Transcript CORPORATE SOCIAL RESPONSIBILITY IN INDIA

CORPORATE SOCIAL
RESPONSIBILITY IN INDIA PATH TO SOCIAL
RESPONSIBILITY AND
GREEN PRACTICES
KSHITIZ KARJEE
Third Year Law Student
Amity Law School, Delhi
Guru Gobind Singh Indraprastha University, Delhi
INTRODUCTION
• Corporate social responsibility (CSR) delineates the
relationship between business and the larger society
• CSR can be defined as a concept whereby companies
voluntarily decide to respect and protect the interest of a
broad range of stakeholders and to contribute to a
cleaner environment and a better society through active
interaction
• Corporations have a degree of responsibility not only for
the economic consequences of their activities, but also
for the social and environmental implications. This is
sometimes referred to as a ‘triple bottom line’ approach
that considers the economic, social and environmental
aspects of corporate activity
NATURE OF CORPORATION
• Originally, company has been considered an artificial
person
• But with the advent of organic theory, a company is
considered a living organism, is entitled to rights and
also liable for duties
• Law confers personality to the company and strictly
speaking personality denotes having rights and duties
• In India, the Supreme Court has categorically declared
that even though company is not a citizen, it can claim
the protection of fundamental rights, which are
guaranteed under the Constitution of India
• Now, if a corporate entity enjoys rights, it has to bear
certain duties or responsibilities like natural person.
Thus, with the change in the nature of a corporation, its
role has also changed
ROLE OF CORPORATION IN SOCIETY
• Corporations are not only a profit churning
organizations, the working of which would be no
concern to the society, rather they are multinational
giants affecting the different sectors of society by their
functioning
• Maximization of social welfare should be the legitimate
goal of a company
• Present role of corporation
 Starting company in rural area
 Employing socially handicapped and weaker
sections of community
 Taking interest in work, welfare of employees and
their families including the spread of adult literacy
 Environmental protection
 Consumer’s health, welfare and safety
SOCIAL RESPONSIBILITY
• Social responsibility emphasizes the intimacy of the
relationship between the corporation and society
• Means of production of economy should be so employed
that it leads to enhancement of total socio- economic
welfare
• In every society there are social forces which form the
basis of social responsibility. These forces are as follows:
 Social institutions
 Labour organizations
 Social consciousness
 Modern management
CLASSIFICATION OF SOCIAL
RESPONSIBILITY
• Responsibility towards itself
Each corporate entity to do business and stay in the
business has to work towards growth, expansion and
stability and thus earn enough profits
• Responsibility towards shareholders
Secure and safeguard the shareholders’ investment and
endeavour to provide a reasonable return on their
money
• Responsibility towards State
Foremost duty to not indulge in tax evasion practices to
realize fruits of welfare state concept
• Responsibility towards consumers
It is imperative for every corporate entity to fulfill its
contractual obligations to its customers
DEVELOPMENT OF CSR
• Present age is money dominated. Business enterprises
are coming up with new strategies to earn more and
more profits
• Globalization led to the opening of the markets and
thereby facilitated in cross-border trades. Centralized
mode of production has given way to a highly
decentralized mode of production which is spread across
the world
• Rules of corporate governance have changed. On one
hand, globalization and liberalization have provided a
great opportunity for corporations to be globally
competitive by expanding their production base and
market share. On the other hand, the same situation
poses a great challenge to the sustainability and viability
of such mega-businesses, particularly in the context of
emerging discontent against MNCs across the world
• By capping and limiting the unsustainable use of
resources, a healthy environment can be sustained
• Threats to sustainability include climate change (despite
improvements in energy efficiency we still burn too
much fossil fuel), increasing scarcity of water, loss and
fragmentation of biodiversity (deforestation continues
apace in the tropics), and buildup of colossal toxic
pollutants in the environment
• The current wave of interest in CSR differs from the past
experiences
• No longer limited to social concerns, SRI now takes
environmental issues into account
• Today, social responsibility is no longer the purview of
just a handful of managers concerned with the social or
environmental impact of their firm’s operations. Quite
often, it is a part of the overall business strategy
• Upsurge in ‘voluntary initiatives’ associated with codes
of
conduct,
improvements
in
environmental
management systems, improved health and safety
standards, etc.
