MEVE 012: Unit 12 - Corporate Social Responsibility

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 UNIT 12: CORPORATE SOCIAL RESPONSIBILITY

12.0 Introduction

Corporate Social Responsibility (CSR) has emerged as a vital tool for integrating social and environmental concerns into the business framework. Beyond profit-making, businesses today are expected to act ethically and contribute to sustainable development. CSR has transitioned from being a philanthropic act to a strategic necessity, helping companies build goodwill, gain consumer trust, and ensure long-term profitability.

In this unit, we explore the concept, evolution, legal mandates, global standards, and India's framework for CSR, as well as the role of NGOs in facilitating CSR initiatives.

12.1 Objectives

After studying this unit, you should be able to:

  • Define the concept and evolution of CSR.
  • Understand the relationship between CSR and sustainable business.
  • Explain the Triple Bottom Line approach.
  • Examine CSR practices and policies in India, including the Companies Act, 2013.
  • Understand global standards and indices related to CSR.
  • Recognize the role of NGOs in CSR implementation.

12.2 Concept and Definition of CSR

Corporate Social Responsibility (CSR) refers to a company’s responsibility towards society and the environment in which it operates. It encompasses ethical behavior, legal compliance, sustainable development, stakeholder engagement, and voluntary initiatives to contribute to societal well-being.

Key definitions:

  • According to the World Business Council for Sustainable Development (WBCSD), 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.”
  • The Indian Companies Act, 2013 defines CSR as activities undertaken by a company in pursuance of its statutory obligation in areas like poverty alleviation, education, gender equality, environment, and more.

12.2.1 Triple Bottom Line and CSR

The Triple Bottom Line (TBL) approach integrates three key dimensions:

  1. People – Social responsibility towards employees, communities, and stakeholders.
  2. Planet – Environmental responsibility, reducing ecological footprint.
  3. Profit – Economic responsibility ensuring financial health and long-term value creation.

CSR aligns closely with the TBL model as businesses are now judged not only by financial performance but also by their social and environmental impact.

12.2.2 CSR and Sustainability of Business

CSR enhances business sustainability by:

  • Building brand reputation and consumer loyalty.
  • Attracting and retaining employees who value ethical work environments.
  • Reducing legal risks through compliance with environmental and labor laws.
  • Ensuring long-term viability by contributing to the sustainability of the communities and ecosystems where the business operates.

CSR is increasingly being seen as a strategic investment in risk management, innovation, and stakeholder trust.

12.2.3 Evolution and Scope of CSR

Evolution:

  • Philanthropy era: Businesses made donations without strategic alignment.
  • Regulatory era: Governments began mandating ethical practices.
  • Strategic CSR era: CSR became integrated into corporate mission and strategy.

Scope of CSR:

  • Environmental management (e.g., waste reduction, clean energy)
  • Community development (e.g., education, health)
  • Ethical labor practices
  • Consumer protection
  • Fair trade practices
  • Employee welfare
  • Governance transparency

CSR today spans global supply chains, digital responsibility, and stakeholder engagement.

12.3 CSR Initiatives by Companies

Some global and Indian companies have embraced CSR with innovative programs:

Global Examples:

  • Microsoft: Digital literacy and technology access in underserved communities.
  • Unilever: Sustainable sourcing and hygiene campaigns.
  • Google: Renewable energy and education grants.

Indian Examples:

  • Tata Group: Education, healthcare, water conservation through Tata Trusts.
  • Infosys Foundation: Promotes education, arts, healthcare, and rural development.
  • Reliance Foundation: Women empowerment, disaster response, and agriculture.

CSR initiatives often reflect the company’s core values and address issues relevant to their operational region.

12.4 CSR in India and Companies Act, 2013

India became the first country to mandate CSR through Section 135 of the Companies Act, 2013. Key provisions include:

  • Applicable to companies with:
    • Net worth ≥ ₹500 crore, or
    • Turnover ≥ ₹1,000 crore, or
    • Net profit ≥ ₹5 crore
  • Required to spend at least 2% of average net profits (of the preceding three years) on CSR activities.
  • Must constitute a CSR Committee with at least three directors.
  • CSR activities must be disclosed in the Board’s Report and on the company website.

