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    REFERENCE NOTE.No. 11 /RN/Ref./2013

    For the use of Members of Parliament Not for Publication

    Corporate Social Responsibility

    ------------------------------------------------------------------------------------------------------------------------The reference material is for personal use of the Members in the discharge of their Parliamentary duties, and is not for

    publication. This Service is not to be quoted as the source of the information as it is based on the sources indicated at

    the end/in the text. This Service does not accept any responsibility for the accuracy or veracity of the information or

    views contained in the note/collection.

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    Corporate Social Responsibility

    The 21st century is characterized by unprecedented challenges and opportunities,

    arising from globalization, the desire for inclusive development and the imperatives of

    climate change. Indian business, which is today viewed globally as a responsible

    component of the ascendancy of India, is poised now to take on a leadership role in the

    challenges of our times. It is recognized the world over that integrating social,

    environmental and ethical responsibilities into the governance of businesses ensures their

    long term success, competitiveness and sustainability. This approach also reaffirms the

    view that businesses are an integral part of society, and have a critical and active role to

    play in the sustenance and improvement of healthy ecosystems, in fostering social

    inclusiveness and equity, and in upholding the essentials of ethical practices and good

    governance. This also makes business sense as companies with effective CSR, have

    image of socially responsible companies, achieve sustainable growth in their operations

    in the long run and their products and services are preferred by the customers.

    Indian entrepreneurs and business enterprises have a long tradition of working

    within the values that have defined our nation's character for millennia. India's ancient

    wisdom, which is still relevant today, inspires people to work for the larger objective of the

    well-being of all stakeholders. These sound and all-encompassing values are even more

    relevant in current times, as organizations grapple with the challenges of modern-day

    enterprise, the aspirations of stakeholders and of citizens eager to be active participants in

    economic growth and development1.

    The idea of CSR first came up in 1953 when it became an academic topic in

    HR Bowens Social Responsibilities of the Business. Since then, there has been

    continuous debate on the concept and its implementation. Although the idea has been

    around for more than half a century, there is still no clear consensus over its definition.

    One of the most contemporary definitions is from the World Bank Group, stating,

    Corporate social responsibility is the commitment of businesses to contribute to

    sustainable economic development by working with employees, their families, the local

    1India, Ministry of Corporate Affairs, Corporate Social Responsibility Voluntary Guidelines 2009

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    community and society at large, to improve their lives in ways that are good for business

    and for development.2

    Corporate Social Responsibility Voluntary Guidelines 2009

    In order to assist the businesses to adopt responsible governance practices, the

    Ministry of Corporate Affairs has prepared a set of voluntary guidelines which indicate

    some of the core elements that businesses need to focus on while conducting their affairs.

    These guidelines have been prepared after taking into account the governance challenges

    faced in our country as well as the expectations of the society. The valuable suggestions

    received from trade and industry chambers, experts and other stakeholders along with the

    internationally prevalent and practiced guidelines, norms and standards in the area of

    Corporate Social Responsibility have also been taken into account while drafting these


    Fundamental Principle: Each business entity should formulate a CSR policy to guide its

    strategic planning and provide a roadmap for its CSR initiatives, which should be an

    integral part of overall business policy and aligned with its business goals. The policy

    should be framed with the participation of various level executives and should be approved

    by the Board.

    Core Elements:

    The CSR Policy should normally cover following core elements:

    1. Care for all Stakeholders:

    The companies should respect the interests of, and be responsive towards all

    stakeholders, including shareholders, employees, customers, suppliers, project affected

    people, society at large etc. and create value for all of them. They should develop

    mechanism to actively engage with all stakeholders, inform them of inherent risks and

    mitigate them where they occur.

    2The Challenges of Social Corporate Social Responsibility: Facts for You, May 2013, pp. 38-39

    3 India, Ministry of Corporate Affairs, Corporate Social Responsibility Voluntary Guidelines 2009

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    2. Ethical functioning:

    Their governance systems should be underpinned by Ethics, Transparency and

    Accountability. They should not engage in business practices that are abusive, unfair,

    corrupt or anti-competitive.

