Status of Corporate Social Responsibility: In Indian Context

By
Mrs Parul Khanna*, Mrs Gitika Gupta*& Ms Rakhi Arora**
*Lecturer Rayat- Bahra Institute of Management, Hoshiarpur
** Lecturer Guru Nanak Institute of Management & Technology (GNIMT),
Ludhiana

An Introduction to CSR
In the last twenty years, there has been a sea change in the nature of the triangular
relationship between companies, the state and the society. No longer can firms continue
to act as independent entities regardless of the interest of the general public. The
evolution of the relationship between companies and society has been one of slow
transformation from a philanthropic coexistence to one where the mutual interest of all
the stakeholders is gaining paramount importance. Companies are beginning to realise the
fact that in order to gain strategic initiative and to ensure continued existence, business
practises may have to be moulded from the normal practise of solely focussing on profits
to factor in public goodwill and responsible business etiquettes(Reynard and Forstater,
2002). An examination of some of the factors which have led to the development of the
concept of corporate social responsibility (CSR) would be ideal starting ground for the
conceptual development of suitable corporate business practises for emerging markets.

The business environment has undergone vast changes in the recent years in terms of
both the nature of competition and the wave of globalization that has been sweeping
across markets. Companies are expanding their boundaries from the country of their
origin to the evolving markets in the developing countries which have been sometimes
referred to as emerging markets. The current trend of globalization has brought a
realisation among the firms that in order to compete effectively in a competitive
environment; they need clearly defined business practises with a sound focus on the
public interest in the markets (Gray, 2001). The increase in competition among the
multinational companies to gain first mover advantage in various developing countries by
establishing goodwill relationships with both the state and the civil society is ample
testimony to this transformation. Secondly, in most of the emerging markets, the state
still holds the key to business success because of the existence of trade and business
regulations restricting the freedom of multinational companies to incorporate their
previously successful business doctrines which have been tried and tested in the
developed nations. The state with its duty of protecting the interests of the general public
would naturally be inclined to give preference to companies which take care of the
interests of all the stakeholders. Thirdly, emerging markets have been identified as a
source of immense talent with the rising levels of education. For example, the expertise
of India in churning out software professionals and China in manufacturing has now
become internationally renowned. In order to draw from this vast talent pool coming up
in developing countries, companies need to gain a foothold in these markets by
establishing sound business practices addressing social and cultural concerns of the
people. It has been observed that consumers consider switching to another company's
products and services, speak out against the company to family/friends, refuse to invest in
that company's stock, refuse to work at the company and boycott the company's products
and services in case of negative corporate citizenship behaviours (Edenkamp, 2002).

Last but not the least, firms all over the world are beginning to grasp the importance
of intangible assets, be it brand name or employee morale. Only firms that have
gained the goodwill of the general public and are ideal corporate citizens will be to
develop these intangible assets into strategic advantages.

Meaning of the term Corporate Social Responsibility

Corporate Social Responsibility (CSR) is viewed as a comprehensive set of policies,
practices and programs that are integrated into business operations, supply chains, and
decision-making processes throughout the organization -- wherever the organization does
business -- and includes responsibility for current and past actions as well as future
impacts1. CSR involves addressing the legal, ethical, commercial and other expectations
society has for business, and making decisions that fairly balance the claims of all key
stakeholders. Effective CSR aims at “achieving commercial success in ways that honor
ethical values and respect people, communities, and the natural environment.” Simply put
it means “what you do, how you do it, and when and what you say.”
Several terms have been used interchangeably with CSR. They include -- business ethics,
corporate citizenship, corporate accountability, sustainability and corporate
responsibility.
The issues that represent an organization‟s CSR focus vary by size (small, medium and
large), sector (for example, financial institutions, infrastructure providers, textile
manufacturers, agri-producers, supermarket retailers, etc.) and even by geographic
region. In its broadest categories, CSR typically includes issues related to business ethics,
community investment, environment, governance, human rights, the marketplace and the
workplace.

Figure 1: Areas of Corporate Social Responsibility

World Business Council for Sustainable Development defines Corporate Social
Responsibility (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.”

