INTRODUCTION
Corporate social responsibility has become increasingly popular over the last several decades; nevertheless, many scholars vehemently disagree over its role in economic development and corporate law. Some contend that because CSR is a young and broad field, it is difficult to define exactly what one means by “corporate social responsibility’ and hence, it is hard to implement and monitor various initiatives, for example, focus on the environment while others focus on labor or human rights. Traditional corporate law scholars echo Milton Friedman’s cry that is the only of Friedman: they see CSR as a method of undermining the necessary regulatory development of impoverished countries and would opt for more regulation over more corporate giving. Understanding the context of this global debate is a necessary precursor to evaluating the recent initiative in India.
International corporate social responsibility aims to address the problem caused by multinational corporate enterprises (MCEs) operating in less-developed countries with insufficient regulation. The services traditionally performed by state regulation, such as ensuring that companies internalize harmful environmental externalities or follow basic moral tenets in their labor practices, may instead need to be performed through international law or codes voluntarily adopted by companies themselves!’ Since international law still struggles with issues of enforcement and legitimacy, many companies have simply crafted their own codes or signed on to voluntary agreements to indicate to consumers that they intend to be “socially responsible” wherever they operate!’ While the codes are essentially unenforceable, the idea is that they will be ethically binding on the companies and monitored closely by consumers and NGOs.
THEORETICAL FOUNDATIONS AND DEBATES ON CORPORATE SOCIAL RESPONSIBILITY
Thomas Donaldson characterizes CSR as a global social contract. Obliging companies to behave in a morally and socially acceptable manner in exchange for access to the international market. As with any social contract, he posits that we must ask two questions: why does the contract exist, and how can one tell when it has achieved its purpose? For some, the answer revolves around the environment and ensuring that companies avoid imposing negative externalities on ecosystems in developing countries.’ For others, the answer involves paying workers a living wage, keeping reasonable hours and labor conditions, and respecting the human rights of local stakeholders. For still others the answer is as broad as being a respectful citizen and re-investing some profits in the local economy or education system. Most scholars envision CSR incorporating all these answers and more. CSR, in its broadest sense. Simply asks companies to consider both the social and financial impacts of their decisions. This idea can be encompassed by the term “triple bottom line,” which has become something of a cliché, but at its core exhorts companies to consider social, environmental, and financial outcomes collectively. These debates have gained increasing importance over the last two decades with the expansion of globalization privatization, and deregulation Still, prominent scholars disagree over both the form that CSR ought to take and whether or not CSR is even a worthy goal of corporate and international law.1
Given that companies have minimal profit incentives to engage in CSR, some scholars speculate that corporate social responsibility is merely a tool to ward off regulation and is a mask for corporate self-interest, Milton Moskowitz once observed. Looking over the history of corporate social responsibility. I can see it as consisting of [ninety-five] percent rhetoric and five percent action. Companies are adept at drawing up high-sounding mission statements. Changing the way they do business? That’s something else. Many companies have been accused by NGOs of green washing their advertising and reports to make their practices look more eco-friendly. The UN, for example, has already removed almost two thousand companies from its Global Compact for non-compliance with its terms. By espousing good intentions via CSR, though, corporations buy themselves more time as they attempt to stave off further regulation. Vogel bluntly admits that increased corporate regulation would be preferable to CSR, but corporations are too powerful and will not allow the requisite political changes.
Accordingly, Scholars like Kent Greenfield argue that since major corporations are technically “public” in that most are publicly listed with stocks that can be purchased by anyone, corporate law should take on a more regulatory bent and serve broader social purposes. Like environmental law and labor law, corporate law should be viewed as “public” law, or law that concerns society more generally” In the long run, Greenfield doubts the wisdom of a system like CSR that proposes market solutions for market imperfections “corporate law” he claims, should be “predicated upon our collective political decisions about what we want our society to look like” and not simply on what economic abyss after all, countries with more regulation than the United States, like Canada, Germany, Holland, and Sweden, are both economically secure and more likely than America to offer their populace a chance at upward mobility and the “American dream.2
This leftist critique of CSR claims that further regulating corporations would not violate any a priori economic “right. To argue that corporations have a right to be free of regulation seems Lochnerian and retrograde.’ Since the government offers corporations many necessary “goods,” such as state-sponsored legal recognition as well as the ability to own or lease resources and hire employees, businesses ought to be obliged to furnish something in return, beyond profits for shareholders.’ CSR, these scholars argue, does not go far enough in supporting the development of regulatory systems abroad; rather, it may undermine developing countries’ fledgling efforts at regulation.
