Revisiting Corporate Social Responsibility from the Philosophical Perspective

Corporate Social Responsibility (“CSR”) is a constantly evolving phenomenon in our society. It is a self-regulating mechanism whereby businesses monitor and ensure compliance with the spirit of law, ethical standards, and international norms.

Mr. Ashok Kapur, Joint Managing Director, Institute of Directors and one of the eminent speakers for second panel of the seminar, stated that by incorporating corporate citizenship with the mandate of company law, India has become a part of the global fraternity. Accordingly, corporates are identified to have the responsibility, as any citizen, to integrate social, environmental and economic concerns within their institutional framework. It was argued that CSR is not law. Rather, it is a concept that influences the culture and values of corporations and that the need for CSR primarily arises because corporations on the whole are not looked upon as factoring in social and environmental considerations in their business models.

Section 135 of the 2013 Act prescribes mandatory CSR spending of 2% of profit before tax for companies with net worth of Rs. 500 Cr. or a turnover of Rs. 1000 Cr. or net profit of Rs. 5 Cr. CSR provisions under the 2013 Act are fairly comprehensive in terms of where the funds could be deployed. Companies have the liberty to choose action areas which are most strategic and beneficial for them, as per their CSR policy. For guidance purposes, as much as nine activity areas encompassing all social development activities like education, healthcare, environmental sustainability, gender equality, employability etc. are provided in the 2013 Act. Companies can choose to set up trusts, societies, companies recognized under Section 8 or fund such existing firms operating in India to implement the activities outlined in its CSR strategy. Companies recognized under Section 8 of 2013 Act are those that are directed towards promotion of commerce, art, science or any such object and are allowed to be registered as limited companies, subject to grant of license from the Government.

The concept of CSR that is now being implemented under the 2013 Act is not a new thought. The spirit of the modern CSR is already exists in Indian philosophical thought. For instance, in Gandhi’s view, revenue is derived from the society itself; this obliges the entities to give something in return. In his words, ‘wealth is meant for use by self and the public’. Mr. Kapur, therefore, argued that the concept of CSR in the 2013 Act is a mere embodiment of the Gandhian philosophy. While highlighting the importance of the role of corporates in the society, he emphasized that the Gandhian definition of ‘business’ primarily calls for less of commercialization and expansion on part of corporations. Accordingly, corporates are conceived to be trustees of public funds. As generally observed, corporations predominantly consider profit-making as their fundamental duty. This Gandhian vision calls for corporations to go beyond this duty. This vision, at present, has been substantially converted into something which is much more concrete by integrating CSR in the 2013 Act.

Note: This post is part of the report on a conference titled 'Reflections on The Companies Act, 2013' organised by the Michigan-Jindal Centre for Global Corporate and Financial Law and Policy on the 24th of October, 2013