Block-3

CORPORATE SOCIAL RESPONSIBILITY

IN INDIA
BLOCK 3 CORPORATE SOCIAL
RESPONSIBILITY IN INDIA
This block discusses in detail all the aspects of Corporate Social Responsibility
(CSR) in Indian context. Firstly, it touches upon the topics such as phases of
development, various models, trends of CSR in India. Further, Evolution of CSR
Law under Companies Act 2013 has been explained in detail where all the salient
aspects such as quantum of spending, committee constitution, audit etc have been
covered. Lastly, the importance of CSR in public sector enterprises (PEs/PSUs)
and the specific guidelines issued by government for them have been discussed in
detail.
Unit 9 first traces the history of CSR in India where different phases of development
have been explained. Then it discusses different models of CSR such as ethical
model, statist model, liberal model, stakeholder model. Further it traces the evolution
of regulatory mechanism of CSR in India, where CSR provisions under Companies
Act 2013 and its amendments have been touched upon. Lastly, current trends of
CSR and various CSR initiatives by several Indian companies have been elaborated
upon.
Unit 10 discusses the applicability of CSR Provisions and the activities listed out
under Schedule VII. Section 135(1) provides that every company attracted by CSR
provisions must constitute a Corporate Social Responsibility Committee of the Board
of Directors. The composition rules of the CSR Committee by different companies
and their duties & responsibilities have been listed. Other important provisions such
as Quantum of CSR Spending and Transfer of Unspent Amount, Implementation
& Monitoring of CSR Activities have been discussed in detail. Then, the latest
amendments in CSR law relating to several provisions have been explained.
Unit 11 first explains the meaning and scope of CSR in public enterprises. Then,
the global guidelines to promote CSR have been explained. Further the guidelines
of CSR issued by government for PSUs have been discussed in detail. Then the
revision of guidelines on CSR for CPSEs (Central Public Sector Enterprises), 2010
have been explained.
Corporate Social
Responsibility in India

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 CSR in Indian Context
UNIT 9 CSR IN INDIAN CONTEXT
Objectives
After reading this unit you will be able to:-
 Discuss the evolution of CSR in India
 Explain the models of CSR operating in India
 Discuss the current trends and practices of CSR in India
Structure
9.1 Introduction
9.2 CSR in India: Historical Background
9.3 Models of Social Responsibility Operating in India
9.4 Evolution of Legislation on CSR: Voluntary Practices to Regulatory Mechanism
9.5 Current Trends and Practices of CSR in India
9.6 CSR Initiatives of Indian Companies
9.7 Summary
9.8 Keywords
9.9 Self-Assessment Questions
9.10 References/Further Readings

9.1 INTRODUCTION
In this unit we will read about the evolution of CSR in India over time. India has a
long tradition of philanthropy since ancient times. During the preindustrial period,
philanthropy was largely motivated by religion. The merchants also used to help
the society to get over various natural calamities like famines and floods. During
the colonial rule, the industrial families used to contribute to social causes. During
independence movement, the notion of ‘Trusteeship’ introduced by Mahatma Gandhi
put pressure on the industrialists to contribute towards nation building and social
development. Post-independence, with the coming up of Public Sector Undertakings
(PSUs), private sector took a backseat and public sector became a key driver of
development. However, the limited effectiveness of the public sector, shifted the
expectation back to the private sector for socio-economic development of the country.
The economic liberalization in the 1990s helped the Indian companies to grow rapidly.
This increased their willingness to contribute towards social causes. The companies
started getting involved in various CSR programmes like building schools and hospitals,
empowering rural youth by providing vocational trainings, organizing health camps
etc. Corporates also started joining hands with NGOs to use their expertise in bringing
about a positive change in the lives of the people. With the passing of the Company’s
Act 2013 and the New CSR Rules 2014 which have come into effect since April
2014, CSR has become binding under legislation.
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Corporate Social
Responsibility in India 9.2 CSR IN INDIA: HISTORICAL BACKGROUND
The Phases of Development of CSR in India

The mention of the concept of CSR in India dates to the Vedic period. Rigveda
mentions about sharing of wealth by the rich with the poor. Ancient texts like Manu
Smriti also talks of the nature of business done which should be for the good of
the society and for the good of the business in the long run. It also instructs that
the means of wealth that is acquired should be in line with the principles of dharma.
One form of giving is through the religious institutions. Prior to the evolution of modern
philanthropy, religious institutions were the most important sources serving the poor
either through temple trusts, waqfs, gurudwaras and churches.
The book ‘Beyond Business: From Merchant Charity to Corporate Citizenship’
gives an account of philanthropic practices in India. This section draws on that book.
According to Sundar, (2000), the development of CSR in India can be divided
into four phases.
Phase 1 (CSR driven by Charity and Philanthropy): This phase is from 1850
to 1914. CSR in the initial phase was driven by culture, traditions, family values,
industrialization, and religion. Religious obligations and traditions based on charity
and philanthropy like dan, seva and zakat have been followed in India since ancient
times. In 1850s, the merchants, driven by the purpose of committing themselves to
the society for religious purposes made huge donations for construction of temples.
During times of famines and epidemics, the merchants also helped the society in
overcoming these calamities by donating food and money.
Industrialization was pioneered in India in the 19th century by a few families like
Tatas, Birlas, Godrej, Shriram, Singhania, Lalbhai, Sarabhai, Mahindra, Modi, Bajaj
and Annamali. These business houses were committed to CSR, however, while doing
so they also had motives such as business considerations, supporting of specific
communities and political objectives. During this phase, all the donations were done
for the construction of schools, hospitals, temples etc. without any consideration
of the long-term impact of these donations.
Phase 2 (CSR driven by Social Development): The second phase of CSR in
India is from 1914 to 1960. This period was dominated by India’s struggle for
independence. The CSR during this period was greatly influenced by Gandhi’s theory
of trusteeship. Established family businesses had established trusts for building of
schools, colleges, scientific and training institutions etc. These trusts also involved
themselves in various social causes initiated by Mahatma Gandhi like abolition of
untouchability, women’s empowerment, and rural development. During this phase,
the business houses were drawn to the political fight for independence. Not only
did they participate in the economic and social development of the country, they
perceived the economic development of the country as the fight against the British
rule. The vision of living in a free country was the driving force which led to involvement
of corporate sector in the development of the country.
Phase 3 (CSR in the Mixed Economy): The third phase of CSR in India is from
1960 to 1980. The role of state in development increased greatly after independence.
This phase was characterized by emergence of several public enterprises. Several
130 legislations on corporate governance, labour and environmental standards also came
into existence during this phase. Heavy regulations and License Raj replaced the CSR in Indian Context
self-regulatory activities of the corporate. However, the state failed to eradicate
poverty and support economic development. The expectation shifted back to private
sector and their involvement in the socio-economic development of the country became
very essential. Businesses were expected to be more transparent, socially accountable
and have regular stakeholder dialogues. Inspite of all these efforts, the CSR failed
to match the expectations in its contribution to development.
Phase 4 (Interface between philanthropic and business approaches): This
phase starts from 1980s till the present day. During this phase, the companies started
viewing CSR as a sustainable business strategy and started adopting multi stakeholder
approach. With the liberalization of the economy in 1990s, India became integrated
with the global markets. With the abolition of the license systems, there was a boom
in the economy. The growth in the economy has helped the Indian companies to
grow rapidly which has increased their willingness to participate more actively in
the socio-economic development of the country. India has now become an important
production and manufacturing base for many of the transnational companies as a
result of which, the Indian companies involved in production and export of goods
to developed countries are required to comply with various international standards
of labour, environment etc.

9.3 MODELS OF SOCIAL RESPONSIBILITY

OPERATING IN INDIA
A report by The Energy and Resource Institute (TERI) (Kumar et al. 2001) mentions
four models of CSR that are present in India.
1. The Ethical Model: This is based on the Gandhian Model of Trusteeship.
The philosophy of Trusteeship propounded by Mahatma Gandhi believes
that the rich should use their wealth for the welfare of the poor and the
underprivileged. In India, poverty and inequality still is a structural problem
and unless businesses come forward to strengthen the society, these problems
will continue to create conflict of interest among different segments of the
society. The Gandhian model of Trusteeship is based on the principle that
the surplus wealth should be kept in trusts for the greater good of the society.
The business while being economically viable should also uphold their ethical
values to create sustainable livelihoods for all. The Gandhian model provides
directions for transforming an unequal society into an egalitarian society.
Some corporate are huge in terms of their size and the number of lives
they impact and hence can be instrumental in bringing about structural changes
in the society. When the corporate governance and finance are in order,
they can generate social reforms.
2. The Statist Model: This model came into being with the adoption of
socialist and mixed economy by Jawahar Lal Nehru. In this model, the
corporate responsibilities were governed by state ownership and legal
requirements. The Labour Laws and Management Principles had in them
the basic elements of corporate responsibility, particularly those related to
community and worker relationships. Most of the public sector companies
even today follow the static model of state sponsored corporate philosophy.
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Corporate Social 3. The Liberal Model: This model was propounded by Milton Friedman.
Responsibility in India
According to Friedman, the social responsibility taken up by the corporate
distorts economic freedom of the shareholders as they have no say in
deciding how their money will be spent in these activities. He argued that
corporations should engage in activities that would generate revenue and
profit. However, in doing so they should abide by the law and follow ethical
customs. Friedman in his article in New York Times in 1970 titled “The
Social Responsibility of business is to increase its profits” says that “…
there is one and only one social responsibility of business to use its resources
and engage in activities designed to increase its profits so long as it stays
in the rules of the game, which is to say, engages in open and free
competition, without deception or fraud.”
In his argument he says that the Directors of corporation or other executives
should not take up socially responsible programmes as they do not have
any incentive for prudent spending of the shareholder’s money.
4. The Stakeholder Model: The Stakeholder Model was propounded by
Edward Freeman. The theory argues that the company should be driven
by the welfare of the stakeholder and not stockholders alone. Stakeholders
include shareholders, employees, consumers, suppliers, competitors, related
government agencies and local communities. This model considers itself
with not just profit earning but also the impact upon major stakeholders.
In support of this model Freeman argues that when a firm is responsive
towards the concerns of the stakeholders, they become more resilient
themselves. It also results in better long- term performance of both the firm
as well as the society.
Activity 1
Discuss with elderly members in your family/society and discuss with them how
philanthropy was carried out during their times. Ask if they had contributed to any
of the philanthropic/charity activities. Write about it.
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9.4 EVOLUTION OF A LEGISLATION ON CSR:

VOLUNTARY PRACTICES TO REGULATORY
MECHANISM
The corporations in India, have a long tradition of philanthropy and have been engaged
in social activities. CSR started becoming a topic of interest for the policy makers
and corporate in the late 1990s. At policy level, CSR was first formalized in India
with the issuance of Corporate Social Responsibility Voluntary Guidelines in 2009
by the Ministry of Corporate Affairs. It included the basic elements of CSR like
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ethical functioning, human rights, worker’s right, environmental considerations, CSR in Indian Context
stakeholder welfare etc. This was followed by other guidelines called the National
Voluntary guidelines of Social, Environmental and Economic Responsibilities of
Business, issued in 2011 by the Ministry of Corporate Affairs. These guidelines urged
the corporate to adhere to the nine principles of CSR and the adherence to the
guidelines was based on the ‘apply or explain’ approach. With the enactment of
Section 135 of the Company’s Act 2013, India became the first country to make
CSR spending and disclosure mandatory for large companies with specific turnovers.
The Department of Public Enterprises (DPE) has also been issuing guidelines on
CSR for Central Public Sector Enterprises (CPSE) from time to time. The guidelines
on Corporate Governance for CPSEs was given in 2010 to bring more transparency
and accountability in the functioning of CPSEs. These guidelines pertain to both
listed and unlisted CPSEs and give clear directions in terms of the composition,
functional roles of Board of Directors, Audit Committee, Remuneration Committee,
Subsidiary Companies, Disclosures, Report, Compliance and Schedule of
implementation. DPE also issued the guidelines on Corporate Social Responsibility
and Sustainability for CPSEs. These guidelines spell out the sustainability initiatives
the CPSEs are expected to take. The CPSEs Conclave held in April, 2018
recommended utilization of CSR funds in a focused manner by adopting a theme-
based approach. It was proposed that a common theme be identified each year
for undertaking CSR by CPSEs. School education and health care were identified
as the theme for focused intervention. Sixty percent of the annual CSR expenditure
of the CPSEs was required to be for the thematic program. A list of 112 aspirational
districts was identified by NITI Aayog which was to be given preference.

9.4.1 The National Voluntary Guidelines on Social, Environ

mental and Economic Responsibilities of Business
The National Voluntary Guidelines were laid down by the Ministry of Corporate
Affairs to provide guidance to the companies to work in accordance with the national
policies of inclusive growth and climate change. The guidelines help the corporate
to formulate objectives keeping in consideration their impact on stakeholders and
environment.
The NVGs are based on nine principles which are as under

The Nine Principles of National Voluntary Guidelines

1. Businesses should conduct and govern themselves with ethics, transparency,
and accountability.
2. Businesses should provide goods and services that are safe and contribute
to sustainability throughout their life cycles.
3. Businesses should promote the wellbeing of all the employees.
4. Businesses should respect the interests of and be responsive towards all
stakeholders, especially those who are disadvantaged, vulnerable and
marginalized.
5. Businesses should respect and promote human rights.
6. Business should respect, protect, and make efforts to restore the environment.
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Corporate Social
Responsibility in India 7. Businesses when engaged in influencing public and regulatory policy should
do so in a responsible manner.
8. Businesses should support inclusive growth and equitable development.
9. Businesses should engage with and provide value to their customers and
consumers in a responsible manner.
Source: [Link]

9.4.2 The Companies Act 2013 and CSR

The Act
The inclusion of the CSR mandate under the Companies Act, 2013 is an attempt
to supplement the government’s efforts of equitably delivering the benefits of growth
and to engage the Corporate World with the country’s development agenda. The
Companies in India are governed by Clause 135 of the Companies Act 2013 for
performing their CSR activities.
Section 135
Section 135 of the Companies Act 2013 lays down that:
 The 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 shall constitute a CSR Committee of the Board consisting of 3
or more directors of which one will be an independent director.
 The CSR Committee will be responsible to:
i. formulate and recommend to the Board, a Corporate Social
Responsibility Policy which shall indicate the activities to be undertaken
by the company as specified in Schedule VII;
ii. recommend the amount of expenditure to be incurred on the activities
referred to in i.; and
iii. monitor the Corporate Social Responsibility Policy of the company from
time to time.
 The Board of every company shall:
i. after taking into account the recommendations made by the Corporate
Social Responsibility Committee, approve the Corporate Social
Responsibility Policy for the company and disclose contents of such
Policy in its report and place it on the company’s website, if any, in
such manner as may be prescribed; and
ii. ensure that the activities as are included in Corporate Social
Responsibility Policy of the company are undertaken by the company.
 It is also the duty of the Board to ensure that the company spends two
percent of the average net profits made by the company in the preceding
three financial years and while spending the CSR amount, giving preference
134 to local areas where it operates.
  If the company fails to spend the amount, the Board in its report shall specify CSR in Indian Context

the reasons for not spending the same.

