Emerging Paradigms Of Sustainable Social Developments Through Corporate
Social Responsibility – A Comparative Study Between Privately and Publicly
Managed Companies listed in NSE.
# Prof. (Dr.) Pradeep Kumar Aggarwal
## Dr. Deepika Uppadhyay
### Dr. S.K. Yadav
Abstract
“Social obligations is much bigger than supporting worthy causes. It includes anything that
impacts people and the quality of their lives.” – William Ford, Jr., Chairman, Ford Motor Co.
Corporate Social Responsibility (CSR) is an obligation of decision-makers to take actions which
protect and improve the welfare of society as a whole along with their own interests. In many
developing countries, CSR practices are considered as a main engine for social developments.
India is no exception where CSR practices is increasing a significant role in transforming the
society. How people of country can forget the one of the worst floods of the decade in the
Jammu & Kashmir of 2014 wherein more than 300 people lost their lives and thousands remain
stranded. In such a situation companies can create substantial impact through a CSR spending by
supporting relief and playing a vital role in long-term rehabilitation efforts. The study has been
made by using the secondary data. The present paper seeks to analyse the awareness the
conceptual framework related to Corporate Social Responsibility practices in privately and
publicly managed companies listed in National Stock Exchange (NSE) in India. It also makes an
attempt to study the CSR reporting practices by the various corporate under study. Corporate
have to look forward for a more systematic way and have to bring some effective CRS practices
to deal with enhancing transparency and competencies for social developments. The finding of
the paper shows that only a few companies are spending for CSR activities, if the 2 % rule was
followed.
Keywords : Corporate Social Responsibility, Social issues, CSR practices, CSR reporting, Pubic
and Privately managed companies.
# Faculty & Head of the Finance, School of Business Studies, SHARDA University, Greater Noida, U. P.
E-mail ID –pradeep.aggarwal@sharda.ac.in
## Faculty of Finance, School of Law, SHARDA University, Greater Noida, U.P. E-mail IDdeepika.upadhyay@sharda.ac.in
### Faculty of Commerce, Govt. P.G. College, Tigaon, Distt.- Faridabad, Haryana ; E-mail ID –
sudeshyadav215@gmail.com
1
Introduction
Days are gone when profit maximization was considered the dominant goal of business. It was
considered that ‘the business of business is to do business and thereby secure social and
economic ends.’ Today, gradually emphasis shifted from ‘maximizing short-term to optimization
of long-term gains. Unbrindled self-interest gave way to an enlightened social interest. ‘Profit
with service’ rather than ‘Profit maximization’ became the motto of business.
During 20th Century, further revolutionary change in public expectations of business took place.
Today, a business firm is not considered the sole prerogative of its owners, but rather the concern
of all its stake-holders i.e. all those who have a stake in that business. Business exists because it
serves society and it is as much a social institution as an economic one .It is rightly said that no
business can exist in the ill society. Thus, all business firms are expected to discharge social
functions and social responsibilities, which go beyond law and order traditions of the past. The
modern concept of social responsibility of business is the outcome of several economic, social,
political and legal forces, which have compelled, persuaded and helped businessmen to become
increasingly responsibly towards society is not a matter of choice, but an essential pre-requisite
for ultimate success in business.
Mandatory Regulations under the Companies Act, 2013
In India, the requirement of CSR is governed by clause 135 of Companies Act,2013 which
specifies that companies with a net worth of Rs 500 crore or more ( or a turnover of Rs 1,000
crore or more / net profit of Rs5 crore or more) will have to constitute a CSR committee with
three or more directors and allocate at least 2 per cent of their three-year annual profit towards
CSR activities. The pictorial representation below gives the representation of Section 135 (1).
2
The above provision requires every company having such prescribed Networth or Turnover or
Net. Profit shall be covered within the ambit of CSR provisions. The section has used the word
"companies" which connotes a wider meaning and shall include the foreign companies having
branch or project offices in India
Why Business Should Assume C.S.R.
Business plays a very significant role in economic, social, political and technological affairs. So
business owes responsibilities to all segments of society. Broadly, there are following reasons for
assuming the CSR activities –
1. Responding to demands of Society – As business gets larger, the public takes more
interest in it, as it has greater impact on the community. Managers respond to public
opinion so as to maintain public image of their company. The original purpose of
corporate was to serve the public good.
2. Moral Justification – Business now tends to participate in the development of better
world.
