UNIT 4: CORPORATE SOCIAL RESPONSIBILITY

Comprehensive Exam Notes — 4th Year BBA/MBA

1. Concept of Corporate Social Responsibility (CSR)
CSR is the obligation of a corporation to conduct business in a manner that is ethical, accountable, and
beneficial to society beyond profit maximization. It integrates economic, legal, ethical, and philanthropic
responsibilities into business strategy.
1. Carroll's Pyramid (1991): Four-layer framework: Economic (be profitable) → Legal (obey law) →
Ethical (be ethical) → Philanthropic (be a good corporate citizen); foundational model for CSR
conceptualization.
2. Triple Bottom Line (TBL): John Elkington's 3P model — People, Planet, Profit — mandates firms
measure social and environmental performance alongside financial outcomes.
3. Stakeholder Theory vs. Shareholder Theory: Freeman's stakeholder model expands corporate
duty to employees, suppliers, communities, and environment; contrasts with Friedman's view that
social responsibility is profit maximization alone.
4. Voluntary vs. Mandatory CSR: In India, CSR under Section 135 of Companies Act 2013 is
mandatory for qualifying firms, making India one of the few countries with legislated CSR
expenditure obligations.
5. Inside-Out vs. Outside-In Linkages: Porter & Kramer's framework: Inside-out linkages =
company's impact on society; Outside-in linkages = societal forces shaping company
competitiveness; CSR strategy must address both.
6. Responsive vs. Strategic CSR: Responsive CSR = acting as a good citizen and mitigating harm;
Strategic CSR = creating shared value where social programs reinforce competitive advantage
(Porter & Kramer, 2006).
7. Social Contract Theory: A firm operates under an implicit contract with society — receiving
societal resources (labor, infrastructure, legal systems) and obligated to return social value;
violation erodes the license to operate.
8. Enlightened Self-Interest Doctrine: Corporations practice CSR not purely altruistically but
because it generates long-term returns through reputation capital, employee retention, consumer
loyalty, and risk reduction.
9. Institutional Theory of CSR: Firms adopt CSR practices due to coercive (regulatory), normative
(industry standards), and mimetic (imitation of peers) isomorphic pressures from institutional
environments.

EXAMPLE: CSR Concept in Practice

Tata Group's CSR is rooted in institutional philanthropy and enlightened self-interest — 66% of
Tata Sons' equity is held by charitable trusts. This demonstrates Carroll's Pyramid fully: profit-
making entities funding legal, ethical, and philanthropic obligations simultaneously.

CARROLL'S PYRAMID OF CSR

PHILANTHROPIC
(Be a good corporate citizen)
ETHICAL
(Be ethical — do what is right)
LEGAL
(Obey the law)
ECONOMIC (Be Profitable —
ECONOMIC ECONOMIC
Foundation of all CSR)
2. Corporate Philanthropy
Corporate philanthropy refers to voluntary contributions by corporations to social causes through
donations, grants, employee volunteering, or in-kind gifts. It is the discretionary, goodwill-driven tier of
CSR and sits at the top of Carroll's Pyramid.
10. Strategic Philanthropy vs. Pure Philanthropy: Strategic philanthropy aligns charitable giving
with core business competencies (e.g., tech firm donating STEM education programs); pure
philanthropy has no business motive — both serve social goals but differ in integration depth.
11. Corporate Foundations as Vehicles: Companies create dedicated foundations (e.g., Infosys
Foundation, Azim Premji Foundation) to institutionalize philanthropic efforts, ensuring governance,
continuity, and tax benefits under Income Tax Act Section 80G.
12. Cause-Related Marketing (CRM): Pioneered by American Express (1983); ties commercial
transactions to charitable donations — a percentage of product sales goes to a designated cause;
blurs line between CSR and marketing.
13. Employee Volunteering Programs (EVPs): Structured programs where employees devote work
hours to community service; firms gain goodwill and employee engagement; examples: IBM's
Community Service Teams, Wipro's Earthian program.
14. In-Kind Donations vs. Cash Grants: In-kind donations (products, services, expertise) often
deliver higher social utility than cash grants, especially for non-profits lacking procurement
capacity; also reduce tax burden on surplus inventory.
15. Donor-Advised Funds (DAFs): Financial intermediaries that pool corporate donations and
disburse to approved NGOs; provide anonymity, tax efficiency, and professional fund management
for large-scale philanthropic portfolios.
16. Matching Gift Programs: Corporations match employee charitable contributions 1:1 or 2:1;
amplifies employee engagement and community investment without sole reliance on corporate
budget allocation.
17. Philanthrocapitalism: Approach where philanthropic investment is treated with venture capital
discipline — outcome metrics, return on social investment (ROSI), and scalability are demanded;
associated with Gates Foundation model.
18. Criticism: Greenwashing and Tokenism Risk: Philanthropy divorced from core business
operations can constitute mere image management; Anita Roddick (Body Shop) argued
corporations use philanthropy to distract from harmful core practices — necessitates integrated
CSR over isolated giving.

EXAMPLE: Corporate Philanthropy

Azim Premji Foundation has committed over ₹1,45,000 crore to education in India — one of the
largest philanthropic pledges globally. Unlike pure charity, it employs outcome metrics and
operates district-level field institutions, reflecting the philanthrocapitalism model.