Though section 135 makes CSR spending and reporting mandatory, it gives flexibility
to the companies to choose the CSR activities from the list of activities that the
corporate can potentially undertake.
The CSR Rule, 2014
Source: [Link] Companies Act Notification 2014, Ministry of Corporate Affairs
A set of rules framed under section 135 of the Act, came into force on 1st April,
2014. It lays down rule for the following:
CSR Activities
 The CSR activities taken up by the companies will be as per the stated
CSR policy and activities taken up by the company under its normal course
of business will be excluded from CSR activities. A company can implement
the CSR activities approved by the CSR committee either on its own or
through a non-profit foundation set up by the company to facilitate this
initiative or through an independently registered non-profit organization that
has a record of being into such activities for at least three years or in
collaboration with other companies.
 The activities undertaken in India will only be considered under the CSR
activities.
 Spending on activities that benefit only the employees of the company, also
known as self-serving expenditure will not be considered as CSR spending.
The companies are free to spend on capacity building of their employees
but the expenditure should not be more than 5 percent of the total CSR
expenditure in any particular year.
 Contribution to political parties will also not be considered as CSR activity.
 The income generated from the CSR activities should be credited back to
the community or CSR corpus and this would be over and above the
mandatory 2% of profit.
CSR Committee
 The companies which are bound by the CSR clause are required to constitute
a CSR Committee of the Board consisting of 3 or more directors of which
one will be an independent director. A private company with only two
directors on its Board will have only two directors in the CSR Committee
and in case of foreign company, the Committee will have at least two persons
of which one will be an authorized person residing in India and the other
will be nominated by the foreign company.
CSR Policy
 The CSR policy of a company will include:
 List of projects or programmes within the Schedule VII of the Act which
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Corporate Social the company will undertake, along with the implementation schedules
Responsibility in India
and other modalities.
 Monitoring process of these programmes
 The policy will also specify that the surplus generated from the CSR
programmes will not be a part of the business profit of the company.
CSR Expenditure
 All expenses including contribution to the corpus for programmes relating
to CSR activities approved by the board will be included as CSR activities
provided, they are in conformity with the activities which fall within the purview
of Schedule VII of the Act.
CSR Reporting
 The rules also provide a format for the board report on CSR which includes
reasons for spending of less than 2 % of the average net profits of previous
three years and a responsibility statement stating that the company’s CSR
policy, implementation and monitoring mechanism are in accordance with
the CSR objectives. The report is signed by the CEO, MD, or Director
of the company.
Display of CSR Activities on its Website
 The Board of Directors shall disclose the content of the CSR policy in its
report as well as on the company’s website as per the particulars specified.
Companies (Corporate Social Responsibility) Amendment Rules, 2021 (the
“new CSR Rules”)
Ministry of Corporate Affairs notified the Companies (Corporate Social Responsibility
Policy) Amendment Rules, 2021 (“Amendment”) which provides amendments to
the Companies (Corporate Social Responsibility Policy) Rules, 2014 (“Rules”) in
relation to the corporate social responsibility (“CSR”) obligations required to be
complied with by the companies under the Companies Act, 2013 (“Act”). The
Amendments have been made with the objective of bringing transparency and increase
the accountability of the companies undertaking CSR activities. Some of the important
amendments have been discussed below:
 Amendment to Rule 2 (‘Definitions’)
o Under the Amended Rules “Administrative overheads” will now mean
expenses incurred by the company for ‘general management and
administration’ of Corporate Social Responsibility functions in the
company but shall not include the expenses directly incurred for the
designing, implementation, monitoring, and evaluation of a particular
Corporate Social Responsibility project or programme.
o Corporate Social Responsibility (CSR)” will now include activities
undertaken in pursuance of normal course of business of the company
provided that any company engaged in research and development activity
of new vaccine, drugs and medical devices in their normal course of
business may undertake research and development activity of new
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 vaccine, drugs and medical devices related to COVID-19 for financial CSR in Indian Context
years 2020-21, 2021-22, 2022-23.
o CSR will also include any activity undertaken by the company outside
India provided it is for training of Indian sports personnel representing
any State or Union territory at national level or India at international
level.
 Amendment to Rule 4 (CSR Implementation)
o The Board shall ensure that the CSR activities are undertaken by the
company itself or through specified companies.
o Every entity having an established track record of at least three years
in undertaking similar activities which intends to undertake any CSR
activity, must register itself with the Central Government, Ministry of
Corporate Affairs (MCA) by filing the form CSR-1 electronically with
the Registrar, with effect from the 01st day of April 2021.
o For implementing CSR, a company may also engage International
Organisations for designing, monitoring and evaluation of the CSR
projects or programmes as per its CSR policy as well as for capacity
building of their own personnel for CSR.
 Amendment to Rule 5 (CSR Committee)
o The CSR Committee formulates and recommends to the Board, an
annual action plan in pursuance of its CSR policy. Thus, amendment
to Rule 5 has introduced impact assessment for the projects undertaken
by the company and companies may engage with International
Organisations for the same.
 Amendment to Rule 7 (CSR Expenditure)
o The board shall ensure that the administrative overheads shall not exceed
five percent of total CSR expenditure of the company for the financial
year.
o In case the CSR project is income generating by way of fees etc., such
income should be ploughed back into the same project but not form
part of the business profit of the company.
o Excess CSR spend in any particular year can be set off against CSR
expenditure over the immediate succeeding three financial years and
the Board of the company passing a resolution to that effect.
o CSR assets (e.g., schools, hospitals, skill development centers etc.)
can be held by a Registered Public Trust or Registered Society, having
charitable objects and CSR Registration Number under Rule 4(2) and
not just Section 8 Companies as was proposed earlier in March 2020.
 Amendment to Rule 8 (CSR Reporting to include Impact Assessment)
o Every company having average CSR obligation of ten crore rupees
or more in pursuance of subsection (5) of section 135 of the Act, in
the three immediately preceding financial years, shall undertake impact
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Corporate Social assessment, through an independent agency, of their CSR projects having
Responsibility in India
outlays of one crore rupees or more, and which have been completed
not less than one year before undertaking the impact study.
 Amendment to Rule 9 (Display of CSR activities on its website)
o The Board of Directors of the Company shall mandatorily disclose the
composition of the CSR Committee, and CSR Policy and Projects
approved by the Board on their website, if any, for public access.
 Amendment to Rule 10 (Transfer of unspent CSR amount)
o Companies that spend more than the mandatory two per cent on CSR
in a particular financial year may carry it forward as credit for fulfilment
of CSR obligations for the block of the next three years.
Schedule VII
Source: [Link]
The Schedule VII of the Companies Act provides a list of activities which can be
included by companies in their CSR policies where the CSR spending can be done.
These activities relate to:
(i) Eradicating extreme hunger and poverty;
(ii) Promotion of education;
(iii) Promoting gender equality and empowering women;
(iv) Reducing child mortality and improving maternal health;
(v) Combating human immunodeficiency virus, acquired immune deficiency
syndrome, malaria, and other diseases;
(vi) Ensuring environmental sustainability;
(vii) Employment enhancing vocational skills;
(viii) Social business projects;
(ix) Contribution to the Prime Minister’s National Relief Fund or any other fund
set up by the Central Government or the State Governments for socio-
economic development and relief and funds for the welfare of the Scheduled
Castes, the Scheduled Tribes, other backward classes, minorities, and
women; and
(x) Such other matters as may be prescribed.
Activity 2
Visit a CSR office of a company in the city of your residence. Find out the various
CSR projects undertaken by the company. Identify which of the activities mentioned
in Schedule VII do these projects correspond to.
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 CSR in Indian Context
9.5 CURRENT TRENDS AND PRACTICES OF CSR IN
INDIA
Prior to Companies Act 2013, CSR clause was voluntary for companies, they were
however required to disclose their CSR spending to their shareholders. After the
amendment to Companies Act 2013, made in April 2014, India became the first
country in the world to make CSR mandatory.
Some of the emerging trends that the CSR in India is expected to witness are:
1. NGOs Will Adapt and Get Better at Working with the New Type of
Funders – Corporates
Traditionally, the NGOs have been collaborating with government agencies and
the international aid agencies. However, in recent years NGOs have found new
collaborators in the large Indian companies and multinational corporations. There
is an increasing trend of MNCs partnering with the NGOs to execute their social
responsibility initiatives in areas like education, sanitation, sustainability, health,
water etc. This partnership with corporates has better equipped the NGOs not
just in terms of higher funds but also with the required technological and intellectual
resources required in implementing the projects. The role of NGOs has become
more focused on aspects like impact, deliverables, adhering to timelines, doing
diligent reporting etc. Now the focus is more on measurable outcomes.
2. Corporates Will Start Thinking of CSR as Another Pillar of Their
Corporate Strategy, instead of as Philanthropy
Sustainability issues and social responsibility have become a key consideration
for business leaders and decision-makers in the corporate sector, in the last
couple of years. Companies these days think of CSR as an integral part of
their managerial process, decision making and overall strategy with an aim to
position themselves not just as philanthropic but also as socially responsible
organizations. Companies view CSR as an investment to build sustainable societies
which have a significant positive impact on the societies. Companies have seen
a shift from having a separate CSR strategy to having a corporate strategy which
incorporates CSR.
3. More Companies Will Comply and Engage in Long-term Partnerships
with NGOs
NGOs have the expertise and experience in working in a variety of development
sectors like environment, education, health, gender issues etc. Each of these
sectors is different from the other and needs a different approach to deal with
its set of challenges and issues. Also, measurable impacts of various interventions
take a long time to achieve. With companies having very little or no knowledge
of working in the development sector, they seek to engage in long term
collaborations with NGOs to be able to make a greater on-ground impact.
4. For-Profit Social Ventures Will Emerge as a Major Force of Social Good
Other than the non-profit organizations working in the social sector, there are
several for-profit ventures that have emerged in the past few years that are
tackling social issues through innovative products and services. One such example
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Corporate Social is of women entrepreneurs manufacturing low cost articles which are made
Responsibility in India
accessible to semi-rural and urban areas. For-profit ventures are also equipped
with better managerial and technical skills needed to address some major issues
in the social sector. They are also helping corporate sector to build effective
organizational and governance models.
5. Technology and Innovation Will Play a Major Role in Addressing
Structural Issues in the Social Sector and Building NGOs’ Organizational
Capabilities
Technology has proven to be useful to both social sector as well as the corporates.
Technology has helped the social sector to move away from the traditional mode
of operating to a more efficient and transparent way by digitizing and automating
workflows and streamlining the way the organizations interact with each other.
Technology can also help corporate to assess the consistency between the ethical
value the company endorses and their actions supporting the same by collating,
accessing and analysing relevant data.

9.6 CSR INITIATIVES OF INDIAN COMPANIES

Some of the CSR initiatives of Indian companies are listed below:
1. Tata Chemicals Ltd.
Tata Chemicals Ltd. has spent on improving the quality of life and fostering
sustainable and integrated development in the communities where it operates
is central to Tata Chemicals’ corporate philosophy. In order to do so Tata
Chemicals established Tata Chemicals Society for Rural Development (TCSRD)
in 1980 as a society and trust. It lays emphasis on the spirit of participatory
development by involving the beneficiaries at each stage of the development
process which ensures viability and sustainability of the programmes (Fernandes,
2019). Around 30 percent of the TCSRD funds are spent on wildlife
conservation. The amount is distributed over three places the company operates
- Mithapur in Gujarat, Haldia in West Bengal and Babrala, Uttar Pradesh.
2. Infosys Ltd.
Infosys Limited had established the Infosys foundation in 1996 to implement
its social development projects. The major works of the Foundation’s works
included the introduction of Aarohan Social Innovation Awards, restoration of
water bodies in Karnataka, supporting the construction of a metro station in
partnership with Bangalore Metro Rail Corporation Limited, enabling the pursuit
of access and excellence in sports through the GoSports Foundation, and relief
efforts in Tamil Nadu, Karnataka, and Kerala (Fernandes, 2019).
3. Bharat Petroleum Corporation Ltd.
BPCL as a part of its CSR initiatives, focuses on imparting holistic education
by facilitating usage of technology and infrastructural facilities. Additionally, BPCL’s
CSR philosophy also includes participation in projects of national importance
like the Swachh Bharat Abhiyan involving creation and maintenance of toilets,
associated sanitation facilities, Waste Management initiatives leading to overall
health and hygiene for the communities.
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4. Mahindra & Mahindra Ltd. CSR in Indian Context

Among the various development programmes supported by Mahindra and

Mahindra are Nanhi Kali programme to provide educational support to
underprivileged girls in India. It sponsors Lifeline Express (hospital on train) to
provide medical care, treatment, and surgical intervention to individuals. Through
Mahindra Hariyali 0.95 million trees were planted which contributed to improving
green cover and protecting bio-diversity in the country.
5. Vedanta Ltd.
The CSR portfolio of Vedanta has diverse projects based on 10 broad thematic
areas running across various locations. The Nandghar project is the flagship
initiative which aims at rebuilding Anganwadis to ensure health and learning of
children in rural areas and for skilling and empowering women.
6. Indian Oil Corporation Ltd.
Indian Oil has been involved in various social development activities across
the nation. Most of these projects are for improving the quality of life of the
marginalized and underprivileged sections of the society. The key thrust areas
of the company include Safe drinking water and protection of water resources,
Healthcare and sanitation, Education and employment-enhancing vocational skills,
Empowerment of women and socially/economically backward groups.
7. Hindustan Unilever Ltd.
Hindustan Unilever Limited (HUL), believes in long term sustainable growth
achieved by reducing environmental footprints and increasing its positive social
impact. The various CSR programmes of the company include Handwashing
Behaviour Change Programme, Plastic Waste Management, Project Prabhat,
Water Conservation Project, Swachh Aadat Swachh Bharat, Project Shakti,
Domex Toilet Academy, Asha Daan, Sanjeevani and Supporting Healthcare.
Activity 3
What does Section 135 lay down?
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9.7 SUMMARY
In this unit you have read about the evolution of CSR in India. You read about
how CSR evolved from being driven by charity and philanthropy in the 19th Century
to CSR being a sustainable corporate strategy. You have also read about the four
models of CSR present in India – The Ethical Model, the Static Model, Liberal
Model and Stakeholder Model. You have also read about how Indian CSR shifted 141
Corporate Social from voluntary practices to a regulatory mechanism with the inclusion of CSR mandate
Responsibility in India
in the Company’s Act 2013. Further, the unit discusses some of the emerging trends
that the CSR in India is expected to witness. Finally, the unit briefs about some of
the CSR initiatives by few leading companies.

