What is Corporate Social Responsibility (CSR)?

Corporate social responsibility (CSR) is a self-regulating business model that helps a company be socially accountable—to itself, its stakeholders, and the public. By practicing corporate social responsibility, also called corporate citizenship, companies can be conscious of the kind of impact they are having on all aspects of society, including economic, social, and environmental.

To engage in CSR means that, in the ordinary course of business, a company is operating in ways that enhance society and the environment, instead of contributing negatively to them.

Understanding Corporate Social Responsibility (CSR)

Corporate social responsibility is a broad concept that can take many forms depending on the company and industry. Through CSR programs, philanthropy, and volunteer efforts, businesses can benefit society while boosting their brands.

As important as CSR is for the community, it is equally valuable for a company. CSR activities can help forge a stronger bond between employees and corporations, boost morale and help both employees and employers feel more connected with the world around them.

KEY TAKEAWAYS

• Corporate social responsibility is important to both consumers and companies.
• Starbucks is a leader in creating corporate social responsibility programs in many aspects of its business.
• Corporate responsibility programs are a great way to raise morale in the workplace.

For a company to be socially responsible, it first needs to be accountable to itself and its shareholders. Often, companies that adopt CSR programs have grown their business to the point where they can give back to society. Thus, CSR is primarily a strategy of large corporations. Also, the more visible and successful a corporation is, the more responsibility it has to set standards of ethical behavior for its peers, competition, and industry.

Small-and-mid-sized businesses also create social responsibility programs, although their initiatives are not often as well-publicized as larger corporations.

Example of Corporate Social Responsibility

Starbucks has long been known for its keen sense of corporate social responsibility and commitment to sustainability and community welfare. According to the company, Starbucks has achieved many of its CSR milestones since it opened its doors. According to its 2019 Global Social Impact Report, these milestones include reaching 99% of ethically sourced coffee, creating a global network of farmers, pioneering green building throughout its stores, contributing millions of hours of community service, and creating a groundbreaking college program for its partner/employees.¹

Starbucks’ goals for 2020 and beyond include hiring 10,000 refugees, reducing the environmental impact of its cups, and engaging its employees in environmental leadership.¹ Today there are many socially responsible companies whose brands are known for their CSR programs, such as Ben & Jerry’s ice cream and Everlane, a clothing retailer.^2 3

Special Considerations

In 2010, the International Organization for Standardization (ISO) released a set of voluntary standards meant to help companies implement corporate social responsibility. Unlike other ISO standards, ISO 26000 provides guidance rather than requirements because the nature of CSR is more qualitative than quantitative, and its standards cannot be certified.⁴

Instead, ISO 26000 clarifies what social responsibility is and helps organizations translate CSR principles into practical actions. The standard is aimed at all types of organizations, regardless of their activity, size, or location. And, because many key stakeholders from around the world contributed to developing ISO 26000, this standard represents an international consensus.⁵

What is Corporate Social Responsibility?

Corporate Social Responsibility is a transformational initiative or activity practised by Indian corporations. Mandated by the government, it is a positive step towards collective upliftment and well-being of the community. The CSR activities in India need to be in alignment with the socio-economic development of the society in some way or the other.

CSR Activities – Meaning

There is no definitive description that can define Corporate Social Responsibility activities completely. Still, to help understand and get an idea of what comprises of CSR, it has been defined under the CSR Rules. The definition of CSR activities is as follows:

• Programs or projects which are relating to activities specified in the Schedule 7; or
• Programs or projects which relating to activities that are undertaken by the Board in that have been recommendations of the CSR Committeeas per the declared CSR policy. This would be subject to the condition that such policy covers subjects enumerated in the Schedule.

This definition of CSR suggests that it allows companies to engage in projects or programs relating to activities enlisted under the Schedule. While qualifying listed companies must engage in CSR activities in India, flexibility has been given to the company and CSR committee to decide which areas of development they want to contribute in. The activities taken up must be compulsorily displayed on the company website (if any).

The Companies Act, April 2013

The Companies Act 2013 has formulated Section 135 and is landmark legislation that makes Indian companies answerable to the government about their CSR expenditure. India is the first country to make the incorporation of Corporate Social Responsibility activities mandatory for qualifying companies. It is, for sure, a remarkable step towards growth, overall development and humanity.

