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org (E-ISSN 2348-1269, P- ISSN 2349-5138)

Corporate Social Responsibility (CSR) in India: A

Case Study with reference to Reliance Industries
Limited
Anjan Kumar Roy Choudhury
Assistant Professor,
Dept. of Commerce,
Vidyasagar Evening College,
Kolkata, West Bengal, India.

Abstract

Corporate Social Responsibility (CSR) is the attitude and thinking of the corporate entities to discharge its
responsibility towards society, environment and own profitability, known as Triple Bottom Line, for
sustainable development. For a corporate body profit making should not be sole criteria, besides, it should
concentrate on the social responsibilities towards other stakeholders and the environment, which have a
significant contribution for the growth and development of the organisation. In India CSR has been made
mandatory for corporate entities with the enactment of Companies Act, 2013, but from ethical & societal
point view they should perform such responsibilities for social inclusion and own profitability. The study
attempts to know the CSR activities in India and also the CSR activities of Reliance Industries Limited (RIL),
the largest private sector firm in India at this moment with respect to financial parameters, during the last few
years.

Key Words: CSR, Ethics, sustainable Development, Philanthropy, RIL

1. Introduction

In India social responsibilities of the businessmen and lords & kings even in the Vedic era are evidenced by
the ancient literature, in the Mouryan rein the great philosopher Kautilya emphasised on ethical practices of
businesses, which they used to do voluntarily by means of establishment of temples, digging of wells,
spreading of education among masses etc. Thus as far as CSR in concerned, India has a long past. The
objectives of corporate entities as well as all profit seeking business organisations are broadly categorised into
two parts- profit maximisation or wealth maximisation for its owners and social responsibilities. Corporate
Social Responsibility (CSR) indicates Triple Bottom Line approach i.e. responsibility towards society,
environment and profit earnings. This is also known as ‘3P’ Approach i.e. People, Planet and Profit.

People means persons related directly or indirectly with the organisations, like, workers and the people of the
society where it operates. Since they contribute to the organisation in different ways for the growth and
sustainable development, it is the responsibility of the corporate body to share a portion of their profit for the
benefit of the society.

Planet means environment where from it collects resources like, ram material, power etc. for its product. It is
their responsibility to protect the environment; not to produce any harmful product and to take measure to
control environmental pollution.

Profit means the economic value added after deducting the cost of capital and it increases the net wealth of
the owners of the organisation. Profit maximisation, which is the basic objective of the business entities, can

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be possible by reducing inefficiencies, reducing wastage, proper utilisation of raw material, man power and
other resources etc.

CSR should not be considered as only a social welfare or charity, but an integral part of the company’s policy.
Proper CSR policy should be taken by the entity for its sustainable development. Though prior to the
enactment of Companies Act, 2013, CSR was completely voluntary or philanthropic, but it gained a
momentum since 2014 after the legislation and also the CSR policy of the corporate bodies has now a specific
focus or direction.

2. Literature Review

The following published research papers have been reviewed thoroughly to identify the research gap in this
area, so that objectives can be fixed to undertake a study, as well as, knowledge about the unfold area can be
explored.

Saluja & Kapoor, 2017 studied ‘CORPORATE SOCIAL RESPONSIBILITY – EVOLUTION’ and concluded
that the success of corporate social responsibility lies mostly on the corporate business entities along with government
and corporate entities should protect the interests of all the stakeholders like, workers, society, environment, customers
etc. Profitability and growth of the business should not be the sole criteria; instead from legal and ethical point of view
they should come forward and discharge their social responsibilities in a country like India where poverty, fast growing
population, illiteracy are the major issues. They also added that in India corporate social responsibility was mentioned in
the ancient literatures.

Mitra et al., 2018 in their study ‘Communicating Corporate Social Responsibility in the post mandate
period: Evidence from India’ concluded from both theoretical and managerial point of view. From
theoretical point of view they showed that corporate social responsibility of the firm and its performance are
directly related. Besides they mentioned that in India CSR has been made mandatory with the enactment of
Companies Act, 2013 but it is restricted to large business entities. On the other hand, from managerial point of
view, the study showed that the management should consider the amount spent for CSR as an investment
since it accelerates the betterment of the firm’s performance.

Carroll, 2008 studied ‘A History of Corporate Social Responsibility: Concepts and Practices’ and came
to the conclusion that since the beginning of the current millennium CSR activity has become a global
phenomena, firms operating in European Union have shown their interest in CSR voluntarily, as reported by
OECD. The author also added that in today’s competitive world, CSR activity must add value to the success
of corporate entity, and CSR would be the key to success.

Enock & Basavaraji, 2014 studied ‘Corporate Social Responsibility of Tata company and ITC company: A
comparative study’ and concluded that today CSR is one of the pillars of success. Since all informations are
available to all the stakeholders today due to technological development, corporate bodies can’t ignore it,
instead CSR should be incorporated into business policies for sustainable development.

