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Impact of CSR on Indian Companies: A note

Without a sense of caring, there can be no sense of community - Anthony J. D'Angelo

Introduction
The notion of give and take underpins the concept of corporate social responsibility (CSR). Because corporate organizations use important resources from society in the form of raw materials, human resources, and other resources for their operations, they should function as trustees of the society and must provide something to the society's well-being.

Keeping in mind the resource utilization by companies, environmental concerns and sustainable growth, India with its major amendment in the Companies Act in 2013 became the first ever country to make CSR mandatory by adding section 135 to the Act which changed the option from willingness to obligation and upon which companies with total finances of Rs. 5 billion, a turnover of Rs. 10 billion, or a total profit of around Rs. 50 million must now spend at least 2% of their average net profit.

Albeit introduced as a legislation in 2013, the notion of corporate social responsibility is not new in India. The rich history of trade and commerce provides volumes of evidences of outstanding consultants promoting ethical ideals at the start. Contributions were frequently used to build temples, educational buildings, and public building in addition to extending help through philanthropy as their contribution to the society one way or another. As time went on, philanthropy changed to corporate social responsibility, and firms began to focus on crucial issues. Many leaders, on the other hand, who were inspired by Gandhi's ideas, implemented ethical practises in their enterprises.

Throughout the pre-mandate era, society was improved during the period of independence (1914-1960), and the economy was subsequently shifted to a mixed economy, with public-sector companies flourishing until the late 90s, during then while a handful of companies like the Tata Group and Birla Group did have CSR policies, most just maximised profits.

A look back at the history of CSR indicates that it was dominated by the notion of charity until the 1990s. Businesses which saw CSR as a philanthropic gesture frequently limited themselves to one-time cash donations and did not devote their resources to community programmes. Furthermore, firms seldom considered the stakeholder while developing such programmes, lowering the efficacy and efficiency of CSR efforts.

Addressing the problem of social responsibility, the MCA enforced CSR pursuit for select corporations after thoroughly examining the situation. This historic step was taken by the Companies Act, 2013, which replaced the previous act, which had been in place for a very long time. During this time, there was a lot of agreement and a lot of conflict. While some businesses welcomed the new legislation, others took a defensive stance toward the obligation.

Impact of CSR mandate on Indian Companies

In order to fix the abovementioned issue, the Companies Act made monitoring and evaluation (M&E) a basic programme requirement and a vital role of the CSR committee. Education in the shape of PGD programmes, short-term training, and even seminars has been developed. The number of CSR consultants has exploded. And businesses have been preparing to comply with the obligation, particularly those with single-person departments that have historically outsourced all CSR work.

Others have large budgets dedicated just to people, with programme budgets in the hundreds of crores. Both must measure impact in order to comply with the ACT's reporting requirements.

The "Companies Amendment Rules, 2020" were also introduced by the MCA in 2020. These guidelines change the meaning of CSR policy, include new requirements for international organisations, and allow the government to create the "National Unspent CSR Fund," which will distribute cash from the CSR budget that have not been spent on CSR activities. This rule also specifies the requirements created for CSR-compliant firms, in addition to the new benchmarks set. There is stringent penalty for non-compliance too under subsection 7 of section 135 of the Act.

Corporates will now always have to strike a balance when it comes to designing and conducting CSR operations. With the least amount of money spent, they would try to have the most influence. More significantly, they must be "shown" doing good under the Act. Needs assessments, baseline surveys, and research are all important components of planning for long-term results and impact. Compliance and visibility may be sacrificed on the altar of fast victories to show accomplishments when executing initiatives, in order to achieve change on the ground and actual effect.

Most of Corporate India is still figuring out the technology to make this work for them, given the large quantities of money that will be required of them and a crucial restriction: CSR initiatives must benefit their workers and fall within the scope of normal business. Sustainable initiatives with a clear business value were stalled, altered, or eventually dropped from the CSR fold.

While the argument rages over whether this will continue to effect corporate hunger for emerging markets and the exploration of underprivileged populations as customers, the author would argue that CSR actions provide valuable data for market intelligence even when they are not directly related. The majority of CSR activities are carried out in the physical location of operations, as required by law.

There has been an increase in requests for tools that not only assist corporations in implementing more community engaging CSR programmes, but also enhance the company's expertise and interests like hitting two birds with one stone and making a whole new corporate structure around it.

There is also seen a slew of digital solutions for CSR project administration, staff volunteerism, data collecting, and other purposes. Both the NGO implementation partner and the business field workers have boosted their efficiency by using technology to monitor remote places. Social Impact Assessment may be combined with traditional market research and stakeholder interactions in a variety of methods, such as brand perception analysis and NGO ranking for a Performance Index.