Be it a private sector company or a public sector company, Corporate Social Responsibility CSR has to be adhered to by all listed companies. If a company falls in either of the following criteria for compulsion, they need to form a CSR committee. Companies:

• That has a net worthof Rs. 500 crores or more, or
• That have an annual turnover of Rs. 1000 crores or more, or
• That generate a profitof Rs. 5 crores or more.

During any financial year, if any of the above financial strength criteria are met then the rules of Section 135 apply. Prior to the compulsion of the Corporate Social Responsibility clause, CSR activities in India were voluntary for the listed companies. However, it was mandatory for them to disclose their CSR spending to their shareholders. Under the Companies Act, the preference has to be given to local areas in which the company operates.

The CSR Committee and Policies

The qualifying companies are required to form a CSR committee. They are needed to spend at least 2% of its average net profit for the 3 previous consecutive financial years on CSR initiatives. Mandatorily, a CSR committee has to be formed by the qualifying company. It also has to appoint at least 3 Board of Directors (Board). This Committee is responsible for preparing and recommend to the Board, a policy and a plan that will specify the CSR activities to be undertaken (CSR Policy). They would also suggest (and protect) the amount of expenditure to be incurred on the activities referred. Monitor the implementation of CSR Policy and activity is also their job. The Board will analyse the recommendations and suggestions made by the CSR Committee and support the CSR Policy and activities of the company.

The Role of the Board of Directors in CSR

The significant role of the board of directors of a company plays a crucial role in the CSR activities of the company. The role of the Board includes:

• Approval of the Corporate Social Responsibility policy.
• Ensuring that the CSR plan gets implemented in its entirety.
• Full disclosure of the spends and plan of CSR policies which are related to its report.
• Displaying the same on the company website.
• Making sure that specified amount allotted is being spent by the company in CSR activities.
• Though there is no penalty if the entire amount is not spent on CSR activities in India, the CSR committee and the board’s report should include the reason for the short spending.

Types of CSR activities under Schedule VII of the Companies Act 2013

The following are the types of CSR activities in India that the qualifying listed companies under the Companies Act 2013 can contribute to:

(i) Eradicating hunger, poverty and malnutrition

This can be done by promoting health care and sanitation in rural areas. This can also be a contribution to the Swach Bharat Kosh which has been set-up by the Central Government. Blood donation camps can also be done as a part of a company’s CSR initiative.

(ii) Promoting education

This can be inclusive of providing education to children and essential vocational skill training that enhance employment or special education among women, elderly and the differently-abled.

(iii) Promoting gender equality.

Women empowerment programmes can be launched by setting up affordable hostels for women. Establishing old age homes, daycare centres and other facilities for senior citizens is another option. Orphanages can also be set up and managed by the CSR committee.

(iv) CSR initiatives related to the environment

Contributions can be made towards environmental sustainability. Activities that help in maintaining the ecological balance, protection of flora and fauna, promote animal welfare, conservation of natural resources and maintaining quality of soil, air and water including contribution to the Clean Ganga Fund set-up by the Central Government.

(v) Protection of national heritage, art and culture:

This can include the restoration of heritage sites, buildings of historical importance and works of art. Public libraries can be set up as well.

(vi) Measures can be taken towards the benefit and support of armed forces veterans, war widows and families.

(vii) Contributions to the Prime Minister’s National Relief Fund or any other fund set up by the central government, for welfare, development and relief of the schedule caste, tribes, other backward classes, women and minorities.

(viii) Contributions or funds provided to the development of technology located within the central government approved academic institutions.

(ix) Contributions can be made towards rural development projects and slum area development.

CSR activities of companies in India

Indian companies were always very generous when it came to voluntary contributions to social welfare. But since it has been made compulsory, more impactful steps have been taken up.

In quantitative terms, the  CSR spending by top Indian companies in 2018 was 47% higher after the mandate. The power and energy sector contributed over 2400 crores, The sector of banking and financial services contributed 1353 crores while the IT Industry generated about 1100 crores for the corporate social responsibilities. As of 2016, about 460 companies have been listed as CSR contributors for the country. Some of the big guns are ITC, Tata Group, Infosys, Ambuja Cement, Ultratech Cement, Mahindra & Mahindra, Tata Chemical and Bharat Petroleum Corporation Ltd.

