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CORPORATE SOCIAL RESPONSIBILITY IN INDIA: AN OVER VIEW

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JOURNAL OF ASIAN CORPORATE
BUSINESS SOCIAL RESPONSIBLITY IN INDIA: AN OVER VIEW / 53
MANAGEMENT
Vol. 9, No. 1, January-June 2017: 53-67

CORPORATE SOCIAL RESPONSIBILITY IN INDIA:

AN OVER VIEW
S. VIJAY KUMAR*

Abstract: The CSR campaign has been actively supported by the world organizations
like World Bank, UNDP, OECD, European commission and MNCs. Still today, the
practice of CSR remains basically philanthropic but now it has move on from nation and
institution building to community development with global influences. The Indian
Companies Act, 2013 has introduced the CSR idea to the forefront in the country and
through explains the mandate in promoting greater transparency and disclosure. The
Schedule 7 of the Act listing the CSR activities, suggests the communities to be focal
point. On the other hand, by discussing a company’s relationship to its stake-holders and
integrating CSR into its core operations, the Draft Rules suggest that CSR needs to go
beyond communities and also beyond philanthropy. It would be quite interesting to observe
and study how it translates into practice at ground level and also how the understanding
of the CSR in India undergoes a change. The recent initiatives of the present Government
at the Centre seems certainly encouraging. It has directed its public sector undertakings
to earmark certain percentage of their annual budget for the furtherance of the CSR
activities. The present paper highlights the emerging perspectives of Corporate Social
Responsibility in India.

The Government of India in 1976 had inserted the term “socialist” in the preamble
of country’s constitution thereby committing itself to ensuring a development
process which would be guided and spearheaded by the state. But the ground
situation is now fast changing in India. Post 1991, there is increasingly a receding
role of the state in the economic and social sphere. An increasing acceptance of
CSR by large number of corporate, post liberalization can thus be seen in the
context of the larger role being consciously carved for the private sector in an
economy which was earlier largely controlled and managed by the State. The
corporate world is keen to exploit the opportunities that are being provided by
the new economic outlook of the State. Today, 93% of the world’s largest 250
companies now publish annual corporate responsibility reports, almost 60% of
which are independently audited.

*
Head & Associate Professor (Retd.), Department of Economics, Kakatiya Government (UG&PG) College
(NAAC “A” Grade), Hanamkonda, Warangal District (Telangana State). The author was Member Board
of Studies, Kakatiya University, Warangal – 506 009 (India).
 54 / S. VIJAY KUMAR

India’s ancient wisdom, which is still relevant today, inspires people to work
for the larger objective of the well-being of all stakeholders. For example, our
Rushees, Munees and Saints preached us to serve the society. The idea of CSR first
came up in 1953 when it became an academic topic in HR Bowen’s “Social
Responsibilities of the Business”. Since then, there has been continuous debate on
the concept and its implementation. Although the idea has been around for more
than half a century, there is still no clear consensus over its definition.
World Business Council for Sustainable Development defined CSR as “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.”
Brief History and Evolution of CSR in India: India has the world’s richest
tradition of corporate social responsibility. Though the term CSR is comparatively
new, the concept itself dates back to over a hundred years. CSR in India has evolved
through different phases, like community engagement, socially responsible
production and socially responsible employee relations.
CSR & Hinduism: Social responsibility is a manifestation of dharma, the
duty of human beings towards society. Atharvana Veda says that “one should
procure wealth with one hundred hands and distribute it with one thousand
hands”. The Yajurveda says that “enjoy riches with detachment, do not cling to
them because the riches belong to the public, they are not yours alone”. In the
Rig Veda, there is also a mention of the “need for the wealthy to plant trees and
build tanks for the community as it would bring them glory in life and beyond.
“Let us walk together, Let us talk together, Let our heart vibrate together”
– Rig Veda. KautiIya also “emphasized ethical practices and principles while
conducting business”.
CSR & Islam: Islam had a law called Zakaat which ruled that a portion of
one’s earning must be shared with the poor in the form of donation.
CSR & Sikhism: Similar to Islam’s Zakaat, Sikhs followed what they called
Daashaant.