GLOBAL AND INDIAN PERSPECTIVES ON CORPORATE SOCIAL RESPONSIBILITY AND SUSTAINABLE DEVELOPMENT
India’s current system of corporate governance is something of a hybrid. Like many post-colonial countries when India first gained its independence in 1947, it opted for a socialist governance structure with many industries and enterprises controlled by the state. India experienced a massive financial crisis around 1991. The IMF agreed to provide loans to India only if they would liberalize the economy and privatise sectors.After this step,India’s economy has been growing at a rapid pace to facilitate foreign direct investment. India has lifted most of its recently enacted corporate law from liberal American and British models. The economy is now functionally capitalist, although the constitution remains socialist. It is largely this divide between a developing once socialist country with an impoverished populace and its booming capital white aspirations that the 2013 Companies Act will attempts to navigate.
Emphasis on social environmental and economic sustainability has become a focus of many CSR efforts. Sustainability was originally viewed in terms of preserving the earth’s resources. In 1987, the World Commission on Environment and Development published a landmark action plan for environmental sustainability. The commission, named after former Norwegian Prime Minister GroHarlen Brundlandt, defined sustainability as “meeting the needs of the present without compromising the ability of future generations to meet their needs.” Companies are now challenged by stakeholders including customers, employees, investors and activists to develop a blueprint for how they will sustain economic prosperity while taking care of their employees and the environment.3
At the same time mainstream investors are being challenged to ensure that they review CSR issues when analyzing companies. The United Nations Environment Program Financial Initiative asked one of the world’s largest law firms to research whether institutional investors such as pension funds and insurance companies are legally permitted to integrate environmental, social and governance issues into their investment decision-making and ownership practices. The resulting report, released in October 2005, concluded that investors were not only permitted to but also sometimes required to take such factors into account.
“Integrating environment, social and governance considerations into an investment analysis so as to more reliably predict financial performance is clearly permissible and is arguably required in al jurisdictions,” the report concluded.
The origin of the term Sustainable Development (SD) lies in the 18th century and was actually used in forestry. In those times, it was only allowed to cut down a certain number of trees so that a long-lasting protection of the tree population was guaranteed. The Club of Rome precipitated an international discussion due to its report “Limits to Growth” (Meadows, 1972). In the course of this discussion, an eco-development approach was created which effected the protection of resources and environment coming to the fore. This development has led to the mission statement of SD we have today. In 1987, the World Commission on Environment and Development defined SD as an ethical concept and has become the major definition of SD: “Sustainable Development is a development that fulfills present needs without compromising the need of future”. It contains within it two key concepts: the concepts of “needs”, in particular the essential needs of the world’s poor, to which overriding priority should be given. Thus, the goals of economic and social development must be defined in terms of sustainability in all countries developed or developing, market-oriented or centrally planned.”, cited in ‘Our Common Future(World Commission on Environment and Development. 1987). Elkington goes more into detail when arguing that companies should not only focus on enhancing its value through maximizing profit and outcome but concentrate on environmental and social issues equally. Sustainable Development is known for the model triple- bottom- line.4
Whereas the term SD has mainly started to be used in the 1950’s.The framework of CSR has already been established in the 1950’s and 60’s. Bowen defined CSR in 1953 as one of the first-as “an obligation to pursue policies to make decisions and to follow lines of action which are compatible with the objectives and values of society. In the beginning, however, the term Social Responsibility was rather used than CSR. Social Responsibility assumes that economic and legal duties of the companies should be extended by certain responsibilities to society. Carroll argues that Social Responsibility exists of four components such as economic, legal, ethical and discretionary expectations that society has of a company and that companies have to decide which layer they focus on.
