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Corporate Social Responsibility Indian Perspective

Concept of Corporate Social Responsibility is not new to india

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Corporate Social Responsibility Indian Perspective

  1. 1. CONCEPT OF CSR IS NOT NEW TO INDIAN COMPANIES A report submitted for internal assessment of Company Law Under the guidance of Prof. S N Ghosh Deepa Chandrasekar IIPM IIPM TOWER, GURGAON.
  2. 2. ACKNOWLEDGEMENT We thank Prof. S N Ghosh in particular for assigning us this topic and encouraging us to write in the first place. We owe much to Prof. S N Ghosh for his helpful comments. We are indebted to all those who have been helpful throughout the process of writing this Report– Mrs.DeepaChandrasekar, Ms.Ekta Yadav and Mr. but as the cliché goes, we are solely responsible for any remaining errors of fact or judgment. CONCEPT OF CSR IS NOT NEW TO INDIAN COMPANIES 2
  3. 3. Contents Acknowledgement 1. Abstract 4 2. Introduction 5 3. Definition 6 4. Difference between Charity & CSR 7 5. Forerunners in corporate social responsibility 8 6. Government Support & Potential Benefits 11 7. Conclusion 14 CONCEPT OF CSR IS NOT NEW TO INDIAN COMPANIES 3
  4. 4. Abstract CSR is not new to India; companies like TATA and BIRLA have been imbibing the case for social good in their operations for decades long before CSR become a popular cause. In spite of having such life size successful examples, CSR in India is in a very nascent stage. It is still one of the least understood initiatives in the Indian development sector. It is followed by a handful of public companies as dictated by the very basis of their existence, and by a few private companies, with international shareholding as this is the practice followed by them in their respective foreign country. Thus the situation is far from perfect as the emphasis is not on social good but rather on a policy that needs to be implemented. A lack of understanding, inadequately trained personnel, non availability of authentic data and specific information on the kinds of CSR activities, coverage, policy etc. Further adds to the reach and effectiveness of CSR programmes. But the situation is changing. And CSR is coming out of the purview of ‘doing social good’ and is fast becoming a ‘business necessity’. The ‘business case’ for CSR is gaining ground and corporate houses are realizing that ‘what is good for workers - their community, health, and environment is also good for the businesses. CONCEPT OF CSR IS NOT NEW TO INDIAN COMPANIES 4
  5. 5. CONCEPT OF CSR IS NOT NEW TO INDIAN COMPANIES Introduction Corporate social responsibility (CSR) is a form of corporate self-regulation integrated into a business model. Ideally, CSR policy would function as a built- in, self-regulating mechanism whereby business would monitor and ensure their adherence to law, ethical standards, and international norms. Business would embrace responsibility for the impact of their activities on the environment, consumers, employees, communities, stakeholders and all other members of the public sphere. Furthermore, business would proactively promote the public interest by encouraging community growth and development, and voluntarily eliminating practices that harm the public sphere, regardless of legality. Essentially, CSR is the deliberate inclusion of public interest into corporate decision-making, and the honoring of a triple bottom line: People, Planet, and Profit. CONCEPT OF CSR IS NOT NEW TO INDIAN COMPANIES 5
  6. 6. CONCEPT OF CSR IS NOT NEW TO INDIA Corporate – means organized business Social – meaning every thing dealing with the people Responsibility – means accountability between the two Corporate Social Responsibility “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”. Exhibits the ethical behavior that an organization exhibits towards its internal and external stakeholders Denotes the responsibility of an organization towards the environment and society in which it operates. CSR involves various voluntary efforts It involves providing innovative solutions to societal and environmental challenges. Organizations generally believe that acting in a socially responsible manner will create value for them. an organization is committed to social causes, also gives employees a sense that the company would also be committed to the welfare of its employees as well. “Corporate social responsibility must not be defined by tax planning strategies alone. Rather, it should be defined within the framework of a corporate philosophy, which factors the needs of the community and the regions in which a corporate entity functions.” Prime Minister -Dr. Manmohan Singh CONCEPT OF CSR IS NOT NEW TO INDIAN COMPANIES 6