• Large companies are also participating in so-called
‘multi-stakeholder initiatives’ and ‘public-private
partnerships’ with NGOs and governmental or
multilateral organizations
• The United Nations has played an important role in
promoting partnerships with transnational companies
(TNCs) through various arrangements
• Criticism: Many CSR initiatives amount to ‘green wash’
and CSR is a genuine attempt on the part of big business
to improve social, environmental and human rights
conditions but the CSR agenda needs to be broadened
and implementation strengthened
CSR AND ENVIRONMENT
• If we consider the corporation to be the ‘public vehicle of
society’ and if we take ‘social responsibility’ to imply a
broadly-based responsibility to society, then the
responsibility of corporate executives is to order the
priorities of the corporation and set the managerial
balance in line with changing needs of society, while at
all times keeping an eye on the interests of the
stakeholders in corporate management
• This does not imply that social responsibility is the
‘primary responsibility’ and economic responsibility the
‘secondary responsibility’. Rather, social responsibility
must be recognized as a concept that encompasses both,
and whose aim is to create the synergetic development
of society and the corporation by harmonizing the two
responsibilities on a higher dimension
BHOPAL GAS DISASTER
• The disaster at Union Carbide Corporation (UCC) plant
on December 3, 1984, released 40 tons of poisonous
methyl isocyanate gas (MIC)
• The aftermath of the disaster left 15,000 dead, numerous
ill, with a polluted environment that is yet to recover
• The victims of the disaster are yet to receive adequate
compensation and medical help from the company
• NEED FOR CSR
Dow Chemicals, which took over UCC in 2001, from the
beginning of takeover, ensured that there were no
outstanding liabilities in relation to the Bhopal disaster
It did not take any responsibility for the tragedy, as well
as cleaning up the site and ground water, medical
monitoring, economic compensation and rehabilitation
for the victims
It put entire responsibility on government and freed
itself from taking any legal obligation saying that it
wanted to protect the shareholders’ interest. At the 2003
annual shareholder meeting, William S Stavropoulos,
CEO of Dow Chemicals, stated that the case of disaster
had been resolved in court and thus they are not liable
for it any further.
Having seen the impact of negligence, Bhopal Gas Leak
Disaster (Processing of Claims) Act, 1985 and
Environmental Protection Act, 1986 were enacted
Dow being financially sound should have been more
responsible towards socio, economic and environmental
issues. Hence, for Dow, it was high time to take some
positive action and proper CSR approach towards
human rights
HUMAN RIGHTS AND CSR
• Four basic trends can be identified as catalyzers of the
new human rights presence in business discourses and
top level economic forums
First – the controversial process of economic
globalization
second – the emerging network society
third – information and knowledge technologies which
create expectations of greater corporate transparency
while fast tracking and multiplying content and
information on these issues in local and global
interactions
fourth – the emerging risk society by which company
reputation, image and identity are coming under the
scrutiny of certain rising values in a civil society that is
increasingly informed and mobilized on such issues
• Corporations are part of the entire society and human
rights focus on the dignity and worth of the human
beings who compose the society
• Human rights form part of international law and
corporations are bound by those laws that are applicable
to non-state parties
• A current development lies in the area of environmental
crimes and humanitarian law
• In the international arena, human rights are often in a
state of flux and satisfactory human rights condition in a
country may deteriorate because of an outbreak of civil
conflict or some other apocalyptic event. The corporation
then has to choose whether to disinvest or risk
accusations of collusion with the human rights violators.