3. Self-interest of business for longer-run – For example, (a) Responsibilities towards
shareholders for attracting investment; (b) concerns for employees who can harmonise
with company’s best interests, and (c) Avoiding environmental pollutions.
4. Ethical behavior and generation of profits for shareholders is not incompatible.
5. All Stakeholders have a ‘Stake’ in companies because they can be harmed, if a
company behaves unethically.
Objectives of the Study
1. To gain an understanding of how CSR is defined by various companies under study.
2. To trace out the major social issues required for social developments;
3. To gauge insights into the type of CSR activities undertaken by various companies under
study;
4. To obtain insights into the quantum of contribution made by various companies under
study towards CSR activities;
3
5. To analyze the disclosure and reporting practices of the various companies selected for
the study.
Research Hypothesis
To statistically test the validity and applicability of the findings of the study with respect to
the above stated research objectives, the following hypothesis have been developed –
H1 : The quantum of investment in CSR is independent of the type of ownership of company.
H2 : The level of significant of disclosures and reporting practices is independent of the type
of ownership.
Research Methodology
For the purpose of the study a detailed questionnaire was prepared and survey method was
adopted to collect information relating to Primary data. The annual reports of these
organization and detailed information from the company’s websites were obtained.
Information was gathered from 30 various companies listed in National Stock Exchange
(NSE) in India. Out of total 30 companies, 15 are in privately managed companies and 15 by
publicly managed companies. Only those companies have been selected for the study which
discloses the CSR practices in their annual report.
Limitations of the Study
Since a major information is obtained from the websites of the companies and only a few
information is obtained through the questionnaire. The Sample size is small i.e. 30 only. The
further research can be obtained on a larger sample size and for a particular type of industry.
The study does not intend or aim to pass a qualitative judgement on any corporate initiative
or how good or bad it is, but rather focuses on presenting a broad view of implementing the
CSR practices.
Literature Review
Perrini (2007) that large firms are more likely to identify relevant stakeholders and meet
their CSR requirements through specific and formal CSR strategies.
4
Bardhan (2008) A study was conducted regarding present scenario of disclosures of
Corporate Social Performance in West Bengal. It was found that 47% of the companies did
not disclose their social performance. In most of the cases, Corporate Social activities have
been found for local areas around the factory of head office.
Thanika Devi (2009) ‘A case study on CSR Perspectives of SMEs’ In this study, it has been
shown that CSR in Mauritius is no more a business ideology but an essential business
practice among small and medium companies, irrespective of their areas of operation. They
are themselves keen to derive the maximum value from this policy area and push for a
transition from a voluntaristic, business-led CSR to a regulated, tested and civil society
grounded practice of social environmental accountability.
Soni (2009) his findings says that trend of CSR in India is not very encouraging. The CSR
initiatives are taken by big organizations only. Small and medium sized companes are not
serious about their Corporate Social Responsibility. They must concrete steps towards CSR.
Gunay (2010) finds that top managers and directors believe that as the hierarchy in their
firms increases, CSR activities will also increase. It is also found that there is a positive
correlation among the variables of organizational behaviours of industrial firms in Turkey.
Although these correlations among the variables of organizational behaviours are low, they
are statistically significant.
Misir (2010) ‘A study on Impacts of Investments on CSR’ was done and depicted the study
that there exists partial positive relationship between investment in CSR and market price per
share.The findings of the study also indicate that financial performance of the sample
enterprises has been influenced by the investment in CSR in terms of market price per share
and net asset value per share during the study.
5
Results and Discussions
Objective 1 –To Gain an understanding of how CSR is defined by various companies
under study: In line with literature arguing that CSR is an issue of growing importance in
both academia and business. This study found that all respondents within the companies
under study surveyed were familiar with and had knowledge of the term corporate social
responsibility. The study further shows that the majority of respondents defined CSR as
‘Helping/Contributing to the welfare of society (People/children in need).
Objective 2 -To trace out the major social issues required for social developments : The
following figure identifies areas of social issues in which CSR initiatives are required from
the various companies under the study –
Table 1 : Areas of Major Social Issues in order to importance given for CSR activities
Serial No.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Social Issues
Education
Healthcare / Sanitation
Infrastructure Development
Enhancing Employability
Entrepreneurship
Conservation and Water Harvesting
Women Empowerment
Environment Protection Schemes
Disaster Relief
Others
Objective 3 : To gauge insights into the type of CSR activities undertaken by various companies
under study;
The following table identifies areas of CSR in which various companies under study are
involved –
6
Table – 2 : Areas of CSR
Areas of CSR
No of Privately managed
No of Publicly managed
Companies involved
Companies involved
Total
1. Health Care programme
6
7
13
2. Environmental sustenance
6
5
11
3. Community Development
2
2
04
3
4
07
5. National Heritage
1
2
03
6. Cultural Initiatives
3
2
05
7. Rural Development
3
4
07
8. Child Labour
1
0
01
9. Public Amenities
3
4
07
10. Sports
4
5
09
11. Donations to Welfare org.
5
3
08
4. Helping to victims of Natural
Calamities
Source : Complied from the annual reports of the companies under study.