9.8 KEYWORDS
Philanthropy : The desire to promote the welfare of others, expressed
especially by the generous donation of money to good
causes.
Schedule VII : This provides a list of activities which can be included
by companies in their CSR policies where the CSR
spending can be done.
National Voluntary : The National Voluntary Guidelines were laid down by the
Guidelines Ministry of Corporate Affairs to provide guidance to the
companies to work in accordance with the national
policies of inclusive growth and climate change.

9.9 SELF-ASSESSMENT QUESTIONS

1. Discuss the static model of social responsibility.
2. List out the emerging trends of CSR in India.

3. What are the characteristics of the third phase of development of CSR in India?
4. List down activities which can be included in companies CSR policies under
Schedule VII of the Company’s Act.
5. Elaborate on The National Voluntary Guidelines (NVGs) on Social, Environmental
and Economic Responsibilities of Business released by the Ministry of Corporate
Affairs (MCA).

9.10 REFERENCES/ FURTHER READINGS

Adopted from School of Extension and Development Studies, Programme Post
Graduate Diploma in Corporate Social Responsibility, Course MEDS-051
Fundamentals of CSR, Vol 1, Block 4, Evolution and Concept of CSR, Unit3,
Perspective in Indian Context, pg 54-68
Arora, B.& Puranik, R. (2004). A Review of Corporate Social Responsibility in
India. Development. 47. 93-100. 10.1057/[Link].1100057
Dadrawala, N. H. (2021, January 25). Analysis of Companies (Corporate Social
Responsibility Policy) amendment rules, 2021. Centre For Advancement of
Philanthropy. Retrieved September 8, 2022, from [Link]
companies-corporate-social-responsibility-policy-amendment-rules-2021/
Fernandes, K. (2019). Top 20 Indian Companies for CSR in [Link]://
[Link]/top-indian-companies-for-csr-2019/
142
Sood, A. and Arora, B. (2006). The Political Economy of Corporate Responsibility CSR in Indian Context
in India. UNRISD
Sundar, P. (2000). Beyond Business: From Merchant Charity to Corporate Citizenship.
Indian Business Philanthropy through the Ages. Tata McGraw-Hill Publishing
Company, New Delhi.
Sharma, J. and Gupta, S. (2019). 5 Trends that will Redefine CSR Sector in 2019.
[Link]

143
Corporate Social
Responsibility in India UNIT 10 CSR LEGISLATIONS AND POLICY
GUIDELINES
Objectives
After going through this unit, you should be able to:
 Understand the concept of Corporate Social Responsibility
 Understand the evolution of Corporate Social Responsibility in India
 Understand the different CSR provisions applicable to organisations in India
 Understand the difference between CSR and Corporate Governance vis-
à-vis ESG (Environmental, Social and Governance)
Structure
10.1 Introduction
10.2 Evolution of CSR Law in India
10.3 Applicability of CSR Provisions and the Activities listed out under
Schedule VII
10.4 Constitution of CSR Committees
10.5 CSR Policy
10.6 Quantum of CSR Spending and Transfer of Unspent Amount
10.7 Implementation and Monitoring of CSR Activities
10.8 Duties and Responsibilities of the CSR Committee and the Board
10.9 Other Salient Features of CSR after the latest Amendments
10.10 CSR and Corporate Governance vis-à-vis ESG
10.11 CSR Audit
10.12 Summary
10.13 Self-Assessment Questions
10.14 Further Readings/References

10.1 INTRODUCTION
Corporate Social Responsibility [CSR] is a concept whereby organisations serve
the interests of the Society by taking responsibility for the impact of their activities
on customers, employees, shareholders, communities and the environment in all aspects
of their activities.
The Concept of CSR has evolved over the years in India. With the introduction of
mandatory provisions in the statute books of India, it has gained enormous importance
both as a mandatory compliance as well as an ethical and moral obligation on the
part of responsible corporates. It is no more to be construed as a mere Philanthropic
Activity, but essentially, as a societal necessity and responsibly that Corporates are
144
required to perform. A voluntary act on the part of corporates as per their own CSR Legislation and
Policy Guidelines
will and fancy as existed before the statutory recognition/compulsion, has now taken
a well-structured form and conduct based on the dynamic statutory provisions under
the Companies Act, 2013 and the relevant rules framed there under as amended
from time-to-time synchronising with the changing societal needs. In other words,
the Corporates which otherwise exert a considerable influence on the Economy of
the Country have now been statutorily obligated to take more initiatives and
responsibilities towards Social, Environmental and Economic wellbeing of the Nation
in a very transparent and quantifiable or measurable manner.
It would be worthwhile to understand the evolvement of CSR in our country prior
to it getting statutorily made mandatory. The blossoming of CSR into its current
status may briefly be traced as follows:
 While some of the Corporates were already serving the society in their
own way on a voluntary basis, there was no uniformity. The welfare measures
for the society were generally considered to be the sole responsibility of
the Government as enshrined in the Constitution under Directive Principles
of State Policy.
 While CSR was talked about, The Companies Bill 2008, introduced in
the then Lok Sabha also did not contain any provisions relating to CSR
and it lapsed with the dissolution of the Lok Sabha. This Bill again got
introduced as The Companies Bill 2009. This Bill too did not deal with
CSR. However, when this Bill got referred to the then Standing Committee
on Finance, reference of introduction of CSR as a concept for larger
companies to make disclosures on their CSR policies and their activities
under such policies were introduced, for the first time.
 Thereafter, Ministry of Corporate Affairs (MCA) came out with Corporate
Social Responsibility Voluntary Guidelines 2009 in December 2009. The
said Guidelines envisaged that the corporates to formulate a CSR Policy
to guide their strategic planning and providing a roadmap for their CSR
initiatives under certain core elements.
 Later, on the recommendation of the Standing Committee on Finance, after
having due and extensive deliberations, MCA agreed to introduce statutory
provisions on CSR in the Companies Act. Numerous recommendations
of the said Committee and several other suggestions for amendments in
the said Bill, necessitated introduction of a new Bill viz., ‘The Companies
Amendment Bill 2011’ which contained Clause 135 dealing with CSR. This
Bill finally got consummated into Companies Act, 2013 replacing six decades
old Companies Act,1956.
 India made a history of sorts in the Global Corporate Scenario by giving
due statutory recognition and status to CSR in the landmark Corporate
Legislation of the Country.

10.2 EVOLUTION OF CSR LAW IN INDIA

Section 135 of the Companies Act, 2013 had come into force with effect from 1st
April 2014. Section 135 stipulates the threshold limits for companies that are statutorily
required to comply with CSR provisions along with other relevant stipulations. Schedule
145
Corporate Social VII of the Act provides the details of the Activities that can be undertaken by a
Responsibility in India
company under its CSR Policy. MCA came out with Companies (CSR Policy) Rules,
2014 which govern the entire gamut of CSR activities of the Company.
However, the CSR provisions under Section 135, Schedule VII and the CSR Rules
have remained quite dynamic in keeping with the evolving social scenario. The List
of Activities and other stipulations have undergone several changes over the past
seven years. In other words, MCA has remained alive to the experiences that both
the Corporates and the Ministry gathered over these years on the evolution and
development of CSR. This fact could be appreciated by going through the gist of
developments that have taken place subsequent to the introduction of Section 135.
The far-reaching steps taken by MCA in the implementation of CSR Law could
briefly be summarised as stated below:
 First and foremost was the constitution of a separate CSR Cell in May
2014 with the responsibility of proposing amendments to CSR rules and
schedule thereto. CSR Cell was also to issue necessary clarifications with
regard to the provisions of CSR and implementations thereto. This Cell
was also entrusted with tasks such as, the responsibility of coordinating
with other Administrative Ministries, analysis of CSR expenditure of the
companies, compliance with CSR provisions by the companies, etc.
 Later, MCA constituted a High-Level Committee [HLC] in February 2015
to monitor the progress of implementation of CSR by the companies. The
HLC submitted its Report in September 2015.
 MCA, based on the recommendation of this Committee, instituted National
CSR Awards to recognise the CSR initiatives of the companies as well as
to encourage them to take more and more steps for public good under
the realm of CSR.
 MCA also launched National CSR Data Portal to achieve transparency
and factual disclosures.
 Simultaneously, MCA started closely monitoring the compliance of CSR
provisions by companies, by studying the statutory disclosures made in reports
of the Board of Directors of the companies and initiating necessary action
wherever necessary through the concerned ROCs.
 In course of time, MCA set up an internal Expert Committee to revisit
Schedule VII of the Act and guidelines for enforcement of CSR provisions.
Two sub-committees viz., Legal Sub-committee and Technical Sub-committee
too were constituted to assist the main Expert committee. In July 2018,
these committees submitted their reports.
 As MCA felt a greater need to further fine tune the CSR provisions, it
constituted another High-Level Committee under the Chairmanship of
Secretary MCA in 2018 [HLC 2018] and this HLC submitted its Report
on 7th August 2019.
 These significant developments ultimately culminated in MCA notifying
necessary amendments to Section 135 of the Companies Act, 2013 as well
as to the CSR Rules framed thereunder on 22 nd January 2021 for
strengthening the CSR ecosystem by simplifying compliances and improving
disclosures.
146
Activity 1 CSR Legislation and
Policy Guidelines
List down major highlights of the evolution of CSR Law in India.
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Now, let us dwell on Section 135 and the relevant CSR Rules thereunder
(after these major amendments) as prevailing currently.

