Opinion

Community Benefit or A Selfish Motive?: Looking Beyond the Strict Lines of CSR Amidst the Pandemic

Background

COVID 19 pandemic has drastically affected every sphere of life and altered the dynamic of almost everything we know. In the economic sphere, companies have been adversely affected. Despite facing severe losses in the form of low profits, lack of resources, and cutting down of human resources, companies have continued to operate with their restricted means, thereby also serving to the society. Big corporates in India play multiple roles in the social landscape of the country. Companies in India function as the primary source of income and wealth generation for a significant proportion of the population, and more pertinently, the ‘working class’. Amidst the unfortunate pandemic, companies have continued to maximized their efforts to fulfil all stakeholders’ interests, including that of their employees and the community at large.

One of the age-old methods of enforcing the social commitment of companies while dispensing their business activities is that of Corporate Social Responsibility (CSR). CSR was inducted into the corporate law regime in India in 2014 and is considered a company’s commitment to society, a means to give back what it has earned. It is much broader than the concepts of mere charity or philanthropy. Under the regime, companies that have plenty to offer, undertake beneficial activities for the society in a sustainable manner, intending to balance the interests of the society and the long-term interests of its stakeholders. Effective CSR measures boost the principles of good corporate governance within the company while also making a remarkable and positive impact on the social welfare front. CSR is regarded as a commitment to meet the company’s social obligations by playing an active role to improve the quality of life to the communities and stakeholders on a sustainable basis.

CSR under Company Law in India

An interesting factor about CSR is that there exists no statutory definition for the concept. Section 135 of the Companies Act, 2013 regulates the applicability of CSR on certain companies.  Schedule VII of the Companies Act, 2013 lists out eligible activities that qualify as CSR, and it is pertinent that CSR spending on such activities must be done in accordance with the Companies (Corporate Social Responsibility Policies) Rules, 2014 (CSR Rules).. The CSR Rules and the items listed in Schedule VII of the Companies Act, 2013, govern what constitutes eligible CSR activities and dictates how they are conducted. The CSR Rules (Rule 4) also specify that certain activities cannot be qualified as eligible CSR activities. One of them pertains to “Activities that Significantly Benefit the Employees of the Company and their Families.”

Activities concerning Preventive Health Care

One of the eligible activities that have gained significance particularly during the unprecedented outbreak of the pandemic is “Activities Done in Furtherance of Preventive Health Care ” that is specified under Schedule VII. This item includes within itself activities promoting “Access to Medical Care”.  Activities concerning “Promotion of Health Care Including Preventive Health Care” have also been included within the purview of “Disaster Relief” listed in Schedule VII. Preventive health care activities also include, as per the MCA, “enabling access to, or improving the delivery of, public health systems“. Presently, in the light of Covid -19, the MCA issued specific clarifications to include spending of funds for various activities related to the pandemic as eligible CSR under the ambit of ‘promotion of health care, including preventive health care and disaster management’.

With the advent of the said clarifications, a particular concern in the corporate world has arisen- can the rules of CSR be expanded to include the inoculation of employees and family members of a company at the expenditure of the company, since such an activity would serve a significant social interest. ? While the daily number of cases being reported owing to COVID 19 are  still on a raise there is doubtfulness regarding whether the current vaccination drive conducted by the government can tackle the above-said issues The priority basis vaccination drive and the issues of unequal distribution have been alleged of being violative of Articles 14 and 21 of the Constitution of India. Moreover, the varied pricing of vaccinations available in India has added to the plight of many people, especially that of the “working class”. The CSR rules mandate that no activity shall constitute eligible CSR if being done for the benefit of employees and their families, but considering the context of the pandemic, when the existing vaccination drive conducted by the State is drawing criticism for issues of affordability and accessibility, it does seem fair that, if companies could at least provide free vaccines to its employees, a large proportion of Indian population would be inoculated free of cost. It is also pertinent to highlight that employees of a company are one of its primary stakeholders, the welfare and interest of whom is of utmost priority. 

