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Abstract:
The following paper is about the legacy of CSR in India. In an attempt in explaining the same,
the paper will first discuss the history of CSR in India which can be divided into the following:
Ancient Era
Medieval Era
Pre-Independence Era
Post-Independence Era
This is done to set a historical backdrop/context so as to understand in a better way how CSR
in India evolved through the times. And this evolution could be categorised into the following
phases:
After investigating into each of these phases, we will look at the state of CSR in the recent past
and also the features of S.135 of the Companies Act, 2013 about mandatory CSR, its critiques
and finally give suggestions for a better, more effective and efficient CSR mechanism in the
country.
Methods of Research:
Secondary sources (i.e.) Research papers written by other individuals/foundations, links to
CSR is something which is not easy to define as it includes various concepts which overlap
with it, but broadly, the fundamentals of the concept of CSR is that not only the government
but also the corporate bodies should make it their responsibility to address social issues.
Though profit maximization is the primary aim of any business, there has been a shift in the
past two decades from maximizing shareholders’ interest to maximizing stakeholders’ interest.
In the same period there has been a growing realization that businesses can not run profitably
in the long run if they do not take care of the society from which it procures various means of
running its business and day to day activities. To dig deeper into this, we can look at it from
Business perspective: According to this perspective, it could be said that CSR is a new
business strategy which takes into account the interests of all stakeholders and in turn
Environmental and Social perspective: This perspective says that businesses need to
ensure stability and sustainability of social and environmental factors around it as only
by doing so, any business could ensure a sustainable market for it in the long run.
And in a country like India where the richest 1% hold almost 60% of the nations’ wealth and
lead to almost 75% of nations’ income generation, CSR must be incorporated by each and
every business in order to work towards reducing this huge gap of income inequality.
Legacy of CSR in India.
History of CSR in India:
Many might think that like most of the things, even CSR came to India pretty late and only
after the developed nations; but to everyone’s surprise that is not the case as the concept of
CSR though not in its entirety but in its gist was present in India since the Vedic period. To
have a clearer picture, let us look into the history of CSR in India.
Ancient Era
Medieval Era
Pre-Independence Era
Post-Independence Era
Ancient Era:
Ancient Era can be sub-divided into Vedic Era and Post-Vedic Era.
The basic fundamentals of CSR can be tracked back to the Indian civilization which was one
of the oldest civilizations of the world. The people in this civilization followed the principles
of “Vasudhav Kutumbukam” or in other words “The whole world is like a family” which means
that every person has a right to lead a happy life and it is everyone’s responsibility to share
whatever resources are available with each other (No inequality, Social CSR). According to
Sanatan Dharma it was believed that all the trees and animals were god’s creations and it was
the responsibility of people to take care of the flora and fauna (Environmental CSR). Adding
to these the general business practises of the traders were heavily influenced by leaders or
This era marks the birth of one of the greatest saints whose perchings are still followed by many
people, the world over; it is none other than Gautam Buddha. With respect to CSR, Buddha
taught that one should not have more than required and should distribute whatever is excess.
Coming to Kings and Kingdoms, the Mauryan Empire started with the reign of Chandragupta
Maurya who insisted on protecting flora and fauna (Environmental CSR). And next to the Kin,
Ashoka who adopted Buddhism discouraged discrimination based on caste (Social CSR),
One of the notable kings of the Vardhan Dynasty was Harsha Vardhana, he donated huge sums
to the Nalanda University. Adding to this Hiuen Tsang mentioned that “Benevolent institutions
on the Ashokan Models, for the benefit of travellers, poor, the sick, were established throughout
the empire (of Harshavardhana). Rest Houses (Dharmashalas) were built in both towns and
rural parts, and provided with food and drink, physicians being stationed at them to supply
medicine to the necessitous without stint.” “Buddhist monasteries or viharas, charity houses
and theroyal lodges were constructed by the king where everyday foodstuffs were provided for
Another notable dynasty during this period was the Pala dynasty who ruled the present
north east India, Bangladesh and Nepal. They were known for their trading skills, charity and
philanthropy. The Arabs referred to them as the most considerate rulers in India. It is said that
Nalanda University, one of the greatest universities in the history of world was at its height
1
CSR in India, Available at:
http://shodhganga.inflibnet.ac.in/bitstream/10603/46116/12/12_chapter%204%20csr%20in%20india.pdf
Legacy of CSR in India.
