Corporate Social Responsibility-an analysisAuthor: Nilesh Kumar Baghel, Semester VI, Hidayatullah National Law University, Raipur

IntroductionGlobalization has become a common word in almost all parts of the world. It has virtually connected the entire world and there seems to be no geographical barrier for access to any part of the world. It would not be incorrect if we say that the world economy is globalized. There seems to be only one market in the world, with interdependent production and consumption. The impact of globalization can be seen in the growth of the world trade as a proportion of output. In this era because of role of business entities in world economy society expects from these business entities to be a socially responsible citizens. In the recent years, the term corporate social responsibility (hereinafter referred as CSR) has gained prominence, both in business and in the press, to such an extent that it seems to have become ubiquitous. The relationship between organisations and society has been the subject of much debate, often of a critical nature. The decade has witnessed protest concerning the actions of organisations, exposure of corporate exploitation and unfolding of accounting scandals. At the same time, ethical behavior and a concern for the environment have been shown to have a positive correlation and corporate performance. The nature of CSR is therefore a topical one for business and academics. In other words, corporations are a part of society just as much as each one of us is, as an individual. According to Hobbes, Locke & Jean Jacque Russeau, within the concept of Social Contract, society and corporations must co-exist and contribute to the well being of each other. There is a contract, which is at once explicit and implicit, that governs the operation of business within a given community.As when Benjamin Franklin concurs to this opinion when he remarks that doing good is not a private act between a bountiful giver and a grateful receiver, it is a prudent social act.While discussing Corporate Social Responsibility, the basic question is not whether we wish to compel or forbid certain kinds of corporate conduct by legislative command, but whether it is socially desirable for corporations organized for profit voluntarily to identify and pursue social ends where this pursuit conflicts with the presumptive shareholder desire to maximize profit.Corporate governance and CSR reforms have become a major focus of governments and corporations over the past several decades. In the United States, for example, following the Enron scandal and the recent financial crisis, both government and private industry have become embroiled in debates about the role of corporate governance in causing such crises and the corporate governance solutions to prevent future crises. Similarly, some investor groups, employee groups, and corporations themselves have advocated for or undertaken numerous CSR efforts. These efforts focus not just on shareholder wealth maximization, but also on the broader impact of the corporation on its stakeholders. These debates are not just occurring in developed economies. Countries around the world are engaging in rich and nuanced debates, and undertaking significant reforms in the corporate governance and CSR arenas.Corporate law in India has been fundamentally transformed since the early 1990s. In conjunction with significant economic globalization, liberalization and privatization, the Indian government has introduced a series of corporate governance reforms aimed in part at creating a system of transparent, ethical, and accountable corporate functioning. Early reforms sought to implement rules and practices that addressed traditional corporate governance concerns, in other words the relationship between firm managers and shareholders and the relationship among different groups of shareholders, particularly majority and minority shareholders.CSR is described as a companys obligation to be accountable to all of its stakeholders in all its operations and activities. Socially responsible companies consider the full scope of their impact on communities and the environment when making decisions, balancing the needs of stakeholders with their need to make a profit.Thus the present work deals with impact of CSR in the era of globalization. The work focuses on the meaning and definition of CSR and what are the benefits of it. What are the legal provisions or steps relating to CSR, how it developed and what are the future challenges before the CSR, are some of the major issues of the present work.

1. What is Corporate Social Responsibility?We are committed to creating economic value, but we are not indifferent to how we do it.... Progressive businesses are gaining competitive advantage by responding to societal signals.... We prosper by helping society to prosper.[footnoteRef:2] [2: Idar Kreutzer, CEO Storebrand, Merrill Lynch Banking & Insurance CEO Conference, London 6th October 2005.]

There is growing recognition of the significant effect the activities of the private sector on employees, customers, communities, the environment, competitors, business partners, investors, shareholders, governments and others. It is also becoming increasingly clear that firms can contribute to their own wealth and to overall societal wealth by considering the effect they have on the world at large when making decisions. Business opinion polls and corporate behavior both show increased levels of understanding of the link between responsible business and good business.[footnoteRef:3] [3: David Crowther and Renu Jatana, The Free Market & Social Responsibility in International Dimensions of Corporate Social Responsibility Vol. I 1-2 (1st ed. 2005). ]

