Trapping India’s CSR in a Legal Net: Will the Mandatory Trusteeship Contribute to Triple Bottom Line?

Corporate Responsibility in India: Academic Perspectives on the Companies Act 2013

“…According to authors embracing this position, past contributions by many firms were substantially higher than 2%, thus, inadvertently lowering CSR investments. In line with this argument, a philanthropic or benevolent commitment to society is reduced to a CSR tax [63][64][65][66]68,90,97]. Accordingly, an unintended consequence may be a shift from quality to quantity, or from long-term societal commitments to short-term projects and programs [63,64,68,90,97].…”

“…The differentiation to philanthropy as conceptualized in the Act reveals another layer of tension between its advantages and disadvantages. According to some authors, traditional philanthropic activities are preserved since firms can continue to invest in health-or education-related initiatives, or donate their 2% contribution to the Prime Minister's National Relief Fund [63,64,73,87,102,105]. Explicitly excluded in the Act, however, are donations or gift-giving to charities, leading others to claim that the true philanthropic nature of CSR has been fundamentally undermined [64,65,73,90].…”

“…Far more prevalent are debates on the disadvantages and challenges associated with mandating something, which traditionally was considered discretionary. While some argue that CSR in India is contradicting international or Western normative or business practices [51,59,92,110,111,117], others argue that CSR in the form of philanthropy is a natural and discretionary part of business and should remain voluntary, lest the "unique joy and benefits that flows from giving back to society" be removed [79] (p.7) (see also [64,83,103,110]). According to this view, mandating CSR may jeopardize firms' willingness to engage with society, resulting in passive participation [45,57,59,64,65,90,101].…”

“…Second, the Act compels firms to embed economic, social, and environmental objectives into their core business strategy, projects, and processes [45,69,70,86,87,105,107], which results in improved stakeholder relations and new business opportunities [58,67,68,90,92,97,105], competitive advantage [75,104,105], or enhanced efficiency relating to CSR activities [45,69,78,107]. By enforcing the disclosure of CSR practices, the Act furthermore promotes transparency and accountability [47,61,63,64,69,76,88,89,97,105,109,117], and it assists in unifying sporadic CSR activities by standardizing procedures [59,77,90,97]. Here, three examples from the literature:…”

“…The main premise here is that all activities undertaken "in pursuance of the normal course of business" cannot be considered as CSR [65] (p. 90) (see also [53,63,100]). This includes initiatives aimed at improving operational efficiency [64], developing and supporting employees [63,64,90,100], and activities that may generate profits, including all forms of shared value creation [51,57,64,65,79,87,88,90,91]. The Act's focus on mainly large and successful national firms inadvertently provides a competitive advantage to small, unprofitable, or international firms, which are currently exempt from participating in the CSR activities as outlined by the Act [45,55,72,74,78,83,107].…”