Corporate Social Responsibility

This article has been written by Sonali Srivastava. Sonali is currently a third-year student in National Law University Odisha.

Corporate Social Responsibility is seen as an initiative taken by the companies whereby they take responsibility of and accountability for their activities. The effects company have on environment and society around it is the basic concern with which corporate social responsibility deal. Somehow in india the term CSR is highly misunderstood among companies. Some companies think that it is merely a regulation with which they have to comply, however the perspective behind CSR is the wider impact which company have on its surrounding .

The ‘Triple Bottom Line” model, emphasis on three responsibility of firm which comes on it wityh the type of activities it carry out. They are: social, economic and environmental. These responsibilities are necessary to ensure economic prosperity, environmental quality and social justice.[1]

We can see corporate social responsibility is integral part of corporate governance which bring a change as it shift the idea with which a firm works i.e. from shareholder’s theory to stakeholder’s theory.  Basically actions of the firm which are not for their profit maximization but have good impact on society and environment can be called as Corporate social responsibility. Today according to certain survey conducted in Indian Companies, we came across certain drivers and barriers of CSR in India. The most prominent driver for CSR is seen to be Philanthrophy, however others being image building, employee morale amd ethics. The survey report suggests that this may be attributed to an enabling corporate environment that is more conscious of the implications of involvement of business in CSR activities with specific reference to the Indian context.[2] However talking about the challenges faced by CSR are like Lack of community participation in CSR activities, Need for capacity building of the local, non-governmental organizations, sues of transparency.   It seems unless the poverty is eliminated from the society, the growth of economy can never be achieve in full fledged manner. Here comes the role of corporations and their corporate social responsibility which they need to play honestly and have tactful implement of their policies which they made for community welfare.

However previously we saw corporate social responsibility as voluntarty step taken by corporations for betterment of society . however now, with the massive efforts of Mr. Sachin Pilot and other parliamentary members, CSR has gained importance in New Companies Act, 2013.[3]  Section 135 of Companies Act determines Corporate Social Responsibitly. Certain new additions to CSR provision are:

  • Constitute a CSR committee of Board which shall consist of minimum three directors, out of which one shall be independent director.
  • The committee shall formulate and recommend CSR Policy which indicates company’s activity as specified in Schedule VII and also amount recommend for the same.
  • At least 2% of the average net profit of the immediately preceding three financial years of the company shall be used for spending in accordance with the CSR Policy.
  • According to the approach “Comply or Explain”, Board should explain the reason for not spending such amount if it fails to do so.
  • The company shall give preference to its local area from where it operates, for CSR activities.

Earlier the corporate self regulation was seen as the only and dominant aim of corporation in their area of Corporate Conduct. However the laws now address the issues relating to stakeholders and protection of their interest as one of the main aims which the corporation has to fulfill as part of their corporate conduct.

They is also one more view to Corporate Social Responsibility which is generally called as negative aspect of it. It is said that under CSR company must not carry out any activity which has negative impact on its stakeholders and community. Now it is seen that Indian companies are more focused on positive aspect of CSR which says only to do philanthropy and companies keep doing it in order to compensate for the disastrous impact which their activities have on society. Noted Indian philanthropist Rohini Nilekani has called the provision an “outsourcing of governance” that is taking the failure of the state and the corporate and trying to create a model out of it[4]. In India, there are less chances of CSR existing smoothly with profit making goals of company. It is diversity of stakeholder interests that make it difficult for companies and boards to measure performance and Corporations in India have concentrated shareholding so still board members are puppet in hand of promoters or majority shareholders. The CSR provisions show the responsibility of board to manage CSR policies. Now this shows that there is risk of promoters serving their own self interest in the name of CSR policies.

However, the challenge for the companies is to determine a strong and innovative CSR strategy which should deliver high performance in ethical, environmental and social areas and meet all the stakeholders‟ objectives. It can be said, extensive research and studies need to be done in order to make CSR more effective and innovative.

[1] Grahame F. Thompson, Global Corporate Citizenship: What Does it Mean?, 9Competition & Change 131–152, 131-152 (2005).

[2] A Review of Corporate Social Responsibility in India by Bimal Arora and Ravi Purnik

[3]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”, Lord Holme and Richard Watts, available at:

[4] See Corporate Social Responsibility in India: No Clear Definition, but Plenty of Debate, KNOWLEDGE@WHARTON (Aug. 2, 2011).

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