This article is written by Sanmati Rathore, a student at Symbiosis Law School, Pune.
Table of Contents
In international business, there is a continuing debate going on human rights and CSR intersection. These both concepts basically put forwards the idea of social reform and focuses on fulfilling moral obligations, CSR thus encourages the corporations to operate in a socially responsible manner.
The dynamism of CSR with respect to Human rights is still under study due to voluntary nature of both the terms. Corporate Social Responsibility is an idea which suggests the responsibility of the corporation towards society economically and socially. Apart from it CSR also includes due diligence towards environment and to protect it. Various human rights like- “Right to life, to health, to safe and clean environment, to have basic standard of living” etc. can be very much infringed by the corporations if they act in erratic manner as evident from past, for e.g., Bhopal Gas Tragedy, Satyam Scandal etc. CSR is also denoted as “Triple Bottom Line Approach” considering Economic, Social and Environmental facets under corporate initiative.
International Human Rights Norms and CSR
Following is the list of Human Rights instruments including Declarations, Compacts etc. which are upholding the importance of contribution of a business towards the social reformation and betterment of people, environment etc.
ILO Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy
The primary focus of this Declaration is to promote and encourage the social and economic progress due to contributions by the enterprises and to help in eradicating obstacles in their operations. (see here for details)
ILO Tripartite Declaration of Fundamental Principles and Right to work
This Declaration was adopted in year 1988 and makes it clear that merely economic growth is not capable of ensuring equity as a whole and cannot justify social progress. It has a follow up procedure in which the States that has not ratified at least one or more related conventions are asked to submit their inter-border reports on the subject, these reports are then reviewed by a committee consisting of independent experts. (see here for details)
OECD Guidelines for Multinational Enterprises
Concrete and exhaustive guidelines have been formulated with respect to human rights adherence of MNEs. (see here for details)
UN Global Compact (UNGC)
The two main aim of this compact consist of mainstreaming 10 pivotal principles in relation to human rights and the second is to yield efforts to achieve UN goals like MDGs i.e., Millennium Development Goals. This Compact is merely a voluntary initiative and does not establish a code of conduct. With the motive of organisation and development or corporate sustainability, it furnishes the policy framework and also offers the platform to encourage different initiates by the states and promotes partnership of various state parties.
The Johannesburg Declaration on Sustainable Development (2002)
It enumerates the duty of private sector towards the society and need of developing accountability. (see here for details)
Universal Declaration of Human Rights
UDHR states that “every individual and organ of society has responsibility to strive to promote respect for these rights and freedoms and by progressive measures, national and international, to secure their universal and effective recognition and observance”. The corporations are crucial organ of any society thus holds responsibility as well. The following figure displays the development of guidelines from UDHR (1948) to Protect- Respect- Remedy Framework (2011).
Figure 1: Dateline of International Conventions from 1948
Source– (see here)
CSR in Indian Legal Framework
In India, the mandate of CSR was introduced through the Companies Act 2013. It is a delight that India is one of those few nations across the globe to have CSR provisions in the municipal laws and the first nation to bring CSR activities in the legislation which was further followed by Britain as well.
CSR Municipal Laws in India
The Companies Act, 1956 is now succeeded by the Act of 2013 which made CSR mandatory. Section 135 (see here) brought by new act through the notification of 27th February 2014 made it compulsory to adhere CSR norms within India. The act takes into its purview public, private and others if they meet any one the following requirements-
- “Net worth- Rs 500 Cr or more.
- Annual Turnover- Rs 1000 Cr or more.
- Annual Net Profit- Rs 5 Cr or more”.
If a company fulfils any of the above given requirements, than they are required to form a CSR committee with minimum of three directors one being independent director. This committee is responsible for making policy for implementing CSR initiatives according to 7th Schedule of the act. After ensuring proper implementation the committee is also required to submit annual report of all these activities undertaken in a year. The board of Directors are obligated to consider the suggestions put forward by this committee regarding any CSR activity
Amendment of 2019 (see here)
According to this amendment, Now Section 135 requires those companies to fall under the mandate who have not completed three financial years and falls under the category of CSR mandate. Now it requires them to give 2% of their net profit for CSR for last preceding 3 years or the year from which it incorporated. Also, the companies are now required to transfer the unspent amount in funds like PM Relief Fund within 30 days of the end of 3rd financial year. This new amendment gave power to central government to ensure the compliance of CSR mandate.
Why CSR Policies are still not effective in India?
- Companies do have resources but are not aware about ground reality regarding the existing problem of the society and thus fails to address sufficiently.
- Most companies consider money as a way to fulfil CSR mandate, however, there are several problems in Indian society which needs help beyond money and majority of companies fails to do so.
- As section 135 of the act mandates 2% of the net profit to be spent on CSR, but the companies’ attempts to hide the true accounts and thus there is lack of transparency.
- There have been several instances where companies have misled their net profits to get away from CSR mandate.
Suggestions to make CSR efficacious in India
- There is need of amendment in Section 135 which should allow CSR initiatives beyond fiscal spending. For instance if a corporation is engaged in making notebooks, then it can take distribute some stock to marginalised students, if a company is making sanitary napkins, then it can distribute some in rural areas etc.
- Companies should collude with the institutes involved in assessing the actual social problems and then the company should strategically invest to eradicate those problems instead of vigorously spending money on any CSR activity.
- Apart from the above mentioned collusion, the companies should also collude with the ground workers and NGOs to have better and real perspective.
- Practices for escaping CSR mandate by the companies should be strictly scrutinized and punished.
CSR constitutes as an important aspect in social development as well as in removing carbon footprints of any company. International Human Rights law is diligent enough to ensure sustainable growth if society and to minimize the negative effects of any corporations. These various instruments are evident of the fact that human rights law is cautious towards promotion of CSR activities; however, the non-binding nature of Human rights declaration is a threat. There is no Instrument to deal with strict enforcement of CSR Policy by various Companies within a state. This calls for better and exhaustive convention with a strong enforcement mechanism to ensure adherence nationally and internationally
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