Corporate Social Responsibility in India

Corporate Social Responsibility in India

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Willy Brandt School’s own Daniela Sota Valdivia reports on CSR challenges and achievements in India:

Corporate Social Responsibility is essentially about taking resources from businesses, and investing those resources into responsible corporate citizenship projects.[1] CSR emerged as an instrument for businesses to address societal problems. In India, section 135 of the Companies’ Act of 2013, ensures that companies invest at least 2% of their average profits made during the preceding three financial years towards CSR investment. The companies bound by this law are those that during a financial year have: A) net worth of 5 billion Rupees or more or; B) turnover of 10 billion Rupees or more; or C) net profit of 50 million Rupees or more. With this measure, India has become the first country to enshrine corporate financial contributions into law.

This measure responds the government’s objective of reducing inequality in a country where the richest 1% hold 58% of the country’s total wealth.[2] Not surprisingly, India occupies position 122 out of 155 in the 2017 World Happiness Report. The second reason behind this measure is the willingness of the government to ensure a friendlier corporate-citizen relationship in the long term. It is essential to consider that good corporate practices have been a part of some of the most important companies in India long before the 2013 Companies’ Act was introduced. Tata Group, a global enterprise and headquartered in India, has incorporated a culture of giving back to society since the beginning of their operations under the direction of founder Jamsetji Tata. Sixty-six percent of the equity share capital of Tata Sons is held by philanthropic trusts. This unique business approach could be one of the factors crucial to its worldwide success. Tata Communications is the number one international wholesale voice service provider and Tata Motors is among the top ten commercial vehicle manufacturers. According to a study conducted by the Indian Institute of Management in Udaipur, 3 companies that belong to Tata are in the top 5 manufacturing and service companies in India with the highest CSR spending.

The Companies’ Act entered into force in 2014. After four years, its achievements and challenges are noticeable. According to the data provided for the 2015-2016 financial year by the Ministry of Commercial Affairs, 2,693 companies have had a CSR spending higher than 1,333 Euros. The sectors that have most benefited from this spending are health, hunger, poverty, water, and sanitation with an estimated spending of 41,541,675 Euros. The company with the highest spending (approximately 8,692,628 Euros) is the Indian holding conglomerate company Reliance Industries.

Major attention has also been given to education and rural development. However, the reason behind greater corporate attention to sanitation is open defecation in India. Around 564 million people do not have access to proper sanitation, making it a serious threat to public health. India reports the highest number of diarrheal deaths among children under five in the world[3]. In this scenario, Tata Power has been at the forefront of the fight against open defecation. Tata Power has provided 6,700 households across India with access to proper sanitation facilities in the 2016 fiscal year[4]. Like Tata, many other companies have undertaken their own initiatives against different social problems and have generated a positive impact in Indian society. CSR not only benefits citizens but companies as well. It greatly strengthens the customer-business relationship. This improved relationship will play a pivotal role in the future of this fast-growing economy in which a positive corporate image is necessary.

For many, CSR is simply the friendly face of capitalism, an instrument that distorts reality and hides capitalism’s detrimental side-effects. Some believe that CSR targets specific sectors that allow corporations to obtain greater benefits, leaving other sectors unattended. In India, important sectors like technology or entrepreneurship—key sectors for the development of the country—have not received adequate attention, as well as sensitive sectors like human trafficking. In 2016 almost 20,000 women and children were victims of human trafficking, a rise of nearly 25% from the previous year[5]. Another negative feature of CSR is that it nourishes the government’s inability to tackle social problems and shields attention from greater problems such as corporate corruption and tax evasion in the country.

In conclusion, four years after the implementation of the Companies’ Act 2013, private sector participation in easing social problems in India is greater. The private sector has spent more on social programs and the short-term positive results are perceivable. CSR has shown its usefulness as an instrument for development policies. Nonetheless, in order to achieve long term solutions, CSR needs to be part of a broader development program in which many more instruments are used.

 

[1] MOORE, Carol. Corporate Social Responsibility and Creating Shared Value – What’s the difference?. Heifer International. 2014. Pg. 4

[2] http://timesofindia.indiatimes.com/business/india-business/indias-rising-income-inequality-richest-1-own-58-of-total-wealth/articleshow/56586277.cms

[3] http://unicef.in/Whatwedo/11/Eliminate-Open-Defecation

[4] http://indiacsr.in/tata-powers-sanitation-drive-benefits-6700-households-in-fy16/

[5] http://timesofindia.indiatimes.com/india/almost-20000-women-children-trafficked-in-india-in-2016-govt-report/articleshow/57569145.cms

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Daniela Sota Valdivia is a second-year Master of Public Policy student at the Willy Brandt School majoring in International Political Economy and Public and Nonprofit Management. She is registered lawyer in Peru and has worked for both the public and the private sector. Her experience in the Public Prosecutor’s Office has given her a special interest in topics related to corruption, organized crime and violence against women. On top of that, her volunteer work has awakened her concern about education and sexual and reproductive rights.

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