CORPORATE SOCIAL RESPONSIBILITY IN INDIA - PATH TO SOCIAL RESPONSIBILITY AND GREEN PRACTICES

1. CORPORATE SOCIAL RESPONSIBILITY IN INDIA - PATH TO SOCIAL RESPONSIBILITY AND GREEN PRACTICES KSHITIZ KARJEE Third Year Law Student Amity Law School, Delhi Guru Gobind Singh Indraprastha University, Delhi

2. INTRODUCTION • Corporate social responsibility (CSR) delineates the relationship between business and the larger society • CSR can be defined 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 • Corporations have a degree of responsibility not only for the economic consequences of their activities, but also for the social and environmental implications. This is sometimes referred to as a ‘triple bottom line’ approach that considers the economic, social and environmental aspects of corporate activity

3. NATURE OF CORPORATION • Originally, company has been considered an artificial person • But with the advent of organic theory, a company is considered a living organism, is entitled to rights and also liable for duties • Law confers personality to the company and strictly speaking personality denotes having rights and duties • In India, the Supreme Court has categorically declared that even though company is not a citizen, it can claim the protection of fundamental rights, which are guaranteed under the Constitution of India • Now, if a corporate entity enjoys rights, it has to bear certain duties or responsibilities like natural person. Thus, with the change in the nature of a corporation, its role has also changed

4. ROLE OF CORPORATION IN SOCIETY • Corporations are not only a profit churning organizations, the working of which would be no concern to the society, rather they are multinational giants affecting the different sectors of society by their functioning • Maximization of social welfare should be the legitimate goal of a company • Present role of corporation • Starting company in rural area • Employing socially handicapped and weaker sections of community • Taking interest in work, welfare of employees and their families including the spread of adult literacy • Environmental protection • Consumer’s health, welfare and safety

5. SOCIAL RESPONSIBILITY • Social responsibility emphasizes the intimacy of the relationship between the corporation and society • Means of production of economy should be so employed that it leads to enhancement of total socio- economic welfare • In every society there are social forces which form the basis of social responsibility. These forces are as follows: • Social institutions • Labour organizations • Social consciousness • Modern management

6. CLASSIFICATION OF SOCIAL RESPONSIBILITY • Responsibility towards itself Each corporate entity to do business and stay in the business has to work towards growth, expansion and stability and thus earn enough profits • Responsibility towards shareholders Secure and safeguard the shareholders’ investment and endeavour to provide a reasonable return on their money • Responsibility towards State Foremost duty to not indulge in tax evasion practices to realize fruits of welfare state concept • Responsibility towards consumers It is imperative for every corporate entity to fulfill its contractual obligations to its customers

7. DEVELOPMENT OF CSR • Present age is money dominated. Business enterprises are coming up with new strategies to earn more and more profits • Globalization led to the opening of the markets and thereby facilitated in cross-border trades. Centralized mode of production has given way to a highly decentralized mode of production which is spread across the world • Rules of corporate governance have changed. On one hand, globalization and liberalization have provided a great opportunity for corporations to be globally competitive by expanding their production base and market share. On the other hand, the same situation poses a great challenge to the sustainability and viability of such mega-businesses, particularly in the context of emerging discontent against MNCs across the world

8. By capping and limiting the unsustainable use of resources, a healthy environment can be sustained • Threats to sustainability include climate change (despite improvements in energy efficiency we still burn too much fossil fuel), increasing scarcity of water, loss and fragmentation of biodiversity (deforestation continues apace in the tropics), and buildup of colossal toxic pollutants in the environment • The current wave of interest in CSR differs from the past experiences • No longer limited to social concerns, SRI now takes environmental issues into account • Today, social responsibility is no longer the purview of just a handful of managers concerned with the social or environmental impact of their firm’s operations. Quite often, it is a part of the overall business strategy

9. Upsurge in ‘voluntary initiatives’ associated with codes of conduct, improvements in environmental management systems, improved health and safety standards, etc. • Large companies are also participating in so-called ‘multi-stakeholder initiatives’ and ‘public-private partnerships’ with NGOs and governmental or multilateral organizations • The United Nations has played an important role in promoting partnerships with transnational companies (TNCs) through various arrangements • Criticism: Many CSR initiatives amount to ‘green wash’ and CSR is a genuine attempt on the part of big business to improve social, environmental and human rights conditions but the CSR agenda needs to be broadened and implementation strengthened

10. CSR AND ENVIRONMENT • If we consider the corporation to be the ‘public vehicle of society’ and if we take ‘social responsibility’ to imply a broadly-based responsibility to society, then the responsibility of corporate executives is to order the priorities of the corporation and set the managerial balance in line with changing needs of society, while at all times keeping an eye on the interests of the stakeholders in corporate management • This does not imply that social responsibility is the ‘primary responsibility’ and economic responsibility the ‘secondary responsibility’. Rather, social responsibility must be recognized as a concept that encompasses both, and whose aim is to create the synergetic development of society and the corporation by harmonizing the two responsibilities on a higher dimension