    3. Respect for Workers' Rights and Welfare:

    Companies should provide a workplace environment that is safe, hygienic and humane

    and which upholds the dignity of employees. They should provide all employees with

    access to training and development of necessary skills for career advancement, on an

    equal and non-discriminatory basis. They should uphold the freedom of association and

    the effective recognition of the right to collective bargaining of labour, have an effective

    grievance redressal system, should not employ child or forced labour and provide and

    maintain equality of opportunities without any discrimination on any grounds in recruitment

    and during employment.

    4. Respect for Human Rights:

    Companies should respect human rights for all and avoid complicity with human rights

    abuses by them or by third party4.

    5. Respect for Environment:

    Companies should take measures to check and prevent pollution; recycle, manage and

    reduce waste, should manage natural resources in a sustainable manner and ensure

    optimal use of resources like land and water, should proactively respond to the challenges

    of climate change by adopting cleaner production methods, promoting efficient use of

    energy and environment friendly technologies.

    6. Activities for Social and Inclusive Development:

    Depending upon their core competency and business interest, companies should

    undertake activities for economic and social development of communities and

    geographical areas, particularly in the vicinity of their operations. These could include:


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    education, skill building for livelihood of people, health, cultural and social welfare etc.,

    particularly targeting at disadvantaged sections of society.

    Implementation Guidance:

    1. The CSR policy of the business entity should provide for an implementation strategy

    which should include identification of projects/activities, setting measurable physical

    targets with timeframe, organizational mechanism and responsibilities, time schedules

    and monitoring. Companies may partner with local authorities, business associations

    and civil society/non-government organizations. They may influence the supply chain

    for CSR initiative and motivate employees for voluntary effort for social development.

    They may evolve a system of need assessment and impact assessment while

    undertaking CSR activities in a particular area. Independent evaluation may also be

    undertaken for selected projects/activities from time to time.

    2. Companies should allocate specific amount in their budgets for CSR activities. This

    amount may be related to profits after tax, cost of planned CSR activities or any other

    suitable parameter.

    3. To share experiences and network with other organizations the company should

    engage with well established and recognized programmes/platforms which encourage

    responsible business practices and CSR activities. This would help companies to

    improve on their CSR strategies and effectively project the image of being socially


    4. The companies should disseminate information on CSR policy, activities and progress

    in a structured manner to all their stakeholders and the public at large through their

    website, annual reports, and other communication media5.

    Provision for CSR in Companies Bill 2012

    Till date it is very difficult exercise to analyze the spending of CSR by various firms

    and private companies and such information is not maintained at government level, even


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    among the top 100 firms by revenue, there are many who dont report their CSR spends or

    even declare the social causes they support, that is because they are not required to do so

    by law and no provisions for CSR exists in the Companies Act, 1956 so currently the

    Ministry does not maintain such details. But all that will change when the new Companies

    Bill, 2012 (which has already been passed by the Lok Sabha) becomes a law 6.

    The Companies Bill, 2012 incorporates a provision of CSR under Clause 135 which

    states that every company having net worth Rs. 500 crore or more, or a turnover of Rs.

    1000 crore or more or a net profit of rupees five crore or more during any financial year,

    shall constitute a CSR Committee of the Board consisting of three or more Directors,

    including at least one Independent Director, to recommend activities for discharging

    corporate social responsibilities in such a manner that the company would spend at least 2

    per cent of its average net profits of the previous three years on specified CSR activities. It

    is proposed to have detailed rules after passing of Companies Bill 2012 by Rajya Sabha to

    give effect to this provision7.

    According to Schedule-VII of Companies Bill, 2012 the following activities can be

    included by companies in their CSR Policies:-

    (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 Ministers National Relief Fund or any other fund set by theCentral Government or the State Governments for socio-economic development

    6CSR Report Card: Where Companies Stand - Forbes India Magazine dated 18.3.2013

    7Rajya Sabha Unstarred Question No. 2986 dated 22.4.2013

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    and relief and funds for the welfare of the Scheduled Caste, the Scheduled Tribes,other backward classes, minorities and women; and

    (x) such other matters as may be prescribed8.

