INSTITUTE OF COMPANY SECRETARIES OF INDIA

CORPORATE SOCIAL
RESPONSIBILITY

A PROJECT REPORT
Submitted by Ms.
GITIKA ARORA
Reg. No. 250041609/02/2013
 Table of Content
Particulars Page No.

INTRODUCTION

INTRODUCTION TO CORPORATE SOCIAL RESPONSIBILITY 555

PROJECT DESCRIPTION

PRESENT SCENARIO IN CSR 10

THE COMPANIES (CSR POLICY) RULES, 2014 13
ACTIVITIES AS PER SCHEDULE VII OF COMPANIES ACT, 2013 IN WHICH 18
COMPANIES MAY CONTRIBUTE FOR CSR

DETAILED CLARIFICATION OF MINISTRY OF CORPORATE 20

AFFAIRS ON CSR BY WAY OF CIRCULAR, NOTIFICATION AND
AMENDMENT IN RULES

CSR BENEFITS TO COMPANIES AND SOCIETY ATLARGE 24

INITIATIVES ON CSR BY VARIOUS COMPANIES IN INDIA 33

PYRAMID OF CSR 40

CONCLUSION OF THE PROJECT 45

 An introduction to Corporate
Social Responsibility (CSR)

CSR DEFINITIONS

Corporate Social Responsibility (CSR) is defined as :

 An ethical business approach to meet social, environmental, sustainable

and moral responsibilities to ensure that businesses make a positive
contribution to society (United Nations 1984).

 As a concept whereby companies integrate social and environmental

concerns in their daily business operations and in their interaction with
stakeholders on a voluntary basis (European Commission 2001).

 Companies response to the sustainability agenda to do with issues within

the environment, social, ethical and economic context (DTI 2003)

 A business' commitment to contribute to sustainable economic

development, working with employees, their families, the local community,
and society at large to improve their quality of life (World Business Council
for Sustainable Development).

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CSR is not a tick box activity to say that you have just complied. CSR takes some
hard thinking on how a business can genuinely help the societies in which they
operate. It is about listening to needs, taking responsibility and having a
philosophy and ethos that does no harm but creates good, mutual respect and is
a process of continuous evolution. CSR encourages the development of a
governance culture.

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Common Understanding Stakeholders

 Common Understanding Stakeholders : CSR relates to the idea whereby a

business addresses and balances the needs of stakeholders

 Who/what are stakeholders? “Individuals and groups who may affect or be

affected the actions, decisions, policies, practices or goals of an enterprise.”

Examples:
• Shareholders and other investors
• Employees
• Customers
• Governments
• Local communities
• NGOs
• Environment

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CSR focus - People, Planet and Profit (“Triple Bottom-line”)

 Stakeholders in a business - customers,

employees, shareholders, communities and
environment
 Sustainable development and profits are
inter-related
 Corporate profits need to be analyzed in
conjunction with social prosperity

Evolved through the concept of ‘giving’ – an integral part of Indian

culture
 Philanthropy
 Religious Donations

Objectives of Corporate Social Responsibility

1) Through this mechanism, the organization monitors whether they are

adhering to :
a) the law,
b) ethical standards and
c) International norms.

2) The business should embrace the responsibility for the impact of their
activities on:
a) the environment,
b) consumers,
c) employees,
d) communities,
e) Stakeholders and all other people in their sphere of operation.

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 3) It is the responsibility of a business to proactively promote public interest
through encouraging the community growth and development, elimination
of harmful practices. It is the deliberate inclusion of public interest into the
organizations decision making and honoring the bottom line:

a) people,
b) planet and
c) Profit.

CSR – Internal v/s External

 Internal (carried out within the organization) viz.

]]

Energy and water conservation

 Employee welfare – training, healthcare

 Affirmative action – employment of backward sections

Corporate governance

 External (within vicinity or for society at large), viz.

Community development

Capacity building

Environmental protection
Healthcare
Creating awareness - education, health, social issues

 E-initiatives – Online Information, education, etc

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PROJECT DESCRIPTION

PRESENT SCENARIO OF CSR

Companies Act 2013 has introduced several new provisions which change the
face of Indian corporate business. One of such new provisions is Corporate Social
Responsibility (CSR). The concept of CSR rests on the ideology of give and take.
Companies take resources in the form of raw materials, human resources etc
from the society. By performing the task of CSR activities, the companies are
giving something back to the society.

Ministry of Corporate Affairs has notified Section 135 and Schedule VII of the
Companies Act as well as the provisions of the Companies (Corporate Social
Responsibility Policy) Rules, 2014 which has come into effect from 1 April 2014.

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 Applicability:

Section 135(1) prescribes the threshold that mandate companies to undertake

CSR activities

Every company having

(a) net worth of Rs 500 crore or more;

(b) turnover of Rs 1000 crore or more;

(c) Net profit of Rs 5 crore or more.

During any financial year shall constitute a Corporate Social Responsibility

Committee of the Board consisting of three or more directors, out of which at
least one director shall be an independent director.

