SAMF

CORPORATE SOCIAL RESPONSIBILITY

IN PUBLIC POLICY: A CASE OF INDIA

Dr Ram Kumar Mishra Dr Geeta Potaraju

Director, Institute of Public Enterprise, Assistant Professor, Institute of Public
Hyderabad. Enterprise, Hyderabad.
E-mail: [email protected] E-mail: pgeeta@ipeindiaorg

Dr Shulagna Sarkar
Assistant Professor, Institute of Public
Enterprise, Hyderabad.
E-mail: [email protected]

ABSTRACT
Corporate Social Responsibility has been looked at as a remedy for the
inequalities created due to economic liberalization and globalization. India is
especially ridden with socio, economic and cultural inequalities among the
semi-urban and rural population and vulnerable to human induced
environmental hazards. In such a scenario, CSR has emerged as a potential
method for resolving the anomalies. CSR is being used as an effective tool by
all stakeholders, including government, corporates and civil societies, to
address issues of education, health, environment and livelihoods through
various interventions. The paper aims to indentify how public policies can
address social issues by governing CSR. The paper discusses the case of
mandating CSR in India and highlights the initial impact of the revolutionary
initiative of the government.

Key Words: Corporate Social Responsibility, Public Policy, Liberalization,

Globalization, Cultural

INTRODUCTION
Corporate Social Responsibility (CSR) not only encompasses what companies
do with their profits, but also how they make them. It goes beyond
philanthropy and compliance to address the manner in which companies
manage their economic, environmental and social impacts and their
stakeholder relationships in all key spheres of influence: the workplace,
the market place, the supply chain, the community and the public policy
realm. At present, the world over, there is an increasing awareness about
Corporate Social Responsibility (CSR), Sustainable Development (SD) and
Non-Financial Reporting (NFR). Consequently, there is a concerted effort

302
 SAMF

among all types of organizations to ensure that sustainable development is

not lost sight of in the pursuit of their respective goals - profit making, social
service, philanthropy, etc. CSR entails the integration of social and
environmental concerns by companies in their business operations as also
in interactions with their stakeholders.
The concept of Corporate Social Responsibility brings various perspectives
and paradigms given the recognition and strategic importance it has gained.
CSR had aroused considerable interest as early as the 1960s and 70s,
bringing forth a wide range of scholarly contributions (Cheit, 1964; Heald,
1970; Ackermann & Bauer, 1976; Carroll, 1979). The literature on CSR is
quite vast and draws on a number of different theoretical traditions. Despite
a vast and growing body of literature on CSR (Crane, McWilliams, Matten,
Moon, & Siegel, 2008; Lockett, Moon, & Visser, 2006) and on related
concepts, defining CSR is not easy. First, this is because CSR is an
“essentially contested concept,” being “appraisive” (or considered as
valued), “internally complex,” and having relatively open rules of application
(Moon, Crane, & Matten, 2005). Second, CSR is an umbrella term overlapping
with some, and being synonymous with other, conceptions of business-
society relations (Matten & Crane, 2005). Third, it has clearly been a
dynamic phenomenon (Carroll, 1999).
Sundar (2000) has chronicled the rise of CSR in the new economic regime
in India. He has discussed the emergence of new activists who largely came
from the urban middle classes. These activists were concerned with a whole
range of activities including education, “peoples’ science”, health and the
environment. Grassroots mobilizations against large national and
transnational projects—such as the construction of large dams and the
consequent displacement of communities, and the patenting of life forms
and plant genetic materials with implications on farmers’ rights—became
common in India during these developmental years.
The objectives of the paper are:
To indentify how public policies can address country specific issues.
To discusses the case of mandating CSR in India and highlight the initial
impact of the revolutionary initiative of the government.

