Table of contents About the author. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix Contents at a glance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xi Historical Perspective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Chapter 1 History of CSR in India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.1 The Vedic Age and the concept of Sarva Loka Hitam. . . . . . . . . . . . . . . . . . . . . 1 1.2 The King’s duty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.3 The citizen’s duty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1.4 CSR and religious obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1.5 CSR during the Freedom Movement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Chapter 2 Global Perspective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 2.1 CSR and sustainability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 2.2 Ancient Times. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 2.3 Modern Times. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 2.4 How to effectively communicate CSR activities?. . . . . . . . . . . . . . . . . . . . . . . 13 2.5 The Leaders of CSR globally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 2.6 Philosophy of CSR in various countries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 2.7 CSR as part of Directive Principles in countries although not mandatory as per statute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Chapter 3 Voluntary CSR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 CSR in India prior to the mandate in Companies Act, 2013. . . . . . . . . . . . . . . . . . . . . 19 3.1 Voluntary CSR and its impact. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 3.1.1 Voluntary Guidelines for CSR and their impact. . . . . . . . . . . . . . . . 20 3.1.2 Corporate Social Responsibility Voluntary Guidelines, 2009 . . . . . 21 3.1.3 From 2009 Guidelines to 2011 Guidelines. . . . . . . . . . . . . . . . . . . . 22 3.1.4 National Voluntary Guidelines on Social, Environmental and Economical Responsibilities of Business, 2011 . . . . . . . . . . . . 23 3.1.5 Annual Business Responsibility Report. . . . . . . . . . . . . . . . . . . . . . 24 3.1.6 Directive of SEBI. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 3.2 The pioneers amongst corporates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 3.2.1 A Glimpse of the then-CSR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 3.2.2 Pioneers in Indian CSR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 3.3 Broad category of activities taken up under CSR. . . . . . . . . . . . . . . . . . . . . . . 35 3.4 How the existing CSR investors reacted to the mandate. . . . . . . . . . . . . . . . . . 36 xiii
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Chapter 4 Mandatory CSR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Mandatory requirement of CSR under Companies Act, 2013 . . . . . . . . . . . . . . . . . . . 39 4.1 Legal provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 4.1.1 Companies Act, 2013. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 4.1.2 The Schedule VII. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 4.1.3 Companies (Corporate Social Responsibility Policy) Rules, 2014 . 45 Companies (Accounts) Rules, 2014. . . . . . . . . . . . . . . . . . . . . . . . . 51 4.1.4 4.2 Companies Act, 2013 and CSR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 4.2.1 Specific requirements under the new Act. . . . . . . . . . . . . . . . . . . . . 51 4.3 Penalty for non-compliance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 4.4 Schedule VII with illustrations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 4.5 Funds notified by the government. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 4.6 Compliance Charts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 4.7 CSR Audit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 Chapter 5 Other Provisions for CSR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 Other relevant provisions of CSR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 5.1 Accounting aspects under ICAI Accounting Standards with illustrations . . . . 86 5.1.1 GN (A) 34: ‘Guidance Note on Accounting for Expenditure on CSR Activities’ by ICAI. . . . . . . . . . . . . . . . . . . . . 86 5.1.2 Calculation of Net Profits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 5.2 Taxation aspects. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 5.2.1 A look at the Schedule VII activities . . . . . . . . . . . . . . . . . . . . . . . 104 5.2.2 Summary of relevant sections under Income-tax Act, 1961. . . . . . 108 5.2.3. Ambiguity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109 5.2.4. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109 5.3 CSR under DPE Guidelines for PSUs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110 Listed Company Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . 147 Chapter 6 Background. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147 6.1 Annexure I: Suggested format for business responsibility report. . . . . . . . . . 149 6.2 Annexure II: Principles to assess compliance with environmental, social and governance norms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156 Chapter 7 CSR during Project Phase. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161 7.1 Environment Protection Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161 7.2 Environment Impact Assessment (EIA) Notification 2006. . . . . . . . . . . . . . . 163 7.3 Categorisation of Projects and Activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164 7.4 When Environmental Clearance is Required. . . . . . . . . . . . . . . . . . . . . . . . . . 164 7.5 Making CSR a Pre-condition for Environmental Clearance. . . . . . . . . . . . . . 165
