Corporate Social Responsibility In India And It’s Pre And Post Covid Effects
Author: LawSphereX
Category: Corporate & Insolvency
Published:
Updated:
CORPORATE SOCIAL RESPONSIBILITY IN INDIA AND
IT’S PRE AND POST COVID EFFECTS Adv. Nayan Jitendra Hule, BA.LLB, LL.M., Deccan Education Society’s Shri. Navalmal Firodia Law College, Savitribai Phule Pune University
ABSTRACT
The concept of Corporate Social Responsibility (CSR) involves businesses committing to ethical behavior and contributing to economic development while enhancing the well-being of their employees, families, local communities, and society at large. CSR has historical roots in ancient India, as evidenced by references in the Rig Veda emphasizing the importance of giving back to society for social development. This principle of giving back, known as DHARMA AND SEVA, has been deeply embedded in Indian culture for centuries. In the early 1990s, Mahatma Gandhi introduced the concept of Trusteeship to promote socioeconomic growth. In India, CSR is regulated by section 135 of The Companies Act, 2013, and it serves as a form of self-regulation that highlights a company's economic and social responsibilities. In recent years, several amendments have been made to this Act.
Under these amendments, companies with a net worth of 500 crore or more, a turnover of 1,000 crore or more, or a net profit of 5 crore or more in any financial year are mandated to allocate at least 2% of their average net profits from the past three years to CSR activities. The COVID-19 pandemic has prompted significant changes in CSR policies, with many companies directing their CSR funds towards Covid-19 relief efforts. The Indian government designated the Covid-19 outbreak as a 'notified disaster,' making it permissible for companies to allocate funds to Covid-19 relief as part of their CSR activities. Research into the CSR activities of corporate companies during Covid-19 in India will be valuable in identifying any challenges faced by the government during the pandemic.
Additionally, it is important for the Ministry of Corporate Affairs to implement reforms that can be utilized during similar pandemic situations. This research aims to examine the CSR initiatives undertaken by corporate companies during the global pandemic and analyze the revised CSR spending patterns adopted by several companies. Keywords: CSR, Covid relief funds, Global Pandemic, Ministry of Corporate Affairs
1 INTRODUCTION
There is not a consensus among experts on what exactly qualifies as a corporate social responsibility (CSR) initiative. However, the fundamental tenet of corporate social responsibility (CSR) is that businesses that use public resources have an obligation to return some of the positive effects of their profit-making operations to society. CSR is a self-policing business strategy that assists an organization in being socially responsible to its stakeholders, the general public, and the company itself. Companies can become aware of the kind of impact they are having on the economic, social, and environmental facets of society by engaging in corporate social responsibility, also known as corporate citizenship.
According to the United National Industrial Development Corporation (UNIDO), “Corporate social responsibility is a management concept whereby companies integrate social and environmental concerns in their business operations and interactions with their stakeholders”. 1 CSR has been adopted worldwide, but its implementation varies by country. The LBG model is commonly used to help companies assess the value and impact of their community investments on both society and business. Although CSR is a well-established concept globally, India became the first country to legally mandate it in 2013. The Covid pandemic completely changed the landscape of CSR requirements, leading the corporate sector to not only engage in traditional charitable activities but also contribute to Covid management efforts to fulfill their mandatory obligations. A. CSR FRAMEWORK IN INDIA: a.
The Companies Act, 2013 has instituted the idea of CSR under Section 135 of the Companies Act, 2013, to the forefront and through its disclose-or-explain directive, is promoting greater disclosure and transparency. The Act stipulates that companies which meet a certain set of criteria will have to spend at least 2% of their average profits in the last three years towards CSR activities. Schedule VII of the Act,
1 United Nations Industrial Development Organization (UNIDO)
United Nations Industrial Development Organization, Corporate Social Responsibility (CSR), UNIDO, http://www. unido. org/csr/o72054. html (last visited Nov. 12, 2023) which lists out the CSR activities, advises communities be the focal point. 2 b. Some key features of CSR under the Companies Act,2013. Corporate Social Responsibility legislation under the Companies Act,2013 mandates the companies that are mentioned below to engage in CSR activities and spend at least 2% of their average net profit from the three fiscal years prior to the current one on CSR initiatives. Company with - • a net worth of Rupees 500 crore or more; • a turnover of Rupees 1000 crore or more; or • a net profit of Rupees 5 crore or more must comply with the CSR provisions.
3 Companies that adhere to CSR Regulations are required to establish a CSR committee to formulate an annual strategy and propose it to the board. The CSR committee is also tasked with creating, proposing, and overseeing the company's CSR policy. The Ministry of Corporate Affairs (MCA) revised the Companies (Corporate Social Responsibility Policy) Rules, 2014 in accordance with Section 135 and Subsections (1) and (2) of Section 469 of the Companies Act 2013. These rules are now known as the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2022. The objective is to assess the cost of conducting social impact assessments of Corporate Social Responsibility (CSR) activities and the procedure for managing unspent CSR funds of corporations. The Amendments made were as follows: a.
