Sustainability Development through CSR Activities in India

Published by MBA Skool Team, Published on August 09, 2014

India under the Gandhian values has always emphasized on sustainable development where each member of the society, the animals and trees grow and live together in harmony. With neo liberalization policy in the turn of the century, our country opened up to promote globalization, privatization and liberalization. Large corporate houses came into existence and old ones deepened their roots to hold on to the competition. Along with this, the demand for resources in terms of land, water, cheap labour and economic support increased from these companies. One of the consequences is the divide between rich and poor expanded over the years. Many people’s livelihood and habitats were disturbed. A lot of forested land was acquired and turned into industrial hubs. What was observed in the process was the cost incurred in terms of all these was way higher than the benefits.

Also, many recent studies and survey outcomes have given out that our planet Earth is slowly turning into dangerous habitat to live and have a livelihood due to the human activities which are unsustainable. Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs. The definition implies three dimensions - technology ,resources and social structure; and the limits of each.

Image Courtesy:, David Castillo Dominici

Many governments in various countries have managed to resist and stand up firmly to make sure that the current and ongoing developmental actions remain in balanced and optimal harmony with ecosystem and environment. This in turn leads to better human security as well. Therefore we see that the idea of maintaining environmental and social security is not just the responsibility that needs to be taken up by the respective governments, but equally demands a proactive and effective involvement and participation from the companies and industries. Recently, environmental concern is becoming one of the most discussed and important issue among general public. With stringent regulations by government, heightening of consumer environmental awareness and increasing pressure from various stakeholder parties has made firms to go green.

Hence Government of India came up with new guidelines for these corporates in the new Companies act 2013 to have a mandatory corporate social responsibility activity in their company.

CSR under Companies Act 2013

The companies Act 2013 defines CSR as;

"Corporate Social Responsibility (CSR)" means and includes but is not limited to

(i) Projects or programs relating to activities specified in Schedule VII to the Act or

(ii) Projects or programs relating to activities undertaken by the board of directors of a company(Board) in pursuance of recommendations of the CSR Committee of the Board as per declared CSR policy of the company subject to the condition that such policy will cover subjects enumerated in Schedule VII of the Act

Only India among all the nations of the world is bent upon to make sure corporates take up socially responsible activities by making it mandatory to have a spending of 2% of their net profit on corporate social responsibility activities or CSR.

The Ministry of Corporate Affairs under Companies Act 2013, Section 135 and Schedule VII has notified that the provisions of the Companies Rules, 2014 has come into effect from April 1, 2014.

With this each of the companies, private or public limited, either with a net worth of Rs 500 crore or a turnover of Rs 1,000 crore or net profit of Rs 5 crore, has to spend a stipulated amount of 2% of its total net profit as mentioned earlier, in the preceding immediate three financial years on CSR related activities. These activities are not being performed in the normal course of their business agenda, but must be in accordance to any of the activities specified in the Schedule VII of Companies 2013 Act. Any contribution to a political party will not be considered as a CSR activity and for computation of CSR expenditure, only the activities inside India would have to be considered. The turnover, net worth and net profits of the company have to be calculated in terms of Section 198 of Companies 2013 Act.

Sustainability reports as communication tool for CSR

In India, with the impact of globalisation, larger activism among stakeholder, and the greater flow of information to all the parties involved, demand that corporates do their businesses activities in a transparent and socially responsible manner. The sustainability reports which are released by the corporates for the stakeholders showcase the social activities undertaken by companies and also provide sustainability accountability of the company.

The companies have Corporate Social Responsibility activities and strategies since their public, customers and investors expect them to be sustainable and responsible. The definition for reports on sustainable development has been stated as the public reports by companies which provides internal and external stakeholders with a snapshot of corporate’s stand on activities in perspective of environmental, social and economic dimensions. Usage of sustainability report is one of the recent ways for CSR communication used by the companies.

The sustainability report content and nomenclature has evolved over the past decade. It has either been called global citizenship report, corporate social responsibility report or sustainability report. However, regardless of the way it is named, these reports released by companies are a stage or platform for companies to show to all the stakeholders from a top level regarding the positive responsible corporate citizenship the company follows.

The CSR activities can also act as differentiating factor for many companies and they can identify their uniqueness in this manner. For example, ITC takes pride in its green forestation and boasts of being the greenest and most sustainable companies in India. Over the past year, it has covered almost 1.60 lakh hectares of land under forest. Similarly coke and Pepsi as a part of CSR and sustainability strategy work on being water positive and environment friendly. The sustainability reports are channels for communication to the external world used to communicate regarding its CSR activities and it is gaining popularity among various companies. Corporate Social Responsibility (CSR) Communication is an extremely important aspect of corporate communications as it gives legitimacy to companies' activities and actions and aids in covering up and preventing the negative attitudes associated with big corporates and their actions. With an expected CSR spending requirement by these companies reaching up to 10,054 Crores in FY15(Capital line database 2014), the important issue to ponder is how these companies are spending on their CSR activities.

Challenge: Making CSR initiatives sustainable

Till now, we saw the importance of CSR activities under the light of Companies Act and opportunity for companies to use sustainability report as an indirect tool for communicating CSR activities. But one big challenge which remains is, the companies have to see to that the CSR activities are sustainable, be it social or environmental.

Corporate social responsibility activities conducted by companies are a part where a strong social base for a better future and to show concern to garner attention to social and environmental causes. CSR activities range from being a channel or medium to give back in a little manner to the society and country, to leading in the forefront in impacting environmental and social welfare. Recently it has indeed occupied a centre stage in different sections of social areas. CSR or sustainability development has not just been narrowed to branding or marketing gimmick or strategy.

In the current world, with the increase of a more socially responsible people infused into workforce has driven sustainable development for companies in company activities to a whole new level. Sustainability in every aspect be it supply chain, material procurement, marketing, branding, finance, mergers and acquisitions and many more functions is highly valued.

With this challenge of having a self-sustaining CSR activity agenda, the companies are coming up with initiatives that are sustainable and work on understanding at which point to drop or alienate from such activities which are detrimental or destructive to the core work of the company.


This article has been authored by Ganashree S from XLRI Jamshedpur


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