Need for CSR

While the interests of shareholders and the actions of managers of any business enterprise
have to be governed by the laws of economics, requiring an adequate financial return on
investments made, in reality the operations of an enterprise need to be driven by a much
larger set of objectives that are today being defined under the term CSR. The broad
rationale for a new set of ethics for corporate decision making, which clearly constructs
and upholds a organization's social responsibility, arises from the fact that a business
enterprise derives several benefits from society, which must, therefore, require the
enterprise to provide returns to society as well. A business cannot succeed in a society
which fails. This, therefore, clearly establishes the stake of a business organization in the
good health and well being of a society of which it is a part. More importantly, in this age
of widespread communication and growing emphasis on transparency, customers of any
product or service are unlikely to feel satisfied in buying from an organization that is seen
to violate the expectations of what is deemed to be ethically and socially responsible
behaviour. It is becoming increasingly evident that organizations that pay genuine
attention to the principles of socially responsible behaviour are also finding favour with
the public and are the preferred choice for their goods and services.

Why do organizations pledge their commitment towards CSR?

In the recent years corporate business houses have substantially involved towards societal
responsibilities. Companies have started to realise the importance of CSR and initiating
the steps towards it. Today, the objectives of the companies are not limited to profit
maximisation, economic gains or enhancing competencies but at the same time ensure
environmental protection, promotion of social responsibility including consumer interest.
It will lead to good public image which in turn have positive impact on the wealth of the
organisation. The reasons that motivate organisations to involve in CSR activities are
discussed as follows:
1. Young blood in the organisation wants more than the financial benefit. They feel
sense of pride to be connected with the organisation which is socially responsible.
Strong CSR practices can help in attracting, recruiting and retaining the best
young talent.
2. Responsible companies give greater priority to their customers. With diminishing
business boundaries across the world consumers have become aware and more
demanding in terms of information regarding conditions in which the products
and services are produced along with the sustainability impact thereof.
3. CSR is about values and accountability which includes the behaviour of the
people. Many potential clients who themselves operate CSR activities expect their
suppliers to do similar kind of programmes. Sometimes the selection is on the
basis of social responsiveness of the supplier.
4. Globalisation and universal expansion of the economies enhances the
consideration of image and reputation among organisations. An organisations
image and reputation can be ruined in days through unregulated and unethical
practices. So, imbibing CSR practices becomes the strong foundation in image
building.
5. Environment protection becomes an area of concern these days. A CSR
programme that aims to conserve earth's natural resources, avoiding pollution,
water conservation and minimising global warming effects are the areas in which
the companies take initiative.
6. Legislators are introducing regulations to force businesses to act more responsibly
whether that is in regard to the environment, finance, health and safety, wellbeing
or a variety of other areas. Corporations by taking substantive voluntary steps
with respect to these issues can avoid government intervention when seen as a
pioneer in these areas rather than being forced by law to comply.
7. CSR practices can help the organisation to avoid the risk of corruption scandals,
environment disasters, child labour violations and dangerous work environment.
These incidents also draw unwanted attention from regulators, courts,
 governments and media. A genuine effort in playing straight and having good
CSR record with the right check insulates the companies from such risks.

KPMG-CSR survey has presented a range of motivating factors and drivers for CSR
which are discussed in table 1 as below:
Drivers Priority in (%)
Economic Considerations 74
Ethical Consideration 53
Innovations and Learning 53
Employee Motivation 47
Risk Management or risk reduction 47
Access to capital or increased shareholder 39
value
Reputation or brand 27
Market share improvement 21
Strengthened supplier relations 13
Cost saving 9
Improved relationship with governmental 9
authorities
Others 11
Source: Data taken from – KPMG international. KPMG surveys of Corporate Responsibility Reporting
2005.
Historical Aspects of CSR in India
Unlike western capitalism, businesses in Asia are part of a social welfare philosophy
embedded in corporate philanthropy (Mohan, 2001). Some families from traditional
merchant communities pioneered indigenous industrialization in India in late 19th
century and participated not only in freedom struggle but in the nation-building process
thereafter (ibid.).
Preceding the independence of India, in 1944, a set of concerned industrialists came out
with a development plan for India called the Bombay Plan (Srinivasan and Tendulkar,
2003). During 1950s/1960s, Narayan (cited in IIC, 1966) stated, influenced by Gandhian
philosophy of „trusteeship‟ – an ancient idea revived and reinterpreted by Mahatama
Gandhi – most of the businessmen in India saw their business empires as a „trust‟ held in
the interest of community at large. Businesses made significant contributions to support
schools, colleges and hospitals, and emphasis later shifted to supporting technical
training, public health and rural development (Mohan, 2001). Also, post-independence,
with a mixed economy framework, India experienced the elements of state-sponsored
CSR activities through large public sector companies.