11. BHOPAL GAS DISASTER • The disaster at Union Carbide Corporation (UCC) plant on December 3, 1984, released 40 tons of poisonous methyl isocyanate gas (MIC) • The aftermath of the disaster left 15,000 dead, numerous ill, with a polluted environment that is yet to recover • The victims of the disaster are yet to receive adequate compensation and medical help from the company • NEED FOR CSR Dow Chemicals, which took over UCC in 2001, from the beginning of takeover, ensured that there were no outstanding liabilities in relation to the Bhopal disaster It did not take any responsibility for the tragedy, as well as cleaning up the site and ground water, medical monitoring, economic compensation and rehabilitation for the victims

12. It put entire responsibility on government and freed itself from taking any legal obligation saying that it wanted to protect the shareholders’ interest. At the 2003 annual shareholder meeting, William S Stavropoulos, CEO of Dow Chemicals, stated that the case of disaster had been resolved in court and thus they are not liable for it any further. Having seen the impact of negligence, Bhopal Gas Leak Disaster (Processing of Claims) Act, 1985 and Environmental Protection Act, 1986 were enacted Dow being financially sound should have been more responsible towards socio, economic and environmental issues. Hence, for Dow, it was high time to take some positive action and proper CSR approach towards human rights

13. HUMAN RIGHTS AND CSR • Four basic trends can be identified as catalyzers of the new human rights presence in business discourses and top level economic forums First – the controversial process of economic globalization second – the emerging network society third – information and knowledge technologies which create expectations of greater corporate transparency while fast tracking and multiplying content and information on these issues in local and global interactions fourth – the emerging risk society by which company reputation, image and identity are coming under the scrutiny of certain rising values in a civil society that is increasingly informed and mobilized on such issues

14. Corporations are part of the entire society and human rights focus on the dignity and worth of the human beings who compose the society • Human rights form part of international law and corporations are bound by those laws that are applicable to non-state parties • A current development lies in the area of environmental crimes and humanitarian law • In the international arena, human rights are often in a state of flux and satisfactory human rights condition in a country may deteriorate because of an outbreak of civil conflict or some other apocalyptic event. The corporation then has to choose whether to disinvest or risk accusations of collusion with the human rights violators. Very often the corporation may be a supporter of international human rights standards and yet be in a nation where human rights policies are difficult or impossible to implement

15. CODES FOR CSR CONDUCT • UN Copenhagen World Summit for Social Development of 1995; UN World Summit on Sustainable Development, Johannesburg, 2002; ILO’s 1998 Declaration on Fundamental Principles and Rights at Work Standards; OECD’s Updated Study on International Trade and Core Labour Standards, 2000 as The International Organization for Standardization (ISO) • NGOs like Amnesty International, Human Rights First have also developed standards for the CSR arena • Protect environment • Attain equitable access to education and primary health care • Reduce absolute poverty by a target date • Eliminate forced child labour • Accelerate development of the least developed countries

16. CSR INITIATIVES AND EXAMPLES • ANAND CORPORATE SERVICES LIMITED Twenty-five years ago, the SNS Foundation, an expression of Anand’s corporate social responsibility, was born. The Foundation has created programs in the fields of health, education, natural resource management and life skills training, only to make sure that fellow humans could breathe easy • INFOSYS TECHNOLOGIES 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

17. ITC LIMITED ITC is engaged in elevating its partnership with the Indian farmer to a new paradigm by leveraging information technology through its trailblazing ‘e-Choupal’ initiative. It 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. • LARSEN & TOUBRO LIMITED L&T promotes Construction Vocational Training in India by establishing a Construction Skills Training Institute (CSTI) at Manapakkam, Chennai and many other parts which imparts free of cost basic training in farm work, carpentry, masonry, plumbing and sanitary, etc.

18. VIOLATION OF CSR PRINCIPLES: CASE OF COCA COLA IN INDIA • Coca Cola is one of the most recognized brands across the globe. It ranks among one of the top foreign investors in India • High degree of public protest against the Coca Cola plant at Plachimada, Kerala got international attention and led to government intervention for closure of the plant • Plant at Plachimada was alleged to have exploited the ground water resources leading to drying up of wells and other natural water resources in the area • Company had to deal with protest from the local community and environmental conservation groups • Company was also accused of supplying poisonous waste as fertilizers to the local farmers

19. The sludge which was disposed in open ground ran along with rain water to the natural water resources. Tests also showed that the water available to the wells was contaminated and unsuitable for consumption • Added to these were the findings from the Center for Science and Environment which said that twelve large soft drinks brands manufactured by Coca Cola and its rival Pepsi, sold in and around Delhi, contained a cocktail of pesticide residues including chemicals which can cause cancer and damage the nervous and reproductive system and also reduce the bone mineral density • The case clearly shows that emerging markets can respond and protest against the irresponsible behavior of MNCs • The case also shows that emerging markets might have loose laws which do not protect interests of local population or laws that are not implemented properly

20. CONCLUSION • The role of a successful company is to contribute to national wealth, generate employment opportunities, promote e-business and e-commerce, bring transparency in management policies, and provide open communication and a safe working environment • India is facing many problems viz. unclear, unpractical and poorly monitored regulations, poor infrastructure, a complicated tax system, and too much bureaucracy • Broad frameworks on corporate governance should be developed and followed. And further, penalties for non-compliance should be strictly implemented