10.3 APPLICABILITY OF CSR PROVISIONS AND

THE ACTIVITIES LISTED OUT UNDER
SCHEDULE VII
A company satisfying any of the following criteria during the immediately preceding
financial year is required to comply with CSR provisions specified under section
135(1) of the Companies Act, 2013 read with the Companies (CSR Policy) Rules,
2014 made thereunder:
(i) net worth of rupees five hundred crore or more, or
(ii) turnover of rupees one thousand crore or more, or
(iii) net profit of rupees five crore or more.
Schedule VII lists outs the CSR Activities as follows:
(i) Eradicating hunger, poverty and malnutrition, promoting health care including
preventive health care and sanitation including contribution to the Swach
Bharat Kosh set-up by the Central Government for the promotion of
sanitation and making available safe drinking water.
(ii) Promoting education, including special education and employment enhancing
vocation skills especially among children, women, elderly and the differently-
abled and livelihood enhancement projects.
(iii) Promoting gender equality, empowering women, setting up homes and hostels
for women and orphans; setting up old age homes, day care centres and
such other facilities for senior citizens and measures for reducing inequalities
faced by socially and economically backward groups.
(iv) Ensuring environmental sustainability, ecological balance, protection of flora
and fauna, animal welfare, agroforestry, conservation of natural resources
and maintaining a quality of soil, air and water including contribution to
the Clean Ganga Fund set-up by the Central Government for rejuvenation
of river Ganga.
(v) Protection of national heritage, art and culture including restoration of buildings
and sites of historical importance and works of art; setting up public libraries;
promotion and development of traditional arts and handicrafts.
(vi) Measures for the benefit of armed forces veterans, war widows and their
dependents, Central Armed Police Forces (CAPF) and Central Para Military
Forces (CPMF) veterans, and their dependents including widows. 147
Corporate Social (vii) Training to stimulate rural sports, nationally recognized sports, Paralympic
Responsibility in India
sports and Olympic sports.
(viii) Contribution to the Prime Minister’s National Relief Fund or Prime Minister’s
Citizen Assistance and Relief Fund in Emergency Situations Fund (PM-
CARES Fund) or any other fund set up by the Central Government for
socioeconomic development and relief and welfare of the scheduled caste,
tribes, and other backward classes, minorities and women.
(ix) (a) Contribution to incubators or research and development projects in
the field of science, technology, engineering and medicine, funded by
the Central Government, State Government, Public Sector Undertaking
or any agency of the Central Government or State Government and
(b) Contributions to public funded Universities; Indian Institute of
Technology (IITs); National Laboratories and autonomous bodies
established under Department of Atomic Energy (DAE), Department
of Biotechnology (DBT); Department of Science and Technology(DST);
Department of Pharmaceuticals, Ministry of Ayurveda, Yoga and
Naturopathy, Unani, Siddha and Homoeopathy (AYUSH); Ministry
of Electronics and Information Technology and other bodies, namely
Defence Research and Development Organisation (DRDO); Indian
Council of Agricultural Research (ICAR); Indian Council of Medical
Research(ICMR); and Council of Science and Industrial Research
(CSIR), engaged in conducting research in science, technology,
engineering and medicine aimed at promoting Sustainable Development
Goals (SDGs).
(x) Rural development projects.
(xi) Slum area development.
[This item has been further amplified in the Explanation as: “For the purpose
of this item the term ‘slum area’ shall mean any area declared as such by
the Central Government, or any State Government or any other competent
authority under any law for the time being in force]
(xii) Disaster management, including relief, rehabilitation and reconstruction
activities.
The act stipultes that a company shall give preference to the local area and
areas around it where it operates, for spending the amount earmarked for
Corporate Social Responsibility activities.
As explained in the foregoing paragraphs, the companies will have to spend on CSR
as per the provisions of the Act and the CSR Policy Rules. The Ministry of Corporate
Affairs (MCA) notified the Companies (CSR Policy) Amendment Rules, 2021
(‘Rules’) through a notification dated 22 January 2021. These Rules provide substantial
amendments to the Companies (Corporate Social Responsibility Policy) Rules, 2014.
The said Rules provide that “Corporate Social Responsibility (CSR)” means the
activities that a company undertakes in accordance with the statutory obligation
laid down in Section 135 of the Act and in accordance with the provisions contained
in the Rules, but shall not include the following:
148
  Activities undertaken in the normal course of company business. However, CSR Legislation and
Policy Guidelines
a company engaged in the development and research activity of new drugs,
vaccines, and medical devices in its normal course of business can undertake
the development and research activity of a new drug, vaccine and medical
devices relating toCOVID-19 for the financial years 2020-21, 2021-22,
2022-23 subject to the conditions that:
- The company shall carry out such development and research activities
in collaboration with any of the organisations or institutes mentioned
in Schedule VII item(ix) of the Act.
- The company must disclose the details of the activity separately in the
Annual report on CSR included in the report of the Board of Directors
(‘Board’).
 Activities undertaken by a company outside India except for training of
Indian sports personnel representing India at the international level or Union
or State territory at the national level.
 Contribution of any amount indirectly or directly to any political party under
section 182 of the Act.
 Activities benefiting employees of the company defined in Section 2(k) of
the Code on Wages, 2019.
 Activities supported by a company on a sponsorship basis to derive
marketing benefits for its services or products.
 Activities carried out to fulfil other statutory obligations under any law in
force in India.
Activity 2
Enlist the activities mentioned under schedule VII on which companies can spend
to comply with CSR provisions.
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10.4 CONSTITUTION OF CSR COMMITTEES

Section 135(1) provides that every company attracted by CSR provisions must
constitute a Corporate Social Responsibility Committee of the Board of Directors.
The composition of the CSR Committee is stipulated as under:
Listed companies Three or more directors, out of which at least one
shall be an independent director.
Unlisted public companies Three or more directors, out of which at least one
shall be an independent [Link], if there 149
Corporate Social is no requirement of having an independent director
Responsibility in India
in the company, two or more directors.

Private companies Two or more directors. No independent directors

are required as mentioned in the provision under
section 135(1).

Foreign company At least 2 persons of which one person shall be a

person resident in India authorized to accept on
behalf of the foreign company, the services of notices
and other documents. The other person shall be
nominated by the foreign company.
A welcome feature of the latest amendment is that where the amount required
to be spent by a company on CSR does not exceed Rs. 50 Lakhs, the
requirement for constitution of the CSR Committee is not mandatory and
the functions of the CSR Committee, in such cases, shall be discharged by
the Board of Directors of the company.

10.5 CSR POLICY

As per the amended definition, “CSR Policy” means a statement containing the
approach and direction given by the board of a company, taking into account the
recommendations of its CSR Committee, and includes guiding principles for selection,
implementation and monitoring of activities as well as formulation of the annual action
plan.
In other words, CSR Policy elaborates the activities to be undertaken by the Company
in alignment with the activities as listed out in Schedule VII to the Act. In general,
the CSR Policy contains a Statement detailing:

 the approach and direction given by the Board of Directors of a company

based on the recommendations of its CSR Committee.

 Guiding Principles governing the selection, implementation and monitoring

of CSR Activities.

 Formulation of an Annual Action Plan.

It is very important that the CSR Activities shall not be the same as those undertaken
by the company in its normal course of business.

Another significant requirement is that the Board of Directors should ensure that
the contents of the CSR Policy is placed on the website of the company, if any.
Activity 3

Write down the composition of CSR Committees for different type of companies.

..........................................................................................................................

..........................................................................................................................

..........................................................................................................................
150
 CSR Legislation and
10.6 QUANTUM OF CSR SPENDING AND TRANSFER Policy Guidelines
OF UNSPENT AMOUNT
a. Quantum of CSR Spending
A company attracted by CSR provisions are required to spend at least 2% of
its average net profits made during the 3 immediately preceding financial years
in pursuance of its CSR Policy. In case, a company has not completed 3 financial
years since its incorporation, it should be ensured that the average net profits
shall be calculated for the such immediately preceding financial years since its
incorporation.
The average net profit for the purpose of CSR activities is to be computed as
per the provisions of Section 198 of the Act. It must be exclusive of the items
given under Rule 2(1)(h) of the Companies (CSR Policy) Rules, 2014. Section
198 of the Act specifies certain additions/deletions (adjustments) to be made
while calculating a company’s net profit. It mainly excludes capital payments/
receipts, income tax and set-off of past losses. Profit Before Tax (PBT) is to
be used for computation of net profit under Section 135 of the Act.
b. Transfer of Unspent Amount
The Act stipulates that where the company fails to spend the required amount,
the Board, in its report on CSR policy and activities forming part of the Report
of the Board of Directors, shall specify the reasons for not spending such
amount and, unless the unspent amount relates to any ‘ongoing project’, transfer
such unspent amount to a *Fund specified in Schedule VII, within a period
of six months of the expiry of the financial year.
*Funds that are specified for Transfer of Unspent CSR Amount
 Contribution to Prime Minister’s National Relief Fund
 Any other fund initiated by the central government concerning socio-economic
development, relief and welfare of the scheduled caste, minorities, tribes,
women and other backward classes
 A contribution made to an incubator funded either by the central government,
the state government, public sector undertaking of state or central
government, or any other agency.
 Contributions made to:
- Public-funded universities
- National Laboratories and Autonomous Bodies (established under the
auspices of the Indian Council of Agricultural Research (ICAR)
- Council of Scientific and Industrial Research (CSIR)
- Department of Atomic Energy (DAE)
- Indian Institute of Technology (IITs)
- Indian Council of Medical Research (ICMR)
151
Corporate Social - Defence Research and Development Organisation (DRDO)
Responsibility in India
- Department of Science and Technology (DST) engaged in conducting
research in technology, science, medicine, and engineering aimed at
encouraging Sustainable Development Goals (SDGs).
In the case of an ‘ongoing project’ under the company’s CSR policy, the unspent
amount, shall be transferred by the company to an exclusive account to be opened
by the company in any scheduled bank within 30 days from the end of the financial
year. This account shall be designated as ‘Unspent Corporate Social Responsibility
Account’, and the funds shall be used towards its obligations under the CSR Policy
within a period of three financial years from the date of the transfer.
If the company is unable to utilise the said funds at the end of the three financial
years, the funds should be transferred to the ‘specified fund’ mentioned above within
a period of thirty days upon completion of the third financial year.
An ‘ongoing project’ means a multi-year project that a company undertakes to
fulfil its CSR obligation within three years, excluding the financial year in which itis
commenced. It will also include projects that were initially not approved as multi-
year projects but whose duration is extended beyond one-year by the board based
on reasonable justification.
Another welcome measure introduced by the Amendment in 2021 is that if a
company spends an amount in excess of the requirements, it can set off such excess
amount against the requirement to spend under this sub-section for such number
of succeeding financial years and in such manner, as may be prescribed.

10.7 IMPLEMENTATION AND MONITORING OF CSR

ACTIVITIES
A. Implementation of CSR Activities
A company can undertake CSR activity either by itself or through implementing
agencies which are registered with MCA in the required manner, with effect from
1st April 2021.
The following type of entities are entitled to apply and get registered as Implementing
Agencies:
 Companies that are established under Section 8 of the Act, or a registered
society or registered public trust under Section 12A and80G respectively
of the Income Tax Act, 1961, established by the companies themselves
or along with any other company.
 Companies that are established under Section 8 of the Act or a registered
society or registered trust established by the Central or State Government.
 Entity established under State legislature or an Act of Parliament.
 Companies that are established under Section 8 of the Act, or a registered
public society or registered trust under section 12A and80G respectively
of the Income Tax Act, 1961, and having a track record of at least three
years in undertaking similar activities.
152
The above entities who intend to undertake CSR activity should register themselves CSR Legislation and
Policy Guidelines
with the Central Government by following the required procedural formalities after
satisfying themselves of fulfilling the eligible criteria. They need to file the Form
CSR-1 with the Registrar, effective from 1 April 2021. The entities must sign and
submit formCSR-1 electronically. It should be digitally verified by a Company
Secretary, Chartered Accountant or Cost Accountant in practice.
On successful submission of Form CSR-1 on the MCA portal, the system will
automatically generate a unique CSR Registration Number.
However, these new and amended requirements would not impact ongoing
CSR Projects and Programmes that were undertaken prior to 1st April 2021.
In this context, the following significant aspects with regard to implementation of
CSR activities are worth noting:
 Engaging International Organisation: A company can engage
‘international organisations’ for monitoring, designing and evaluating the CSR
programmes or projects as per its CSR policy and for capacity building
of its personnel for CSR.
- As per the extant amended CSR Rule 2(1)(g), an ‘international
organisation’ is an organisation notified by the Central Government as
an international organisation under Section 3 of the United Nations
(Privileges and Immunities Act, 1947 to which the provisions of the
Schedule to the said Act apply.)
- Accordingly, companies have the option to appoint any other entity
to undertake the prescribed overhead jobs in respect of CSR. In any
case, the threshold (5% of CSR Expenditure) allowed as administrative
overhead will be applicable.
 Collaboration With Other Companies: A company may also collaborate
with other companies for undertaking projects or programmes or CSR
activities in such a manner that the CSR committees of respective companies
are in a position to report separately on such projects or programmes
in accordance with CSR rules.
B. Monitoring of CSR Activities
The Board of a company should satisfy that the funds disbursed for CSR activities
are utilised for the purposes and in the manner as approved by them. The person
responsible for financial management or the Chief Financial Officer should certify
to this effect.
In the case of any ongoing project, the Board should monitor the implementation
of the project in the approved timelines and year-wise allocation. It can make any
modifications for smooth implementation of the project within the permissible time.

10.8 DUTIES AND RESPONSIBILITIES OF THE CSR

COMMITTEE AND THE BOARD
CSR Committee:
 The CSR Committee shall formulate and recommend a CSR Policy to the
Board. 153
Corporate Social  CSR Policy shall lay down the CSR programmes and projects to be
Responsibility in India
undertaken by the company in subjects/areas in alignment with those specified
in Schedule VII of the Act.
 The Committee shall recommend the expenditure sought to be incurred
under such activities to be undertaken by the company.
 Modalities of implementation schedules and utilisation of funds for the projects
or programmes.
 It is also the responsibility of the Committee to monitor the implementation
the activities under the Policy by introducing a transparent controlling and
reporting mechanism for the individual projects and programmes.
 Details of impact and any need assessment for the projects undertaken by
the company.
Board of Directors:
 After due consideration and deliberation on the recommendations made
by the CSR Committee, the Board shall approve the CSR Policy of the
Company.
 The Board must ensure that the Activities mentioned in its CSR Policy are
undertaken.
 The Board shall make sure that the company spends minimum 2% of the
average net profits made during the 3 immediately preceding financial years
as per CSR Policy.
 In case, a company has not completed 3 financial years since its
incorporation, the Board should ensure that the average net profits shall
be calculated for such immediately preceding financial years since its
incorporation.
 The Board’s Report shall include an annual report on CSR which
should cover the following aspects:
 The Composition of CSR Committee
 The Contents of CSR Policy
 In case, CSR spending is less than 2% of the Net Profit as stipulated,
the reasons for the unspent amount as well as details of transfer of
unspent amount relating to ongoing project, if any, to the specified fund
under the Act [such transfer shall happen within a period of 6 months
from the expiry of the financial year].
 In the case of a foreign company, the Balance Sheet filed shall contain an
Annexure regarding a Report on CSR.
In case of non-compliance of CSR provisions, the penalty on the company would
be twice the unspent amount required to be transferred to any fund included in
Schedule VII of the Act or Unspent CSR Account, as the case may be, or one
crore rupees, whichever is less. Every officer in default would attract a penalty
of 1/10thof the unspent amount required to be transferred to any fund included in
Schedule VII of the Act or Unspent CSR Account, or two lakh rupees, whichever
154 is less.
 CSR Legislation and
10.9 OTHER SALIENT FEATURES OF CSR AFTER Policy Guidelines
THE LATEST AMENDMENTS
A. Creation or Acquisition of a Capital Asset

The CSR amount may be spent by a company for creation or acquisition of a

capital asset, which shall be held by–

(a) a company established under section 8 or a Registered Public Trust or

Registered Society, having charitable objects and CSR Registration
Number or

(b) beneficiaries of the said CSR project, in the form of self-help groups,
collectives, entities;

Or

(c) a public authority as defined under 2 (h) of RTI Act, 2005:

It is further stipulated that any capital asset created by a company prior to

the commencement of the Companies (CSR Policy) Amendment Rules,
2021, shall within a period of 180 days from such commencement comply
with the requirement of this rule, which may be extended by a further period
of not more than 90 days with the approval of the Board based on reasonable
justification.

