A study related to corporate Governance and is mainly focused on the Corporate social Responsibility in selected companies of hospitality industry

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A STUDY ON THE EMERGING TRENDS AND CHALLENGES
OF CORPORATE SOCIAL RESPONSIBILITY IN SELECTED
COMPANIES OF HOSPITALITY INDUSTRY: INDIA
Submitted by
SABARI ANAND.M
SUDHARSHAN.E
SHIRLEY EVARITA.A
DEPARTMENT OF MANAGEMENT STUDIES

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ABSTRACT
This paper elucidates how, the corporate innovate their CSR activities in the era of
corporatism. There is always an extensive debate on CSR policy with the corporate as some of
them think this is futile of spending instead, they would enhance the wealth of the shareholders.
As directed by section 135 of Companies Act 2013, under certain criteria some companies are
obliged to do CSR activities. In this paper we would bring out some of top companies CSR
activities and how they effectively intertwine their business activities. This paper is a purely
based on the secondary data and of descriptive in nature. This paper also speaks about the legal
provision and recent amendment in the companies act 2013 regarding CSR policies. The
following will throw lights on the best CSR policies and the spending of selected companies of
hospitality industry.
KEY WORD:
CSR-Corporate Social Responsibility; Amendment; Hospitality industry, challenges

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1. INTRODUCTION
In India the Corporate Social Responsibility (CSR) activities are regulated by a piece of
legislation. Section135 of the Companies Act, 2013 mandates companies to create social value
(SV)(public goods) byundertaking CSR activities as per CSR policy adopted by theirBoard in
line with the Schedule VII of the Act. It is well said that CSR is an investment not an expenditure
of the corporate which becomes an integral part of the wealth creation process for the
stakeholders. The corporate become more sustainable or create more economic value (EV) with
the intervention ofinnovative CSR related activities, which enhances trust and credibility after
considering society’s need and finding out the effective ways to fulfil the existing and anticipated
demand of the communities. The good governance and CSR resultsinto better image of the
Company by spending at least 2% ofthe average profit of previous 3 years. As small drops of
water make the mighty ocean, the effective CSR activities of eligible corporate in India would
bring a new dawn of development.The govt. of India has constituted a number of committees
from time to time for developing a framework through which the CSR activities could be
effectively governed and monitored.
AMENDMENTS IN SECTION 135 OF COMPANIES ACT:
There are various ambiguities in the existing CSR provisions.To bring more clarity in the
existing provisions, Section 135 ofthe Companies Act, 2013 was amended in line with the
uniform approach among the companies.
1. In section 135 of the principle Act,
In sub-section (1),
For the words “any financial year”, the words “the immediately preceding financial year”
shall be substituted;
EXPLANATION:
The important term “any financialyear” used in Section 135(1) is notvery clear. There
could be different assumptions/meaning possible by using the word “any financial year”.The
basic condition of CSR eligibilityis net worth/turnover/net profit.The bone of contention is the
networth/turnover/net profit for theimmediately preceding financialyear or the current financial
year.General circular No.21/2014 dated18.06.2014 clarified that “any financialyear” referred