CORPORATE PHILANTHROPY: TYPES & MECHANISMS

TYPE MECHANISM / EXAMPLE
Strategic Philanthropy Aligns with business core (Tech firms → STEM
grants)
Corporate Foundations Infosys Foundation, Azim Premji Foundation
Cause-Related Marketing % of sales donated to NGO (American Express
model)
Employee Volunteering IBM, Wipro structured volunteer hours
In-Kind Donations Product/expertise gifts to NGOs
Matching Gift Programs 1:1 employee donation matching
Philanthrocapitalism Gates Foundation outcome-metrics model
3. Strategic Planning and Corporate Social Responsibility
Strategic CSR embeds social responsibility into the firm's strategic planning process — moving beyond
compliance and charity to create shared value where business and social objectives reinforce each
other.
19. Porter & Kramer's Shared Value Framework: Argues that companies create economic value by
creating societal value; three routes: reconceiving products/markets, redefining productivity in
value chains, and enabling local cluster development.
20. CSR as SWOT Input: CSR-relevant factors enter strategic analysis: environmental regulations
(Threats), community relationships (Opportunities), ethical reputation (Strengths), unresolved
social impacts (Weaknesses).
21. Materiality Assessment in Strategy: GRI-recommended process to identify and prioritize CSR
issues most significant to stakeholders and business performance; output is a Materiality Matrix
that guides resource allocation.
22. CSR Integration in Mission/Vision Statements: Companies like Patagonia embed
environmental responsibility into founding mission ('We're in business to save our home planet');
strategic alignment ensures CSR is not siloed but organization-wide.
23. Balanced Scorecard (BSC) Extended for CSR: Kaplan & Norton's BSC adapted to include
social/environmental KPIs alongside financial, customer, internal process, and learning
perspectives — ensures CSR metrics are tied to strategic performance review.
24. Long-Term Value Creation vs. Short-Term Profit Tension: CSR initiatives often sacrifice short-
term margins for long-term brand equity, regulatory goodwill, and risk reduction; strategic planning
must model NPV of social investments with appropriate discount rates.
25. Stakeholder Mapping in Strategic CSR Planning: Power-Interest Grid (Mendelow Matrix)
categorizes stakeholders by influence and interest; determines engagement depth (manage
closely vs. keep informed) to prevent strategic surprises from communities or regulators.
26. CSR in Corporate-Level vs. Business-Unit Strategy: Corporate-level CSR sets group-wide
values and compliance frameworks; business-unit CSR adapts them to sector-specific material
issues — requires vertical alignment to avoid contradictory messaging.
27. Scenario Planning with Social Risk Variables: Climate change, geopolitical instability,
inequality, and regulatory shifts are modeled as social risk scenarios in strategic planning (e.g.,
Shell's scenario planning unit integrates societal trends since 1970s).

EXAMPLE: Strategic CSR Planning

Unilever's Sustainable Living Plan (USLP) was embedded directly into corporate strategy —
committing to halve environmental footprint while doubling revenues by 2020. Each brand was
required to have a social purpose. This is strategic CSR operationalized through cascading KPIs
in the Balanced Scorecard.

CSR STRATEGIC PLANNING PROCESS

STAGE CSR ACTION
1. Vision/Mission Embed social purpose in founding statements
2. Environmental Scan Include CSR factors in PESTLE & SWOT
3. Materiality Assessment Identify key ESG issues via stakeholder survey
4. Strategy Formulation Porter's Shared Value — align business & social
goals
5. Implementation BSC with CSR KPIs; assign ownership
6. Monitoring & Review GRI Reporting, ESG ratings, Stakeholder
feedback
4. Relationship of CSR with Corporate Sustainability
Corporate sustainability refers to a company's long-term viability through environmental stewardship,
social equity, and economic performance. CSR is often the operational expression of sustainability
commitments — the two are complementary but conceptually distinct.
28. Brundtland Definition Applied to Corporations: Sustainability = 'meeting present needs without
compromising future generations' ability to meet theirs' (WCED, 1987); corporations apply this by
ensuring that resource consumption and waste generation remain within planetary boundaries.
29. ESG Framework as Sustainability Measurement Tool: Environmental, Social, and Governance
(ESG) metrics quantify corporate sustainability for investors; CSR programs generate data inputs
for ESG scoring used by MSCI, Sustainalytics, and Bloomberg indices.
30. Circular Economy Integration: Sustainability moves CSR beyond philanthropy to redesigning
production systems — closed-loop supply chains, zero-waste manufacturing, and product take-
back programs reduce resource dependency and long-term operational risk.
31. Natural Capital Accounting: Corporations now measure and monetize their dependence on
ecosystem services (clean water, biodiversity, carbon sinks); integrating natural capital accounting
into balance sheets represents advanced sustainability-CSR convergence.
32. UN SDGs as Corporate Sustainability Roadmap: 17 Sustainable Development Goals (2015–
2030) provide a universal framework for corporate sustainability strategies; CSR activities are
mapped to specific SDGs in annual reports (e.g., SDG 4 for education CSR).
33. Sustainability Reporting Standards: GRI vs. SASB vs. TCFD: GRI (Global Reporting Initiative)
covers multi-stakeholder ESG disclosure; SASB is sector-specific for investor audiences; TCFD
focuses on climate-related financial risks — companies often use all three.
34. Business Case for Sustainability: Risk-Adjusted Returns: Sustainability reduces exposure to
stranded assets, regulatory penalties, and reputational crises; KPMG studies show ESG leaders
deliver 3–5% higher risk-adjusted returns than laggards over 10-year horizons.
35. Decoupling Economic Growth from Environmental Degradation: A core sustainability
objective: absolute decoupling means GDP/revenue grows while resource use and emissions fall;
CSR programs targeting carbon neutrality and water positivity contribute to this decoupling goal.
36. Integrated Reporting (IR) Framework: IIRC's <IR> Framework requires companies to report on
how they create value across financial, manufactured, intellectual, human, social, and natural
capitals — bridging CSR disclosure with sustainability reporting.

EXAMPLE: CSR & Sustainability

Mahindra Group's 'Rise for Good' platform maps all CSR activities to UN SDGs and discloses
them through GRI Standards and Integrated Reporting. Their Project Hariyali (tree plantation)
addresses SDG 13 (Climate Action), contributing to both corporate sustainability and CSR
mandate under Companies Act.