Contributions were majorly towards two sectors – health and education. About Rs 3,893 crore were spent as CSR in the last financial year in those two areas of development. 1029 crores were spent on rural development projects whereas 525 crores were diligently contributed towards equality and empowerment.

Companies in India doing CSR activities in India

ITC 

ITC has been doing impactful CSR activities in India for years now. ITC has educated about 2,52,329 children through its 2,334 Supplementary Learning Centres. They have also supported empowered about 15378 women members through 1183 self – help groups.

Tata Power

Tata Power has made it its topmost priority to empower women through its Self Help Groups in Kutch Region of Gujarat. This initiative provides financial aid and loans for housing, purchasing cattle, capital for business, education, marriage and medical purposes.

Infosys

Infosys is one of the early adopters of Corporate Social Responsibility. They have takes up projects like the restoration of water bodies in Karnataka and metro station construction in partnership with Bangalore Metro Rail Corporation Limited. Also, they are making a contribution in Sports through their GoSports Foundation. Their CSR initiative also includes a relief fund for Tamil Nadu, Karnataka and Kerala.

Reliance

Reliance has taken up the initiative of securing the life of villagers of Balangir district. They have a life insurance programme for them. The “Education for All” initiative was launched to provide access to quality education in India to everybody. They work to protect the right to education of underprivileged children, girl-child and differently-abled. They also contribute to disaster relief funds.

Tata steel

Tata Steel, for the last 100 years, has been committed to the social development and upliftment of Jharkhand. The agenda of their CSR committee is to improve the quality of life of the communities it operates in. They also launched a train called “Lifeline Express” in 1991, a running hospital, that serves the needy regions of India. They have done numerous done AIDS awareness programmes.

Amul

Over the years, Amul has contributed to rural health and development through Tribhuvandas Foundation. They have also established Swarnjayanti Gram Swarozgar Yojana, a holistic self-employment programme in Kheda district. They also successfully run tree plantation drives, blood donation camps and rural sanitation programmes. They also provide scholarships through their Amul Scholar schemes.

Cafe Coffee Day

The beloved coffee shop, Cafe Coffee Day, employs 50 speech and hearing impaired people at their various outlets as staff. They do this as a part of their CSR activity as a move towards equal employment. They called them the ‘Silent Brew-masters’. CCD also has tie-ups with NGO Enable India to empower differently-abled people. Their biggest CSR initiative is the SVGH Vocational Training College in Chikmagalur, Karnataka.

P&G

“Shiksha – Padhega India, Badhega India” is a crucial part of Procter & Gamble’s CSR. THE Shiksha initiative has, till date, helped about 280,000 underprivileged children to get access to their right to education. They have also built & supported over 140 schools across India.

Wipro

Wipro makes its contribution to education and upliftment through Wipro Care. Not just education, Wipro addresses disaster relief and rehabilitation and health and wellness programmes for the needy as well through Wipro Care. They have also launched Wipro Eye that promotes ecological sustainability in its operations.

 

DLF

DLF is India’s largest real estate company. Initiated in the interest of educating children of construction workers, Swapana Sarthak Informal School was established. They have also set up employable vocational training centres under the banner of DLF LIFE. They’ve also set up DLF Inspire to improve the quality of life of underprivileged children.

Importance of Corporate Social Responsibilities

While CSR is a BIG step by companies for making a powerful change, let’s be frank, it also means an enhanced overall reputation. For companies, it is also a powerful statement through which they convey what they stand for. It helps its employees, people and the company itself contribute to something that is bigger than its own needs. CSR also gives employees a sense of belonging. It strengthens the bond among employees and attachment towards the organization as well.

Corporate social responsibility goes a long way in creating a positive word of mouth around the organization as a whole. It plays a great role in making brand publicity. When people hear about CSR activities by a company, they intuitively develop a positive feeling for the brand. They tend to lean towards brands that take a stand. 2% might sound like a small amount, but large companies generate profit in crores. It is a huge contribution and brings about a big change towards the welfare of society and the development of the country.