B. Impact Assessment

Companies having average CSR obligation of ten crore rupees or more in the
three immediately preceding financial years, and companies that have CSR projects
with outlays of minimum Rs. 1 crore and which have been completed not less than
one year before impact assessment shall undertake impact assessment, through
an independent agency, of their CSR projects. The impact assessment reports
shall be placed before the Board and shall be annexed to the annual report on
CSR.

Impact assessment shall be carried out project-wise only in cases where both the
above conditions are fulfilled. In other cases, it can be taken up by the company
on a voluntary basis.

The expenditure incurred on impact assessment is over and above the specified
administrative overheads of 5%. Expenditure up to a maximum of 5% of the total
CSR expenditure for that financial year or Rs. 50 lakhs (whichever is lower) can
be incurred separately for impact assessment.

C. A few other Important Amendments in CSR Rules:

Administrative overheads:

Administrative overheads mean the company expenses incurred for administration

and general management of the CSR functions. However, it will not include the direct
expenses incurred for implementing, designing, evaluating, and monitoring a particular
CSR project or programme. 155
Corporate Social Net profit:
Responsibility in India
Net profits mean the net profit of a company according to its financial statement
prepared under the applicable provisions of the Act, but it will not include the
following:
- Any profit arising from overseas branch/branches of the company, whether
operated as a separate company or otherwise.
- Any dividend received from another company in India covered under and
complying with Section 135 of the Act.
CSR Expenditure:
 Administrative overheads shall not exceed five percent of total CSR
expenditure.
 Any surplus arising out of the CSR activities shall not form part of the
business profit and shall be ploughed back into the same project or transferred
to the Unspent CSR Account and spent in pursuance of CSR policy and annual
action plan of the company or transfer such surplus amount to a Fund specified
in Schedule VII, within a period of six months of the expiry of the financial
year.
 Where a company spends an amount in excess of requirement, such excess
amount may be set off against the requirement to spend up to immediate
succeeding three financial years subject to the conditions that –
- the excess amount available for set off shall not include the surplus arising
out of the CSR activities and
- the Board of Directors the company shall pass a resolution to that effect.
Form CSR-2
The Ministry of Corporate Affairs (MCA) vide Notification dt. 11th February, 2022,
vide powers conferred by section (1) and (2) of Section 128 and subsection (3)
of Section 129, Section 133, Section 134 and other applicable sections read with
Section 469 of the Companies Act, 2013 has notified as follows:
In Companies (Accounts) Rules, 2014, in rule12, after sub-rule(1A) the following
sub rule may be inserted namely;
(1B) Every company covered under the provisions of sub- section (1) of Section
135 shall furnish a report on Corporate Social Responsibility in form CSR-2 to
the Registrar for the preceding financial year (2020-2021) and onwards as an
addendum to Form AOC-4 XBRL or AOC-4NBFC (Ind As) as the case may be.
Dedicated Portal for CSR
Ministry of Corporate Affairs, Government of India is contemplating to establish a
National CSR Exchange portal to disseminate Corporate Social Responsibility related
data and information filed by the companies registered with it.
D. Ministry of Corporate Affairs (MCA’s) Frequently Asked Questions
(FAQs) and Clarifications:
After the major amendments in CSR provisions in 2021, MCA has come out with
156 General Circular No.14/2021 on 25th August 2021 annexing therein an extensive
list of Frequently Asked Questions and MCA’s Response/Clarifications on the issues CSR Legislation and
Policy Guidelines
raised thereon ‘for better understanding and facilitating effective implementation of
CSR. The essence of many of the clarifications have been incorporated under the
relevant subject matters while dealing with them then and there. However, here, an
attempt has been made to summarise a few more clarifications which could be
considered significant:
 Provisions of section 135, read with Schedule VII of the Act and Companies
(CSR Policy) Rules, 2014 provide the broad framework within which the
eligible companies are required to formulate their CSR policies including
activities to be undertaken and implementation of the same. CSR is a board-
driven process, and the Board of the company is empowered to plan,
approve, execute, and monitor the CSR activities of the company based
on the recommendation of its CSR Committee. The Government has
no direct role in the approval and implementation of the CSR
programmes /projects of a company.
 The Government monitors the compliance of CSR provisions through the
disclosures made by the companies in the MCA 21 portal. For any violation
of CSR provisions, action can be initiated by the Government against such
non-compliant companies as per provisions of the Companies Act, 2013
after due examination of records, and following due process of law. Non
compliance of CSR provisions has been notified as a civil wrong w.e.f.
22nd January, 2021.
 The provision relating to contribution to corpus as admissible CSR
expenditure has been amended and the contribution to corpus of any entity
is not an admissible CSR expenditure w.e.f. 22nd January, 2021.
 The expenses relating to transfer of capital asset such as stamp duty and
registration fees, will qualify as admissible CSR expenditure in the year of
such transfer.
 The first proviso to section 135(5) of the Act provides that the company
shall give preference to local areas and the areas around where it operates.
Some activities in Schedule VII such as welfare activities for war widows,
art and culture, and other similar activities, transcend geographical boundaries
and are applicable across the country. With the advent of Information &
Communication Technology (ICT) and emergence of new age businesses
like e-commerce companies, process-outsourcing companies, and aggregator
companies, it is becoming increasingly difficult to determine the local area
of various activities. The spirit of the Act is to ensure that CSR initiatives
are aligned with the national priorities and enhance engagement of the
corporate sector towards achieving Sustainable Development Goals (SDGs).
Thus, the preference to local area in the Act is only directory and not
mandatory in nature and companies need to balance local area preference
with national priorities.
 CSR expenditure cannot be incurred on activities beyond Schedule VII
of the Act. The activities undertaken in pursuance of the CSR policy must
be relatable to Schedule VII of the Companies Act, 2013. The items enlisted
157
Corporate Social in Schedule VII of the Act are broad-based and are intended to cover a
Responsibility in India
wide range of activities. The entries in the said Schedule VII must be
interpreted liberally to capture the essence of the subjects enumerated in
the said Schedule.
 CSR expenditure can be incurred in multiple modes:

(i) ‘Activities route’, which is a direct mode wherein a company undertakes

the CSR projects or programmes as per Schedule VII of the Act, either
by itself or by engaging implementing agencies as prescribed in
Companies (CSR Policy) Rules, 2014.
(ii) ‘Contribution to funds route’, which allows the contributions to various
funds as specified in Schedule VII of the Act.
(iii) Contribution to incubators and R&D projects, as specified in item (ix)(a)
and contribution to institutes/organisations, engaged in research and
development activity, as specified under item (ix) (b) of Schedule VII
of the Act.
 Contributions to the following funds (specified in Schedule VII) shall be
admissible as CSR expenditure:
(i) Swachh Bharat Kosh
(ii) Clean Ganga Fund
(iii) Prime Minister’s National Relief Fund (PMNRF)
(iv) Prime Minister’s Citizen Assistance and Relief in Emergency Situations
Fund (PM CARES Fund)
(v) Any other fund set up by the Central Government and notified by the
Ministry of Corporate Affairs, for socio-economic development and
relief and welfare of the Scheduled Castes, the Scheduled Tribes, other
backward classes, minorities and women.
 Any activity benefitting employees of the company shall not be considered
as eligible CSR activity. As per the rule, any activity designed exclusively
for the benefit of employees shall be considered as an “activity benefitting
employees” and will not qualify as permissible CSR expenditure. The spirit
behind any CSR activity is to benefit the public at large and the activity
should be non-discriminatory to any class of beneficiaries. However, any
activity which is not designed to benefit employees solely, but the public
at large, and if the employees and their family members are incidental
beneficiaries, then, such activity would not be considered as “activity
benefitting employees” and will qualify as eligible CSR activity.
 Sponsorship activities of an event are done with an aim of deriving marketing
benefits for a company’s product or services. The intent of CSR is to
encourage companies to undertake the activities in a project or programme
mode rather than as a one-off event. Companies shall not use CSR purely
as a marketing or brand building tool for their business, but brand building
158 as a collateral benefit does not vitiate the spirit of CSR.
  The budget outlay dedicated for one project can be used against another CSR Legislation and
Policy Guidelines
project. In such a case, the Board and CSR Committee should appropriately
record the alteration in the target spending and modify the same in accordance
with the actuals.
 Companies are not permitted to spend the unspent CSR amount, other
than the amount pertaining to ongoing projects, on any CSR activity during
the intervening period of six months after the end of the financial year. Such
unspent CSR amount is required to be transferred to any fund included in
Schedule VII of the Act.
 Section 135(5) of the Act prescribes minimum spending obligation for the
company. The company may fulfil its CSR spending obligation directly by
itself or through engaging an implementing agency. The implementing agency
acts on behalf of the company and mere disbursal of funds for implementation
of a project does not amount to spending unless the implementing agency
utilises the whole amount.
 A company can open a single special account, called ‘Unspent Corporate
Social Responsibility Account’, for a financial year in any scheduled bank,
to transfer the unspent amount w.r.t ongoing project(s) of that financial year.
A company needs to open a separate ’Unspent CSR Account’ for each
financial year but not for each ongoing project.
 Rule 8(3)(b) of the Companies (CSR Policy) Rules, 2014 provides that
impact assessment reports shall be placed before the Board and shall be
annexed to the report on CSR. It is clarified that web-link to access the
complete impact assessment reports and providing executive summary of
the impact assessment reports in the annual report on CSR, shall be
considered as sufficient compliance of the said rule.
 In case two or more companies choose to collaborate for the implementation
of a CSR project, then the impact assessment carried out by one company
for the common project may be shared with the other companies for the
purpose of disclosure to the Board and in the annual report on CSR. The
sharing of the cost of impact assessment may be decided by the collaborating
companies subject to the limits as prescribed in the Rules.

10.10 CSR AND CORPORATE GOVERNANCE

VIS-A-VIS ESG
Corporate Social Responsibility (CSR) and Corporate Governance have lot
of similarities, leading one to think that they are the two sides of the same coin.
They had similar beginnings. CSR started more as a philanthropic activity on a
voluntary basis by responsible corporates. So also, is the case with Corporate
Governance. Ethical Business Conduct was an unwritten code amongst good
corporates even prior to it getting codified.
Later Corporate Governance became mandatory with the introduction of Clause
49 for listed Enterprises by SEBI. With the changing times and needs, the requirements
and compliances under Corporate Governance are getting fine-tuned from time to
time to make enterprises behave as good Corporate Citizens.
159
Corporate Social CSR which started as a good business practice and more as a voluntary philanthropical
Responsibility in India
activity or set of activities by the companies in the environments and surroundings
that they were operating, became a mandatory compulsion with the introduction of
Section 135 in the Companies Act, 2013 for many corporates based on certain
criteria.
More than anything else, many stakeholders including the general public started giving
credence and importance to the corporates based on their Corporate Governance
structure as well as their societal commitments in terms of their CSR programmes
and projects for the common good.
In this scenario, entered ESG or the Environmental, Social and Governance. It has
become the latest buzzword in the corporate world. Corporates’ responsibilities
towards Environmental, Social and Governance issues created a greater expectation
amongst various stakeholders especially amongst the investors. Investors started
using ESG as a significant criterion to assess the performance of the companies in
their respective domain and areas of operation. In the Indian context, CSR is treated
more as a statutory and compliance requirement whereas ESG on the other hand
started gaining importance with investors and financial community in taking their
investment decisions.
As both revolve around the best principles and practices of business ethics, adding
certainly immense value to an enterprise, the corporates have started aligning their
CSR activities and ESG commitments. Apart from boosting the image of the company,
this serves a greater purpose of enhancing the reputation of companies with financial
investors leading to a win-win situation for both.
Also, it is worth noting that the Companies Act, 2013 under Section 134(m) mandates
companies to include a report by the Board of Directors on Conservation of Energy,
along with the annual financial statement, which in essence is an ESG disclosure.
This is further amplified in the Companies (Accounts) Rules, 2014. Similarly, SEBI
has stipulated certain ESG disclosures in respect of Listed entities.
It is evident that with the increasing importance of ESG, the companies that have
aligned their CSR activities with their ESG goals, beyond the mere statutory
compulsions/compliances, would grow immensely in their stature and brand
enhancement. No doubt, they will also become preferred choices among global
investors who have been of late laying greater emphasis on ESG and sustainability
reporting. The companies operating with such lofty objectives, while serving a greater
cause of social, environmental and sustainability commitments, also become very
successful in their respective sphere of operations and scale new heights in every
aspect including their brand image, turnover and profits.
Activity 4
Explain the difference between CSR and Corporate Governance vis-à-vis
ESG.
..........................................................................................................................
..........................................................................................................................
..........................................................................................................................
160
 CSR Legislation and
10.11 CSR AUDIT Policy Guidelines

CSR Rules require monitoring and reporting of CSR activities. These have been
dealt with in detail elsewhere in this Article under relevant headings. Similarly, we
have also seen that corporates with larger CSR outlays as stipulated in the Rules,
after the latest amendment, need to carry out Impact Assessment through an
Independent Agency and the impact assessment report after consideration by the
Board of Directors should be annexed to the annual report on CSR.
In this context, it may be mentioned that The Institute of Chartered Accountants
have come out with a Technical Guide in the form of a handbook consisting of a
detailed report on the implementation of CSR activities, requirement of CSR Audit,
reporting requirements etc under CARO 2020 relevant to CSR.

10.12 SUMMARY
Indian corporates in general have not lagged behind in their social obligations and
responsibilities even when CSR was voluntary. With CSR getting a legally structured
form and a spectrum of activities getting specified in Schedule VII, with minimal
spending statutorily monitored and regulated, CSR has reached greater heights. With
the growth of Indian corporates, it is natural that CSR spending too have gone up
substantially. It is also heartening to note that how with the Government’s timely
intervention and clarification, CSR spending and contributions by the corporates
have come to the aid of COVID management.
The Government too, on its part, realising that the Indian corporates are discharging
their CSR obligations in a more responsible way, in keeping pace with the changing
needs of the society and the environment in which they operate, carried out the
latest amendment in the CSR provisions and CSR Rules. Significantly, the penal
provisions in CSR law got substituted by civil liability with much reduced penalty
for non-compliance.