  7. 7. Difference between Charity & CSR CHARITY Means donating money, goods, time or effort For poor and needy cause It is selfless giving toward any kind of social need CSR It is how company align their value to social cause It can be people centric or planet centric It is not self less act, company derive long term benefit from CSR For and against argument The practice of CSR is subject to much debate and criticism. Proponents argue that there is a strong business case for CSR, in that corporations benefit in multiple ways by operating with a perspective broader and longer than their own immediate, short-term profits. Critics argue that CSR distracts from the fundamental economic role of businesses; others argue that it is nothing more than superficial window-dressing; others argue that it is an attempt to pre- empt the role of governments as a watchdog over powerful multinational corporations. Critics of CSR as well as proponents debate a number of concerns related to it. These include CSR's relationship to the fundamental purpose and nature of business and questionable motives for engaging in CSR, including concerns about insincerity and hypocrisy. Critics concerned with corporate hypocrisy and insincerity generally suggest that better governmental and international regulation and enforcement, rather than voluntary measures, are necessary to ensure that companies behave in a socially responsible manner. CSR could prove to be a valuable asset in an age of Mergers & Acquisitions, as it helps firms spread their brand name. CONCEPT OF CSR IS NOT NEW TO INDIAN COMPANIES 7
  8. 8. Forerunners in corporate social responsibility TATA Considered as pioneers in the area of CSR, the Tata group has played an active role in nation building and socio-economic development since the early 1900s. From its inception, the Tata group has taken up a number of initiatives for the development of society. A unique feature of the group is that 63 percent of the equity capital of the parent firm - Tata Sons Limited - is held by Tata trusts, which are philanthropic in nature. Explains the chairman of the Tata Group, Ratan N. Tata, “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.” The Tata Business Excellence Model integrates social responsibility into the framework of corporate management wherein social responsibility is encapsulated as Key Business Process. In fact all social service departments in Tata companies have annual programmes and budgets… and all this is aligned to the MD’s Balanced Score Card. "The Tata credo is that 'give back to the people what you have earned from them'. Moreover for any business to sustain in the long run they have to look beyond business. - Jamshetji Tata CONCEPT OF CSR IS NOT NEW TO INDIAN COMPANIES 8
  9. 9. About 7000 villages around Jamshedpur and Orissa benefit from development programmes run by the Tata Steel Rural Development Society (TSRDS). Programmes of TSRDS cover issues like education, irrigation, afforestation, adult literacy, vocational training, handicrafts and rehabilitation of the handicapped persons. The Community Development and Social Welfare Department (CDSW) at Tata steel carries out medical and health programmes, blood donation drives, mass screening of Tuberculosis patients immunization camps and drug de- addiction. In 1999, Tata Steel embarked on an AIDS awareness programme, which has now become an integral part of all training programmes. Routine activities like immunization programmes, sterilization operations and mother and child health care programmes are conducted through 9 family welfare centres, 9 child clinics and 6 community-based clinics. In fact, Tata Steel’s Centre for Family Initiatives (CFI) was successful in influencing 59 per cent of Jamshedpur’s eligible couples practicing family planning, compared to the national figure of 35 per cent. A commitment to the welfare of the community has long been central to the value system of companies in the Tata Group. To build upon this heritage the Tata Council for Community Initiatives (TCCI) has created the Tata Guidelines on Community Development, an effort of over three years from the field evolved into a framework of best practices. CONCEPT OF CSR IS NOT NEW TO INDIAN COMPANIES 9
  10. 10. BIRLA The Birla groups of companies are also among the pioneers in the field of corporate social responsibility in India. As part of the Aditya Vikram Birla Group’s Social Reach, the Birla group runs as many as 15 hospitals in India; includes Adult education and schools conducting as many as 78 schools all over India; rehabilitates Handicapped persons having touched more than 5000 physically challenged individuals. More than 1,00,000 patients have been examined under the Group’s medical programmes. Over 15,000 children along with 2000 pregnant women have been immunized, over 500 cataract patients operated, 2000 TB patients provided medical care, 100 leprosy-afflicted attended to, free of cost. It also provides Vocational Training, having provided training to over 3000 women and having distributed over 1400 tool kits in a variety of areas like electrical, auto repair, electronic equipment maintenance and repair and tailoring. It has adopted several villages under its Village Infrastructure Development programme and has provided extensive training to over 10,000 villagers in its Carpet Weaving Center.xiii MAHINDRA Among corporates who have displayed deep commitment to Corporate Social responsibility over long years is Mahindra & Mahindra. The late Mr. K. C. Mahindra for promoting education among Indians at all levels established the K. C. Mahindra Education Trust in 1953. Every year the Trust offers up to 30-40 interest-free loan scholarships to post-graduate students going abroad for higher studies. CONCEPT OF CSR IS NOT NEW TO INDIAN COMPANIES 10
