Corporate Social Responsibility - Indian Perspective

CONCEPT OF CSR IS NOT NEW TO INDIAN COMPANIES

A report submitted for internal assessment of Company Law

Under the guidance of

Prof. S N Ghosh

Deepa Chandrasekar

IIPM

IIPM TOWER, GURGAON.

ACKNOWLEDGEMENT

We thank Prof. S N Ghosh in particular for assigning us this topic and encouraging us to write

in the first place. We owe much to Prof. S N Ghosh for his helpful comments.

We are indebted to all those who have been helpful throughout the process of writing this

Report– Mrs.DeepaChandrasekar, Ms.Ekta Yadav and Mr. but as the cliché goes, we are

solely responsible for any remaining errors of fact or judgment.


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Contents Acknowledgement

1. Abstract 4 2. Introduction 5 3. Definition 6 4. Difference between Charity & CSR 7 5. Forerunners in corporate social responsibility 8

6. Government Support & Potential Benefits 11 7. Conclusion 14


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Abstract

CSR is not new to India; companies like TATA and BIRLA have been imbibing

the case for social good in their operations for decades long before CSR become

a popular cause. In spite of having such life size successful examples, CSR in

India is in a very nascent stage. It is still one of the least understood initiatives

in the Indian development sector. It is followed by a handful of public

companies as dictated by the very basis of their existence, and by a few private

companies, with international shareholding as this is the practice followed by

them in their respective foreign country. Thus the situation is far from perfect

as the emphasis is not on social good but rather on a policy that needs to be

implemented.

A lack of understanding, inadequately trained personnel, non availability of

authentic data and specific information on the kinds of CSR activities,

coverage, policy etc. Further adds to the reach and effectiveness of CSR

programmes. But the situation is changing. And CSR is coming out of the

purview of ‘doing social good’ and is fast becoming a ‘business necessity’. The

‘business case’ for CSR is gaining ground and corporate houses are realizing

that ‘what is good for workers - their community, health, and environment is

also good for the businesses.


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Introduction

Corporate social responsibility (CSR) is a form of corporate self-regulation

integrated into a business model. Ideally, CSR policy would function as a built-

in, self-regulating mechanism whereby business would monitor and ensure

their adherence to law, ethical standards, and international norms. Business

would embrace responsibility for the impact of their activities on the

environment, consumers, employees, communities, stakeholders and all other

members of the public sphere. Furthermore, business would proactively

promote the public interest by encouraging community growth and

development, and voluntarily eliminating practices that harm the public

sphere, regardless of legality. Essentially, CSR is the deliberate inclusion of

public interest into corporate decision-making, and the honoring of a triple

bottom line: People, Planet, and Profit.


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CONCEPT OF CSR IS NOT NEW TO INDIA

Corporate – means organized business

Social – meaning every thing dealing with the people

Responsibility – means accountability between the two

Corporate Social Responsibility

“Corporate Social Responsibility 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”.

Exhibits the ethical behavior that an organization exhibits towards its

internal and external stakeholders

Denotes the responsibility of an organization towards the environment

and society in which it operates.

CSR involves various voluntary efforts

It involves providing innovative solutions to societal and environmental

challenges.

Organizations generally believe that acting in a socially responsible

manner will create value for them.

an organization is committed to social causes, also gives employees a

sense that the company would also be committed to the welfare of its

employees as well.

“Corporate social responsibility must not be defined by tax

planning strategies alone. Rather, it should be defined within the

framework of a corporate philosophy, which factors the needs of

the community and the regions in which a corporate entity

functions.”

Prime Minister -Dr. Manmohan Singh


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Difference between Charity & CSR

CHARITY Means donating money, goods, time or effort For poor and needy cause It is selfless giving toward any kind of social need

CSR It is how company align their value to social cause It can be people centric or planet centric It is not self less act, company derive long term benefit from CSR

For and against argument

The practice of CSR is subject to much debate and criticism. Proponents argue

that there is a strong business case for CSR, in that corporations benefit in

multiple ways by operating with a perspective broader and longer than their

own immediate, short-term profits. Critics argue that CSR distracts from the

fundamental economic role of businesses; others argue that it is nothing more

than superficial window-dressing; others argue that it is an attempt to pre-

empt the role of governments as a watchdog over powerful multinational

corporations. Critics of CSR as well as proponents debate a number of

concerns related to it. These include CSR's relationship to the fundamental

purpose and nature of business and questionable motives for engaging in CSR,

including concerns about insincerity and hypocrisy.

