This article is written by Sukhmani Singh, a student of Army Institute of Law, Mohali.
The world is developing with time. What was considered to be impossible yesterday, is possible now. We all know that every action has an equal and opposite reaction. So, if I give a simple example, an industry might be making the best of leather, but, what is the use when that causes a lot of pollution? Nowadays, people are thinking not just about the industry or company and its motives; the models of business are no longer revolving around the monetary aim. In a layman’s language, if I have to define what Corporate Social Responsibility is, I would say that it is the awakening of corporate conscience which aims at embracing the responsibility for the company’s actions. It is a positive step that is taken by doing social good that is beyond the interest of the company. Now, it is a requirement by law. This term became really popular in the 1960s which, unfortunately, has been construed very narrowly.
Those people who support the concept of Corporate Social Responsibility say that it is positive step in the sense that it helps the company make long term profits while doing some social good as well. This statement is rebutted by saying that too much work would just distract the company from achieving its main aim of profit making. Studies have proved that when a model for corporate social responsibility is properly executed, it has a neutral effect on the financial outcome.
The United Nations Industrial Development Organization defines corporate social responsibility as “a management concept whereby companies integrate social and environmental concerns in their business operations and interactions with their stakeholders.”
The world has become more and more aware. All the major players have been contributing to the society in one way or another. If we take the example of India, Aptech, a leading education player with a global presence that has played a broad and continued role in encouraging and nurturing education throughout the country since its inception. As a global player with complete solutions-providing capabilities, Aptech has a long history of participating in community activities. It has, in association with leading NGOs, provided computers at schools, education to the deprived, and training and awareness-camps.
This concept of Corporate Social Responsibility has been introduced all across the globe. Different countries have different ways of application. What is common is that all the countries use the LBG model to assess the real value and impact of their community investment to both, the business and society.
When we talk about Corporate Social Responsibility (CSR), it is understood that it is executed after a lot of planning and strategising.
Here is a brief comparison of the CSR regulation across the globe!
1) In USA
The Corporate Social Responsibility (CSR) team in the Bureau of Economic and Business Affairs leads the Department’s engagement with U.S. businesses in the promotion of responsible and ethical business practices. The mission of the CSR office is to:
- Promote a holistic approach to CSR to complement the EB Bureau’s mission of building economic security and fostering sustainable development at home and abroad.
- Provide guidance and support for American companies engaging in socially responsible, forward-thinking corporate activities that complement U.S. foreign policy and the principles of the Secretary’s Award for Corporate Excellence program.
- Build on this synergy, working with multinational companies, civil society, labour groups, environmental advocates, and others to encourage the adoption of corporate policies that help companies “do well by doing good.”
2) In UK
It is a part of Corporate Governance. The Companies Act 2006 has now added to those pressures by requiring directors to have regard to community and environmental issues when considering their duty to promote the success of their company and by the disclosures to be included in the Business Review. CSR is, now, an integral part of good governance, for bigger companies in particular.
3) In Europe
The European Commission’s CSR agenda for action is:
- Enhancing the visibility of CSR and disseminating good practices.
- Improving and tracking levels of trust in business.
- Improving self and co-regulation processes.
- Enhancing market reward for CSR
- Improving company disclosure of social and environment information.
- Further integrating CSR into education, training and research.
- Emphasising the importance of national and sub-national CSR policies.
- Better aligning European and global approaches to CSR.
The CSR strategy is built upon guidelines and principles laid down by the United Global Compact, United Nations Guiding Principles on Business and Human Rights, ISO 26000 Guidance Standard on Social Responsibility and OECD Guidelines for Multinational Enterprises.
4) In India
CSR in India has traditionally been seen as a philanthropic activity. And in keeping with the Indian tradition, it was an activity that was performed but not deliberated. In 2014, India became the first country in the world to have a mandatory CSR contribution legislation. In India, the concept of CSR is governed by clause 135 of the Companies Act, 2013, which was passed by both Houses of the Parliament, and had received the assent of the President of India on 29 August 2013. The CSR provisions within the Act is applicable to companies with an annual turnover of 1,000 crore INR and more, or a net worth of 500 crore INR and more, or a net profit of five crore INR and more. The new rules, which will be applicable from the fiscal year 2014-15 onwards, also require companies to set-up a CSR committee consisting of their board members, including at least one independent director. The Act encourages companies to spend at least 2% of their average net profit in the previous three years on CSR activities.
5) Other countries
France, Denmark, South Africa and China have a mandatory reporting obligation on the amount spent on CSR activities.
All the major countries take CSR with a lot of seriousness, may be out of conscience or because the laws that are being formulated. Some countries are governed by various boards in this matter whereas for some countries, strict laws are made. By and large, what we can say for sure is that though the methods are be different, the end result is quite encouraging. Some other reasons for embracing CSR are that it is an innovation that is a huge benefit to a company and society. Brand differentiation is another reason why companies embrace CSR. CSR is more than fulfilling a duty to the society; it should also bring competitive advantage. All in all, it is an excellent step for the companies and the societies. The models made for implementation of CSR should be made with more planning and skill so that the effect is deeper and wider.