The Corporate Social Responsibility Committee shall

(a) Formulate and recommend to the Board, a Corporate Social Responsibility

Policy which shall indicate the activities to be undertaken by the company as
specified in Schedule VII;

(b) recommend the amount of expenditure to be incurred on the activities

referred to in clause (a); and

(c) Monitor the Corporate Social Responsibility Policy of the company from time
to time.

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Requirement to disclose in board Report

As per the provisions of section 135(4) of the Companies Act, 2013 The Board of
every company referred to in sub-section ( 1), shall –

(a) After taking into account the recommendations made by the Corporate
Social Responsibility Committee, approve the Corporate Social
Responsibility Policy for the company and disclose contents of such Policy
in its report and also place it on the company's website, if any, in such
manner as may be prescribed; and

(b) Ensure that the activities as are included in Corporate Social Responsibility
Policy of the company are undertaken by the company.

Amount to be spent on CSR :

The Board of every company referred to in sub-section ( 1), shall ensure that the
company spends, in every financial year, at least two per cent of the average net
profits of the company made during the three immediately preceding financial
years, in pursuance of its Corporate Social Responsibility Policy:

Provided that the company shall give preference to the local area and areas
around it where it operates, for spending the amount earmarked for Corporate
Social Responsibility activities:

The company can also make the annual report of CSR activities in which they
mention the average net profit for the 3 financial years and also prescribed CSR
expenditure but if the company is unable to spend the minimum required
expenditure the company has to give the reasons in the Board Report for non-
compliance so that there are no penal provisions are attracted by it.

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 THE COMPANIES (CORPORATE SOCIAL RESPONSIBILITY POLICY)
RULES, 2014

INCLUSIVE DEFINITION OF THE TERM CSR

While the Companies Act used CSR as a nomenclature without actually defining it,
the notified rules have defined the term ‘CSR’ to mean and include but is not
limited to:

(i) projects or programs relating to activities specified in the Schedule VII to the
act
Or

(ii) projects or programs relating to activities undertaken by the Board of directors

of a company in Pursuance of recommendations of the CSR Committee as per
the declared CSR policy subject to the condition that such policy covers
subjects enumerated in the Schedule VII .

By providing the definition of CSR, the scope and application of CSR that can be
undertaken by the companies has been further clarified. The definition of CSR
assumes significance as it allows companies to engage in projects or programs
relating to activities enlisted under the Schedule VII. It also permits flexibility to
companies by allowing them to choose their preferred CSR engagements that are in
conformity with the CSR policy.
By keeping the definition of CSR inclusive, MCA acknowledges the urgent need of
the industry to be given more freedom in choosing their CSR activities. However, it
would be interesting to watch this space and see whether such autonomy (if given)
can have any significant multiplier effect - both for the economy and corporates. It
also needs to be seen whether such autonomy will allow flexibility to companies in
choosing activities from outside the list of Schedule VII.

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INSTITUTIONAL COVERAGE OF CSR

While Section 135 (1) of Companies Act brings under its purview every company
which would mean to include a company incorporated in India.

The CSR Rules have made an attempt to broaden the definition of the term
'company' to include a foreign company having a branch or project office of a
foreign company. This gives an expansionist scope under the CSR Rules to
regulate such companies which prima facie are not included under Section 135.

Thus, the CSR Rules which were supposed to be supplementary to the main
provision seems to have overreaching effect well beyond the scope of Section 135
as originally contemplated. This is a clear discordance which may be opened to
judicial scrutiny as MCA has gone beyond its legislative mandate.

Further, it seems to be an overarching provision and applicability of the same may

be perceived by the foreign companies as an additional tax, over and above their
corporate taxes for doing business in India.

COMPUTATION OF NET PROFIT

Every company will have to report its standalone net profit during a financial year
for the purpose of determining whether or not it triggers the threshold criteria as
prescribed under Section 135(1) of the Companies Act.
Indian company: The CSR Rules have clarified the manner in which a company’s
net worth will be computed to determine if it fits into the ‘spending’ norm. In order
to determine the ‘net profit’, dividend income received from another Indian
company or profits made by the company from its overseas branches have been
excluded. Moreover, the 2% CSR is computed as 2% of the average net profits
made by the company during the preceding three financial years.
Foreign company: The CSR Rules prescribe that in case of a foreign company
that has its branch or a project office in India, CSR provision will be applicable to
such offices. CSR Rules further prescribe that the balance sheet and profit and loss
account of a foreign company will be prepared in accordance with Section 381(1)
(a) and net profit to be computed as per Section 198 of the Companies Act. It is
not clear as to how the computation of net worth or turnover would be arrived at
in case of a branch or project office of a foreign company.

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APPOINTMENT OF INDEPENDENT DIRECTORS ON THE BOARD
The CSR Rules have dispensed with the requirement of appointing an independent
director on the CSR Committee of the Board of an unlisted company as well as a
private company. It has brought in the much needed clarity, as under the
Companies Act, there is no requirement regarding appointment of independent
director on the board of directors of the unlisted or private company.

Further, the CSR Rules have relaxed the requirement regarding the presence of
three or more directors on the CSR Committee of the Board. In case where a
private company has only two directors on the Board, the CSR Committee can be
constituted with these two directors. The CSR Committee of a foreign company
shall comprise of at least two persons wherein one or more persons should be
resident in India and the other person nominated by the foreign company.