Schedule VII of the Act lists permissible CSR activities, including:

  • Eradicating hunger and poverty
  • Promoting education and gender equality
  • Ensuring environmental sustainability
  • Protection of national heritage
  • Contribution to Prime Minister’s Relief Fund
  • Rural development projects

This law has transformed CSR from voluntary to a legally binding obligation.

12.5 Standards, Guidelines, Initiatives, and Indices

12.5.1 OECD Guidelines

The OECD Guidelines for Multinational Enterprises provide voluntary principles for responsible business conduct in areas like:

  • Employment and industrial relations
  • Environment
  • Consumer interests
  • Bribery and corruption
  • Science and technology
  • Human rights

These guidelines promote transparency, accountability, and sustainable development.

12.5.2 GRI Sustainability Reporting Guidelines

The Global Reporting Initiative (GRI) is a global framework that helps businesses report sustainability-related impacts.

  • Covers economic, environmental, and social performance.
  • GRI Standards include indicators on emissions, labor practices, human rights, and product responsibility.
  • Encourages stakeholder engagement and comparability of reports across organizations.

12.5.3 ISO 26000 – Guidance on Social Responsibility

ISO 26000 is an international standard that offers guidelines (not certification) on social responsibility for all types of organizations.

Core principles include:

  • Accountability
  • Transparency
  • Ethical behavior
  • Respect for stakeholder interests
  • Respect for international norms of behavior
  • Respect for human rights

12.5.4 Dow Jones Sustainability Index (DJSI)

Launched in 1999, the DJSI evaluates the sustainability performance of leading companies worldwide.

  • Assesses economic, environmental, and social criteria.
  • Recognizes industry leaders in sustainability.
  • Encourages investors to invest in socially responsible businesses.

12.5.5 FTSE4GOOD Index

The FTSE4Good Index Series helps investors identify companies that meet global CSR standards.

  • Covers environmental management, climate change, human rights, and anti-corruption.
  • Acts as a benchmarking and investment tool for ethical investors.

12.6 NGOs and CSR

Non-Governmental Organizations (NGOs) play a vital role in planning, implementing, and monitoring CSR initiatives. Their contributions include:

  • Identifying community needs and local challenges.
  • Ensuring accountability and transparency.
  • Bridging the gap between corporations and society.
  • Offering expertise in areas such as education, health, and the environment.

Partnerships between businesses and NGOs can lead to more meaningful, long-term community impact.

12.7 Let Us Sum Up

Corporate Social Responsibility has become an integral aspect of modern business strategy. It is no longer limited to charitable acts but encompasses a broader responsibility toward stakeholders, society, and the environment. With legal backing in India through the Companies Act, 2013, and alignment with international standards like ISO 26000 and GRI, CSR has evolved into a critical tool for achieving sustainable development. NGOs, indices, and global reporting frameworks further enhance the transparency and effectiveness of CSR activities.

12.8 Keywords

·         Corporate Social Responsibility (CSR): A self-regulating business model that helps a company be socially accountable.

·         Triple Bottom Line: Framework considering social, environmental, and financial impacts (People, Planet, Profit).

·         Sustainability of Business: Ability of a business to maintain long-term economic, environmental, and social value.

·         CSR Initiatives: Programs or projects undertaken by companies to address social or environmental issues.

·         Companies Act, 2013: Indian legislation mandating CSR activities for certain companies.

·         OECD Guidelines: Principles for responsible business conduct developed by the Organisation for Economic Co-operation and Development.

·         GRI Guidelines: Global standards for sustainability reporting developed by the Global Reporting Initiative.

·         ISO 26000: International guidance on social responsibility for organizations.

·         Dow Jones Sustainability Index (DJSI): A global index evaluating corporate sustainability performance.

·         FTSE4GOOD Index: Index measuring the performance of companies demonstrating strong Environmental, Social, and Governance (ESG) practices.

·         NGOs in CSR: Non-governmental organizations involved in the planning and execution of CSR projects.

 

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