Emerging Paradigms Of Sustainable Social Developments Through Corporate Social Responsibility – A Comparative Study Between Privately and Publicly Managed Companies listed in NSE.
# Prof. (Dr.) Pradeep Kumar Aggarwal
## Dr. Deepika Uppadhyay
### Dr. S.K. Yadav
Abstract
“Social obligations is much bigger than supporting worthy causes. It includes anything that impacts people and the quality of their lives.” – William Ford, Jr., Chairman, Ford Motor Co.
Corporate Social Responsibility (CSR) is an obligation of decision-makers to take actions which protect and improve the welfare of society as a whole along with their own interests. In many developing countries, CSR practices are considered as a main engine for social developments. India is no exception where CSR practices is increasing a significant role in transforming the society. How people of country can forget the one of the worst floods of the decade in the Jammu & Kashmir of 2014 wherein more than 300 people lost their lives and thousands remain stranded. In such a situation companies can create substantial impact through a CSR spending by supporting relief and playing a vital role in long-term rehabilitation efforts. The study has been made by using the secondary data. The present paper seeks to analyse the awareness the conceptual framework related to Corporate Social Responsibility practices in privately and publicly managed companies listed in National Stock Exchange (NSE) in India. It also makes an attempt to study the CSR reporting practices by the various corporate under study. Corporate have to look forward for a more systematic way and have to bring some effective CRS practices to deal with enhancing transparency and competencies for social developments. The finding of the paper shows that only a few companies are spending for CSR activities, if the 2 % rule was followed.
Keywords : Corporate Social Responsibility, Social issues, CSR practices, CSR reporting, Pubic and Privately managed companies.
# Faculty & Head of the Finance, School of Business Studies, SHARDA University, Greater Noida, U. P.
E-mail ID –
## Faculty of Finance, School of Law, SHARDA University, Greater Noida, U.P. E-mail ID-
### Faculty of Commerce, Govt. P.G. College, Tigaon, Distt.- Faridabad, Haryana ; E-mail ID –
Introduction
Days are gone when profit maximization was considered the dominant goal of business. It was considered that ‘the business of business is to do business and thereby secure social and economic ends.’ Today, gradually emphasis shifted from ‘maximizing short-term to optimization of long-term gains. Unbrindled self-interest gave way to an enlightened social interest. ‘Profit with service’ rather than ‘Profit maximization’ became the motto of business.
During 20th Century, further revolutionary change in public expectations of business took place. Today, a business firm is not considered the sole prerogative of its owners, but rather the concern of all its stake-holders i.e. all those who have a stake in that business. Business exists because it serves society and it is as much a social institution as an economic one .It is rightly said that no business can exist in the ill society. Thus, all business firms are expected to discharge social functions and social responsibilities, which go beyond law and order traditions of the past. The modern concept of social responsibility of business is the outcome of several economic, social, political and legal forces, which have compelled, persuaded and helped businessmen to become increasingly responsibly towards society is not a matter of choice, but an essential pre-requisite for ultimate success in business.
Mandatory Regulations under the Companies Act, 2013
In India, the requirement of CSR is governed by clause 135 of Companies Act,2013 which specifies that companies with a net worth of Rs 500 crore or more ( or a turnover of Rs 1,000 crore or more / net profit of Rs5 crore or more) will have to constitute a CSR committee with three or more directors and allocate at least 2 per cent of their three-year annual profit towards CSR activities. The pictorial representation below gives the representation of Section 135 (1).
The above provision requires every company having such prescribed Networth or Turnover or Net. Profit shall be covered within the ambit of CSR provisions. The section has used the word "companies" which connotes a wider meaning and shall include the foreign companies having branch or project offices in India
Why Business Should Assume C.S.R.
Business plays a very significant role in economic, social, political and technological affairs. So business owes responsibilities to all segments of society. Broadly, there are following reasons for assuming the CSR activities –
1. Responding to demands of Society – As business gets larger, the public takes more interest in it, as it has greater impact on the community. Managers respond to public opinion so as to maintain public image of their company. The original purpose of corporate was to serve the public good.
2. Moral Justification – Business now tends to participate in the development of better world.
3. Self-interest of business for longer-run – For example, (a) Responsibilities towards shareholders for attracting investment; (b) concerns for employees who can harmonise with company’s best interests, and (c) Avoiding environmental pollutions.