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Chapter 8 Reality Check. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167 8.1 Year in review – 2014-15. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167 8.1.1 The major investors in CSR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167 8.1.2 Chart-wise depiction of Expected vs. Actual. . . . . . . . . . . . . . . . . 172 8.1.3 More statistics. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173 8.1.4 Development sector-wise spending . . . . . . . . . . . . . . . . . . . . . . . . 173 Reasons reported for not spending. . . . . . . . . . . . . . . . . . . . . . . . . 174 8.1.5 8.1.6 Default and the reaction of regulators . . . . . . . . . . . . . . . . . . . . . . 176 8.1.7 Performance: PSUs vs. Non-PSUs. . . . . . . . . . . . . . . . . . . . . . . . . 176 8.1.8 Mode of implementation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177 8.2 Year in review 2015-2016. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177 8.2.1 Year in review – 2015-2016. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177 8.2.2 Statistics. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182 8.2.3 Development sector-wise spending . . . . . . . . . . . . . . . . . . . . . . . . 182 8.3 State-wise experience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183 8.3.1 State-wise experience in 2014-2015. . . . . . . . . . . . . . . . . . . . . . . . 183 8.3.2. State-wise experience in 2015-2016. . . . . . . . . . . . . . . . . . . . . . . . 184 8.3.3 Various CSR activities taken up. . . . . . . . . . . . . . . . . . . . . . . . . . . 185 Chapter 9 The Way Forward . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189 9.1 Benefits of CSR Obligation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189 9.2 Scope for improvement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191 9.2.1. The areas needing clarity/action. . . . . . . . . . . . . . . . . . . . . . . . . . . 191 9.3 Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 194 Chapter 10 Frequently Asked Questions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195 FAQs on CSR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195 10.1 Concept and Applicability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195 10.2 Expenditure qualifying as CSR investment. . . . . . . . . . . . . . . . . . . . . . . . . . . 199 10.3 Board and CSR Committee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200 10.4 CSR Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203 10.5 Acceptable reasons for not spending. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 204 10.6 Implementation mechanism. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 204 10.7 CSR activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 206 10.8 New companies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 210 10.9 Taxation and tax implications. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 210 10.10 Monitoring of CSR activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211 10.11 Profit from CSR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211 10.12 Local area meaning. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 212 10.13 Employee and employee benefit activities . . . . . . . . . . . . . . . . . . . . . . . . . . . 212 10.14 Holding and Subsidiary company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 213 10.15 Foreign company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 213 xv
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10.16 Non-compliance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 214 10.17 Accounting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 215 10.18 Contribution in Kind. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217 10.19 Amount of spending . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217 10.20 CSR vs Charity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217 10.21 Statutory payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 219 10.22 Private and unlisted public companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 219 10.23 CSR Report. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220 10.24 Setting off and carry forward. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220 10.25 CSR on the Website. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 221 Appendix I
Sample CSR Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 223 (A) Listed or unlisted Public Sector Company. . . . . . . . . . . . . . . . 223 (B) Listed or unlisted Private Sector Company . . . . . . . . . . . . . . . 237 (C) Private Sector Company without profit. . . . . . . . . . . . . . . . . . . 253
Appendix II Notifications, Circular and Rules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 261 1 MCA Notifications relating to Companies Act, 2013. . . . . . . . 264 2. MCA Notifications relating to the Companies (CSRÂ policy) Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 269 3. Relevant Circulars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 278 4. Proposed Amendments under the Companies (Amendment) Bill, 2016 as Introduced in Lok Sabha. . . . . . . . 298
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Corporate Social Responsibility is a buzzword today, especially after the coming into effect of the Companies Act, 2013. It has received significant attention over the past decade or so because of the importance being given by the government. As a result, both profit and non-profit organizations have been focusing on the environmental, social and business practices of corporations. Today CSR has become one of the core components of corporate strategy and an important tool to minimize conflicts with stakeholders. In this connection, it may be noted that CSR implies the twin responsibility of corporations of contributing towards the greater benefit of the society, especially that of the less privileged, and at the same time, of making itself accountable for the harms caused by its actions to the society. With the coming into effect of the new Companies Act, 2013, CSR has become a household name so far as professionals and the industry are concerned. But although the mandate is new, the concept of CSR is an age-old and time-tested concept. It has been in existence since the very concept of business came into being, albeit in its ‘voluntary’ avatar. Mandatory CSR is what the new Act introduces and with this, our mother Act also becomes the only legislation in the world to make CSR mandatory. But CSR is not a new concept in India. It would not be wrong to say that from the Vedic Ages, the country has seen an influence of social responsibility on business houses. The main objective of business houses was to create wealth for the society through manufacturing, selling and distribution of their products or rendering of services. But the Vedic principle of Sarva loka hitam was at the base of the economic structure of the country meaning that every business was to be run with an intent to do good to everybody in the society. The teachings in Veda instructed a businessman to ensure the continuous flow of resources for the people who needed it rather than the mere accumulation of such resources in the hands of the people of one section of the society. The prime responsibility of a business house, apart from wealth creation, was to generate value for the society by initiating a positive social change.
