Concepts and Trends in

CSR, Sustainability
 Defining Corporate Social Responsibility
• Bowen (1953) – ‘Social Responsibilities of the Businessman’: “It refers to
the obligations of businessmen to pursue those policies, to make those
decisions, or to follow those lines of action which are desirable in terms of
the objectives and values of our society”
• McGuire (1963) – ‘Business & Society’: “The idea of social
responsibilities supposes that the corporation has not only economic and
legal obligations but also certain responsibilities to society which extend
beyond these obligations”
• Johnson (1971) ‘Business in Contemporary Society: Frameworks &
Issues’: “A socially responsible firm is one whose managerial staff
balances a multiplicity of interests. Instead of striving only for larger
profits for its stockholders, a responsible enterprise also takes into account
employees, suppliers, dealers, local communities, and the nation”
 Carroll’s CSR Pyramid
Carroll (1983), “corporate Contribute resources to the
Be a good community; improve quality of
social responsibility involves corporate
the conduct of a business so Philanthropic responsibilities life
citizen
that it is economically
profitable, law abiding, ethical Obligation to do what is
and socially supportive. To be Be Ethical right, just and fair. Avoid
socially responsible then means ethical responsibilities harm.
that profitability and obedience
to the law are foremost Law is society’s codification
conditions when discussing the Obey the law Legal of right and wrong. Play by
firm’s ethics and the extent to responsibilities the rules of the game.
which it supports the society in
which it exists with
contributions of money, time Economic responsibilities The foundation on
and talent” Be which all other rest.
profitable
 A brief timeline of CSR emergence in recent years
• 2007 – Corporate Governance Code: Environmental and Social information related disclosures to be
provided in Annual Reports
• 2009 – Ministry of Corporate Affairs releases Voluntary Guidelines related to Corporate Social
Responsibility (CSR)
• 2009 – Ministry of Corporate Affairs makes it mandatory for public sector oil companies to spend 2%
of their net profits on CSR
• 2011 – Ministry of Corporate Affairs released National Voluntary Guidelines on Social,
Environmental and Economic Responsibilities of Businesses in alignment with ISO 26000
• 2012 – SEBI mandates ESG reporting for top 100 listed entities
• 2013 – Section 135, Companies Act, 2013
• 2014 – Amendments to Guidelines on Corporate Social Responsibility and Sustainability for Central
Public Sector Enterprises (2013/ 2014)
• 2019 – Release of National Guidelines on Responsible Business Conduct, 2018 (NGRBC)

National_Voluntary_Guidelines_2011_12jul2011.pdf; CompaniesAct2013.pdf; General_Circular_21_2014.pdf

CompaniesActNotification2_2014.pdf; Revised_CSR_Guidelines.pdf; Guidelines_on_CSR_SUS_2014.pdf
 Legal Aspects of CSR in India
• Statutory obligation under Section 135 of Companies Act, 2013
• Relevant Sections:
• Section 134 (3)
• There shall be attached to statements laid before a company in general meeting, a report by its Board of
Directors, which shall include
(o) the details about the policy developed and implemented by the company on corporate social
responsibility initiatives taken during the year;
• Section 135 (Main Provision)
• Schedule VII (Permissible Activities)
Section 135, Companies Act, 2013
• 135. (1) Every company having

net worth of rupees five hundred crore or more,

or turnover of rupees one thousand crore or more

or a net profit of rupees five 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.