The end of this era saw the rise of Alauddin Khalji who made sure that the prices of the
basic necessities were fixed and are available throughout the year and other commodities priced
In this period, there have been all kinds of rulers, and then these two notable rulers who made
exceptional contributions towards CSR, namely Sher Shah Suri and Akbar. “Sher Shah built
roads for travellers along with resting places, dug wells, constructed hospitals, provided free
kitchens for needy persons and credited for organising mail service and police. His
management was so effective that Akbar the great followed his management style and further
improved on it.”2 Adding to this, Akbar was also acclaimed by many to be the people’s ruler
The rule of the European’s started in the 18th century and this changed the economics
of the nation. Indian businessmen could not compete with the foreign traders and were either
running in losses or shut their business completely. While the others who could transition and
capitalize on new opportunities flourished. The businessmen who made profits used those
profits to help the needy. Mahatma Gandhi played an important role in inspiring these
businessmen in contributing towards the society. He proposed the idea of trusteeship which
Though most of the Indian business families have always contributed to public welfare.
The two important business enterprises which played an important role in public welfare are
TATA and Birla. The TATA group has always set aside certain amount of their profits for
welfare purposes, they also made provisions for unskilled workers (daily labour in 1917) and
2
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Legacy of CSR in India.
also maternity benefits (in 1928) even before the laws to govern those were implemented (in
1948 and 1946 respectively) and also set up the TATA Institute of Fundamental Research.
Birlas too engaged extensively in philanthropy. Adding to this, they also set up Birla Institute
of Technological Sciences in their hometown (Pilani) which now has various campuses across
the nation and is a pioneer in engineering education of the country. Apart from this, they set up
various trusts, established hospitals with state-of-the-art technology which majorly served poor
The Indian Business families continued their welfare activities even after post-independence,
but other businesses were not so into the idea of charity, philanthropy or CSR because of the
fact that Indian tax laws and stringent laws which made most of the business to practise unfair
means of trade.
The things we discussed so far falls more in the domain of philanthropy and charity and
not entirely CSR. That was because CSR in current understanding only started spreading in the
early 1970’s and was practised as a full-fledged strategy in early 1990’s. Since we are done
looking at the history of CSR in India, and have set up a backdrop, now using the already set
backdrop it will be easier for us to understand how CSR as a concept evolved through the ages
in India.
Legacy of CSR in India.
Evolution of CSR in India:
The evolution of CSR in India can be categorized into the following phases3:
Phase 1: Pure philanthropy and charity before and during industrialization (1850-1914):
Initially the major drivers of CSR among the traders and businessmen of India were the ideas
of charity and philanthropy. Before industrialization reached India, i.e. before 1850, the traders
and businessmen contributed to society by setting up temples, mosques and also helped the
people in need when epidemics like draughts, floods etc stroke by providing them with basic
necessities like food and money. By doing so they also retained a social standing in the society.
When the British entered India and brought with them foreign goods and new techniques that
came with the industrial revolution, the businessmen of India struggled but there were a few
business families like Tata, Godrej, Bajaj, Modi, Birla, Singhania who transitioned along with
the revolution and flourished. Though most of them were strongly inclined towards social
welfare, many say that their social welfare decisions were highly influenced by caste and
politics.
Most of the CSR activities at this time period were pure charity and philanthropy which
would constitute as outside the firm activities as the owner of a business organisation is
3
CSR in the World and India, Available at:
http://shodhganga.inflibnet.ac.in/bitstream/10603/15950/12/12_chapter%203.pdf
Legacy of CSR in India.