CSR vs. CORPORATE SUSTAINABILITY — KEY DISTINCTIONS

CORPORATE
DIMENSION CSR
SUSTAINABILITY
Long-term viability of firm &
Focus Stakeholder welfare & ethics
planet
Time Horizon Short to medium term Long term (intergenerational)
Measurement Social impact reports ESG scores, SDG mapping, IR
Strategic, systemic risk
Driver Regulatory, reputational
reduction
Community programs,
Output Business model transformation
philanthropy
5. CSR and Business Ethics
Business ethics provides the normative foundation on which CSR rests — defining what corporations
ought to do based on moral principles. CSR translates ethical obligations into concrete policies and
stakeholder commitments.
37. Normative Theories Underpinning CSR Ethics: Utilitarianism (maximize aggregate social
welfare), Kantian Deontology (duty-based obligations to stakeholders), Virtue Ethics (character of
the firm), and Contractarianism (social contract) — each generates different CSR obligations.
38. Ethical Relativism vs. Ethical Universalism in Global CSR: Multinationals face tension
between local cultural norms and universal ethical standards; UN Global Compact's 10 principles
represent a universalist approach to baseline ethical conduct across all operating jurisdictions.
39. Corporate Moral Agency: Debate on whether corporations can be moral agents; French (1984)
argues they can through Corporate Internal Decision (CID) structures; legal personality and
vicarious liability reinforce corporate moral accountability.
40. Whistleblower Protection as Ethical-CSR Intersection: Companies with strong CSR
frameworks institutionalize whistleblower mechanisms (Vigil Mechanism under Companies Act
S.177); protects internal ethical dissent — absence indicates governance failure.
41. Supply Chain Ethics and Extended CSR Responsibility: Ethical obligation extends to Tier-1
and Tier-2 suppliers — child labor, forced labor, unsafe conditions in supplier facilities constitute
CSR failure even if the parent company is not directly culpable (cf. Rana Plaza, 2013).
42. Conflict of Interest Governance: Ethics codes prohibit directors and officers from situations
where personal interest conflicts with corporate duty; CSR reporting on anti-corruption (GRI 205)
requires disclosure of anti-bribery training and incidents.
43. Ethical Investment and Socially Responsible Investing (SRI): Investors apply negative
screening (exclusion of tobacco, weapons), positive screening (ESG leaders), and engagement
strategies; ethical investment creates market incentive for corporate ethical behavior.
44. Greenwashing as Ethical Violation: Misrepresenting environmental credentials to gain
reputational benefit constitutes deceptive practice under consumer protection law and violates
CSR's ethical foundation; EU Green Claims Directive (2023) imposes legal liability.
45. Ethical Leadership and Tone at the Top: CEO and board commitment to ethics is the strongest
predictor of organizational ethical culture; CSR frameworks require board-level CSR oversight
(CSR Committee under Companies Act) to embed ethics in governance.

EXAMPLE: CSR & Business Ethics

Volkswagen's 'Dieselgate' scandal (2015) — deliberate manipulation of emission tests —

represents a catastrophic failure of business ethics masquerading as environmental CSR. VW's
public sustainability reports claimed compliance; the deception cost $33 billion in fines, illustrating
that ethical failure destroys CSR credibility irreversibly.

LINKAGE: ETHICAL THEORIES → CSR OBLIGATIONS

ETHICAL THEORY CSR OBLIGATION DERIVED
Utilitarianism Maximize net social welfare; cost-benefit analysis
of CSR spend
Kantian Deontology Duty to stakeholders regardless of profit
outcomes
Virtue Ethics Cultivate corporate character — honesty,
fairness, responsibility
Social Contract Theory Operate within societal expectations; maintain
license to operate
Stakeholder Theory Balance interests of all stakeholders, not just
shareholders
6. CSR and Corporate Governance
Corporate governance provides the structural framework of accountability, transparency, and control
within which CSR is operationalized. Good governance is a prerequisite for credible, sustained CSR —
without it, CSR commitments become performative.
46. Board-Level CSR Oversight: CSR Committee: Companies Act 2013, S.135 mandates a CSR
Committee of the Board (minimum 3 directors, including 1 independent) responsible for
formulating and monitoring CSR policy — embedding CSR in governance architecture.
47. Agency Theory and CSR Governance: Agency problem: managers (agents) may divert CSR
resources for personal reputational gain rather than shareholder/stakeholder value; governance
mechanisms (audit, disclosure, board oversight) mitigate this risk.
48. Transparency and Non-Financial Disclosure: SEBI's Business Responsibility and Sustainability
Report (BRSR — mandatory from FY 2022-23 for top 1,000 listed companies) integrates ESG
disclosures into governance reporting framework.
49. Executive Compensation Linked to CSR KPIs: Progressive governance frameworks tie CEO
and senior management variable pay to ESG/CSR performance metrics — aligning personal
incentives with social and environmental commitments.
50. Independent Directors as CSR Watchdogs: At least one independent director on CSR
Committee ensures objectivity; independent directors with stakeholder perspective prevent CSR
from being reduced to compliance checkbox.
51. Stakeholder Governance Model (Pluralist Model): Expands traditional shareholder-centric
governance; codetermination models (Germany's supervisory boards include employee
representatives) institutionalize stakeholder interests in governance.
52. Anti-Corruption and Anti-Bribery Governance: UK Bribery Act 2010, India's Prevention of
Corruption Act — governance frameworks require adequate procedures (policies, due diligence,
training); failure constitutes corporate liability regardless of individual culpability.
53. Integrated ESG Reporting and Audit: Third-party assurance of CSR/ESG reports (by Big4 firms)
enhances credibility; IIRC's Integrated Reporting Framework demands connectivity between
financial and non-financial governance disclosures.
54. SEBI Listing Obligations and CSR Governance: LODR Regulations require listed companies to
disclose CSR activities, CSR Committee composition, and unspent CSR amounts; non-
compliance attracts financial penalties and regulatory scrutiny from SEBI.

EXAMPLE: CSR & Corporate Governance

Satyam Computers scandal (2009) — India's largest corporate fraud — exposed how absence of
governance (rubber-stamp board, no independent oversight) enables CSR fraudulence. Post-
Satyam, Companies Act 2013 mandated CSR Committees with independent directors, directly
linking governance reform to CSR accountability.

