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Corporate Social Responsibility and Labour Welfare

Project Assignment 5th Semester, 5 year B.A., LL.B. (hons) Submitted By AJJUGUTTU KAILASHNATH REDDY Hall Ticket No.11/LLB/03

DAMODARAM SANJIVAYYA NATIONAL LAW UNIVERSITY November 2013

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ACKNOWLEDGMENT

This is to state that, I AJJUGUTTU KAILASHNATH REDDY of Roll no.201103 completed my semester (fifth) project work for LABOUR LAW II on the topic CORPORATE SOCIAL RESPONSIBILITY AND LABOUR

WELFARE. I hereby thank MR. R BHARATH KUMAR for supporting me throughout the work and my friends and my parents for extending their support.

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Contents
List of Cases ................................................................................................................................ 4 Table of Statutes .......................................................................................................................... 4 Abbreviations............................................................................................................................... 4 Labour Welfare ............................................................................................................................ 5 History of Labour Welfare .......................................................................................................... 5 Objectives of Labour Welfare ..................................................................................................... 5 Nature of Welfare ........................................................................................................................ 6 Principles ..................................................................................................................................... 6 Constitutional frame work ........................................................................................................... 8 Corporate Social Responsibilities (CSR): ................................................................................... 9 Meaning of CSR ........................................................................................................................ 10 Definition of CSR ...................................................................................................................... 10 Concept of CSR ......................................................................................................................... 11 Needs and Importance of CSR .................................................................................................. 11 Historical Perspective ................................................................................................................ 12 Approaches to CSR ................................................................................................................... 13 Corporate Social Responsibility in India ................................................................................... 13 CSR Philosophies in India ......................................................................................................... 14 Some Cases of CSR Initiatives in India..................................................................................... 14 Instances of violation of CSR Principles ................................................................................... 15 CONCLUSION ......................................................................................................................... 17 Bibliography .............................................................................................................................. 18

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List of Cases
1. Bhopal Gas Tragedy Case 2. Cadbury Case 3. Unilever Global Company Case

Table of Statutes
1. The Factories Act, 1948 2. The Plantation Act, 1951 3. The Mines Act, 1952 4. The Motor Transport Act 5. Industrial Dispute Act
6.

Employees State Insurance Act

Abbreviations
1. ILO International Labour Organizations 2. NGO Non-governmental Organizations 3. CSR Corporate Social Responsibility 4. WBCSD - World Bank Committee for Sustainable Development 5. TOT Transfer of Technology 6. MNC Multinational Corporation 7. ITC Ltd Imperial Tobacco Company of India Limited 8. LABS - Livelihood Advancement Business School 9. UCIL - Union Carbide India Limited 10. UCC - Union Carbide Corporation 11. CREP - The Corporate Responsibility for Environmental Protection 12. DNA - Deoxyribonucleic acid 13. HR Human Rights

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Labour Welfare
Labour Welfare activity in India was largely influenced by humanitarian principles and legislation. Labour welfare is an important dimension of industrial relation. Labour welfare includes overall welfare facilities designed to take care of wellbeing of employees and in order to increase their living standard. It can also be provided by government, non-government agencies and trade unions. Labour Welfare means anything done for the intellectual, physical, moral and economic betterment of the workers, whether by employers, by government or other agencies. According to Arthur James -Labour welfare means anything done for the comfort and improvement, intellectual and social, of the employees over and above the wages paid which is not a necessity of the Industry. According to ILO, Labour Welfare means such services, facilities, and amenities which may be established in vicinity of undertaking to perform their work in healthy and congenial environment and to avail of facilities which improve their health and bring high morale.

History of Labour Welfare

In India, the labour welfare started sometime during the First World War (1914-1918). Till then well-being of workers in factories was hardly though by anybody. ILO has played a very significant role for labour welfare. Formed by Indian Central government and State Governments for Welfare of Labour in industries. Government has laid down minimum standards for employment and working conditions in organizations. Trade unions and various social organizations also function as agencies for implementation of labour welfare measures.

Objectives of Labour Welfare

Labour Welfare provides social comfort to employees. It provides intellectual improvement of employees. To build stable work force.

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To provide healthy and proper working conditions. To ensure wellbeing of employees and families. The dependents of the workmen can claim for the benefits of workmen. Welfare activities will be carried out at all levels in the organization. It will be provided over and above regular wages. It can be a social concept which relates to welfare of employees, their families and community as a whole.

