Corporate social responsibility and society

Dr. D. Mukhopadhyay
The year of 2000  is  of  high significance  in the history of Corporate Social Responsibility (CSR)practices  in the globe  when Mr. Kofi Annan,  the United Secretary General, launched  the UN Global Compact (UNGC), the first  CSR initiative at  international level. UNGC is  the embodiment of ten principles concerning  Human Rights, Labour, Environment and Anti Corruption. There are two principles under Human Rights and they are (i) Businesses should  support and respect  the protection of international human rights within their sphere of influence and (ii) it makes sure  that they are not complicit in human rights abuses. Next comes Labor which  consists of  four principles and they are  (iii) Businesses should  uphold  the freedom of association and the effective recognition of the right to collective bargaining (iv) the elimination of all forms of forced and compulsory labour (v) the effective abolition of child labour and (vi)  the abolition of discrimination in respect of employment and occupation. As far as Environment Protection is concerned, there are three principles and they are (vii) Businesses should  support  a precautionary approach to environmental challenges (viii) undertake initiatives  to promote greater environmental responsibility and (ix) encourage  the development  and diffusion of environmentally friendly technologies. Finally comes Anti Corruption which was added to above list in 2004.  Principle ten advocates that businesses should work against corruption in all forms including extortion and bribery. The phrase CSR is also known as corporate citizenship.
CSR as a corporate governance philosophy  emerged in the lexicon of social sciences in early 1950s when Howard Bowen published his  seminal work under the nomenclature ” Social Responsibilities of Businessmen (1953) ” and the phrase ” Corporate Social Responsibility ”  was coined by Howard Bowen who is known as the father of CSR.  CSR as a modern management concept started to become   of significant relevance   during last fifty or more years and it became an issue of serious research in the field of corporate governance. In India, CSR was a voluntary initiative  until 2013 when the new Companies Act replaced  the companies Act, 1956 and CSR practices  in India  become legally enforceable   among the  Indian Companies  including foreign Companies operating  in India  with effect from 1st April, 2014. Section 135(5) of the Companies Act, 2013 provides that both the Public Ltd. as well as Private Ltd.  Companies having (i) net worth of Rs. 500 Crores  or more or (ii) turnover of Rs. 1,000 Crores or more or (iii) net profit of Rs. 5 Crores or more  in any of the previous three  financial years to contribute  to the CSR  activities not less than 2% of its average net profit during the three preceding financial years . it is also contained in the relevant  law  that ”Average net profit”  shall be ascertained  in accordance  with the provisions of  Section  198  of the Companies Act, 2013. Among the approved CSR activities, eradication of hunger and poverty, education and environmental protection are included for spending out of CSR contribution. Thus, India is a country that makes CSR activities enforceable by law. Let us portray the views  of A. Bakhsheshy (2007) who advocated  in his famous work  entitled ” Corporate Citizenship, Social Responsibility, Responsiveness and Performance” where the author sketched  the pyramidal structure of CSR anatomy  and it looks like Economic Responsibilities-at the base of the pyramid, Legal Responsibilities  at the second rung of the pyramid, Ethical Responsibilities at the third rung of the pyramid and finally  Philanthropic Responsibilities at the  zenith of the pyramid . By interpretative implication,  Economic Responsibilities  advocates for  earning profit, Legal Responsibilities include  obedience to law, Ethical Responsibilities advocate  that businesses should  not do anything  which is unethical (like Satyam Computers in recent past) and finally Philanthropic Responsibilities  prescribes   that businesses should  contribute  resources   to the community in order  to improve the quality of life of the common citizens of the country.
There is inseparable and symbiotic relationship between business and society. Therefore, business cannot ignore its responsibilities towards the cause of the society. However, there is an ongoing debate  on the issues concerning  mandatory CSR initiatives  of the corporate sector   and there are two schools of thought-  and on one side , proponents of  CSR  practices  like Howard Bowen and Peter  F. Drucker and on the contrary, there are opponents like Milton Friedman. However, CSR has a great role in social development as far as India is concerned where the gulf between the ”haves and have nots” is considerably wider and CSR initiative may be an effective instrument to reduce this disparity of income distribution that prevails at alarming rate in Indian society.  It is too early to assess the degree of effectiveness of the provision of Section 135(5) of the Companies Act, 2013 with regard to implication mandatory of CSR contribution and it falls in the domain of the social scientists and management thinkers to keep vigilance over the implementation mechanism   of CSR likely to be evolved during the forthcoming decades. However, it may be asserted that CSR is definitely an important initiative of the legislators for bringing about    egalitarianism in the process of distribution of national income and wealth among the citizens of the country. CSR Practice is now bestowed with legal mandate and becomes mandatory for certain groups of companies in India. The companies who are   of blue chip in nature are to share their profit with the society with an object for bringing the gap between haves and have not’s. They are supposed to contribute for bringing about  development in education,  healthcare  and other philanthropic avenues. The companies who are required to practice CSR are to formulate policies for implementing the   provisions of the Companies Act, 2013. Perhaps this is fit for high appreciation for the law makers who understand that it is difficult to achieve something with advisory mandate and without legal mandate nothing is enforceable in India.  Government itself alone cannot bring about social and economic development of the society and it is perhaps the need of the hour to  take the help of corporate sector . Corporate sector is the powerful engine for conversion of raw materials into finished products which serve the consumers and help earning revenue for the organization. It has been observed that Government of India has been trying since independence to boost up the   socio – economic conditions of the people who are not in a position to avail education, better shelter,   and even no provisions for two square meals a day   but resources remaining under the control of the Government is not adequate to meet the   basic needs of the society. Under the circumstances, it is the corporate sector to  shoulder  little responsibility  at least  for  discharging social responsibility besides the Government and it is  quite appreciable that Government  and law makers have taken a pragmatic steps for   ensuring  the gap between the  haves and have not’s through  making mandatory provision in the Companies Act, 2013. Companies Act, 2013 is the   principal instrument for regulating and controlling the functions and performance of the corporate sector in India. Law making is one step but proper implementation of the law is another important step that Government should adopt. The Companies Act, 2013 is not explicit enough as to how this law shall be made operational and if any company violates the provisions the law with regard to CSR, then what should be the penalty or punishment. The Law is silent as far as the implementation of the CSR provision is concerned. It may not be out of context to mention that many Laws are made by the Parliament of India but they are not made operational in true spirit of a particular law and that is the most important issue to be taken into consideration.  The law besides making any provision   for practice must also make necessary provisions for prosecution of those who are responsible for implementation if they fail to do so.
India is developing economy and she suffers from not having provisions of basic necessities and it is the ultimate responsibility of the Government to bring the country on egalitarian line which is the indicator of even distribution of national income and wealth.   Even before making provision for compulsory adoption and practice of CSR in the Companies Act, 2013, CSR Practice is existence India but that was a voluntary in nature and in this context, the names of WIPRO, Reliance, Tata Sons and Birlas can be named without any hesitation as    they have been practicing   CSR in India. The aim of the provision of CSR in the Companies Act , 2013 is to expand the circumference of CSR practice and include  many more companies  in the  CSR practice  besides those who are practicing CSR voluntarily. In India, hardly anybody cares to do any good for the society unless it is made compulsory or obligatory by the law of the land. Therefore law has a great role   to make CSR practice mandatory for the companies who fulfils  or meets the  provisions of the Companies Act, 2013 and it is  the most significant steps taken by the Government.
(The author of this article is Professor of Management at School of Business, Faculty of Management, Shri Mata Vaishno Devi University, Katra, Jammu & Kashmir). He may be reached at mukhopadhyay.dinabandhu @ gmail. com)
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