Vaidya, 2017 opined in his study ‘Corporate social responsibility as a social license’ that to get social licence
to operate in the society, corporate bodies should make fruitful investment in the society for social upliftment.
He also added that in India since The Companies Act, 2013 has come into effect, CSR activities has improved
significantly.

Mukherjee et al., 2017 presented their joint paper ‘Mandatory Corporate Social Responsibility: The India
Experience’ at the 8th Conference on Financial Markets and Corporate Governance (FMCG) 2017, At New
Zealand and found that the large companies which used to spend a considerable amount for CSR activities
have reduced their spending after the legislation, while small companies, as they have no legal obligation
discontinued spending for this purpose, as well as, government was disappointed for their focus and direction
of spending. They also inferred that there was a negative impact of the CSR spending on the firm’s profit
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during the post legislation period, specifically, large companies ( B Companies) who were forced to spend on
CSR activity for the first time by the Act.

Arora & Puranik, 2004 studied ‘A review of corporate social responsibility in Indian development’ and
opined that taking two aspects company’s own profitability in the one hand and development of the society on
the other, most of the Indian companies explain CSR activities in their own way, which is more or less
philanthropic, instead of addressing the main issues if the society and mostly it is CEO-driven.

3. Research Gap

It is evident with the above literature review that there are further scope of research to enlighten the CSR
activities of large corporate bodies in India after the enactment of Companies Act, 2013 and subsequent
Companies Amendment Rules.

4. Objective of the Study

The present study is consists of two objectives:

i. To understand the present & past CSR position in India;

ii. To know the CSR activities of Reliance Industries Limited and spending for such activities.
5. Research Methodology

This is a descriptive study and completely based on secondary data, collected from various research papers,
published in national and international journals, books& websites.
Case study has been made based on data of 5 years i.e. from the financial year 2011-12 to 2015-16. Data have
been presented and analysed with the tables.
6. Background of CSR in India

CSR in India is not a new concept but older than the western countries. From the different studies in this field
it can be observed that from the ancient nature of CSR till the mandated CSR in India it has crossed a lot of
miles and changed its nature, quality, quantity and direction. The entire time period can be classified into
different phases:

Table-I: Roadmap of CSR in India

Phase of CSR Nature

First ( till the 1st decade of 20th Mainly based on ethics and philanthropic. Till 1850 businessmen,
century) landlords, emperors out of their religious beliefs used to spend money for
construction of temples, reliefs for flood and other natural calamities
etc.(Arora, 2004). During the first decade of 20th century big industrialist
families like, Tata, Birla, Godrej etc. upgraded the concept by establishing
charitable trust, educational institutions etc.(Mohan, 2001)
Second ( India’s Independence Industrialists were pressed hard to contribute to the society for its welfare
struggle period i.e. till 1960) by showing their patriotism. Mahatma Gandhi asked the big industrialists
to show their gesture for the under privileged section of the society, but that
was self-regulated. Gandhi influenced the business houses to make modern
India and responding to Gandhi they made trustees for colleges, research
institutes etc.
Third ( Post independence Public Sector Undertakings (PSU) influenced CSR by distributing wealth
period i.e. 1960 to 1980) among the weaker section of the society (Arora, 2004). Different
malpractices were found due to industrial policies like, licensing, tax
reform, restriction in the private sector which led to legislation of corporate
governance, trade policies etc. Since PSUs were not operating successfully,
there was a natural intention to form private sector undertakings and thus
social welfare was interrupted. In consequences, a workshop on CSR was

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arranged in 1965 to address the transparency of the business houses and

social issues, where academicians, politicians and business representatives
took part.
Fourth (Post reform period i.e. Licensing system was abolished; in 1990s globalisation and liberalisation
1980 onwards) took place; corporate sector experienced huge profit (Arora & Puranik,
2004); they incorporated CSR as an integral part of their sustainable
business strategy; started contributing more towards society and charity
turned into responsibility.

Since, CSR in India was self- regulated and not towards priority sector oriented, government felt the
legislation of CSR and thus it was incorporated in the Companies Act, 2013. The voluntary CSR became
mandated CSR.

7. Provisions of Indian Companies Act, 2013

India is the first country across the world that has mandated CSR by insertion of section 135 in the Companies
Act, 2013, along with Schedule-VII of the said Act, on the assumption that this initiative will help to
accomplish the sustainable development of the nation. According to the section, every company that satisfies
either of the three criteria- (a) net worth of Rs. 500 crores or more; or (b) annual turnover of Rs. 1000 crores
or more; or (c) annual net profit of Rs. 5 crores or more, shall be bound to constitute a CSR committee of the
board, where there must be at least three directors and at least one of them must be independent director and
the company shall spend at least 2% of the average net profit of the last three years for CSR purpose.

