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Corporate social responsibility and business sustainability in India- in retrospect and prospect

Student Name: Mr Amit Kumar Thakur
Guide: Prof. Manipadma Datta
Year of completion: 2020

Abstract:

The concepts like Sustainability and Sustainable Development are taking Centre stage in CSR. The macro approach on CSR addresses both governance and operations aspects, but the major challenge remains to achieve the operational deliverables related to Schedule VII of Section 135. The micro level deliverables would address and achieve the larger goals of CSR and thus help to achieve the Sustainable Development Goals.

The present work has identified few problems as emerged from the research gaps resulting from the review of literature. These problems are related to operations, governance and strategy on CSR, unavailability of reliable data to study history of CSR , lack of appropriate methods and relevant studies on CSR and Sustainability specifically revolving around history of CSR. Second, post passage of the company law, how CSR has created new opportunities and challenges for businesses and how businesses would align themselves as per the CSR provision. Third, we find that there is evolution of newer paradigms linking CSR to Sustainable Development Goals and how to interconnect both. Fourth, how to conduct critical appraisal of CSR performance for companies in India post Companies Act 2013 for the study, Fifth, what type of survey need to be conducted to understand the governance and operations aspects of CSR and Business Sustainability.

Review of Literature clearly establishes and identifies gaps about critical perspectives on CSR, its historical perspectives, legislation aspects, various changes in a phased manner, linkage with SDG’s for a holistic understanding and linkage between CSR and Business Sustainability.

The importance of identifying these problems has led to develop research objectives that CSR has long history in Indian context. There have been strong evidences from ancient history that CSR has been practiced from Vedic times and how CSR has evolved over time. The study aims to understand various stages of CSR and subsequently how CSR has become part of business strategy with newer paradigms by linking CSR with SDGs’.

Further with the passage of the Companies Act 2013 and making CSR mandatory for Section 135 companies, there has been empirical study conducted to understand the CSR policies of companies, critically appraise CSR performance, expenditure trend and implementation models for CSR projects.

The whole approach has eventually resulted that there has been no such research-based study that has developed such efficient model in which CSR and Sustainability have been studied in such an extended depth.

The importance of identification of problems has helped to understand regulatory framework that sets norms for corporate players, mobilization of effort in aiding development, governance related responsibilities and CSR trend in management of corporations, large and small, public and private, along with importance to environmental and stakeholder issues. It has led empirical research so that practices could be reconciled with the theory.

The research investigates linkages between CSR and Business Sustainability in India: in Retrospect and Prospect. It uses various approaches to reach practical understanding and offer solutions for CSR and Business Sustainability. The methodology is exploratory in nature and the research aim is attained by classifying it into various objectives and using interdisciplinary approach for each objective. It does so by investigating: how the concept of CSR evolved over time along with the major theoretical debates on business and society interface, emergence of newer paradigms to link CSR to SDG’s, the evolution of CSR being adopted as an integral part of India’s company law framework, critically appraise CSR performance in India since its introduction in the Companies Act 2013, conduct survey for company executives, problem identification and offer recommendations for all round improvement for CSR and Business Sustainability.

1. The research methodology is three-fold covering the following areas:
a. Documenting a comprehensive historical and theoretical evolution/history of CSR on the basis of available literature.
b. A quantitative analysis of CSR performance over time.
c. A qualitative study, based on questionnaire survey of company executives and analysis thereof to assess the governance and operations aspects and prescribing recommendations for improvement.

There have been separate inputs on Research Methodology for respective chapters.

The findings of the research shows that in the Indian context, CSR has its roots from Vedic times, India has seen ‘CSR’ from its phase as a moral social duty (not obligation) to corporate philanthropy, which has been there since 1800’s, to the current phase of CSR being adopted as a part of corporate strategy. Various phases of CSR cover philanthropy and charity since 1800, trusteeship concept, public sector role in CSR and legalized CSR till today. The long term business sustainability can be achieved through effective implementation of CSR which can help to develop brand equity and strengthens better perception among stakeholders. This enhances business performance and creates long term value for the organization.

