Dr. D. Mukhopadhyay
The year of 2000 is of high significance in the history of Corporate Social Responsibility (CSR)practices in the globe when Mr. Kofi Annan, the United Secretary General, launched the UN Global Compact (UNGC), the first CSR initiative at international level. UNGC is the embodiment of ten principles concerning Human Rights, Labour, Environment and Anti Corruption. There are two principles under Human Rights and they are (i) Businesses should support and respect the protection of international human rights within their sphere of influence and (ii) it makes sure that they are not complicit in human rights abuses. Next comes Labor which consists of four principles and they are (iii) Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining (iv) the elimination of all forms of forced and compulsory labour (v) the effective abolition of child labour and (vi) the abolition of discrimination in respect of employment and occupation. As far as Environment Protection is concerned, there are three principles and they are (vii) Businesses should support a precautionary approach to environmental challenges (viii) undertake initiatives to promote greater environmental responsibility and (ix) encourage the development and diffusion of environmentally friendly technologies. Finally comes Anti Corruption which was added to above list in 2004. Principle ten advocates that businesses should work against corruption in all forms including extortion and bribery. The phrase CSR is also known as corporate citizenship.
CSR as a corporate governance philosophy emerged in the lexicon of social sciences in early 1950s when Howard Bowen published his seminal work under the nomenclature ” Social Responsibilities of Businessmen (1953) ” and the phrase ” Corporate Social Responsibility ” was coined by Howard Bowen who is known as the father of CSR. CSR as a modern management concept started to become of significant relevance during last fifty or more years and it became an issue of serious research in the field of corporate governance. In India, CSR was a voluntary initiative until 2013 when the new Companies Act replaced the companies Act, 1956 and CSR practices in India become legally enforceable among the Indian Companies including foreign Companies operating in India with effect from 1st April, 2014. Section 135(5) of the Companies Act, 2013 provides that both the Public Ltd. as well as Private Ltd. Companies having (i) net worth of Rs. 500 Crores or more or (ii) turnover of Rs. 1,000 Crores or more or (iii) net profit of Rs. 5 Crores or more in any of the previous three financial years to contribute to the CSR activities not less than 2% of its average net profit during the three preceding financial years . it is also contained in the relevant law that ”Average net profit” shall be ascertained in accordance with the provisions of Section 198 of the Companies Act, 2013. Among the approved CSR activities, eradication of hunger and poverty, education and environmental protection are included for spending out of CSR contribution. Thus, India is a country that makes CSR activities enforceable by law. Let us portray the views of A. Bakhsheshy (2007) who advocated in his famous work entitled ” Corporate Citizenship, Social Responsibility, Responsiveness and Performance” where the author sketched the pyramidal structure of CSR anatomy and it looks like Economic Responsibilities-at the base of the pyramid, Legal Responsibilities at the second rung of the pyramid, Ethical Responsibilities at the third rung of the pyramid and finally Philanthropic Responsibilities at the zenith of the pyramid . By interpretative implication, Economic Responsibilities advocates for earning profit, Legal Responsibilities include obedience to law, Ethical Responsibilities advocate that businesses should not do anything which is unethical (like Satyam Computers in recent past) and finally Philanthropic Responsibilities prescribes that businesses should contribute resources to the community in order to improve the quality of life of the common citizens of the country.
There is inseparable and symbiotic relationship between business and society. Therefore, business cannot ignore its responsibilities towards the cause of the society. However, there is an ongoing debate on the issues concerning mandatory CSR initiatives of the corporate sector and there are two schools of thought- and on one side , proponents of CSR practices like Howard Bowen and Peter F. Drucker and on the contrary, there are opponents like Milton Friedman. However, CSR has a great role in social development as far as India is concerned where the gulf between the ”haves and have nots” is considerably wider and CSR initiative may be an effective instrument to reduce this disparity of income distribution that prevails at alarming rate in Indian society. It is too early to assess the degree of effectiveness of the provision of Section 135(5) of the Companies Act, 2013 with regard to implication mandatory of CSR contribution and it falls in the domain of the social scientists and management thinkers to keep vigilance over the implementation mechanism of CSR likely to be evolved during the forthcoming decades. However, it may be asserted that CSR is definitely an important initiative of the legislators for bringing about egalitarianism in the process of distribution of national income and wealth among the citizens of the country. CSR Practice is now bestowed with legal mandate and becomes mandatory for certain groups of companies in India. The companies who are of blue chip in nature are to share their profit with the society with an object for bringing the gap between haves and have not’s. They are supposed to contribute for bringing about development in education, healthcare and other philanthropic avenues. The companies who are required to practice CSR are to formulate policies for implementing the provisions of the Companies Act, 2013. Perhaps this is fit for high appreciation for the law makers who understand that it is difficult to achieve something with advisory mandate and without legal mandate nothing is enforceable in India. Government itself alone cannot bring about social and economic development of the society and it is perhaps the need of the hour to take the help of corporate sector . Corporate sector is the powerful engine for conversion of raw materials into finished products which serve the consumers and help earning revenue for the organization. It has been observed that Government of India has been trying since independence to boost up the socio – economic conditions of the people who are not in a position to avail education, better shelter, and even no provisions for two square meals a day but resources remaining under the control of the Government is not adequate to meet the basic needs of the society. Under the circumstances, it is the corporate sector to shoulder little responsibility at least for discharging social responsibility besides the Government and it is quite appreciable that Government and law makers have taken a pragmatic steps for ensuring the gap between the haves and have not’s through making mandatory provision in the Companies Act, 2013. Companies Act, 2013 is the principal instrument for regulating and controlling the functions and performance of the corporate sector in India. Law making is one step but proper implementation of the law is another important step that Government should adopt. The Companies Act, 2013 is not explicit enough as to how this law shall be made operational and if any company violates the provisions the law with regard to CSR, then what should be the penalty or punishment. The Law is silent as far as the implementation of the CSR provision is concerned. It may not be out of context to mention that many Laws are made by the Parliament of India but they are not made operational in true spirit of a particular law and that is the most important issue to be taken into consideration. The law besides making any provision for practice must also make necessary provisions for prosecution of those who are responsible for implementation if they fail to do so.
India is developing economy and she suffers from not having provisions of basic necessities and it is the ultimate responsibility of the Government to bring the country on egalitarian line which is the indicator of even distribution of national income and wealth. Even before making provision for compulsory adoption and practice of CSR in the Companies Act, 2013, CSR Practice is existence India but that was a voluntary in nature and in this context, the names of WIPRO, Reliance, Tata Sons and Birlas can be named without any hesitation as they have been practicing CSR in India. The aim of the provision of CSR in the Companies Act , 2013 is to expand the circumference of CSR practice and include many more companies in the CSR practice besides those who are practicing CSR voluntarily. In India, hardly anybody cares to do any good for the society unless it is made compulsory or obligatory by the law of the land. Therefore law has a great role to make CSR practice mandatory for the companies who fulfils or meets the provisions of the Companies Act, 2013 and it is the most significant steps taken by the Government.
(The author of this article is Professor of Management at School of Business, Faculty of Management, Shri Mata Vaishno Devi University, Katra, Jammu & Kashmir). He may be reached at mukhopadhyay.dinabandhu @ gmail. com)
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