The government approach towards the Labour Welfare is been already discussed in the below acts: The Factories Act, 1948 The Plantation Act, 1951 The Mines Act, 1952 The Motor Transport Act

Nature of Welfare
Schemes of labour welfare shall be updated time to time according to needs of workers. Labour welfare provides facilities in addition to regular wages and other economic benefits. Employers, government, NGOs etc. introduce labour welfare measures. Labour welfare provides facilities which improve workers work-life balance.

Principles
Labour welfare is dependent on certain basic principles. The following are the principles on which successful implementation of welfare programmes depends: 1. Adequacy of Wages: Labour welfare measures cannot be a substitute for wages. Workers have a right to adequate wages. But high wage rates alone cannot create healthy atmosphere, nor bring about a sense of commitment on the part of workers. A combination of social welfare, emotional welfare and economic welfare together would achieve good results.

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2. Social Liability of Industry: Industry, according to this principle, has an obligation or duty towards its employees to look after their welfare. The constitution of India also emphasizes this aspect of labour welfare. 3. Impact on Efficiency: This plays an important role in welfare services, and is based on the relationship between welfare and efficiency, though it is difficult to measure this relationship. Programmes for housing, education and training, the provision of balanced diet and family planning measures are some of the important programmes of labour welfare which increases the efficiency of the workers, especially in underdeveloped or developing countries. 4. Increase in Personality: The development of the human personality is given here as the goal of industrial welfare which, according to this principle, should counteract the baneful effects of the industrial system. Therefore, it is necessary to implement labour welfare services. Both inside and outside the factory, that is, provide intra-mural and extra-mural labour welfare services. 5. Totality of Welfare: This emphasizes that the concept of labour welfare must spread throughout the hierarchy of an organization. Employees at all levels must accept this total concept of labour welfare programme will never really get off the ground.

6. Co-ordination or Integration: This plays an important role in the success of welfare services. From this angle, a co-ordinated approach will promote a healthy development of the worker in his work, home and community. This is essential for the sake of harmony and continuity in labour welfare services. 7. Democratic Values: The co-operation of the worker is the basis of this principle. Consultation with, and the agreement of workers in, the formulation and implementation of labour welfare services are very necessary for their success. This principle is based on the assumption

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that the worker is "a mature and rational individual." Industrial democracy is the driving force here. Workers also develop a sense of pride when they are made to feel that labour welfare programmes are created by them and for them. 8. Responsibility: This recognizes the fact that both employers and workers are responsible for labour welfare. Trade unions, too, are involved in these programmes in healthy manner, for basically labour welfare belongs to the domain of trade union activity. Further, when responsibility is shared by different groups, labour welfare work becomes simpler and easier. 9. Accountability: This may also be called the Principle of Evaluation. Here, one responsible person gives an assessment or evaluation of existing welfare services on a periodical basis to a higher authority. This is very necessary, for then one can judge and analyze the success of labour welfare programmes. 10. Timely: The timeliness of any service helps in its success. To identify the labour problem and to discover what kind of help is necessary to solve it and when to provide this help are all very necessary in planning labour welfare programmes. Timely action in the proper direction is essential in any kind of social work. Last, but not the least is the fact that labour welfare must aim at helping workers to help themselves in the long run. This helps them to become more responsible and more efficient.

Constitutional frame work

The Government of India, therefore, enacted a series of legislation to protect the working class from exploitation and to bring about improvements in their living and working conditions. Industrial Dispute Act, Employees State Insurance Act, Factories Act, Minimum Wages Act were enacted. The goals set in our constitution have a bearing on industrial legislation and adjudication. Indian constitution guarantees fundamental rights to its citizens and has laid down certain directive principles of state policy for the achievement of social order based on justice.

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Equality of opportunity to all citizens in matters of employment is guaranteed. Traffic in human beings, forced labour, employment of child labour in factories, mines or at other hazardous location is prohibited.

The directive principles are not enforced by any court. It shall be the duty of the State to apply these principles in making laws. Labour welfare is on the concurrent list on which the central as well as state governments have power to make laws. Article 39, 41, 42 and 43 have a special relevance in field of industrial legislation and adjudication. Article 39 accentuates the basic philosophy of idealistic socialism and provides a motivation force to the directive principles by laying down that the state shall direct its policy towards equal pay for men and women.

