A
company exists because of the society which can also be described as its
sole source for earning profits. There is no company that can function
without the help of a proper societal structure. Hence societies often act like
assets for a company. Unlike the material assets for which the company
conducts regular maintenance, the intangible assets like the society
also require some specific obligations to be fulfilled by the
company. Certain responsibilities that are termed as Corporate
Social Responsibilities need to be fulfilled by the company to
return its favour towards the society. These responsibilities can
range from a100 wide range of
activities in the form of social services, charities etc. These
responsibilities often yield to create a good120
impact for the company as it increases the trust among consumers which
in turn upholds the dignity of the company for creating a better future.
As per
section 135, every company with a net worth of Rs. 500
crore or more or a total turnover which is Rs. 1000 crore or more, or a
net profit which has a yield of Rs. 500 crore or more in its immediately
preceding financial year must constitute a CSR committee which shall
constitute200 three or more
directors out of which at least one must be designated as an
independent director.
The
historical evolution of CSR derives its roots from the late 1800s. During
that period, work culture in the factories and industries was240 not paid the required attention that it
deserved. Business owners and investors were also unaware of the fact
that certain obligations must be fulfilled towards the welfare of the
society. Hence with the rise of philanthropic approach, businesses
slowly started to realize the necessity of CSR.
CSR
creates an impact on both the business and the society. The operational
structure300 which
required long working hours with minimum to no benefits for the
employees gradually came to an end. The production structures of the
companies were re-designed to maximize the potentiality
of its employees. Factory conditions were also improved keeping in mind the
safety of the workmen.
In
1953, an American economist named Howard Bowen published his book named 'Social
Responsibilities360 of a Businessman'
in which the term Corporate Social Responsibilities came into
existence for the first time. This particular book recognized the impact
that corporate organizations can create upon a society as far as welfare
and development are concerned. This400
forced the business tycoons to perform their obligations for a greater
and common good.
In the
early 1900s, businesses were only meant to earn profits. Hence, the scope of
CSR was quite narrow if compared to the modern age. Industrialists back in the
day were only driven with the aim of earning profits. They did not perform any
obligations towards the society nor the society demanded anything from
them. This was due to the lack of awareness among the people480 as they saw businesses as profit making
bodies and not as charitable institutions. But as time passed by, people
started500 demanding different
rights that companies became bound to fulfil.
This
includes reduction in working hours, prohibition of unfair trade practices etc.
In the early 1960s, this notion of capitalism and profit making began to
shift as companies started to recognize their obligations towards the society.
With the emerging of modern problems for the modern society,
companies also focused on various charitable doings and not just profit
making. As CSR continued to develop, companies also designed new decision-making
strategies, in which their decisions were not only meant for earning
profits, but also featured practices that were meant to benefit the600 society and the people.
Therefore,
companies started to view society as an asset. At this point of time,
CSR mainly included notions such as protection of environment, waste
management, labour laws etc. With the emergence of globalization
in the 1990s, the scope of CSR became more prevalent as various agreements
involved companies to provide their consent. Companies became more
focused on developing eco-friendly techniques of production and other
possible green ways of conducting business.
In the
21st Century, companies have started to include the CSR policies in their
internal operations because businesses nowadays are inclined towards getting
positive feedback from700
their consumers and have become more consumer-friendly. Hence companies
often engage in CSR activities in order to refine their goodwill720 in the market, as well as attract
consumers. The scope of CSR has widened and companies nowadays allocate a
separate amount of fund for CSR activities. CSR activities are not only beneficial
for the society but also the business as well. As a matter of
fact, CSR also helps the company to recruit talented human resources,
as employees these days often tend to find values in the organization they are
working.
This
creates an upper hand for the company as800 well as the individuals attached
to it. The course of Industrialization has cherished as well as
caused numerous side effects to the society. But in order to evolve as
developed nations, industrialization is also necessary. Hence, the aim
is to840 strike an ecological
balance by keeping environmental harm to a minimum.
Nowadays,
every multinational company has an in-house Committee. These Committees
are responsible for allocating and providing advisory reports to the Board
of Directors, for the fulfilment of CSR activities. The Board of
Directors examines and verifies the reports and provides consent to execute
such CSR activity. Recommendations and contents900
of the CSR policy may vary from company to company depending on its size
and volume of operations.
CSR
has become an important element when it comes to global business practices
and designing strategies. The United Nations is also involved in the
surveillance for whether a company or an organization which fits the parameters
of falling under the purview of960
CSR is performing its activities or not. Hence, the United Nations acts as a watchdog
over the companies, forcing them to carry out their obligations towards
the society.
The
United Nations Committee on Human Rights restricts the companies to engage1000 in unlawful trade practices
which might harm consumer interests. Moreover, the OECD guidelines also
prohibit the companies to get involved in corruptions, respect the validity of labour
laws, to curtail activities that pose threat to the environment and may cause
pollution etc. These guidelines are often comprehensive and companies might
have to interpret them accordingly.
The International
Labor Organization is also a governing body for businesses and
organizations. Their focus is to supervise and interpret labour laws and
ensure that1080 companies are
following them and the interests of the workmen are taken care of. These
generally include relief from long1100
working hours, provision of minimum wages, safe and secure working conditions,
elimination of child labour etc. Workmen should be considered as assets of
the company as they are responsible for all the lower and middle
level management tasks. In other words, they are the
'powerhouse' of the company and hence the company must meet its
obligations towards them.1157
