Public Policy Intervention in CSR in India

Corporate Social Responsibility (CSR), by its very term and definition, is voluntary in nature. It is the way business houses shape their ethics and behaviour to align with the need and expectation of the society they operate in. In short, CSR is the social character of the business bodies. Akin to any individual behaviour, corporate behaviour is largely determined by the intrinsic philosophy of companies. It is a choice before any company if it wants to be socially responsible and do well or be irresponsible and perish gradually. Throughout its stages of evolution across the countries CSR has remained associated with volunteerism.

However, as CSR has become more widespread and pervasive in the social, economic and environmental ecosystems around the globe, role of government and public institutions in influencing CSR policies and practices is gradually acquiring momentum. Though this is happening unevenly across the countries, some of them are witnessing it as a mainstreamed modus operandi. India is one such country where the role of government through policy involvement is getting as extensive and intensive as its CSR movement.

Few questions apparently pop up here. Does CSR necessitate public policy intervention? Does something which is supposed to be voluntary require to be urged by policy makers? Is penalizing measure effective in dealing with the deficit in expected CSR action of business bodies? Worth-debating as it is, a scrutiny is called for keeping the situation in India in the background as the country has now a legal framework in the form of Section 135 of the Companies Act 2013. And, also before and apart from this mandatory provision, there are few Guidelines issued by the Indian Government to guide CSR behaviour and practices.

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Needless to cite, the CSR culture, even without public policy influence, has acquired a substantial growth in almost all countries where CSR has been mainstreamed so far. This happened because CSR is intrinsic in the companies doing business in these parts of the world. These companies have well understood that social responsibility is the fundamental trait for business survival. They cannot function outside the society. So what they do is defining and displaying their behaviour ethically towards society before initiating their business, and correcting their manners when they go wrong in social, economic and environmental terms. All these happen, as should, spontaneously and voluntarily.

If we look at the history of CSR in India we can see how big business empires have displayed exemplary social responsibility on account of their corporate philosophy. Ethics, rather than regulation, has guided their behaviour. Comes 2014- the watershed year, CSR ecosystem in India received a major breakthrough as the new and revised Companies Act 2013 made it mandatory for the profit-making companies to mark out minimum 2% of their profit for CSR activities. But it cannot be termed as the first and only public policy on CSR in the country. Before this, in 2011, the Ministry of Corporate Affairs has launched the National Voluntary Guidelines (NVGs) for Social, Environmental & Economic Responsibilities of Business.

Also, Department of Public Enterprises (DPE) of Government of India has introduced the Guidelines for CSR & Sustainability for Central Public Sector Enterprises (CPSEs) in 2013. SEBI Guidelines (2012) asks the top 100 listed companies to disclose information on their ESG (Environmental, Social and Governance) performance. Apart from these, several global guidelines like OECD Guidelines for multinational enterprises, United Nations Global Compact (UNGC) initiative, etc. have shown their impact on CSR attitude of Indian companies.

Several studies have confirmed that all these public policies have, more or less, shaped the social behaviour of Indian corporate houses. Hence, it can safely be believed that since early 2010s Indian CSR movement has started to be steered by policies, though volunteerism has still remained the bedrock for most of the businesses for their CSR approaches.

Let us look how far public policy intervention has changed the CSR scenario in India. Through their “carrot and stick” approach, public policies have reorganized and streamlined CSR practices as a whole. Regulatory elements of some policies have enforced and elicited CSR behaviour from companies which were earlier shorn of it. Governments seek proactive role of businesses for solving societal maladies by guiding their social conduct. Endorsing and facilitating aspects of public policies have encouraged and catalyzed CSR practices, thus taking them to next levels. And, to put it simply, the series of policies on CSR have popularized the concept.

As a result of this enthusiasm, more and more companies have jumped on the CSR bandwagon, and are contributing to several causes leading to national development. Gradual upsurge in expenditure on CSR over the years bears testimony to it. Further, public policies have provided regular and supportive framework to the companies for implementing their CSR agenda. They provide an enabling situation for realization of CSR vision of companies.

Provisions for mandatory disclosure and reporting have prompted corporate bodies to initiate responsible social conduct. Government of India as well as state governments identify priorities for development and suggest companies to incorporate these into their CSR plan. Because of this, dovetailing of projects happens in thematic areas, be it health, sanitation, livelihood, education or others. To sum up, public policies have generated considerable positive influence in practice, outreach and communication of CSR modus operandi of Indian corporate houses.

On the flip side, as CSR is gradually gaining political bearing, it is seen at several instances that public authorities, instead of acting as facilitators, command what companies should do pertaining to their social behaviour. As a result of this, strategic relevance of CSR initiatives taken by concerned companies seems to have diminished.

Hence, the desired and appropriate ways must be understood by both the Governments and Companies so that CSR can be utilized as one of the opportunities for the new economic order. Both public and private resources must be coalesced for realizing top priorities of development. States can develop framework for creating partnerships for CSR. Actors in the supply chains should be made to adopt CSR by public policies. Governments should ensure that CSR by companies is not just tokenism by developing and using assessment mechanisms.

Authors: Himanshu Sekhar Panigrahi works with Hindustan Copper Limited as Dy. Manager-CSR. 

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Disclaimer: The views expressed by the authors in this feature are entirely their own and do not necessarily reflect the views of India CSR Network and its Editor.