Based on the Comparative study of the 30 companies, it was observed that while some
companies chose to narrow their focus on a few thematic areas while others took a broader view
and undertook a larger scope of areas to focus on. Out of 30 Companies under study, it was
found that there were as many as 23 corporate focusing on 4-6 thematic areas, whereby only 7
stuck to six or more thematic areas.
7
Areas of CSR involved
Figure 1 : Graph depicting on areas of CSR in which Companies under study are in involved
It has also been observed that for 46 % privately managed corporate ( 54 % in publicly managed
companies), the CSR initiatives is being implemented thorough a well structured separated
Foundation. Among more than 50 per cent corporate in both of the sector, there is a separate
CSR department that take care of the activities to be implemented.
The top five areas of CSR activities in which the companies under study from both of the
sectors- privately managed and publicly managed c are involved in the following list in
descending order –
1.
2.
3.
4.
5.
Health & Safety Programme
Education programme
Environmental programme
Donation to Welfare organisations & NGOs
Assistance to poor & underprivileged
8
-
43 %
36 %
24 %
19 %
18%
Some companies from privately managed and publicly managed companies are involved
in ‘other areas of CSR ( 7%) such as Sports activities, assistance during natural calamities
etc.
Objective No. 4 : To obtain insights into the quantum of contribution made by various
companies under study towards CSR activities;
Table 3
Status of CSR Spending with compare to 2 % of PAT in Privately Managed Companies
Rs in Crore
Sr
Actual
2 % of
Name of Company
Revenue AVE. PAT
Variation
NO.
Spend
PAT
1
RIL
368571
21138
288
2
TATA MOTORS
170678
8437
15
169
-154
3
TATA STEEL
135976
3895
146
78
68
4
HINDALCO
82549
3597
28
72
-44
5
BHARTI AIRTEL
71506
6511
33
130
-97
6
L&T
64960
4818
70
96
-26
7
M&M
63030
2948
22
59
-37
8
TCS
48894
8935
51
179
-128
9
STERLITE
43116
6831
7
137
-130
10
ADANI Enterprises
39416
1940
14
39
-25
11
ICICI
37995
6366
24
127
-103
12
MARUTI
40050
2162
12
43
-31
13
JSW
36964
1569
32
31
1
14
INFOSYS
33734
7128
26
143
-117
15
HDFC
29930
3608
3
72
-69
Source : compiled from CSRidentity.com, together with Forbes India.
Table - 4
Status of CSR Spending with compare to 2 % of PAT in Publicly Managed Companies
(Rs in Crore)
S.
No:
1
2
3
4
5
Company
Indian Oil
BPC
HPC
ONGC
SBI
AVG.
Revenue PAT
442459
7783
223315
1438
195891
1118
151121
23660
147197
13056
Actual
Spend
83
8
27
121
71
9
2 % of
PAT
156
29
22
473
261
Variation
-73
-21
5
-352
-190
6
7
8
9
10
11
12
13
14
15
Coal India
MMTC
NTPC
SAIL
GAIL
OIL INDIA
POWER FINANCE
POWER GRID
BHEL
Hindustan Zinc
78410
67023
66366
51428
44861
17215
13075
10312
50654
12061
11759
129
9334
5153
3891
2988
2695
2664
5823
4823
119
3
49
61
54
50
13
25
37
8
235
3
187
103
78
60
54
53
116
96
-116
0
-138
-42
-24
-10
-41
-28
-79
-88
Source : compiled from CSRidentity.com, together with Forbes India.