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under Section135(1) of the Act read withRule 3(2) of Companies CSR rule,2014, implies ‘any of
the three precedingfinancial year’. There wasa concern that the CSR rules maybe overriding the
2013 Act. The2017 amendment Act replacesthe words “any financial year”with the word “the
immediately preceding financial year”. Nowit is very clear that the applicabilityof CSR
requirement would bedecided only and only for the immediatelypreceding financial year.
2. The following provision shall be inserted, namely: -
“Provided that where a Company is not required to appoint an independent director under
subsection (4) of section149, it shall have in its Corporate Social Responsibility committee two
or more directors
EXPLANATION:
Section 135(1) provides that CSRcommittee of the Board shall consistof three or more
directors, out of which at least one shall be an independentdirector (ID). Rule 5(1) of CSR Policy
Rule 2014 relaxes the requirement of Independent director in the CSR Committeeof non-listed
public Company, Private Company and foreignCompany. The requirement of IDon the CSR
committee was arisingfrom the principal Act, 2013. Lateron, the CSR Policy Rule, 2014 allowsto
have the committee withless than 3 directors without IDand overrides the Companies Act,2013.
There was a great concernthat how rules override the Act.By including the CSR rules
clarificationin the Act itself, the 2017Amendment Act addressed thisconcern and also clarify that
CSRcommittee may be formed withtwo or more directors. This is awelcome provision in the
Act. Afterthe enactment of AmendmentAct, 2017, Rule 5(1) of CSR PolicyRule 2014 would be
non-operationaland have no use among thecompanies.
3. In sub-section (3),
For the words and figure “asspecified in Schedule VII”, thewords and figures “in areas
orsubject, specified in ScheduleVII” shall be substituted;
EXPLANATION:
Schedule VII provides the list of activitiesto be undertaken by the Companyin pursuance of
the CSR policyformulation. Schedule VII focuses onbroad areas and intended to cover awide
range of activities which havebeen further explained to be interpretedliberally vide general
CircularNo. 21/2014 dated June 18, 2014.The word “as specified in ScheduleVII” used earlier,

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was not reflectingthe correct intention as it narrowsdown or restricts the scope of activities.Now
the drafting error hasbeen corrected through the AmendmentAct, 2017 which provides that
“formulate and recommend to theBoard, a CSR policy which shall indicatethe activities to be
undertakenby the Company in areas or subjectspecified in Schedule VII”. As suchthere is no
change in law.
2. LITERATURE REVIEW
Sharma Swati, Sharma Reshu & Kishor Jugal (2014) has explained in their paper “Emerging
trends in corporate social responsibility in India- a descriptive study” that Corporate Social
Responsibility (CSR), can be portrayed as, the constant commitment by companies towards the
financial and social advancement of networks in which they work. It has been observed that the
areas they choose somewhere relate to their core values. The Findings of the study results that
companies not only concentrate on how they will position their product or how they will sell it
but will also concentrate on their social strategy.
Kadambala Varun Kumar, Chalmeti Prabhat (2016) in their paper “Corporate social
responsibility-emerging trends in India: a descriptive study” notes that with the execution of the
Companies Act of 2013. This paper endeavors to recognize the adjustments in the idea of CSR
and the methodologies and patterns in its usage in India. The examination utilizes auxiliary
information and attempts to concentrate on perceptions of patterns in exercises. The paper holds
the finding that there is an even greater push from consumers, investors and governments for
increased transparency now and companies are gradually disclosing their internal data.
S.Vijayalatha, Dr.G.Brindha (2015) implies in their paper” Emerging Trends and Challenges
in Corporate Social Responsibility- India “ that the present situation corporate social
responsibility(CSR) paying an essential job to be contend with their condition A few
organizations have now enthusiastically taken up to the reason for CSR in nations with rising
economies, in India. The recommendation of the study states that there is a need for creation of
awareness about CSR amongst the general public to make CSR initiatives more effective. This
awareness generation will be preoccupied by numerous stakeholders together with the media to
spotlight the great work done by company homes during this space.
Lakshmi, V. Gowri & Kumar, T. Phaninder (2018) has identified in their study “A study on
corporate social responsibility and emerging trends in India”that the administration of India has
not relegated any expert to arrange the services and other focal specialists for their work on