Critics concerned with corporate hypocrisy and insincerity generally suggest

that better governmental and international regulation and enforcement, rather

than voluntary measures, are necessary to ensure that companies behave in a

socially responsible manner. CSR could prove to be a valuable asset in an age

of Mergers & Acquisitions, as it helps firms spread their brand name.


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http://en.wikipedia.org/wiki/Display_window

http://en.wikipedia.org/wiki/Multinational_corporations

http://en.wikipedia.org/wiki/Multinational_corporations

Forerunners in corporate social responsibility

TATA

Considered as pioneers in the area of CSR, the Tata group has played an

active role in nation building and socio-economic development since the early

1900s. From its inception, the Tata group has taken up a number of initiatives

for the development of society. A unique feature of the group is that 63 percent

of the equity capital of the parent firm - Tata Sons Limited - is held by Tata

trusts, which are philanthropic in nature.

Explains the chairman of the Tata Group, Ratan N. Tata, “We do not do

it for propaganda. We do not do it for publicity. We do it for the satisfaction of

having really achieved something worthwhile.” The Tata Business Excellence

Model integrates social responsibility into the framework of corporate

management wherein social responsibility is encapsulated as Key Business

Process. In fact all social service departments in Tata companies have annual

programmes and budgets… and all this is aligned to the MD’s Balanced Score

Card.

"The Tata credo is that 'give back to the people what you have earned from them'.

Moreover for any business to sustain in the long run they have to look beyond

business. - Jamshetji Tata


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About 7000 villages around Jamshedpur and Orissa benefit from

development programmes run by the Tata Steel Rural Development Society

(TSRDS). Programmes of TSRDS cover issues like education, irrigation,

afforestation, adult literacy, vocational training, handicrafts and rehabilitation

of the handicapped persons.

The Community Development and Social Welfare Department (CDSW) at

Tata steel carries out medical and health programmes, blood donation drives,

mass screening of Tuberculosis patients immunization camps and drug de-

addiction. In 1999, Tata Steel embarked on an AIDS awareness programme,

which has now become an integral part of all training programmes.

Routine activities like immunization programmes, sterilization operations

and mother and child health care programmes are conducted through 9 family

welfare centres, 9 child clinics and 6 community-based clinics. In fact, Tata

Steel’s Centre for Family Initiatives (CFI) was successful in influencing 59 per

cent of Jamshedpur’s eligible couples practicing family planning, compared to

the national figure of 35 per cent.

A commitment to the welfare of the community has long been central to

the value system of companies in the Tata Group. To build upon this heritage

the Tata Council for Community Initiatives (TCCI) has created the Tata

Guidelines on Community Development, an effort of over three years from the

field evolved into a framework of best practices.


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BIRLA

The Birla groups of companies are also among the pioneers in the field of

corporate social responsibility in India. As part of the Aditya Vikram Birla

Group’s Social Reach, the Birla group runs as many as 15 hospitals in India;

includes Adult education and schools conducting as many as 78 schools all

over India; rehabilitates Handicapped persons having touched more than 5000

physically challenged individuals. More than 1,00,000 patients have been

examined under the Group’s medical programmes. Over 15,000 children along

with 2000 pregnant women have been immunized, over 500 cataract patients

operated, 2000 TB patients provided medical care, 100 leprosy-afflicted

attended to, free of cost.

It also provides Vocational Training, having provided training to over 3000

women and having distributed over 1400 tool kits in a variety of areas like

electrical, auto repair, electronic equipment maintenance and repair and

tailoring. It has adopted several villages under its Village Infrastructure

Development programme and has provided extensive training to over 10,000

villagers in its Carpet Weaving Center.xiii

MAHINDRA

Among corporates who have displayed deep commitment to Corporate

Social responsibility over long years is Mahindra & Mahindra. The late Mr. K.