CSR-GOVERNANCE INTEGRATION ARCHITECTURE

GOVERNANCE LAYER CSR FUNCTION
Board of Directors Set CSR policy, approve budget, oversight
accountability
CSR Committee Formulate policy, monitor implementation, report
to Board
CEO/MD 'Tone at the top'; cascade CSR into organizational
culture
CFO Budget allocation, fund utilization compliance
(S.135)
Audit Committee Review CSR expenditure, prevent siphoning of
CSR funds
Independent Auditors Third-party ESG/CSR report assurance
SEBI / MCA Regulatory oversight; enforce BRSR and
Companies Act CSR provisions
7. CSR Provisions under the Companies Act 2013
Section 135 of the Companies Act 2013, read with CSR Rules 2014 (amended 2021), is the statutory
backbone of mandatory CSR in India — making India the first country in the world to legislate a
minimum CSR expenditure requirement.
55. Applicability Threshold (S.135(1)): Companies with net worth ≥ ₹500 crore OR turnover ≥
₹1,000 crore OR net profit ≥ ₹5 crore in immediately preceding financial year are mandated to
constitute a CSR Committee and spend on CSR.
56. Mandatory Spend Quantum: 2% of Average Net Profit: 2% of average net profit of immediately
preceding 3 financial years (calculated under S.198) must be spent; profit for this calculation
excludes dividends from foreign subsidiary companies.
57. Schedule VII Activities: CSR spending restricted to Schedule VII activities: poverty eradication,
education, gender equality, environmental sustainability, healthcare, national heritage, rural
development, armed forces welfare, sports, PM-CARES, etc.
58. Implementation Modalities: Companies can implement CSR (a) directly, (b) through registered
Section 8 companies, trusts, or societies, (c) through government bodies, or (d) through any entity
established by Central/State Government.
59. Unspent CSR Amount: Two Distinct Treatments: Unspent on ongoing projects → transferred to
Unspent CSR Account within 30 days of FY end, to be utilized within 3 years; Unspent on non-
ongoing activities → transferred to PM National Relief Fund or Schedule VII funds within 6 months.
60. Penalty for Non-Compliance (2021 Amendment): Company fined 2x unspent amount or ₹1
crore, whichever is less; officer in default fined ₹25 lakh or 1/10th of unspent amount, whichever is
less — converting CSR obligation from disclosure-based to penalty-based.
61. Impact Assessment Requirement: Companies with annual CSR obligation ≥ ₹10 crore and
projects with ≥ ₹1 crore outlay per project must conduct third-party impact assessment; cost of
assessment capped at 5% of CSR budget or ₹50 lakh.
62. Annual Report Disclosure (Form CSR-2): Separate Annual Report on CSR activities is
mandatory; from FY 2021-22, Form CSR-2 to be filed separately with MCA; disclosures include
CSR policy, Committee composition, project-wise expenditure, and carry-forward amounts.
63. 10% Administrative Overhead Cap: Administrative expenses of the company for CSR purposes
capped at 10% of total CSR expenditure; CSR capacity-building expenditure for implementing
agencies also included within this 10% cap.

EXAMPLE: Companies Act CSR Provision

Reliance Industries (FY2023): CSR obligation ≈ ₹900+ crore (2% of average net profit). Spent on
healthcare (HM hospitals), education (Dhirubhai Ambani International School), disaster relief.
Filed Form CSR-2 disclosing project-wise spend, demonstrating compliance with S.135
disclosure obligations.

S.135 CSR COMPLIANCE FRAMEWORK — KEY NUMBERS

PARAMETER THRESHOLD / REQUIREMENT
Net Worth Trigger ≥ ₹500 crore
Turnover Trigger ≥ ₹1,000 crore
Net Profit Trigger ≥ ₹5 crore
Mandatory Spend 2% of average net profit (3 years)
Admin Overhead Cap 10% of CSR expenditure
Impact Assessment Trigger CSR obligation ≥ ₹10 crore
Penalty (Company) 2x unspent or ₹1 crore (lower)
Penalty (Officer) 1/10th unspent or ₹25 lakh (lower)
8. CSR Committee
The CSR Committee is a mandatory sub-committee of the Board of Directors constituted under Section
135(1) of the Companies Act 2013. It is the governance body responsible for the formulation,
implementation, and monitoring of CSR activities.
64. Composition Requirements under S.135(1): Minimum 3 directors, of which at least 1 must be an
independent director; exception: companies not required to have independent directors need not
include one — only 2 directors required in such cases.
65. Unlisted Public Company CSR Committee: If company does not have obligation to appoint
independent directors under S.149(4), CSR Committee must have at least 2 directors; captures
SME-scale unlisted companies within the framework.
66. Formulation of CSR Policy: Primary function: draft a CSR Policy indicating activities to be
undertaken per Schedule VII, implementation methodology, monitoring process, and modalities for
transparent utilization of funds.
67. Budget Recommendation to Board: Committee recommends the annual CSR expenditure to the
Board; the Board may modify but must record reasons for any modification; ensures budgetary
discipline and alignment with 2% mandate.
68. Annual Action Plan: As per CSR Rules 2014 (amended 2021), CSR Committee formulates an
Annual Action Plan listing: projects/programs, implementation agencies, timelines, modalities, and
monitoring mechanism.
69. Monitoring and Reporting Obligation: Committee monitors implementation of CSR projects and
reports compliance status to the Board; Board's Annual Report includes committee's disclosure on
CSR spending vs. obligation (the 'comply or explain' requirement).
70. CSR Committee and Impact Assessment Oversight: For eligible companies (CSR obligation ≥
₹10 crore), CSR Committee oversees commissioning and reviewing third-party impact
assessments to evaluate effectiveness of CSR interventions.
71. Chief CSR Officer / Nodal Officer Role: Companies appoint a nodal officer (equivalent to Chief
CSR Officer) to coordinate CSR Committee functions; responsible for project identification, NGO
due diligence, fund disbursement, and utilization certificate collection.
72. Distinction from Other Board Committees: Unlike Audit Committee (mandatory for all listed
cos) or Nomination Committee, CSR Committee is triggered by financial thresholds; its mandate
spans strategy, operations, and governance — unique cross-functional jurisdiction.