Article 41 lays down that the State shall, within limits of its economic capacity and development, provide for right to work, to education and public assistance in case of unemployment, old age, sickness, disablement and other cases.

Article 42 enjoins the state government to make provision for securing just and humane conditions of work and for maternity relief. The Factories Act, 1948 provides for health, safety, welfare, employment of young persons and women, hours of work for adults, holidays and leave with wages. Article 43 enjoins the State to assure a living wage, conditions of work ensuring a decent standard of life and full employment leisure and social and cultural opportunities.

Corporate Social Responsibilities (CSR):

Corporate Social Responsibility is the continuing commitment by business to behave ethically 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. Corporate social responsibility is not a new concept in India. However, what is new is the shift in focus from making profits to meeting societal challenges. Giving a universal definition of corporate social responsibility is bit difficult as there is no common definition as such. However, there are few common threads that connect all the

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perspectives of CSR with each other; the dedication to serve the society being most important of them. Most ideal definition of corporate social responsibility (CSR) has been given by world business council for Sustained Development which says,

Meaning of CSR
Conducting business in an ethical way and in the interests of the wider community. Responding positively to emerging societal priorities and expectations. A willingness to act ahead of regulatory confrontation. Balancing shareholder interests against the interests of the wider community. Being a good citizen in the community.

Definition of CSR
A good company delivers excellent products and services, and a great company does all that and strives to make the world a better place. William Ford Jr., Chairman, Ford Motor Co. By 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. By 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 Corporate Social

Responsibility 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. The World Bank Committee for Sustainable Development (WBCSD) The continuing commitment by business to behave ethically 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.

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After looking into the aforementioned definitions one can say that Corporate Social Responsibility (hereinafter referred to as CSR) is basically a concept whereby companies decide voluntarily to contribute to a better society and a cleaner environment. Corporate social responsibility is represented by the contributions undertaken by companies to society through its business activities and its social investment. After the careful perusal of the aforementioned definition it is clear that CSR is also connected with the concept of sustainable development in the companys level. Firstly, let us now discuss what do we meant by Sustainable development. Generally, we define it as, development that meets the needs of the present generation without compromising the ability of the future generation to meet their own needs. There is a considerable overlap, interaction and interrelation between the CSR and Sustainable Development. The concept of CSR has a triple bottom line approach that considers the economic, social and environmental aspects of corporate activity. Thus CSR demands businesses to manage the economic, social and environmental impacts of their operations to maximize the benefits and minimize the downsides. Through an effective CSR programme companies can improve access to capital, sharpen decision-making and reduce risk, enhance brand image, uncover previously hidden commercial opportunities, including new markets, reduce costs, attract, retain and motivate employees.

Concept of CSR
It is a concept in which organizations consider the interests of society by taking responsibility for the impact of their activities on customers, suppliers, employees, shareholders, communities other stakeholders, future generation and on environment. The organizations voluntarily taking advance steps to improve the quality of life for employees and their families as well as for the local community and society.

Needs and Importance of CSR

1. Solving Social Problems. For example, is the protest against aerosol sprays. 2. Resource given by the organizations to solve the social problem. Organization should be, for example, give due consideration to the design of work organization and job

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satisfaction, make very reasonable effort to give security of employment, and provide employment opportunities for minority groups. 3. Improves Public Image of the Firm: -Social initiatives taken by organizations tend to promote goodwill, public favour, corporate trust, profit. E.g. Cigarettes 4. Improving Stock Price: -for example: giving recognition to the needs of developing countries; limiting the extent of political involvement or campaigning; donations to, or sponsorship of, the arts, educational or educational or research institutions, sporting organizations or charities. 5. Best Interest of Business to Promote and Improve the Communities. 6. Assist to Government: - to solve social, economic and political problems of the country. 7. Pressure of Consumer Movement: - to protect consumers against business malpractices like adulteration, black marketing, unfair pricing, shortage in weight, measures, etc. 8. Pressure of Trade Union: - relations between management and labour. 9. Need of Social Audit. 10. Attracts and retains staff. 11. Customers are attracted to socially responsible companies 12. Corporate Social Responsibility attracts investors. 13. Corporate Social Responsibility helps to cut your business costs. 14. To share the negative consequences as a result of industrialization. 15. Helping to get talents. 16. Role in transfer of technology (TOT) 17. CSR is for human right corporate sustainability. 18. For corporate sustainability goals. 19. Interdependency between a corporation and community. 20. A CSR program can be seen as an aid to alleviate poverty