PHASES OF CSR IN INDIA

Phase 1 (1850 to 1914): The first phase of CSR is known for its charity and
philanthropic nature. CSR was influenced by family values, traditions, culture and
religion, as also industrialization. The wealth of businessmen was spent on the
welfare of society, by setting up temples and religious institutions. In times of
drought and famine these businessmen opened up their granaries for the poor and
hungry. With the start of the colonial era, this approach to CSR underwent a
significant change. In pre-Independence times, the pioneers of industrialization,
names like Tata, Birla, Godrej, Bajaj, promoted the concept of CSR by setting up
charitable foundations, educational and healthcare institutions, and trusts for
 CORPORATE SOCIAL RESPONSIBLITY IN INDIA: AN OVER VIEW / 55

community development. During this period social benefits were driven by

political motives.
Phase 2 (1914 to 1960): The second phase was during the Independence
movement. Mahatma Gandhi urged rich industrialists to share their wealth and
benefit the poor and marginalized in society. His concept of trusteeship helped
socio-economic growth. According to Gandhi, companies and industries were the
‘temples of modern India’. He influenced industrialists to set up trusts for colleges,
and research and training institutions. These trusts were involved in social
reform, like rural development, education and empowerment of women.
Phase 3 (1960 to 1990): This phase was characterized by the emergence of
PSUs (Public Sector Undertakings) to ensure better distribution of wealth in society.
The policy on industrial licensing and taxes, and restrictions on the private sector
resulted in corporate malpractices which finally triggered suitable legislation on
corporate governance, labour and environmental issues. Since the success rate of
PSUs was not significant there was a natural shift in expectations from public to
private sector, with the latter getting actively involved in socio-economic
development. In 1965, academicians, politicians and businessmen conducted a
nationwide workshop on CSR where major emphasis was given to social
accountability and transparency.
Phase 4 (1990 onwards): In this last phase CSR became characterized as a
sustainable business strategy. The wave of liberalization, privatization and
globalization (LPG), together with a comparatively relaxed licensing system, led to
a boom in the country’s economic growth. This further led to an increased momentum
in industrial growth, making it possible for companies to contribute more towards
social responsibility. What started as charity is now understood and accepted as
responsibility.
Table 1
Phases of CSR in India
1st Phase (1850 – 1914) 2ndPhase (1914– 1960) 3rd Phase (1960 – 1990) 4th Phase (1990 onwards)
Mainly During the CSR under the aegis CSR in aglobalized
Philanthropy and Independence struggle Of mixed economy. world ina puzzled
state.
Charity during CSR usedas a tool for Organizations
Industrialization. Social Development. Organizations Responsibility
Organization solely Organization is for Responsibility towards Proprietor,
responsible to proprietor, managers towards proprietor, Managers,
Proprietor and employees managers and other Environment
and Manager. Environmental Factors. and Public in general.

Significance of CSR: It has become an important topic because of the following

factors:
• CSR helps in strengthening the relationship between companies and
stakeholders.
 56 / S. VIJAY KUMAR

• It enables continuous improvement and encourages innovations.

• Attracts the best industry talent as a socially responsible company.
• Provides additional motivation to employees.
• Mitigates risk as a result of its effective corporate governance framework.
• Enhances ability to manage stakeholder expectations.

Table 2
The four models of Corporate Responsibility (Arora & Puranik 2004)
Model Focus Champions
Ethical Voluntary commitment by companies M. K. Gandhi
to public welfare
Statist Statist State ownership and legal Jawahar Lal Nehru
requirements determine
Liberal Corporate responsibilities limited to Milton Friedman
private owners (shareholders)
Stakeholder Companies respond to the needs of R. Edward Freeman
stakeholders, customers, employees,
communities, etc.

DRIVERS OF CSR
1. Care for all Stakeholders: The companies should respect the interests of,
and be responsive towards all stakeholders, including shareholders, employees,
customers, suppliers, project affected people, society at large etc. and create
value for all of them. They should develop mechanism to actively engage with
all stakeholders, inform them of inherent risks and mitigate them where they
occur.
2. Ethical functioning: Their governance systems should be underpinned by
Ethics, Transparency and Accountability. They should not engage in business
practices that are abusive, unfair, corrupt or anti-competitive.
3. Respect for Workers’ Rights and Welfare: Companies should provide a
workplace environment that is safe, hygienic and humane and which upholds
the dignity of employees. They should provide all employees with access to
training and development of necessary skills for career advancement, on an
equal and non-discriminatory basis. They should uphold the freedom of
association and the effective recognition of the right to collective bargaining
of labour, have an effective grievance redressal system, should not employ
child or forced labour and provide and maintain equality of opportunities
without any discrimination on any grounds in recruitment and during
employment.
4. Respect for Human Rights: Companies should respect human rights
for all and avoid complicity with human rights abuses by them or by third
party.
 CORPORATE SOCIAL RESPONSIBLITY IN INDIA: AN OVER VIEW / 57

