What we do today and the choices we make today affect the future. We live in
a world that is becoming increasingly complex with the passage of time. Global
issues have become part of our everyday life. Social, cultural, economic, and
environmental issues catch our attention like never before. The liberalisation
of the market in the early 1990s and the entry of the MNCs in India also brought
in their wake the culture of responsible business.
Profit is no more the sole
objective of the profit-making organisations. Along with profit, a responsible
and sustainable business also became one of the primary objectives of the
organisations. The piece discusses the corporate social responsibility (CSR),
with specific focus on India. It begins by giving a broad understanding of the
history of the CSR and its applicability, followed by corporate governance,
touching upon United Nations Global Compact (UNGC), ISO, and GRI.
Though CSR came as an obligatory measure in India only in 2013 by the amendment
of the Companies Act, 1956, the concept is not new. The idea of trusteeship
advocated by M. K. Gandhi and followed by many companies, was in existence even
when there was no concept of CSR. TATA is one of such companies that contributed
immensely in the field with its huge philanthropic activities.
As J.R.D. Tata
No success in material terms is worthwhile unless it serves the needs or
interests of the country and its people.
The government deems CSR as a business
contribution for sustainable development. It is a concept in which the company
serves the interest of its stakeholders by taking all the responsibility for its
act during the course of its business.
There is a great diversity of the definitions of the term CSR, highlighting one
or the other of its various dimensions.
According to Michel Hopkins:
Social Responsibility is concerned with treating the stakeholders of a company
or institution ethically or in a responsible manner. Ethically or in a
refers to treating key stakeholders in a manner deemed
acceptable according to international norms.
European Union has defined CSR as:
A concept whereby companies integrate social and environmental concerns in their
business operations and in their interaction with their stakeholders on a
According to Business for Social Responsibility (BSR):
Corporate social responsibility is operating a business in a manner which meets
or excels the ethical, legal, commercial and public expectations that a society
has from the business.
During the initial phase of economic liberalization the government often made
lucrative offers to foreign companies to attract foreign investment without any
proper statutory provisions. Many MNCs entered India without any proper
guidelines for them to follow while functioning in India, which resulted in the
degradation of ecological, financial, and cultural resources. We live in a
global ecosystem where what happens in one country sooner or later affects the
other countries as well.
Traced back in the ancient Roman Laws and witnessed in
entities such as asylums, homes for the poor and old, hospitals and
orphanages, CSR in India came as a stride to make businesses legally
responsible. And further, make them conscious of their larger duty towards
United Nations Global Compact 
The United Nations Global Compact (UNGC) envisions the creation of sustainable
companies and stakeholders with ten principles derived from the following
the Universal Declaration of Human Rights, the International Labour
Organization's Declaration on Fundamental Principles and Rights at Work, the Rio
Declaration on Environment and Development, and the United Nations Convention
against Corruption. These principles are divided into four broad categories and
then subdivided into ten principles.
The principle states every business should
support and respect the protection of internationally declared human
rights and make sure that they are not involved in any such activities that
are in violation of human rights or abuse of law. Businesses should also
uphold the freedom of association and should recognise the right to collective
bargaining for the elimination of all forms of forced and compulsory
labour, abolition of child labour and elimination of discrimination in
respect of employment and occupation.
Every businesses should also support a
precautionary approach to environmental challenges by undertake initiatives
to promote greater environmental responsibility and encourage the development
and diffusion of environmentally friendly technologies. Additionally it
should work against corruption in all its forms, including extortion and
CSR and Corporate Governance
CSR and corporate governance are inextricable in today's globalised world. Mark
Walsh and John Lowry in their joint article stated corporate governance is an
increasingly important aspect of CSR to provide the more solid foundations on
which broader CSR principles and business ethics can be further enhanced.
CSR also known as corporate conscience, corporate citizenship, social
performance, or sustainable responsible business is a corporate self-regulation
integrated into business model. Governance and business ethics form the basis of
Corporate Social Responsibility.
Contemporary discussion of corporate governance tend to refer to principles
raised in three documents released since 1990: The Cadbury Report (UK, 1992),
the Principles of Corporate Governance (OECD, 1998 and 2004), the Sarbanes-Oxley
Act of 2002 (US, 2002). The Cadbury and OECD report present general principles
around which business are expected to operate to assure proper governance. The
Sarbanes-Oxley Act, informally referred to as Sarbox or Sox, is an attempt by
the federal government in the United States to legislate several principles
recommended in the Cadbury and OECD report.
With great power comes great responsibility
, as Winston Churchill famously
said at the, House of Commons in 1906. CSR is based on Triple Bottom Line (TLB)
theory. It is the responsibility of an organization for the impacts of its
decisions and activities on society, its environment as well as on its own
prosperity, known as the triple bottom line (TBL) of people, planet, and
profit. This is often referred to as the three pillars
of the business entity.