Very often the corporation may be a supporter of
international human rights standards and yet be in a
nation where human rights policies are difficult or
impossible to implement
CODES FOR CSR CONDUCT
• UN Copenhagen World Summit for Social Development
of 1995; UN World Summit on Sustainable
Development, Johannesburg, 2002; ILO’s 1998
Declaration on Fundamental Principles and Rights at
Work Standards; OECD’s Updated Study on
International Trade and Core Labour Standards, 2000 as
The International Organization for Standardization (ISO)
• NGOs like Amnesty International, Human Rights First
have also developed standards for the CSR arena
 Protect environment
 Attain equitable access to education and primary
health care
 Reduce absolute poverty by a target date
 Eliminate forced child labour
 Accelerate development of the least developed
CSR INITIATIVES AND EXAMPLES
• ANAND CORPORATE SERVICES LIMITED
Twenty-five years ago, the SNS Foundation, an
expression of Anand’s corporate social responsibility,
was born. The Foundation has created programs in the
fields of health, education, natural resource management
and life skills training, only to make sure that fellow
humans could breathe easy
• INFOSYS TECHNOLOGIES LIMITED
Infosys promoted, in 1996, the Infosys Foundation as a
not-for-profit trust to which it contributes up to 1% PAT
every year. Additionally, the Education and Research
Department (E&R) at Infosys also works with employee
volunteers on community development projects
• ITC LIMITED
ITC is engaged in elevating its partnership with the
Indian farmer to a new paradigm by leveraging
information technology through its trailblazing ‘eChoupal’ initiative. It is significantly widening its farmer
partnerships to embrace a host of value-adding activities
viz. creating livelihoods by helping poor tribes make
their wastelands productive, investing in rainwater
harvesting to bring irrigation to parched dry lands,
empowering rural women by helping them evolve into
entrepreneurs, and providing infrastructural support to
make schools an exciting platform for village children.
• LARSEN & TOUBRO LIMITED
L&T promotes Construction Vocational Training in India
by establishing a Construction Skills Training Institute
(CSTI) at Manapakkam, Chennai and many other parts
which imparts free of cost basic training in farm work,
carpentry, masonry, plumbing and sanitary, etc.
VIOLATION OF CSR PRINCIPLES: CASE
OF COCA COLA IN INDIA
• Coca Cola is one of the most recognized brands across
the globe. It ranks among one of the top foreign
investors in India
• High degree of public protest against the Coca Cola
plant at Plachimada, Kerala got international attention
and led to government intervention for closure of the
plant
• Plant at Plachimada was alleged to have exploited the
ground water resources leading to drying up of wells
and other natural water resources in the area
• Company had to deal with protest from the local
community and environmental conservation groups
• Company was also accused of supplying poisonous
waste as fertilizers to the local farmers
• The sludge which was disposed in open ground ran
along with rain water to the natural water resources.
Tests also showed that the water available to the wells
was contaminated and unsuitable for consumption
• Added to these were the findings from the Center for
Science and Environment which said that twelve large
soft drinks brands manufactured by Coca Cola and its
rival Pepsi, sold in and around Delhi, contained a
cocktail of pesticide residues including chemicals which
can cause cancer and damage the nervous and
reproductive system and also reduce the bone mineral
density
• The case clearly shows that emerging markets can
respond and protest against the irresponsible behavior
of MNCs
• The case also shows that emerging markets might have
loose laws which do not protect interests of local
population or laws that are not implemented properly
CONCLUSION
• The role of a successful company is to contribute to
national wealth, generate employment opportunities,
promote e-business and e-commerce, bring transparency
in
management
policies,
and
provide
open
communication and a safe working environment
• India is facing many problems viz. unclear, unpractical
and poorly monitored regulations, poor infrastructure, a
complicated tax system, and too much bureaucracy
• Broad frameworks on corporate governance should be
developed and followed. And further, penalties for noncompliance should be strictly implemented