A REPORT

ON THE

CORPORATE SOCIAL RESPONSIBILITY RATING


OF TOP
INDIAN COMPANIES

GUIDED BY: PROF. SUPRITI MISHRA

PGDM: 2010-2012
GROUP: 3
AKASH KU ROUT (01) HIMADRI BARAH (21)
TAPAN KU SAH00 (05) SURAJ PATTNAIK (24)
In a democracy like India's, sustainable solutions to society's problems can only be found
though the collaboration and involvement of all stakeholders is a unique organization that
connects citizens, civil society groups, corporates, academicians, media and government
through online methods.

Contents

1. Introduction
2. Why a Rating on Corporate Social Responsibility?
3. Definition of CSR
4. Importance of CSR Ratings for Different Stakeholders
5. Methodology for the CSR Ratings and Study
 6. Results of the CSR Ratings of the 50 largest Indian companies, 2008
7. Rating Criteria
8. Some observations from the Study and Ratings
9. Recommendations to companies
10. Industry Sector Analysis
11. CSR by Group Companies
12. Some Recent Trends in CSR in India
13. Closing Statement
14. Annexure 1: Table of Level 4 rated companies
15. Annexure 2: Table of Level 3 rated companies

Introduction

The problems and issues that confront society today are too large and complex to be solved
by government and NGOs alone. Sustainable solutions to society’s problems can only be
found through the collaboration and involvement of all who are part of it.

Companies have tremendous strengths; they have extremely capable people, technology,
access to money, the ability of geographical reach, etc. Many companies worldwide and now
even in India are more powerful than governments and even countries, and thus corporate are
important stakeholders in society.

Our objective of the research was online content analysis of India’s fifty largest company by
collecting data from their website and rate them according to their CSR activities. The
Corporate Social Responsibility Study and Ratings of Indian Companies was undertaken to
explore and understand the role that corporate are playing and can play in finding meaningful
solutions to the problems facing India today.
Why a Rating on Corporate Social Responsibility?

CSR Ratings are important to various stakeholders for different reasons: - government bodies
can use CSR Ratings to develop industry-wise CSR guidelines, industry associations can use
them to set benchmarks of CSR for companies to follow, NGOs get to know about the CSR
undertaken by companies, thus enabling partnerships with them, and companies themselves
learn about and from the CSR initiatives of other companies.

Usually corporate are invited to enter or nominate themselves for CSR awards, and hence
only the good companies are highlighted, whereas a rating enables a comparative study across
all companies. We undertook a CSR study and rating to understand the CSR activities of all
companies on an equal level, thus showing up companies doing minimum some kind of CSR
activity, as well as showcasing companies doing good work.

Definition of CSR

“Every company harms the environment and people!”

Corporate Social Responsibility is thus just about two aspects

1. The steps taken by the company to neutralize, minimize or offset the negative effects
caused by its processes and product-usage

2. The further positive steps a company takes using its resources, core competence, skills,
location and funds for the benefit of people and environment.

Corporate Social Responsibility helps to define the contribution of a company beyond

economic value and creating employment, and weighs this contribution against the damage
done by the company through its products and processes.

Corporate Social Responsibility is also a forward-action, i.e. it flows from a company’s vision
and mission and is part of the company’s everyday actions, rather than a retrospective action
that is undertaken by a company at the end of its process.

Importance of CSR Ratings for different stakeholders

Corporate and their activities are connected to a large number of people, directly and
indirectly. These include employees, suppliers, consumers/customers, government, investors,
citizens/community and the environment. Each of these has a role to play to make CSR
effective and sustaining, and the CSR Ratings helps to identify their individual and
collaborative roles.