On the other hand, Friedman as most known defender of the neoclassical view of economics defines Social Responsibility completely differently: “There is one and only one social responsibility of business – to use its resources and engage in activities to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition, without deception or fraud”. Until today this neoclassical view has been the primary paradigm of business. Concepts of SD and CSR criticize this point of view. Of course, the economic perspective is important, but a company also has a burden of environmental and social responsibilities to handle. As wood puts it “the basic idea of corporate social responsibility is that business and society are interwoven rather than distinct entities: therefore, society has certain expectations for appropriate business behavior and outcomes. Organizations such as the World Business Council for Sustainable Development (WBCSD) actively take part in the sustainability and CSR discussion. WBCSD regards CSR as engine for the social dimension (social progress) which supports companies to fulfill their responsibilities as good citizens and defines CSR as “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” (WBCSD, 2006). On the other hand, the Commission of European Communities describes CSR as a “concept whereby companies integrate social and environmental concerns into their business operations and interactions with their stakeholders on a voluntary basis-‘ (Commission of the European Communities 2001):
CSR is an integral part of sustainable development. Exactly where it fits in is vigorously dedicated, mainly because the concept of sustainable development also has many different interpretations. This diagram, illuminates CSR’s Relationship with sustainable development should be the main focus on an institutional level, within NGO’s or other organizations (WBCSD vs. EU).5
According to the World Business Council for Sustainable Development (WBCSD) report for Corporate Social Responsibility; Issues which have emerged strongly from the work group are as follows: Human Rights are the universal rights that every person is entitled to enjoy and to have protected. The underlying idea of such rights fundamental principles that should be respected in the treatment of all men women and children exists in some form in all cultures and societies. Such rights are enshrined in the Universal Declaration of Human Rights, adopted by the United Nations in 1948, The declaration covers two broad sets of rights: Civil and Political Rights; and Social and Cultural Rights. WBCSD dialogue Identified these sub-issues, Female/women’s rights: inter-generational equity indigenous people survival rights: freedom from oppressive regimes: gay rights: disabled persons rights: freedom of speech. Suggested to business that.
There is no argument that shareholders who own the company have the first call on the performance of management. But some argue that companies also have to satisfy a broader group of interested parties, commonly called stakeholders. These include not only shareholders, but also employees, customers, consumers, suppliers, communities and legislators. Such stakeholders are seen to have both influence and rights, which although different in kind and degree from those of shareholders, still demand respect.
Employee rights are embodied in the International Labour Organization’s Declaration on the Fundamental Principles and Rights at Work. These include: freedom of association and the right to collective bargaining: elimination of all forms of forced and compulsory labor; abolition of all child labor: and the elimination of discrimination in respect of employment and occupation.6Protecting the environment from the impact of operations is a core responsibility.They should commit to continuous improvements in eco-efficiency (doing more with less) and managing the full lifecycle of their product or service.
CSR is ‘the economic, legal, ethical and discretionary expectations that society has of organizations”. The well accepted definition of CSR is not a common term; MNC’s prefers sustainable development or sustainable business while several Indian companies talk about responsible business or Triple P (People, Planet, and Profit).
According to the Indian Corporate: “Sustainable development implies optimizing financial position while not depleting social and environmental aspects and CSR implies supporting issues related to children, women and environment”. These corporate refer in its definition of CSR to community development. In the context of Western community, development is often seen as charity. The background of this is that stakeholders see the large western companies as capitalist islands in a developing country. This position gives them a certain responsibility towards the community. Most of the MNC’s leave room to their Indian daughter company to develop initiatives in this field; sometimes they have a special fund. All kinds of initiatives are developed by the interviewed Indian companies, many times bottom up initiated by the employees. Nearly all leading corporate in India are involved in corporate social responsibility (CSR) programs in areas like education, health, livelihood creation, skill development, and empowerment of weaker sections of the society. Notable efforts have come from the Tata Group, Infosys, Bharti Enterprises, ITC Welcome group, Indian Oil Corporation among others.7
LEGAL AND INSTITUTIONAL FRAMEWORK GOVERNING CORPORATE SOCIAL RESPONSIBILITY IN INDIA
The sustainable development is the barometer to measure inclusive and integrated growth of an economy. The economy of the country is said to be good if there is balanced and equitable growth of all sectors of the economy like infrastructure, agriculture, rural development, industry, information technology, education, health, irrigation, real estates. The term Sustainable Development was the main scenario in the United Nations Conference on Environment Development, The Earth Summit, at Rio-deJaneiro in 1992. The World Business Council for Sustainable Development (WBCSD), having a membership of 200 leading multinationals, has been active and dedicated to sustainability issues. The council’s main focus is on energy and climate. The council has three main recommendations for business working on sustainable development i.e. Worker awareness-raising and common understanding, measuring the impact of sustainable development initiatives in a transparent way for further improvement and made its necessary to work with others.8
These three features will help the multinational to contribute for sustainable development of a country.”