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social obligation The endeavors of CSR, in India, have become consistently over the previous
decade. This article endeavors to discover the present scene of CSR advancement in India, as
surveyed by various partners and traditions help organizations translate CSR for better usage and
yielding of results.
Sharma, GSeema (2019) has acknowledged in their paper “Corporate Social Responsibility in
India: An Overview” about the concept of CSR is not new to India. This article discusses the
concept of CSR as understood by Indian businesses in the past, and the changing interpretations
of the concept in the age of globalization and expanding markets. After a detailed analysis, the
article concludes that the future of CSR in India is bright, and that its importance will continue to
grow even further given the increasing importance accorded to CSR world-wide, and India's own
realization that it needs CSR to achieve long-term sustainability in the world economy.
2.1 Research Gap:
It is known from the earlier research papers that most Articles are done on the CSR
policy of the hospitality sector as a whole. In this particular study we wanted to highlight,
analyze and compare the CSR policy that has been followed by two large players of the
hospitality industry in India. Moreover the study will establish a correlation between CSR
expenditure and net profit of the organization.
2.2 Objectives of the study:
1. To analyse and compare the trends of CSR in selected companies of hospitality industry
in India.
2. To identify the major challenges of CSR in hospitality industry of India.
3. To establish any correlation between CSR expenditure and net profit in the current year.
2.3 Research Methodology:
This research paper is descriptive in nature and the study is based on the secondary data. The
secondary data has been collected from the websites of the respective companies, reputed journals
and official government Websites. The article has explained the different CSR areas focused by the
two hotels of hospitality industry which have been picked up randomly .Later analysis of CSR in
hospitality industry has been explained and Challenges of hospitality industry are also explained.

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3. DATA ANALYSIS &
CORPORATE SOCIAL RESPONSIBILITY OF HOSPITALITY SECTOR
3.1 INDIAN TOBACCO COMPANY LIMITED:
Established in 1910 as the Imperial Tobacco Company of India Limited, the company
was renamed as the Indian Tobacco Company Limited in 1970 and further to I.T.C. Limited in
1974. The periods in the name were removed in September 2001 for the company to be
renamed as ITC Ltd.2005-09, by Boston Consulting Group.
3.2 ITC’S STRATEGIES:
Identifying and evaluating climate change risk for each business.
Reducing the environment impact of our processes, products and services and working
towards creating a positive environmental footprint.
 Adopting a low carbon growth path through reduction in specific energy consumption
and enhanced use of renewable energy sources.
 Enlarging our carbon positive footprint through increased carbon sequestration by
expanding forestry projects in wastelands.
 Working towards minimising waste generations, maximising its reuse and recycling and
using external post-consumer waste as raw material in our units.
1. Water Conservation:
ITC continues to focus on integrated water management including water conservation
including water conservation and harvesting initiatives at its units. These include adopting latest
technologies to reduce fresh water intake and increase reuse and recycling practices, best
practices to achieve zero effluent discharges, rainwater harvesting, etc.
2. Recycling and Waste Management:
ITC has made significant progress in reducing specific waste generation through constant
monitoring and improvement of efficiencies in material utilisation and also in achieving almost
total recycling of waste generated in operations.
3. Significant Air Emission:
In order to continually reduce ITC’s energy footprints green features are integrated in all new
constructions and are also being incorporated in existing hotels, manufacturing units,
warehouses and offices complexes during retrofits.

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3.3 CSR EXPENDITURE:
CSR expenditure will include all expenditure, direct and indirect, incurred by the
company on CSR plan Moreover, any surplus arising from any CSR programmes shall be used
for CSR. Accordingly, any income arising from CSR programmes will be netted off the CSR
expenditure and such net amount will be reported at CSR expenditure.
CSR details of FY (Rs in ‘000 Cr)
Particular 2016-17 2015-16 2014-15
Average Net Profit 13,763.29 123,00.00 106.00
CSR Prescribed Expenditure 275.27 246.76 212.922
CSR Spent 275.27 249.00 226.95
Local Area Spent 275.96 247.500 214.06
SOURCE: csr.gov.in/CSR/company profile
3.4 INTERPRETATION:
 The above table specifies the amount that has been spent by ITC for the period of three
years. It is evident from the table that as the profit of the company increased they have
also increased amount that should be spent on CSR. The allotted CSR amount has been
spent only in the local area.
 TAJ GVK Hotels and Resorts Ltd works on small scale when compared to ITC, some of
the areas where TAJ all 66 rooms and cottage-style villas, as well as roads, were situated
in tree-free areas on 108 acres. Cottages were painted with mud paints made on-site and
local tribes were encouraged to revive traditional crafts to and add authentic touches.
Roof tiles were handcrafted from recycled tiles from dismantled homes. Old Recycled
wood was used extensively in Spa and other areas. All lighting throughout the property is
LED and CFL, no halogen or Incandescent fixtures are used. Natural river stones were
used throughout property. Great Care was taken to preserve 250 species of local flora and
the ground is home to a strawberry farm. TAJ has spent the amount allocated by
company’s act 2013 that is 2 % of last three years average net profit. Area of spending is
equal to the prescribed amount as per law.