LITERATURE REVIEW
Though companies are initiating CSR activities yet a large number of them
are inspired by the benefits received due to the emphasis on CSR by the
government. Mandating CSR through legislations has a cascading effect

303
 SAMF

Figure 1: Benefits of CSR

The triple bottom-line concept is very popular as it highlights the importance

of focus on all Profit, People, and Planet. Similarly CSR when implemented
reaps benefits to all including -

PROFIT PEOPLE
Benefits to the Company Benefits to the Community
• Enhancement in reputation • Enhanced charitable contributions
• Improved brand image • Improvement in community programs
• Improved performance in the areas of:
• Education
• Increased customer loyalty
• Health
• More ability to attract and retain
employees • Livelihood- Skill development
• Enhanced transparency and • Empowerment
accountability • Eradicating poverty

PLANET
Environmental Benefits
• Usage of renewable resources
• Reduced carbon foot prints
• Increased acceptance of environmental
management standards
• Increased forest expansion
• Saved flaura and fauna

on companies in initiating the CSR drive. In spite of large acceptance and

presence of CSR across the world, Levitt (1958) set up a base for the debate
about the social responsibility of business and emphasized that
‘government’s job is not business, and business’s job is not government’.
Reich (1998) has explained that government should act as arbiter of
business responsibility in society. This view is reinforced by another point
of view that sees government as helping business to achieve CSR through
regulation, control and enforcement (Broberg, 1996).
Corporate social responsibility is not a mandated practice in the United
States; instead, it is something extra that companies do to improve their
local and global communities. The Responsible Business Conduct (RBC)
team provides guidance, promotion and support for responsible business
practices, engaging the private sector, labor groups, non-governmental
organizations, and other governments. The RBC team also manages the
Advisory Committee on International Economic Policy (ACIEP) and the

304
 SAMF

Table 1: Legislations encouraging CSR focus across nations

305
 SAMF

Table 1 (Cont.)

Secretary of State’s annual Award for Corporate Excellence (ACE) program,

and leads the Department’s efforts on the National Action Plan on
Responsible Business Conduct. The team also houses the U.S. National
Contact Point, the U.S. government obligation to provide a mechanism for
the resolution of disputes arising under the OECD Guidelines for
Multinational Enterprises.
The Bureau of Economic and Business Affairs (EB) pursues Economic
Diplomacy for America, making the United States of America and its people
more prosperous and secure. The Corporate Social Responsibility (CSR) team
in the Bureau of Economic and Business Affairs leads the Department’s
engagement with U.S. businesses in the promotion of responsible and ethical
business practices. It provides guidance and support for U.S. companies to
undertake socially responsible corporate activities and ethical business
practices that promote sustainable development and engages with business,
trade unions, and civil society to adopt and implement exemplary corporate
policies. The Department’s interaction with the private sector is done under
the framework of the Organization for Economic Cooperation and
Development (OECD) Guidelines for Multinational Enterprises and with
EB’s U.S. National Contact Point for the Guidelines. The State Department
promotes and recognizes exemplary CSR activities of businesses through
the annual Secretary of State’s Award for Corporate Excellence, the ACE
The problems of each country differ substantially. The analysis of the
status of developed, developing countries and LDC’s identifies the issues

306
 SAMF

that can be undertaken as CSR. In developed countries the focus is majorly

on environment and fair labour practices. The developing countries and
LDC’s majorly focus on community development as an area of concern.
Developed countries are found to spend more on education as compared to
developing countries. No evident trend was found with regards to health
expenditure in developed and developing countries. In some developing
countries the health and education expenditure was found to be
considerably low. It is manifested from the data that the issues of developing
and developed countries are different and the government expenditure on
managing the issues vary from developed, developing and LDC’s.

CSR @ INDIA: A CASE STUDY

CSR: INDIAN DEFINITION
Various definitions of CSR have been doing the rounds for much too long.
CSR is the process by which an organization thinks about and evolves its
relationships with stakeholders for the common good, and demonstrates
its commitment in this regard by adoption of appropriate business processes
and strategies. Thus CSR is not charity or mere donations. CSR is a way of
conducting business, by which corporate entities visibly contribute to the
social good. Socially responsible companies do not limit themselves to using
resources to engage in activities that increase only their profits. They use
CSR to integrate economic, environmental and social objectives with the
company’s operations and growth.
Advocates of the concept of CSR believe that organizations receive a social
sanction from society that requires that they, in return, contribute to the
growth and development of the society. Despite differences of opinion about
the efficacy of CSR, there is a general consensus among academicians,
policy makers, and practitioners that corporations should operate within
the norms and mores of the societies in which they exist.
Through CSR, a conscientious corporate would first assess the needs of
the community and the environment through a consultative mode, formulate
a CSR Policy as a response to this and initiate activities/projects through
measurable budgets and timelines leading to impactful sustainable
development. An alert CSR Committee of the Board of every such Company
must closely monitor its CSR Policy to ensure that it is effective. This Policy
may also need to be an organic document, and could be periodically
reviewed to be in harmony with changing societal and environmental needs.
The Social, Environmental & Economic Responsibilities of Business, MCA,
July, 2011, urges businesses to embrace the “triple bottom-line” approach
307
 SAMF

whereby its financial performance can be harmonized with the expectations

of society, the environment and the many stakeholders it interfaces with
in a sustainable manner.
DPE guidelines on CSR and Sustainability defines Corporate Social
Responsibility as a company’s commitment to its stakeholders to conduct
business in an economically, socially and environmentally sustainable
manner that is transparent and ethical.