choosing to give some money out for social welfare. Such activities are usually one time and
Under most of this phase, CSR was heavily dominated by India’s freedom struggle and
Gandhi’s idea of trusteeship. The businesses continued to contribute towards social welfare
and aimed at fostering social development. They saw their economic prosperity as not only a
protest against the colonial rule but also as contributing to the overall social development of
the nation. With the vision of a “Modern and Free India” the businesses continued doing so
and also started setting up trusts and educational institutions as advised by Gandhi. Most of
these trusts were also set up to work towards achieving social reforms which were in line with
Gandhi’s ideas like abolishing untouchability and women empowerment. As Gandhi once said
“India is not Calcutta and Bombay. India lives in her several hundreds of villages.", many of
This was comparatively a lot better than pure charity and philanthropy as under those
the person donating will donate certain amount to a school or college, there is nothing long
term in it, but by setting up trusts and educational institutions the businesses which have the
required resources can do good and continue to do good in the long run. This could be referred
After the Independence, India adopted a mixed economic framework with the Public Sector
Undertakings (PSUs) at the centre of it. The government implement stringent laws with respect
to industry licensing, labour, environment, high taxes and so on; and hence this period was
called as an “Era of Control & Command”. This led to various corporate malpractices by the
businesses. The PSUs were setup in order to make sure equitable distribution of resources but
Legacy of CSR in India.
through the passage of time, they failed, and the emphasis shifted to the private sector to revive
the socio-economic condition of the nation. In 1965 many influential academicians, politicians
and businessmen setup aimed at promoting CSR and its practises, but it failed to catch steam.
This might be because the business regulations were just (around 1965) made a little flexible
and businesses which found difficult all these years to profitably run business were finally
given a bit of relaxation and immediately proposing the idea did not work out as planned by
Though the businesses were initially reluctant towards incorporating CSR into their business
strategies, as the time passed (i.e.) early 1980s the businesses moved from pure philanthropy
and charity to setting up trusts and to finally incorporating CSR as one of their business
strategies. Just when CSR was picking up among the Indian corporates, the government
decided to open Indian markets for foreign trade and investment (1991 Liberalisation), experts
thought this might lead to reduced CSR activities by the Indian companies but to the contrary
as the opportunities increased for them through liberalised laws, they also invested increasing
After liberalisation, India became a hub for foreign companies for outsourcing various
activities due to availability of cheap labour and also lenient labour and environment laws.
Though this might look like all sunshine and roses, it is not always the case, some of the MNC’s
are trying to take huge advantage of the developing countries by manufacturing and selling
them goods which they wouldn’t otherwise sell in developed countries like the US or UK. A
real-life example was when “Coca-Cola recalled 500,000 bottles Dasani (bottled water) from
UK market due to excess of Bromate by a very small quantity than the prescribed legally. On
the other hand, when in 2003 Coca-Cola and Pepsi exceeded the EU pesticide standards in the
Legacy of CSR in India.
carbonated drinks, the company did not take any action. Only reason was that at that time
Indian standards were not having any pesticide limit for the carbonated drinks. The moral of
the story is that MNCs do not care for the society and they take most profitable route to do the
business by following the minimum standards of the country of operation.”4 It is also CSR for
MNCs to not take advantage of their weak regulatory authorities and exploit the developing
nations by selling them products of mediocre quality or setting up factories with no or low
safety measures. This is something which is still happening in developing and third world
nations and it is important for MNCs to wake up and stop doing this.
As aforementioned, CSR is not new to India, maybe in a different form but it has always been
there and with globalisation it only led to more companies coming forward and incorporating
CSR in their business plans and not just as some other expense or a promotional strategy.
Companies have separate teams to formulate strategies, allocate budgets and measure results
of their CSR activities so that they could better them. There are innumerable examples of good
CSR by Indian companies. Since we have already discussed abut what the TATAs and Birlas
have done let us look into some other giants that have contributed substantially towards CSR,
like “Bharat Petroleum Corporation Limited, Maruti Suzuki India Limited, and Hindustan
Unilever Limited. Provision of improved medical and sanitation facilities, building schools and
houses, and empowering the villagers and in process making them more self-reliant by
providing vocational training and a knowledge of business operations are the facilities that
4
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Legacy of CSR in India.
these corporations focus on. Many of the companies are helping other peoples by providing
Former head of Indian Institute of Corporate Affairs (IICA), Dr Bhaskar Chatterjee when the
companies Act was passed by the parliament and came into force in 2014 outlined the following
important features about the section (S.135) that was put in to govern the CSR activities of the
companies6.
"All companies with turnover of Rs.1,000 crore and more - or a net worth of Rs 500
crore and more or net profit of Rs.5 crore and more - will have to spend at least two
“From April 1, all 16,245 registered companies must nominate three members for their
CSR committee from their board. Companies cannot do whatever they want and claim
"Under the new rules coming into effect, anything done the employees is not CSR, it is
a human resource activity. Compliance with any rule or regulation is not CSR.
