CSR AND PRIVATE SECTOR:

“Corporate Social Responsibility” (CSR) it is generally presumed that

we are referring to the operation of a private sector entity in a manner
that accounts for the social and environmental impact created by the
entity or, business. CSR not only refers to an organization’s
commitment to developing and integrating policies (most commonly
in the form of social, environmental and economic sustainability) into
daily business operations, but to the self-reporting on progress made
toward implementing such practices.

Presently, most of corporate America has taken to addressing issues

affecting virtually every area of operations: governance and ethics;
worker hiring, opportunity and training; responsible purchasing and
supply chain policies, and energy and environmental impact. The
Companies Act as amended in 2014 has made it mandatory for
companies to spend at least 2% of their average net profit for the
immediately preceding three financial years on corporate social
responsibility (CSR) activities. According to data provided by
Minister of State in the Ministry of Corporate Affairs, Arjun Ram
Meghwal, private companies have spent Rs 5,665 crore, and public
sector companies have spent Rs 2,364 crore in 2014-15. As per the
amendments made in The Companies Act, The Government of India
has made it mandatory for companies that have an annual turnover of
Rs 1,000 crore or more, or a net worth of Rs 500 crore or more, or a
net profit of Rs 5 crore or more, to set aside 2% of their average net
profit for the immediately preceding three financial years for CSR.

Minister of State in the Ministry of Corporate Affairs, Arjun Ram

Meghwal said, responding to a question in the Lok Sabha that, in the
year 2014-15, out of 4,257 registered PSU and private companies, 116
public firms (out of 169) and 1,790 private companies (out of 4,088)
spent money on CSR initiatives. An important point to be noted is that
out of 4,257 registered companies, 2,351 companies did not make any
CSR expenditure at all. As reported by Zee Business, In the Financial
year 2014-15, Private sector companies have spent nearly Rs 5,700
crore on Corporate Social Responsibility (CSR) activities, when
compared to the nearly Rs 2,400 crore spent by government-owned
companies. Education sector has received the major share of CSR
contributions by Indian companies. Education, environment and
animal welfare and rural development appeared to be the most
preferred area for CSR activities among Indian companies. A total of
Rs 2519.92 crore was spent by the private and public companies in
the education sector. This was followed by environment and animal
welfare, and rural development. The Clean Ganga initiative was the
least favourite among the Indian Cooperates, with only Rs 17.16 crore
spent. From a total 4,257 registered companies, 2,351 did not make
any CSR expenditure. Of the 1,906 companies that have engaged in
CSR activities collectively spent Rs 8,029 crore. The private sector
companies spent Rs 5,665 crore, while public sector companies spent
Rs 2,364 crore in 2014-15. CSR reports often focused on philanthropy
as a driver of CSR. That notion has been supplanted by a broad
commitment to protecting and improving the lives of workers and the
communities in which companies do business. In an era of “why can’t
government be run more like a business,” it should come as no
surprise that younger job applicants are inquiring whether the public
sector entity to which they are applying has its version of social
responsibility policy or statement. During an international workshop
on the role of government in social responsibility matters,
independent sustainability consultant Paul Hohnen suggested that
government endeavour to:

– Create an enabling environment.

– Raise awareness and stimulating public debate for challenges and

issues.

– Promote CSR initiatives by endorsing or inviting business and

wider community support.

– Formally recognize CSR initiatives.

– Develop CSR guidance documents.

– Build capacities for CSR in businesses, civil society and public

authorities through trainings, Internet platforms, etc.
– Convene businesses and stakeholders as an extension of capacity-
building.

– Mediate (i.e., active but neutral arbitration) interests (for example in

tri-partite bodies) that can build on the convening role.

– Fund research and facilitating networking of researchers in the CSR

context.

– Fund CSR initiatives.

– Engage in public-private partnerships.

– Develop tools for CSR management.

Today, corporate social responsibility (CSR) is an issue that affects

not only industry but the consumer, as well. And its principles stretch
beyond the boardroom and into the classrooms of schools and
universities.