KEY CHALLENGES IN CSR IMPLEMENTATION

One of the key challenges faced by companies is to define the right CSR
strategy and identify focus areas for their intervention. Many Companies
face the challenge of trained manpower and technical know-how to develop
effective CSR strategies. There is a need to build up capacity within
organizations to develop effective CSR Policy and Strategies.
Operationalizing the CSR strategy can also at times become a great
challenge. When it comes to implementation, the CSR strategy of a company
is implemented through a series of projects which have expected outputs
and outcomes as well as budgets associated with it. Project management
remains a weak link especially in public sector companies.
Enhancing systems and processes to enhance accountability in the
implementation of CSR projects is of prime importance. According to a report
submitted to the Supreme Court by the CBI, an estimated 20 lakh NGOs are
operating across the country. This means one NGO per 650 people for a
population exceeding 1.3 billion are operating in India. Most of the
companies involve non-government organizations (NGOs) as partners to
undertake their CSR projects. Developing adequate accountability and
transparency in designing and implementing various identified projects
by the companies along with their partner agencies is a key area of concern.
The Transparency International (TI) Corruption Perceptions Index 2015
has rated India at 76 (up from 85 in 2014) of 168 countries, with a score of
38 out of 100. India is ranked 130 out of 190 countries in the World Bank
Group’s annual report, “Doing Business 2017,” one rank up from last year.

THE IMPACT OF MANDATE

Report on CSR by Times of India (2016) discloses that after the new
Companies Act made it mandatory, India’s total CSR reporting increased
by 27% in 2015, the maximum among 45 countries surveyed by
international audit firm KPMG.

308
 SAMF

The data shows that oil and gas sector which includes both public and
private sector are the leaders in CSR spent followed by services and banking
sector in India.

Table 2: Top 10 companies in CSR Spent, 2015-16

Source: NGOBOX, India CSR outlook report, 2016

Out of the total outlay of Rs 6,490 crore towards CSR in India for 2015,
companies have spent Rs 5,115 crore. The health sector accounts for 20%
of the spending followed by education with 19%. Maharashtra has 205
projects under CSR, the maximum among Indian states, followed by
Karnataka (152), West Bengal (123) and Tamil Nadu (122). While companies
based in India have a target of Rs 5,779.68 crore for 2015, they have spent
Rs 4,708 crore. But out of the target of Rs 710.12 crore for foreign-based
companies, only Rs 406.17 crore has been spent. Among Indian companies,
the private sector has performed far better than the public sector. Against
the prescribed amount of Rs 2,306 crore, PSUs spent Rs 1,628 crore (71%).
The energy and power sector accounted for the highest expenditure under
CSR. Nearly Rs 1,994 crore (39%) of total spending is by the power sector
followed by banks and IT firms (13% each), mining and metals (11%), and
consumer goods (9%).
The data in Figure 2 reveals that out of the various subjects and activities
indicated in Schedule VII of the Companies Act, Rs. 1,463 crores were spent
on activities targeted at promoting Education, Vocational skills and
livelihood enhancement. Eradicating Hunger, Poverty & Health Care was
the next favourite with a spending of Rs. 1,422 crore. Rs. 1,189 crore were
spent on Environment sustainability activities. Rural Development projects
saw 724 crore rupees of spending. An amount of Rs. 42.6 crores were
contributed to the Swatch Bharat Kosh and Rs. 15.5 crores to the Clean

309
 SAMF

Ganga fund. A contribution of 125 crores was made to the Prime Minister’s
National Relief Fund (PMNRF).
According to the Indian CSR outlook report of 2016, this is a survey of
250 companies, accounting for 1/3rd of the total CSR spent. The study shows
that there is a substantial improvement in the actual CSR spend vis-à-vis
prescribed CSR in FY 2015-16.While it was 79% in FY 2014-15, it has
increased to 92% in the last financial year.