The term “Sustainable Development” was born and developed in the world conservation strategy produced jointly in 1980 by the International Union for the Conservation of Nature and Natural Resource (IUCN) World Wildlife Fund (WWF) and United Nations Environment Programme (UNEP) and planned ‘to help advance the achievement of sustainable development through the conservation of living resources’. It declared that ‘conservation like development is for people’. Conservation includes conservation of all living and non-living things, which are for human use. Thus, sustainable development means the management of biosphere (the earth’s crust and atmosphere where living matter is found) for human needs and that is conservation’s primary concern.
The field of sustainable development can be conceptually broken into three constituent parts: environmental sustainability, economic sustainability and socio- political sustainability. Sustainable Development is said to encompass: (a) help for poor, because they are left with no option but to destroy their environment; (b) the ideas of self-reliant development, within natural resource constraints; (c) the idea of cost-effective development using non-traditional economic criteria; (d) the issues of health care, appropriate technology, food, self-reliance, clean water and shelter for all; and (e) the notion that people-centered initiatives are needed.9
The Apex Court has always been flag-runner of CSR initiatives right from Bhopal Gas Tragedy10, Dehradoon Quarrying Case11, CNG case12, Oleum Gas Leak Gas13, Ganga Pollution Case14 etc. In National Textile Workers Union v. P.R. Ramakrishnan the Apex Court held that the traditional view that a company is the property of the shareholders is an exploded myth. According to the new socio-economic thinking a company is a social institution having duties and responsibilities towards the community in which it functions.
In Birla Zauri Agro Chemical Ltd. Goa Case. In this case, the Goa High Court ordered the closure of the company’s operations because the effluents of the company were polluting the sea. Obviously, the Hon’ble Supreme Court of India is referring to Corporate Social Responsibility when it talks to duties and responsibilities towards the community. The supreme legal document, the Constitution of India under Art.297 vests natural resources in the Union of India and Art. 39(b) requires distribution of resources to sub serve the common good, commercial practice in the oil and gas industry.
The S.C. in M.C. Mehta vs. Union of India15 A case dealing with leakage of oleum gas from one of the plants of an Indian company, developed the absolute liability principle. The court reasoned that the 19th century Rylands vs. Fletcher principle of strict liability was not suitable to meet the needs of a modern industrial society.
The newly enacted Companies Act, 2013 incorporates provisions relating to Corporate Social Responsibility activities. CSR, which had previously been voluntary contribution, by corporates, has now been made mandatory under this new law. Ensuring environmental sustainability, ecological balance and conservation of natural resources by the corporates forms an important care of the policy contemplated under section 135 of the Companies Act, 2013. Lastly, the Judicial Activism through Public Interest Litigations also need greater credit in enforcing. Corporate under take environmentally healthy operations and activities.
According to Schedule-VII of Companies Act, 2013 the following activities can be included by companies in their CSR Policies: –
1. Eradicating extreme hunger and poverty.
2. Promotion of education;
3. Promoting gender equality and empowering women;
4. Reducing child mortality and improving maternal health;
5. Ensuring environmental sustainability;
6. Employment enhancing vocational skills;
7. Social business projects;
8. contribution to the Prime Minister’s National Relief Fund or any other fund set by the Central Government or the State Governments for socio-economic development and relief and funds for the welfare of the Scheduled Caste, the Scheduled Tribes, other backward classes, minorities and women;
The Companies Act 2013, under section 135 also provides for constitution of a CSR Committee of the Board. The CSR Committee is required to
A. Formulate and recommend to the Board, a CSR Policy which shall indicate the activities to be undertaken by the company as specified in Schedule VII;