Historical Perspective
The term Corporate Social Responsibility (CSR) came into common use in late 1960s and early 1070, after many MNCs coined the term Stakeholders, terming those on whom an organizations activities have an impact. It was theorized that corporate owners were different that stake holders. Those in favor of CSR stated that corporations make longer term profits by

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operating with CSR philosophy and those against stated that CSR distracts from the economic role of business. It has been stated that in India CSR has developed in four phases:

Approaches to CSR
There are two basic approaches to CSR: Traditional Approach and Modern Approach Traditional Approach, under the traditional/classical operation of the corporate enterprises, societys basic demands upon the business were to produce goods and services efficiently and the responsibility of business enterprises was to use resources and engage in activities designed to increase profits and size of enterprises. Modern Approach, new social pressures have changed the objectives of business enterprises. There is growing public demand for corporate involvement in solving many social practices so that social responsibility becomes a standard by which business practices are evaluated. It is opined that business houses should formulate financial goals for the shareholders and social goals like pollution abatement, minority employment and related corporate activities.

Corporate Social Responsibility in India

Corporate Social Responsibility Practices in India sets a realistic agenda of grassroots development through alliances and partnerships with sustainable development approaches. At the heart of solution lies intrinsic coming together of all stakeholders in shaping up a distinct route for an equitable and just social order. Indu Jain, Chairman, the Times of India Group, New Delhi CSR in India is in a very nascent stage. It is still one of the least understood initiatives in the Indian development sector. A lack of understanding, inadequately trained personnel, nonavailability of authentic data and specific information on the kinds of CSR activities, coverage, policy etc. further adds to the reach and effectiveness of CSR programs. But the situation is now changing. Corporate houses are realizing that what is good for workers their community, health, and environment is also good for the business.

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CSR Philosophies in India

MODEL ETHICAL STATIST FOCUS CHAMPIONS

Voluntarily commitment by M K GANDHI companies to public State ownership and legal JAWAHAR LAL NEHRU requirements determine corporate responsibilities Corporate responsibilities Milton Friedman limited to private owners. Companies respond to the R Edward Freeman needs of StakeholdersCustomers, employees etc.

LIBERAL STAKEHOLDER

Some Cases of CSR Initiatives in India

1. Reliance Industries Ltd. Reliance Industries Ltd. launched a countrywide initiative known as Project Drishti, to restore the eye-sights of visually challenged Indians from the economically weaker sections of the society. 2. Hero MotoCorp Hero MotoCorp takes considerable pride in its stakeholder relationships, especially ones developed at the grassroots. The Company believes it has managed to bring an economically and socially backward region in Dharuhera, Haryana, into the national economic mainstream. 3. Infosys Technology 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. 4. ITC Limited ITC partnered the Indian farmer for close to a century. It is now engaged in elevating this partnership to a new paradigm by leveraging information technology through its

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trailblazing e-Choupal initiative. ITC 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. 5. LABS of Dr. Reddys Labs Dr. Reddys lab started LABS (Livelihood Advancement Business School) in the year 1999. It trains the underprivileged youngsters, even street children for livelihood earnings in the job areas i.e. technology, healthcare, hospitality, finance and marketing issues. It involves four types of volunteers viz Student volunteer mentors, Faculty volunteer mentors, Network mentors and Resource mentors. In a newly emerged global market as the competition is very intense and the customers are very sophisticated, companies must ensure social responsibility in order to secure fundamental relationships that fuel business growth.

Instances of violation of CSR Principles

Bhopal Gas Tragedy, The Bhopal disaster also known as Bhopal Gas Tragedy was one of the worlds worst industrial catastrophes. It occurred on the night of December 23, 1984 at the Union Carbide India Limited (UCIL) pesticide plant in Bhopal, Madhya Pradesh, India. A leak of methyl isocyanate gas and other chemicals from the plant resulted in the exposure of hundreds of thousands of people. Estimates vary on the death toll. The official immediate death toll was 2,259 and the government of Madhya Pradesh has confirmed a total of 3,787 deaths related to the gas release. Others estimate 3,000 died within weeks and another 8,000 have since died from gas-related diseases. A government affidavit in 2006 stated the leak caused 558,125 injuries including 38,478 temporary partial and approximately 3,900 severely and permanently disabling injuries. UCIL was the Indian subsidiary of Union Carbide Corporation (UCC). In 2001 the USbased gigantic Dow Chemical purchased Union Carbide, thereby acquiring its assets and liabilities. However it has been steadfastly refusing to clean up the site, provide safe drinking