5. Respect for Environment: Companies should take measures to check and

prevent pollution; recycle, manage and reduce waste, should manage natural
resources in a sustainable manner and ensure optimal use of resources like
land and water, should proactively respond to the challenges of climate change
by adopting cleaner production methods, promoting efficient use of energy and
environment friendly technologies.
6. Activities for Social and Inclusive Development: Depending upon their
core competency and business interest, companies should undertake activities
for economic and social development of communities and geographical areas,
particularly in the vicinity of their operations.

KEY ISSUES IN CSR

Labour Rights: Child labour, Forced labour, Right to organize, Safety and health.
Environmental conditions: Water & Air emissions, Climate Change, Human
Rights, Cooperation with Paramilitary Forces, Complicity in Extra-Judicial
Killings.
Poverty Alleviation: Job Creation, Public Revenues, Skills and technology.
CSR Current Scenario in India: Although the roots of CSR lie in philanthropic
activities (such as donations, charity, relief work, etc.) of corporations. The 21st
century is characterized by unprecedented challenges and opportunities, arising
from globalization, the desire for inclusive development and the imperatives of
climate change. Indian business, which is today viewed globally as a responsible
component of the ascendancy of India, is poised now to take on a leadership role in
the challenges of our times. In India, CSR has evolved to encompass employees,
customers, stakeholders and sustainable development or corporate citizenship.
Numerous organizations grade companies on the performance of their corporate
social responsibility. As a result CSR has emerged as an inevitable concern for
business managers in every organization.
CSR Activit ies in India: Education, gender equity and women’s
empowerment, combating HIV/AIDS, malaria and other diseases, eradication of
extreme poverty, contribution to the Prime Minister’s National Relief Fund and
other central funds, social business projects, reduction in child mortality,
improving maternal health, environmental sustainability and employment
enhancing vocational skills among others. Investment in education, health, skill
development and social infrastructure will enhance capabilities of the youth by
improving their nutritional, skill and educational level, which in turn will better
their employment prospects.

SPECIFIC FEATURES OF COMPANIES ACT – 2013

• These rules came in to force from 1st April, 2014.
 58 / S. VIJAY KUMAR

• The government of India made it mandatory for companies to undertake CSR

activities under the Companies Act, 2013.
• The CSR activities will have to be within India, and the new rules will also
apply to foreign companies registered here.
• Funds given to political parties and the money spent for the benefit of the
company’s own employees (and their families) will not count as CSR.
• The concept of CSR is defined in clause 135 of the Act, and it is applicable to
companies which have:
• An annual turnover of Rs 1,000 crore or more, or a
• Net worth of Rs 500 crore or more, or a
• Net profit of Rs 5 crore or more.
• An average of the previous three financial years PAT will be considered for
calculating the 2% for CSR.
• CSR policy of a company should ensure that surplus arising out of a CSR activity
will not become part of business profits.
• CSR policy should specify that the CSR corpus will include the following: a) 2%
of average net profit; b) any income arising thereof; c) Surplus arising out of
CSR activities.
• The companies can carry out these activities by collaborating either with a
NGO, or through their own trusts and foundations or by pooling their resources
with another company.
• The law also entails setting up of a CSR committee which shall be responsible
for decisions on CSR expenditure and type of activities to be undertaken.
Prior to each annual meeting, the board must submit a report that includes
details about the CSR initiatives undertaken during the previous financial
year.
• This committee shall consist of three or more directors, with at least one
independent director whose presence will ensure a certain amount of democracy
and diversity in the decision-making process.
• All companies falling under the provision of Section 135 (1) of the Act should
report, in the prescribed format, the details of their CSR initiatives in the
director’s report and on the company’s website.
• In case a company has failed to spend 2% of the average net profit, the reason
for doing so should be mentioned in the annual board report. However, the act
does not provide any guidance on what constitutes acceptable reasons for which
a company may avoid spending 2% on CSR.
CSR will increase availability of funds for welfare activities and may lead to
delivery of goods and services to the people in a cost-effective manner. The clause
 CORPORATE SOCIAL RESPONSIBLITY IN INDIA: AN OVER VIEW / 59

