The concept of Corporate Social Responsibility has gained recognition and significance with the evolution of the global economy into a borderless and increasingly integrated world. Commercial world gradually has begun to perceive CSR as a value-added strategy enhancing corporate reputation and, more importantly financial performance. The concept of CSR means that organization has moral, ethical and philanthropic responsibilities in addition to their responsibilities to earn a fair return for investors and comply with the law.
While there may be no single universally accepted definition of CSR, each definition that currently exists underpins the impact that businesses have on society at large and the societal expectations of them. Although the roots of CSR lie in philanthropic activities (such as donations, charity, relief work, etc.) of corporations, globally, the concept of CSR has evolved and now encompasses all related concepts such as triple bottom line, corporate citizenship, philanthropy, strategic philanthropy, shared value, corporate sustainability and business responsibility. This is evident in some of the definitions presented below:
The EC defines CSR as “the responsibility of enterprises for their impacts on society”. To 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”.
The WBCSD defines CSR as “the continuing commitment by business to contribute to economic development while improving the quality of life of the workforce and their families as well as of the community and society at large.”
Corporate Social Responsibility is nothing but how the business takes responsibility for social, economic and environmental impacts it produces from its operation or products. It also includes the labor standard, employee relations and human rights.
The Canadian Centre for Philanthropy: CSR is “a set of management practices that ensure the company minimizes the negative impacts of its operations on society while maximizing its positive impacts”.
Peter F. Drucker refers to CSR as “a way companies manage the business processes to produce an overall positive impact on society.”
According to the UNIDO , “Corporate social responsibility is a management concept whereby companies integrate social and environmental concerns in their business operations and interactions with their stakeholders. CSR is generally understood as being the way through which a company achieves a balance of economic, environmental and social imperatives (Triple-Bottom-Line Approach), while at the same time addressing the expectations of shareholders and stakeholders. In this sense it is important to draw a distinction between CSR, which can be a strategic business management concept, and charity, sponsorships or philanthropy. Even though the latter can also make a valuable contribution to poverty reduction, will directly enhance the reputation of a company and strengthen its brand, the concept of CSR clearly goes beyond that.”
From the above definitions, it is clear that:
Corporate social responsibility is predominantly considered as a western phenomenon due to strong institutions, standards, and appeal systems which are weak in developing countries of Asia (Chappie and Moon, 2005).
Despite the growing awareness and popularity of the term CSR, there is no general consensus as to what it actually means. In fact, CSR is often used interchangeably with various other terms, such as corporate philanthropy, corporate citizenship, business sustainability, business ethics, and corporate governance. Although these other terms do not all mean the same thing, there is one underlying thread that connects them all – the understanding that companies have a responsibility not just toward shareholders, but also toward other stakeholders, such as “customers, employees, executives, non-executive board members, investors, lenders, vendors, suppliers, governments, NGOs, local com- munities, environmentalists, charities, indigenous people, foundations, religious groups and cultural organizations.” All of these stakeholders are equally important to a corporation, and it should therefore strive with sincerity to fulfill the varied expectations of each.
[A corporation] has a role to play in treating its employees well, preserving the environment, developing sound corporate governance, supporting philanthropy, fostering human rights, respecting cultural differences and helping to promote fair trade, among others. All are meant to have a positive impact on the communities, cultures, societies and environments in which companies operate.
It is a known fact that a corporation is owned by shareholders who provide risk capital in expectation of a financial return. Hence, the primary goal of corporate management is to run the business profitably to maximize shareholder value in the form of dividend and appreciated stock prices. But this is an extremely narrow interpretation of profitability, and one which focuses on one stakeholder while ignoring the contribution of others in the success of the enterprise. Shareholders are important stakeholders as they are the ones who have invested their money in the financial equity. But a modern company has several types of equity in addition to financial equity. Investments in these other equities are made by a variety of stakeholders.
