CORPORATE SOCIAL IRRESPONSIBILITY IN INDIA

CORPORATE SOCIAL
IRRESPONSIBILITY IN
INDIA
A PROJECT ON MARKETING RESEARCH
SUBMITTED TO:
SIR NARENDER VERMA
SUBMITTED BY:
ANKIT DABRAL
13MSM16

C o r p o r a t e S o c i a l I r r e s p o n s i b i l i t y
Page 1
Table Of Contents
S. No. Topic Name Page No.
1 Introduction 2
2 The Origins of Socially Responsible Business 4
3 Meaning 5
4 Corporate Social Responsibility in India 6
5 The Companies Act, 2013 8
6 List of activities under schedule VII 10
7 Why is CSR clause of new Companies Act so
critical for SME’s
11
8 Corporate Social Responsibility (CSR) &
Small and Medium Enterprises
12
9 Example of Corporate Social Irresponsibility 15
10 How Can 1 Organisation Adopt or work for
CSR
21
11 Conclusion 25

Page 2
Introduction
India is a country of myriad contradictions. On one hand, it has grown to
be one of the largest economies in the world, and an increasingly
important player in the emerging global order, on the other hand, it is
still home to the largest number of people living in absolute poverty
(even if the proportion of poor people has decreased) and the largest
number of undernourished children.
What emerges is a picture of uneven distribution of the benefits of
growth which many believe, is the root cause of social unrest.
Companies too have been the target of those perturbed by this uneven
development and as a result, their contributions to society are under
severe scrutiny.
Governments as well as regulators have responded to this unrest and the
National Voluntary Guidelines for Social, Environmental and Economic
Responsibilities of Business or the NVGs (accompanied by the Business
Responsibility Reports mandated by the SEBI for the top 100 companies)
and the CSR clause within the Companies Act, 2013 are two such
instances of the steps taken.
According to Indian Institute of Corporate Affairs, a minimum of 6,000
Indian companies will be required to undertake CSR projects in order to
comply with the provisions of the Companies Act, 2013 with many
companies undertaking these initiatives for the first time.

Further, some estimates indicate that CSR commitments from companies
can amount to as much as 20,000 crore INR.
This combination of regulatory as well as societal pressure has
meant that companies have to pursue their CSR activities more
professionally. This handbook attempts to bring together good
practices of companies and grant-making foundations so as to
assist companies pursue their CSR activities effectively, while
remaining aligned with the requirements of the Companies Act,
2013.
The Origins of Socially Responsible Business
Page 3
CSR is as old as the legal corporation itself.
In the late nineteenth century, commentators regret the decline of “the
personal responsibility on which the integrity of democratic institutions

depends” in private business, and they urged the business community
not to undermine social values through their new brand of greedy
capitalism and to an extent, it worked.
Business stewardship was insufficient, however, to deal with the social
needs created by the Great Depression, a void filled by government
intervention and the idea that the private sector had a “social
responsibility” did not gain traction again until the 1960s and 1970s.
Then, the concept reappeared with the rapid increase in the size and
power of corporations, and it shifted focus from the noblesse oblige of
wealthy business owners to an institutional philosophy that placed
business alongside government, local communities, and religion to
collectively enhance society.
Page 4
Meaning
Corporate Social Irresponsibility means the negligence / ignorance of the
enterprises for their impact on society.
The enterprises don’t completely meet their social responsibility,
enterprises “should have in place a process to integrate social,
environmental, ethical human rights and consumer concerns into their

business operations and core strategy in close collaboration with their
stakeholders”.
CSR in India tends to focus on what is done with profits after they are
made. On the other hand, sustainability is about factoring the social and
environmental impacts of conducting business, that is, how profits are
made.
Hence, much of the Indian practice of CSR is an important component of
sustainability or responsible business, which is a larger idea, a fact that is
evident from various sustainability frameworks.
Corporate Social Responsibility In India:
CSR in India has traditionally been seen as a philanthropic activity. And in
keeping with the Indian tradition, it was an activity that was performed
but not deliberated.
As a result, there is limited documentation on specific activities related to
this concept. However, what was clearly evident that much of this had a
national character encapsulated within it, whether it was endowing
institutions to actively participating in India’s freedom movement, and
embedded in the idea of trusteeship.
Page 5