Figure 2: Thematic Priorities in CSR - Schedule VII

- Theme-wise number of companies

Source: India CSR outlook report, 2016 NGOBOX

REFLECTION ON THE THEMATIC AREAS OF CSR INVESTMENT

The data reflects that Education (including skilling) and Healthcare themes
have been the most preferred areas of CSR projects. Environment
sustainability stands as the third most preferred area of CSR projects.
The outcomes of the Sec 135 of Companies Act, 2013 has surely brought
in a change. The India CSR outlook report, 2016 identifies the outcomes as
mentioned below:
• The overall quality of reports and availability of data has improved.
310
 SAMF

Table 3: Thematic Areas of CSR Initiatives of Indian companies

Source: NGOBOX, India CSR outlook report, 2016

• Despite the fact that the Section 135 of the Companies Act mandates
companies to prepare CSR report (as part of the annual report) in a
particular format, more than 30 companies did not followed the
format and went on hiding (moreover ignoring) crucial information
like project location, implementing partners, project specific budget
and spend, etc.
• There is a high discrepancy in the reported data when accounting
for actual CSR spend and project-wise CSR spend of companies.
• A few companies spent the unspent amount of last year’s CSR budget
in this financial year (15-16) and have calculated it as the actual
CSR spend of FY 15-16, taking their actual CSR spend much higher
than the prescribed CSR of this FY.

CONCLUSION
Ratan N. Tata has said, “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.” In some cultures it is believed that doing good deeds in a
discreet way is more desirable and rewarding than for publicity.

311
 SAMF

Companies should go in with a long-term commitment towards CSR

which will demonstrate added value to both shareholders and stakeholders.
Also, the entire workforce should be engaged in CSR activities as nowadays
employees are choosing to work in organizations whose values resonate
with their own. Leaders must be prepared to make a personal commitment
if the CSR activities are to realize their full potential.
A well planned CSR improves the bottom line of the company. An ethical,
environment friendly and socially responsible management can buy
customers’ and employees’ loyalty. Thus, the new paradigm is shifting from
outsourcing CSR to deploying corporates’ own resources with the
philanthropic model being replaced by stakeholder-participation model. It
is essential that companies understand the essence of true CSR as
undertaking initiatives not just to fulfill the legal and ethical requirements.
The CSR activities should be undertaken in sync with national issues. This
brings in a cohesive effort of government and corporates to deal with the
major issues of the country leading to the development of the country as a
whole.

REFERENCE
1. Blowfield, M., and Murray, A. (2008). Corporate Responsibility: A Critical
Introduction”. Oxford, Oxford University Press.
2. Carroll, A.B., and Buchholtz, A. K. (2003). Business and Society: Ethics
and Stakeholder Management, 5th ed. Australia: Thomson South-
Western.
3. Crane, A. Abagail, W. , Matten, D. Moon, J. and Siegel, D. (2009) The
Oxford Handbook of Corporate Social Responsibility, Oxford Handbooks
4. Cowell, S.J., Wehrmeyer, W., Argust, P.W., Graham, J. and Robertson, S.
1999. Sustainability and the primary extraction industries: theories
and practice, Resources Policy 1999, 25(4): 277-286.
5. Jenkins, Heledd and natalia Yakovleva. 2006. Corporate social
responsibility in the mining industry: Exploring trends in social and
environmental disclosure. Journal of Cleaner Production. 14():271-284.
6. Holzmann, R. and Jorgenson, S. (2000): Social Risk Management: A
new conceptual framework for Social
7. India CSR outlook report, 2016 NGOBOX, available at: www.ngobox.org
(accessed on 5th Dec, 2016)
312
 SAMF

8. Portes, A. (2000), Social Capital: Its origins and applications in modern

sociology, in Lesser, E. (Ed.), Knowledge and Social Capital, 43-69,
Boston: Butterworth-Heinemann.
9. Ritzer, G. 2003. Rethinking Globalization: Glocalization/ grobalization
and something/ nothing. Sociological Theory, 21(3): 193-209.
10. Times of India (2016) India leads in CSR spending growth available at:
http://timesofindia.indiatimes.com/business/India-leads-in-CSR-
spending-growth/articleshow/51173712.cms (accessed on 12 th Dec,
2016)

313