B. Monitor the Corporate Social Responsibility Policy of the company from time to time.
The format for disclosure of CSR policy and the activities therein as part of Boards report will be prescribed in the rules.16
CONCEPTUAL DIMENSIONS AND ETHICAL FOUNDATIONS OF CORPORATE SOCIAL RESPONSIBILITY
The concept of social responsibility has become a complex one and has both positive and negative sides. On the positive side, its focus is on solving community problems to live up to public expectations. On the negative side, it aims at avoiding public criticism by restoring social balance through the production of social benefits equivalent to social costs. It is also interpreted as an attitude, as a constraint, as a cost, as a goal, and as a policy. It is also defined as social reform and a social movement. It is considered a relative term as no absolute interpretation of it at any point of time at any place is possible. It is seen as a natural obligation, a moral duty, a legal compulsion, civic responsibility, or statesmanship.
Rama Krishna Bajaj (1971) regards it not as a matter of philanthropy but an indispensable civic responsibility. “Social Responsibility by its inseparable bond with economic responsibility is inescapable. Today the businessman has to accept civic responsibilities…In other words; community service must now become an integral part of business activity. This is not a matter of more philanthropy.”17
Rama Krishna Bajaj (1971) regards it not as a matter of philanthropy but an indispensable civic responsibility. “Social Responsibility by its inseparable bond with economic responsibility is inescapable. Today the businessman has to accept civic responsibilities…In other words; community service must now become an integral part of business activity. This is not a matter of more philanthropy.”18
CONCLUSION
Corporate Social Responsibility (CSR) is becoming central to sustainable development by integrating social, environmental, and economic goals. In India, CSR offers valuable examples for both developing and developed nations by demonstrating how businesses can contribute to societal well-being while maintaining profitability. Effective CSR requires collaboration among key stakeholders—corporates, government, and civil society—supported by technology and a positive approach. Sustainable corporate growth depends on social stability, and many organizations have shown that profit and social good can coexist through innovation and responsible practices. Moving beyond legal compliance, socially conscious companies actively use resources and expertise to address societal challenges. India, inspired by its history of collective action, now has an opportunity to achieve economic freedom by reducing poverty, unemployment, and inequality. Through coordinated efforts and inclusive growth, CSR can help ensure distributive justice and improve overall quality of life, contributing significantly to a more equitable and sustainable society.
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Footnotes
1. Jusg, Gerbar. Partnership Between Society And Business In Developing And Newly IndustrializingCountries-The Business Prospective. (Chris Milner, Edward Elgar Publication).
2. Rural litigation Entitlement Kendra Dehradoon v. State of U.P.,(1985)2 SCC 431
3. Ibid.
4. M.C. Mehta v. U.O.I., (1991) 2 SCC 137
5. D. Votaw, and S.P. Sethi, “Do we need a New Corporate Response to a Changing Social Environment?” California Management Review,12(1)3-16 pp.17-31,1969
6. The Indian Journal of Commerce, Vol.XXVII, No. 101, December1974
7. S.P.Bansal, Kulbhushan Chandel, et.al, Corporate Social Responsibility: Sustainable & Inclusive Growth4 (Bharti Publications, Delhi, 2013).
8. Jusg, Gerbar. Partnership Between Society And Business In Developing And Newly IndustrializingCountries-The Business Prospective. Chris Milner, Edward Elgar Publication.
9. S.P.Bansal, KulbhushanChandel,et.al., CorporateSocial Responsibility:Sustainable & Inclusive Growth 304,305(Bharti Publications,Delhi,2013)
10. Union Carbide Corp. v. Union of India,(1991) 4SCC 586.
11. Rural litigation Entitlement Kendra Dehradoon v. State of U.P.,(1985)2 SCC 431
12. M.C. Mehta v. U.O.I., (1991) 2 SCC 137
13. M.C. Mehta v. U.O.I.,(1986) 2 SCC 176
14. M.C. Mehta v. U.O.I., AIR 1988 SC 471
15. AIR 1987 SC 1086
16. S.P. Bansal, Kulbhushan Chandel, et.al., Corporate Social Responsibility: Sustainable & Inclusive Growth 32,33 (Bharti Publications, Delhi,2013).
17. The Indian Journal of Commerce, Vol. XXVII, No. 101, December1974.
18. The Indian Journal of Commerce, Vol.XXVII, No. 101, December1974