As some observers have pointed out, the practice of CSR in India still
remains within the philanthropic space, but has moved from institutional
building (educational, research and cultural) to community development
through various projects.
Also, with global influences and with communities becoming more active
and demanding, there appears to be a discernible trend, that while CSR
remains largely restricted to community development, it is getting more
strategic in nature (that is, getting linked with business) than
philanthropic, and a large number of companies are reporting the
activities they are undertaking in this space in their official websites,
annual reports, sustainability reports and even publishing CSR reports.
The Companies Act, 2013 has introduced the idea of CSR to the forefront
and through its disclose-or-explain mandate, is promoting greater
transparency and disclosure.
Schedule VII of the Act, which lists out the CSR activities, suggests
communities to be the focal point.
On the other hand, by discussing a company’s relationship to its
stakeholders and integrating CSR into its core operations, the draft rules
suggest that CSR needs to go beyond communities and beyond the
concept of philanthropy. It will be interesting to observe the ways in
which this will translate into action at the ground level, and how the
understanding of CSR is set to undergo a change.
Page 6

The Companies Act, 2013:
In India, the concept of CSR is governed by clause 135 of the Companies Act, 2013,
which was passed by both Houses of the Parliament, and had received the assent
of the President of India on 29 August 2013.
The CSR provisions within the Act is applicable to companies with an annual
turnover of 1,000 crore INR and more, or a net worth of 500 crore INR and more,
or a net profit of five crore INR and more.
The new rules, which will be applicable from the fiscal year 2014-15 onwards, also
require companies to set-up a CSR committee consisting of their board members,
including at least one independent director.
The Act encourages companies to spend at least 2% of their average net profit in
the previous three years on CSR activities. The ministry’s draft rules, that have
been put up for public comment, define net profit as the profit before tax as per
the books of accounts, excluding profits arising from branches outside India.
The Act lists out a set of activities eligible under CSR. Companies may implement
these activities taking into account the local conditions after seeking board
approval. The indicative activities which can be undertaken by a company under
CSR have been specified under Schedule VII of the Act.
Page 7

The draft rules (as of September 2013) provide a number of clarifications and
while these are awaiting public comment before notification, some the highlights
are as follows:
 Surplus arising out of CSR activities will have to be reinvested into CSR
initiatives, and this will be over and above the 2% figure.
 The company can implement its CSR activities through the following
methods: Directly on its own .
 Through its own non-profit foundation set- up so as to facilitate this
initiative.
 Through independently registered non-profit organisations that have a
record of at least three years in similar such related activities .
 Collaborating or pooling their resources with other companies .
 Only CSR activities undertaken in India will be taken into consideration.
 Activities meant exclusively for employees and their families will not qualify.
A format for the board report on CSR has been provided which includes amongst
others, activity-wise , reasons for spends under 2% of the average net profits of
the previous three years and a responsibility statement that the CSR policy,
implementation and monitoring process is in compliance with the CSR objectives,
in letter and in spirit. This has to be signed by either the CEO, or the MD or a
director of the company .
Page 8