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3.5 TAJ GVK HOTELS AND RESORTS LIMITED:
IHCL has championed the cause of skilling less privileged youth in the country since
more than a decade; long before the inception of the CSR mandatory spends under the
Companies Act, 2013 in the country. It’s a known fact how badly Indian youth at the bottom of
the pyramid lack timely guidance & handholding for what they can do post high school to
become employable. Their CSR & Affirmative Action effort has been focused on addressing this
gap. They build capacities of institutions that serve the youth from poor socio-economic
backgrounds & remote hinterlands and run industry relevant vocational training programmes that
benefit such youth who drop out from the traditional educational system.
3.5.1 Employee Volunteering
Volunteering is the primary channel through which CSR & Inclusion initiatives are undertaken
across the board. Year on year, they encourage associates to volunteer for participating in
community development initiatives
3.5.2 CSR Budget
The amounts to be spent by the Company shall be as stipulated under the Act, as amended from
time to time (presently 2% of the average net profits of the Company for the preceding three
financial years) and as approved by the Board. Any surplus arising out of the CSR projects or
programs or activities shall not form part of business profits of the Company.
3.5.3 Target and Communication Groups
The Company’s target communities shall include rural, less-privileged, school dropout,
differently abled, marginalized youth and women; indigenous artisans, disaster victims and other
such groups associated within their focus areas.
3.5.6 Project Underway
 Vocational Skill Development Programs.
 Partnerships to Preserve & Promote Indigenous Heritage, Culture, Arts and Handicrafts.
 Income-generation and Livelihood Enhancement Programs.

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3.6 CSR EXPENDITURE
CSR details of FY (Rs in ‘000 Cr)
Particulars 2016-17 2015-16 2014-15
Average Net Profit 7.72 6.95 2.84.
CSR Prescribed Expenditure 0.15 0.139 0.022
CSR Spent 0.15 0.139 0.022
Local Area Spent 0.15 0.00 0.00
SOURCE: csr.gov.in/CSR/company profile
3.7 INTERPRETATION:
 Taj GVK Hotels have lower average profit when compared to that of ITC but they have
contributed 2% to the CSR as specified in the companies’ act 2013.They spent their
complete CSR amount of 2016-17 in the local area and in the other two years it is seen
that they spent the CSR amount outside the local area
 ITC works on a large scale when compared to Taj GVK Hotels and Resorts, ITC e- Chou
pal has spent more than 4 million on farmers empowerment, 690000 acres of land has
been greened (afforestation), they have spent 11 positive years in recycling solid waste,
ITC uses 43% of power consumption from renewable sources, they have built 23
platinum rated Green Buildings, ITC Hotels are LEED Platinum Certified buildings. For
more than 13 years they have maintained carbon positive footprints.
 ITC also has developed watershed over 930000 acres of land. More than 61000 rural
women have benefited. More than 570000 children have been benefited. ITC has spent
the amount allocated for CSR activities in a justifiable manner and have extended their
area of spending by 69 lakhs.