    The Companies Bill, 2012, Clause 135 also provides for constitution of a CSRCommittee of the Board. The CSR Committee is required to;

    (a) formulate and recommend to the Board, a CSR Policy which shall indicate theactivities to be undertaken by the company as specified in Schedule VII;

    (b) recommend the amount of expenditure to be incurred on the activities referred to inclause (a); and

    (c) monitor the Corporate Social Responsibility Policy of the company from time totime.

    (d) The format for disclosure of CSR policy and the activities therein as part of Boardsreport will be prescribed in the rules once the Bill is enacted9.

    The data pack compiled by CSR together with Forbes India is revealing

    to some extent how much each company will have to fork out on CSR when they will

    bound by law and their actual spending for the financial year 2012. The data is given in


    Guidelines on CSR for Public Enterprises

    The Department of Public Enterprises had issued Guidelines on Corporate Social

    Responsibility (CSR) for CPSEs in April, 2010 which have been issued formally to the

    Ministries/Departments for compliance in the Central Public Sector Enterprises (CPSEs)

    under their administrative control. Following are the salient features of guidelines on CSR

    & Sustainability:

    (i) Corporate Social Responsibility and Sustainability is a companys commitment to its

    stakeholders to conduct business in an economically, socially and environmentally

    sustainable manner that is transparent and ethical.

    8Lok Sabha Unstarred Question No. 4113 dated 21.3.2013

    9Lok Sabha Starred Question No. 153 dated 7.3.2013

    10CSR Report Card: Where Companies Stand - Forbes India Magazine dated 18.3.2013

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    (ii) In the revised guidelines, CSR and Sustainability agenda is perceived to be equally

    applicable to external and internal stakeholders, including the employees of a

    company, and a companys corporate social responsibility is expected to cover even

    its routine business operations and activities. CPSEs are expected to formulate

    their policies with a balanced emphasis on all aspects of CSR and Sustainability

    equally with regard to their internal operations, activities and processes, as well as

    in their response to externalities11.

    (iii) In the revised guidelines CSR and Sustainable Development have been clubbed

    together in one set of guidelines for CSR and Sustainability because of close

    linkage between the two concepts.

    (iv) Public Sector enterprises are required to have a CSR and Sustainability policy

    approved by their respective Boards of Directors. The CSR and Sustainability

    activities undertaken by them under such a policy should also have the

    approval/ratification of their Boards. Within the ambit of these guidelines, it is the

    discretion of the Board of Directors of CPSEs to decide on the CSR and

    Sustainability activities to be undertaken.

    (v) The financial component/budgetary spend on CSR and Sustainability will be based

    on the profitability of the company and shall be determined by the Profit After Tax

    (PAT) on the company in the previous year.

    PAT of CPSES in the Previous year Range of the Budgetary allocationfor CSR and Sustainability activities(as % of PAT in previous year)

    (i) Less than Rs. 100 crore

    (ii) Rs. 100 crore to Rs. 500 crore

    (iii) Rs. 500 crore and above




    All CPSEs shall strive to maximize their spending on CSR and Sustainability

    activities and move towards the higher end of their slabs of budget allocation.

    11Rajya Sabha Starred Question No. 202 dated 12.3.2013

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    (vi) Loss making companies are not mandated to earmark specific funding for CSR and

    Sustainability activities. However, they must pursue CSR and Sustainability policies

    by integrating them with their business plans, strategies and processes, which do

    not involve any financial expenditure. They may also collaborate with the profit

    making CPSEs and assist them in ingenious ways without financial support in CSR

    and Sustainability activities12.