  11. 11. The Mahindra Search for Talent Scholarships is a scheme established in 34 schools in India to enthuse and reward students who have achieved excellence in their academic pursuits. The Mahindra All India Talent Scholarships are awarded every year from all over India to over 300 students from lower income group families with good scholastic record pursuing job- oriented diploma courses in various polytechnics. Others Similar commitment to CSR has been displayed by several corporates in India. The list, which at best can be far from complete, includes Arvind Mills, Escorts, Dabur, Bajaj, Godrej, Hero Honda, DCM Sriram, Ashok Leyland, Ballarpur Industries, Eicher, Kinetic Group, Kirloskar, Infosys, Reliance, Ranbaxy, Wipro, each of which has been deeply committed to their communities engaging in programmes encompassing education, health, education, integrated rural development. Beyond the private sector, corporate players in India’s public sector too have been actively involved in corporate social responsibility initiatives. Most public sector units in the heavy engineering industry have not only set up a township around the plant, but also established a school, a hospital and several other civic facilities for its employees and those that live in that area. CONCEPT OF CSR IS NOT NEW TO INDIAN COMPANIES 11
  12. 12. Government Support Private sector companies have been encouraged to undertake rural development programmes down the years through fiscal incentives by the government. For instance, special benefits are offered in the industrial policy to companies that set up industries in backward areas and tax incentives are also offered to companies that set up water purification projects. Potential business benefits The scale and nature of the benefits of CSR for an organization can vary depending on the nature of the enterprise, and are difficult to quantify, though there is a large body of literature exhorting business to adopt measures beyond financial ones at it is found that a correlation exist between social/environmental performance and financial performance. However, businesses may not be looking at short-run financial returns when developing their CSR strategy. The business case for CSR within a company will likely rest on one or more of these arguments: Human resources A CSR programme can be an aid to recruitment and retention, particularly within the competitive graduate student market. Potential recruits often ask about a firm's CSR policy during an interview, and having a comprehensive policy can give an advantage. CSR can also help to improve the perception of a company among its staff, particularly when staff can become involved through payroll giving, fundraising activities or community volunteering. CONCEPT OF CSR IS NOT NEW TO INDIAN COMPANIES 12
  13. 13. Risk management Managing risk is a central part of many corporate strategies. Reputations that take decades to build up can be ruined in hours through incidents such as corruption scandals or environmental accidents. These can also draw unwanted attention from regulators, courts, governments and media. Building a genuine culture of 'doing the right thing' within a corporation can offset these risks. Brand differentiation In crowded marketplaces, companies strive for a unique selling proposition that can separate them from the competition in the minds of consumers. CSR can play a role in building customer loyalty based on distinctive ethical values. Several major brands, such as TATA, BIRLA are built on ethical values. Business service organizations can benefit too from building a reputation for integrity and best practice. License to operate Corporations are keen to avoid interference in their business through taxation or regulations. By taking substantive voluntary steps, they can persuade governments and the wider public that they are taking issues such as health and safety, diversity or the environment good corporate citizens with respect to labour standards and impacts on the environment. CONCEPT OF CSR IS NOT NEW TO INDIAN COMPANIES 13
  14. 14. Conclusion Today, CSR talks about responsibility across all stakeholders in terms the ‘Triple Bottom-line’; people, planet & profits. CSR has come a long way in India. From responsive activities to sustainable initiatives, corporates have clearly exhibited their ability to make a significant difference in the society and improve the overall quality of life. In the current social situation in India, it is difficult for one single entity to bring about change, as the scale is enormous. Corporates have the expertise, strategic thinking, manpower and money to facilitate extensive social change. Effective partnerships between corporates, NGOs and the government will place India’s social development on a faster track. References 1. 2. 3. 4. 5. CONCEPT OF CSR IS NOT NEW TO INDIAN COMPANIES 14