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3.8 The Emerging Challenges faced by the Hospitality Industry
 Society expects many things from the corporate sector. Enterprise is being asked to move
beyond the commercial sphere.
 Different stake holders place varying demands on organizations. Such demand varies
over time and in different contexts.
 The primary expectation centres on wealth creation or profit function of the enterprise.
But this is not the only expectation.
 Customer continue to demand products that are safe, reliable and useful, services that are
responsive to the changing needs, and advertising that is honest and informative.
 The public at large expects business to help project the physical environment and the
health and safety of all those who are exposed to dangerous technologies or substances.
 Issue such as corporate power and corporate compliance, corporate activities and
corporate disclosures of information will continue to concern an increasing number of
people in the community.
 The emerging multipurpose corporations will demand multipurpose goals and synergistic
policies that accomplish more than a single goal at time. This compels organizations to
develop new measures of performance. Instead of focusing on the single bottom line of
profits as in the past, organizations are expected to focus attention on multiple bottom
lines-social, environmental, political and ethical-which are all interconnected.
 Corporations face difficulty in CSR implementation and in its effectiveness. The main
reason of challenge in practical work was that CSR requires high cost and corporations’
in adequate financial resources to train the staff
 It is most commonly understood that the greatest main challenge for implementing and
developing CSR were steady competitive tension, inadequate backing from the
government and other nongovernment organizations beside the huge cost of
implementation
 Lack of support from customers and investors was an additional challenge.
Complimenting to these, the core challenge in implementation of CSR was difficulty in
changing traditional business practices to CSR agenda that requires leaders’ great
commitment in managing and in changing their focus and behaviour.
 Lack of managers’ expertise and capability to successfully implement desired changes
was also creating challenge in CSR implementation process.

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 It is argued that a change is not an easy process and it requires commitment and hard
work to make a desired change.
 It became evident that the changes in developed CSR plans means that they are not easy
to administer it and there is also an increasing proof that a basic 14 transformation in the
business model cannot happen without a major dedication by the leadership and an
alteration in the target area and behaviour of leaders.
 Considering the changes required for effective CSR implementation, it is crucial to
follow up on how changes could be most actively done. Past researches indicated that it is
not easy to introduce and make change in corporations because of which most of the
instructions and ways of change were unsuccessful in brining needed results. However,
more current research points out that there are other ways of thinking about and coming
to change which is most of the time directs to greater favourable results. Change could be
a linear process and should be done from the upper level of corporations and made
uniformly across all levels in reference to specific plans.
3.9 SUGGESTION TO RECTIFY CSR CHALLENGES IN HOSPITALITY INDUSTRY:
The present chapter presents suggestions to the various services and business enterprises which
fall under both Hospitality Industry and Banking sector to promote better relationships between
these servicesand society in general and the various stakeholders in particular.
The following are the suggestions:
1. Identification of reasons and benefits of practicing Corporate Social Responsibility in
different sectors of business can have a scope for further research along with development of
company ethics programme, integration of business ethics and ethics training to the staff.
2. A study involving other independent variables such as Corporate Reputation, Organizational
Climate, and Sustainability can be undertaken to find out its effect on Corporate Social
Responsibility
3. Further study may focus on identifying and comparing the perception of line managers, staff
managers, and employees on Corporate Social Responsibility practices of the comp
4. Identification of programs and policies to enhance Corporate Social Responsibility practices is
also a relevant area of research.

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5. Companies and organisations should integrate social entrepreneurship into their core culture
by actively channelizing their research and development capabilities in the direction of socially
innovative products and services.
4. CONCLUSION
CSR fetch a very important place in the development scenario of India today and can create as an
alternative tool for sustainable development. The study shows that though the Indian service
industry are making efforts in the CSR areas but still there is a requirement of more emphasis on
CSR. There is a notion among some company is that CSR as an expenditure. There is enough
evidence provided by many scholars and academician that CSR is an investment not expenditure.
We conclude by our paper that CSR policy is something beyond law and regulation, it purely a
sense of concern towards the society in which we are also being a part of it. The future prospects
of the study would be comparison of the service sector with the other industry which are very
close to the customer i,e FMCG etc.

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