Table 3
2013 Vs 2014 Rankings
Rank (2014) Company Rank (2013) Company
1 Mahindra & Mahindra Ltd. 1 Tata Steel Ltd
2 Tata Power Company Ltd. 2 Tata Chemicals Ltd.
3 Tata Steel Ltd. 3 Mahindra & Mahindra Ltd
4 Larsen & Toubro Ltd. 4 Maruti Suzuki India Ltd
5 Tata Chemicals Ltd. 5 Tata Motors Ltd
6 Tata Motors Ltd. 6 Siemens Ltd.
7 GAIL (India) Ltd. 7 Larsen & Toubro Ltd
8 Bharat Petroleum Corporation Ltd. 8 Coca-Cola India Pvt. Ltd
9 Infosys Ltd. 9 Steel Authority of India Ltd
10 Jubilant Life Sciences Ltd. 10 Infosys Lt
Source: Economic Times (13-10-2015)

on environmental sustainability will help in bringing down pollution and emission

of greenhouse gases and will help in compliance with international norms and
regulations. Therefore, this clause is a step towards achieving social and
environmental sustainability, which will benefit society in future.
Analysis: The CSR Study of finds that many companies have scaled up
operations in CSR and are looking at it as a priority. Mahindra and Mahindra lead
the pack. Compared to the previous study it has jumped two ranks. There are four
Tata group companies in the top 10 list. GAIL replaces SAIL in the public sector
honours; while Bharat Petroleum joins the top ten list. Interestingly no foreign
players make it to the top 10 list. Interestingly, Jubilant Life sciences, a healthcare
company has entered the top ten list.
A Study by NGOBOX: Selected 100 BSE-listed companies that have published
their annual report and where information about the CSR spending was available
as on July 16, 2015. These 100 companies are a good representation of large and
medium companies and account for 33 sectors as per the BSE sector classifications.
Public Sector Units and Public Sector Banks out of the purview of this analysis as
the required information were not available.

KEY FINDINGS OF THE STUDY (2015)

• Nearly one-fourth (27%) of the companies spent more than the prescribed CSR
spend and about two-third (64%) of the companies spent less than the prescribed
CSR spend.
• 2% of the companies spent zero amount from their prescribed CSR spend and
9% the companies spent exactly same as the prescribed CSR amount. 39% of
the companies spent more than 50% of the prescribed CSR spent but missed
the target of the prescribed CSR spend.
 60 / S. VIJAY KUMAR

Table 4
Top 10 Companies (Percentage-wise) in Spending More than the Prescribed CSR (2015)
Sl. No. Companies Actual CSR spend Prescribed CSR Actual CSR
to the % of the Spent (INR Cr.) Spent (INR Cr.)
Prescribed CSR
1 VIP Industries Ltd 210.1% 1.19 2.5
2 Tech Mahindra Ltd 172.3% 30.88 53.21
3 UPL Ltd 153.2% 6.93 10.62
4 Reliance Industries Ltd. 142.7% 533 760.58
5 Godrej Consumer Products Ltd 129.6% 12.41 16.08
6 Marico Ltd 117.8% 9.50 11.19
7 Torrent Pharmaceuticals Ltd 109.6% 13.69 15.01
8 Bharat Forge Ltd 106.3% 10.56 11.23
9 Tata Power Co Ltd 104.4% 29.80 31.1
10 Wipro Ltd 103.7% 128.00 132.7