EXAMPLE: CSR Committee

HDFC Bank's CSR Committee (FY2023) comprises 3 Board Directors including 1 independent
director. It oversees 'Parivartan' — HDFC's CSR programme. The Committee approved ₹945
crore CSR spend across rural development, healthcare, and education; reviewed third-party
impact assessments for major projects.

CSR COMMITTEE: STRUCTURE & FUNCTIONS

ELEMENT DETAIL
Minimum Members 3 Directors (2 if no independent director
obligation)
Independent Director At least 1 mandatory (if company has ID
obligation)
Key Function 1 Formulate CSR Policy under Schedule VII
Key Function 2 Recommend annual CSR budget to Board
Key Function 3 Draft Annual Action Plan (projects, timelines,
agencies)
Key Function 4 Monitor implementation and report to Board
Key Function 5 Oversee impact assessments (if applicable)
Reporting Output CSR section in Board's Annual Report + Form
CSR-2
9. CSR Models
CSR models provide conceptual frameworks for understanding how corporations integrate social
responsibilities into their operations. Different models reflect varying philosophical, cultural, and
strategic orientations toward the firm's social role.
73. Carroll's Four-Part Model (1979): Economic → Legal → Ethical → Philanthropic responsibilities
in ascending discretion; economic responsibility is mandatory baseline; philanthropic is voluntary;
most cited CSR taxonomy globally.
74. Archie Carroll's CSR Pyramid (1991): Visual representation of four-part model: economic as
base (largest), philanthropy at apex (smallest); demonstrates that financial viability is prerequisite
for fulfilling higher-order social obligations.
75. Clarkson's Stakeholder Model: Max Clarkson (1995) classifies stakeholders as Primary
(survival-dependent: shareholders, employees, customers, suppliers) and Secondary (not survival-
critical: media, government, community); CSR prioritized accordingly.
76. Wartick & Cochran's Corporate Social Performance Model (1985): Three-dimensional model:
Principles (CSR as responsibility), Processes (corporate social responsiveness — reactive,
defensive, accommodative, proactive), Policies (management of stakeholder issues).
77. Wood's Corporate Social Performance (CSP) Model (1991): Integrates principles (institutional,
organizational, individual), processes (environmental scanning, stakeholder management, issues
management), and outcomes (social programs, policies, impacts) — most comprehensive CSR
model.
78. Elkington's Triple Bottom Line (TBL) Model: Performance measured on 3 axes: Economic
(profit), Social (people), Environmental (planet); pioneered integrated sustainability measurement;
adopted by GRI standards and now forms basis of ESG reporting.
79. Porter & Kramer's Creating Shared Value (CSV) Model: Post-CSR evolution: firms create
economic value by creating societal value — through product innovation (markets), supply chain
productivity, and ecosystem/cluster development; treats social issues as business opportunities.
80. Indian Trusteeship Model (Gandhian): Gandhi's doctrine of Trusteeship: wealth holders are
trustees of society's resources; business profit must be managed for community welfare;
influenced TATA Group's philanthropic governance structure — indigenous Indian CSR model.
81. Concentric Circle Model (Committee for Economic Development, 1971): Inner circle: basic
economic function; intermediate circle: exercising economic function with social consciousness;
outer circle: involvement in broader social concerns; precursor to Carroll's model.

EXAMPLE: CSR Models

ITC Limited applies the Triple Bottom Line Model explicitly — 'E Choupal' (e-agriculture platform)
generates economic value for ITC while creating social value for farmers (empowerment, income)
and environmental value (sustainable agriculture). This exemplifies CSV (Porter & Kramer)
layered on TBL — making ITC a benchmark case for theory-in-practice CSR.

CSR MODELS: COMPARATIVE OVERVIEW

MODEL AUTHOR/YEAR CORE CONCEPT
Economic → Legal → Ethical →
Carroll's Pyramid Carroll (1991)
Philanthropic
Triple Bottom Line Elkington (1994) People + Planet + Profit
 Principles + Processes +
Corporate Social Performance Wood (1991)
Outcomes
Social value = Competitive
Creating Shared Value Porter & Kramer (2011)
advantage
Business = Trustee of societal
Trusteeship Model Gandhi / Tata tradition
resources
Primary vs. secondary
Stakeholder Model Clarkson (1995)
stakeholder management
10. CSR Codes
CSR codes are voluntary or semi-voluntary instruments — principles, guidelines, and charters —
adopted by companies, industry bodies, or international organizations to standardize CSR conduct and
reporting across sectors and geographies.
82. UN Global Compact (UNGC) — 10 Principles: Launched 2000; 10 principles across Human
Rights (1-2), Labour (3-6), Environment (7-9), Anti-Corruption (10); largest voluntary corporate
sustainability initiative globally with 15,000+ participants; requires annual Communication on
Progress (COP).
83. OECD Guidelines for Multinational Enterprises (2011 update): Non-binding recommendations
to MNEs on responsible business conduct; cover employment, environment, anti-bribery,
consumer protection, science/technology; implemented by National Contact Points (NCPs) in
member countries.
84. ILO Tripartite Declaration on Multinational Enterprises: International Labour Organization's
MNE Declaration covers employment creation, training, working conditions, and industrial
relations; aligns MNE labor practices with international labor standards.
85. National Voluntary Guidelines (NVGs) / BRR India 2011: MCA issued NVGs on Social,
Environmental and Economic Responsibilities of Business; evolved into Business Responsibility
Report (BRR) required by SEBI for top 500 listed firms; now superseded by BRSR.
86. SEBI's BRSR (Business Responsibility and Sustainability Report) — 2021: Mandatory ESG
disclosure framework for top 1,000 listed companies from FY2022-23; 9 principles from NVGs;
quantitative, comparable disclosures on environmental, social, and governance parameters.
87. GRI Standards (Global Reporting Initiative): Most widely used international CSR/sustainability
reporting standards; three Universal Standards (Foundation, General Disclosures, Management
Approach) and Topic Standards (economic, environmental, social); enables comparability.
88. Equator Principles (EP IV — 2020): Risk management framework for financial institutions to
assess environmental and social risk in project finance; 137 financial institutions from 38 countries
have adopted; projects in sensitive sectors require ESIA.
89. AA1000 Stakeholder Engagement Standard: AccountAbility's framework ensuring organizations
engage stakeholders systematically; three principles: Inclusivity, Materiality, and Responsiveness;
used for CSR report verification and stakeholder management processes.
90. Ruggie Framework (UN Guiding Principles on Business & Human Rights — UNGPs): John
Ruggie's 'Protect, Respect, Remedy' framework (2011): State duty to protect human rights,
corporate responsibility to respect rights, access to remedy for victims; now forms basis of EU
Corporate Sustainability Due Diligence Directive.