1.1
THE VEDIC AGE AND THE CONCEPT OF SARVA LOKA HITAM
While many think that CSR is a new concept, in reality it is not quite so. Learnings on corporate social responsibility can also be drawn from the Vedic 1
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literature contained in the Vedas and Shrimad Bhagavad Gita as well as two ancient Indian writings–one on political economics, the Arthashastra by Chanakya or Kautilya (dating back to the 4th century BC) and the Tamil work on ethics and morality titled Thirukkura by Tamil poet Thiruvalluvar (dating back to the 2nd century BC). Looking at the history, we know that in our country, thousands of years ago the kings used to practice their social responsibility because it was the norm, not a mandate like today. It was definitely the customary law. The legendary Chanakya’s book Arthashastra even spoke about the king’s duty. He writes that it is the government’s duty to ensure the well-being of the society, but for that matter business houses cannot stay away from this responsibility. The concept of Sarva loka hitam in Vedic literature refers to the ‘for the benefit of all stakeholders’, which is exactly what the new mandate in the Companies Act, 2013 seeks to address. Talking of corporate social responsibility, it is nothing but a duty, which is ‘dharma’ as per the Vedic literature.
Chanakya Sutra Two of Chanakya’s Sutras state–Sukhasya Mulam Dharma and Dharmasya Mulam Artha. On a closer study we will find that these sutras contain the very basis of corporate social responsibility. By the first sutra, he states that happiness is gained by doing things rightly and doing right things, and by the latter he states that Dharma without wealth is not possible, as a wealthless person cannot do anything for the society. The objective of doing business is to generate wealth or Artha. Only when a business earns that Artha it can fulfil its Dharma, which in turn will give Sukha or happiness by benefiting everybody around, which would ideally mean the stakeholders, being the shareholders, financers, employees, customers, creditors, suppliers, distributors, government and the society. This also indicates that business houses must strive to generate wealth by ethical means and share it equitably amongst stakeholders to bring happiness to oneself and others at the same time. The discussion on ancient concept of corporate social responsibility can go on, running into hundreds of pages, but that is not what we intend to do, as our main aim is to show how the concept of CSR has gradually evolved through the centuries. In this context it may be noted that just like in the Indian Vedic literature, the ancient concept of corporate social responsibility among business houses can be found amongst the Chinese, Egyptians and Sumerians. Modern day CSR, however, originated in the west in the 19th century.
1.2
THE KING’S DUTY
As already discussed earlier on in this chapter, in the ancient days, it was the duty of the king to ensure the well-being of his subjects. Some available shlokas and prayers prove this point. We will take up a few, for example–Prayer number 3:24:5 from the Atharva Veda says: shatahasta samahara sahasrahasta samkira 2
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which literally translates to ‘collect wealth with one hundred hands and distribute it with one thousand hands’. Similarly a Vedic prayer directs the king as follows: ‘take care of the welfare and growth of all your people. Then you will grow as the Sun grows and shines at dawn after its rise’. These go in to show how the ancient societies would groom their kings to take up social responsibility as they ascended to the throne. Going back to our earlier references of two of the most noted ancient literary works, Chanakya writes in the Arthashastra that the happiness of the king rests in the happiness of his subjects. The king is not supposed to have any self-interest, happiness and enjoyment. His sole happiness should lie in seeing the welfare of his subjects. In this context, Thiruvalluvar wrote in the Thirukkural that the king who rules based on the concept of dharma and protects his people from vices will be regarded as having divine quality. Similarly the popular Vedic prayer Loka samastha sukhino bhavanthu meaning ‘let everybody live peacefully’ also shows that the concept of CSR is deep-rooted in ancient Indian texts and literature and was widely followed by the kings in ruling their kingdom. In the epic of Mahabharatha, in the Shanti Parva to be precise, we get to learn that the public interest is to be given priority over the king’s interest. In the same way, there are ample lessons on corporate social responsibility that are to be learnt from the epics like the Ramayana, and religious texts like the Upanishads and the Puranas. All of these texts have talked of the leader engaging in welfare of the society as a matter of duty or responsibility.