4. Ethical behavior and generation of profits for shareholders is not incompatible.
5. All Stakeholders have a ‘Stake’ in companies because they can be harmed, if a company behaves unethically.
Objectives of the Study
1. To gain an understanding of how CSR is defined by various companies under study.
2. To trace out the major social issues required for social developments;
3. To gauge insights into the type of CSR activities undertaken by various companies under study;
4. To obtain insights into the quantum of contribution made by various companies under study towards CSR activities;
5. To analyze the disclosure and reporting practices of the various companies selected for the study.
Research Hypothesis
To statistically test the validity and applicability of the findings of the study with respect to the above stated research objectives, the following hypothesis have been developed –
H1 : The quantum of investment in CSR is independent of the type of ownership of company.
H2 : The level of significant of disclosures and reporting practices is independent of the type of ownership.
Research Methodology
For the purpose of the study a detailed questionnaire was prepared and survey method was adopted to collect information relating to Primary data. The annual reports of these organization and detailed information from the company’s websites were obtained. Information was gathered from 30 various companies listed in National Stock Exchange (NSE) in India. Out of total 30 companies, 15 are in privately managed companies and 15 by publicly managed companies. Only those companies have been selected for the study which discloses the CSR practices in their annual report.
Limitations of the Study
Since a major information is obtained from the websites of the companies and only a few information is obtained through the questionnaire. The Sample size is small i.e. 30 only. The further research can be obtained on a larger sample size and for a particular type of industry. The study does not intend or aim to pass a qualitative judgement on any corporate initiative or how good or bad it is, but rather focuses on presenting a broad view of implementing the CSR practices.
Literature Review
Perrini (2007) that large firms are more likely to identify relevant stakeholders and meet their CSR requirements through specific and formal CSR strategies.
Bardhan (2008) A study was conducted regarding present scenario of disclosures of Corporate Social Performance in West Bengal. It was found that 47% of the companies did not disclose their social performance. In most of the cases, Corporate Social activities have been found for local areas around the factory of head office.
Thanika Devi (2009) ‘A case study on CSR Perspectives of SMEs’ In this study, it has been shown that CSR in Mauritius is no more a business ideology but an essential business practice among small and medium companies, irrespective of their areas of operation. They are themselves keen to derive the maximum value from this policy area and push for a transition from a voluntaristic, business-led CSR to a regulated, tested and civil society grounded practice of social environmental accountability.
Soni (2009) his findings says that trend of CSR in India is not very encouraging. The CSR initiatives are taken by big organizations only. Small and medium sized companes are not serious about their Corporate Social Responsibility. They must concrete steps towards CSR.
Gunay (2010) finds that top managers and directors believe that as the hierarchy in their firms increases, CSR activities will also increase. It is also found that there is a positive correlation among the variables of organizational behaviours of industrial firms in Turkey. Although these correlations among the variables of organizational behaviours are low, they are statistically significant.
Misir (2010) ‘A study on Impacts of Investments on CSR’ was done and depicted the study that there exists partial positive relationship between investment in CSR and market price per share.The findings of the study also indicate that financial performance of the sample enterprises has been influenced by the investment in CSR in terms of market price per share and net asset value per share during the study.
Results and Discussions
Objective 1 –To Gain an understanding of how CSR is defined by various companies under study: In line with literature arguing that CSR is an issue of growing importance in both academia and business. This study found that all respondents within the companies under study surveyed were familiar with and had knowledge of the term corporate social responsibility. The study further shows that the majority of respondents defined CSR as ‘Helping/Contributing to the welfare of society (People/children in need).
Objective 2 -To trace out the major social issues required for social developments : The following figure identifies areas of social issues in which CSR initiatives are required from the various companies under the study –
Table 1 : Areas of Major Social Issues in order to importance given for CSR activities
Serial No. Social Issues
1. Education
2. Healthcare / Sanitation
3. Infrastructure Development
4. Enhancing Employability
5. Entrepreneurship
6. Conservation and Water Harvesting
7. Women Empowerment
8. Environment Protection Schemes
9. Disaster Relief
10. Others
Objective 3 : To gauge insights into the type of CSR activities undertaken by various companies under study;
The following table identifies areas of CSR in which various companies under study are involved –
Table – 2 : Areas of CSR
Areas of CSR No of Privately managed No of Publicly managed TotalCompanies involved Companies involved
1. Health Care programme 6 7 13
2. Environmental sustenance 6 5 11
3. Community Development 2 2 04
4. Helping to victims of Natural
Calamities 3 4 07
5. National Heritage 1 2 03
6. Cultural Initiatives 3 2 05
7. Rural Development 3 4 07
8. Child Labour 1 0 01
9. Public Amenities 3 4 07
10. Sports 4 5 09
11. Donations to Welfare org. 5 3 08
Source : Complied from the annual reports of the companies under study.