In addition to building trust with the community and giving firms an edge in attracting good customers and employees, acting responsibly towards workers and others in society can help build value for firms and their shareholders. There is no way to avoid paying serious attention to corporate citizenship: the costs of failing are simply too high.... There are countless win-win opportunities waiting to be discovered: every activity in a firms value chain overlaps in some way with social factors... The job of todays leaders is to stop being defensive and start thinking systematically about corporate responsibility.[footnoteRef:4] [4: Michael Porter, Professor, Harvard Business School, at the April 2005 Business and Society Conference on Corporate Citizenship, sponsored by the University of Torontos Rotman School of Management]

Businesses are an integral part of the communities in which they operate. The general public has high expectations of the private sector in terms of responsible behavior. Consumers expect goods and services to reflect socially and environmentally responsible business behavior at competitive prices. Shareholders also are searching for enhanced financial performance that integrates social and environmental considerations, both in terms of risk and opportunities.[footnoteRef:5] [5: Responsible Competitiveness: Reshaping global markets though responsible business practices, (Sept. 26, 2012), http://www.accountability.org/images/content/1/1/110/Full%20Report%20(Compressed).pdf.]

1.1 Corporate Social Responsibility: Meaning and Definition Social responsibility is the responsibility of an organisation for the impacts of its decisions and activities on society and the environment through transparent and ethical behavior that is consistent with sustainable development and the welfare of society; takes into account the expectations of stakeholders; is in compliance with applicable law and consistent with international norms of behavior; and is integrated throughout the organisation.[footnoteRef:6] [6: Working definition, ISO 26000 Working Group on Social Responsibility, Sydney, February 2007]

Corporate social responsibility (CSR) is a form of corporate self-regulation integrated into a business model. CSR policy functions as a built-in, self-regulating mechanism whereby a business monitors and ensures its active compliance with the spirit of the law, ethical standards, and international norms. CSR is a process with the aim to embrace responsibility for the companys actions and encourage a positive impact through its activities on the environment, consumers, employees, communities, stakeholders and all other members of the public sphere who may also be considered as stakeholders.William Ford Jr., Chairman, Ford Motor Co. has defined the term Corporate Social Responsibility as A good company delivers excellent products and services, and a great company does all that and strives to make the world a better place.According to European Union, CSR is a concept that an Enterprise is accountable for its impact on all relevant Stakeholders. It is a continuing commitment by Business to behave fairly and responsibly and contribute to Economic Development while improving the Quality of life of the workforce and their families as well as of the local community and society at large.According to Michael Hopkins, CSR is concerned with treating the Stakeholders of the Firm Ethically or in a socially responsible manner. Consequently, behaving socially responsibly will increase the human development of Stakeholders both within and outside the Corporation.Professor A. Quartz of Luxembourg University defined CSR 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.i. .

1.2 Potential benefits of implementing a CSR approachKey potential benefits for firms implementing CSR include the followings:1) Better anticipation and management of an ever-expanding spectrum of risk: Effectively managing governance, legal, social, environmental, economic and other risks in an increasingly complex market environment, with greater oversight and stakeholder scrutiny of corporate activities, can improve the security of supply and overall market stability. Considering the interests of parties concerned about a firms impact is one way of better anticipating and managing risk.

2) Improved reputation management: Organizations that perform well with regard to CSR can build their reputation, while those that perform poorly can damage brand and company value when exposed. Reputation, or brand equity, is founded on values such as trust, credibility, reliability, quality and consistency. Even for firms that do not have direct retail exposure through brands, their reputation for addressing CSR issues as a supply chain partner- both good and bad- can be crucial commercially.

3) Enhanced ability to recruit, develop and retain staff: This can be the direct result of pride in the companys products and practices, or of introducing improved human resources practices, such as family-friendly policies. It can also be the indirect result of programs and activities that improve employee morale and loyalty. Employees are not only front-line sources of ideas for improved performance, but are champions of a company for which they are proud to work.

4) More robust social license to operate in the community: Improved citizen and stakeholder understanding of the firm and its objectives and activities translates into improved stakeholder relations. This, in turn, may evolve into more robust and enduring public, private and civil society alliances (all of which relate closely to CSR reputation, discussed above). CSR can help build social capital.

5) Improved relations with regulators: In a number of jurisdictions, governments have expedited approval processes for firms that have undertaken social and environmental activities beyond those required by regulation. In some countries, governments use (or are considering using) CSR indicators in deciding on procurement or export assistance contracts. This is being done because governments recognize that without an increase in business sector engagement, government sustainability goals cannot be reached.