    (vii) Mandatory compliance with legal requirement/rules/regulations/laws in letter and in

    spirit will be covered under CSR and Sustainability activity. However, expenditure

    on such activities would not be covered by CSRs financial component and would

    be considered as mainstream business spend.

    (viii) The unutilized budget for CSR activities planned for a year will not lapse and will,

    instead, be carried forward to the next year. However, the CPSEs will have to

    disclose the reasons for not fully utilising the budget allocated for CSR and

    Sustainability activities planned for each year. The unspent amount will have to be

    spend within the next two financial years, failing which, it would be transferred to a

    Sustainability Fund to be created separately for CSR and Sustainability activities.

    (ix) From amongst these beneficiaries of CSR and Sustainability spend (financial

    component) of a company, the stakeholders directly impacted by its operations and

    activities can rightfully stake a claim for attention before others. Such stakeholders

    are generally located in the periphery of commercial operations of a company. The

    corporate social responsibility of a company towards these stakeholders extends

    beyond its legal obligation to compensate for, and ameliorate the impact of its

    commercial activities. For this reason, CPSEs must accord priority to these

    stakeholders and undertake CSR and Sustainability projects in the periphery of its

    commercial operations on priority.

    (x) CPSEs are expected to take initiative to promote welfare of employees and labour

    by addressing their concerns of safety, security, professional enrichment and


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    healthy working conditions, whether mandated or otherwise. However, expenditure

    on mandated activities cannot qualify for CSRs financial components13.

    (xi) Although CPSEs may select their CSR and Sustainability projects from a vast range

    of available options, priority should be accorded to activities pertaining to (i)inclusive growth of society, with special attention to the development of weaker

    sections of society and the backward districts of the country, and (ii) environment

    sustainability. CSR and Sustainability initiatives should focus on capacity building,

    skill development and infrastructural development for the benefit of the marginalised

    and under privileged sections of the local communities and also in the backward

    regions so that avenues are created for their employment and income generation,

    and they also experience empowerment and inclusion in the economic mainstream.

    Weaker sections would include SC, ST, OBC, minorities, women and children, BPL

    families, old and aged, physically challenged, etc.

    (xii) It is mandatory for CPSEs to take up at least one major project for development of a

    backward district as identified by the Planning Commission for its Backward Region

    Grand Fund (BRGF) Scheme, and one major project for environment sustainability.

    For Maharatna CPSEs, it is mandatory to take up one more major project in either

    of the two categories.

    (xiii) A Board level committee headed by either the Chairman and / or Managing

    Director, on an Independent Director would assist the Board of Directors to

    formulate CSR and Sustainability policies and oversee the implementation of CSR

    and Sustainability projects/activities by the CPSE.

    (xiv) There is emphasis on internalizing the philosophy and spirit of CSR and

    Sustainability within the organizational culture and ethos. The philosophy and spirit

    of corporate social responsibility and sustainability should get embedded in the core

    values of all the CPSEs, be imbibed by the employees at all levels and it should

    permeate into all the activities, processes, operations and transactions of the

    enterprise. Corporate enterprises professing t behave responsibly are expected to


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    produce goods and services that are safe and healthy for the consumers and the

    environment, with reduced cost to the company in the long run.

    (xv) 5 per cent of the annual budget for CSR and Sustainability activities has to be

    earmarked for Emergency needs, which would include relief work undertaken duringnatural calamities/disasters, and contributions towards Prime Ministers / Chief

    Ministers Relief Funds.

    (xvi) Ethical conduct of business lies at the core of responsible business. To promote

    organizational integrity it is essential that premium is placed on individual probity of

    employees; transparency in all activities, dealing and transactions is encouraged;

    unethical, corrupt and anti-competition practices are discouraged temptation of

    quick returns and marginal gains in business through questionable means is

    resisted; and, position and situations that give rise to possible conflict of interest are


    (xvii) Sustainability reporting and disclosure of all CSR and Sustainability activities

    undertaken by a CPSE is mandatory. By reporting transparently and with

    accountability, public sector companies can gain and reinforce the thrust of the

    stakeholders. This, in turn, would provide a powerful stimulus to their CSR and

    Sustainability policies and agenda, and motivate them to pursue them with greater