• (2) The Board's report under sub-section (3) of section 134 shall disclose the
composition of the Corporate Social Responsibility Committee.
(3) 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.
(4) 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.
• (5) 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:
• Provided further that if the company fails to spend such amount, the Board shall, in
its report made under clause (o) of sub-section (3) of section 134, specify the reasons
for not spending the amount.
• Explanation.—For the purposes of this section “average net profit” shall be
calculated in accordance with the provisions of section 198.
CSR Criteria and Provisions
Form a CSR committee
Approve the CSR policy
Ensure implementation of the activities
under CSR
Role of Ensure 2% spend
the Board
Disclose reasons for not spending the
Net worth > 500 Crore INR amount (if applicable)
Turnover > 1000 Crore INR Three or more directors with at least one
Net Profit > 5 Crore INR CSR independent director
Committee
Formulate and recommend a CSR policy to
the board
Recommend activities and the amount of
expenditure to be incurred
Monitor the CSR policy from time to time
Schedule VII: Activities which may be included by companies in Corporate Social
Responsibility Policies
Activities relating to:—
• 1[(i) Eradicating hunger, poverty and malnutrition, 2[‘‘promoting health care
including preventive health care’’] and sanitation 4[including contribution to the
Swach Bharat Kosh set-up by the Central Government for the promotion of
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 centres 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, agroforestry, conservation of natural resources and
maintaining quality of soil, air and water 4[including contribution to the Clean
Ganga Fund set-up by the Central Government for rejuvenation of river Ganga].
• (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 art and handicrafts;
• (vi) measures for the benefit of armed forces veterans, war widows and their
dependents;
• (vii) training to promote rural sports, nationally recognised sports,
paralympic sports & olympic sports
• (viii) contribution to the prime minister's national relief fund or any other fund set
up by the central govt. for socio economic development and relief and welfare of
the schedule caste, tribes, other backward classes, minorities and women;
• 6[(ix) Contribution to incubators funded by Central Government or State Government or
any agency or Public Sector Undertaking of Central Government or State Government, and
contributions to public funded Universities, Indian Institute of Technology (IITs), National
Laboratories and Autonomous Bodies engaged in conducting research in science,
technology, engineering and medicine aimed at promoting Sustainable Development Goals
(SDGs).]
• (x) rural development projects]
• 3[(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.]
• 5[(xii) disaster management, including relief, rehabilitation and reconstruction activities.]
 Amendments to Guidelines on Corporate Social Responsibility and
Sustainability for Central Public Sector Enterprises (2013/ 2014)
• Expanded the construct of CSR for public sector to include, not just activities for
external stakeholders (funded by the PSU), but also internal stakeholders, and
covering routine business operations and activities
• Earlier, Corporate Social Responsibility and Sustainable Development treated as
two separate issues, leading to operational/ reporting problems, this issue has been
resolved
• Thrust of CSR and Sustainability is on capacity building, empowerment of
communities, inclusive socio-economic growth, environment protection,
promotion of green and energy efficient technologies, development of backward
regions, and upliftment of the marginalised and under-privileged sections of the
society.
• CSR policy document of a CPSE should also include a vision and mission
statement of how the CPSE proposes to comply with the Guidelines
Suggested Points for CPSEs within Amended Guidelines
• Take up at least one major project for development of a backward district
• Expected to act in a socially responsible manner at all times, adoption of “shared
value” approach
• Top leadership involvement through a two – tier structure:
• a Board level committee headed by either the Chairman and / or MD, or an Independent Director,
and a group of officials headed by a senior executive of not less than one rank below the Board
level
• Provide credible evidence of pre – project assessment of stakeholder needs likely to
benefit from CSR and Sustainability activity
• Unutilised budget for CSR activities planned for a year not to lapse, carried forward to
next year. Report reasons for failure to spend allocated sum.
• Unspent amount of the budget has to be spent within next two financial years, failing
which, it would be transferred to a ‘Sustainability Fund’ to be created separately for
CSR and Sustainability activities
 Suggested Points for CPSEs within Amended Guidelines
• Reduction in number of projects mandated from 10 to 2 (maharatna companies can have
additional one project). Stress instead on scalability of the project. Ease of managing,
reporting etc as reasons for the change. Suggested to do combined projects with other PSUs
for optimal use of resources and synergy of expertise and capabilities for maximum socio-
economic or environmental impact
• Take initiatives to:
i) promote organisational integrity and ethical business practices through transparency in
disclosure and reporting procedures,
ii) leverage green technologies, processes and standards to produce goods and services that
contribute to social and environment sustainability,
iii) contribute to inclusive growth and equitable development in society through capacity
building measures, empowerment of the marginalised and underprivileged sections /
communities.
iv) promote welfare of employees and labour (casual or contractual), by addressing their
concerns of safety, security, professional enrichment and healthy working conditions,
whether mandated or otherwise. However, expenditure on mandated activities cannot qualify
for CSR’s financial components.
 Mandatory Projects
• Mandatory to have one project each related to:
i) inclusive growth of society, with special attention to the development of weaker
sections of society and the backward districts of the country, (esp. capacity
building, skill development and infrastructural development). Weaker sections
include SC, ST, OBC, minorities, women and children, BPL families, old and aged,
physically challenged, etc.
ii) environment sustainability
i) projects for water, waste or energy management, promotion of renewable sources of energy,
biodiversity conservation, etc.
ii) Projects for reduction, re-use and recycle of waste materials, rain-water harvesting and
replenishing the ground water supply, protection, conservation and restoration of eco-system,
reduction of carbon emissions through energy efficient and renewable energy technologies,
greening the supply chain, and innovation in products and services which have a clear and
tangible impact on environmental sustainability
iii) take up other projects / activities also to fully utilize their annual budget for CSR
and Sustainability
 For CPSEs, CSR activities are mandatory
• Mandatory for all profit making CPSEs to undertake CSR activities as per the
provisions of the Act and the CSR Rules.
• Such CPSEs would be expected to spend at least 2% of the profit made in the
preceding year on CSR activities
• Sick or loss making companies or those having a negative Net Worth are not
mandated to earmark specific funds for CSR, Sustainability activities. However,
integration of sustainability issues in business plans, strategies & processes is a must.
• All CPSEs must adopt a CSR and Sustainability Policy specific to their company with
the approval of the Board of Directors. The philosophy and spirit of CSR and
Sustainability must be firmly ingrained in the policy and it must be consistent with the
CSR provisions of the Act, Schedule VII of the Act, CSR Rules, & the Guidelines
• Also, expected to adopt innovative methods for water, waste and energy management,
reduction of carbon emission, preservation of bio-diversity, and production of goods
and services which are consumer and environment friendly, without any additional
cost, perhaps even savings to the company
 Amendment to CSR sections in 2019
• Transfer of unspent funds: any unspent CSR funds during a financial year (in respect of
an ongoing CSR Project), must be transferred into a special account within 30 days
from the end of the financial year. This account will be called an Unspent Corporate
Social Responsibility Account (Unspent CSR Account). Proceeds will have to be spent
by the company towards the CSR projects in line with its CSR policy within 3 financial
years from the date of such transfer. If the company is unable to spend the amount
within the allocated period (3 financial years), then, such unspent amount should be
transferred to a fund specified under Schedule VII of the Companies Act (Schedule VII
Fund) within 6 months from the end of the relevant financial year.