10.13 SELF-ASSESSMENT QUESTIONS

1. Trace the evolvement of CSR in our country prior to it getting statutorily made
mandatory.
2. What are the methods of implementing CSR activities as per the Companies
(CSR Policy) Amendment Rules?
3. Which activities do not qualify as eligible CSR activity?
4. Enlist Duties and Responsibilities of the CSR Committee and the Board.
5. List down some salient features of CSR after the latest Amendments.

10.14 FURTHER READINGS/REFERENCES

ClearTax. (2022, January 31). Corporate Social Responsibility under Section
135 of Companies Act 2013. ClearTax. Retrieved April 27, 2022, from https://
[Link]/s/corporate-social-responsibility#:~:text=Section%20135(1)%20of%20
the,%2C%20turnover%2C%20or%20net%20profits 161
Corporate Social ClearTax. (2022, April 14). CSR. Companies Corporate Social Responsibility Policy
Responsibility in India
Rules. Retrieved April 27, 2022, from [Link]
The Companies (Amendment) Act, 2020. Ministry of Corporate Affairs. (2020).
Retrieved April 27, 2022, from [Link]
getdocument?mds=pnbKQcxlMYbXIvg20K4TWw%253D%253D&type=open
Tandon, A., & Seth, S. (2019). ESG – beyond CSR. Chartered Secretary: The
Journal for Governance Professionals, 49(5), 1–116.

162
 CSR Legislation and
UNIT 11 CSR IN PUBLIC SECTOR UNITS Policy Guidelines

(PSUs)
Objectives
After studying this unit, you should be able to:
 Understand the meaning & scope of Social Responsibility in PEs;
 Appreciate the need and importance of Corporate Governance, Social
Responsibility in the changing scenario;
 Discuss the guidelines issued by the government to promote CSR practice
by public sector enterprises;
 Elaborate on the evolution of the guidelines and specific dimensions included/
excluded to make them more holistic and socially responsive.
Structure
11.1 Introduction
11.2 Social Responsibility of Business
11.3 Social Responsibility Strategies
11.4 Social Responsibility towards different groups
11.5 Social Audit
11.6 Global Guidelines to promote CSR practice
11.7 Guidelines for Public Sector Enterprises
11.8 Guidelines on CSR for CPSEs, 2013 Onwards
11.9 Summary
11.10 Keywords
11.11 Self- Assessment Questions
11.12 References & Further Readings

11.1 INTRODUCTION
As is understood from previous chapters, Corporate Social Responsibility (CSR)
is a company’s commitment towards all involved stakeholders to invest for social,
economic and environmental good. Over time, as CSR has taken center stage,
companies increasingly realize the competitive advantages of a responsible business.
Thus, there has been more interest drawn towards investing into CSR activities and
seeking returns in terms of social impact and brand image. The question however
remains that what guidelines are there to support planning, implementation and
assessment of CSR practice? Besides private companies, how are public sector
enterprises implementing CSR? Are there any guidelines to steer the CSR practice
of public sector enterprises? How do the guidelines ensure that the goals of CSR
are met? Answers to these questions lie in understanding in greater detail, guidelines
that have been issued by the government to steer CSR practice among public sector
enterprises, their modalities and transformation over time. 163
Corporate Social
Responsibility in India 11.2 SOCIAL RESPONSIBILITY OF BUSINESS
The growth of large corporations with their professional managers has changed the
nature of society through its effect on competitive forces and the ownership of private
property. With the increase of power in society, they are forced to concern themselves
with the nature of social responsibilities. Management must take decisions involving
moral issues and must adapt itself to the social forces that affect it. The idea of
social responsibility of business is based upon the concept that business is something
more than a purely economic institution.
Public Enterprises operates within the precincts of the society. While its immediate
society, where it operates, provides its environment, material, manpower, market
etc. the whole global society provides for its global corporate citizenship and ensures
its facilities in terms of environment, market, perspectives, exposure to technology
and integration with priorities in the business scenario. The social responsibility of
Public Enterprises consists of its responsibility to its consumers and customers, its
prospects, its immediate society (community), its human resources (people), its society
at large, ecological environment, the Government, and its business environment. Social
responsibility of business is not new to our country. In the olden days, whenever
there was a famine, the leading businessmen of the area would literally throw open
their godowns and their treasure chests to provide food and other assistance to
the needy. The history of every region of this country is replete with stories of the
magnificent manner in which businessmen rose to the occasion in times of calamity.
Even in ordinary times, it was the businessmen who looked after the welfare of the
destitute, the goshalas, wells and ponds wherever what was difficult to get, the
pathashalas and so on. So, to accept social responsibility is no more than rededicating
ourselves to the cherished values in the field of business. Gandhiji reminded of these
values when he propounded the theory of trusteeship. India is a democratic welfare
state. She wants to achieve welfare through democratic means. Business organization,
which fit in with such a specification, would have a better scope to survive and
grow here. In order to make them suitable for such a business environment, they
should foster a corporate objective of maximizing social benefit. This must be
considered as the social responsibility of business. It pertinently means that every
business enterprise has a responsibility to take care of the society’s interest.
Though the fundamental purpose of Public Enterprises is to produce and distribute
goods and services in such a manner that income exceeds costs, society expects
that business is conducted in a socially responsible manner. Social responsibility
embraces multitude of internal and external relationships of the firm. Business
enterprises, conscious of their social responsibility, would seek to comply with the
laws concerned with employment of women, non-discrimination in employment,
ecological effects of production, consumers, and employee welfare, and in general
they would think of the impact their action has on the community.
Social and ethical aspects of business impinge upon the choice of strategy. What
societal values and expectations after business and how a firm perceives its social
and ethical obligations are interactive in character and both of these may become
constraints in strategy formation. That’s how consumerism, occupational health and
safety, product safety, concern for environmental protection, nutritional issues, beliefs
about ethics and morals and other for environmental protection, nutritional issues,
164
beliefs about ethics and morals and other similar societal based factors impact upon CSR in Public Sector
Units (PSUs)
the strategies have to accommodate these factors. Some instances can be cited.
Most of the Public and Private Enterprises adopted the villages for development.
Most of the Enterprises launched awareness camps about AIDS. Cigarette
manufacturers have reduced the tar and nicotine content of cigarettes. Food processors
have altered the use of preservatives in food products and have begun to promote
nutritional content and “natural” flavors.
Activity 1
Why Social Responsibility is important for the business?
..........................................................................................................................
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11.3 SOCIAL RESPONSIBILITY STRATEGIES

In view of the ongoing controversy regarding whether or not a business has social
responsibility, it is not surprising to find a wide range of industry responses to the
issue. Business responses to social responsibility tend to fall within four categories:
(i) Social opposition, (ii) social obligation, (iii) social response, and (iv) social
contribution. These positions fall along a continuum, ranging from low to high levels
of socially responsible behaviour.
Table 11.1 Common Characteristics of Socially Responsible Firms

1. Initially founded by far-sighted people who visibly set the firms moral tone.
2. Stuck to the basics and produced only high-quality goods and services for
specific market niches.
3. Developed a public image that emphasized that commitment to quality and
often used non-traditional means to promote it.
4. Firmly practiced the dual principles of self-management and decentralization.
5. Brought in outside people to provide needed talent and additional
perspectives.
6. Encouraged all employees to become part of the shared mission through
full worker participation in decisions.
7. Paid fairly and usually offered benefit packages exceeding the competition.
8. Emphasized a democratic people orientation and did without executive perks.
9. Constantly solicited feedback from customers on all subjects from product
direction to corporate donations.
10. Top managers possessed an extensive knowledge of current events and took
a wide-ranging interest in affairs outside their business.
165
Corporate Social
Responsibility in India 11. Offered donations in cash or services to people in need of help.
12. Took an active role in the operations of their local communities.
13. Deal with like-minded businesses and encourage their employers to do the same.
14. Constantly look to the future but always pay attention to the past.

11.4 SOCIAL RESPONSIBILITY TOWARDS

DIFFERENT GROUPS
In addition to making a fair and adequate return on capital, business must be just
and humane, as well as efficient and dynamic. The modern business has manifold
responsibilities (a) itself, (b) to its customers; (c) employees; (d) owners, shareholders
and partners, (e) community and (f) the state. The task of management is to reconcile
and harmonize these separate and sometimes conflicting responsibilities.
The S.R. of Business can best be assumed in an atmosphere of freedom with the
least possible restraint on healthy competition. Concentration and monopoly have
to be watched and guarded, and wherever necessary, dispersed.
Every business has an overriding responsibility to make the fullest possible use of
its resources, both human and capital. Management has the responsibility to provide
security of employment with fair wages and equal opportunity for personal growth
and advancement within the business, which is a requirement of justice, and means
of securing efficient management.
It highlights the respective roles of the enterprises, the shareholders, the workers,
the customers, the management and the community. The responsibility of management
is to fulfill the fair first needs of these claimants besides, providing consumer
satisfaction.
It laid emphasis on the reciprocal duties between business and the community through
laying down of practical measures like reliable means of communication, better
education of the citizens about civil responsibilities, local meetings and social audit.
The following flowchart presents business’s social responsibilities towards different
groups.
Table: 11.2: Business’s social responsibilities towards different groups

Business Firm’s Responsibilities

Towards Owners/ Towards Employees Towards Customers

Shareholders

 Fair Dividend  Meaningful Work  Fair price

 Solvent and Efficient  Job Satisfaction  Superior Quality

Business

 Optimum use of  Fairness Salaries  Superior Service

Resources & Benefits

 Planned Growth  Best Quality of  Superior Product

Work life Design
166
 CSR in Public Sector
 Effective  Succession Planning  Quick and Complete Units (PSUs)
Communication and Development Information

Towards Government Towards Society Towards Inter-Business

 Payment of Taxes,  Employment without  Fair Competition

 Custom Duties etc  Discrimination 

 Abide by the Laws  Employment to  Cooperation for

Disadvantaged Sharing of Scarce
Persons Resources and
Facilities

 Observe the Policies  Community Welfare  Collaboration for

Services Maximization of
Business efficiency

 Maintain Law &  Business Morality

Security  Maintaining Pollution
free Environment

 Maintaining
Ecological Balance

11.5 SOCIAL AUDIT

Social audit has been variously defined. As it happens with any new management
technique, there is not yet any definition which has gained acceptance. Bauer and
Fenn define social audit as “a commitment to systematic assessment of and reporting
of some meaningful definable domain of a company’s activities that have social impact”.
The author’s emphasis is on the assessment and reporting of corporate social
programmes.
Dilley defines the social audit as “investigation of an enterprise’s performance as a
member of the community in which it has its primary impact: such investigations
consisting of the preparation of an inventory of the socially relevant activities of the
enterprise, qualification (to the extent possible) of the social costs and benefits resulting
from those activities and compilation of the other quantitative information providing
insight into the social performance of the enterprise” (Hindu Business Line, 1997).
Dilley’s definition highlights the making of an inventory of the socially relevant activities
and their quantification in terms of costs and benefits.
Caroll and Bailer, describe social auditing “as a form of measurement”. According
to them “Social audit is a natural evolutionary step in the concern for operationalizing
corporate social responsibilities and, in its essence, represents a managerial effort
to develop a calculus for gauging the firm’s socially oriented activities. That, it is
an attempt to measure, monitor and evaluate the organizations performance with
respect to its social programmes and social objectives” (Chartered Secretary, Oct,
1997).
167
Corporate Social Features of Social Audit
Responsibility in India
 The areas for social audit include any activity which has a significant social
impact, such as activities affecting environmental quality, consumerism,
opportunities for women and other disadvantaged people in society and
similar others.
 The second feature about social audit is that it can determine only what
an organization is doing in social areas, not the amount of social good that
results from these activities. It is a process audit rather than an audit for
results.
 Thirdly, social performance is difficult to audit because most of the results
of social activities occur beyond the company’s gate and the company has
no means of securing data on the results. Even if data are available, it is
difficult to establish how many of them have occurred due.
Social Audit in India
In India, the TISCO was the first company to set up a Social Audit Committee for
conducting social audit of its work under the chairmanship of Justice S.P. Kotwal,
and Prof. Rajini Kothari and Prof. P.G. Mavalankar as members. This committee
was entrusted with the task of “examining and reporting whether, and the extent to
which, the TISCO fulfilled the objectives contained in Clause 3A of its Articles of
Association regarding its social and moral responsibilities to the consumers, employees,
shareholders, and the local community”. The Committee opined, “On an examination
of all aspects, the company fulfilled its obligations to all concerned.”
In India, the companies in general and the public sector undertakings in particular
should make disclosure of information for the use of people outside the enterprise,
which include:
 financial institutions and creditors (who are interested in financial position,
fund- flow and debt-paying capacity of the enterprise);
 shareholders, academic institutions and consultants (who are interested in
quantitative and qualitative information regarding proper utilization of resources
transferred to the concern);
 the government (for knowing about financial and statistical information for
planning and operating of those enterprises and initiating and administering
financial and economic policies and programmes at state and national levels.
 trade unions, political leaders (require information for broad labour policy
decisions, for etc.); and
 environments (who need information regarding air and water pollution
ecological imbalances, depletion of resources and conservation of energy).