Analysis: VIP Industries emerges as the best performer by spending more than
the double of prescribed CSR spend, followed by Tech Mahindra Ltd and UPL Ltd.
Table 5
Bottom 10 Companies (Percentage-wise) in spending prescribed CSR spends (2015)
Sl. No. Bottom 10 Performers Prescribed CSR Actual CSR Actual CSR Spend
as % of the
prescribed CSR
1 Monsanto India Ltd 1.8 0 0.0%
2 Nilkamal Ltd 1.15 0 0.0%
3 Motherson Sumi Systems Ltd 11.7 0.15 1.3%
4 Oberoi Realty Ltd 6.96 0.16 2.3%
5 Finolex Cables Ltd 3.03 0.11 3.6%
6 Dewan Housing Finance Corp Ltd 11.58 0.45 3.9%
7 Sonata Software Ltd 0.68 0.034 5.0%
8 IFB Industries Ltd 0.724 0.046 6.4%
9 Bajaj Electricals Ltd 2.076 0.1628 7.8%
10 Shriram Transport Finance Co Ltd 38.15 6.924 18.1%

Table 6
CSR Spending in Pharmaceutical Sector Companies (2015)
Sl. No. Company Prescribed CSR Actual CSR Spend
Spend (INR Cr.) (INR Cr.)
1 Torrent Pharmaceuticals Ltd 13.69 15.01
2 Novartis India Ltd 3.24 3.33
3 Abbott India Ltd 4.52 4.63
4 Ajanta Pharma Ltd 3.74 3.82
5 Biocon Ltd 7.10 7.13
6 Dr Reddy’s Laboratories Ltd 36.6 29.17
7 Unichem Laboratories Ltd 3.08 2.41
8 Ipca Laboratories Ltd 9.68 7.09
9 Alembic Pharmaceuticals Ltd 4.72 3.1
10 Lupin Ltd 39.6 12.6
11 Pfizer Ltd (India) 6.02 1.29
 CORPORATE SOCIAL RESPONSIBLITY IN INDIA: AN OVER VIEW / 61

Analysis: Out of 11 pharmaceuticals sector companies only 5 companies could

spend the prescribed CSR amount.

Table 7
CSR Spending in Banking & Finance Sector Companies (2015)
Sl. No. Company Prescribed Actual CSR Percentage of
CSR Spend Spend the Prescribed
1 Mahindra & Mahindra Financial Services Ltd 24.87 24.87 100.0%
2 IDFC Limited 47 46.5 98.9%
3 Axis Bank Ltd 133.77 123.22 92.1%
4 ICICI Bank Ltd 172 156 90.7%
5 Bajaj Holdings and Investment Ltd 5.47 4 73.1%
6 Bajaj Finserv Ltd 1.48 1 67.6%
7 Cholamandalam Investment & Finance Co. Ltd. 8.6 5.73 66.6%
8 SREI Infrastructure Finance Ltd 2.26 1.38 61.1%
9 HDFC Bank Ltd 197.13 118.55 60.1%
10 Housing Development Finance Corp 9.93 4.49 45.2%
11 Manappuram Finance Ltd 10.173 4.46 43.8%
12 Yes Bank Ltd 38.02 15.71 41.3%
13 Capital First Ltd. 1.93 0.75 38.9%
14 Magma Fincorp Ltd. 3.78 1.26 33.3%
15 Kotak Mahindra Bank Ltd 39.2 11.97 30.5%
16 Shriram Transport Finance Co Ltd 38.15 6.924 18.1%
17 Dewan Housing Finance Corp Ltd 11.58 0.45 3.9%

Analysis: Only one company managed to spend the prescribed CSR spend among
17 Banking and Finance sector companies. Almost 50% of the companies could not
spend even half of the prescribed CSR spend. While Mahindra & Mahindra Financial
Services managed to spend all of the prescribed CSR spend while DHFL could
spend only 3.9% of the prescribed CSR making it to the last spot in the list.

Table 8
CSR Spending in Public Sector Enterprises
As per central government guidelines all Central Public Sector enterprises would need to allocate a
percentage of profit for CSR and sustainable activities. The range of these financial allocations is as
follows:

PAT of Central Public Sector Enterprises in Range of the Budgetary allocation for CSR
the Previous year and Sustainability activities (as % of PAT
in previous year)
(i) Less than Rs. 100 crore 3%-5%
(ii) Rs. 100 crore to Rs. 500 crore 2%-3%
(iii) Rs. 500 crore and above 1%-2%

Future CSR in India: Companies’ journey towards business transformation

via sustainability and CSR initiatives with some of the following key trends would
be emerging:
 62 / S. VIJAY KUMAR

