The Evolution Of CSR Policies In India: From Philanthropy To Sustainable Development

by | Jul 25, 2022 | CSR

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From simple acts of giving to planning a greener future, India’s business world has come a long way in helping society. Talking about the evolution of  CSR Policies in India, we must first know that the concept of socially responsible business is not new in India. Many corporations have been socially accountable since ancient times. Before independence, large Indian firms were actively involved in various socially significant programs. Their impact is notable and evident. However, Corporate social responsibility (CSR) has evolved significantly in India over the years. From being a matter of philanthropy and charity in the early days, it has now become a strategic imperative for businesses to ensure sustainable growth and development.

Although the contemporary concept and thought of CSR began and evolved in the West, it was adopted by some of India’s largest corporations. The Government of India recognizes the complexities of the Indian context and the difficulties confronting the Indian legally mandated CSR spend and activities on a specific class of firm. This fresh idea deviates from the typical CSR approach in the best of cases. The law has provided a platform, corporations have the ability, and NGOs are prepared to collaborate, elevating the entire CSR process to a new level.

Concept of Corporate Social Responsibility

In India, the issue of corporate social responsibility (CSR) has evolved into a movement. Recently, experts and policymakers have been focusing on identifying and establishing the optimal CSR model to satisfy the needs of society. Since the beginning of written history, socially conscious enterprises have existed in India. It afterward stayed in force in many forms and shapes. The Government of India recently formalized CSR by inserting it into the Companies Act 2013. This legislation and the accompanying rules provide detailed requirements for a class of businesses in India to engage in CSR practices.

CSR Policies in India

Corporate social responsibility (CSR) is a self-operating business model that assists a firm in being socially responsible to itself, its stakeholders, and the general public. Companies that practice corporate social responsibility might be aware of their impact on all parts of society, including the economic, social, and environmental. The corporation’s practices and policies on corporate social responsibility must positively impact the globe. These practices are based on the premise that a company’s influence does not have to be constantly negative. Through trials, businesses may improve the world and lessen their negative social and environmental impact. The public receives more social and environmental information as more firms worldwide engage in corporate social responsibility efforts.

History of Corporate Social Responsibility

Corporations have been employing (CSR) to contribute to society for decades. The leadership concept we recognize today is primarily a twentieth-century invention that emerged in the early 1950s. While corporate social responsibility has grown in popularity in recent years, the notion can be traced back to the Industrial Revolution. Although ethical businesses had existed for over a century, American economist Howard Bowen first used Corporate Social Responsibility in his 1953 article Social Responsibilities of the Businessman. As a result, Bowen is frequently known as the “Father of CSR.” The Committee for Economic Development introduced the concept of the social contract between corporations and society in 1971. This contract advanced the idea that firms function and exist due to public permission and are obliged to contribute to society’s needs.

India’s Scenario

The origins of socially responsible people in business can be traced back to India’s ancient culture. Many examples of socially conscious people in industry can be found in Indian mythology and ancient history. There have been instances where these business people have been involved in numerous public welfare activities such as pond digging, feeding people in need, establishing temples and orphanages, and so on.

According to the literature, the primary motivation for engaging in such activities was most likely religious, charitable, or some higher calling. During the medieval period, a similar trend could be seen. During the eighteenth century, the Industrial Revolution in Europe enabled the expansion of corporate activities, resulting in large-scale businesses with a more significant impact on their employees, consumers, and community. Their stature grew gradually, and their influence spread beyond their home countries.

Later, like other countries, India saw the creation of huge businesses and business houses such as Tata, Birla, and Bajaj. These corporations built large-scale industrial facilities that generated enormous revenues and profits and were involved in various social projects such as education, health, and community service. These commercial houses also played an essential role in India’s liberation movement. Until independence, these corporate houses and British firms operating in India were the leading Indian players. Businesses’ volunteer actions motivated by religious, charitable, community service, or nationalistic feelings were the defining aspect of socially responsible behavior throughout this period.

Evolution of CSR policies in India

The evolution of CSR policies in India can be broadly divided into four phases:

Phase 1: Philanthropy and Charity (1800s-1950s)

The first phase of CSR in India was characterized by philanthropy and charity. This was a time when businesses were largely owned and controlled by families, and the owners felt a moral obligation to give back to the communities in which they operated. CSR initiatives during this period were mostly focused on providing basic amenities such as education, healthcare, and infrastructure to the poor and needy.

Phase 2: Social Obligation (1950s-1980s)

The second phase of CSR in India began with the country’s independence in 1947. The government of India recognized the importance of CSR in promoting social and economic development, and it passed a number of laws and regulations to encourage businesses to engage in CSR activities. During this period, CSR initiatives became more focused on addressing the needs of marginalized communities and promoting social welfare.

Phase 3: Strategic CSR (1980s-2013)

The third phase of CSR in India began in the 1980s, with the rise of globalization and the increasing competition in the global market. Businesses began to realize that CSR could be a strategic tool to improve their reputation, attract and retain talent, and gain a competitive advantage. CSR initiatives during this period were more focused on sustainability and long-term impact.

Phase 4: Mandatory CSR (2013-Present)

The fourth and current phase of CSR in India began with the introduction of the Companies Act 2013. This law made it mandatory for all companies with a turnover of INR 1000 crore or more to spend at least 2% of their net profit on CSR activities. The law also specified the areas in which CSR funds could be used, such as education, healthcare, poverty alleviation, and environmental protection.

The mandatory CSR provision has been a major driver of the evolution of CSR in India. It has forced businesses to take CSR more seriously and to invest in activities that have a measurable impact on society. As a result, CSR has become more integrated into the business strategy of many companies, and it is now seen as an essential part of doing business in India.