In 1997 Briton John Elkington introduced the term (TBL) which is based on the
principle that business entities have more to do with things other than
profit-making. Here people (human capital) refer to the society where the
business conducts its operations, planet (natural capital) refers to the
sustainable environment practices, and profit is shared by all concerned.
As corporations aimed for growth through globalization and by acquiring the MNC
status, many encountered new challenges that limited their growth and potential
profits. Government rules and regulations, tariffs, environmental restrictions
and work environment standards if not followed constitute labour exploitation.
These are problems that cost millions of dollars to these MNCs. Some view that
ethical issues as simply an additional cost on these MNCs, while others use CSR
as a strategic tactic to gain public support for their presence in global
Thus, helping them to sustain a competitive advantage, by using social
contributions made by them, provide a subconscious level of advertising. Global
competition places a particular pressure on MNCs. It examines not only their
labour practices, but also their entire supply chain. From the perspective of
CSR it is all government control.
Cadbury Greenbury and Hampel Committee reports of 1999 are considered the best
code of corporate governance practice. Based on it, SEBI constituted a committee
on corporate governance under the chairmanship of Kumar Mangalam Birla, to
promote and raise the standard of corporate governance in respect of listed
companies. SEBI considered the recommendation and amended the listing agreement
by inserting Clause 49 in the listing agreement. These provisions could not
prevent some catastrophe in the corporate governance of companies like Enron,
As a result, SEBI felt further need to improve corporate governance
standard and constituted a second committee, chaired by Narayana Murti. Based on
the recommendation of the Narayan Murti committee SEBI revised Clause 49 of
Listing Agreement. The revised clause superseded all the previous circulars and
notifications. It was applicable to all the companies seeking listing for the
first time and also for the existing companies having paid up share capital of
rupees three crores and above or net worth of rupees twenty-five crores or more
any time in the history of the company. In 2015 the listing agreement was
replaced by SEBI Listing Obligations and Disclosure Requirements (LODR)
International Organisation on Standardisation (ISO)
With globalisation the global business practice is intensely influenced. In
order to build the trust of the global clients, the domestic companies started
practising the global business standard. International organisation on
standardisation is such a standard setting body consisting of members from
different nation. It was one of the first organizations granted general
consultative status with the United Nations Economic and Social Council. It is
world's largest developer of global standard.
ISO 26000 provides guidance on how
business can operate in a socially responsible way considering the global
interest. The standard was formally launched in 2010 after years of
negotiations, consultations and discussions with various countries.
Global Reporting Initiative (GRI)
GRI helps businesses and governments worldwide understand and communicate their
impact on critical sustainability issues such as climate change, human rights,
governance and social well-being. It also facilitates social, environmental and
economic benefits considering all the countries. The GRI Sustainability
Reporting Standards are developed with true multi-stakeholder contributions
considering global public interests.
The four focus areas of GRI are creating standards and guidance to advance
sustainable development. It aims to provide the market with leadership on
consistent sustainability disclosures, including engaging with stakeholders on
emerging sustainability issues. It further aims to harmonize the sustainability
landscape by making GRI the central hub for sustainability reporting frameworks
and initiatives, and select collaboration and partnership opportunities that
serve GRI's vision and mission.
It also aims to lead efficient and effective sustainability reporting to improve
the quality of disclosures made using the GRI Standards. It reduces reporting
burden. It also aspires to explore reporting processes that aid decision-making.
Drive effective use of sustainability information to improve performance are
also aimed at by working with policy makers, stock exchanges, regulators and
investors to drive transparency and enable effective reporting.
- UNGC, The Ten Principles of the UN Global Compact, The Power of
Principles (Sep. 28, 2019, 5:30
- United Nations Global Compact, Human Rights, Principle 1 (2004)
- United Nations Global Compact , Human Rights, Principle 2 (2004)
- United Nations Global Compact, Labor, Principle 3 (2004)
- United Nations Global Compact, Labor, Principle 4 (2004)
- United Nations Global Compact, Labor, Principle 5 (2004)
- United Nations Global Compact, Labor, Principle 6 (2004)
- United Nations Global Compact, Environment, Principle 7 (2004)
- United Nations Global Compact, Environment, Principle 8 (2004)
- United Nations Global Compact, Environment, Principle 9 (2004)
- United Nations Global Compact, Anti-Corruption, Principle 10 (2004)
- Walsh Mark & Lowry John, CSR and Corporate Governance, RM (ed.) 38, 39
- Nilima Prakash, Ethical Behavior and Social
Responsibility, International Research Journal of Management Sociology &
Humanity, 76, 80
- International Standard Organisation, ISO 26000 Social
Responsibility (Sep. 28, 2019, 7:00 PM) https://www.iso.org/iso-26000-social-responsibility.html
- Global Reporting Initiative, About GRI, (Sep.28, 2019, 7:30 PM) https://www.globalreporting.org/Information/about-gri/Pages/default.aspx
The author is a lawyer and certified corporate governance professional.