Business
scandals involving high profile organizations such as Enron and WorldCom have
rocked the corporate world and be-come front-page news. This has shaken
consumer confidence in both business leaders and the economy, creating concern
about business ethics and governance. As a result, corporate social
responsibility (CSR) has become increasingly important.
Corporate Social Responsibility is a company’s commitment to its
stakeholders to conduct business in an economically, socially and
environmentally sustainable manner that is transparent and ethical. Stakeholders
include employees, investors, shareholders, customers, business partners,
clients, civil society groups, Government and non-government organizations,
local communities, environment and society at large. Corporate enterprises are
expected to conduct their business operations and activities in a socially
responsible and sustainable manner at all times.
Some
of the drivers pushing business towards CSR include:
1. The shrinking role of government
In
the past, governments have relied on legislation and regulation to deliver
social and environmental objectives in the business sector. Shrinking
government resources, coupled with a distrust of regulations, has led to the
exploration of voluntary and non-regulatory initiatives instead.
2. Demands for greater disclosure
There
is a growing demand for corporate disclosure from stakeholders, including
customers, suppliers, employees, communities, investors, and activist
organizations.
3. Increased customer interest
There
is evidence that the ethical conduct of companies exerts a growing influence on
the purchasing decisions of customers. In a recent survey, more than one in
five consumers reported having either rewarded or punished companies based on
their perceived social performance.
4. Growing investor pressure
Investors
are changing the way they assess companies' performance, and are making
decisions based on criteria that include ethical concerns. The Social
Investment Forum reports that in the US in 1999, there was more than $2
trillion worth of assets invested in portfolios that used screens linked to the
environment and social responsibility. A survey by revealed that more than a quarter of
share-owning Americans took into account ethical considerations when buying and
selling stocks. (More on socially responsible investment can be found in the
'Banking and investment' section of the site.)
5. Competitive labour markets
Employees
are increasingly looking beyond paychecks and benefits, and seeking out employers
whose philosophies and operating practices match their own principles. In order
to hire and retain skilled employees, companies are being forced to improve
working conditions.
6. Supplier relations
As
stakeholders are becoming increasingly interested in business affairs, many
companies are taking steps to ensure that their partners conduct themselves in
a socially responsible manner. Some are introducing codes of conduct for their
suppliers, to ensure that other companies' policies or practices do not tarnish
their reputation.
Current Status of CSR In India
CSR is not a new concept
in India. Corporates like the Tata Group, the Aditya Birla Group, and Indian
Oil Corporation, to name a few, have been involved in serving the community
ever since their inception. Many other organizations have been doing their part
for the society through donations and charity events. Today, CSR in India has
gone beyond merely charity and donations, and is approached in a more organized
fashion. It has become an integral part of the corporate strategy. Companies
have CSR teams that devise specific policies, strategies and goals for their
CSR programs and set aside budgets to support them.
These programs, in many
cases, are based on a clearly defined social philosophy or are closely aligned
with the companies‟ business expertise. Employees become the backbone of these
initiatives and volunteer their time and contribute their skills, to implement
them. CSR Programs could range from overall development of a community to
supporting specific causes like education, environment, healthcare etc.
Best practices followed by Indian Companies related to CSR are as
follows:
ONGC and Indian Oil
Corporation has been spending 0.75-1 % of their net profits on CSR activities.
In 2007-08 Rs. 246.70 crores was spent by oil PSUs on CSR activities. ONGC‟s
CSR projects focus on higher education, grant of scholarship and aid to deserving
young pupils of less privileged sections of society, facilities for
constructing schools etc.
SAIL has taken successful
actions in environment conservation, health and medical care, education, women
upliftment providing drinking water.
BHEL & Indian Airlines
have been acclaimed for disaster management efforts. BHEL has also adopted 56
villages having nearly 80,000 inhabitants.
Reliance Industries
initiated a project named as “ Project- Drishti” to bring back the eyesight of
visually challenged Indians from the economically weaker sections of the
society. This project has brightened up the lives of over 5000 people so far.
Mahindra & Mahindra
launched a unique kind of ESOPs- Employee Social Option in order to enable
Mahindra employees to involve themselves in socially responsible activities of
their choice.
GlaxoSmithKline
Pharmaceuticals‟ CSR programs primarily focus on health and healthy living.
They work in tribal villages where they provide medical check-up and treatment,
health camps and health awareness programs. They also provide money, medicines
and equipment to non-profit organizations that work towards improving health
and education in under-served communities.
Bajaj Electricals Ltd
corporate social responsibility activities include Education, Rural Development
& Environment.
Provision
of improved medical and sanitation facilities, building schools and houses, and empowering the
villagers and in process making them more self-reliant by providing vocational training and a knowledge of business operations are the facilities
that these corporations focus on. Many of the companies are helping other
peoples by providing them good standard of living.
Also
Corporates increasingly join hands with Non-governmental organizations (NGOs) and use their expertise in devising programs which
address wider social problems.
For
example, a lot of work is being undertaken to rebuild the lives of the tsunami
affected victims. This is exclusively undertaken by SAP India in
partnership with Hope Foundation, an NGO that focuses mainly on bringing about improvement
in the lives of the poor and needy. The SAP Labs Center of HOPE in Bangalore
was started by this venture which looks after the food, clothing, shelter and
medical care of street children.
Mandatory CSR requirements in
other Countries:
1. Saudi Arabia:
In
Saudi Arabia, the Companies are required to pay amounts “equal to 2.5% of
income and capital” to the revenue department, which will then distribute the
amounts to the needy around the country. Revenues are collected by the
Department of Zakat, governmental organization and distributed to needy and
poor people across the country. A Zakat payment made of listed companies has to
be disclosed and filed with the Capital Market Authority (the Saudi Version of
the SEC).
2. United States:
The Conglomerate Blog has reported on recent amendments
to the Oregon Corporate Code that requires companies to act in an
environmentally and socially responsible manner. It says:
“Oregon
recently amended its Corporate Code which expressly permit corporations to
include in their charter a provision authorizing or directing the corporation
to conduct its business “in a manner that is environmentally and socially
responsible.” The legislative history of the amendment notes that courts in
other jurisdictions have interpreted corporations’ obligation to act in
shareholders’ interest to mean that corporations must maximize shareholder
profit, even if it results in a corporate failure to act environmentally and
socially responsible. Apparently the amendment is designed to counteract this
kind of interpretation, and encourage corporations to engage in sustainable
behavior.”
3. China:
Even the recent Company Law of the People’s Republic of China, enacted in 2005,
has a set of obligations on companies that amount to corporate social
responsibility. For example, Article 17 states:
“A
company shall protect the legal rights and interests of its employees, enter
into labor contracts with them according to law, take part in social insurance,
improve labor protection and make production safe.
A company
shall take various measures to improve the professional education and
on-the-job training of its employees so as to enhance their quality.”
This Article has been compiled by student of student of ICAI Tarveen Kaur. She can be reached at tarveen.11@gmail.com
To widen the revenue base from indirect tax
collections, the finance ministry has implemented a one-time amnesty scheme for
service tax defaulters to pay their dues without any penalty or late payment
charges. The Voluntary Compliance Encouragement Scheme (VCES), which came into
force after the passage of the Finance Bill on May 10, can be availed by a
service tax defaulter by the year end. Such a scheme has been first time
introduced by finance minister P. Chidambaram while presenting the budget for
2013-14 as there are 17 lakhs registered assesses under the service tax but
only 7 lakhs were filing returns. Hence one-time Voluntary Compliance
Encouragement Scheme has been introduced.
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