The benefits of implementation of CSR can be well defined in terms of Ronald Bown as We believe in CSR because it is a proposition aligned with our values, but also because it makes business sense. Our commercial partners expect from us sound environmental and social practices. We get and understand the message and are actively promoting CSR among associates. We want to be recognised as a responsible industry, adding value to our products.[footnoteRef:7] [7: Ronald Bown, President, Chilean Fruit Exporters Association at GRI G3 launch, October 2006.]

2. Implementing Corporate Social Responsibility: Strategies and Initiatives led by Governmental and Inter Governmental Bodies2.1 CSR strategy Every business and individual needs to do their bit to tackle the enormous challenges of climate change and waste. A firm may continue to sell great quality, stylish and innovative products but customers, employees and shareholders now expect them to take bold steps and do business differently and responsibly. Now it believes that a responsible business can be a profitable business.[footnoteRef:8] [8: Stuart Rose, Staying Green in Tough Economic Climate, (Sept. 30, 2012), http://www.hbrgreen.org/2008/03/the_hard_economics_of_green.html]

A CSR strategy is a road map for moving ahead on CSR issues. It sets the firms direction and scope over the long term with regard to CSR, allowing the firm to be successful by using its resources within its unique environment to meet market needs and fulfill stakeholder expectations.A good CSR strategy identifies the following:i. overall direction for where the firm wants to take its CSR work;ii. the stakeholders and their perspectives and interests;iii. a basic approach for moving ahead;iv. specific priority areas;v. a time line for action, responsible staff, and immediate next steps; andvi. a process for reviewing and assuring outcomes.Different firms may be at different stages of awareness of and work on CSR, which will dictate the contents of the strategy. Some may decide to adopt a minimum necessary stance. Others may wish to make strategic forays into particular areas.

2.2 International Initiatives Led by Governmental and Inter Governmental BodiesIn addition to being a ready-made source of wisdom and experience, those that have been developed with governmental input, and based on agreed international standards, offer an additional level of legitimacy and recognition. Some of the most widely used are mentioned below:(A) United Nations Global CompactThe United Nations Global Compact, which was first launched 1999 on the initiative of the UN Secretary-General Kofi Annan, calls on the private sector to embrace core set of ten principles pertaining to human rights, labour, the environment, and anticorruption. Supported by a small international secretariat and a network of local organizations, the Global Compact acts as a learning forum to facilitate the exchange of experiences and good practice. Based on the level of its use, it is currently the worlds most popular multi-stakeholder CSR initiative.[footnoteRef:9] [9: George Kell, Towards Universal Business Principles, Dilemmas in Competitiveness, Community and Citizenship Business and Human Rights Seminar, The London School of Economics and Political Science, 22 May 2001, also at http://www.unglobalcompact.org/newsandevents/speeches_and_statements/london_school_of_economics.html]

(B) OECD Guidelines for Multinational EnterprisesIn June 2000, the OECD issued its revised Guidelines for Multinational Enterprises. The Guidelines establish non-binding principles and standards for responsible business conduct with the aim of promoting economic, environmental and social progress. They also ensure that MNEs act in harmony with the policies of host economies. It is the most important government-backed CSR code and covers such diversified areas as disclosure, employment and industrial relations, human rights, the environment, anti-bribery measures, and taxation and consumer interests. All 30 of the OECDs industrialized country members have formally adhered to the revised guidelines, as well as nine non-member countries (Argentina, Brazil, Chile, Estonia, Israel, Latvia, Lithuania, Romania and Slovenia). Adhering governments commit to appoint a national contact point to promote the guidelines and to help resolve problems that may arise as they are implemented. Also relevant in this context is the OECDs Risk Awareness Tool for Multinational Enterprises in Weak Governance Zones.[footnoteRef:10] [10: Jim Baker, Corporate Social Responsibility and Economic Development, (Sept. 26, 2012), http://www.oecd.org/daf/internationalinvestment/investmentstatisticsandanalysis/2423198.pdf. ]