Companies are required to establish a CSR committee to supervise their CSR responsibilities and unutilized CSR funds. Unspent CSR funds can be retained in this account for a duration of three years. The Amendment Rules also eliminated the exemption for companies that no longer meet CSR committee criteria. 2 Ministry of Corporate Affairs, Companies Act, 2013: Ministry of Corporate Affairs, The Companies Act, 2013, https://www. mca. gov. in/Ministry/pdf/CompaniesAct2013. pdf (last visited Nov. 12, 2023)
3 Ministry of Corporate Affairs general circular 14/2021 available at
https://www. mca. gov. in/Ministry/pdf/FAQ_CSR. pdf last seen on 12. 11. 2023 b. The CSR Rules previously permitted up to 5% of CSR expenditure or Rupees 50 lakhs for impact assessment. The Amendment Rules capped the expenditure on social impact assessments, which can be considered CSR spending, at up to 2% of all CSR expenditure or Rupees 50 lakhs, whichever is higher. This modification allows for increased spending on impact assessments for significant CSR projects. c. The Amendment Rules introduced a new format for the annual report on CSR endeavors. The annual reports must encompass the following details: i. A concise explanation of its CSR policy; ii. Information about the CSR committee's members, including the name of the director, designation, and the number of meetings attended and held by the director; iii.
Links to the company's website featuring CSR Committee membership, policy, and board-approved initiatives; executive summary and impact assessments of CSR projects. Companies are now obligated to disclose in their annual report the CSR amount allocated to active projects, additional projects, the surplus amount for set-off, if applicable, and the unspent CSR amount for the previous three financial years. The company must elucidate how many capital assets were generated or procured through CSR expenditure during the fiscal year. Furthermore, the annual report should clarify if the company fails to spend 2% of the average net income of the three financial years preceding the current one. Scope of activities under CSR: Schedule VII of Companies Act, 2013, provides a wide spectrum of activities which may be undertaken by the body corporates in India.
Apart from the specified activities, the Government may prescribe any other activity which it thinks proper to be included within the ambit of CSR. The activities that can be done by the company to achieve its CSR obligations include a. eradicating extreme hunger and poverty; b. promotion of education; c. promoting gender equality and women empowerment d. reducing child mortality and improving maternal health, e. combating human immuno-deficiency virus, acquired, immune deficiency syndrome, malaria and other diseases f. ensuring environmental sustainability; g. employment enhancing vocational skills; h. social business projects; i.
contribution to the Prime Minister’s National Relief Fund or any other fund set up by the Central Government or the State Governments for socio-economic development and relief and funds for the welfare of the Scheduled Castes, the Scheduled Tribes, other backward classes, minorities and women and j. such other matters as may be prescribed by the government of India.
2 THE IMPACT OF COVID-19 ON INDIAN SOCIETY AND ECONOMY
COVID-19 has had a broad and complex impact on Indian society and the economy, having different effects on the healthcare system, marginalized populations, and the overall economy. a. Medical Systems: India's healthcare system was put under strain by the abrupt increase in COVID-
19 cases, which resulted in shortages of hospital beds, medical oxygen, and other
supplies in several areas. People who were already unwell and inside the healthcare system had pre-existing vulnerabilities, particularly in rural locations where access to high-quality healthcare services were scarce. b. Economic hardships: Lockdowns and other economic disruptions had a significant negative influence on daily wage earners, migrant laborers, and workers in the unorganized sector, leaving them with unstable employment and financial situations. c. Food shortages: The food storage and hunger resulted from vulnerable groups' difficulty accessing food as a result of employment losses and interruptions in the food supply chains.
Economic Status of the Nation: The pandemic significantly slowed down the economy, which resulted in job losses in a number of industries, especially small enterprises, tourism, and hospitality Manufacturing and trade were impacted by disruptions in domestic and international supply chains, which resulted in delays and shortages of necessities. The financial situation of small and medium-sized businesses (SMEs) was difficult because of low demand, interrupted business processes, and cash flow issues. The COVID-19 pandemic's effects on India's economy and society brought to light structural weaknesses and the necessity of strong social safety nets, healthcare systems, and resilient economies that can endure similar crises.
The reaction from other sectors, including corporate social responsibility (CSR) programs, sought to lessen these difficulties and assist the impacted populations through these difficult times.