Based on the Comparative study of the 30 companies, it was observed that while some companies chose to narrow their focus on a few thematic areas while others took a broader view and undertook a larger scope of areas to focus on. Out of 30 Companies under study, it was found that there were as many as 23 corporate focusing on 4-6 thematic areas, whereby only 7 stuck to six or more thematic areas.
Areas of CSR involved
Figure 1 : Graph depicting on areas of CSR in which Companies under study are in involved
It has also been observed that for 46 % privately managed corporate ( 54 % in publicly managed companies), the CSR initiatives is being implemented thorough a well structured separated Foundation. Among more than 50 per cent corporate in both of the sector, there is a separate CSR department that take care of the activities to be implemented.
The top five areas of CSR activities in which the companies under study from both of the sectors- privately managed and publicly managed c are involved in the following list in descending order –
1. Health & Safety Programme - 43 %
2. Education programme - 36 %
3. Environmental programme - 24 %
4. Donation to Welfare organisations & NGOs - 19 %
5. Assistance to poor & underprivileged - 18%
Some companies from privately managed and publicly managed companies are involved in ‘other areas of CSR ( 7%) such as Sports activities, assistance during natural calamities etc.
Objective No. 4 : To obtain insights into the quantum of contribution made by various companies under study towards CSR activities;
Table 3
Status of CSR Spending with compare to 2 % of PAT in Privately Managed CompaniesRs in Crore
Sr NO. / Name of Company / Revenue / AVE. PAT / Actual Spend / 2 % of PAT / Variation / AVG. PAT / Actual Spend
1 / RIL / 368571 / 21138 / 288 / Rs Crore
2 / TATA MOTORS / 170678 / 8437 / 15 / 169 / -154
3 / TATA STEEL / 135976 / 3895 / 146 / 78 / 68
4 / HINDALCO / 82549 / 3597 / 28 / 72 / -44
5 / BHARTI AIRTEL / 71506 / 6511 / 33 / 130 / -97
6 / L&T / 64960 / 4818 / 70 / 96 / -26
7 / M&M / 63030 / 2948 / 22 / 59 / -37
8 / TCS / 48894 / 8935 / 51 / 179 / -128
9 / STERLITE / 43116 / 6831 / 7 / 137 / -130
10 / ADANI Enterprises / 39416 / 1940 / 14 / 39 / -25
11 / ICICI / 37995 / 6366 / 24 / 127 / -103
12 / MARUTI / 40050 / 2162 / 12 / 43 / -31
13 / JSW / 36964 / 1569 / 32 / 31 / 1
14 / INFOSYS / 33734 / 7128 / 26 / 143 / -117
15 / HDFC / 29930 / 3608 / 3 / 72 / -69
Source : compiled from CSRidentity.com, together with Forbes India.
Table - 4Status of CSR Spending with compare to 2 % of PAT in Publicly Managed Companies
(Rs in Crore)
S. No: / Company / Revenue / AVG. PAT / Actual Spend / 2 % of PAT / Variation
1 / Indian Oil / 442459 / 7783 / 83 / 156 / -73
2 / BPC / 223315 / 1438 / 8 / 29 / -21
3 / HPC / 195891 / 1118 / 27 / 22 / 5
4 / ONGC / 151121 / 23660 / 121 / 473 / -352
5 / SBI / 147197 / 13056 / 71 / 261 / -190
6 / Coal India / 78410 / 11759 / 119 / 235 / -116
7 / MMTC / 67023 / 129 / 3 / 3 / 0
8 / NTPC / 66366 / 9334 / 49 / 187 / -138
9 / SAIL / 51428 / 5153 / 61 / 103 / -42
10 / GAIL / 44861 / 3891 / 54 / 78 / -24
11 / OIL INDIA / 17215 / 2988 / 50 / 60 / -10
12 / POWER FINANCE / 13075 / 2695 / 13 / 54 / -41
13 / POWER GRID / 10312 / 2664 / 25 / 53 / -28
14 / BHEL / 50654 / 5823 / 37 / 116 / -79
15 / Hindustan Zinc / 12061 / 4823 / 8 / 96 / -88
Source : compiled from CSRidentity.com, together with Forbes India.