(C) International Labor Organization (ILO)The ILO is a UN specialized agency comprising governments, employers and workers organizations. Since its inception in 1919, the ILO has adoptedon a tripartite basis international labour standards (ILS) covering a wide range of rights at work, including the rights of indigenous peoples. These instruments are the basis of most other social initiatives. The labour content of the revised OECD MNE Guidelines, for example, is based on ILS. The ILO has given special attention to multinational enterprises by adopting the 1977 Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy. This recently revised Declaration is a global commitment designed to guide governments, employers and workers in areas of employment, training, working conditions and industrial relations. More recently, the ILO adopted the Declaration on Fundamental Principles and Rights at Work, which focuses attention on the core labour rights dealing with child labour, forced labour, non-discrimination and freedom of association and collective bargaining. This key document has become the basis for the majority of social initiatives, including the labour principles of the UN Global Compact.[footnoteRef:11] [11: The ILO and Corporate Social Responsibility (CSR), (Sept. 26, 2012), http://www.ilo.org/wcmsp5/groups/public/---ed_emp/---emp_ent/---multi/documents/publication/wcms_116336.pdf. ]

(D) International Finance Corporation (IFC)The IFC is a member of the intergovernmental World Bank Group of organizations. Its mission is to promote sustainable private sector investment in developing countries. The IFCs new Environmental and Social Standards of IFC came into force in April 2006, replacing previous guidelines. The new standards define the roles and responsibilities of IFC and its client companies. They include: a Policy on Social and Environmental Sustainability on IFCs role and responsibility in supporting project performance in partnership with clients; a Disclosure Policy defining IFCs obligations to disclose information about itself and its activities; and an Environmental and Social Review Procedure, which gives direction to IFC officers in implementing the Policy on Social and Environmental Sustainability and reviewing compliance and implementation by private sector projects.[footnoteRef:12] The IFC was also closely involved in the creation of the Equator Principles, an initiative of private financial institutions to set down common social and environmental principles for the management of project financing. The recently revised Equator Principles have now incorporated, and are fully consistent with, IFCs environmental and social Performance Standards, which ensure that there is one consistent standard for private sector project financing for all adhering banks and institutions.[footnoteRef:13] [12: Performance Standard on Environmental and Social Sustainability, January 2012, (Sept. 26, 2012), http://www1.ifc.org/wps/wcm/connect/115482804a0255db96fbffd1a5d13d27/PS_English_2012_Full-Document.pdf?MOD=AJPERES. ] [13: The Equator Principles, June 2006, (Sept. 28, 2012), http://www.equator-principles.com/resources/equator_principles.pdf. ]

2.3 CSR and human rightsAlthough the primary responsibility for the promotion and protection of human rights rests with states, there is growing recognition of the important role that the private sector and other actors can play in avoiding any involvement in human rights violations and more widely promoting respect for human rights.[footnoteRef:14] Most multilaterally-endorsed CSR initiatives include a human rights component based in part on key United Nations human rights instruments such as the UDHR.[footnoteRef:15] For the most part, however, the human rights sections of existing mechanisms are not as well developed as other aspects of CSR. As a set of draft norms proposed by a UN Sub-Commission showed, there are many relevant international conventions, and controversy about how they should be applied.[footnoteRef:16] [14: The Voluntary Principles on Security + Human Rights, (Sept. 28, 2012), http://www.voluntaryprinciples.org./principles/introduction.] [15: The Universal Declaration of Human Rights, (Sept. 26, 2012), http://www.un.org/en/documents/udhr/index.shtml. ] [16: Draft Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with Regard to Human Rights, E/CN.4/Sub.2/2003/12 (2003), (Sept. 30, 2012), http://www1.umn.edu/humanrts/links/NormsApril2003.html]

3. Corporate Social Responsibility: Constitutional and Legal Measures under Indian Society3.1 CSR and Constitutional Provision:In the context of CSR, our Constitution is quite straightforward and simple. Part III of the Constitution guarantees to us certain fundamental rights. Article 14 of the Constitution grants to all peoples equality before law and equal protection of the laws. Similarly, Article 19 confers certain fundamental freedoms, including the freedom to form any association or union. But this freedom is not unlimited and is subject to some reasonable restrictions laid down by law.[footnoteRef:17] [17: M.P. Jain, Indian Constitutional Law, Lexis Nexis Butterworths Wadhwa Nagpur, Gurgaon (6th ed. 2012) (1962)]