Page 9

Why is the CSR clause of the new Companies Act,
Page 10
2013 so critical for SMEs?
By requiring companies, with a minimum net profit of 5 crore INR, to spend on CSR activities,
the Companies Act, 2013 is likely to bring in many SMEs into the CSR fold.
This will usher in a fresh set of challenges to a sector that is increasingly being asked by its B2B
customers to comply with environmental and social standards, while remaining competitive in
terms of price and quality.
Thus, SMEs will have to quickly learn to be compliant with these diverse set of requirements
and it is hoped that this handbook will facilitate their ability to comply with the CSR clause of
the Companies Act, 2013.
Business Responsibility Reporting
The other reporting requirement mandated by the government of India, including CSR is by
the SEBI which issued a circular on 13 August 2012 mandating the top 100 listed companies to
report their ESG initiatives.
These are to be reported in the form of a BRR as a part of the annual report. SEBI has provided
a template for filing the BRR. Business responsibility reporting is in line with the NVG published
by the Ministry of Corporate Affairs in July 2011. Provisions have also been made in the listing
agreement to incorporate the submission of BRR by the relevant companies.
The listing agreement also provides the format of the BRR. The BRR requires companies to
report their performance on the nine NVG principles. Other listed companies have also been
encouraged by SEBI to voluntarily disclose information on their ESG performance in the BRR
format.
Corporate Social Responsibility (CSR) &
Small and Medium Enterprises (SME’s)
Small and medium enterprises (SMEs) significantly contribute towards India’s
economic growth. These serve independently and also as ancillary to larger units

and help generate employment and industrialize the rural and backward regions of
India.
They employ nearly 40% of India’s workforce and contribute around 45% to
India’s manufacturing output20.
What do they do ?
The business activities of SMEs are performed in proximity to the locals. This
enables them to be aware of community needs, manage expectations and develop
CSR programmes appropriately.
 Now that the CSR clause in the Companies Act, 2013 covers companies that
have a net profit of five crore INR and above, it is expected that while micro-enterprises
will not qualify, many small and medium enterprises (SMEs) will.
 SMEs are being treated separately in this handbook because of their distinct
features. The CSR activities of these enterprises are driven by the personal
interests of promoters who hold a significant financial stake in the business.
They tend to be in clusters and engaged in similar business activities. While the
quantum of revenue available for CSR with individual SMEs is expected to be small,
all eligible companies in a specific geographical cluster, who single handed as well
as collectively impact the same community, can pool their resources to create a
sizeable CSR fund.
Page 11
How can SMEs contribute to CSR initiatives?
This section analyses the option of undertaking collaborative CSR activities by SMEs. This
collaboration can also be used by other companies to maximise the impact of their CSR
initiatives while reducing the operational costs for fund management.
Why collaborate for CSR initiatives?
CSR is for all companies. SMEs in India have participated in CSR activities but these efforts
have not been optimally delivered. One possible reason can be the fact that CSR activities
depend on the profits of an SME and any fluctuations in profits can adversely affect their

capability to continue their contribution for CSR. Another reason can be the limited human
resources available to SMEs which may also result in the lack of a professional approach.
Collaboration has the following advantages:
 Reduces operational cost:
Individual CSR efforts by a company consist of establishing a CSR department, assessing the
needs of local communities, undertaking programmes directly or through an NGO and
conducting regular impact assessment studies. A common organisation catering to a number
of companies will carry out these activities collectively and thus reduce the operational cost of
management.
Undertake long-term projects:
A major hindrance in developing long-term projects is the uncertainty in the CSR budget. This
is dependent on the financial performance of the company.
A fluctuating performance implies that the CSR budget allocations can be unreliable and can
jeopardize a programme initiated earlier.
Pooling resources addresses this issue to a certain extent as the other partners can increase
their share in case there is variance in allocation from a certain segment
of the cluster.
The long-term programmes also have greater impact than the short-term projects.
Communities are increasingly realising the importance of the support offered by these
programmes in making their lives better. Long-term programmes also lead to better community
relations and this ensures avoiding situations of community unrest that hamper business activities.
Learning from experiences:
A common entity with multiple participants from the cluster will help assess community
needs, undertake relevant programmes based on past experiences and address a greater
number of community issues.
Page 12