EXAMPLE: CSR Codes

Tata Steel is a UNGC signatory (since 2008), reports under GRI Standards (GRI 2021), complies
with BRSR disclosures, and has adopted the Equator Principles for greenfield project financing.
This multi-code compliance demonstrates how companies layer multiple CSR codes to signal
credibility to diverse stakeholder groups.

KEY CSR CODES — QUICK REFERENCE

CODE / FRAMEWORK ISSUING BODY & KEY FOCUS
UN Global Compact UN — 10 Principles: Rights, Labour,
Environment, Anti-Corruption
OECD MNE Guidelines OECD — Non-binding; covers full spectrum of
responsible business
GRI Standards GRI — Universal sustainability reporting
standards
BRSR (India) SEBI — Mandatory ESG disclosure; top 1,000
listed cos
AA1000 AccountAbility — Stakeholder engagement
verification
Equator Principles EPFI — Environmental/social risk in project
finance
UNGPs (Ruggie) UN — Business & Human Rights: Protect-
Respect-Remedy
11. Standards on CSR
CSR standards are formal frameworks with defined requirements, measurement criteria, and
verification processes that allow organizations to systematically implement and communicate social
responsibility. They differ from codes in their technical rigor and applicability.
91. ISO 26000:2010 — Guidance on Social Responsibility: The foremost international CSR
standard; provides guidance (not requirements) on 7 core subjects; applicable to all organizations
regardless of size, sector, or geography; not certifiable.
92. SA8000 (Social Accountability International): Certifiable standard for ethical supply chains;
covers: child labor, forced labor, health & safety, freedom of association, discrimination,
disciplinary practices, working hours, remuneration; used for supplier audits globally.
93. ISO 14001 — Environmental Management System: Certifiable standard specifying requirements
for EMS; organizations demonstrate continuous improvement in environmental performance;
directly relevant to the environmental dimension of CSR; widely adopted in manufacturing.
94. ISO 45001 — Occupational Health & Safety: Replaces OHSAS 18001; certifiable OHS
management standard; addresses worker safety — a core social dimension of CSR; integrates
with ISO 14001 and ISO 9001 in integrated management systems.
95. GRI Sustainability Reporting Standards (GRI 1, 2, 3 — 2021): Universal standards for
sustainability disclosures; GRI 1 (Foundation), GRI 2 (General Disclosures), GRI 3 (Material
Topics); Sector Standards for 40+ industries; not certifiable but subject to third-party assurance.
96. AccountAbility AA1000 Series: AA1000APS (Accountability Principles Standard), AA1000AS
(Assurance Standard), AA1000SES (Stakeholder Engagement Standard); provides assurance
framework for CSR reports — the 'how to audit CSR' standard.
97. EMAS — EU Eco-Management and Audit Scheme: EU regulatory standard for environmental
management, stricter than ISO 14001; mandatory public environmental statement verified by
accredited verifier; applicable to organizations operating within EU.
98. B Corp Certification: Issued by B Lab (NGO); holistic social and environmental performance
standard covering governance, workers, community, environment, customers; legal commitment to
stakeholder accountability embedded in corporate charter.
99. UN SDG Industry Matrix and Sector-Specific Standards: UNGC and UNCTAD developed
sector-specific SDG industry matrices (financial services, food & agriculture, healthcare,
manufacturing) translating SDG commitments into industry-level performance standards.

EXAMPLE: CSR Standards in Practice

Infosys BPM is SA8000 certified (ethical supply chain), ISO 14001 certified (EMS), and reports
under GRI Standards with AA1000 assured reports. This 'standards stack' enables Infosys to
address labor rights, environmental performance, and reporting credibility simultaneously across
its global operations.

CSR STANDARDS: CERTIFIABLE vs. NON-CERTIFIABLE

STANDARD CERTIFIABLE? / FOCUS
ISO 26000 NO — Guidance only; 7 core CSR subjects
SA8000 YES — Ethical supply chain; labor rights
ISO 14001 YES — Environmental Management System
ISO 45001 YES — Occupational Health & Safety
GRI Standards NO — Reporting standard; assurance possible
AA1000 AS NO — Assurance framework for CSR reports
B Corp Certification YES — Holistic social & environmental
performance
EMAS YES (EU) — Environmental audit & management
12. ISO 26000 — Definition of Social Responsibility
ISO 26000:2010, 'Guidance on Social Responsibility,' is the definitive international standard defining
social responsibility (SR) for all types of organizations. It was developed through a multi-stakeholder
process involving 99 countries and 42 international organizations.
100. ISO 26000 Official Definition: Social Responsibility is defined as: 'Responsibility of an
organization for the impacts of its decisions and activities on society and the environment, through
transparent and ethical behavior' — emphasizing accountability, not just intent.
101. Key Elements: Contribution to Sustainable Development: SR must contribute to sustainable
development, including health and welfare of society; distinguishes SR from mere compliance or
philanthropy — development orientation is built into the definition.
102. Consideration of Stakeholder Expectations: SR requires organizations to take into account
the expectations of stakeholders — not just regulatory requirements; stakeholder identification and
engagement is definitionally embedded.
103. Compliance with Applicable Law as Baseline: ISO 26000 explicitly includes compliance with
applicable law and consistency with international norms of behavior as foundational elements —
SR is above and beyond legal compliance.
104. Integration Throughout the Organization: SR is not a separate add-on function; the ISO
26000 definition implies integration of socially responsible behavior into all organizational
decisions and activities — embedding vs. siloing.
105. 'All Types of Organizations' — Not Just Corporations: Unlike CSR (Corporate Social
Responsibility), ISO 26000 uses 'Social Responsibility' broadly — applicable to governments,
NGOs, cooperatives, hospitals, universities — universal applicability is a definitional design choice.
106. Impacts of Decisions AND Activities: Definition covers both policy-level decisions (investment
choices, market entry) and operational activities (manufacturing processes, supply chain) —
ensuring comprehensive scope of accountability.
107. Transparent and Ethical Behavior as Conduct Standard: Transparency (disclosure) and
ethics (value-based conduct) are the behavioral standards in the definition — not outcomes alone;
how SR is practiced matters, not just what is done.
108. Non-Certifiable by Design: ISO 26000 is guidance, not a management system standard; ISO
explicitly decided it should not be used for third-party certification or regulatory/contractual use —
distinguishes it from ISO 14001 or SA8000.