Article 21 of the Constitution guarantees the protection of life and personal liberty to all persons. The expression life assured in Article 21 of the Constitution has a much wider meaning which includes right to livelihood, better standard of living, hygienic conditions in work place and leisure.[footnoteRef:18] The court has read Articles 21, 38, 42, 43, 46 and 48A together in Consumer Education and research Centre v. Union of India[footnoteRef:19], the court held, Right to life includes protection of the health and strength of the worker and is a minimum requirement to enable a person to live with human dignity. The State, be Union or State government or an industry, public or private, is enjoined to take all such action which will promote health, strength and vigor of the workman during the period of employment and leisure and health even after retirement as basic essentials to live the life with health and happiness. The right to human dignity, development of personality, social protection, right to rest and leisure are fundamental human rights to a workman assured by the Charter of Human Rights, in the Preamble and Articles 38 and 39 of the Constitution. [18: Maneka Gandhi v. Union of India, AIR 1978 SC 597] [19: AIR 1995 SC 922]

The Supreme Court has taken recourse to this Article to interpret Article 21 to include right to livelihood. The court in Olga Tellis v. Bombay Municipal Corporation[footnoteRef:20] observed that, If there is an obligation upon the state to secure to the citizens an adequate means of livelihood and the right to work, it would be sheer pedantry to exclude the right to livelihood from the context of right to life [20: AIR 1986 SC 180]

In Madhu Kishwar v. State of Bihar[footnoteRef:21], with a view to protect the economic interests of tribal women depending on agriculture for their livelihood, the Supreme Court has ruled that on death of the last male holder in an agricultural tribal family, the dependant family female members have the constitutional remedy of continuing to hold the land as long as they remain dependent on it to earn their livelihood. [21: AIR 1996 SC 1870]

Article 24 puts a partial restriction on employment of child labour, and it prohibits the employment of a child below the age of fourteen years to work in any factory or mine, or in any other hazardous employment. In Asiad labour case[footnoteRef:22], the court held that Article 24 is a Fundamental Right, which is plainly and indubitably enforceable against every one. It is also the duty of the Union Government, State Governments and other government bodies to ensure that the contractors to whom they have entrusted construction work also obey this obligation.[footnoteRef:23] The court has reiterated this ruling in Labourers Working on Salal Hydro-Project v. State of Jammu & Kashmir[footnoteRef:24]. [22: Peoples Union for Democratic Rights v. Union of India, AIR 1982 SC 1473.] [23: Id.] [24: AIR 1984 SC 177]

The Supreme Court has expanded the locus-standi under Article 32 of the Constitution to allow Public Interest Litigation. This has immensely helped the unorganized sector, because the unorganized sector usually consists of those people who do not have adequate means to approach the court for redressal of their grievances.[footnoteRef:25] PIL allows public-spirited persons or organization to bring the cause of such people to the notice of the court and thus seek redressal. There are number of instances where a PIL has been filed with regard to these sectors. Prominent among them are the Asiad Labour Case[footnoteRef:26] and the Bandhua Mukti Morcha case.[footnoteRef:27] [25: Satheesh Kumar T. Narayanan, Indian Family-Managed Companies: The Corporate Governance Conundrum, (Sept. 30, 2012), http://unpan1.un.org/intradoc/groups/public/documents/apcity/unpan033971.pdf.] [26: Supra note 42. ] [27: AIR 1984 SC 802]

Part IV of the Constitution, Article 36 to 51 contains the Directive Principles of State Policy. The socio- economic objectives, set out in Part IV of the constitution, guide and shape the new corporate philosophy. The directive principles are enacted with the intention applying them in enacting laws and, amongst other things, they are intended for the general betterment of the people, including workers. For example, Article 38 requires that it shall be the responsibility of the State to ensure a proper social order for the promotion and welfare of the citizens and the State shall ensure social, economic and political justice. The Court in Consumer Education and research Centre v. Union of India[footnoteRef:28] held that the preamble and Article 38 of the Constitution of India - the supreme law, envisions social justice as its arch to ensure life to be meaningful and livable with human dignity. Similarly, Article 39 provides for certain policies and basic principles to be followed by the State which includes elimination of gender inequality, just and fair distribution of wealth, ownership and control of material resources, effective management of the economy, principle of equal pay for equal work, health and strength of workers and tender age of the children should not be abused. Article 42 requires that the State shall make provision for securing just and humane conditions of work, while Article 43 provides, the State shall endeavor to secure, by suitable legislation or economic organisation or in any other way, to all workers, agricultural, industrial or otherwise, work, a living wage, conditions of work ensuring a decent standard of life and full enjoyment of leisure and social and cultural opportunities. [28: AIR 1995 SC 922]