Few Indian companies which led to an impact in society due to their CSR activities are ITC which is a hotel industry also involved in agriculture and packaging. This group has been active in the creation of a livelihood as well as environmental conservation projects. According to records, the company's CSR actions have resulted in the livelihood of more than six million individuals and Tata Steel which has a well-defined CSR policy that focuses on critical areas such as health, education, and livelihoods.

This industry has influenced change by not only propelling the corporation to new heights, but also by assisting in the improvement of society. It offers scholarships, participates in women's empowerment programmes, promotes rural development, raises awareness, has an environmentally responsible approach, and assists in the healthcare sector. There are more companies under this list such as Reliance Industries Ltd., Wipro Ltd., NTPC etc.

CSR's Challenges

Despite the fact that CSR has gained popularity in India, there are a number of obstacles that limit its efficacy and reach. CSR efforts face a variety of problems, including a lack of awareness of the idea of CSR, the absence of accurate data and precise information on the types of CSR activities, coverage, policy, and so on. Reduced CSR endeavors are exacerbated by a lack of training and underdeveloped workforce. A Times Group poll received comments from participating organisations regarding the numerous problems that CSR programmes face in various parts of the country.

Lack of community interest in CSR activities: There is a lack of community enthusiasm in participating in and contributing to company CSR initiatives. This is primarily due to the fact that local populations have little or no understanding of CSR, and no major attempts have been made to raise awareness of CSR and create trust in local communities about such projects.

Openness concerns: One of the primary issues raised by the poll is a lack of transparency. Companies have stated that there is a lack of openness on the side of local implementing agencies, since they do not make sufficient attempts to share information on their programmes, audit issues, effect assessment, and money use. This stated lack of openness has a detrimental influence on the process of creating trust between businesses and local communities, which is critical to the success of any local CSR effort.

Game of mere numbers: Measuring influence will never be simple, and monitoring a process filled with subjective elements like as culture, behaviour, and attitudes will always need careful consideration and analysis. One of the main reasons qualitative research and ethnography are being employed increasingly in the social sphere is to combat quantitative research's heavy emphasis on numbers.

More qualitative methods, such as PRA, have been created to uncover layers of social needs and effects. According to "The Theory of Change," it also helps distinguish between a program's output and results. The danger is that, with mandatory reporting of CSR efforts, the "number game" would resurface, which corporations are all too acquainted with and eager to pursue.

Non-availability of well-organized non-governmental organisations: It is also reported that in remote and rural areas, there is a lack of well-organized non-governmental organisations that can assess and identify real community needs and collaborate with businesses to ensure successful CSR implementation. This also strengthens the rationale for investing in local communities by enhancing their capacity to carry out local development initiatives.

Conclusion
It is a well-known truth that when businesses demonstrate real interest in socially responsible behaviour, the public favours them. Furthermore, CSR not only benefits society, but it also benefits the company because it enhances the public's perception of the organisation. Firms frequently engage in "Nation Building" initiatives in order to establish a personal connection with the public and build a stronger reputation.

Another important topic is if CSR can compensate for a company's lack of expertise. The argument is that, as a result of the company's CSR initiatives, stakeholders have more trust in the company and are ready to overlook ineptitude at the corporate level.

CSR has been shown to have a favourable influence on developing countries with poor institutions for assuring long-term economic growth. This is because CSR initiatives provide corporations with a chance to be more cautious in their corporate operations while also contributing to society. In a country where corporations and the government collaborate on CSR initiatives, CSR activities pave the path for filling institutional deficiencies.

While the debate rages over whether this has and will continue to affect corporate appetite to innovate for emerging markets and explore undeserved communities as consumers and suppliers, we would argue that even when CSR activities are not directly associated with business, they can still reveal significant data for market intelligence. After all, most CSR activities must take place in the actual region of business, as mandated by law.

References:
  1. Section 135 of Companies Act, 2013 - Corporate Social 24 Mar. 2022
    http://corporatelawreporter.com/companies_act/section-135-of-companies-act-2013-corporate-social- responsibility/.
  2. An Analysis Of Corporate Social Responsibility In India Dr. Reena Shyam
    10.29121/granthaalayah.v4.i5.2016.2674
  3. MCA notifies the Companies (CSR) Amendment Rules, 2020." https://www.argus- p.com/updates/updates/mca-notifies-the-companies-csr-amendment-rules-2020/.
  4. Impact of CSR - an opportunity or a hindrance - iPleaders
  5. https://www.indiacode.nic.in/show- data?actid=AC_CEN_22_29_00008_201318_1517807327856§ionId=1326§ionno=135&orderno=13-9
  6. Impact Of The Companies Act On Csr Activities In India - CSR Mandate
  7. Top Education CSR Projects (csrbox.org)

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