EXAMPLE: ISO 26000 Definition Application

A cooperative bank applying ISO 26000 would interpret 'impacts of decisions on society' to
include: lending decisions (who gets credit), investment choices (avoiding arms manufacturers),
and community engagement. The cooperative's SR extends to all stakeholder impacts — not just
environmental compliance — matching the ISO 26000 definitional breadth.

ISO 26000 DEFINITION — DECONSTRUCTED

ELEMENT OF DEFINITION IMPLICATION
'Responsibility of an organization' Applies to ALL types of organizations, not just
firms
'Impacts of decisions and activities' Both policy decisions AND day-to-day operations
'On society and the environment' Dual accountability — social AND environmental
outcomes
'Transparent and ethical behavior' Conduct standard: HOW, not just what is done
'Stakeholder expectations' Beyond legal compliance; proactive engagement
required
'Sustainable development' Long-term orientation; intergenerational
responsibility
'Integrated throughout organization' Not a silo; embedded in all functions and
decisions
13. ISO 26000 — Principles and Scope
ISO 26000 is structured around 7 principles of social responsibility and 7 core subjects. The scope
covers all types of organizations globally, with guidance applicable regardless of sector, size, or
development stage.
109. Principle 1: Accountability: Organization must be accountable to stakeholders and the
broader society for its impacts; accountability includes willingness to accept scrutiny and respond
to criticisms regarding decisions and activities.
110. Principle 2: Transparency: Transparent in decisions and activities affecting society and
environment; disclose policies, decisions, and outcomes in an accessible, accurate, and complete
manner to affected stakeholders.
111. Principle 3: Ethical Behaviour: Organization should behave ethically at all times; based on
values of honesty, equity, and integrity; reject practices that provide unfair advantage through
unethical means.
112. Principle 4: Respect for Stakeholder Interests: Identify, consider, and respond to the
interests of stakeholders — even those not directly in a contractual relationship; broader than
shareholder primacy.
113. Principle 5: Respect for Rule of Law: Compliance with all applicable laws and regulations; no
organization is above the law; includes tax obligations, competition law, and environmental
regulations across all jurisdictions of operation.
114. Principle 6: Respect for International Norms of Behaviour: Where national law is insufficient
or conflicts with international human rights norms, organizations should respect international
standards (ILO, UDHR, UNGC); applies especially to MNEs in weak governance states.
115. Principle 7: Respect for Human Rights: Recognize importance and universality of human
rights as protected by Universal Declaration of Human Rights; avoid infringing rights and address
adverse human rights impacts within sphere of influence.
116. 7 Core Subjects of ISO 26000: Organizational Governance; Human Rights; Labour Practices;
The Environment; Fair Operating Practices; Consumer Issues; Community Involvement and
Development — each has specific issues and expected actions.
117. Scope: Universality and Voluntariness: Applicable to public sector, private sector, and civil
society; intended for use in all countries — developed, developing, and transition economies;
voluntary adoption; cannot be used for certification purposes.

EXAMPLE: ISO 26000 Principles in Action

A pharmaceutical company applying ISO 26000 Principle 6 (Respect for International Norms)
would ensure affordable access to essential medicines in developing countries even where no
national law mandates it — aligning with UDHR Article 25 (right to health). This goes beyond
legal compliance, demonstrating the normative reach of ISO 26000's principles.

ISO 26000 — 7 PRINCIPLES & 7 CORE SUBJECTS

7 PRINCIPLES 7 CORE SUBJECTS INTEGRATION POINT
1. Accountability 1. Organizational Governance Board-level SR oversight
2. Transparency 2. Human Rights Rights due diligence disclosure
3. Ethical Behaviour 3. Labour Practices Fair employment conditions
4. Stakeholder Interests 4. The Environment Environmental impact mgmt
5. Rule of Law 5. Fair Operating Practices Anti-bribery, competition
6. Int'l Norms 6. Consumer Issues Safe products, fair marketing
7. Human Rights 7. Community Involvement Local development programs
14. ISO 26000 — Benefits
ISO 26000 provides both organizational and societal benefits by offering a universally recognized
framework for integrating social responsibility into governance, strategy, and operations. Benefits
accrue across multiple dimensions of organizational performance.
118. Competitive Advantage through SR Differentiation: ISO 26000 adoption signals commitment
to global SR norms; enhances reputation among environmentally and socially conscious
consumers, institutional investors, and international business partners.
119. Stakeholder Trust and Relationship Capital: Systematic stakeholder engagement per ISO
26000 guidance builds trust capital; reduces risk of reputational crises, community opposition, and
regulatory interventions that stem from stakeholder alienation.
120. Risk Management: Social and Environmental Risk Reduction: ISO 26000's 7 core subjects
function as a social risk map; organizations addressing all 7 systematically reduce exposure to
supply chain human rights violations, environmental liabilities, and governance failures.
121. Attraction and Retention of Talent: ISO 26000-aligned labor practices (fair wages, safe
workplaces, no discrimination) improve employer brand; Millennial and Gen Z workforce
increasingly select employers based on SR commitments.
122. Improved Access to Capital: ESG Investor Appetite: Institutional investors (UNPRI
signatories managing $120+ trillion) screen for ESG performance; ISO 26000-aligned
organizations provide data inputs for ESG ratings, improving access to sustainable finance
instruments (green bonds, SLLs).
123. Enhanced Regulatory Standing and License to Operate: Proactive SR beyond legal
compliance builds goodwill with regulatory authorities; reduces probability of stringent enforcement
actions and improves standing in regulatory consultations.
124. Supply Chain Sustainability and Resilience: ISO 26000 application to supply chain
management identifies social and environmental risks in upstream operations; leads to
diversification, ethical sourcing, and reduced vulnerability to supply chain disruptions.
125. Contribution to SDGs and Global Sustainability Goals: Organizations adopting ISO 26000
contribute measurably to UN SDGs; SDG alignment creates shared language with governments,
development banks, and multilateral institutions — unlocking partnership opportunities.
126. Organizational Cohesion and Employee Engagement: Common SR values embedded
through ISO 26000 create organizational culture alignment; employees in SR-active organizations
show higher engagement scores, lower turnover, and greater productivity (Gallup, Deloitte
research).