The study reveals that CSR expenditure has been increasing year after year which is evident by the fact that in the financial year 2014-15, Rs 9500 crores, whereas in the financial year 2015-16, total spent reached to Rs 13800 crores whereas in 2016-17, expenditure was 14100 crores. What is being observed an increasing trend in investment for social cause and widening of the development sector investment through CSR. (Thakur and Datta 2019).

There have been several developments which led to creation for varied social initiatives. The CSR provisions in Companies Act 2013 has provided new direction to developmental activities and has provided businesses an opportunity for implementing CSR in a structured manner.

The concept of sustainability for businesses has been taking centre stage and CSR had started playing an important role in this direction. CSR is now understood as an effective tool to reach to stakeholders and to earn respect for the companies in terms of social and environmental commitment.

The survey conducted as part of the thesis work establishes that governance and operations aspects related to CSR has strengthened post Companies Act 2013.The outcome indicates that CSR has evolved post Companies Act 2013 in terms of developing CSR policy, spending, processes involved, focus thematic areas , compliance and impact.

It can be summarized that CSR activities have been very clearly defined in the Schedule VII of Section 135 of Companies Act 2013. The activities must be implemented by the companies as listed in the Act. The CSR activities provide a wonderful platform for the companies to engage community, customers, NGO’s, create visibility and build brand reputation. Companies in the ambit must focus on the core defined activities and must avoid spending in the unrelated areas. It is in the benefit of the companies to design CSR projects in line with the provisions of the Act. The Act must be followed by the Companies for which it has been created so that the goals as visualized in CSR could be achieved for all stakeholders.

The CSR mandate has developed from the concept of ideals to mandate over the years from the concept of shareholders perspective to stakeholders’ approach with close engagement of legislators, judiciary and academia providing varying interpretations of what could constitute responsibility of business corporations.

The enactment of the law and its implementation has several policy implications. The Indian model of CSR, as enunciated through the Companies Act 2013, has mandated compulsory spending in areas as defined by the government, apart from mandating reporting of activities, for specified category of companies.

The budget planning, allocation and partner identification is finalized at the Board level and CSR Committee of a company. The best of the minds are now involved to see that CSR achieves its agenda and goal.

The CSR programs are aligning towards development agenda of the nation and complementing several Government programs meant for social development hence Government must act as a catalyst in social change. Government is becoming more stringent on CSR compliance for the companies not adhering to the law.

There is more data available on CSR as CSR has completed 5 years of its journey on April 1, 2019 which provides Corporates, Government and NGO to take strategic decisions on CSR.

It can be argued that the history of legal framework on CSR outside India started to develop during 1900 century and in India started from policy interventions of Department of Public Enterprises Guidelines, 2009, National Voluntary Guidelines, 2011, Securities Exchange Board of India, 2012 and finally got completed with the passage of the Companies Act 2013. It is evolving in nature and hence various developments and priority areas are being added from time to time through various amendments to the law. There has been few amendments to CSR which would help to both comply and penalise the companies and executives for not adhering to the provisions of the law. It will open new avenues by covering more companies, provide more budget for social development. The policy is getting stricter on companies to ensure that companies focus and spend all the budget on CSR to create and strengthen the environment of social development. (Thakur and Datta, 2019).

There are certain limitations to the study. First the surveys are entirely based on qualitative data which have been coded and analyzed, thereby restricting the use of several statistical techniques. Second, the study is majorly confined to India due to the relevance of the research topic though global perspectives have also been covered. Third, initially data availability on the topic was limited, since the law was passed in 2013, but eventually data was available through various reliable sources both from Government and other sources which led to analysis, chapter development and findings.

Irrespective of these limitations, this study has ensured achievement of all the objectives, and there is ample scope for future research on new areas of CSR and Business Sustainability, its policy implications on operations and governance areas and how organization can align CSR with Business to achieve various Sustainable Development Goals, however these concepts, need to be further explored, from further research, driven by well-designed sustainable framework.