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water or compensate the victims, or even disclose the composition of the gas leak, Dow Chemical, like UCIL earlier, claims that it has no liability of the past. The Dow Chemical Company, with annual sales of $28 billion, says in its web site: it is committed to the principles of Sustainable Development and its approximately 50,000 employees seek to balance economic, environmental and social responsibilities. Cadbury Case In October 2003, a Cadbury stockiest in Mumbai detected worms in Cadburys Dairy Milk chocolate. Then the Commissioner of Food and Drug Administration of Maharashtra examined the sealed Dairy Milk packs and found worms in them. He immediately ordered the seizure of all Cadburys Dairy Milk chocolates from the companys factory in Talegaon near Pune. This attracted lots of criticism from consumer activists on lack of appropriate laws on storage. They also demanded immediate government action against Cadbury. Another factor brought to light was that the chocolates were delivered by three wheelers, which did not have refrigeration facility for appropriate transit maintenance of the product. Unilever Global Company Case In the year 2001 the Unilever Company has dumped 300 metric tons of mercury at Kodaikanal located at South India. As a contrast to the above activity the Unilever website states, We are committed to conducting our operations with integrity and with respect for the interests of our stakeholders.. We are also committed to making continuous improvements in the management of our environmental impacts and to working towards our longer term goal of developing a sustainable business. In order to tackle above situations a new initiative has taken by Government of India, that is CREP, or The Corporate Responsibility for Environmental Protection initiated by the Indian government recently this year in 2003, is a case in point. A guideline for a set of non-mandatory norms for 17 polluting industrial sectors has been set but there is no real pressure for implementation or internalization. An ethical being which claims to respect the earth cannot have discontinuities in its practices. Ethical practices have to place in an integrity framework, and that implies at the very least a lack of multiple ways of being. This can be no different for individuals as for companies. Contrast to the above news the Unilever website states All

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Unilever companies must comply with local laws and adopt the same standards for occupational health and safety, consumer safety and environmental care. The above cases show that emerging markets might have loose laws which protect the interests of the local population. However it is in the best interest of the corporations to take care of the welfare of the local community. The adverse publicity caused by the protests and media coverage brings out high degree of negative public response for the product safety of the company.

CONCLUSION
CSR is not new to India; companies like TATA and BIRLA have been imbibing the case for social good in their operations for decades long before CSR become a popular cause. In spite of having such life size successful examples, CSR in India is in a very nascent stage. It is still one of the least understood initiatives in the Indian development sector. It is followed by a handful of public companies as dictated by the very basis of their existence, and by a few private companies with international shareholding as this is the practice followed by them in their respective foreign country. Thus the situation is far from perfect as the emphasis is not on social good but rather on a policy that needs to be implemented. But organizations are coming to realize the bottom-line benefits of incorporating sustainability into their DNA. Its beneficial for attraction and retention and its the right thing to do. HR is a key organizational leader and can take the lead or partner with other executives to work cross-functionally to integrate CSR objectives into how business gets conducted. HR practitioners can act as translators of the organizations CSR commitment vertically and horizontally across departments. To guarantee the supply of responsible and ethical goods, it is especially important to implement a nationwide system of CSR standards. I think that today, more so than ever, corporate responsibility is the best strategic as well as financial path that most businesses can follow. For most businesses there are both compelling reasons to be responsible and compelling statistics that validate that responsible businesses do better according to traditional financial metrics. By accepting responsibility, we take effective steps toward our goal: an inclusive human society on a habitable planet, a society that works for all humans and for all nonhumans. By accepting responsibility, we move closer to creating a world that works for all.

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Bibliography
Websites www.legalsutra.com www.kohjlaw.com www.legalservicesindia.com www.indiankanoon.com

Books Khan & Khan, Labour & Industrial law, 1st ed., S.Gogia & Company, Hyderabad, 2009. S.N.Mishra, Labour & Industrial Law, 25th ed., Central Law Publications, Allahabad, 2009.