1. Make in India but with Responsibility: The new thrust towards “Make in
India” shifts focus from services to manufacturing. It includes both Indian as
well as foreign companies catering to both domestic as well as international
demand. This has a number of implications:
(a) Manufacturing companies require larger investments and are more likely
to fall in the mandatory CSR bracket.
(b) The CSR lifecycle for manufacturing typically starts with local community
driven inventions. This is likely to see a surge as Make in India picks up
steam.
(c) International markets demand greater focus on social interventions. This
is manifested in no child labour, humane working conditions, environmental
safeguards etc. This will force companies to spend more on CSR in India.
(d) The demand for trained CSR managers will increase multifold.
(e) Make in India will lead to a thrust towards efficient supply chains.
Sustainable supply chains will demand attention.
(f) Support system for improved disclosure and CSR governance will be in
demand.
2. Global Indian Corporations need to manage International Risk and
Reputation: Indian companies are going global. They are addressing not just
customers of developed countries but under explored markets in Africa and
Latin America. Mining rights in Australia, factories in South Africa and telecom
networks in Kenya are the growth engines of the future. Globalization and this
expansion in scale for Indian companies offers unique opportunities, though at
the same time it brings tremendous risks. Scale is many times difficult to manage
when companies use strict command and control structures that can’t really
adapt to changes in local environments. Technology and the fast moving flow of
information are great disruptors that have brought many a global corporation
to its knees. Customers, Suppliers and Governments have been joined by NGOs,
Communities, Employees and Media over information networks to create Social
Risk. Global Indian companies now need to factor in the new reality where
Reputation, Responsibility and Risk are increasingly interconnected.
3. CSR and Reputation will be part of Strategic Intelligence: Going forward
companies will connect not just as producers but as people. The personal digital
brand is now the most powerful entity in the world. It can influence consumers
to promote or turn away from corporations. It can influence trends and shake
up the established norms. Information is today freely and readily available,
what one does with the flow of information and how quickly the corporation
responds is really what will matter in the digital world of tomorrow. CSR will
be more about genuine impact that simple philanthropy. It will be about
connecting causes to brands and people. Genuine inside out responsibility for
 CORPORATE SOCIAL RESPONSIBLITY IN INDIA: AN OVER VIEW / 63

the world we live in built into product lifecycle, communication and on ground
engagement.
4. CSR management will need insight and adaptation not just knowledge
and skill: Linkages of CSR to core business and strategic intelligence
management will help companies navigate the quickly changing landscape and
even manage unexpected twists. Though this can only happen if the CSR manager
of tomorrow has not just knowledge and skill but insight. These insights will help
companies find breakthroughs that can help solve everyday problems, connect
through conversations and help people. The connected world no longer forgives
centralized model of one way corporate communication that was the norm in the
last century. The insight is necessary to tune CSR activities to local needs and
aspirations rather than a common approach across the global footprint. Adaptation
to changing needs, regulations and societal changes will be imperative.
5. Innovate, Transform and Engage: Most corporates think inside out – “I spend
so much money therefore I am a socially responsible company”. Others focus on
the no of activities or Spread. They key question though is, Are my activities
impactful? Are they genuinely changing the ground reality? Companies need to
build, innovate and transform on a regular basis. India’s top companies are
investing in products and services that will build sustainability at the core.
New Technologies, Dematerialization, Reuse and Recycling will drive business
innovation. Companies need to earn trust and so do the causes they support.
Providing a service without looking at customer safety, won’t help in getting
customers to believe in your brand no matter how charitable you are.
Responsibility is about the values that integrate with the 4 Ps of marketing –
product, price, place and promotion. Just as FMCG (Fast Moving Consumer
Goods) companies need to think about better packaging, Banks need to think
about whether services at concessional rates or loan waivers to the poor really
qualify as CSR.