CSR is also considered as the commitment of business to con tribute to sustainable economic development by working with employees, their families, the local community and society at large to improve their lives in ways which are beneficial for both business and development (World Business Council, 2002).
Towards developing a rationale for Corporate Social Responsibility
CSR goes by many names, which include: corporate citizenship, corporate philanthropy, corporate giving, corporate community involvement, community relations, community affairs, community development, corporate responsibility, global citizenship, and corporate societal marketing. It makes no difference what this social commitment of companies is called. It is a NEW way of doing business to cater to the needs of the market and its stakeholders. Social responsibility is the responsibility of an organization for the impacts of its decisions and activities on society and the environment, through transparent and ethical behavior that is consistent with sustainable development and the welfare of the society; takes into account the expectations of stakeholders ; is in compliance with applicable law and consistent with international norms of behavior and is integrated throughout the organization.This is a working definition by ISO 26000 working group on social responsibility (Sydney, February 2007)
CSR is the way in which an organization strikes a balance between economic, social and environmental imperatives on the one hand and the expectations and welfare of the shareholders on the other. This implies that social responsibility or rather its execution involves a well planned strategy. Assessment of the social environment, formulation of objectives, devising operational plans and programmes, monitoring social progress, assessment of social and economic impact and summary of outcomes and performances are of utmost importance.In other words CSR implies that the profits of corporate houses should be diverted to socially responsible activities for the benefit of the society. Companies can exert an emphatic influence over the quality and credibility of its products in the market through its CSR activities, which has a great impact on society and also provides better synergy returns to their business. In fact CSR is the impact of organizational activity on society. CSR is becoming an increasingly important activity to businesses nationally and internationally. As globalization accelerates and large corporations serve as global providers, these corporations have progressively recognized the benefits of providing CSR programs in their various locations. CSR activities are now being undertaken throughout the globe.
The rationale for CSR has been articulated in a number of ways. In essence it is about building sustainable businesses, which need healthy economies, markets and communities, which again necessitate all business houses whether private or public to carry out CSR activities. The government has declared it compulsory for industries to be socially responsible. They cannot ignore the society while carrying out production and amassing profit. A vibrant association or a high degree of correlation can be revealed between CSR and good public governance. Earlier this was neither specified nor executed, as the industrial policy resolutions failed to point out the real role of industries in society. Infact the real costs that the society incur, are primarily due to the presence and operation of the industrial houses. Public sector units may have to shell out 2-5% of profit in CSR. CSR for a PSU may no more be a photo opportunity for its chairman but would involve people-centric projects to be funded by 2-5% of the company’s net profit.
Today’s consumers hold companies to a higher standard. They’re looking for more than just material products or quality services when choosing a company to work with: Nine in 10 consumers expect companies to not only make a profit, but also operate responsibly to address social and environmental issues, according to a study by Cone Communications. Eighty-four percent of global consumers also said they seek out responsible products whenever possible.
Recognizing how important social responsibility is to their customers, many companies now focus on and practice a few broad categories of corporate social responsibility (CSR).
While many companies now practice some form of social responsibility, some are making it a core of their operations. Ben and Jerry’s, for instance, uses only fair trade ingredients and had developed a sustainability program for dairy farms in its home state of Vermont. Starbucks has created its C.A.F.E. Practice guidelines, which are designed to ensure the company sources sustainably grown and process coffee by evaluating the economic, social and environmental aspects of coffee production.
CORPORATE SOCIAL RESPONSIBILITY (CSR) IN INDIA
The beginning of Twenty first century in India has seen the term CSR coming to the forefront of development discourse. Interestingly, the Indian state is taking lead in defining the meaning, extent and scope of CSR and creating a context within which the on-going CSR discourse is emerging. In the process, it is also providing legitimacy to the role of CSR in development.
Corporate social responsibility (CSR), also known as sustainable responsible business (SRB), or corporate social performance, is a form of corporate self-regulation integrated into a business model. Ideally, CSR policy would function as a built-in, self-regulating mechanism whereby business would monitor and ensure their adherence to law, ethical standards, and international norms.