Example of Corporate Social Irresponsibility:
Page 13
(Source: http://www.downtoearth.org.in/node/3395 )
In the unfortunate case of Chakla village in Jharkhand, neither existed.
After facing resistance in several villages, the Abhijeet Group settled upon this
village because its mixed population made it easier to buy land for a power plant.
After four villagers the company had employed were shot down, allegedly by
Maoist rebels, police are now investigating the relations between the company
and a breakaway Maoist group.
The company may have used the strongmen to break the resistance in the village
to sell land.
Villagers resist selling land to companies because it is a raw deal.
Most are yet to see a factory that improves their lives--a lot of them see pollution
and coercive land deals.
But they have seen politicians bring them some relief, which is why they prefer
politicians to corporates.
This is exactly the opposite of India's urban rich, which prefers corporates, as

illustrated after the 2008 Mumbai terror attacks and in the television news studios
that have an eye and a half on their TRPs.
Page 14
CASE STUDY ON DG CEMENT
COMPANIES CORPORATE SOCIAL RESPONSIBILITY AFTER GENERAL ORDER, 2009
(S.R.O. 983(I)/2009)
DG CEMENT COMPANY IN 2010
Company is a responsible corporate citizen and fully recognizes its responsibility towards community,
employees and environment in 2010.
Corporate philanthropy
 Company contributed for the construction of Choa saiden shah bye-pass road. In addition we also
rebuilt factory road at D.G. khan site for smooth and safe transportation.
Energy conservation
 The management of company is so keen about the global warming and playing its part to cut down the
use of fossil fuels to its minimum. For this purpose they have put a project of power generation from
waste heat recovery. Earlier these heat and gases were going in the air. The company has spent about
Rs. 2.0 billion on this project. This project is expected to save about 20k tons of fossil fuel annually and
put its favorable impact on environment by reducing green house gases.
Environmental protection measures
 A complete environment management system is in place at D.G. khan cement and it provides a
complete systematic approach to comply with natural environmental quality standards. Traditionally,
cement plants are considered to be environmentally hazardous but company has installed most
modern and state of the art equipment for dust collection. Needed quantity of bag filters and
electrostatic precipitators have been installed to collect the dust and waste gases and feed them again
in the system?
Community investment and welfare schemes
 Water is in short supply in surrounding area of our production facilities. Company has made necessary
arrangements to provide drinking water to local residents free of cost at different locations as per the
needs of the residents.

Page 15
Consumer protection measures
 There are no consumer protection measures for consumers in the annual general report.
Welfare spending for under-privileged classes
 D.G. khan cement fully realizes the role of local community and always gives maximum preference to
local resident for employment opportunities. in addition, several social community projects by
management of D.G. khan cement have been placed to uplift the living standards of local residents
Industrial relations
 The transactions between the related parties were made at arm's length prices determined in
accordance with the comparable uncontrolled prices method. The company has fully complied with the
best practices on transfer pricing as contained in the listing regulations of stock exchanges in Pakistan.
Employment of special persons
 There is no any special person employed in the company.
Occupational safety
 Being a safety conscious company your management has placed stiff occupational standards keeping in
view the potential threats and associated risks. For operation of the system responsibilities, awareness
& training, documentation operational control, departmental objectives and emergency preparedness/
response have been implemented at different levels. Consistent adherence to the system and
continual improvements are ensured by periodic management reviews.
 Primary focuses of these standards are:
o Prevent injuries and damage to health of employees, contractors, visitors and the company's
infrastructure.
o To make workplaces safer that meets or surpasses legislative and other requirements applicable.
o Establish measurable objective and targets that are reviewed periodically to ensure continual
improvements.
o To provide awareness and information to all the employees, contractors and visitors.
Health
 A free medical centre and hospital has been established providing medical facilities to the locals of the
area at both the manufacturing facilities. A team of male and female doctors with paramedic staff has
been appointed to provide round the clock medical services to the local residents. In addition fully
equipped ambulance service is also available to transfer the emergency patients to nearby hospitals.
National-cause donations
 Company is fully aware of the miseries of the flood affected people. In this regard, company provided
food to 300 people daily twice a day in the D.G. khan area. In addition, DGKC also provided shelter in