According to a report issued by Halina Ward, Director, Corporate

Responsibility for Environment and Development, International
Institute for Environment and Development, some of the ancillary
benefits of a public sector CSR include their ability to help inspire
new strategies to address gaps in public sector capacity. Further, a
solid CSR can offer valuable insights for partnerships by creating
synergies between the complementary skills of public, private and
civil society actors to achieve public policy goals related to
sustainable development. Even though state-run companies had a
five-year head start with respect to setting aside funds for corporate
social responsibility (CSR) initiatives, they lagged behind their
private sector peers in terms of the efficiency of spending on such
efforts. Public sector companies spent only 66.7% of what they had to
spend in the year ended 31 March while private companies spent 82%
of the prescribed spend in the first year of mandatory CSR spending,
according to showed data compiled by Next Gen, a CSR management
firm. Under Companies Act of 2013, both public and private
companies had to set aside 2% of their net profits. Earlier, public
companies needed to set aside anywhere between 0.5% to 5% of net
profits based on the profits of the company, according to the 2010
CSR guidelines issued by department of public enterprises.
NextGen’s data from 85 NSE-listed companies from top 100
companies by market capitalisation on the National Stock Exchange
of India (NSE) shows that the 19 public sector unit (PSU) companies
spent Rs.1,686 crore FY15, while 66 private companies
spent Rs.3,307 crore. The data was collected until 14 September.
“PSUs have taken time to evolve and they have been a bit complacent
about CSR,” said Vijay Ganapathy, a partner at Think through
Consulting Pvt Ltd, a CSR consulting firm. Also, they are in
industries where customer perception of the company does not matter
as much as it does for a private company and this has led to a degree
of complacency in meeting the CSR spending target. Corporate Social
Responsibility (CSR) embraces business responsibility and the firm's
impact on the environment, consumers, employees, surrounding
communities and all stakeholders. The panellists and moderator
expressed their belief that there is great opportunity in this field.
Companies may be left behind in terms of customer growth, future
employees, and profits if they don’t look at areas of risk and
opportunity to drive a CSR program. Rebecca Freyvogel, Senior
Manager of the U.S. Chamber of Commerce’s Business Civic
Leadership Center, spoke about the gradual evolution of CSR from
voluntary philanthropy to an essential business strategy. She cited
examples of Chevron addressing human rights issues in areas vital to
its supply chain, and Daimler’s strategic investment in educating its
workforce. She identified several trends in CSR, citing increases in
corporate skills-based volunteerism, public/private partnerships and
green initiatives. Addressing CSR’s role in the current economic
downturn, Freyvogel indicated that statistics have been positive, with
69 percent of companies either increasing or holding constant their
CSR budgets. This, combined with an increase in favourable
government policies stemming in part from the stimulus package,
means an increase in interest and involvement in corporate
citizenship. Niki Zoli, Manager of Social Responsibility and
Community Engagement at Marriott International, attributed the
impetus of Marriott’s CSR initiatives to the company culture and its
“spirit to serve.” A large part of Marriott’s CSR is its environmental
strategy, which includes reducing its own carbon footprint,
encouraging and educating guests and employees, greening the supply
chain (similar to Wal-Mart’s efforts), and increasing its number of
LEED-certified properties. Johanna Polsenberg, Vice President of
Cassidy & Associates, spoke about resiliency within companies
during this economic crisis, noting that CSR is actually moving
forward at a faster pace in some cases as a result of this economic
climate. Trends show that when customers spend their money on a
product or service, they’d like to spend it with a company that is
socially responsible as opposed to one that isn’t demonstrating its
benefit to society as a whole. Freyvogel left the group with a final
thought: Gallop does a survey of the image of corporate America and
this image is constantly decreasing; however, through CSR we can
change the way business is run and the perceptions of communities.
It’s a good time to be in this field. In the world of business, the main
“responsibility” for corporations has historically been to maximize
profit and increase shareholder value. In other words, corporate
financial responsibility has been the sole bottom line of success. With
an era of globalization the economies of business has changed from
corporate centric to the consumer centric, where the consumer’s
perception for a product, service, concept or an organization is most
concerned. Business being an integral part of the society, which
influences and influenced by the society, cannot ignore the
importance of society. In the last few decades this wind of
transformation gave birth to a broader corporate responsibilities–for
the environment, for local communities, for working conditions, and
for ethical practices–has gathered momentum and taken hold. This
new driving force is known as corporate social responsibility (CSR).
This consists of wide range of activities and programs, which involves
looking at how to improve social, environmental and economical
impacts of business. CSR plays a vital role in the sustainable business
strategy, which emphasizes on how to maximize the utility of
resources with minimum consumption, exploration of resources
without exploitation and maintain surplus balance of resources for
future generations. In this context, it is noteworthy to mention that
The Brundt land Report (1987) says "Sustainable development is
development that meets the needs of the present without
compromising the ability of future generations to meet their own
needs. It contains within it two key concepts: The concept of needs, in
particular the essential needs of the world's poor, to which overriding
priority should be given The idea of limitations imposed by the state
of technology and social organization on the environment's ability to
meet present and future needs." In this present paper the researcher
tries to analyze, evaluate and describe the role of corporate social
responsibility in sustainable development amongst the private and
public sectors, with reference to the Iron & steel and automobile
manufacturing industry in India in a multi dimensional analysis.
There are many and significant corporate social responsibility
overlaps between the private sector and government. They include:
how to assess whether a potential vendor is green; responding to the
people or how the need for society to go green changes the market
place and understanding how an organization’s communications can
have an impact on its image as a green organization. The role of
private sector can be more expansive in the sanitation area. Apart
from building toilets, corporate could also play an active role in
ensuring that people use and maintain the toilets. This can only be
achieved when the private sector starts working at the grassroots
level. The Government of Maharashtra has set a deadline of October
2017 to eradicate open defecation from urban areas of the state.