The CSR Rules, by including foreign companies within its ambit, have provided
latitude to treat persons authorized by the foreign company akin to directors of an
Indian company for the purposes of affixing a fiduciary duty and liabilities in the
event of any breach in the reporting requirements for CSR provisions. By
expanding the scope of CSR Rules, it is apparent that the government has
overlooked the limited role (to accept on behalf of company service of process and
any notices or other documents) of the authorized persons of the foreign
companies in India.

MODALITIES FOR UNDERTAKING CSR ACTIVITIES

Instead of carrying out the CSR activities itself, company may undertake the CSR
activities in following ways:

CSR Activities

Registered Trust Establish a Section 8 Collaboration of Companies

Company
or
Registered Society

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Conducting CSR through a third party:
CSR activities can be undertaken through a registered society or trust or a Section
8 Company under the Companies Act. In this regard, the CSR Rules have
liberalized the participation of a third party to undertake CSR activities on behalf of
the spending company provided it fulfills the relevant track record of three years
in undertaking similar projects or programs. Such an entity would have to follow
the specifications and modalities regarding utilization of funds, monitoring and
reporting requirements as provided by the spending company.
Conducting CSR through group entities: Autonomy to the companies to carry out
their CSR activities through their own or holding or subsidiary or associate
company’s registered society or trust or Section 8 Company have been provided.
Collaborating or pooling resources: Collaboration with other companies for
undertaking CSR projects or programs is also permitted subject to the condition
that the collaborating companies are in a position to report separately as per the
reporting requirements under the Companies Act.

CSR EXPENDITURE

Nature of CSR expenditure and geographic limitations

Expenditure incurred on specified activities that are carried out in India will qualify
as CSR expenditure. Such expenditure includes contribution to the corpus or on
projects or programs relating to CSR activities. Any activity undertaken solely for
the benefits of employees and their families will remain outside the purview of
CSR activity.

Expenditure incurred in undertaking normal course of business will not form a part
of the CSR expenditure. Companies would need to clearly distinguish those
activities which are undertaken specifically in pursuance of normal course of
business and those that are done incrementally as part of the CSR initiatives.

Any surplus arising out of CSR activities will not be considered as business profit
for the spending company. It is unclear whether the surplus will form part of the
CSR Fund for the next financial year.

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The CSR Rules are unequivocal in stating that any form of direct or indirect
contribution made to any political party by company cannot be counted towards
CSR activity.

Employees’ contribution towards CSR

Companies are permitted to train their employees and/or personnel of their

implementing agencies to build CSR capabilities. Any expenditure incurred in
providing such training up to a ceiling of five percent in one financial year is
permitted under the CSR budget. However, owing to a ceiling on the percentage of
amount that can be spent for training purposes, the idea of including and
computing employees’ time-value contribution towards CSR has not been factored
at all. Allowing companies to train employees subject to a pre-fixed budget while
excluding employees’ time-contribution will create a dichotomy in allocation of
CSR expenditure.

PROVISION FOR NON APPLICABILITY OF CSR PROVISION

The requirement and compliance under the CSR provision will cease to be
applicable to a company which for the three consecutive years falls outside the
purview of the threshold requirement of annual turnover or net worth or net profit
as envisaged under Section 135(1) of the Companies Act.

SCOPE OF ACTIVITIES UNDER SCHEDULE VII

Substantial changes have been made into the activities enlisted in the Schedule.
In the present CSR Rules, the scope of activities under the Schedule has been
expanded to include preventive healthcare, sanitation, providing safe drinking
water, protection of national heritage, rural development projects, measures to
benefit armed forces veterans, rural development projects and the like.
Similarly, several new spectrum of activities such as promoting rural sports,
nationally recognized sports, setting up homes and hostels for women, orphans
and senior citizens, reducing inequalities in socially and economically backward
groups and support to technology incubators in academic institutions have also
been included in the list of CSR activities under Schedule. However, the most
notable absentees are ‘social business

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projects’ and residual clause giving power to the government to prescribe other
matters on CSR related activities.

ACTIVITIES AS PER SCHEDULE VII OF COMPANIES ACT, 2013 IN WHICH

COMPANIES MAY CONTRIBUTE FOR CSR

Ministry of Corporate Affairs vide its Notification dated 27th February, 2014
(which has come into force with effect from 1st April, 2014) has come up with the
modified Schedule VII which covers wide range of activities which can be
undertaken by the Companies as a part of their CSR initiatives.