11.6 GLOBAL GUIDELINES TO PROMOTE CSR

PRACTICE
The global impetus that CSR has received in recent years has oriented companies
to invest socially and evolve a profit-oriented welfare approach. Besides the legal
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provisions that bind companies, several initiatives reflect how companies are investing CSR in Public Sector
Units (PSUs)
responsibly to improve their brand image alongside addressing the prevailing socio-
economic issues in the societal milieu in which they are operating. A comprehensive
guidance for companies pertaining to CSR is available in the form of several globally
recognized guidelines, frameworks, principles and tools. Most of these guidelines
relate to the larger concept of sustainability or business responsibility, in keeping
with the fact that these concepts are closely aligned globally with the notion of CSR
(CII, 2013). The United Nations guiding principles on business and human rights
are grounded in recognition of the states’ existing obligations to fulfill human rights
and fundamental freedoms, role of business enterprises in a society to perform
specialized functions and the need for rights and obligations to be matched to
appropriate and effective remedies when breached (United Nations, 2011). These
guiding principles apply to all states and to all business enterprises, both transnational
and others, regardless of their size, sector, location, ownership and structure. These
guiding principles are to be understood as a coherent whole and should be read,
individually and collectively, in terms of their objective of enhancing standards and
practices with regard to business and human rights so as to achieve tangible results
for affected individuals and communities, and thereby also contributing to a socially
sustainable globalization.
United Nations Global Compact (UNGC) is the world’s largest corporate citizenship
initiative with the objective to mainstream adoption of sustainable and socially
responsible policies by businesses around the world. UNGC outlines 10 principles
derived from various UN conventions covering four broad areas, namely: human
rights, environmental protection, labour rights and anti-corruption.
The International Labor Organization (ILO, 2017), provides direct guidance to
enterprises (multinational and national) on social policy and inclusive, responsible
and sustainable workplace practices. This is known as ILO’s tripartite declaration
of principles on multinational enterprises and social policy. This is majorly applicable
to multinational organizations.
The Organization for Economic Co-operation and Development (OECD) established
a set of guidelines for multinational enterprises in 1976, and was thus a pioneer in
developing the concept of CSR (OECD Guidelines for Multinational Enterprises,
2008). The purpose of these guidelines was to improve the investment climate and
encourage the positive contribution multinational enterprises can make to economic
and social progress. In addition to the OECD’s 30 member countries, 11 observer
countries have endorsed the guidelines. Similarly, the Institute for Social and Ethical
Accountability has set a series of standards which enable organizations to become
accountable, responsible and sustainable. Another such tool includes OECD’s CSR
policy tool which aims to help companies gain insight into their current CSR activities,
assess its value and determine other CSR activities that can be employed. Social
Value UK international has created a framework based on Social Generally Accepted
Accounting Principles (SGAAP) that can be used to help manage and understand
the social, economic and environmental outcomes created by an organization or a
person.
Transparency is noted to be a crucial factor to enhance the economic, social and
environmentally responsible focus while conducting any business. Incentives to
encourage CSR reporting such as employee benefits have been focused on to
encourage CSR reporting and measures such as mandatory CSR reporting have 169
Corporate Social been undertaken to ensure the provision is put into practice. For instance, in 2007,
Responsibility in India
the Malaysian government passed a regulation to mandate all publicly listed companies
to publish their CSR initiatives in their annual reports on a “comply or explain” basis.
Accordingly, all public listed companies (PLCs) in Malaysia have to either publish
CSR information or need to provide an explanation as to why they should be
exempted. In another example, in 2009, the Denmark government enforced
mandatory CSR reporting, asking all state-owned companies and companies with
total assets of more than €19 million, revenues more than €38 million and more
than 250 employees, to report their social initiatives in their annual financial reports.
For the purposes of enforcing transparency in businesses with regard to environment,
social and governance, France passed a law called Grenelle II, which mandates
integrated sustainability and financial reporting for all companies listed on the French
Stock exchanges, including subsidiaries of foreign companies located in France and
unlisted companies with sales revenue of more than €400 million and more than
2,000 employees.
On similar lines in India, over the last decade, CSR has rapidly picked up pace
with some companies focusing on strategic CSR initiatives to contribute towards
nation building. Gradually, Indian companies have shifted their focus to need-based
initiatives aligned with the national priorities such as public health, education, livelihoods,
water conservation and natural resource management. The potential role and
responsibility of the business and corporate sector in contributing towards societal
betterment have been intensively deliberated across the country. In the last five years,
the Government of India has been focusing on persuading companies to participate
in addressing social and developmental issues, not only as a part of their social
responsibility but also their business practices (EY Global CSR Summit, 2013). In
order to set a common standard for companies to better their CSR efforts, voluntary
CSR guidelines regarding sustainability are vital. An adoption and practice of a
common set of standards will hold companies accountable to meet these guidelines
while also creating a peer pressure on other companies for them to comply with
the guidelines. In this regard, the National Voluntary Guidelines (NVGs) on Social,
Environmental and Economic Responsibilities of Business, have been laid down by
the Ministry of Corporate Affairs in order to provide companies with guidance in
dealing with the expectations of inclusive growth and imperatives of climate change,
while working closely within the framework of national aspirations and policies. These
are applicable to all businesses irrespective of size, sector or location (Ministry of
Corporate Affairs, 2018). These NVGs were designed with the intent of assisting
enterprises to become responsible entities whereby they formulate their financial
or business objectives while considering the impact on various diverse stakeholders
including society and environment at large.
Historically, the Indian government has taken several steps even before CSR became
a legal binding on corporates and PSUs alike highlighting that every public sector
enterprise (PSE) being part of the ‘state’ has its “moral responsibility to play an
active role in discharging social obligations endowed on a welfare state, subject to
the financial health of the enterprise” (CAG, 2015). One such example is the
Department of Public Enterprises (DPE) issuing guidelines on corporate social
responsibility for central public sector enterprises in the year 2010. Over time, these
guidelines have been reworked and have evolved to include several other dimensions
such as sustainability. The next section will take you through the evolution of these
guidelines over time.
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Activity 2 CSR in Public Sector
Units (PSUs)
Go through the above section and write down the key points of the global guidelines
to promote CSR practices.
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11.7 GUIDELINES FOR PUBLIC SECTOR

ENTERPRISES
Setting an example for the private sector, guidelines regarding expenditure on CSR
activities for Central Public Sector Enterprises were issued by the Department of
Public Enterprises. According to these “Guidelines on Corporate Social Responsibility
and Sustainability for Central Public Sector Enterprises (CPSE)” revised by the
Department of Public Enterprises (DPE), Ministry of Heavy Industries and Public
Enterprises every year, each CPSE shall with the approval of its Board of Directors
make a budgetary allocation for CSR and Sustainability activities or projects for
the year. These guidelines came into effect from 1 April 2013 and are a revised
version of the previous comprehensive ‘Guidelines on Corporate Social Responsibility
for Central Public Sector Enterprises’ issued by The Department of Public Enterprises
(DPE), in April 2010. The earlier guidelines focused mainly on CSR activities for
external stakeholders whereas the revised guidelines by the DPE also take internal
stakeholders, particularly employees, into account.
Guidelines on CSR for CPSEs, 2010
The Committee on Public Undertakings (COPUs) recommended the social obligation
of every public sector enterprise. Resultantly, based on these recommendations,
DPE issued a general set of guidelines in 1994. These guidelines rendered discretion
to the Board of Directors of the PSEs to create socially responsible business practices
in line with their Article of Association under the aegis of their respective department.
It was in the year 2010 that DPE issued a new set of guidelines which called for
integration of the business plan under CSR with social and environmental concerns
related to the CPSE (ibid, 2015). The guidelines were in the form of specific actionable
agenda based on the steps of a project lifecycle:
a. Concept
The guidelines introduce the term ‘triple bottom line’ specifying that corporate
performance be measured on parameters of economic, social and environmental
impact thereby prompting public corporations to reorient the yardsticks to measure
business performance. They state that “Corporate Social Responsibility is a concept
whereby organizations serve the interests of society by taking responsibility for the
impact of their activities on customers, employees, shareholders, communities and
the environment in all aspects of their operations.’’ The guidelines link the concept
of CSR with Sustainable Development highlighting the underlying dimension of
integration of social and business goals.
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Corporate Social b. Planning
Responsibility in India
The guidelines specify that CSR planning should be done in a way that it is relevant
for the targeted population, reaches the smallest unit depending on resource availability
and capability, and should match with the long-term business plan. The ideal scenario
for a CSR project is to be located in the periphery of the place where the company
carries out its activities. However, it can be anywhere in the country if the former
is not possible. Specifying the components of an ideal plan, the guidelines state that
a CSR plan should include requirements relating to baseline survey, activities to be
undertaken, budgets allocated, timelines prescribed, responsibilities and authorities
defined and major results expected. The plan should also detail out the implementation
guidelines and the modalities of monitoring and evaluation.
c. Implementation
For the purpose of implementation, the guidelines direct that implementation should
be done through specialized agencies and not by CPSE staff. Such agencies can
range from community-based organizations, NGOs, Trusts, Village Panchayats, SHGs,
consultancy organizations to contracted agencies for civil works and should be verified
on their track record. Even though the guidelines separate implementation, they direct
all CPSEs to generate awareness among all staff members about the CSR activities
being undertaken. To avoid duplication of effort, the guidelines state that CSR projects
should be dovetailed with other governmental initiatives instead of creating duplicity.
For selecting activities/ projects, attention should be paid to creating community
goodwill, social impact and a positive change and also create a positive image for
the company. The implementation component specifically highlights that the project
should align with the millennium development goals and also suggests that the activities
should fall in the ambit of 3 UN Global Compact Principles pertaining to environmental
businesses entailing supporting precautionary approach to environmental challenges,
undertaking initiatives to promote greater environmental responsibility and encourage
the development and diffusion of environmentally friendly technologies.
d. Research, Documentation, Advocacy, Promotion and Development
The guidelines provision for creating a CSR Hub which will work on compiling
nationwide initiatives leading to a database, conducting research and advocacy,
preparing panels of implementing, monitoring and validation agencies, conduct
conferences, seminars, workshops and acting as a think tank. The CSR hub is
provisioned to be supported by DPE alongside making it eligible to receive funding
from State PSEs, UN agencies, national and state bodies, government departments,
trusts, philanthropic missions of national and international repute.
e. Funding
In 2010, the guidelines provisioned for calculation of the CSR budget using net
profit as the parameter. However, the guidelines only gave a percentage range for
a different range of net profit unlike the current provision of 2%. For companies
having a net profit of less than 100 crores in the previous year, the expenditure
range for CSR in a financial year is specified to be 3-5%, for companies with a
net profit of 100-500 crore, the CSR range is 2-3% and for companies earning a
net profit of 500 crore or more, the specified CSR expenditure range is kept at
0.5-2%. For companies that are making losses, there is no compulsion to earmark
CSR funding. For companies having different profit centers like factories or plants,
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there can be different allocated CSR budgets. In the event of an unspent CSR fund, CSR in Public Sector
Units (PSUs)
the guidelines provision for creating a CSR fund which will accumulate unspent CSR
funds and be known as the non-lapsable-pool for the North East.
f. Clarifications
The guidelines clarify that they override any other direction in this regard by any
other ministry or department as they are coherent with the draft guidelines for
corporates issued by the Ministry of Corporate Affairs. Detailing the illegibility of
CSR spends, the guidelines specify that any grant made to an agency not implementing
CSR projects, any activity related to staff benefits will not count as CSR. They
also make provisions for any amendments to the guidelines by DPE in the future.
g. Baseline Survey and Documentation
Conducting a baseline survey before the start of every project is mandatory. This
is done to ensure that the impact of the CSR activities is quantified. Documentation
of all CSR processes, activities, expenses, etc., is also emphasized upon and open
access in the public domain is provisioned in the guidelines.
h. Monitoring
Monitoring is stated to be an important aspect of CSR practice and is specified to
be conducted on a periodic basis. For the purpose of monitoring, the guidelines
provision for creating a CSR committee or a social audit committee and evaluation
by an independent external agency is also mandated for. To ensure that CSR practice
is resulting in impact, the guidelines specify that the concerned ministry/ department
should measure a CPSEs performance with reference to its CSR activities to the
extent that from 2010-11, 5 marks are specified for CSR activities and 5 for
sustainable development initiatives.
These guidelines witnessed minor amendments such as one dated 4th February,
2011 which directed CPSEs to include contribution to the National CSR Hub located
in the Tata Institute of Social Sciences as CSR spend (DPE, 2011) and another
dated 21st June, 2011 which directed CPSEs to include fee of any CSR training
or workshop as CSR spend.
In totality, the guidelines issued by DPE in 2010 were a precursor to the revised
guidelines issued in 2013 followed by 2014. The revisions thus made in 2014 were
largely taking into consideration the CSR Act of 2013 and therefore, the revised
guidelines clearly state that they do not override the provisions of the Act and are
drafted to supplement the CSR provisions in the Act and the Schedule VII rules.
Activity 3
What are the key components of guidelines on CSR for CPSEs issued by DPE in
2010?
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Corporate Social
Responsibility in India 11.8 GUIDELINES ON CSR FOR CPSEs, 2013
ONWARDS
Revision of Guidelines on CSR for CPSEs, 2010
The Department of Public Enterprises revised the CSR guidelines of 2010 which
became effective from 1st April, 2013. The guidelines propose to infuse policy content
in a large measure. CPSEs are directed to constitute CSR policy in a way to include
sustainability measures as an equally important component. The following are the
key features of the guidelines:
a. CPSEs take up at least one major project for development of a backward
district
b. CPSEs to earmark 5% of their annual budget for CSR and sustainability
activities to meet the emergency needs which may include relief work
undertaken during natural calamities/ disasters/ contribution towards Prime
Minister’s/ Chief Minister’s Relief Funds or to the National Disaster
Management Authority
c. CPSEs to conduct business in a manner that is socially responsible and
mutually beneficial for the business and the society
d. CPSEs to constitute a two-tier structure, viz., a board level committee and
a group of officials headed by a senior executive not less than one rank
below the board level to steer the CSR and sustainability agenda of the
company
e. CPSEs to disclose reasons for unspent CSR and sustainability budget. The
revised guidelines however provide for the unspent budget being spent within
the next two financial years, failing which, it will be transferred to a
‘Sustainability Fund’ to be created separately for CSR and Sustainability
activities.
f. Unlike the previous guidelines that focused on number of projects, the revised
guidelines advise CPSEs to focus on scalability of CSR and sustainability
projects
g. CPSEs to allow usage of the infrastructural facilities created from CSR
and sustainability budget by employees which should however not exceed
25% of the total number of beneficiaries
h. Monitoring of the CSR and sustainability activities should be conducted
by an external agency. In case of projects being implemented by an external
agency, monitoring of the project must be conducted by the CPSEs through
the team of officials specially designated for the task.
Guidelines on CSR for CPSEs, 2014
Enactment of the Companies Act of 2013 brought all companies including CPSEs
in the ambit of Section 135 and Schedule VII of the Act. As you have studied in
the previous unit, the aforementioned Section and the Schedule lay down the
modalities for any company including public sector enterprises to undertake and
implement CSR. Prior to the CSR rules, the DPE guidelines on sustainability issued
174
in December, 2012 were applicable to CPSE from April, 2013. In these guidelines, CSR in Public Sector
Units (PSUs)
CSR and sustainable development were treated complementary wherein CSR was
seen as a constituent of the overarching framework of sustainability. The revised
guidelines of 2014 are also based on the same principle reaffirming the need to
look at sustainable development as the larger parameter alongside which business
conduct and CSR agenda should be devised. The guidelines clarify that they do
not supersede the CSR provisions of the Act and the Schedule VII and any
contradiction arising in practice, provisions of the Act will prevail. Other provisions
in the guidelines are as follows:
a. The term sustainability is used in conjunction with CSR with the vision that
provisions in the Act coupled with sustainability initiatives will facilitate
achievement of Sustainable Development Goals. Thus, the guidelines
emphasize the need to take sustainability initiatives in addition to CSR
compliance thereby making it mandatory for CPSEs to ensure CSR
compliance in conjunction with the provisions in the guidelines.
b. Besides the CSR policy that is to be drafted under the Act, the guidelines
mandate CPSEs to have a vision and mission statement detailing how the
CPSE proposes to comply with the guidelines along with description of
its sustainability initiatives. Thus, the guidelines propose the CSR policy to
be named as ‘CSR and Sustainability’ Policy which by no means indicate
any digression from the provisions under the Act but instead reiterate the
commitment of a CPSE towards addressing social, economic and
environmental concerns which may be beyond the ambit of the CSR Act.
c. The CSR and Sustainability Policy must be in accordance with the provisions
of the Act, Schedule VII of the Act, CSR rules and guidelines, and the
policy directions issued by the government from time to time.
d. If there is a need to add new CSR activities that do not fall in the ambit of
the current policy, it can be done with the approval of the board and will
be considered as an amendment to the policy.
e. The guidelines make it mandatory for all CPSEs making profits in the
preceding year to undertake CSR activities even if the net profits do not
fall in the threshold specified in Section 135 (1) of the Act. Specifying that
such CPSEs will be expected to spend at least 2% of the profit made in
the preceding year on CSR activities.
f. In the event of unspent CSR budget, the CPSE will have to specify the
reason for not spending the designated amount. However, the unspent CSR
budget will not lapse and will be carried forward to the next year for utilisation
for the purpose for which it was allocated.
g. The activities listed under CSR for any CPSE should align with the national
priorities such as safe drinking water for all, provision of toilets, health and
sanitation, etc. The overarching focus should be sustainable development
and inclusive growth.
h. In line with the emphasis on sustainability, the guidelines recommend that
besides CSR, every CPSE should focus on aligning its business activities
with the social, economic and environmental responsibilities. However, it
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Corporate Social is specified that the amount spent on sustainability initiatives in the pursuit
Responsibility in India
of sustainable development while conducting routine business activities would
not be counted in the 2% CSR spend.
i. Sustainability initiatives by the CPSE should focus on producing goods and
services which are safe and healthy for consumers and the environment,
resource efficient, consumer friendly and environmentally sustainable through
the production life cycle. Alongside, the initiatives should include steps to
promote the welfare of employees, physically challenged, deprived caste
groups in the form of providing conducive work environment. However,
these steps will not be counted for in the CSR spends.
j. The sustainability and inclusive approach adopted by the CPSE should be
extended to the supply and market chain such that vendors, service providers,
clients and partners align with the commitments on growth and development.
The guidelines term this phenomenon as a CPSE being able to ‘green’ the
supply chain.
k. In terms of locating the CSR activities, the first preference should be given
to the ‘local area’ for CSR activities. This ‘local area’ can be in proximity
to the location of the CPSE or any of its plants or factories. However, if
this is not feasible, a CPSE can undertake CSR activities anywhere in the
country.
l. The CPSE needs to devise an effective communication strategy in order
to create a continuous dialogue with key stakeholders to obtain their feedback
on the CSR activities by the company. The ultimate decision on CSR activities
however lies with the board.
m. The annual CSR report as stipulated by the Act should also include a section
on the actions taken to implement the provisions listed in the guidelines
such that the stakeholders are informed of not only the CSR activities but
also the actions taken by the CPSE towards sustainable development. The
guidelines further advise the CPSE to release an ‘Annual Sustainability
Report’ to render greater transparency and accountability to the company’s
operations.
n. For the purpose of ascertaining the impact of CSR and sustainability
initiatives, the guidelines advise the CPSEs to undertake a needs assessment
survey before selecting CSR activities. Furthermore, the CPSEs should get
an impact assessment study done by an external agency. The expenditure
incurred on needs assessment survey and impact assessment must be within
the overall limit of 5% of administrative overheads of CSR spend.
o. The guidelines clarify that CPSEs which are statutory corporations should
comply with the provisions of the Act, CSR rules and the Guidelines (DPE,
2014).
Recent Amendments
The guidelines issued in the year 2014 have undergone amendments. The first
amendment was issued on 20th November, 2014 which aimed at including select
national priorities under CSR carried out by CPSEs. In the directive, it was specified
176 that
 a. Contributions to Swachh Bharat Kosh set up by the Central Government CSR in Public Sector
Units (PSUs)
for promotion of sanitation and Clean Ganga Fund set up by the Central
Government for the rejuvenation of river Ganga will be considered as
expenditure under CSR.
b. Contributions to Prime Minister’s Relief Fund (PMRF) will not be accepted
if they flow out of budgetary resources, profits or from balance sheets of
PSEs. PMRF will only accept voluntary contributions by individuals and
institutions (DPE, 2014).
The second amendment dated 1st August, 2016 was done to promote observance
of transparency and due diligence in the selection and implementation of CSR activities
by CPSEs. The amendment clarifies that all CPSEs crossing the specified threshold
under Section 135 of the Companies Act, 2013 are mandated to allocate 2% of
their average net profits of three preceding years for CSR activities. The guidelines
direct the ministries and departments to advise the CPSEs in their jurisdiction to.
a. ensure that the CSR activities selected for implementation fall within the
list of activities stated under Schedule VII of the Act.
b. ensure that the engagement with stakeholders is in line with the needs of
people.
c. upload the CSR policy in the public domain on their website along with
the details of the CSR activities being undertaken and the respective fund
allocation.
d. observe transparency and due diligence in the selection and implementation
of activities under CSR.
e. establish an institutionalized mechanism for monitoring, reporting and
evaluation.
f. make efforts to fully utilize the allocated CSR funds for the year (DPE,
2016).
The third amendment to the 2014 guidelines was issued on 10th December, 2018
which was an outcome of the CPSEs conclave in April 2018. A key outcome of
the conclave was the felt need to implement CSR with a theme-based approach
contributing towards national priorities. Followed by the need, the DPE underwent
deliberations with select CPSEs, departments, ministries, NITI Aayog and proposed
the following course of action for the CPSEs:
a. CPSEs to identify a common theme for each year for undertaking CSR.
b. For the year 2018-19, school education and health care are themes for
focused intervention by CPSEs.
c. 60% Of the annual CSR expenditure should be towards the thematic
programme.
d. Aspirational districts to be given preference.
e. The annual theme for the next year will be decided by the competent authority.
The third amendment specifies that the specification of directing 33% CSR funds
towards sanitation and Swachh Bharat Mission activities as specified in the first 177
Corporate Social amendment is superseded. Making NITI Aayog responsible for piloting the
Responsibility in India
amendment, the second amendment specifies directions for a CPSE implementing
a CSR activity in an Aspirational district:

a. The CPSE is supposed to designate a senior functionary as nodal officer

to liaise with the district administration of concerned district.

b. furnish the details of the nodal officer along with the name of the Aspirational
district to NITI Aayog, the concerned department of the CPSE and DPE.

c. furnish details of the projects funded by CPSE under CSR in an Aspirational

district to NITI Aayog, the concerned department of the CPSE and DPE.

d. Brief the concerned Prabhari officer of Aspirational district about the CSR
project being funded by CPSE (DPE, 2018).

Activity 4

How are the guidelines issued by DPE for CPSEs on CSR in the year 2014 different
from the earlier versions?

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11.9 SUMMARY
In recent times corporate social responsibility has become the talk of the day. In
almost all business organizations, this concept is now being used formally. This has
gained a wide recognition as it is important for the economic health of the organization
and the welfare of the society at large. Social responsibility in business or more
popularly known as corporate social responsibility means that the organization has
to work in tune with the public interest. This comprises of areas like social audit.
This becomes a monitoring tool for the public enterprises so as to enhance the efficiency
of these enterprises.
Since 1994 the Government of India has been taking steps to orient public sector
enterprises on the social and environmental responsibility they carry while operating
in the larger human ecosystem. While there are several sets of guidelines that were
issued by the Department of Public Enterprises for Central Public Sector Enterprises,
a major thrust was observed with the implementation of the Companies Act of 2014.
At the same time, to further the enforcement of provisions of CSR and Schedule
VII and extend the efforts of CPSEs to the tangent of sustainability, the DPE issued
guidelines that resonate with the CSR provisions of the Companies Act. The guidelines
serve as a guiding document for CPSEs to practice CSR and Sustainability in
complementarity. In doing so, the guidelines suggest measures that facilitate CSR
practice among CPSEs extending the impact to all involved stakeholders.
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 CSR in Public Sector
11.10 KEYWORDS Units (PSUs)

Department of Public : Department of Public Enterprises is a part of the Ministry

Enterprises of Heavy Industries and Public Enterprises. It is the nodal
department for all Central Public Sector Enterprises and
formulates policy pertaining to CPSEs.
Central Public Sector : Central Public Sector Enterprises are those companies
Enterprises in which the direct holding of the Central Government
or other CPSEs is 51% or more.
Sustainability : The process of bringing about change which is lasting
and becomes constant.
Local Area : The surroundings in proximity to a company’s operational
site/ factory or plant.
Needs Assessment : The study of nature and extent of needs of a population
group with respect to the gap between the current
situation and the desired situation.
Social Impact : A substantial, positive and sustainable change that
addresses a pressing social problem.
Responsible Business : The process of running a business which is socially,
Practices economically and environmentally responsive and
positively impactful for all stakeholders.

11.11 SELF-ASSESSMENT QUESTIONS

1. What are the essential components of a CSR and Sustainability policy?
2. Bring out the features and benefits of social audits?
3. Which year was the first set of guidelines issued by the Government of India
to govern the social conduct of businesses?
4. Explore one successful enterprise of your choice, which is society oriented?
5. What are National Voluntary Guidelines issued by the Government of India?
6. Which year was the first set of guidelines issued by the Government of India
to govern the social conduct of businesses?

11.12 REFERENCES/FURTHER READINGS

Part of the Unit is Adopted from School of Extension and Development Studies,
Programme Post Graduate Diploma in Corporate Social Responsibility, Course
MEDS-051 Fundamentals of CSR, Vol 1, Block 2, CSR Legislations and Guidelines:
Global and India Unit-3, CSR Policy guidelines, p. 112-127.
Part of the Unit is Adapted from School of Management Studies, Masters in Business
Administration (MBA), Course MS-92 Management of Public Enterprises, Block
2, Public Enterprises: Accountability and Governance Unit-9, Corporate Governance
and Corporate Social Responsibility, p. 36-59. 179
Corporate Social CAG. (2015). Corporate Social Responsibility. Chapter 6. Retrieved on November
Responsibility in India
14, 2019 from [Link]
Compliance_Commercial_2_2015_chapter_9.pdf
Confederation of Indian Industry. (2013) Handbook on Corporate Social
Responsibility in India. Retrieved from ttps://[Link]/assets/pdfs/publications/
2013/[Link]
Corporate Governance. (October, 1997). The New Paradigm, Chartered Secretary
October.
Corporate Governance Putting Investors First: Scott C. Newquist with Max B.
Russel, Jaico books. [Link]
‘Corporate Governance and PSU’. Dec. 19, (1996) The Economic Times. Committee
on Financial Systems. (1998). (Narasimham Committee-part II).
Department of Public Enterprises (DPE). (2010). Guidelines on Corporate Social
Responsibility for Central Public Sector Enterprises. [Link].15 (13)/2007-
DPE(GM). Government of India. Retrieved on December 1, 2019 from https://
[Link]/docs/1.7_Annexure%20VII_DPE_CSR_2010.pdf
Department of Public Enterprises (DPE). (2013). New Guidelines on Corporate
Social Responsibility and Sustainability for Central Public Sector Enterprises.
DPE OM No.15 (7)/2012-DPE(GM)-GL-104. Government of India. Retrieved
on December 1, 2019 from [Link]
Responsibility_Sustainability-[Link]
Department of Public Enterprises (DPE). (2014). Office Memorandum. [Link].15
(13)/2013-DPE(GM). Government of India. Retrieved on December 1, 2019 from
[Link]
Department of Public Enterprises (DPE). (2014). Guidelines on Corporate Social
Responsibility and Sustainability for Central Public Sector Enterprises. [Link].15
(13)/2013-DPE (GM). Government of India. Retrieved on November 10, 2019
from [Link]
Department of Public Enterprises (DPE). (2016). Office Memorandum. [Link]-
01/0003/2016-Dir (CSR). Government of India. Retrieved on December 1, 2019
from [Link]
Department of Public Enterprises (DPE). (2016). Office Memorandum. [Link]-
15/0008/2014-Dir (CSR). Government of India. Retrieved on December 1, 2019
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