• Also, in the case where a company has any unspent CSR funds at the end of a financial
year and there are no ongoing CSR projects, the funds should be directly transferred to
the Schedule VII Fund, within 6 months from the end of the relevant financial year.
• Changes in schedule VII (included above)
CSR
• Perspective shift from charitable giving for community affairs to ensuring that
corporate organizations are ethical, fair, just, humane, while being profitable,
efficient and dynamic
• Aligned with national priorities such as public health, education, livelihood, water
conservation, natural resource management, etc
• Responsibility of the corporate sector in achieving Sustainable Development
Goals (SDGs)
 CSR expenditure by Companies reporting on CSR (as on 31st March, 2019)

FY 2014-15 FY 2015-16 FY 2016-17 FY 2017-18

Year of No of Total CSR No of Total CSR No of Total CSR No of Total CSR
filing companies amount companies amount companies amount companies amount
spent spent spent spent
(in Rs. cr.) (in Rs. cr.) (in Rs. cr.) (in Rs. cr.)
NON PSU 10,083 7,249.11 12,551 10,302.39 12,810 11,026.63 11,314 10,787.50
Average 0.72 0.82 0.86 0.95
spend by
NON PSU
PSU 335 2,816.82 404 4,201.26 372 3,285.40 270 2,539.19
Average 8.40 10.40 8.83 9.40
spend by
PSU
Total 10,418 10,065.93 12,955 14,503.65 13,182 14,312.03 11,584 13,326.69
Number of companies in the above Table include companies which are liable and reporting on CSR (Source: HLC on CSR, 2019)
Normative aspect of CSR & SDGs
• Desirable
• Ethical
• Responsibilities to society
• Meet social obligations and values

• Question – what is it that society values? Is it the same across societies

and cultures? Do we have a common goal?
Sustainable Development Goals 2030
Each goal is And they
important are all
in itself … connected
Mode of Implementation
• Rule 4(2) of Companies (Corporate Social Responsibility Policy) Rules, 2014
states the following:
• (2) The Board of a company may decide to undertake its CSR activities approved
by the CSR committee, through a registered trust/ registered society or a company
established by the company or its holding or subsidiary or associate company
under section 8 of the Act or otherwise:
• Provided that-
• (i) if such trust, society or company is not established by the company or its
holding or subsidiary or associate company, it shall have an ‘established track
record of three years in undertaking similar programs or projects;
• (ii) the company has specified the project or progams to be undertaken through
these entities, the modalities of utilization of funds on such projects and programs
and the monitoring and reporting mechanism.
 Mode of implementation opted by companies for implementation of CSR projects
and the CSR expenditure made through that mode (as on 31st March, 2019)
FY 2014-15 FY 2015-16 FY 2016-17 FY 2017-18

Mode of implementation Number of CSR Number of CSR Number of CSR Number of CSR
projects/ (%) expenditure projects/ (%) expenditure projects/ (%) expenditure projects/ (%) expenditure
(in cr.)/ (%) (in cr.)/ (%) (in cr.)/ (%) (in cr.)/ (%)
By Trusts/ Societies/ 1,105 2,054.66 1,441 925.45 2,155 1,301.40 2,136 1,099.46
Section 8 Company set (4%) (20%) (3%) (6%) (4%) (9%) (5%) (8%)
up by the Company itself
Directly by company 7,985 3,429.76 13,925 4,476.46 19,597 4,989.99 17,718 4,929.17
(28%) (34%) (34%) (31%) (40%) (35%) (40%) (37%)

By Trust/ Societies/ 359 140.15 760 215.02 915 436.03 935 340.58
Section 8 Company set (1%) (1%) (2%) (1%) (2%) (3%) (2%) (3%)
up by Central or State
Government or entities
set up under Special act
of Parliament/ State
legislature
Other Implementing 5,643 2,548.69 9,904 5,419.88 13,855 7,567.69 12,943 6,881.64
Agency (19%) (25%) (24%) (37%) (28%) (53%) (29%) (52%)
Not Mentioned 13,892 1,892.67 15,288 3,466.85 12,561 16.92 11,073 75.85
(48%) (19%) (37%) (24%) (26%) (0%) (25%) (1%)
Grand total 28,984 10,065.93 41,318 14,503.65 49,083 14,312.03 44,805 13,326.69