3 CSR ACTIVITIES UNDERTAKEN DURING THE COVID PERIOD
Amid the COVID-19 pandemic, companies in India engaged in a variety of Corporate Social Responsibility (CSR) efforts, aimed at meeting urgent healthcare requirements, aiding marginalized groups, and contributing to economic recovery. Companies undertook several significant CSR projects during this period. A. Healthcare Support: a. Donations made to Healthcare Infrastructure: Donations were given to improve Healthcare Infrastructure. Several companies contributed funds to establish COVID-19 hospitals, expand healthcare facilities, and acquire medical equipment like ventilators, oxygen concentrators, and PPE kits. b. Support to the Frontline Workers: Support was extended to the Frontline Workers. Many companies offered protective gear, meals, accommodation, and financial aid to healthcare professionals and frontline workers who were fighting the pandemic. c.
Assembled COVID Care Centers: COVID Care Centers were set up. Some companies transformed their facilities into COVID care centers or quarantine facilities to provide medical support. d. Food Distribution and Essentials: Food Distribution and Essentials were provided. Many companies distributed food packets, ration kits, and essential supplies to marginalized communities, migrant workers, and daily wage earners affected by the lockdown. e. Financial Assistance Programs: Financial Assistance Programs were implemented. Companies offered financial aid, direct cash transfers, or relief funds to support families facing economic hardships due to job losses or reduced income. f. Awareness Campaigns: Launched public awareness campaigns on COVID-19 preventive measures, hygiene practices, and the importance of vaccination through various mediums like social media, TV, and print. g.
Employee Welfare: Facilitated remote work setups, ensuring employee safety protocols, and offering mental health support programs for employees facing stress and anxiety. Organizing vaccination drives for employees and their families to encourage vaccination and promote community health. These CSR initiatives aimed to address immediate needs, support communities, and assist in the country's overall response to the pandemic. Companies across various sectors mobilized their resources, expertise, and networks to make a meaningful difference during these challenging times.
4. CHANGES MADE IN CSR NORMS IN ORDER TO INCLUDE COVID RELIEF
ACTIVIES: a) Role of Ministry of Corporate Affairs: In 2020, the Indian Government declared the pandemic a disaster. Following this, the Ministry of Corporate Affairs issued a circular on 23. 03. 2020, stating that using CSR funds for Covid-19 would be considered eligible under specific activities listed in the Companies Act, 2013. This led to various corporate sectors initiating Covid relief efforts. In January 2021, when the world's largest Covid-19 vaccination program began, the Ministry of Corporate Affairs further extended its support by issuing another circular on 13. 01. 2021. This circular specified that conducting awareness campaigns on Covid-19 vaccination would be considered an eligible CSR activity. For further clarification one more general circular was issued dated 05. 05.
2021 that spending for creating health infrastructure for Covid care, the eslablishment of medical oxygen generation, ventilators and other medical equipment’s are eligible as CSR activities. 4 The Gazette Notification stated that any R&D activity that is undertaken by companies with reference to areas focusing on the counter Covid response for the years 2020-2023 would come within the ambit of CSR activities subject to certain conditions. And the details regarding these activities must be disclosed in the annual report of CSR in the Board’s report separately. b) The role of “Invest India”: A new CSR-specific assistance cell was established by Invest India to leverage its extensive corporate network in directing funds to governmental and non-governmental relief efforts at both central and state levels.
This initiative facilitated the connection and identification of organizations requiring financial support for their relief initiatives, leading to the establishment of a relief fund repository with contributions surpassing INR 160 crores. 4 National CSR Data Portal: National CSR Data Portal, CSR in India, https://www. csr. gov. in/ (last visited Nov. 14, 2023).
Another contribution of Invest India to the relief efforts was facilitating the donation of essential supplies such as PPE kits, critical care equipment and other commodities. Over
10 lakh units of essential supplies and other equipment reached people in need during the
time of crisis through the pipeline developed by Invest India.5 To develop technology space, Invest India reached out to more than two hundred tech incubators to channel their CSR funds in this domain.
5. NOTABLE CONTRIBUTION MADE BY VARIOUS COMPANIES THROUGH
CSR: a) Wipro: Wipro Enterprises Ltd and Azim Premji Foundation, came together and madea a commitment of spending Rupees. 1125 crore towards tackling the unprecedented health and humanitarian crisis arising from the COVID-19 pandemic outbreak. 6 These funds supported the dedicated medical and service workers on the front lines of the battle against the pandemic and helped alleviate its far-reaching impact on the most affected individuals. In 2020, Wipro Limited transformed one of its IT campuses in Hinjewadi, Pune into a 450-bed interim care COVID-19 hospital within four weeks. The hospital was handed over to the Maharashtra state government in June 2020. b) Infosys: The Infosys Foundation pledged 120 crore rupees for COVID-19 relief efforts in India, with over one-third of the funds going to the PM CARES Fund. During the crisis, Infosys provided 2.