There are several reasons why many private sector companies have
kept away from active involvement in the Swachh Bharat Mission.
One of the major complaints from the private sector has been the
prevalent red tape in municipalities, block development offices, gram
panchayats, seen as a major hurdle. To invest in toilets – their
construction and maintenance, private sector companies have to work
closely with the local governing bodies. But it seems that the
difficulty in coordinating with local bodies has resulted in dwindling
interest in active involvement of the private sector. The Swachh
Bharat Abhiyan began with Prime Minister Narendra Modi’s clarion
call to end open defecation across India by October 2, 2019. The
Prime Minister invited citizens and both the public and private sector
to invest in the building of toilets and working towards eradicating
open defecation from both urban and rural areas. The private sector
responded warmly to Prime Minister Modi’s call for a clean India,
and over the next two years, the Swachh Bharat Kosh received
noticeable expenditure as a part of corporate social responsibility
(CSR). The Union Government is also working towards making 30
per cent of CSR money towards sanitation mandatory, a step that
could see more private investment in the sector of sanitation and
waste management. 2014-15 saw India’s private sector spending
nearly Rs. 42 crores towards toilet construction under Swachh Bharat.
Within two years, the donations seemed to have dwindled, as of the
Rs. 245 crores donated towards Swachh Bharat in 2016-17, 212
crores came from the public sector companies, while smaller
companies and charitable organisations accounted for the rest Rs. 33
crores, as big private sector names remained missing from the list.

Is the private sector’s interest towards a cleaner India diminishing?