    As per the above guidelines on CSR issued by the Department of Public

    Enterprises (DPE) in April, 2010, all profit making Central Public Sector Enterprises

    (CPSEs), including Maharatna CPSEs are required to select CSR activities which are

    aligned with their Business strategy and to undertake them in a project mode. CPSEs are

    mandated to spend their funds on CSR projects selected by them with the approval of their

    respective Boards. All profit making CPSEs are required to allocate budget mandatorily

    through a Board Resolution as percentage of net profit (previous year) in the following



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    PAT of CPSES in the Previous year Expenditure range of CSR in a FinancialYear (% of profit)

    (i) Less than Rs. 100 crore

    (ii) Rs. 100 crore to Rs. 500 crore

    (iii) Rs. 500 crore and above


    2%-3% (subject to a Minimum of Rs. 3 Crore )


    Loss making CPSEs are not mandated to earmark specific funding for CSR

    activities. CSR Budget is fixed for each financial year and this fund does not lapse. It is

    transferred to a CSR funds in which it accumulates. Implementation of CSR activities of

    CPSEs is monitored by the administrative Ministries/Departments of concerned CPSEs.

    States/UT/PSU-wise information of CSR work undertaken by the CPSEs, including

    Maharatna CPSEs and the number of persons benefited therefrom, is not maintained

    centrally in the Department of Public Enterprises. Information furnished by Maharatna and

    Navratna CPSEs on total funds allocated for CSR and the funds utilized for the year 2010-

    11 and 2011-12 is given in the Annexure-II. CPSEs are free to take up CSR Projects for

    upliftment of weaker sections and backward districts15



    The exact provisions of the Companies Bill, 2012 are still being debated. Once the

    Bill is passed in Rajya Sabha, detailed rules would give effect to the provisions of voluntary

    guidelines issued in 2009 to Corporate Sector (Private Companies), then Companies

    would be bound by legal provisions to implement Corporate Social Responsibilities 16. In

    case of public sectors, revised guidelines on CSR and sustainability are being

    implemented from 1 April 2013, as a commitment of the CPSEs to their stakeholders to

    conduct business in an economically, socially and environmentally sustainable manner17.

    15Lok Sabha Unstarred Question No. 2881 dated 14.3.2013

    16CSR Report Card: Where Companies Stand - Forbes India Magazine dated 18.3.2013

    17Rajya Sabha Unstarred Question No. 202 dated 12.3.2013

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    Annexure- I

    Indiastop companies are ranked 1-100 based onNet Sales for the Financial Year 2012 and their spending on CSR

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    Notable Work by Some Companies

    Ashok Leyland

    Operates a FunBus in Chennai and New Delhi. This bus, equipped with a hydraulic lift,

    takes differently abled children and those from orphanages and corporation primaryschools on a days picnic. The company also runs AIDS awareness and prevention

    programmes in its Hosur factories for about 3.5 lakh drivers.

    Axis Bank

    The Axis Bank Foundation runs Balwadis which are learning places for children living in

    large urban slum clusters. It also conducts skill development programmes (PREMA and

    Yuva Parivartan) in motor driving, welding, mobile repairing, tailoring etc, for the youth in

    backward districts.

    Bharat Petroleum Corporation

    Its rain water harvesting project Boond, in association with the Oil Industries Development

    Board, selects draught-stricken villages to turn them from water-scarce to water-positive.

    Some of BPCLs other social programmes include adoption of villages, prevention and

    care for HIV/AIDS and rural health care.

    Hindalco Industries

    Its CSR activities are concentrated in 692 villages and 12 urban slums, where it reaches

    out to about 26 lakh people. It has constructed check dams, ponds and bore wells to

    provide safe drinking water. In education, it awards scholarships to students from the rural

    schools it support. Its other interests include womens empowerment and health care, in

    which it treats patients in hospitals, runs medical camps and operates rural mobile medical

    van services.