The activities involve the following:

(i) Eradicating hunger, poverty and malnutrition, promoting preventive

health care and sanitation and making available safe drinking water;

(ii) Promoting education, including special education and employment

enhancing vocation skills especially among children, women, elderly, and
the differently abled and livelihood enhancement projects;

(iii) Promoting gender equality, empowering women, setting up homes and

hostels for women and orphans; setting up old age homes, day care
centers and such other facilities for senior citizens and measures for
reducing inequalities faced by socially and economically backward
groups;

(iv) Ensuring environmental sustainability, ecological balance, protection of

flora and fauna, animal welfare, agro forestry, conservation of natural
resources and maintaining quality of soil, air and water;

(v) Protection of national heritage, art and culture including restoration of

buildings and sites of historical importance and works of art, setting up
public libraries, promotion and development of traditional arts and
handicrafts;

(vi) Measures for the benefit of armed forces veterans, war widows and their
dependents;

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 (vii) Training to promote rural sports, nationally recognized sports,
paralympic sports and Olympic sports;

(viii) Contribution to the Prime Ministers' National Relief Fund or any other
fund set up by the Central Government for socio-economic development
and relief and welfare of the Scheduled Castes, the Scheduled Tribes,
other backward classes, minorities and women;

(ix) Contributions or funds provided to technology incubators located within

academic institution which are approved by the Central Government;

(x) Rural development projects.

The above mentioned activities constitute the CSR activities and the companies
which are covered under the provisions of Section 135 shall be required to carry
out any one or more of the activities as specified above along with following its
CSR Policy.

As per the Notification dated 6th August, 2014

The following amendments has been made to abovementioned activities of schedule VII

In Schedule VII, after item (x), the following item and entry shall be inserted,
namely:-
“(xi) Slum area development.

Explanation.— For the purposes of this item, the term ‘slum area’ shall mean
any area declared as such by the Central Government or any State Government
or any other competent authority under any law for the time being in force.”

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As per the Notification dated 24th October, 2014

The following amendments has been made to abovementioned activities of

schedule VII

(i) In item (I), after the words “and sanitation”, the words “including contribution
to the Swach Bharat Kosh set-up by the Central Government for the promotion
of sanitation” shall be inserted;

(ii) In item (IV), after the words “and water”, the words “including contribution to
the Clean Ganga Fund setup by the Central Government for rejuvenation of
river Ganga;” shall be inserted.

So by this Notification it is clarified that Contribution towards Swach Bharat Kosh

and clean ganga fund set up by the central government shall be considered as
CSR.

DETAILED CLARIFICATION OF MINISTRY OF CORPORATE AFFAIRS ON CSR BY

WAY OF CIRCULAR, NOTIFICATION AND AMENDMENT IN RULES

Activities expressely disallowed as CSR

The MCA through the circular, provided that the CSR activities should be carried
through the project or programme but not include the following activities:

 Activities undertaken outside India

 Activities meant exclusively for employees and their family
 One-off events such as marathons/ awards/ charitable contribution/
advertisement/ sponsorships of TV programmes etc.
 Expenses incurred by companies for the fulfillment of any Act/ Statute of
regulations (such as Labour Laws, Land Acquisition Act etc.)

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  Contribution made to a political party under section 182 of the
Companies act, 2013

Issues Relating to CSR

The MCA Clarification

Issues Clarification Remarks

Foreign Company The CSR rules prescribe the

following:

 CSR provision shall be

applicable to a foreign
company that has its
branch office or project
office in India

 Expenditure incurred by
Foreign Holding
Company for CSR activities
in India will qualify as CSR
spend of the Indian
subsidiary if, the CSR
expenditures are routed
through Indian subsidiaries
and if the Indian subsidiary
is required to do so as per
section 135 of the Act.

 Provided further that in

case of a foreign company
net profit shall be
calculated as per profit and
loss account prepared in
terms of clause (a) of sub
section
l) of section 381 read with
section 198 of the Act.

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 Independent The CSR Rules have done away This is the
Directors with the requirement of constructive
appointing an independent development which
director on the CSR Committee will provide relief to
of the board of an unlisted many companies.
company as well as private
company.

 The CSR Rules have

relaxed the requirement
regarding the presence of
three or more directors on
the CSR Committee of the
Board. In case a private
company has only two
directors on the board, the
CSR Committee can be
constituted with two
directors.
 The CSR Committee of a
foreign company shall
comprise of atleast two
persons wherein one or
more persons should be
resident in india and the
other person is nominated
by the foreign
company.

Section 135 specify No clarification issued by MCA

that “average net in this regard
profit” shall be
calculated in
accordance with the
provisions of sec
198.

Surplus arising out Surplus arising out of CSR This implies that
of CSR activities activities shall not form a part surplus shall be

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 of the business profits of the reinvested to perform
company CSR activities

Cost incurred to built These cost cannot exceed 5 % of

capacities for carrying total CSR Expenditure of the
out CSR activities company in one financial year
forming part of CSR

CSR Reporting The Board's Report of a company

covered under these rules
pertaining to a financial year
commencing on or after the day
of April, 2014 shall include an
annual report on CSR containing
particulars specified in Annexure.

In case of a foreign company, the

balance sheet filed under sub-
clause (b) of sub-section
(1) of sec 381 shall contain an
annexure as regarding report on
CSR

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 CSR BENEFITS TO COMPANY AND SOCIETY AT
LARGE

Benefits of Corporate Social Responsibility

The Business Benefits of CSR

CSR should not be viewed as a drain on resources, because carefully

implemented CSR policies can help your organization:

 Win new business

 Increase customer retention

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 Develop and enhance relationships with customers, suppliers and networks
 Attract, retain and maintain a happy workforce and be an Employer of
Choice
 Save money on energy and operating costs and manage risk
 Differentiate yourself from your competitors
 Generate innovation and learning and enhance your influence
 Improve your business reputation and standing
 Provide access to investment and funding opportunities
 Generate positive publicity and media opportunities due to media interest in
ethical business activities

Benefits of CSR in SME

The business case for CSR is often promoted, and it is assumed that such
benefits are also felt by SMEs.