Right to Health under Article 21 & Employee Welfare

The constitutional guarantee of Right to Life under Article 21 has given birth to the indispensable concept of Right to Health and Medical Care. The Supreme Court has emphasized the constitutional obligation of the State to provide adequate medical services to the people. Protection of one’s life is not merely a right enshrined under Article 21 but an obligation cast on the State to provide so under Article 21 and Article 47 of the Constitution. Hence, every citizen has the right to acquire free-of-cost vaccinations under Article 21. However, considering that the present nationwide vaccination drive is not entirely reflective of this principle, companies are looking forward to utilizing their CSR funds in inoculating a substantial proportion of the working population in India. Their argument is straightforward: a free-of-cost inoculation drive initiated under the expense of Employer Companies would prove beneficial to the promotion of employees’ and their family members’ healthcare, which constitute a considerable number of people of the society. Moreover, they are also of the belief that welfare, safety and health of employees and family members fall within the realms of ‘social responsibility’ of the company. Therefore, inoculation of employees and family members is not merely an activity that benefits the company alone, but on a larger canvas, it serves the community interest, thereby also saving the interests of company’s stakeholders. This indeed is the philosophy behind effective CSR activities.

Does the initiative qualify to be the need of the hour?

The modern-day corporate philosophy and the role of companies in societal welfare are closely intertwined. Community interests and social welfare primarily drive companies in India. Companies are living, vital, and dynamic social organisms with firm and deep-rooted affiliations with the rest of the community in which it functions With the ongoing pandemic, it is only imperative that the corporates be granted all forms of aids and flexibilities from the State to promote the interests of their employees and their family, who are members of a larger society. Moreover, the times that we live in call for speedy solutions. Being so, the question for consideration is thus, whether a proposal which will substantially benefit a large number of people be disregarded as ineligible CSR activity, merely due to technicalities that these people are employees of Companies?

If the pros and cons are considered, the weights may slightly be in favour of the companies. The initiative, if granted, without any doubt, will have the potential to be of significant contribution in tackling the shortcomings of the nationwide vaccination drive. While half of the country’s population is still struggling to access vaccinations, that too at an unaffordable price and on an unequal priority basis, such an initiative by companies to provide for free and equal distribution of vaccines shall cater to the interests of the employees and their family members, who are also citizens of this country, endowed with the constitutional guarantee of Right to Health. Furthermore, considering the hardships that even corporate have undergone in the last one and a half years, it seems less than unreasonable that they have sought further flexibilities in CSR rules. Moreover, the current conditions advocate little liberty on the authorities to demotivate such initiatives by not looking beyond the stringent wordings of the rules. The effect of the pandemic has been catastrophic, calling out for enforcement of Right to Health of all citizens which includes ability to obtain all kinds of healthcare services, including prevention, which shall be not just accessible to all but also conveniently affordable.

One of the basic principles of CSR is that eligible activities listed in Schedule VII must be interpreted liberally so as to capture the essence of the subjects enumerated in the said Schedule. This is so as to serve the purpose of CSR, which is social welfare. The adversities of the pandemic definitely call for wide interpretation of CSR rules and flexibilities in them, so that there is a benefit reaping out of it for all interested stakeholders. Inoculation of a large number of people at the expense of the company shall significantly lower the burden of the governments, contribute to societal welfare, and last but not the least, be of aid to the corporates itself. While the past one and a half years have brought about flexibilities, relaxations and new additions favouring interests of several entities across various fields, the corporate, which are the backbone of our country, must not be left out. If permitted, such flexibility would be a ray of hope in the darkness that companies and a significant proportion of Indian population have been witnessing.


ABOUT THE AUTHOR

Nanda Surendran

Nanda Surendran, graduated from National University of Advanced Legal Studies, Kochi, presently LLM student in International Trade Laws at the same University. Also has experience as a practicing lawyer at the High Court of Kerala, in the fields of corporate law, intellectual property and civil laws. 

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