As the Indian economy moved from agrarian to industrial, concerns were raised about the
consequences of economic growth with an innate tendency to be imbalanced (Mohan,
2001). The importance of businesses‟ social responsibility to multi-stakeholders was
emphasized at a high-profile seminar in Delhi, and a declaration adopted stated that social
responsibility of an enterprise is responsible to itself, its customers, workers, shareholders
and the community (IIC, 1966).

The emergence of non-family-owned businesses in 1960s and 1970s also saw an increase
in numbers of „trusts‟ setup by businesses (Mohan, 2001). Changes in India's economic
paradigm in 1990s significantly affected the corporate sector, bringing freedom from
controls and increased roles. Shrivastava and Venkateswaran (2000) state that most
corporations agree that this newfound freedom carries with it social responsibilities.

CSR in India
Today, the world is coming round full circle in emphasizing this concept through an
articulation of the principle of social responsibility of business and industry. And this
trend is no different in India either. Mahatma Gandhi, the charismatic visionary leader
who brought the cause of India's independence from British colonial rule, was a person
who in several respects was ahead of his time. His view of the ownership of capital was
one of trusteeship, motivated by the belief that essentially society was providing
capitalists with an opportunity to manage resources that should really be seen as a form
of trusteeship on behalf of society in general.

In June 2008, a survey was carried out by TNS India (a research organization) and the
Times Foundation with the aim of providing an understanding of the role of corporations
in CSR. The findings revealed that over 90 per cent of all major Indian organizations
surveyed were involved in CSR initiatives. In fact, the private sector was more involved
in CSR activities than the public and government sectors. The leading areas that
corporations were involved in were livelihood promotion, education, health,
environment, and women's empowerment. Most of CSR ventures were done as internal
projects while a small proportion were as direct financial support to voluntary
organizations or communities.

Some Surveys in India:

In the past few years, some surveys have been conducted in India by different
organizations to understand the perception of CSR among companies and their different
stakeholders, and to define the drivers and barriers of CSR in India. Some of the
prominent surveys include „Corporate Involvement in Social Development in India‟ in
the year 1996-1997 by Partners in Change (PiC), „Altered Images: the 2001 State of
Corporate Responsibility in India Poll‟ by Tata Energy Research Institute (TERI),
„Corporate Social Responsibility: Perceptions of Indian Business‟ by Centre for Social
Markets (CSM), and „Corporate Social Responsibility Survey, 2002 – India‟ presented
jointly by the British Council, UNDP, Confederation of Indian Industries and Price
Waterhouse Coopers (PWC).

In another survey conducted by Partners in Change (2004) from a sample of 536

companies across India reveal that philanthropy is the most significant driver (64 per
cent) of CSR, followed by image building (42 per cent), employee morale (30 per cent)
and ethics (30 per cent) respectively. The 2004 survey findings present a marked increase
in the number of companies developing and adopting CSR policy as against the earlier
findings in 1999 and 2000. At the same time, the survey also shows that the initiator of a
policy across types of companies is largely the CEO, except in the case of public sector
undertakings where the government policies determine the need to develop a CSR policy
(Ghosh, 2003).

Current status of CSR in India

CSR is not a new concept in India. Corporates like the Tata Group, the Aditya Birla
Group, and Indian Oil Corporation, to name a few, have been involved in serving the
community ever since their inception. Many other organizations have been doing their
part for the society through donations and charity events. Today, CSR in India has gone
beyond merely charity and donations, and is approached in a more organized fashion. It
has become an integral part of the corporate strategy. Companies have CSR teams that
devise specific policies, strategies and goals for their CSR programs and set aside budgets
to support them.

These programs, in many cases, are based on a clearly defined social philosophy or are
closely aligned with the companies‟ business expertise. Employees become the backbone
of these initiatives and volunteer their time and contribute their skills, to implement them.
CSR Programs could range from overall development of a community to supporting
specific causes like education, environment, healthcare etc.