Improved image and reputation.

Improved trust and understanding.

Larger, more prominent profile.

Better market position.

More business.

Increased employee motivation.

Increased attractiveness to potential recruits.

Cost savings and increased efficiency.

Risk management.
Benefits company culture

Strengthens the relations with other stakeholders in the supply chain

Ensures natural resources do not run out

Prevent pollution, health hazards

Creates awareness (e.g. consumers)

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 Build a sustainable future (society and business)

Consumers increasingly don't accept unethical business practices or organizations

who act irresponsibly. Advances in social media (giving everyone a voice) mean
that negative or destructive practices quickly fuel conversations online.
Organizations are accountable for their actions like never before.

and be an Employer of Choice

Save money on energy and operating costs and manage risk

Differentiate yourself from your competitors

Generate innovation and learning and enhance your influence

Improve your business reputation and standing

Other Advantages

Purchases : Better access to the resources, reinforcements of the

relations with the suppliers, pride of collaboration

Commercial activities : Better access to capitals, profitability,

control of management, pride of your customers

Operations : Reduction of the social and environmental impact of the

activities, relation between good vicinity and local associations, better
comprehension of the activities of your company

Credit : Safety of the credits, valorisation of your company and profit-

sharing of the shareholders present and/or future

Marketing: Development of the markets, existing and new,

reinforcement of the image of the brands, competitive advantage,

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 better comprehension of new customer’s needs by a reinforced
proximity, information on the markets.

Institutions : Influence and recognition, better social and citizen

investments, development of new networks and channels of
communication, reputation

Management: Better risk managements, put in legal conformity

(mandatory) and even more) strategic development and organizational
training (the quicker you are there, the less delay you will have to catch up),
innovation.

 Human resources : Resourcing, management of the questions on hygiene

and on safety, development of the human capital, staff safety (when you
have what you need…), pride of this one, which will not want to leave any
more or will want to come to work for you.

Shareholders: Fidelity since the intangible asset of your company will

increase, Pride.

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1. Enhance Company Image
By doing CSR activities, consumers can be more familiar with the company
as a company that is always doing well for society.

2. Strengthening "Brand" Companies

Through the activities of providing product knowledge to consumers with a
way to distribute products for free, can lead to consumer awareness of the
existence of the company's products so as to increase the company's brand
positioning.

3. Develop Cooperation with Stakeholders

In implementing CSR, companies certainly cannot do alone, so it should be
assisted with stakeholders, such as local governments, communities, and
local universities. Then the company can open a good relationship with
these stakeholders.

4. Distinguishing Companies with Rival

If CSR is performed by the company, the company has the opportunity to
highlight its comparative advantage can distinguish it from competitors who
offer similar products or services.

5. Produce Innovation and Learning to Improve Corporate

Influence
Choosing CSR activities in accordance with the main activities of the
company requires creativity. CSR plan consistently and regularly can trigger
innovation within the company that can ultimately improve the role and
position in the company's global business.

6. Opening Access to Investment and Financing for Companies

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 Investors now have the awareness of the importance of investing in
companies that have made CSR. Likewise, providers of funds, such as
banking, higher priority grants to companies that perform CSR.

7. Increase Stock Price

In the end if the company routinely perform Corporate Social Responsibility
in accordance with its core business and do it consistently and regularly, the
business community (investors, creditors, etc.), government, academia, and
consumers will be more familiar with the company. Then the demand for the
company's stock will rise and Company’s stock price will also increase .

The business benefits of corporate social responsibility

Corporate social responsibility (CSR) isn't just about doing the right thing. It means
behaving responsibly, and also dealing with suppliers who do the same. It also
offers direct business benefits. Building a reputation as a responsible business sets
you apart. Companies often favor suppliers who demonstrate responsible policies,
as this can have a positive impact on how they are perceived by customers.

Some customers don't just prefer to deal with responsible companies, but insist on
it. The Co-operative Group, for instance, place a strong emphasis on its corporate
social responsibility and publishes detailed 'warts and all' reports on its
performance on a wide range of criteria - from animal welfare to salt levels in its
pizzas. Reducing resource use, waste and emissions doesn't just help the
environment - it saves you money too. It's not difficult to cut utility bills and waste
disposal costs and you can bring immediate cash benefits. For more information
read our guides on how to save money by reducing waste and use your resources
more efficiently.

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 There are other benefits too:

 A good reputation makes it easier

to recruit employees.

 Employees may stay longer,

reducing the costs and disruption
of recruitment and retraining.

Employees are better motivated and more productive.

CSR helps ensure you comply with regulatory requirements.

Activities such as involvement with the local community are ideal

opportunities to generate positive press coverage.

Good relationships with local authorities make doing business easier.