4 million meals and aid to over 1 million individuals. These contributions have supported thousands of migrant workers by providing essential food and assistance, supplied protective gear to first responders, and delivered 142 ventilators to civilian and military hospitals. Additionally, millions of masks and gloves were procured for police officers, healthcare volunteers, and others, with 10,000 face shields given to medical professionals. Infosys also funded the installation of medical
5 Invest India, The Changing Landscape of CSR in India During COVID-19
The Changing Landscape of CSR in India During COVID-19, Invest India, https://www. investindia. gov. in/siru/changing-landscape-csr-indiaduring-covid-19 (last visited Nov. 12, 2023). 6 https://www. wipro. com/newsroom/press-releases/2020/wipro-azim-premji-foundation-and-wipro-enterprisescommit-inr-1125-crore-towards-tackling-the-covid-19-pandemic/ (last visited Oct. 13, 2024). gas pipelines at two hospitals. Furthermore, in collaboration with Narayana Health, one of India's largest healthcare providers, Infosys established a 100-room hospital in Bengaluru specifically for COVID-19 patients, offering free care to low-income residents. c) Reliance: Reliance Industries Ltd. (RIL), India's largest private sector company, has pledged a donation of Rupees 500 crore to the PM CARES Fund.
In addition, they have also contributed Rupees 5 crore each to the governments of Maharashtra and Gujarat to aid in their efforts against Covid-19. During the initial phase of the pandemic, the Reliance Foundation, the CSR arm of RIL, collaborated with the BMC to establish India's first COVID hospital in Mumbai, featuring a dedicated 225-bed facility at Seven Hills Hospital. Out of these 225 beds, Sir H N Reliance Foundation Hospital exclusively manages 100 beds, including 20 ICU beds. The Foundation announced this week that it will create, commission and manage 100 ICU beds that will be made operational in phases from 15 May, 2021. Sir HN Reliance Foundation Hospital will take over, from 1st May the management and operations of a 550-bed ward, which is currently operational.
Moreover, all the COVID patients in NSCI and Seven Hills Hospital will be treated absolutely free, according to a statement from Reliance Foundation. 7 d) HUL (Hindustan Unilever Ltd): In March 2020, Hindustan Unilever Limited allocated ₹100 crores to support COVID-19 relief efforts in India. As part of its ongoing global collaboration with UNICEF, the company provided more than 1 crore soaps and sanitizers to communities in need during the pandemic. The donations reached 18 states, covering tribal regions, areas affected by floods, COVIDstricken villages, slums, and isolated tea estates. Making hygiene products accessible was a vital measure to encourage handwashing practices as the country continued to face daily challenges from COVID.
7 The CSR Journal, Top CSR Contributions for COVID-19 in India
Top CSR Contributions for COVID-19 in India, The CSR Journal, https://thecsrjournal.in/top-csr-contributions-for-covid-india/ (last visited Dec. 3, 2023).
(Industry wise COVDI-19 response)8 The above mentioned pie circle graph shows the percentage of contributions made by different industrial sectors. It is seen from the pie circle graph that the majority of contributions were made by Auto and Auto Ancillliairies, Computer software, oil and petrochemical and other industries.
6 CONCLUSION
India has seen a significant evolution in Corporate Social Responsibility (CSR), particularly due to the impact of COVID-19. CSR initiatives were gaining traction before the pandemic, but the post-COVID era brought about a change in priorities and approaches. Before the pandemic, CSR mainly focused on philanthropy, community development, and environmental sustainability. However, the pandemic accelerated change, leading to a more comprehensive and inclusive CSR framework. In the pre-COVID scenario, CSR activities were often considered optional or an addition to business operations. Companies voluntarily allocated funds to CSR initiatives, often as part of compliance mandates. However, the pandemic revealed vulnerabilities in society, highlighting the need for a stronger CSR approach.
Companies began to reassess their roles, acknowledging the interconnectedness between business success and societal well-being.
8 CSRBOX
CSRBOX, https://csrbox.org/ (last visited Nov. 3, 2023).
After COVID-19, there has been a noticeable shift in CSR strategies towards more sustainable, long-term commitments. Businesses are integrating social responsibility into their core operations rather than treating it as a separate entity. Emphasis is placed on addressing immediate pandemic-related challenges, such as healthcare support, livelihood restoration, and education accessibility, while also aligning with sustainable development goals. In summary, the pandemic acted as a pivotal moment, redefining the scope and significance of CSR in India. Companies now consider CSR as integral to their purpose, contributing not only to societal welfare but also to sustainable business practices. The future of CSR in India lies in its continued integration into corporate strategies, fostering collaborations, and leveraging technology for inclusive and impactful initiatives.
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