EXAMPLE: ISO 26000 Benefits

Wipro's adoption of ISO 26000 framework contributed to its inclusion in Dow Jones Sustainability
Index (DJSI) — one of the world's leading ESG stock indices. This status improved Wipro's
attractiveness to ESG-focused institutional investors, demonstrated measurable competitive
advantage from ISO 26000 alignment translating into capital market benefits.

ISO 26000 BENEFITS — CATEGORIZED

BENEFIT CATEGORY SPECIFIC BENEFIT
Competitive Reputation enhancement; SR differentiation in
market
Financial ESG investor access; reduced cost of capital
Risk Management Social & environmental risk identification &
mitigation
Human Capital Talent attraction, retention; employee
engagement
Regulatory License to operate; proactive regulatory
compliance
Supply Chain Ethical sourcing; supply chain resilience
Strategic SDG alignment; partnership with governments &
multilaterals
15. ISO 26000 — Certification
ISO 26000 is intentionally designed as a guidance document and NOT a certifiable management
system standard. This is a deliberate architectural decision by ISO — understanding this distinction is
critical, as it fundamentally differentiates ISO 26000 from ISO 9001 or ISO 14001.
127. Non-Certifiable by ISO Policy Decision: ISO explicitly decided that ISO 26000 shall not be
used as a certification standard; Clause 1 of ISO 26000 states: 'It is not a management system
standard and it is not appropriate for certification purposes.'
128. Rationale: Guidance vs. Requirements: ISO 26000 uses the word 'should' (not 'shall');
management system standards (ISO 9001, 14001) use 'shall' — indicating mandatory
requirements subject to audit; guidance language makes third-party conformity assessment
inappropriate.
129. No ISO-Issued SR Certificate Exists: No ISO body issues any certificate, credential, or mark
under ISO 26000; any entity claiming 'ISO 26000 certified' is making a misleading claim — ISO
has explicitly warned against misuse.
130. Third-Party Assessments (Non-Certification): Veritas, TUV, and similar bodies offer 'ISO
26000 Alignment Assessments' or 'Compliance Checks' — these are NOT certifications; they
verify extent of conformance with guidance but carry no ISO imprimatur.
131. National Adaptations with Certification Variants: Some countries have developed national
standards based on ISO 26000 that include certification: Brazil's NBR ISO 26000, Denmark's DS
26000; these are separate national standards — not ISO 26000 itself.
132. ISO 26000 Used as Framework for SA8000 or ISO 14001 Implementation: ISO 26000's 7
core subjects serve as a strategic umbrella; organizations use ISO 26000 to identify SR priorities
and then implement certifiable standards (SA8000, ISO 14001, ISO 45001) for those specific
areas.
133. GRI — ISO 26000 Linkage Document: GRI and ISO issued a linkage document showing
correspondence between GRI Standards and ISO 26000 core subjects; allows companies using
GRI for reporting to also demonstrate ISO 26000 alignment.
134. Contractual and Regulatory Misuse Prohibited: ISO 26000 expressly prohibits use as a
contractual obligation or regulatory requirement; regulators and procurers cannot mandate 'ISO
26000 compliance' as a condition of contract — it distorts voluntary nature.
135. Future Direction: Evolution toward Measurable SR Standards: ISO/TMB (Technical
Management Board) continues to assess whether ISO 26000 should evolve into a verifiable
standard; ESG disclosure mandates globally are creating pressure; ISO working groups are
monitoring CSRD (EU) and ISSB developments.

EXAMPLE: ISO 26000 Certification Misunderstanding

A vendor claiming 'ISO 26000 Certified' on procurement documentation is making an inaccurate

claim — no such certification exists. The correct approach: the company may have undergone an
ISO 26000 Alignment Assessment by TUV SUD, which verifies the degree of guidance adoption.
Procurement officers must distinguish between ISO 26000 alignment reports and actual
certifiable standards like SA8000 or ISO 14001.

ISO 26000 vs. CERTIFIABLE CSR STANDARDS

FEATURE ISO 26000 SA8000 / ISO 14001
Type Guidance Standard Management System Standard
 Language 'Should' (guidance) 'Shall' (mandatory requirements)
Certification NOT POSSIBLE Third-party certification issued
Specific domains (labor /
Applicability All organizations
environment)
Conformity audit by accredited
Audit Alignment assessment only
body
ISO 14001 certificate mark
ISO Mark Cannot display ISO 26000 mark
available
Operational compliance &
Purpose Strategy & guidance
assurance

UNIT 4 — COMPLETE | 15 TOPICS COVERED

Each topic structured with: Intro | 9 Technical Pointers | Example | Diagram/Flow Table