CSR Policies in India as a Regulatory Mandate

During the post-independence period, typified by a mixed economy, the primary focus of impeding public sector organizations was a solid social and developmental agenda to make India self-sufficient. Following liberalization, there was a condition of confusion in which numerous multinational and international corporations became critical actors on the one hand. At the same time, the role of the public sector was observed to be declining on the other. Multinational corporations frequently relocate their industrial operations to developing nations with weak economies; governments are prepared to offer many incentives and concessions to attract foreign investment and regulatory and institutional processes that need to be improved.

In this context, the Government of India’s Ministry of Corporate Affairs (MCA) launched the CSR voluntary guidelines in 2009, later amended and renamed the National Voluntary Guidelines on Social, Environmental, and Economic Responsibilities of Business (NVG). The Parliament of India later adopted these principles as Section 135, Schedule VII, and CSR Rules of the Companies Act, 2013. The rules required a particular class of corporations that met specific criteria to spend 2% of their net profit on activities from Schedule VII. Section 135 brings CSR to the board of directors’ attention by requiring that the board approve the CSR amount and actions of directors. This provision applies to both Indian and international enterprises that are subject to the mandate. For this clause, any company or corporate body incorporated outside India is considered a foreign corporation. This rule will impact the CSR practices of around 20000 Indian enterprises.

The Indian CSR model differs significantly from the famous and prevalent Western model. Companies in the Western model can voluntarily engage in CSR activities of their choice, with the spending determined by management. Indian corporations, on the other hand, are legally required to not only spend the mandated amount but also to engage in CSR activities outlined in Schedule VII of the Companies Act. The CSR policy and decisions have also been mandated on the company boards. Companies must also include information about their CSR operations in their yearly reports.

Companies must publish the amount of money they spend on CSR efforts. This measure will make CSR spending transparent and comparable, at least in terms of input. It also made CSR a regular step that is contingent on company revenues. This will make CSR a common occurrence for businesses, as payments will likely stay the same in most cases. This rule’s third component establishes the CSR’s obligation to the board. The board must approve all decisions and expenditures, and none may be reduced. The fourth aspect is to align the CSR budget with the company’s earnings. The fifth issue is to connect CSR efforts with the Act’s Schedule VII. The activities specified in Schedule VII are expected to align with the nation’s inclusive development objective. The timeline is subject to change based on the nation’s shifting priorities. Finally, the spirit of the legal mandate is that CSR is for the poor, marginalized, underprivileged, oppressed, and dealing with challenging situations. As a result, the legislation requires businesses to go above and above their legal obligations.

India’s corporate sector has many capabilities that, with the correct framework, may be utilized to solve more considerable social, environmental, and economic challenges. Furthermore, CSR is not anticipated to be the firms’ primary focus. They are expected to collaborate with the non-profit sector, which has a significant presence in India and has a long history of implementing social projects. One critical issue is the company’s reporting of CSR initiatives. A form has been created for this purpose, which companies are supposed to fill out and report on.

What The Future Holds?

The future of CSR in India is bright. With the government’s continued support and the growing awareness of the benefits of CSR, businesses are likely to continue to invest in CSR activities. This will help to create a more sustainable and equitable society for all Indians.

Let us have a look at a few other trends that are shaping the evolution of CSR in India:

  • The rise of social entrepreneurship: Social entrepreneurs are individuals or organizations that use business principles to solve social problems. They are playing an increasingly important role in CSR in India, as they are able to bring innovative solutions to complex social challenges.
  • The focus on sustainability: Sustainability is becoming increasingly important for businesses in India. CSR initiatives that are focused on sustainability are seen as being more beneficial to society and the environment in the long run.
  • The need for greater transparency and accountability: There is a growing demand for greater transparency and accountability in CSR reporting. Businesses are being asked to provide more information about how they are using CSR funds and the impact that their CSR initiatives are having.

These trends are likely to continue to shape the evolution of CSR in India in the years to come. As CSR becomes more mainstream, businesses will be under increasing pressure to adopt CSR practices that are sustainable, equitable, and transparent.

Understanding and evaluating the historical backdrop is critical for acknowledging Indian businesses’ CSR practices. This is significant for a variety of reasons. An emphasis on CSR policies in India might offer scholars and practitioners an innovative approach and enlighten executives about diverse, sustainable development methods, which is especially important for a country dealing with multiple environmental and social concerns. Secondly, it is believed that the private sector, both large and small, may work with the government to serve as an effective catalyst for change in the current social and economic circumstances.

FAQs

Q1. What was the evolution of CSR policies in India?

CSR stretches back to the Mauryan era when Chanakya emphasized ethical business practices. As a result, the history of CSR policies in India evolved alongside its historical development. Because business is an intrinsic component of society, it bears a higher duty to it.

Q2. What is the relationship between CSR and sustainability or sustainable development?

To summarise, CSR and sustainability are related but different. CSR is a shorter-term reporting activity, whereas sustainability focuses on the business’s future growth and survival while supporting the environmental, social, and economic factors covered by CSR.

Q3. What was the initial phase of corporate social responsibility policies in India?

Philanthropic and charitable acts drove the first phase of CSR. Along with industrialization, it was impacted by family values, traditions, culture, and religion. Until 1850, wealthy businesspeople shared their money with society by establishing temples or religious institutions.

Also Read: What Is Corporate Sustainability? And Why Is It Necessary?

Author

  • Farhan Khan

    Farhan is an accomplished Sustainability Consultant with 6-7 years of experience, He specializes in the design and execution of innovative sustainability strategies that not only mitigate environmental impact but also foster social responsibility, thereby enhancing overall business performance. With hands-on experience in ESG and BRSR reporting, as well as a wide array of assessments including gap, baseline, midline, impact, and value chain across various regions in India, Farhan brings a strategic and comprehensive approach to sustainability initiatives.

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