1.3
THE CITIZEN’S DUTY
It can be said that the broad principles on which the concept of CSR has been based, are more or less the same as certain religious virtues and values like compassion, honesty, truthfulness, love, trust, charity and so on, that find place in ancient texts and literature. The word ‘company’ or ‘corporation’ may not have been specifically mentioned anywhere, but the directions and guidance is generally for the king and the citizens in the form of their duties that they are expected to perform for happiness of themselves as well as the greater happiness and benefit of the society. As for the citizen’s duty, one can trace back a verse from the Rig Veda which states that the rich people in the society must share their wealth with the poor for social development. In Karma Yoga (Chapter 3) in Bhagavad Gita, text 19 reads as tasmad asaktah satatam, karyam karma samacara, asakto hy acaran karma, param apnoti purusah which means ‘a person must continue to act as a matter of duty without being attached to the fruits of activities; it is by working without attachment, one attains the Supreme’.
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CSR AND RELIGIOUS OBLIGATIONS
There is no denying the fact that religious texts have a role to play in shaping the society. While the Hindu religious texts as detailed above have definitely paved the way for the modern day concept of CSR, sacred writings of other religions also largely talk of charity and social responsibility. In this context we may mention Zakat and Sadaka under the Islamic law, both being forms of charity mentioned in the Quran. While words like ‘company’ or ‘corporate’ are not expected to be found in religious texts, we may infer the spirit of whatever has been mentioned therein. In Islam, there are certain codes of ethics for the dutiful citizens (which of course should imply corporations as well). Zakat or Zakah is a type of alms-giving which is highly regarded in Islam as a religious obligation, kind of a tax for all Muslims who meet a certain criteria of wealth. Zakat is held high as a religious obligation next only to prayer. This is not charity, rather an obligation. Sadaka or Sadaqah, on the other hand, implies charity and benevolence, and in the modern context it would roughly translate to ‘voluntary charity’. It implies voluntary offering, the amount of which is to be decided by the offerer and may also be in the form of kind or kind words. It is the small daily acts of charity, and has no fixed amount or percentage. Zakat is one of the five pillars of Islam, the observance of which distinguishes the truly religious from the others. Where a person’s assets are more than what he needs, he is obliged to pay Zakat at a certain percentage on the surplus he has. And this is not just for a person, the corporations are also expected to pay Zakat. We can see that Zakat is very similar to the concept of the mandatory corporate social responsibility, the only difference being in enforcement, the first being enforced by religion, the latter by legal mandate under the Companies Act, 2013. The money raised through Zakat and Sadaka are used for social welfare activities like feeding the poor, donating clothes, free education and so on. Talking of CSR, Sikhism and Sikh people’s contribution must definitely not be ignored. It may be noted that the Sikhs are required to share 10% of their earnings as dasvandh or daashant (literally meaning tenth part) with poor people. This refers to the practise amongst the Sikhs of contributing one tenth of one’s salary in the name of the Guru. This is deposited in a common pool of resources of the community which is used to help the poor and the needy. This donation in the form of dasvandh is an obligation for everybody belonging to the Sikh religion and is highly valued in the community. Part of this money is utilised in the langar or the famous community kitchen of the Sikhs. Both of these are to some extent similar to the dharmada in Hinduism. It is like a contribution from customers on account of charity and donation. In certain trades, there is practice of dharmada collection. The amount collected is maintained in a separate account for contributions for social purposes. 4
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Historical Perspective
CSR DURING THE FREEDOM MOVEMENT
“The future depends on what you do today”, opined Mahatma Gandhi. Talking about CSR during the Indian freedom struggle, Mahatma Gandhi is one name that often comes to mind. He had proposed the concept of trusteeship wherein the boards of companies were made to realise their fiduciary position with respect to the stakeholders in the society. He played a major role in inspiring industrialists to take up social development work actively. During the time, for many pioneer industrialists, business had taken the backseat and taking more interest in socio-economic development had become the prime driving force. Apart from the concept of trusteeship, the other social activities that were predominant during the freedom struggle were welfare activities like setting up of colleges, schools, hospitals, temples, rest rooms for pilgrims, research institutions etc. by such industrialists. The following is a discussion on the pioneering social activities of some prominent industrialists of the time.