Table No : 5
Summary of Result of Contribution to CSR by Companies under Study
Contribution in CSR Privately Managed Company Publicly Managed Companies Total
More than or equal to
2 % of AVG PAT
02
02
04
Less than of 2 % of PAT
13
13
26
15
15
30
Total
Chi-Square Calculated
0
Degree of Freedom
1.0
Level of Significance
5%
Chi-Square Table Value for 3 Degree of Freedom
At 5 % level of significance
3.84
What can’t be measured, can’t be improved. That was the spirit behind our effort to gather data
on how much different companies under study are spending on CSR currently. Thus, it is evident
from the above table that only 4 companies out of sample of 30 companies are spending on CSR,
if they are bound by law under new Companies Act, 2013. So, about 90 % of the companies
under both of the sector –Privately managed and publicly managed companies are not doing well
10
towards CSR activities. Therefore, Companies from the both of the groups should take more
initiatives towards CSR.
Statistical Result – Chi-square calculated is less than the Chi-square standard table value so
therefore, Ho is accepted and Ha is rejected.
Thus, we can statistically conclude with 95% confidence level that there exists no
relationship between the privately and publicly managed companies with respect to the
significance level of contribution to CSR programme.
Objective No. 5 : To analyze the disclosure and reporting practices of the various companies
selected for the study.
Sustainability Reporting is also gaining prominence and recognition as a value added tool for
displaying a corporate commitment towards transparency and accountability towards its various
stakeholders. It helps a company to report on the social environmental and economic impact of
its activities along with a report on the internal state of its management and employees welfare
system in a manner as rigorous and transparent as financial reporting.
In order to statistically test whether the disclosures and reporting practices of CSR initiatives is
depend or independent on the type of ownership of privately or publicly managed companies, the
following hypothesis has been developed and tested with the help of Chi-square test –
Ho : The level of significant of disclosures and reporting practices is independent of the type
of ownership.
Ha : The level of significant of disclosures and reporting practices is dependent of the type of
ownership.
The primary data in the following table was put to hypothesis testing process by applying the
Chi-square test. The test statistics are given below in the table Table 6
How significant is disclosures and reporting practices
Nature of Ownership Highly Significant Some Significance No Significance
11
Total
Privately managed Companies
6
05
4
15
Publicly managed Companies
8
06
1
15
15
11
05
30
Total
Chi-Square Calculated
2.177
Degree of Freedom
3.0
Level of Significance
5%
Chi-Square Table Value for 3 Degree of Freedom
At 5 % level of significance
5.99
Out of the total number of 30 respondent companies 14 were of the opinion that disclosures
and reporting practices are highly significant and 11 respondents believed that the concept
has some significance while only 5 respondents opined that it has no relevance. On the
whole, a large majority of sample confined the significance of disclosures and reporting.
Statistical Result – Chi-square calculated is less than the Chi-square standard table value so
therefore, Ho is accepted and Ha is rejected.
Thus, we can statistically conclude with 95% confidence level that there exists no
relationship between the privately and publicly managed companies with respect to the
significance level of disclosures and reporting practices.
Conclusion
Corporate Social Responsibility must go beyond the obvious and extend from visible
programs to support social causes to an internal commitment towards ethical behavior
reflected in the integral business processes. The corporate sector must keep a close watch on
its social responsibility and ethical orientation by examining the repercussions of their
decisions, detecting the ethical elements of issues or assigning importance to the interests of
various stakeholders affected by the decision. It would be very limiting for companies to
admit that the purpose of business is just economies and shareholder value. There is a need
to understand that CSR is not only a pure management directive but it is something that is
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central to the company and has to be embedded in the core values and principles of the
corporate. Whatever the corporate do within the purview of CSR has to be related to core
business. It has to utilize things at which corporate are good; it has to be something that takes
advantage of the core skills and competencies of the companies. It has to be mandated of the
entire corporate sector and its scope does not simply begin and end with one department in
the organization.
References
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13
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www.forbesindia.com
www.CSRidentity.com
Karmayog website, available at: http://www.karmayog.org/csr/
Annual reports of the Companies under study.
Appendix – List of Companies – Privately and Publicly managed under Study
Privately Managed Companies Publicly Managed Companies
Sr. no
1
2
3
4
5
6
7
8
9
10
11
12
13
Name of Company
RIL
TATA MOTORS
TATA STEEL
HINDALCO
BHARTI AIRTEL
L&T
M&M
TCS
STERLITE
ADANI
Enterprises
ICICI
MARUTI
JSW
S. No:
1
2
3
4
5
6
7
8
9
10
11
12
13
Name of Company
Indian Oil
BPC
HPC
ONGC
SBI
Coal India
MMTC
NTPC
SAIL
GAIL
OIL INDIA
POWER FINANCE CORP.
POWER GRID
14
14
15
INFOSYS
HDFC
14
15
BHEL
Hindustan Zinc
15