the form of tents to hundreds of families. Going forward, employees of the company have also
surrendered their one day salary for the flood affected people
Page 16
Contribution to national exchequer
 Company paid Rs. 2, 60,492,000 as tax to the government in 2010.
Rural development programmes
 D.G. khan cement is fully aware of its responsibility towards imparting education to future generation.
For this purpose company has established a school named Dera model school which is run by a trust.
All the expenses are borne by the company. In addition, a branch of renowned Bloomfield school is
also running at the company premises. The company has provided building and complete
infrastructure to this school. In addition company gives monthly subsidy to partly cover the running
expenses. Our company spent Rs. 11.292 million Against Rs. 9.790 million Last year on account of
school related expense. About 500 students are currently enrolled in both the schools.
DG CEMENT COMPANY IN 2012
In 2012, company is not giving any disclosure of its corporate social responsibility and not maintains its annual
reports according to the S.R.O. 983(i)/2009.
Corporate philanthropy
 Company contributed for the maintenance of Choa saiden shah bye-pass road. In addition they also
rebuilt factory road at D.G. khan site for smooth and safe transportation.
Energy conservation
 Company has put a project of power generation from waste heat recovery. Earlier these heat and gases
were going in the air. The company has spent about Rs. 2.5 billion on this project. This project is

expected to save about 20k tons of fossil fuel annually and put its favorable impact on environment by
reducing green house gases.
Page 17
Environmental protection measures
 Traditionally, cement plants are considered to be environmentally hazardous but your company has
installed most modern and state of the art equipment for dust collection. Needed quantity of bag
filters and electrostatic precipitators have been installed to collect the dust and waste gases and feed
them in the system? The plants of the company not only comply with the national environmental
standards but also surpass the standards set by the World Bank.
Community investment and welfare schemes
 Water is in short supply in surrounding area of our production facilities. Company has made necessary
arrangements to provide drinking water to local residents free of cost at different locations as per the
needs of the residents. The company has spent huge amount to lay down the required pipelines.
Consumer protection measures
 There in no consumer protection measures for consumers in the annual general report.
Welfare spending for under-privileged classes
 Several social community projects by management of D.G. khan cement have been placed to uplift the
living standards of local residents
Industrial relations
 Company has fully complied with the best practices on transfer pricing as contained in the listing
regulations of stock exchanges in Pakistan.
Employment of special persons
 There are 5 special persons employed in the company in context of corporate social responsibility in
2012.
Occupational safety
 Being a safety conscious company your management has placed stiff occupational standards keeping in
view the potential threats and associated risks. For operation of the system responsibilities, awareness
& training, documentation operational control, departmental objectives and emergency preparedness/
response have been implemented at different levels.
Health

 Free medical centre and hospital has been established providing medical facilities to the locals of the
area at both the manufacturing facilities. a team of male and female doctors with paramedic staff has
been appointed to provide round the clock medical services.
Page 18
Business ethics and anti-corruption measures
 Company has also provided financial assistance for the new campus of U.E.T at Chakwal. Going
forward, students of Ph.D. programs from local universities as well from abroad are associated with
professionals of your company for their thesis and research work.
National-cause donations
 There is no significant work in national clause donations. Company did some work in flood caused by
rains in Dera Ghazi Khan.
Contribution to national exchequer
 Company paid Rs. 55,652,000 as tax to the government in 2012.
Rural development programmes
 A branch of renowned Bloomfield school is also running at the company premises. The company has
provided building and complete infrastructure to this school. In addition company gives monthly
subsidy to partly cover the running expenses. Our company spent Rs. 12.574 million against Rs. 11.292
million last year on account of school related expense. About 500 students are currently enrolled in
both the schools.
Reference of Case Study:
DG Khan Cement Company Annual reports 2007, 2008, 2010 and 2012
How Can 1 Organisation Adopt or work for CSR:
A. Comparative analysis of the three choices for legal entity:
Differential factors Trust Society Section 8 company22