PUBLIC SECTOR FAILS TO UTILIZE 50% OF THEIR FUNDS UNDER CSR

Though, the Companies Act, 2013 mandates two percent compulsory corporate
social responsibility spending by the companies has been in force for over a year,
yet the central public sector companies have not utilized over 50 percent of their
funds under CSR. BJP’s Rajya Sabha MP Shanta Kumar-led committee on public
undertakings presented its report on Friday (4-12-2015). The panel pointed out
an anomaly in the act saying that under the Act a company can only be penalized
for not filing of details regarding CSR, but no penal action for no-performance. The
committee also recommended redefining the term “CSR”. “CSR should be clearly
defined in the Act itself after incorporating the broader principles of CSR i.e. serving
the interest of the most marginalized sections of the society in line with great words
of the father of the nation Mahatma Gandhi, who believed that development is
‘Sarvodaya’ through ‘Antyodaya’ implying the welfare of all by serving the last
man in the queue, the poorest of the poor,” the recommendation said.
 64 / S. VIJAY KUMAR

CHALLENGES OF CSR
Lack of Awareness of General Public in CSR Activities: There is a lack of
interest of the general public in participating and contributing to CSR activities of
companies. This is because of the fact that there exists little or no knowledge about
CSR. The situation is further aggravated by a lack of communication between the
companies involved in CSR and the general public at the grassroots.
Need to Build Local Capacities: There is a need for capacity building of the
local non-governmental organizations as there is serious dearth of trained and
efficient organizations that can effectively contribute to the ongoing CSR activities
initiated by companies. This seriously compromises scaling up of CSR initiatives
and subsequently limits the scope of such activities.
Issues of Transparency: Lack of transparency is one of the key challenges for
the corporate as there exists lack of transparency on the part of the small companies
as they do not make adequate efforts to disclose information on their programmes,
audit issues, impact assessment and utilization of funds. This negatively impacts
the process of trust building among the companies which is a key to the success of
any CSR initiative.
Non-Availability Of Well Organized Non-Governmental Organizations:
There is non - availability of well organized nongovernmental organizations in
remote and rural areas that can assess and identify real needs of the community
and work along with companies to ensure successful implementation of CSR
activities.
Visibility Factor: The role of media in highlighting good cases of successful
CSR initiatives is welcomed as it spreads good stories and sensitizes the population
about various ongoing CSR initiatives of companies. This apparent influence of
gaining visibility and branding exercise often leads many non-governmental
organizations to involve themselves in event based programmes; in the process,
they often miss out on meaningful grassroots interventions.
Narrow Perception towards CSR Initiatives: Non-governmental
organizations and Government agencies usually possess a narrow outlook towards
the CSR initiatives of companies, often defining CSR initiatives more as donor-
driven. As a result, corporates find it hard to decide whether they should participate
in such activities at all in medium and long run.
Non-Availability of Clear CSR Guidelines: There are no clear cut statutory
guidelines or policy directives to give a definitive direction to CSR initiatives of
companies. The scale of CSR initiatives of companies should depend upon their
business size and profile. In other words, the bigger the company, the larger its
CSR programme.
Lack of Consensus: On Implementing CSR Issues There is a lack of consensus
amongst implementing agencies regarding CSR projects. This lack of consensus
 CORPORATE SOCIAL RESPONSIBLITY IN INDIA: AN OVER VIEW / 65

often results in duplication of activities by corporate houses in areas of their

intervention. This results in a competitive spirit between implementing agencies
rather than building collaborative approaches on issues. This factor limits company’s
abilities to undertake impact assessment of their initiatives from time to time.

KEY CONCERNS OF THE COMPANIES ACT, 2013

• The Act does not prescribe any penal provision if a company fails to spend the
stated amount on CSR activities. The Board will need to explain reasons for
non-compliance in its report.
• The threshold limit of Rs.5 crores net profit for applicability of CSR requirements
seems, in comparative terms, to be on the lower side vis-à-vis net worth and
turnover thresholds of Rs.500 crores and Rs.1,000crores respectively. This may
result in companies getting covered under CSR even when they do not meet net
worth/turnover criteria.
• It is not absolutely clear whether a company will need to create a provision in
its financial statements for the unspent amount if it fails to spend 2% on CSR
activities in a particular year.
• After some initial confusion over the tax applicable, it is now clear that CSR
expenditure will be taxable, although for a few activities tax exemption will be
allowed from the financial year 2014-15. However, there is no clarity yet on
these activities.