C. Mahindra for promoting education among Indians at all levels established

the K. C. Mahindra Education Trust in 1953. Every year the Trust offers up to

30-40 interest-free loan scholarships to post-graduate students going abroad

for higher studies.


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The Mahindra Search for Talent Scholarships is a scheme established in

34 schools in India to enthuse and reward students who have achieved

excellence in their academic pursuits. The Mahindra All India Talent

Scholarships are awarded every year from all over India to over 300 students

from lower income group families with good scholastic record pursuing job-

oriented diploma courses in various polytechnics.

Others

Similar commitment to CSR has been displayed by several corporates in India.

The list, which at best can be far from complete, includes Arvind Mills, Escorts,

Dabur, Bajaj, Godrej, Hero Honda, DCM Sriram, Ashok Leyland, Ballarpur

Industries, Eicher, Kinetic Group, Kirloskar, Infosys, Reliance, Ranbaxy, Wipro,

each of which has been deeply committed to their communities engaging in

programmes encompassing education, health, education, integrated rural

development.

Beyond the private sector, corporate players in India’s public sector too have

been actively involved in corporate social responsibility initiatives.

Most public sector units in the heavy engineering industry have not only set up

a township around the plant, but also established a school, a hospital and

several other civic facilities for its employees and those that live in that area.


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Government Support

Private sector companies have been encouraged to undertake rural

development programmes down the years through fiscal incentives by the

government. For instance, special benefits are offered in the industrial policy to

companies that set up industries in backward areas and tax incentives are also

offered to companies that set up water purification projects.

Potential business benefits

The scale and nature of the benefits of CSR for an organization can vary

depending on the nature of the enterprise, and are difficult to quantify, though

there is a large body of literature exhorting business to adopt measures beyond

financial ones at it is found that a correlation exist between

social/environmental performance and financial performance. However,

businesses may not be looking at short-run financial returns when developing

their CSR strategy.

The business case for CSR within a company will likely rest on one or more of

these arguments:

Human resources

A CSR programme can be an aid to recruitment and retention, particularly

within the competitive graduate student market. Potential recruits often ask

about a firm's CSR policy during an interview, and having a comprehensive

policy can give an advantage. CSR can also help to improve the perception of a

company among its staff, particularly when staff can become involved through

payroll giving, fundraising activities or community volunteering.


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Risk management

Managing risk is a central part of many corporate strategies. Reputations that

take decades to build up can be ruined in hours through incidents such as

corruption scandals or environmental accidents. These can also draw

unwanted attention from regulators, courts, governments and media. Building

a genuine culture of 'doing the right thing' within a corporation can offset these

risks.

Brand differentiation

In crowded marketplaces, companies strive for a unique selling proposition that

can separate them from the competition in the minds of consumers. CSR can

play a role in building customer loyalty based on distinctive ethical values.

Several major brands, such as TATA, BIRLA are built on ethical values.

Business service organizations can benefit too from building a reputation for

integrity and best practice.

License to operate

Corporations are keen to avoid interference in their business through taxation

or regulations. By taking substantive voluntary steps, they can persuade

governments and the wider public that they are taking issues such as health

and safety, diversity or the environment good corporate citizens with respect to

labour standards and impacts on the environment.


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Conclusion

Today, CSR talks about responsibility across all stakeholders in terms the

‘Triple Bottom-line’; people, planet & profits.

CSR has come a long way in India. From responsive activities to sustainable

initiatives, corporates have clearly exhibited their ability to make a significant

difference in the society and improve the overall quality of life. In the current

social situation in India, it is difficult for one single entity to bring about

change, as the scale is enormous. Corporates have the expertise, strategic

thinking, manpower and money to facilitate extensive social change. Effective

partnerships between corporates, NGOs and the government will place India’s

social development on a faster track.

References

1. http://www.indianmba.com/ 2. http://www.teriin.org/ 3. www.naukrihub.com/ 4. http://www.tata.com 5. http://www.icmrindia.org/

http://www.teriin.org/

http://www.naukrihub.com/hr-today/corporate-social-responsibility.html

http://www.tata.com/

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Corporate Social Responsibility - Indian Perspective