Part IV-A of the Constitution lays down certain fundamental duties, which include the duty of every citizen of India to strive towards excellence in all spheres of individual and collective activity so that the nation constantly rises to higher levels of endeavour and achievement.3.2 Corporate Social Responsibility Voluntary Guidelines 2009In the past year, the Indian government took steps to incorporate this broader vision of CSR into Indian corporate law. In late 2009, the MCA proposed groundbreaking CSR Guidelines in what has been deemed the first concrete attempt to recognize CSR from a regulatory standpoint.[footnoteRef:29] The CSR Guidelines constitute the outcome of committee sessions conducted by IICA with Advisory Expert Group members of the IICA-GTZ CSR Initiative, a bilateral Indian/German project.[footnoteRef:30] The guidelines themselves attempt to frame CSR as part of Indian history and culture, stating: Indian entrepreneurs and business enterprises have a long tradition of working within the values that have defined our nations character for millennia. Indias ancient wisdom, which is still relevant today, inspires people to work for the larger objective of the well-being of all stakeholders.[footnoteRef:31] [29: Umakanth Varottil, Voluntary Guidelines on Governance and Social Responsibility, (Sept. 30, 2012), http://www.indiacorplaw.blogspot.com/2009/12/voluntary-guidelines-on-governance-and.html.] [30: National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business, (Sept. 30, 2012), http://www.responsible-business.in/csr-guidelines. ] [31: Ministry of Corporate Affairs, Government of India, Corporate Governance Voluntary Guidelines 2009 (Dec. 2009), (Sept. 30, 2012), http://www.mca.gov.in/Ministry/latestnews/CG_Voluntary_ Guidelines_2009_24dec2009.pdf. ]

According to the CSR Guidelines, the CSR Policy should cover the following core elements: i. care for all stakeholders, including shareholders, employees, customers, suppliers, project-affected people, society at large, etc.;ii. ethical functioning, transparency, and accountability; iii. respect for workers' rights and welfare; iv. respect for human rights; v. respect for the environment; and vi. activities for social and inclusive development.[footnoteRef:32] [32: Id.]

The CSR Guidelines also provide little concrete guidance on how companies are to implement the guidelines or on what legal changes need to be made to ensure that socially responsible practices will be part of a firm's way of doing business. It appears from the fundamental principle of the guidelines that the board of directors will formulate and approve CSR policies. Board members, however, may not have the knowledge or tools to undertake these efforts, but there has been little recognition of such shortcomings with respect to placing responsibility on directors to formulate and approve CSR policies.In addition, similar to the corporate governance Voluntary Guidelines, the CSR Guidelines are, as the name indicates, just guidelines. This is arguably positive, as the CSR guidelines are just the initial step into regulating CSR activities. Indeed, some experts have argued that CSR requirements might benefit from a voluntary approach with stringent disclosure requirements that induce a culture of comply-or-explain. This would help vigilant investors, particularly socially responsible and ethical investors.[footnoteRef:33] [33: Umakanth Varottil, Viability of Mandatory CSR, (Sept. 30, 2012), http://www. indiacorplaw.blogspot.com/2010/08/viability-of-mandatory-csr.html.]

3.3 CSR after Amendment of 2013 Which companies fall under the new CSR provision?The CSR provision is applicable to all companies with: A net worth of~500 crores or more; a turnover of~1,000 crores or more; and a net profit of ~5 crores or more during any financial year. What does the Bill require a company to do?Companies required to form a CSR committee with at least one independent director. The CSR spend of a company that meets the required threshold needs to be two per cent of the average net profits of the preceding three financial years. Can a company apply for a tax break if they spend on CSR?At present the Bill has not specified any tax benefits.Will an Indian company become uncompetitive, as 2% of profits will go to CSR?It may not really be the case, as several foreign jurisdictions also have CSR, as well as other laws,which could be affecting their prices. Cost of labour, for instance, is higher in many countries, which affect their pricing. What are the duties of a CSR committee?Formulate and recommend a CSR Policy to the Board which indicate the activities to be undertaken by the company; recommend the amount of expenditure to be incurred in relation to the CSR policy; and monitor the progress of the CSR policy.Where does a company spend the CSR money?CSR activities under the Bill include: Eradicating extreme hunger and poverty; promotion of education promoting gender equality and empowering women; reducing child mortality and improving maternal health; combating HIV, AIDS, malaria, etc; ensuring environmental sustainability imparting employment enhancing vocational skills; social business projects and contribution to certain funds. The company should give preference to local areas while formulating its CSR policy.How is the CSR spend to be accounted for?The draft CSR rules presently require a company to report their CSR spend in a form provided and it is likely that such reporting requirements will be included in the final rules as well.What are the consequences of not complying with the CSR aspects of the Bill?The Bill only provides that sufficient reasons need to be provided for not making the requisite CSR spend. While no specific penalties are contemplated in the Bill with respect to CSR, Chapter XXIX of the Bill (Sections 450 and 451) provide for general penalties for contravention and repeat offences.