Understanding the wider impact of your business can help
you develop new products and services.

CSR can make you more competitive and reduces the risk of sudden
damage to your reputation (and sales). Investors recognise this and are
more willing to finance you.

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CSR AND EMPLOYEES ENGAGEMENT

There are good reasons for companies to more fully engage their employees,
ranging from simple decency to competitive advantages in recruiting and
retention to more effective human resource management. On the financial front,
studies demonstrate a strong relationship between employee engagement and a
company’s stock price, income growth, and overall financial performance.

Several studies aimed directly on the linkage between CSR and employee
engagement have found a strong correlation between employee’s commitment to
their organization and how they rate its social responsibility.

For example, a survey by Sirota Survey Intelligence, of 1.6 million employees in

seventy companies, found that employees who approved of their company’s
commitments to social responsibility, compared to those who did not approve,
were far more engaged on their jobs and more apt to believe that their employers
were interested in their well-being. They also had more favorable perceptions of
their management’s integrity and rated their companies as more competitive, too.

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Registration No. 250041609/02/2013
 Models of Engagement

Transactional approach Relational approach Developmental approach

A transactional approach, where programs are undertaken to meet the needs and
interests of those employees who want to take part in the socially responsible
efforts of a company;

A relational approach, where an organization and its employees together make a

commitment to social responsibility; and

A developmental approach, where a company aims to more fully activate and

develop its employees and the firm to produce greater value for business and
society.

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INITIATIVES ON CSR BY VARIOUS
COMPANIES IN INDIA

Even much before the issue became a global concern, India was aware of
corporate social responsibility (CSR), due to the efforts of organization’s such as
the Tata Group. (Around 66 per cent of Tata Sons, the holding group of the Tata
Group is today owned by a trust).

Corporate companies like ITC have made farmer development a vital part of its
business strategy, and made major efforts to improve the livelihood standards of
rural communities. Unilever is using micro enterprises to strategically augment the
penetration of consumer products in rural markets. IT companies like TCS and
Wipro have developed software to help teachers and children in schools across
India to further the cause of

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education. The adult literacy software has been a significant factor in reducing
illiteracy in remote communities. Banks and insurance companies are targeting
migrant laborers and street vendors to help them through micro-credits and
related schemes.

In June 2008, a survey was carried out by TNS India (a research organization) and
the Times Foundation with the aim of providing an understanding of the role of
corporations in CSR. The findings revealed that over 90 per cent of all major Indian
organizations surveyed were involved in CSR initiatives. In fact, the private sector
was more involved in CSR activities than the public and government sectors. The
leading areas that corporations were involved in were livelihood promotion,
education, health, environment, and women's empowerment. Most of CSR
ventures were done as internal projects while a small proportion were as direct
financial support to voluntary organizations or communities.

In a survey carried out by the Asian Governance Association, which ranks the top
10 Asian countries on corporate governance parameters, India has consistently
ranked among the top three along with Singapore and Hong Kong, for the last
eight years.

In another study undertaken by automotive research company, TNS Automotive,

India has been ranked second in global corporate social responsibility. State-
owned Bharat Petroleum and Maruti Udyog were ranked as the best companies in
India. Bharat Petroleum and Maruti Udyog came on top with 134 points each,
followed by Tata Motors (133) and Hero Honda (131). The study was based on a
public goodwill index and India received 119 points in the index against a global
average of 100. Thailand was at the top slot with 124 points.

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Several foundations run by corporate houses plan to devise a common strategy to
ensure transparency in their social and community development operations, such
as tracking spending in and progress of such projects in their annual reports.

The effort is significant because it brings together a wide range of Indian

companies to share ideas on innovating sustainable programmes. Among them
are Multi Commodity Exchange of India Ltd, Anil Dhirubhai Ambani Group and
media company Bennett, Coleman and Co. Ltd,

Audit firm KPMG will partner with them to offer guidance on evaluating corporate
social responsibility or CSR programmes— a trend companies are slowly
embracing as India's expanding economy contrasts sharply with growing local
protests over land for future industrial projects.

The network alliance stems from the first sustainability summit that was organized
in January by the Associated Chambers of Commerce and Industry of India.

CSR could prove to be a valuable asset in an age of mergers and acquisitions,

especially as it helps companies spread their brand name; The new network will
also serve as a common ground to lobby with the government for tax exemptions
and safeguard other interests in the future.

Indian companies have made little progress in reporting development projects.

And only 48 companies have so far given their commitment to support the United
Nations Global Compact, a charter for improving the global business environment
through standards, such as labour rights and fighting corruption.

Addressing business leaders in May last year, Prime Minister Manmohan Singh said
"Corporate social responsibility must not be defined by tax

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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."

Some say companies have an inherent "mental block" in reporting development

programmes. A recent KPMG study among 27 Indian companies showed that a
mere 8% mentioned their social expenditures in their annual reports, and only
25% filed CSR reports at all. But a quarter of them are also signatories of the
Global Reporting Initiative, a 10-year-old movement started by an NGO called
Coalition for Environmentally Responsible Economies (CERES) and the United
Nations Environment Programme. This encourages companies to make voluntary
disclosures and lays down framework on improving reporting principles.