Bajaj Group of Companies A close associate and follower of Mahatma Gandhi and a freedom fighter himself, Shri Jamnalal Bajaj, was the founder of the Bajaj Group of companies in 1926. The group went on to grow bigger in course of time with 24 companies, including 6 listed entities. During the freedom movement Shri Bajaj adorned many top positions including that of the Chairman of the reception committee for Nagpur Session of the Indian National Congress. He also participated in the non-cooperation movement and Satyagraha, and was also imprisoned by the British for a while. Being an industrialist, he was in a position to fund many such nationalistic initiatives that were taken up as a part of the freedom struggle. Shri Jamnalal Bajaj was much inspired by the way of living of Mahatma Gandhi and his principles of Ahimsa, promoting Khadi, discouraging use of imported goods and so on. Although initially he was conferred the title ‘Rai Bahadur’ by the British in recognition of his contribution of money in the War Fund during the First World War, he later surrendered the title during the non-cooperation movement in 1921. He travelled across the country spreading social causes and concerns like removal of untouchability, promotion of Khadi and village industries etc. He also formed trusts and invested money there for the upliftment of the poor people. After his demise in 1942, in acknowledgement of his social initiatives, the Bajaj Foundation instituted an award known as the Jamnalal Bajaj Award that was given to Indians as well as foreign citizens in recognition of their social activities and initiatives. Notable awardees of this prestigious award include Nelson Mandela and Desmond Tutu.
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The AMUL Social Movement In Anand, a very small town of Gujarat, prior to India’s independence, the milk farmers were having a difficult time as they were being exploited by anticompetitive trade practices of the local trade cartel, the Polson Dairy, which procured milk from them at minimum rates to sell the same to Mumbai. Inspired by the on going freedom movement, the farmers also protested by going on a milk strike. The great Indian visionary and freedom fighter Sardar Vallabhbhai Patel was also approached by them for a solution. He gave them the idea of a cooperative movement, which they followed. A local freedom fighter who had been imprisoned by the British a number of times, Shri Tribhuvandas Patel, helped to found a dairy co-operative in the year 1946 in Anand. Soon a very young Mechanical Engineer from Kerala, Verghese Kurien, who had been recruited to manage a government dairy in Anand came in touch with Tribhuvandas Patel. He was bored with his monotonous job that was devoid of any challenges and was contemplating leaving it. On Patel’s request he agreed to stay back for a few months initially, not knowing that Anand would be his home for the rest of his life and he would eventually come to be named as the ‘Milkman of the Nation’. Dr. Kurien almost revolutionised the milk industry. He started with helping farmers in repairing their machineries only to strengthen the co-operative movement. By 1955 Anand Milk Union Limited, more popularly known as AMUL, was born. Soon enough, Kurien also succeeded in the ‘Operation Flood’, which converted India from a milk importing nation to a milk surplus nation that could export to other countries. The AMUL movement is definitely a predecessor to the concept of mandatory CSR in India, the only striking difference is perhaps that AMUL was formed to uplift the milk farmers, and thereby, improve their social status and standard of living, whereas the modern CSR concept under the Companies Act, 2013 is more driven by the premise of utilisation of an existing company’s profits for greater benefit of the society. However, the objective remains the same.
Godrej Industries By launching the first soap in the world without animal fat in 1918, Godrej not only showed their support in the Swadeshi Andolan (the then version of ‘Make in India’) but also put forward the premise of Ahimsa or non-violence. Some major CSR activities were started by Godrej. In 1920 a donation of INR 3 lakhs was given to the Tilak Swaraj Fund towards the upliftment of the downtrodden. Also, 25% of the shares of the Godrej Group’s holding company Godrej & Boyce were given to a trust that invests in the environment, healthcare and education.