While the figures may suggest so, the private sector’s involvement in
expenditure towards sanitation is a complicated phenomenon that
should not be written off on the basis of figures alone. Till now, the
private sector expenditure was seen a part of CSR initiative where the
involvement of private companies ended with the assigning a certain
amount towards the mission. But experts reckon that it would be more
effective is if sanitation and waste management ventures are turned
into profitable business models, which could then grasp long term
attention of private sector and also in turn lead to revenue generating
mechanisms for small and medium enterprises in the sector of
sanitation and waste management. At the India Sanitation Conclave
organised by the Federation of Indian Chambers of Commerce &
Industry (FICCI) recently, the role of the private sector in Swachh
Bharat evolved as a major discussion point. Instead of looking at
financial contribution to the Swachh Bharat Mission as just CSR, it
was established that the need of the hour was to create an avenue for
private sector where skill development, advocacy and profit could co-
exist. Doing so would result in the creation of an institutional
framework and form comfortable partnership between the private and
public sectors. All production depends on, and is grounded in, natural
and social processes. Corporate Social responsibility (CSR) is claimed
to be a mechanism to address economic social and environmental
challenges altogether. This research thus seeks to accumulate general
knowledge about CSR and to investigate if CSR can ensure business
benefits for the company, and at the same time, beneficial outcomes
for the nature and society. While a research always begins with a
problem or a set of issues that the researcher wants to investigate. In
some cases, to better understand current developments, one needs to
understand the past. This thesis will, therefore, start by taking a step
back. We start with the Industrialization era which is often blamed for
being the reason for the existence of Corporate Social Responsibility
today. Industrialization is the process of social and economic change
that transformed human`s society from an agrarian into an industrial
one. The first country to industrialize was the United Kingdom in the
eighteenth century. Before the Revolution most people lived in small
villages and worked in agriculture. With the advent of
industrialization, many people started to work at the factories, which
required them to move to towns and cities. Industrialization is
therefore a part of a wider modernization process, where social
change and economic development are closely related with
technological innovation, particularly with the development of large -
scale energy and metallurgy production. Corporate social
responsibility (CSR) is a fluid concept and both a means and an end.
It is an integral element of the firm’s strategy—the way the firm
delivers its products or services to markets (means), and also a way of
maintaining the legitimacy of its actions in the larger society by
bringing stakeholder concerns to the foreground (end). CSR is a
vehicle for discussing the obligations a business has towards its
immediate society, a way of proposing policy ideas on how those
obligations can be met, as well as a tool by which the mutual benefits
for meeting those obligations can be identified. The success of a
firm’s CSR reflects how well it has navigated stakeholder concerns
while implementing relationships that exist among business, their
stakeholder groups, the economic system and the communities within
which they exist. Simply put, CSR addresses a company’s
relationships with its stakeholders. However, for corporate
enterprises, the capacity to influence the CSR activities taken up by
them depends on the capacity to communicate with different
stakeholders and on the support obtained from them. In fact, CSR is
an extremely complex web of interaction between an organization and
its stakeholders. There have been extant studies addressing various
issues pertaining to CSR, either with respect to the CSR activities
undertaken by the corporate sector or with respect to their
communication. However, most of these discussions focus on the
phenomenon in the US or Europe, more precisely on the western front
with little emphasis on the developing countries. The rationale behind
studying CSR in developing countries as distinct from CSR in the
developed countries is manifold:

 developing countries represent the most rapidly growing

economies and hence a lucrative growth market for business
(IMF, 2006);
 social and environmental crisis is more acutely felt in the
developing countries (UNDP, 2006);
 developing countries are the ones where the impact of
globalization, economic growth, investment and business
activity are likely to have a strong impact on societal and
environmental issues (World Bank, 2006) and
 challenges faced by the developing countries with respect to
CSR are different as compared to challenges faced by the
developed countries.

One of the visions of the Millennium Development Goals as

imbibed in it was ‘a world with less poverty, hunger and disease,
greater survival prospects for mothers and their infants, better
educated children, equal opportunities for women and a healthier
environment’ (UNDP, 2006). Unfortunately, these visions remain
far from being met in many developing countries like India today.
In this research paper, we would focus our attention on India
because India is a country which has always tried to exhibit the
hallmark of a ‘harmony-with-nature relationship’ between humans
and their environment. Chakraborty (1985) had shown the deep
roots of the Indian ethos from which Indian managers can develop
a structure of values on the basis of which they can develop
stakeholder policies. Gandhi’s theory of social trusteeship
epitomizes this ‘prosperity for all’ attitude. His theory of social
trusteeship is a weapon to address economic inequalities
(Sivakumar, 1995). Corporate India has always boasted of its
strong tradition of corporate philanthropy, and the Indian society
had viewed its business leaders as leaders of social development
(Mohan, 2001). An eye for creative CSR intervention where CSR
was successfully integrated into business strategies was seen in
ITC Ltd with their ‘e-choupal initiative’ and Tata Consultancy
Service in the form of their ‘M-krishi phones’. Regardless of this
strong tradition on philanthropy, it is difficult to imagine that we
have achieved political freedom but not economic freedom, the
freedom from hunger, disease and illiteracy. It is not just the
government or the regulators that have a role to play to transform
India to a ‘Better India’ but even the corporate should come
together and effectively contribute towards a country’s holistic
development that is not just profit-driven but is also value-driven.
This study therefore explores the extent of participation of the
private sector companies in CSR activities.