"Most companies tend to give to charities than make long-term development

commitments. When a company voluntarily opens up for self- evaluation, it
creates value for shareholders when competing with other companies," said Parul
Soni, associate director of KPMG's Aid and Development Services.

An estimated 100 corporate foundations and 25 foreign firms are involved in CSR
activities in India, but statistics on input and output are elusive.

According to Times' Pandey, the Indian corporate sector spent Rs 30,000 crore on
social expenditure during the last financial year, up from Rs17,500 crore the
previous year. Quoting from a government report, he said, companies drew a total
exemptions of Rs 5,500 crore under income-tax laws last year. These figures, an
analyst said, sound improbable as Indian companies still do not distinguish
between philanthropy and internal practices to benefit stakeholders such as
employees and community.

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Companies, too, continue to rely on different models to earmark its social
expenditure, making it difficult to measure the overall impact.

For instance, the Steel Authority of India Ltd (SAIL), the country's largest steel
company, spent Rs100 crore on CSR last year; this was 2% of its profit after tax,
exclusive of dividend tax, according to SAIL spokesperson N.K. Singhal. Yet others,
such as Tata Steel Ltd, which runs a 850-bed hospital and rural projects in 800
villages around Jamshedpur, spends an average of Rs150 crore as part of its
annual revenue expenditure.

What eventually makes up for CSR of a company ultimately depends on

leadership; as part of company decision, about 66% of Tata Sons, the holding
group of the Tata group, is today owned by a trust.

Pharmaceuticals company Jubilant Organosys Ltd, already runs an anti-

tuberculosis programme with the government of Uttar Pradesh. Apart from schools
and hospitals that are run by trusts and societies, the government, too, is
exploring to widen the scope of public-private partnerships to build and maintain
schools and hospitals in return for a fixed annuity payment.

The case studies below demonstrate how diverse company activities can be for
businesses of all sizes.

SAP

Here for Life is a not-for-profit public benevolent organisation focusing on

education, awareness and research aimed at the prevention of youth suicide. The
organization provides resources, education and school based life skills programs to
help prevent suicide amongst young people. Through its charity sponsorship
program SAP Australia supports Here for Life with

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monetary contributions, volunteering and staff involvement in the agency's
programs.

Sun Microsystems

In 1998, Sun became Musica Viva's first and only principal sponsor. By associating
itself with a leader in the IT industry, Musica Viva gains networking opportunities
within the corporate sector, resulting in further sponsorship openings. It gains
access to Sun's staff and customer base to increase awareness of Musica Viva's
activities and performances, enabling it to achieve its own aims of taking the
beauty of music into the lives of ordinary Australians and forging meaningful links
between the arts and the corporate world. The exchange of expertise helps both
partners. Sun provides its technological know-how and assists with market reach
for Musica Viva, which in turn provides opportunities to give something back to
Australia's cultural life through supporting and engaging with music in various
ways.

IBM

IBM - Japan’s ‘e-elder’ initiative is a national program using training materials and
other support from IBM Japan which will hire and train seniors as instructors for
other seniors in an effort to help elder citizens (expected to make up one-fifth of
Japan’s population by 2008) more fully participate in a Web-based society.

HP

In Singapore, HP staff raised nearly $295,000 for charity in 2003 and received a
SHARE Gold Award from the Community Chest of Singapore for

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employee participation exceeding 50%. One event was Gladiathon, a fundraiser in
support of the President's Challenge 2003. Leading by example was the Managing
Director from HP Asia Pacific, who wore a gladiator costume and competed with
other IT industry leaders in the battle for charity. HP was the largest corporate
donor of this event, raising a total of
$121,000.

Microsoft

Microsoft works closely with international organizations such as the World Food
Programme, Save the Children, and Mercy Corps to provide technology-based
development assistance through the HEART (Humanitarian Empowerment and
Response through Technology) program. More and more, global organizations rely
on technology to improve the effectiveness of their humanitarian efforts around
the world.

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PYRAMID OF CSR

PYRAMID OF CSR
Generally the meaning of CSR can be derived from its three parts corporate,
social, and responsibility. CSR involves the relationship between the corporation
and the society with which they interact within. It also includes the responsibilities
that are inherent on both sides of the relationship. (Strategic corporate social
responsibility, 2004).

In South China Morning Post (2002) CSR is described as the action taken by a
company that goes beyond the classical traditional economic view by Friedman
(1970), that companies exist solely to make profit, and look to the society as well.
Companies create relationships through ethical values, transparency, employee
relations, compliance with legal requirements and overall respect for the
communities they operate within.

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The Word Business Council for Sustainable Development define CSR as “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”

As seen above there is not one accepted definition of CSR. Votaw described this
phenomena already in 1972 “corporate social responsibility means something, but
not always the same thing to everybody”. (Votaw, 1972, P.25) This fact has been
noted by several researchers. Carroll, one of the most important scholars within
this field characterized the situation as:” an electric field with loose boundaries,
multiple memberships, and differing training/perspectives; broadly rather than
focused, multidisciplinary.” According to Carroll CSR consist of the economic,
legal, ethical and discretionary expectations that a society holds on a company at
a given point of time. (Archie B Carroll, 1979). These will be explained further in
the following model. Carroll (1991) suggested that CSR consist of four kinds of
social responsibilities: economic, legal, ethical and philanthropic.