Birla Group During the freedom movement a few members of the Birla family were closely associated with Mahatma Gandhi and would often finance the Indian National 6
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Historical Perspective
Congress. Few of the names to reckon are Jugal Kishore Birla, Ghanshyam Das Birla and Rameshwar Das Birla. G.D. Birla was one of the pioneers of corporate social responsibility. He was the president of the Harijan Sevak Sangh founded by Mahatma Gandhi in 1937 to address problems related to untouchability in the country. J.K. Birla was a major contributor of funds for the freedom struggle, and so was G.D. Birla. Immediately after independence in the year 1950, R.D. Birla established a modern hospital with advanced treatment facilities for providing free treatments to the needy in Mumbai.
Walchand Group Walchand Hirachand Doshi was another industrialist who majorly contributed funds and efforts during the freedom movement. The founder of the Walchand Group, Shri Doshi pioneered the setting up of India’s first modern shipyard, first aircraft as well as the first car factory apart from a number of construction companies, sugar plantations, sugar factories, confectioneries and engineering companies. Along with Annie Besant and M.R. Jayakar, Walchand Doshi was among the first sponsors of the Free Press of India, the pioneering national news agency founded in 1927. He also funded many activities of the INC. Walchand faced tough competition from foreign industrialists and yet kept up the struggle to keep his companies in the forefront, an effort that won him accolades in swadeshi and non-cooperation movement. He was one of the founding members of the Maharashtra Chamber of Commerce, Industry & Agriculture and was its President from 1927-38. He also founded the Indian National Ship owners’ Association in 1929 and held the post of its President from 1929-48. He also played a role in founding the Indian Sugar Mills Association and was associated closely with Indian Merchants’ Chamber, Deccan Sugar Factories Association, Deccan Sugar Technologists Association, Association of Indian Automobiles Manufacturers and Automotive Research Association of India. During the freedom struggle and immediately after India’s independence, the Walchand Group was one of the ten largest business houses in the country and definitely the most diversified one. Shri Doshi is remembered for his pioneering role for a number of Indian industries. He started several charitable trusts for social welfare, besides establishing educational institutes and boarding houses.
TATA The Tata Group has contributed in every sphere of human interest, including science, education, art and culture, medicine and community development. The story of Tata Group’s commitment to the society is not new. During the freedom struggle, one of the industrialists that contributed largely was Jamsetji Nusserwanji Tata. Philanthropy was deeply rooted in the group’s work.
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J.N. Tata envisioned the necessity of a technologically proficient generation for hastening industrial progress. Hence, way back in 1892 he established the J.N. Tata Endowment Scheme (which later came to be known as Tata Scholarship) for higher education to help Indian students, irrespective of caste or creed, to pursue higher studies in England. Over just three decades, the scholarship became so prominent that two out of every five Indian Civil Service officers were Tata scholars. For advanced scientific education and research, the group pioneered the establishment of Indian Institute of Science in 1911 after the death of J.N. Tata. It was here that C.V. Raman undertook his research that won him the Nobel Prize in 1930. Various trusts were set up for supporting various social issues like science and technology, upliftment of women and children, scholarships, higher education, removal of purdah system and untouchability. Tata Group also provided some money towards the setting up of Rabindranath Tagore’s dream abode of peace, the Shantiniketan. The city of Jamshedpur was envisioned as a model city, offering an unparalleled standard of living to its residents. With wide streets planted on both sides with shady trees, this city founded back in early 1900s still continues to amaze people. The Group has also promoted sports, art and culture. Back in the 1920s, the Group sponsored athletes and the Indian team going for the Olympic Games. For a nation struggling for independent existence, representing its own name in an international competition gave rise to an unparalleled nationalism. Under the Group’s patronage, India won the gold medal for hockey in the 1928 Olympics at Amsterdam. The Group established a number of sports academies. While J.N. Tata had his own contribution in the freedom struggle, it can be rightly said that by founding this Group he sowed the seeds of self-reliance, and consequent development in the country.
Conclusion While the above paragraphs list out a few of the industrialists and business houses that majorly contributed during the freedom movement in India, the list is in no way exhaustive. There are numerous other business houses and individual industrialists who made a mark and contributed in some way. The reference to their contribution in various literature and historical books and newspapers has so far been made only in the context of patriotism and nationalistic activities, but a reading of the above in detail, leaves no doubt that those were, to a large extent, a means of fulfilling their corporate social responsibility as well. Books on History will yield many more such historical stalwarts and vanguards of CSR in India.
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