Some of these roles for different stakeholders are as listed below:

For Companies
• To sensitize their directors and their employees about their responsibility towards
society
• To identify CSR activities they can and should undertake
 • To understand the various international guidelines and norms for CSR and to
effectively implement these
• To learn about and from the CSR initiatives of other companies

For Industry and trade associations

• To get a snapshot of the state of CSR in India
• To set benchmarks of CSR for companies to follow
• To prepare case studies and highlight best practices of CSR
• To provide consultation on CSR
• To work with Government and NGOs and international organizations to upgrade and
improve CSR activities in India and to set milestones for companies
• To recognize companies doing good CSR activities by instituting awards based on
these parameters
• To understand the huge scale and magnitude of the benefits that are possible if an
entire sector spends at least the recommended minimum amount on CSR.

For Government bodies

• To make industry wise guidelines and to introduce legislations that cause companies
to work effectively towards reducing environmental damage, and restoring damage
done (in the areas of raw material sourcing and usage, by product and waste disposal,
product usage and end disposal)
• To make legislation that rewards CSR and penalizes damage to the environment

For NGOs and consultants

• To know about the areas of CSR work undertaken by companies thus enabling
partnerships with them
• To be able to identify companies which are not doing CSR or doing in a token
manner, so as to approach these companies to initiate meaningful projects
• To assist companies to formulate CSR objectives, implement CSR activities and
monitor and evaluate their CSR activities

For Media
• To stop eulogizing corporate leaders whose companies are damaging the environment
and harming lives
• To present a clear view of CSR that is separate from philanthropy, charity, marketing,
advertising, or expanding business scope and to sensitize the public about this.
• To highlight companies which are practicing good CSR, and to negate those
companies which are actually engaged in marketing or advertising their products or
services under the guise of CSR
• To encourage and enable business publications to have a regular feature or column
dedicated to CSR initiatives along with feedback from NGOs and other stakeholders

For researchers
• To study CSR practices and results
• To influence the shaping of CSR policy and regulations

For students and colleges/ institutions

• To become sensitized about the role and responsibility of companies and to
understand the impact and consequences of everyday processes and actions
• To join a company that is working to benefit society and not one that is harming it
• To develop a holistic view of life and living

For citizens, shareholders and investors

 • To understand that as consumers and stakeholders of companies , we can and need to
influence companies to change harmful policies and adopt CSR practices due to the
huge impact and power that companies have on people and the environment
• To ensure that through our purchase choices we get desirable values for society to be
reflected in how companies do business.

Methodology for the CSR Ratings and Study

• List of 50 largest Indian companies is taken as per Sales figures from the BSE Sensex
as in June 2008
• Information on the 50 companies was collated from the company’s website and
Annual Report of 2007-2008
• Impact of the products and processes of the company is taken into account
• Companies are rated from Level 0 to Level 5 (Level 5 being the highest)
• Rating is based on Sufficient, Necessary and Negative Criteria for different levels.

Results of the CSR Ratings of the 50 Indian companies

Table showing the results of the CSR Ratings of the 50 Indian companies

Karmayog CSR Rating Number Percentage

2008 of Companies of companies
Level 5 0 0%
Level 4 * 10 20%
Level 3 33 66%
Level 2 5 10%
Level 1 2 4%
Level 0 (Lowest) 0 0%
Total 50 100%

* Companies with the highest rating of Level 4 are: ACC, Ballarpur Industries, HDFC,
Infosys Technologies, Jain Irrigation Systems Ltd, Jubilant Organosys, Kansai Nerolac
Paints, Nalco, Tata Steel, Union Bank and Yes Bank.