Page 19
Basic document Trust deed which
contains objects of
the trust (bye-law)
Memorandum of
association
Articles of association
with rules and
regulations
Memorandum of
association
Articles of association
Formation Simple Simple Slightly difficult
Jurisdiction Deputy registrar or
charity commissioner
Registrar of Societies
Registrar of
Companies
Legislation / statute Relevant state trust
act
Societies Registration
Act 1860
Companies Act 2013
Objectives Social benefits and
charitable
Literary, charitable,
scientific and resource
oriented
Nonprofit activities
Re-amendment or
modification of
objects
Alteration can be
undertaken only by
the founder or settler
Easy, legal procedures
Complicated, legal
procedures
Required members Minimum = 2,
maximum = no limit
Minimum = 7,
maximum = no limit
Minimum = 7,
maximum = no limit
Registration As trust with the
registrar
As society with society
registrar
As per Companies Act
under Section 8
(earlier Section 25)
Stamp duty 4% of trust property
value will be executed
in non-judicial stamp
paper with the
registrar
No stamp paper
required for
memorandum of
association, and rules
and regulations
No stamp paper
required for
memorandum and
articles of association
Name Easy to choose Easy to choose Prior approval
required from
Registrar of
Companies
Management board Trustees Governing body Board of directors and
management
committee

Page 20
Succession in
management
By election By election By appointment
Meetings No provisions Annual meeting as per
law, governing body
meeting as per the
rules of society,
Quite extensive as per
the provision of
Company Law
Statutory regulations Nominal Limited Maturable and
exhaustive
Membership transfer Not possible Not possible Free or control as per
desire
Member admission Not applicable Governing body
control
General body or board
control through issue
of capital
Payment to members As notified in trust
deed
Not restricted As approved by
company and state
B. Designing a volunteering programme:
As part of their corporate social responsibility efforts, companies encourage
their employees to volunteer for a cause (usually pre-selected by corporate
human resources or foundations) during work hours under formalised
employee volunteering programmes (EVPs). These EVPs involve substantial
opportunity cost for employers and therefore must be carefully planned and
executed.
Who is a corporate volunteer?
It’s an employ who actively takes on a task, responsibility, or project on his or
her own accord without needing to be assigned or told to do so as part of his or
her daily job duties. Corporate volunteering is generally considered an altruistic
activity and is intended to promote larger social or environmental good or

Page 21
improve the quality of life of a target beneficiary or a community.
Most often, there are no financial gains for the work or service provided by such
volunteers. However, sometimes this volunteering involves incentives such as
personality or profile development, skill development, socialisation, and fun.
In certain areas of volunteering work such as health services, education or
emergency
rescue volunteers receive training before they can contribute. However,
most volunteers serve on a need basis without any prior educational or work
experience of related background.
C. Community Engagement:
A community can be defined as a homogenous group of individuals bound
together geographically, politically, culturally or by certain values, principles or
shared characteristics. For the purposes of this discussion, we define
community as the collection of stakeholders who reside in the local vicinity of
company operations and who rely on or are impacted by its shared resources.
Community engagement is defined as a process in which the needs, priorities
and values of various individuals (not directly associated with or dependent
on a given company) and that of other external organisations in a community
are incorporated into corporate decision-making and management activities.
Tools, technical guidance and standards to be used:
Participatory rural appraisal
Focus group discussions
Door-to-door surveys

Page 22
Conclusion
Thus, it can be concluded that Corporate Social Irresponsibility
means the negligence / ignorance of the enterprises for their
impact on society.
Corporate Social Responsibility of these corporates is not just
limited to environment but also to society, stakeholders, suppliers
etc.
Though the Company Act, 2013 requires at least 2% of the net
profit of last three years to be put for CSR activities but how many
companies actually use this amount for CSR and this amounts to
Corporate Social Irresponsibility.
In order to stop it strict measures and implementation of the Act
is essential.

CORPORATE SOCIAL IRRESPONSIBILITY IN INDIA

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