Phases of Development of Corporate Social Responsibility (CSR) in India
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The concept of Corporate Social Responsibility (CSR) in India has evolved significantly over the years. Initially, CSR was largely influenced by the socio-political environment and economic challenges, and later, it became an essential component of corporate governance, especially in the context of globalization and increased consumer awareness. The development of CSR in India can be divided into several phases, each reflecting the changing business landscape, governmental policies, and societal expectations.
1. Pre-Independence Phase (Before 1947)
In the pre-independence period, CSR in India was primarily driven by philanthropic efforts and religious motives. Many business leaders and industrialists engaged in social welfare activities, but there was little formalization of CSR practices as we understand them today.
Key Features:
- Philanthropy and Charity: Early Indian industrialists and business families, such as the Tata family and Birla family, made significant contributions to society through charitable donations. This included funding for educational institutions, hospitals, and temples.
- Religious and Social Duty: Philanthropic actions were often rooted in religious and cultural traditions of dharma (duty) and seva (service), where the wealthy were expected to contribute to societal welfare.
- Industrial Pioneers: Businessmen like Jamsetji Tata laid the foundation of CSR in India. He not only focused on building industries but also contributed significantly to the education and welfare of the people. He established institutions like the Indian Institute of Science and the Tata Memorial Hospital, which still play key roles in Indian society.
Example:
- Tata Group: One of the early pioneers of CSR in India, the Tata Group’s initiatives during this period included the establishment of educational institutions and hospitals, as well as the development of communities where their factories were located.
2. Post-Independence Phase (1947–1970s)
After India gained independence in 1947, the country embarked on its journey toward economic development, and CSR began to align more with national goals of self-reliance, industrialization, and poverty reduction. The government took a more active role in shaping corporate behavior through laws and policies.
Key Features:
- Government Intervention and Regulation: The Indian government began to play a significant role in shaping CSR practices through regulations, particularly with the enactment of the Companies Act 1956, which laid the groundwork for corporate governance and the concept of business responsibility toward society.
- Public Sector Enterprises (PSEs): A large number of public sector enterprises were set up during this period, and these were expected to play an active role in the welfare of society by contributing to employment, infrastructure development, and regional economic growth.
- Focus on Nation-Building: CSR was focused on contributing to national development, including addressing social and economic disparities, such as improving health, education, and infrastructure in rural areas.
Example:
- BHEL (Bharat Heavy Electricals Limited): BHEL, a public sector enterprise, engaged in CSR activities such as contributing to rural development, promoting education, and supporting health care programs, particularly in areas where it had manufacturing plants.
3. Liberalization and Globalization Phase (1990s–2000s)
The economic liberalization in the early 1990s marked a significant shift in the Indian economy. India opened up its markets to global competition, and private sector companies began to expand rapidly. During this period, CSR became more formalized, professionalized, and aligned with global standards of corporate governance and sustainability.
Key Features:
- Shift Toward Strategic CSR: As India integrated more with the global economy, CSR practices evolved to focus on long-term sustainability and strategic business decisions, rather than just charity or philanthropy. Companies started viewing CSR as a tool for building brand image, enhancing stakeholder relations, and creating long-term value.
- Introduction of Environmental Concerns: The 1990s saw the rise of environmental issues, such as pollution and resource depletion, which led to a growing emphasis on corporate environmental responsibility.
- Rise of Corporate Governance Standards: The introduction of the Narasimham Committee Report (1991) and the Companies Act, 1956 led to greater focus on corporate governance. Companies were expected to implement better management practices and to ensure their activities had a positive impact on society.
Example:
- Infosys: Infosys, a leading IT company, began to formalize its CSR activities in the 1990s by focusing on areas such as education, health care, and rural development. The company set up the Infosys Foundation to support these initiatives.
- Wipro: Wipro, another IT giant, adopted a more formal approach to CSR, focusing on environmental sustainability and social issues like education and rural empowerment.
4. The Mandated CSR Phase (2013–Present)
The 21st century saw a major development in CSR in India with the enactment of the Companies Act of 2013, which legally mandated CSR activities for certain categories of companies. This phase marked the formalization of CSR as a legal requirement for businesses, pushing it to become an integral part of corporate strategy.
Key Features:
- Legal Mandates and Regulations: The Companies Act, 2013, introduced provisions under Section 135, making it mandatory for companies with a net worth of over ₹500 crore or an annual turnover of ₹1,000 crore or more to allocate at least 2% of their average net profit over the past three years toward CSR activities.
- Emphasis on Reporting and Accountability: The Act also stipulated the requirement for companies to disclose their CSR activities in their annual reports, increasing transparency and accountability. The reporting framework was further enhanced by SEBI’s Business Responsibility Reports (BRR).
- Focus on Social and Environmental Sustainability: CSR activities increasingly focus on areas such as environmental sustainability (e.g., renewable energy, water conservation), education, health care, poverty alleviation, and rural development.
Example:
- Reliance Industries: Reliance Industries, a major player in the Indian corporate landscape, has been actively involved in CSR activities such as education programs, health care initiatives, rural development, and disaster relief efforts.
- Tata Group: The Tata Group continues to lead in CSR activities by focusing on community development, education, health care, and environmental sustainability through initiatives like the Tata Sustainability Group.
5. Contemporary Phase (2020 and Beyond)
In the current phase, CSR in India is increasingly becoming an integral part of corporate strategy, with businesses taking an active role in addressing global challenges like climate change, social inequality, and economic development. Companies are using CSR not just for reputational benefits but as a strategic tool for achieving sustainable development goals (SDGs).
Key Features:
- Focus on Global Goals: Companies are aligning their CSR efforts with global sustainability goals, such as the United Nations Sustainable Development Goals (SDGs). CSR activities are focused on achieving social, environmental, and economic sustainability.
- Technology and Innovation in CSR: Technology, especially in the form of digital tools and platforms, is being used to enhance CSR initiatives. Companies are leveraging innovations like blockchain, artificial intelligence, and digital platforms to engage stakeholders and promote transparency in CSR activities.
- Inclusive Growth and Diversity: There is a growing emphasis on inclusivity, diversity, and equality in CSR practices. Companies are focusing on improving gender equality, providing access to education for marginalized communities, and supporting economic empowerment for underprivileged groups.
Example:
- Google India: Google’s CSR activities in India focus on using technology for social good. Its initiatives include programs for digital literacy, support for education, and empowerment of women and rural communities.
- HDFC Bank: HDFC Bank has focused on financial literacy and inclusion, promoting sustainable development, and improving access to education through its Parivartan program.
Conclusion
CSR in India has undergone significant transformation over the decades, from being a voluntary philanthropic activity to a mandatory and strategic component of corporate governance. The evolving nature of CSR reflects the changing economic, political, and social landscape of the country. Today, CSR is not just about charity but about long-term sustainability, stakeholder engagement, and contributing to societal well-being. Going forward, businesses in India are expected to continue aligning their CSR activities with global sustainability goals, focusing on environmental protection, social equity, and inclusive growth.