Bar chart showing the results of the

CSR Ratings of the 50 Indian companies
Rating Criteria

1. Products and Services: The subjective rating (0-5) is based on the Company’s main
products / services.
2. Need of Society: If the product / service offered is not needed by society, then the
CSR rating = 0.
3. Zero Rated Products: Companies which make the following are given a Zero CSR
rating: - cigarettes and tobacco based products - liquor companies
4. Must – do CSR: Every Company degrades the environment, just as every individual
does. Hence, every Company must be working to reduce environmental degradation, and to
rejuvenate the source / place from where it uses resources or operates. To get a CSR rating of
even 1, a Company must be engaged in environmental work that rejuvenates and restores the
damage done.
5. Least harmful process: The process followed in the making of that product or
delivery of that service is considered while assigning the rating of a Company. The process
followed should be one that does the least harm. (Apart from the mandatory regulations and
laws in place)
6. Impacts of usage: The implications of the usage of the product / services is
considered while assigning the rating of a Company. (Pollution, environmental degradation,
waste generation, etc.)
7. Harmful products: Companies, which make the following extensively damage the
environment. Hence a CSR rating of not more than 2 can be given to them, even if they are
doing extensive work under CSR. (Chemicals such as fertilizers, paints, plastics)
8. Harmful processes: Companies which engage in the following processes extensively
damage the environment. Hence a CSR rating of not more than 2 can be given, even if they
are doing extensive work under CSR- mining- aviation- thermal power generation- cement
manufacture- automobiles, auto parts, tyres manufacture- Paper, forestry based products
manufacture- Iron and steel manufacture
9. Minimum CSR Spend: A company must spend an amount equivalent to at least 0.2 %
of its sales for CSR activities. Such an amount provides an idea of the magnitude of CSR that
can be done by a Company. If a Company does not spend this minimum amount, then a zero
or low CSR rating would be give.
10. Employee participation and volunteerism:
This factor has not been a deciding factor in the CSR rating as it is more important for the
Company as a whole to have a defined CSR philosophy which it practices. Within such a set-
up, each employee will be a more sensitized participant, and will hence be contributing
towards the CSR objectives of the Company. This is a far more effective, and long-lasting
method of practicing CSR as compared to employee payroll giving and volunteerism, which
is often not voluntary and is usually also temporary.

11. Reach of CSR Activities:

A second rating has also been carried out simultaneously to determine the extent of impact
that a Company’s CSR activities has. Accordingly, a company would be assigned either “a”,
“b”, or “c” where a = CSR activities involving employees only, b = CSR activities in the
immediate physical vicinity of the Company’s operations and c = CSR activities involving the
larger community and society as a whole.

12. Social Banking and Social Responsibility:

Banking, Insurance and Finance sectors tend to get rated higher because of the nature of
their work. However, engaging in micro-finance and rural banking does not automatically
mean good CSR practice, as often what is termed as “social banking” is just a simple
extension of the customer base and business, and is also part of the priority sector lending that
is mandatory.

Some observations from the Study and Ratings

1. 509 out of 1000 companies (51%) are doing CSR.

2. 21 of the 1000 (2%) companies publish a separate Sustainability Report.

3. 30 (3%) of the 1000 companies have reported the amount spent on CSR.

4. 107 out of 1000 (11%) companies are doing CSR through their own trust or foundation

5. All PSU’s undertake a basic minimum level of CSR based on mandatory regulations (e.g.
relating to employment, target groups of beneficiaries, etc.)

6. Many individual companies under a group report the same CSR activities across the group.

7. Several companies repeat the exact same information every year for CSR with no fresh
records of the current year’s CSR, showing their low commitment to CSR.

10. Common areas in which CSR initiatives are undertaken include Education, Healthcare
and Rural development

11. Many companies spread their CSR funds thinly across many activities, thus reducing the
effectiveness and seriousness of their initiatives

12. The 1000 companies were grouped into 35 industry sectors and analyzed. The
Entertainment & Media, Retail, Mining, Trading, and Construction industries all have low
levels of CSR activities. The Software, Banking and Paper industries are amongst those
sectors with high levels of CSR.

Recommendations to companies

The CSR study led to a set of recommendations to companies.

A) Mandatory Recommendations
There are 3 mandatory recommendations flowing from the premise that ‘every company
must do CSR’, and these are:

1. Minimum annual CSR expenditure

Every company must spend a minimum of 2% of its profit on CSR activities. The scale of
operations of a company and its impact is connected with its turnover and not with its profit.
The larger the company the greater is the damage it is doing to the environment. Conversely
the greater is the company’s ability to do social activity.