The committee shall formulate and recommend CSR policy (indicating the activities to be performed by the
company, as mentioned in schedule- VII) of the company and shall recommend it to the board. The committee
shall also recommend the amount of expenditure
to be incurred for CSR purpose and will look after the CSR policy.
The Board shall approve the CSR policy, as recommended by the CSR committee, after taking necessary
conditions and shall disclose in the company’s website.
On failure to spend the specified amount of money for CSR purpose, the Board shall specify in its report the
reasons behind it.
Mandatory provisions of CSR have come into effect on and from 1.4.2014 and schedule-VII has been revised
accordingly.
According to revised Schedule-VII, only the following activities qualify for CSR:
i. Eradication of hunger, poverty and malnutrition;
ii. Promotion of health, education, vocational skill etc.;
iii. To bring equality in gender, women empowerment;
iv. To ensure environmental sustainability, swatch Bharat Koch etc.;
v. To protect natural heritage, art& culture;
vi. To provide benefit to army, war widows etc.;
vii. To give training for promoting rural sports, Olympic & paralympic sports etc.;
viii. To make contribution to PM’s National Relief Fund and other central govt. funds;
ix. To contribute fund for technology incubators situated within central universities;
x. To develop rural development projects; and
xi. To develop slum area.
If a company, qualifying for CSR activity as per provisions of the Act, fails to report can be imposed a penalty
of maximum Rs. 25, 00, 000 along with a probable imprisonment to extent of Maximum three years.
Source: Bombay Chamber of Commerce, August, 2018
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8. CSR Policy of Reliance Industries Limited (RIL)

The CSR policy of RIL is set with the philosophy “At Reliance, business priorities co-exist with social
commitments and our activities support inclusive growth.” introduced by Mukesh D. Ambani, chairman &
managing director of RIL. The policy reveals that CSR is an integral part of their sustainable growth.

The CSR policy of RIL is looked after by Reliance Foundation (RF) which was established in 2010, headed
by Nita M. Ambani. RF has a composite approach to address India’s most acute development challenges and
most of the CSR activities of RIL are run by RF.

Focus areas as identified by RIL

RIL has identified six major areas to discharge social responsibilities- (i)Rural Transformation, (ii) Health,
(iii)Education, (iv)Environment, (v)Arts, Heritage & Culture and (vi)Disaster Response.
RIL has also decided to incorporate other activities in compliance with Schedule-VII of the Companies Act,
2013 directly or through RF or by establishing other trust or society or anything else.
CSR Budget
i. Minimum 2% of the average net profit of the last three years to spent for CSR activities;
ii. All expenditures incurred for this purpose to be documented; and
iii. Any shortfall in any financial year to be disclosed in the CSR report, duly mentioning the reasons.

9. Data Analysis

Table-II: CSR expenditure of RIL from the F.Y. 2011-12 to 2015-16

CSR Expenditure FY FY FY FY FY
(in ` crore) 2015-16 2014-15 2013-14 2012-13 2011-12
Rural Transformation 107 127 166 74 24
Health 314 608 417 141 91
Education 215 18 80 67 75
Sports for Development 9 4 1 - -
Others 7 4 48 69 61
Total 652 761 712 351 251
Profit after Tax 27384 22719 22548 20886 -
Average Profit for last three Years 24217 22051 - - -
Percentage of CSR Expenditure on 2.6923 3.4511 - - -
Average Profit
Source: [Link] and compiled by the Author

10. Findings
i. Table-II shows that since the enforcement of Companies Act, 2013 regarding CSR (w.e.f.
1.4.2014), the company in the study (RIL) spent more than the threshold limit (2% of the average
profit after tax of the last three years) i.e. in the financial year 2014-15 & 2015-16.
ii. The profit figures from the financial year 2012-13 to 2015-16 shows an increasing trend. It means
CSR and profitability are directly related in this case. More specifically legal compliance regarding
CSR has no adverse effect on the company’s profitability.
iii. RIL used to spend on the areas mostly as focused by Schedule-VII of the Companies Act, 2013 but
they have already incorporated the rest of the areas in their CSR policy.
iv. Table-I shows that from Voluntary CSR to Mandated CSR, govt. of India concentrates more on
sustainable development and CSR activity of the corporate entities towards the focussed area.
11. Conclusion

The study reveals that the Govt. of India (GOI) is concerned about the underprivileged section of the society.
It is evident from voluntary CSR to mandated CSR. Though CSR in India was practised by the businessmen
from the long ago, but in most of the cases they used to think it as charity and it was regulated by top
executives. Now it’s the time, they should change their attitude and frame their CSR policy out of morality
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and sense of ethics, irrespective of legal compliance. Large corporate bodies cannot survive without the
people surrounding them and also the environment. Thus, they should be more sensitive while framing their
CSR policy. The company under the study (RIL) proves that CSR and the profitability are not adversely
related, rather CSR should be considered as an integral part of sustainable development. Besides profit
earning, this is the responsibility of every business entity (even those who are not legally bound), to include
the rest of the society and cautious about the environment. This should be the morality of large corporate
bodies to perform social responsibilities in accordance with Section 135 of the Companies Act, 2013 along
with Schedule-VII of the said Act.

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