Corporate Social Responsibility
CSR is a self-regulatory business model that enables a company to be socially accountable to itself, its stakeholders, and the general public. Companies can be aware of their impact on all aspects of society, including economic, social, and environmental, by practising corporate social responsibility, also known as corporate citizenship.
CSR refers to a company's decision to operate in a way that benefits society and the environment rather than harming them in the ordinary course of business.
• Since the arrival of the joint-stock company in the early years of industrialism, the balance of pursuing market opportunities while maintaining accountability and ethical integrity has proven to be a defining challenge for business enterprise.
• The business enterprise's accountability and responsibility are frequently questioned.
• The obvious failures of corporate governance and business ethics during the global financial crisis has heightened the urgency of finding a better ethical framework and business governance.
• The growing materiality of a more ethically-informed approach is evidenced by a significant increase in the range, significance, and impact of corporate social and environmental initiatives in recent years.
• Despite the difficulties, there are signs that large corporations are taking their social and environmental responsibilities more seriously, and that these issues are becoming more important on the business agenda.
• Corporate governance's narrow focus on the firm's internal control and simply complying with regulations is no longer acceptable. By externalising social and environmental costs, corporations have been able to act in extremely irresponsible ways in the past.
• Too often, corporate goals labelled as "wealth-generating" have resulted in a loss of well-being for communities and the environment. However, in the future, corporations and other entities will find it more difficult to obtain a licence to operate.
• Maintaining the highest standards of integrity and practise in corporate behaviour will be required to obtain a licence to operate. Corporate governance will essentially entail continuous and responsible monitoring of not only the company's financial health, but also its social and environmental impact. With greater recognition of a direct and inescapable relationship between corporate governance, corporate responsibility, and sustainable development, corporate social and environmental responsibility (CSR) appears to be rapidly moving from the margins to the mainstream of corporate activity.
• Corporate Social Responsibility (CSR) is a management concept in which businesses incorporate social and environmental concerns into their operations and interactions with stakeholders. CSR is commonly defined as the process by which a company achieves a balance of economic, environmental, and social imperatives ("Triple Bottom-Line Approach") while also meeting the needs of shareholders and stakeholders.
• It is critical to distinguish between CSR, which can be a strategic business management concept, and charity, sponsorships, or philanthropy in this regard.
TRIPLE BOTTOM LINE APPROACH
• The triple bottom line is a three-part accounting framework that includes social, environmental, and financial considerations.
• The TBL framework has been adopted by some organisations to evaluate their performance in a broader context in order to generate greater business value.
• John Elkington, a business writer, claims to have coined the phrase in 1994.
BENEFITS OF A ROBUST CSR PROGRAMME
Good CSR practises can only bring in greater benefits as the business environment becomes more complex and stakeholders become more vocal about their expectations, some of which are as follows:
1. Communities grant permission to operate: Apart from internal drivers such as values and ethos, governments (through laws and regulations), investors, and customers are some of the key stakeholders who influence corporate behaviour.
• In India, a fourth and increasingly important stakeholder is the community, and many businesses have realised that the 'licence to operate' is no longer granted solely by governments, but rather by communities impacted by a company's operations.
• As a result, a strong CSR programme that meets the aspirations of these communities not only gives them permission to operate, but also allows them to keep that permission, avoiding the so-called "trust deficit."
2. Employee attraction and retention: Several human resource studies have linked a company's ability to attract, retain, and motivate employees to its CSR commitments.
• Employee participation interventions that encourage and enable participation have been shown to boost employee morale and a sense of belonging to the company.
3. Communities as suppliers: A number of innovative CSR initiatives are gaining traction, in which businesses invest in improving community livelihood by incorporating them into their supply chain.
• Communities have benefited and their income levels have increased as a result of this, while these companies have gained access to a new and secure supply chain.
4. Improving corporate reputation: For companies that run effective CSR programmes, the traditional benefits of generating goodwill, creating a positive image, and branding benefits still exist.
• As a result, businesses can present themselves as responsible corporate citizens.
PRESENT STATUS OF CSR IN INDIA
• Following an amendment to the Companies Act in 2013, India became the first country in the world to make corporate social responsibility (CSR) mandatory. As part of any CSR compliance, businesses can invest their profits in areas such as education, poverty, gender equality, and hunger.
• The Ministry of Corporate Affairs has announced that companies' expenditures to combat the COVID-19 (coronavirus) outbreak will be considered valid under CSR activities.
• Funds may be used for a variety of COVID-19-related activities, including healthcare promotion, including preventive healthcare and sanitation, and disaster management.
• Companies with a net worth of INR 5 billion (US$70 million) or more, an annual turnover of INR 10 billion (US$140 million), or a net profit of INR 50 million (US$699,125) or more are required to spend 2% of their average net profits over three years on CSR, according to an amendment to the Companies Act, 2013.
• Prior to that, companies could opt out of the CSR clause, though they were required to disclose their CSR spending to shareholders. CSR encompasses, but is not limited to, the following activities:
1. Projects involving activities covered by the Corporations Act; or
2. Projects related to activities undertaken by the company board in response to recommendations from the CSR Committee, as long as those activities fall within the scope of the Companies Act.
Businesses should be aware that expenses for CSR are not deductible in the calculation of taxable income. The government, on the other hand, is considering re-evaluating this provision, as well as other CSR provisions introduced recently under the Companies (Amendment) Act, 2019.
