face of Indian corporate business. One of such new provisions is Corporate Social Responsibility . The concept of CSR rests on the ideology of give and take. Companies take resources in the form of raw materials, human resources etc from the society. By performing the task of CSR activities, the companies are giving something back to the society.

Ministry of Corporate Affairs has recently notified Section 135 and Schedule VII of the Companies Act as well as the provisions of the Companies (Corporate Social Responsibility Policy) Rules, 2014 (Corporate Social Responsibility Rules) which has come into effect from 1 April 2014.


Section 135 of the Companies Act provides 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 independent director. The Board of every company shall ensure that the company spends, in every financial year, at least 2% of the average net profits of the company made during the three immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy.

Provided that the company shall give preference to the local area and areas around it where it operates, for spending the amount earmarked for Corporate Social Responsibility activities. Provided further that if the company fails to spend such amount, the Board shall, in its report , specify the reasons for not pending the amount.

Further as per the Corporate Social Responsibility Rules, the provisions of Corporate Social Responsibility are not only applicable to Indian companies, but also applicable to branch and project offices of a foreign company in India.

Penalty can be imposed for non-disclosure of CSR as per the Companies Act 2013.

Corporate Social Responsibility: 4,195 companies spend nothing; show cause notices to 496 firms

Government has issued show cause notices to 496 companies for not complying with CSR norms while about 4,195 companies have not spent a single penny on corporate social responsibility activities, Parliament was informed. The reasons for not spending included companies not finding suitable implementing agency, delay in formation of CSR committee and inability to formulate a well conceived CSR policy.

Under the Companies Act, 2013, certain classes of profitable entities are required to shell out at least 2 per cent of three-year annual average net profit towards CSR activities. They have to provide reasons for not spending on such projects. Companies having a turnover of at least Rs 1,000 crore, minimum net worth of Rs 500 crore and those having net profit of Rs 5 crore or more in a financial year are required to comply with the CSR norms. An assessment of CSR expenditure of 7,334 companies for 2014-15 indicates that 4,195 companies did not incur any expenditure on CSR, Minister of State for Corporate Affairs Arjun Ram Meghwal said in a written reply to the Rajya Sabha. Besides, show cause notices have been issued by Registrar of Companies to 496 companies for non-compliance with the CSR norms. Collectively, 3,139 companies have spent a total of Rs 8,803 crore on several CSR initiatives. Most of the funds have been spent on health care projects, environment and animal welfare, education and rural development activities. By PTI | Updated: Nov 22, 2016, 03.39 PM IST


A total of 920 companies listed on NSE spent a total of Rs 8,345 crore towards CSR activities in 2015-16, higher than 895 companies that collectively spent Rs 6,526 crore in the preceding fiscal.

Some activities under Corporate Social Responsibility includes:

    • Promotions of Education, "Educating the Masses and Promotion of Road Safety awareness in all facets of road usage,

    • Drivers’ training,

    • Training to enforcement personnel,

    • Safety traffic engineering and awareness through print, audio and visual media should be included,

Child mortality,

Improving maternal health,

Promotion of gender equality

Donations to IIM [A] for conservation of buildings and renovation of classrooms would qualify as “promoting education” and hence eligible for compliance of companies with Corporate Social Responsibility. Donations to IIMA for conservation of buildings and renovation of classrooms would qualify as “protection of national heritage, art and culture, including restoration of buildings and sites of historical importance” and hence eligible for compliance of companies with CSR.

Disaster Relief

    • medical aid can be covered under ‘promoting health care including preventive health care.’

    • food supply can be covered under eradicating hunger, poverty and malnutrition.

    • supply of clean water can be covered under ‘sanitation and making available safe drinking water’

Enabling access to, or improving the delivery of, public health systems be considered under the head “preventive healthcare” or measures for reducing inequalities faced by socially & economically backward groups”?

Renewable energy projects

Contribution towards the Prime Minister's relief fund

    • Social Business Projects: “giving medical and Legal aid,treatment to road accidentCSR initiatives for the benefit of the predominately rural farming community:(a) Capacity building for farmers covering best sustainable farm management practices. (b) Training Agriculture Labour on skill development.(c) Doing our own research on the field for individual crops to find out the most cost optimum and Agri - ecological sustainable farm practices.Providing effective consumer grievance redressal mechanism.Protecting consumer’s health and safety, sustainable consumption, consumer service, support and complaint resolution.

    • Consumer Protection Activities

    • Consumer Rights to be mandated.

    • all consumer protection programmes and activities” on the same line as Rural Development, Education etc.


Some CSR initiatives that any SME can strive to achieve include simply conducting its business in an ethical manner; paying all taxes and duties, providing a healthy working environment, adhering to basic social security regulations such as minimum wages, ESI, (The Employee State Insurance) PF, etc, shunning cash-based transactions, and avoiding corrupt practices to solicit business — each of these will contribute to a much more equitable society than what we have currently inherited. SMEs are the bulwark of the economy, accounting for more than 45 per cent of industrial output, and more than 40 per cent of India's exports. A widespread adoption of ethical business practices among SMEs can have far-reaching implications for the country.

Business Line, 4th-Feb-2012

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