Corporate Social Responsibility (CSR) Provisions As per Companies Act, 2013, CSR has become mandatory in India. The Ministry of Corporate Affairs (MCA) in exercise of its powers conferred by Section 1(3) of the Companies Act, 2013 (the Act) and vide notification dated 27th February 2014, notified 1 st April 2014 as the date on which the provisions of Section 135 and Schedule VII of the Act shall come into force.
Section 135 read with Companies (CSR Policy) Rules, 2014
Section 135 is applicable to every Company (including its holding or subsidiary, and a foreign Company having branches/project office in India) which meets any of the following criteria during any financial year-
Every Company which does not meet the above mentioned criteria for 3 consecutive financial years is not required to –
Definition of Net Profit
For an Indian Company Net profit as per the Financial Statements prepared under the Act or Companies Act, 1956 and it shall not include the following-
For Foreign Company
Net profit as per the Profit and Loss Account prepared in terms of Section 381(1) (a) read with Section 198 of the Act.
Every applicable Company should spend in every financial year at least 2% of the ‘average net profits’ of the Company, made during 3 immediately preceding financial years.
‘Average net profit’ shall be calculated in accordance with the provisions of Section 198 (sec 198 relates to calculation of net profits for the purpose of determining the limits for managerial remuneration)
If the Company fails to spend such amounts towards CSR activities, the Board is required to provide reasons for not spending the amount in its report laid before the Company in the Annual General Meeting.
CSR Committee of Board
CSR Committee of Board should consist of 3 or more Directors, out of which at least 1 director shall be Independent Director subject to the following criteria-
The Directors Responsibility Statement shall disclose the composition of the CSR Committee.
Role of CSR Committee CSR Committee shall-
Schedule VII of the Act
MCA in exercise of its power conferred by Section 467(1) of the Act and vide notification dated 27 February, 2013 has amended Schedule VII of the Act.
Salient Features of Companies (CSR Policy) Rules, 2014
MCA, in exercise of its power conferred under Section 135 and subsections (1) and (2) of Section 469 of the Act and vide notification dated 27 February, 2013 has notified Companies (CSR Policy) Rules, 2014.(the Rules). These Rules will be effective from 1 st April, 2014.
CSR means and includes but is not limited to –
Corporations do not exist in isolation. Therefore, they should feel some level of responsibility for the community of which they are a part, and should work for the development and progress of that community and society at large. The idea of being a socially responsible company means recognizing obligations and going beyond simple compliance with the law. It is absolutely essential that corporations make sincere efforts to fulfill their obligations because development based solely on economic growth paradigms is unsustainable, and not conducive.
Thus Corporate Social Responsibility (CSR) is about how companies manage the business processes to produce an overall positive impact on society. Thus companies consider the interests of society by taking responsibility for the impact of their activities on customers, suppliers, employees shareholders, communities and other stakeholders, as well as the environment. This is seen to extend beyond the statutory obligation to comply with legislation as organizations are voluntarily taking further steps to improve the quality of life for employees and their families as well as for the local community and society at large. If a company chooses to follow the way of CSR, it will integrate ethical concerns in its activities and in its interaction with all the stakeholders. This implies that the corporate units function in such a way that their CSR activities in all likelihood actually reach out to the beneficiaries –the society in general. The ethical considerations are aimed at preparing the groundwork for expecting the correct reaction or response of their CSR generated activities
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 9. Juno Consulting, Making Sense of Corporate Responsibility 1 (2005), available at http:// wwwJunoconsultingxom.aii/articles/Making_Sense_of_Corporate_Social_Responsibility_Par
 3. See S.K. Chakraborty et al., Management Paradigms Beyond Profit Maximization, 29 Vikalpa: The J. for Decision Makers 97, 106 (2004).
 Id. at 105.
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