    Indian Oil Corporation

    It runs the Indian Oil Foundation (IOF), a non-profit trust, which works for the preservation

    and promotion of the countrys heritage. IOCL also offers 150 sports scholarships every

    year to promising youngsters. Some of its other initiatives lie in the domains of clean

    drinking water, education, hospitals and health care.

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    The Infosys Science Foundation, set up in 2009, gives away the annual Infosys Prize to

    honour outstanding achievements in the fields of science and engineering. The company

    supports causes in health care, culture and rural development. In an interesting initiative

    undertaken by it, 100 school teachers in Karnataka, who were suffering from arthritis,

    underwent free surgery as a part of a week-long programme.

    Mahindra & Mahindra

    Nanhi Kali, a programme run by the KC Mahindra Education Trust, supports education of

    over 75,000 underprivileged girls. The trust has awarded grants and scholarships to

    83,245 students so far. In vocational training, the Mahindra Pride School provides

    livelihood training to youth from socially and economically disadvantaged communities.

    M&M also works for causes related to environment, health care, sports and culture.

    Oil & Natural Gas Corporation

    It offers community-based health care services in rural areas through 30 Mobile Medicare

    Units (MMUs). The ONGC-Eastern Swamp Deer Conservation Project works to protect the

    rare species of Easter Swamp Deer at the Kaziranga National Park in Assam. ONGC also

    supports education and women empowerment.

    Tata Consultancy Services

    Its Computer Based Functional Literacy (CBFL) initiative for providing adult literacy has

    already benefitted 1.2 lakh people. The programme is available in nine Indian languages.

    Besides adult education, TCS also works in the areas of skill development, health care and


    Tata Steel

    It comes out with the Human Development Index (HDI), a composite index of health,

    education and income levels, to assess the impact of its work in rural areas. Health care is

    one of its main concerns. The Tata Steel Rural Development Society aims to improve

    agricultural productivity and raise farmers standard of living.

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    TOP PSUs Spending on CSR

    Maharatna CPSEs

    S. No. Name of the CPSE Year Total fundsallocated for CSR

    (Rs. Crore)

    Funds utilizedfor CSR

    (Rs. Crore )

    1. Coal India Limited 2010-11






    2. Indian Oil Corporation Limited 2010-11






    3. National Thermal Power Corporation Limited 2010-11






    4. Oil and Natural Gas Corporation Limited 2010-11






    5. Steel Authority of India Limited 2010-11






    Navratna CPSEsS. No. Name of the CPSE Year Total funds

    allocated for CSR(Rs. Crore)

    Funds utilizedfor CSR

    (Rs. Crore )

    1. Bharat Electronics Limited 2010-11






    2. Bharat Heavy Electrical Limited 2010-11






    3. Bharat Petroleum Corporation Limited 2010-11






    4. GAIL (India) Limited 2010-11


    69.54(including carry

    forward amount offinancial year





    5. Hindustan Aeronautics Limited 2010-11


    No specificallocation of

    money for CSR,as CSR Policy

    was notifiedformally during

    November 2010




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    6. Hindustan Petroleum Corporation Limited 2010-11






    7. Mahanagar Telephone Nigam Limited 2010-11


    Since MTNL is inlosses, no specificallotment is madeunder CSR Head


    8. National Aluminum company Limited 2010-11






    9. NDMD Limited 2010-11






    10. Neyveli Lignite Corporation Limited 2010-11






    11. Oil India Limited 2010-11






    12. Power Finance Corporation Limited 2010-11






    13. Power Grid Corporation of India Limited 2010-11






    14. Rashtriya Ispat Nigam Limited 2010-11






    15. Rural Electrification Corporation Limited 2010-11






    16. Shipping Corporation of India Limited 2010-11




    5.84includingthe balance

    carry forwardedfrom theprevious year


    Source: Lok Sabha Unstarred Question No. 2881 dated 14.3.2013

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