4. ORGANIZATIONAL Challenges and Limitations to CSR

4.1Complexity of Operations in Global Market by a Business EntitySocially responsible investing (SRI) under Corporate Social Responsibility is a common practice among financial institutions, but it remains unclear whether such institutions can practice SRI if it fulfils the will of their beneficiaries. Some experts believe that traditional approaches to CSR can actually stand in the way of achieving optimum performance. The Dutch-based Anders & Winst Company lists ten of the most common mistakes. Some of these common mistakes are as follows:[footnoteRef:34] [34: Extracted from Ethical Corporation article, appearing at http://www.ethicalcorp.com/content.asp?ContentID4728]

i. Lack of vision: Instead of asking where are we now? think about asking where do we want to be in 10 years?ii. Scale of change: Some of the biggest business and sustainability opportunities will not be achieved by bolt-on approaches. Firms should remain open to radically new approaches and major change;iii. Sub-strategic management: CSR managed at a staff level may fail to address key issues such as new business opportunities and the structure of incentives systems;iv. Risk/opportunity roles: By bundling these two issues together, companies can fail to optimize the opportunities that a separate approach might offer;

Conclusion In spite of the considerable track record of initiatives that are perceived as CSR, the task of crafting new models that are capable of addressing controversial issues of implementation in accordance to the positive legal system and societal variation, seems to be equally challenging for the corporate sector. The suggestion for introduction of CSR in management education and the need for CSR experts in corporate HR departments aimed at nurturing healthy relationship between corporate agencies and communities need serious consideration in emerging context. However, the role of industry associations in the process remains paramount.In the years to come, issues such as corporate accountability, corporate ethics, and disclosure of relevant corporate information shall become increasingly important centers of attention. Besides, diversification and adopting synergistic policies, Corporations need to develop new measures of performance, new standards of ethics and a new awareness of multiple bottom lines instead of concentrating only on profits as they did in the past. They have to increasingly focus on multiple bottom lines informational, social, environmental and ethical which are interconnected and interdependent. Hence, corporations should pay great attention to ethical issues while performing their role because, if ethics are missing, business and society as a whole would not flourish.With the recent spate of corporate scandals and the subsequent interest in corporate governance, a plethora of corporate social responsibility and corporate governance norms and standards have sprouted around the globe. The Sarbanes-Oxley legislation in USA, the Cadbury Committee recommendations for European companies and OECD principles of corporate governance are perhaps the best known among these. But developing countries have not fallen behind either. Well over a hundred different codes and norms have been identified in recent surveys and their number is steadily increasing. India has been no exception to the rule. Several committees and groups have looked into this issue that undoubtedly deserves all the attention it can get.CSR is no longer the purview of just a handful of manager concerned with the social or environmental impact of their firms operations and increasingly has become part of overall business strategy. Widespread economic and political concerns are at the heart of this movement and numbers of factors explains the growing interest in CSR. Some of these are: i. New concern and expectations of citizens, consumers, public authorities and investors in times of globalization and industrial change.ii. The increasing influence of social criteria on the investment decision of individuals and institutions as investors or consumers.iii. Growing concern about environmental degradation.iv. The impact of new information and communication technologies on the transparency and circulation of information business activity.Development of norms and guidelines are an important first step in a serious effort to improve corporate governance. The bigger challenge, however, lies in the proper implementation of those rules at the ground level.

Bibliography:1. Bharats Manual of SEBI, Vol. 2 (2007), Bharat Law House Pvt. Ltd, New Delhi. 2. Taxmanns, SEBI Manual, Vol. 2 (8th ed. June 2006), Taxmann Allied Services (P.) Ltd., New Delhi. 3. I.P. Massey, Administrative Law, Eighth Edition ,Eastern Book CompanyWebliography:1. www.arc.gov.in 2. www.businessdictionary.com3. www.fpsb.co.in4. www.sebi.gov.in5. www.usaid.gov.in6. www1.law.umkc.edu/