CRITIQUES
• A disturbing aspect of Section 135 relates to the linking of a company’s profit-
making with the development of local areas. Companies are required to spend
2% of their average net profits from the preceding three years and focus on
local areas around which they operate. This is an absurd proposition as it will
increase inter-state disparities in social indicators. For instance, states like
Gujarat, Maharashtra and Andhra Pradesh (as also Odessa in 2013), with their
large number of industrial units, are likely to see greater social development
on account of higher CSR spend by the private sector.
• What happens to development projects when companies make losses? According
to one estimate, of the 5,138 firms listed on the BSE, the total number of
companies qualifying under Section 135 has come down from 1,500 in FY 2010
to 1,372 in FY 2012. So has the number of total qualifying companies with
profit after tax greater than zero: from 1,457 to 1,265.
• It is during recessionary times, when the need for CSR expenditure may be highest
among vulnerable groups, that such spending may actually become unavailable.
• The rules in the Companies Act-2013 would make it difficult for companies to
pursue strategic CSR - aligned to business strategy - since any expense that
can be traced back to financial profits may have to be set aside from CSR, as
indicated by the law.
 66 / S. VIJAY KUMAR

• It is possible that companies would prefer to spend on activities specified in the

Act, (such as protection of national art, heritage and culture, promotion of sports,
contribution to the Prime Minister’s National Relief Fund), which have a lower
long-run social impact, ignoring real problems like inter-regional inequality or
particular social stigmas.

SUGGESTIONS
• Under the Companies Act – 2013, a company can only be penalized for not
filing of details regarding CSR, but no penal action for no-performance.  Hence,
there should be a clarification for penal action.
• Creating awareness among the general public in CSR activities and improving
communication between the companies involved in CSR and the general public
at the grassroots.
• There is a need for capacity building of the local non-governmental organizations
as there is serious dearth of trained and efficient organizations that can
effectively contribute to the ongoing CSR activities initiated by companies.
• There is a need for improving transparency on the part of the small companies
as they do not make adequate efforts to disclose information on their
programmes, audit issues, impact assessment and utilization of funds, which is
a key to the success of any CSR initiative.
• There is a need for well organized non-governmental organizations to ensure
successful implementation of CSR activities.
• The role of media in highlighting good cases of successful CSR initiatives is
welcomed as it spreads good stories and sensitizes the population about various
ongoing CSR.
• Broad perception towards CSR initiatives is essential, as non-governmental
organizations and Government agencies usually possess a narrow outlook
towards the CSR initiatives of companies, often defining CSR initiatives more
as donor-driven.
• Clear cut statutory guidelines or policy directives are required to give a definitive
direction to CSR initiatives of the companies.
• Consensus amongst implementing agencies regarding CSR projects is the need
of the hour, because lack of consensus often results in duplication of activities
by corporate houses in areas of their intervention.
• As the act does not provide any guidance on what constitutes acceptable
reasons for which a company may avoid spending 2 % on CSR, hence it should
be clarified.
• The companies in their CSR activities should give more preference for
education, poverty elevation programmes, employment generation, roads and
power etc.
 CORPORATE SOCIAL RESPONSIBLITY IN INDIA: AN OVER VIEW / 67

CONCLUSION
It is too early to say what the real impact of this act will be, especially given that
passing it and enforcing it are too different things. Moreover, today the concept of
corporate social responsibility is firmly rooted on the global business agenda. But
in order to move from theory to concrete action, many obstacles need to be overcome.
A key challenge facing business is the need for more reliable indicators of progress
in the field of CSR, along with the dissemination of CSR strategies. No clear cut
regulatory framework regarding also acts as a hindrance in implementing CSR. It
is found that the degree of CSR activities of companies should depend upon their
business size and profile. In other words, the bigger the company, the bigger is its
CSR program. Non-governmental organizations and Government agencies generally
possess a constricted viewpoint towards the CSR activities of companies. As a result,
they find it hard to decide whether they should contribute in such activities at all
in medium and long range. Lack of transparency is another issue which needs
focus. This is mainly due to the fact that there is little or no knowledge about CSR
within the local communities since no sincere efforts have been made to create
awareness about CSR and win the confidence of local communities. There is a need
to increase the understanding and active participation of business in equitable
social development as an integral part of good business practice.

References
Annual Reports of the Companies Ministry of Corporate Affairs, Government of India.
Arora, B. and Puranik, R. (2004), “A review of corporate social responsibility in India”. Economic
Times: 13 – 10 – 2015.
www.ngosbox.org
www.k4d.org/Health/sustainable-development-challenges-and-csr-activities- in- india.

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