Table showing Rupee impact of 0.2% of sales for CSR expenditure

Size by Company Sales Net Profit Minimum CSR
Sales in in Rs. (cr.)
Rs. Cr. Rs. Cr. at 0.2% of Sales
1 Indian Oil Corp. 226000 7000 452
200 Indian Hotels 1800 370 3.6
400 Ahluwalia Contracts 880 51 1.8
600 Trent 500 30 1.0
800 Technocraft Industries 310 30 0.6
1000 Marathon NextGen. 100 60 0.2
Realty

Total sales of 1000 companies: Rs. 25,00,000 crores

If recommended minimum CSR is spent @ 0.2% of sales, this = Rs. 5000 crores

2) CSR Reporting

A Corporate Sustainability section should be included in the Annual Report and preferably a
separate Corporate Sustainability Report (as per the Global Reporting Initiative framework)
should be published by the company.

CSR reporting should also include details of CSR expenditure by the company.

CSR is linked to the company’s processes. It is recommended that the section on CSR
reporting should come after the EHS (Environment Health and Safety) section in the Annual
Report.
3) Recommended Steps for CSR

a) Adoption of industry guidelines for improving processes

The first step is to identify and adopt methods to minimize the environmental damage caused
by the products and processes. A comprehensive set of guidelines, both general as well as
sector-specific, have been drawn up by the World Bank. These are known as the
Environment, Health and Safety Guidelines (EHS) of the International Finance Corporation
(IFC). The EHS Guidelines are technical reference documents with general and industry-
specific examples of good international industry practice.

b) CSR linked to the skills of a company

Companies must use their core competence, skills and strengths while undertaking CSR
activities, as CSR is not an un-related activity

c) CSR linked to the location of a company

Companies must first undertake CSR activities in the areas they are located in. (factories,
plants, offices, etc.) The greatest impact (in terms of land, pollution, livelihoods, etc.) is on
the local environment and community, and hence companies must focus on improving
conditions in the communities in which they operate.

B) Non Mandatory Recommendations

We have made 9 non-mandatory recommendations on CSR to enable companies to make
their CSR programmes more meaningful and effective.

1. CSR philosophy to be defined

CSR philosophy and focus to be developed from and based on the company’s vision and
mission

2. Ensure responsibility of suppliers

Every company should make efforts towards ensuring responsible behavior from their
suppliers/vendors who must follow all environmental, health and safety as well as human
rights guidelines and norms. It is recommended that reviews and audits of suppliers be
conducted.

3. Create inclusive employment

Companies to offer employment to those who find it difficult to get jobs, by reserving a small
percentage of the workforce for such jobs, with a special emphasis on the local community

4. Link CSR initiatives to government’s development plans

It is recommended that companies undertake CSR activities that are connected with and
supplement the governments social and development goals for India, which are outlined in
documents such as the Five Year Plan, and implemented through various schemes at the
centre and state level. Companies must partner with government in the implementation of
such programmes and schemes.

5. Involve employees in CSR

A company should involve their employees in its social responsibility efforts. This ensures
sustainability of CSR initiatives, as there is a commitment to CSR throughout the
organisation. Further, each employee acting in a socially responsible manner helps the
company as a whole to do undertake more effective CSR.

6. CSR activity to improve the industry sector

Companies, through their CSR activities, should work towards raising standards and setting
benchmarks for their specific industry sectors, thus gradually leading to an overall more
socially responsible sector.

7. Expand Reach to benefit society

Companies must extend their products & services to markets and areas that may not be as
profitable to the company, so as to extend solutions to the problems and issues in remote,
under-serviced areas. While companies do expand their markets into new areas, they must do
so more beyond areas that are potential new markets. Extending business into new areas that
need development may not give immediate profits to a company, but this has long-term
positive impacts on the area and its people.

8. Support areas and issues that are neglected

In a developing country such as India, there are some areas and issues that require sustained
support of a greater depth, beyond what government and society is able to provide, and
companies must come forward to take up these. E.g. Sports such as chess, protection of
endangered species of wildlife, heritage conservation, etc. are all issues that require corporate
support.