Carroll depicted these four categories of CSR as a pyramid figure:

The pyramid of corporate social responsibility portraying the four categories of
CSR begins with the basic notion; an economic responsibility which means that
business exists to make profits. Meanwhile, business organization should obey the
law and regulations. The upper level is that business organizations do business
ethically and have the responsibilities to do what is right, just and fair and to avoid
or minimize harm to different stakeholders. Finally, business organizations are
expected to be good corporate citizens which are the highest level, the so called
philanthropic responsibilities. For CSR to be accepted as a responsible
organization, it should be framed in such a way that the entire range of
business

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responsibilities is included. All the responsibilities are interrelated and exist upon
each other but recently the ethical and philanthropic functions have been given a
greater consideration. However, each of these four responsibilities is worth taking
a closer look at. (Carroll, 1991)

Economic Responsibilities
The primary goal for business organization is to produce goods and services which
consumers needs and wants and to make an acceptable profit in the process. For
start-up firms or organization in its early progress period, the profit motivation is
the main incentive for entrepreneurship. Before the organizations grow bigger and
stronger, the principle role for them is to make as great profit as possible. This is
what characterize the first step in the pyramid and thus needs to be fulfilled before
the company can proceed to the next level. (Carroll, 1991)

Legal Responsibilities
Business organizations can not only operate according to the motive of profit in
the short run, they need to act according to the laws and regulations promulgated
by different levels of
Governments as well as to survive. As a mutual social contract between business
organizations and societies, firms are expected to pursue their economic benefits
within the framework of the law and regulation. Carroll in his paper stated that
“legal responsibilities reflect a view of codified ethics in the sense that they
embody basic notions of fair operations as established by our lawmakers.”(Carroll,
1991, p41) Hence, the legal responsibilities for firms are the fundamental to the
ethical responsibilities and philanthropic responsibilities. (Carroll, 1991)

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Ethical Responsibilities
Although economic and legal responsibilities incorporate some parts of ethical
norms, ethical responsibilities include the activities and practices that are not
codified into law. Carroll (1991) stated that ethical responsibilities should embody
those standards, norms, or expectations that reflect a concern for all kinds of
stakeholders, such as consumers, employees, shareholders, communities etc.
Ethical responsibilities may be seen as embodying newly emerging values and
norms, that come from stakeholders who are nearest in the business environment,
expects enterprises to meet, even though such values and norms may reflect a
higher standard of performance that are currently required by law or regulation.
Carroll in 1991 stated that “the business ethics movement of the past decade has
firmly established an ethical responsibility as a legitimate CSR component”.

Philanthropic Responsibilities
Philanthropic responsibilities consist of the corporate activities or practices that
are in response to the stakeholders’ expectations on the company to be good
corporate citizens. A few examples of the activities and practices are business
contributions to the community or surrounding educational institutions and the
respects to the human welfares around the organizations. The most different
characteristic between ethical responsibilities and philanthropic responsibilities is
that the latter is not expected in a moral sense. The people residing surrounding
the organizations will not regard the organizations to be unmoral if the
organizations do not make donation to the local schools or colleges. Therefore,
philanthropic responsibilities for the organizations are more voluntary behaviors
even though the society has the expectation that the firm shall perform the
activities. (Carroll, 1991)

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CONCLUSION OF THE PROJECT

CONCLUSION

The inclusion of the CSR mandate under the Companies Act, 2013 is an attempt to
complement the Indian government's efforts of delivering the benefits of economic
development to all sections of society by engaging the corporate world.

The concept of corporate social responsibility has gained prominence from all
avenues. Organizations must realize that government alone will not be able to get
success in its endeavor to uplift the downtrodden of society. The present societal
marketing concept of companies is constantly evolving and has given rise to a new
concept-Corporate Social Responsibility. Many of the leading corporations across
the world had

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realized the importance of being associated with socially relevant causes as a
means of promoting their brands. It stems from the desire to do good and get self-
satisfaction in return as well as societal obligation of business.

By expanding the scope of CSR to include foreign companies, its impact on such
companies may be manifold. In light of the ambiguity surrounding financial
computation of foreign companies, it needs to be seen how practical it would be
for branch or project offices to participate in CSR activities. In order to retain the
advantage of having a CSR provision in the Companies Act, MCA must also
facilitate greater convergence with tax and foreign contribution laws in India.

The Indian corporate sector spent US$ 6.31 billion on social expenditure during
2007-08, up from US$ 3.68 billion spent during the previous fiscal. The Steel
Authority of India Ltd (SAIL), the country's largest steel company, spent US$ 21.05
million on CSR last year; Tata Steel Ltd, (which runs a 850-bed hospital and rural
projects in 800 villages around Jamshedpur), spends about US$ 31.58 million as part
of its annual revenue expenditure. Now there are plans to also introduce CSR in the
small and medium enterprises (SME) sector to increase its reach in remote areas.

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Registration No. 250041609/02/2013