Companies should take up this role and voluntarily do it beyond the rule.”
"Any activity done must have been the part of the CSR policy of the company which
must also be made available on the company's website. CSR must be conducted by
5
Evolution of CSR in India, Jana Foundation, Available at:
http://www.janafoundation.org/wpcontent/uploads/2015/10/evolution_of_csr_in_india.pdf
6
Evolution of Corporate Social Responsibility in India, Sawati Nagwan, July 2014, Available at:
https://www.ijltemas.in/DigitalLibrary/Vol.3Issue7/164-167.pdf
Legacy of CSR in India.
"The project should have a starting time and an ending time. Any activity that has not
been given board approval, passed by the board and does not have a board resolution
If any company that qualifies for doing CSR (Net worth of INR 500 crores or more
Turnover of INR 1,000 crores or more Net profit of INR 5 crores or more) and fails to
use 2% of its average profits for the last three years towards CSR activities, the reason/s
Any income arising out of CSR will not be included in the business profits and should
Any collaborations with NGOs and other corporates towards CSR activities will be
Critiques:
There are no penal provisions for default in spending the specified amount towards CSR
activities and also there has been a lot of confusion whether to create a provision in the
company’s financial statements for the specified 2% if the company fails to spend the
The section requires the corporates to focus on the local areas where it is situated this
might lead to a lot of developmental disparities between cities and states as some have
CSR is required even more during recessionary times but during that time since most
of the companies make low or no profits, they won’t be compelled to contribute to CSR.
Legacy of CSR in India.
As very few companies fall in the bracket of the other two parameters (Net worth of
500 Crores and Turnover of 1000 Crores), CSR won’t be available to people when they
It is almost impossible for Indian companies to take part in strategic CSR as any
expense that can be traced back to a company’s profit or benefit won’t be considered
as a CSR activity.
The CSR activities suggested by the government under the Companies Act do not
concern anything long-term and if the companies choose to do those then it would not
make any long-term impact and would ignore more important problems like income
Though it looked like large number of corporates practised CSR, after this section came
into force, many studies were made to know how much these corporates were putting
towards CSR and whether they were meeting the 2% criteria but to everyone’s surprise
these studies yielded that though most of the corporates were putting forward a certain
amount towards CSR activities, these corporates were only using half or less than half
Suggestions:
From the above critiques it is clear that one of the major concerns here is the companies
not complying with S.135 of the Companies Act. The main reason behind this is
because of the reason that there are no penal provisions for companies for their default
but a mere report explaining why they did not meet the 2% criteria which could be
the government can introduce schemes which will have a long-term impact on society
Certain relaxations could be given to companies practising strategic CSR and also
certain CSR expenses could be made tax deductible so as to get the most out of the
partnerships so as to make the best use of each other’s skill, expertise, man power,
Conclusion:
From this paper, it can be concluded that the essence of CSR has always been present in India
in some or the other form. It has evolved from pure charity and philanthropy to setting up
schools, colleges, and trusts to integrating CSR into the corporations’ plans. Companies which
have been doing this for a long time are continuing to do so while some others are only spending
a fraction of what they are supposed to spend. India is one of the very few nations which
mandates CSR for companies meeting certain parameters as mentioned above but without any
control mechanisms like penal consequences or fine for failure of not spending enough towards
CSR such laws do not really make any difference. Therefore, the government should look into
this and take appropriate measures to make sure all the companies falling in the bracket of the
In the words of Former CEO and Chairman of Unilever, Niall Fitzgerald “We believe
that the leading global companies of 2020 will be those that provide goods and services and
reach new customers in ways that address the world’s major challenges - including poverty,
climate change, resource depletion, globalization, and demographic shifts.” And through
Legacy of CSR in India.
multiple empirical researches it has been concluded that any business can only run profitable
in the long-term by making timely contributions towards the society and by ensuring a
sustainable market. As a great person once said, “Change comes from within”, businesses need
to realise that CSR is not some publicity stunt or philanthropy, but it is much more wider than
those and that too they need to realise this before it’s too late and start acting towards building
By
Ajith Reddy D
2016-1560