CSR AMENDMENTS UNDER THE COMPANIES (AMENDMENT) ACT, 2019
1. Previously, if a company couldn't spend all of its CSR funds in a given year, it could carry the money forward and use it in the following fiscal year, in addition to the money allotted for that year.
2. Under the Act's CSR amendments, companies must now deposit any unspent CSR funds into a fund established under Schedule VII of the Act by the end of the fiscal year. This amount must be used within three years of the transfer date, or the fund will be deposited into one of the specified funds.
3. In the event of non-compliance, the new law stipulates a monetary penalty as well as imprisonment. The penalty ranges from INR 50,000 (US$700) to INR 2.5 million (US$35,000), with the company's defaulting officer facing up to three years in prison, a fine of up to INR 500,000 (US $7,023), or both.
4. However, the government is still reviewing these rules after the industry objected to the strict provisions, particularly the jail terms for CSR violations, and has yet to put them into effect.
THE METHODOLOGY OF CSR
CSR is the process of assessing and evaluating an organization's social impact and responsibilities. It starts with a review of the following aspects of each company:
1. Customers
2. Suppliers
3. Environment
4. Communities
5. Employees.
While the most effective CSR plans ensure that organisations follow the law, they also ensure that their investments support the growth and development of marginalised communities and the environment.
CSR should also be long-term, involving activities that an organisation can maintain without jeopardising its business objectives.
1. In India, businesses have been very wise in embracing CSR initiatives and integrating them into their operations.
2. It has been increasingly projected in the Indian corporate setting as companies have realised that, in addition to growing their businesses, it is also critical to build responsible and sustainable relationships with the general public.
3. Businesses now have dedicated departments and teams to develop CSR policies, strategies, and goals, as well as separate budgets to support them.
4. Most of the time, these programmes are based on well-defined social beliefs or are meticulously aligned with the business domain of the company.
CSR TRENDS IN INDIA
• Since the implementation of mandatory CSR provisions in 2014, corporate India has significantly increased its CSR spending. According to a survey, companies spent 47 percent more on CSR initiatives in 2018 than they did in 2014-15, contributing $1 billion to the cause.
• Listed companies in India invested INR 100 billion (US$1.4 billion) in a variety of programmes, including educational programmes, skill development, social welfare, healthcare, and environmental conservation, while CSR contributions to the Prime Minister's Relief Fund increased by 139 percent over the previous year.
• Education received the most funding (38 percent), followed by hunger, poverty, and healthcare (25 percent), environmental sustainability (12 percent), and rural development (12 percent) (11 percent).
• Technology incubators, sports, the armed forces, and programmes aimed at reducing inequalities received very little funding. Industry research estimates that CSR compliance will improve and range between 97 and 98 percent by FY 2019-20, taking into account recent amendments to CSR provisions.
PROMINENT EXAMPLES OF CSR ACTIVITIES IN INDIA
A. TATA GROUP
• The Tata Group, an Indian conglomerate, engages in a variety of CSR projects, the majority of which focus on community development and poverty alleviation.
• It has participated in women's empowerment activities, income generation, rural community development, and other social welfare programmes through self-help groups.
• The Tata Group supports numerous educational institutions with scholarships and endowments. The organisation is also involved in healthcare projects such as child education, immunisation, and raising AIDS awareness.
• Economic empowerment through agriculture programmes, environmental protection, sports scholarship provision, and infrastructure development, such as hospitals, research centres, educational institutions, sports academies, and cultural centres, are among the other areas.
B. MAHINDRA & MAHINDRA
• Mahindra & Mahindra (M&M), an Indian automobile manufacturer, established the K. C. Mahindra Education Trust in 1954 and the Mahindra Foundation in 1969 with the goal of promoting education.
• The company focuses primarily on educational programmes to help economically and socially disadvantaged communities.
• Scholarships and grants, livelihood training, healthcare for remote areas, water conservation, and disaster relief programmes are all part of its CSR initiatives.
• M&M runs programmes like Nanhi Kali, which focuses on girls' education, Mahindra Pride Schools, which provides industrial training, and Lifeline Express, which provides healthcare in rural areas.
C. ITC GROUP
• The ITC Group, a conglomerate with interests in hotels, FMCG, agriculture, information technology, and packaging, has been concentrating on developing sustainable livelihood and environmental protection programmes. Through its CSR activities, the company has been able to provide sustainable livelihood opportunities for six million people.
• Their e-Choupal programme, which aims to connect rural farmers via the internet to purchase agricultural products, now includes 40,000 villages and more than four million farmers.
• It’s social and farm forestry programme helps farmers convert unused land into pulpwood plantations.
• Over 40,000 rural women have found sustainable livelihoods thanks to social empowerment programmes such as micro-enterprises and loans.
D. ULTRATECH CEMENT
• Ultratech Cement, India's largest cement company, is involved in social work in 407 villages across the country, with the goal of promoting self-sufficiency and sustainability.
• Its CSR initiatives are focused on healthcare and family welfare programmes, education, infrastructure, the environment, social welfare, and long-term economic viability.
• Medical camps, immunisation programmes, sanitization programmes, school enrolment, plantation drives, water conservation programmes, industrial training, and organic farming programmes have all been organised by the company.