Best practices followed by Indian Companies related to CSR are as follows:

ONGC and Indian Oil Corporation has been spending 0.75-1 % of their net profits
on CSR activities. In 2007-08 Rs. 246.70 crores was spent by oil PSUs on CSR
activities. ONGC‟s CSR projects focus on higher education, grant of scholarship
and aid to deserving young pupils of less privileged sections of society, facilities
for constructing schools etc.
SAIL has taken successful actions in environment conservation, health and
medical care, education, women upliftment providing drinking water.
 BHEL & Indian Airlines have been acclaimed for disaster management efforts.
BHEL has also adopted 56 villages having nearly 80,000 inhabitants.
Reliance Industries initiated a project named as “ Project- Drishti” to bring back
the eyesight of visually challenged Indians from the economically weaker sections
of the society. This project has brightened up the lives of over 5000 people so far.
Mahindra & Mahindra launched a unique kind of ESOPs- Employee Social
Option in order to enable Mahindra employees to involve themselves in socially
responsible activities of their choice.
GlaxoSmithKline Pharmaceuticals‟ CSR programs primarily focus on health and
healthy living. They work in tribal villages where they provide medical check-up
and treatment, health camps and health awareness programs. They also provide
money, medicines and equipment to non-profit organizations that work towards
improving health and education in under-served communities.
Bajaj Electricals Ltd corporate social responsibility activities include
Education, Rural Development & Environment.

Challenges of CSR
There are number of challenges to the implementation of CSR. They are enumerated
below:
• 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 organisations as there
is serious dearth of trained and efficient organisations 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 challenge 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 utilisation
of funds. This negatively impacts the process of trust building among the companies
which is key to the success of any CSR initiative.

• Non-availability of well organised non-governmental organizations

There is non-availability of well organised non governmental organisations 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 sensitises the population about various ongoing CSR
initiatives of companies. This apparent influence of gaining visibility and branding
exercise often leads many non-governmental organisations 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 organisations 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 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.

Conclusion of the study

Even though companies are taking serious efforts for the sustained development, some
critics still are questioning the concept of CSR. There are people who claim that
Corporate Social Responsibility underlies some ulterior motives while others consider it
as a myth. The reality is that CSR is not a tactic for brand building; however, it creates an
internal brand among its employees. Indulging into activities that help society in one way
or the other only adds to the goodwill of a company. Corporate Social Responsibility is
the duty of everyone i.e. business corporations, governments, individuals because of the
reasons: the income is earned only from the society and therefore it should be given back;
thus wealth is meant for use by self and the public; the basic motive behind all types of
business is to quench the hunger of the mankind as a whole; the fundamental objective of
all business is only to help people.
CSR cannot be an additional extra - it must run into the core of every business‟ ethics,
and its treatment of employees and customers. Thus, CSR is becoming a fast-developing
and increasingly competitive field. The case for demonstrating corporate responsibility is
getting stronger as expectations among key opinion formers, customers and the public are
increasing. Being a good corporate citizen is increasingly crucial for commercial success
and the key lies in matching public expectations and priorities, and in communicating
involvement and achievements widely and effectively.

Suggested Readings:

1. Ghosh J. (2003) „Strategy for Development‟, Frontline Vol. 20, No, 18, India.
2. Goyal S.K. (1996) „Political Economy of India‟s Economic Reforms‟, Working
Paper of the Institute for Studies in Industrial Development (ISID), New Delhi,
India.
3. IIC (1966) Social Responsibilities of Business, New Delhi, India: India
International Centre
4. Srinivasan T.N. and S.D. Tendulkar (2003) „Reintegrating India with the World
Economy‟. Washington, D.C.: Institute for International Economics.
5. Corporate Social Responsibility – Perceptions of Indian Business. Available
at:www.csmworld.org/public/pdf/social_respons.pdf
6. Why Corporate Social Responsibility? The European Business Campaign. Available at:
http://www.csrcampaign.org/why/default.aspx
7. The business case for CSR. The Gateway to Corporate Social Responsibility Website
(UK). Available at: http://www.societyandbusiness.gov.uk/businesscasecsr.shtml
8. The business case for corporate social responsibility – Available at:
http://www.weforum.org/site/homepublic.nsf/Content/The+business+case+for+corporate
+social+responsibility
9. Our CSR Achievements, Challenges and Goals. Available at:
http://www.firstgroup.com/corpfirst/pdf2004/CSR%20ACHIEVE_CHALLENGE_GOA
LS.pdf
10. Corporation Social Responsibility - Putting the Words into Action. Available at:
http://www.natural- resources.org/minerals/csr/docs/csr/Sir%20Robert%20Wilson%20-
%20CSR%20-%20speech%20161001.pdf
11. Behind the mask - The real face of corporate social responsibility. Available at:
http://www.christian-aid.org.uk/indepth/0401csr/csr_behindthemask.pdf (accessed May
9, 2005)