Abstract
From the financial year 2014-15, the Indian corporate sector was made to comply with a newly introduced Sect. 135 (5) by the Companies Act of 2013. The rule required select companies to spend 2% of their average net profits on CSR initiatives. This paper tries to find if the companies have complied with the provision based on data for six financial years starting 2014-15. CSR performance of the top thirty companies forming part of the Bombay Stock Exchange (BSE) Sensex was evaluated and a CSR Spend-to-Obligation (CSR SO) Index was calculated comparing the actual spend vis-à-vis the obligatory requirement. A quantitative and a qualitative methodology were used for the analysis. The quantitative method involved computation of the CSR SO index at various levels. The “quality” of the CSR expenditure was also assessed by speaking to twelve experts from the Corporate to find out if the expenditure was in the right direction. The results show that the aggregate average six-year CSR SO index for the 30 Sensex companies is 0.98, suggesting that companies comply with the requirements of mandatory CSR. Moreover, the experts confirm that CSR spending is in the right spirit and direction. It certainly has a long-term orientation and qualifies as quality spending. A novel CSR-SO index is presented that compares CSR performance by comparing actual CSR spending with obligatory requirements. This index can act as a barometer for CSR performance and facilitate objective evaluation. Additionally, the qualitative assessment of CSR spending shows a holistic approach to evaluating CSR.
Similar content being viewed by others
Data Availability
Relevant data has been provided by way of Tables.
References
Adib, M., Zhang, X., A.A.Zaid, M., & Sahyouni, A. (2021). Management control system for corporate social responsibility implementation – a stakeholder perspective. Corporate Governance, 21 No(3), 410–432. https://doi.org/10.1108/CG-06-2020-0247
Agarwala, N., Pareek, R., & Sahu, T. N. (2022). Does board independence influence CSR performance? A GMM-based dynamic panel data approach. Social Responsibility Journal, (ahead-of-print). https://doi.org/10.1108/SRJ-10-2020-0433
Agarwala, N., Pareek, R., & Sahu, T. N. (2023). Do Firm Attributes Impact CSR Participation? Evidence From a Developing Economy. International Journal of Emerging Markets. Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/IJOEM-05-2022-0876
Annual Reports of the 30 BSE Sensex Companies for the years 2014-15 to 2019-20 accessed on 7th July 2021 from their respective websites.
Aswani, J., Chidambaran, N. K., & Hasan, I. (2021). Who benefits from mandatory CSR? Evidence from the indian Companies Act 2013. Emerging Markets Review, 46, 100753. https://doi.org/10.1016/j.ememar.2020.100753
Atale, N., & Helge, E. J. (2014). Proposed framework for government of India to effectively monitor mandatory CSR initiatives of public sector enterprises in India. Journal of Human Values, 20(1), 75–83. https://doi.org/10.1177%2F0971685813515594.
Bhagawan, P. M., & Mukhopadhyay, J. P. (2018). Does Mandatory Expenditure on CSR Affect Firm Value? Empirical Evidence from Indian Firms. Retrieved on 7th July 2021 from https://www.efmaefm.org/0EFMAMEETINGS/EFMA%20ANNUAL%20MEETINGS/2018-Milan/papers/EFMA2018_0469_fullpaper.pdf
Bhatia, A., & Chander, S. (2014). Corporate social responsibility disclosure by SENSEX companies in India. Management and Labour Studies, 39(1), 1–17. https://doi.org/10.1177/0258042X14535161
Bhattacharyya, A., & Rahman, M. L. (2019). Mandatory CSR expenditure and firm performance. Journal of Contemporary Accounting & Economics, 15(3), 100163. https://doi.org/10.1016/j.jcae.2019.100163
Brin, P., & Nehme, M. N. (2019). Corporate social responsibility: analysis of theories and models, EUREKA: Social and Humanities. – 2019. – № 5. – P. 22–30. https://repository.kpi.kharkov.ua/handle/KhPI-Press/50106
BSE (2021). BSE Sensex - Live Sensex and Stock Values. Retrieved 9 July 2021, from https://www.bseindia.com/sensex/code/16/
Chatterjee, B., & Mitra, N. (2017). CSR should contribute to the national agenda in emerging economies-the ‘Chatterjee model’. International Journal of Corporate Social Responsibility, 2(1), 1.
Deloitte (2009). Quality of earnings. Focus on integrity and quality [online] www2.deloitte.com. Available at: www2.deloitte.com/content/dam/Deloitte/in/Documents/risk/Corporate%20Governance/Audit%20Committee/in-gc-guality-of-earning-how-can-boards-understand-noexp.pdf [Accessed 8 June 2022].
Dharmapala, D., & Khanna, V. (2018). The impact of mandated corporate social responsibility: Evidence from India’s companies act of 2013. International Review of Law and Economics, 56, 92–104.
Dworkin, S. L. (2012). Sample size policy for qualitative studies using In-Depth interviews. Archives of Sexual Behavior, 41, 1319–1320. https://doi.org/10.1007/s10508-012-0016-6
ElAlfy, A., Palaschuk, N., El-Bassiouny, D., Wilson, J., & Weber, O. (2020). Scoping the evolution of corporate social responsibility (CSR) research in the sustainable development goals (SDGs) era. Sustainability, 12(14), 5544.
Elembilassery, V., & Gurunathan, L. (2018). Mandated CSR and mode of implementation: The indian context. Social Responsibility Journal, 14 No(4), 701–718. https://doi.org/10.1108/SRJ-08-2016-0147
Elmaghrabi, M. E. (2021). CSR committee attributes and CSR performance: UK evidence. Corporate Governance, 21 No(5), 892–919. https://doi.org/10.1108/CG-01-2020-0036
Garg, A., & Gupta, P. K. (2020). Mandatory CSR expenditure and firm performance: Evidence from India. South Asian Journal of Business Studies, 9 No(2), 235–249. https://doi.org/10.1108/SAJBS-06-2019-0114
Garg, A., Gupta, P. K., & Bhullar, P. S. (2021). Is CSR Expenditure relevant to the firms in India? Organizations and Markets in Emerging Economies, 12(1), 178–197. https://doi.org/10.15388/omee.2021.12.53
Gatti, L., Vishwanath, B., & Seele, P. (2019). Are we moving Beyond Voluntary CSR? Exploring theoretical and managerial implications of mandatory CSR resulting from the New Indian Companies Act. Journal of Business Ethics, 160, 961–972. https://doi.org/10.1007/s10551-018-3783-8
Ghosh, S. (2020). Narrative analysis of annual Reports—A study of corporate social disclosure in the pre-and post-mandate period. Mandated corporate social responsibility (pp. 45–83) Springer.
Ghosh, S., Pareek, R., & Sahu, T. N. (2022a). How far corporate governance and firms’ characteristics are relevant toward environmental sustainability? An empirical investigation. Rajagiri Management Journal, (ahead-of-print). https://doi.org/10.1108/RAMJ-02-2022-0027
Ghosh, S., Pareek, R., & Sahu, T. N. (2022b). Does board size matter for CSR performance? A GMM-based dynamic panel data approach. International Journal of Business Excellence, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1504/ijbex.2022.10049821
Ghosh, S., Pareek, R., & Sahu, T. N. (2023). U-shaped relationship between environmental performance and financial performance of non‐financial companies: An empirical assessment. Corporate Social Responsibility and Environmental Management, 1–11. https://doi.org/10.1002/csr.2456
Giacomini, D., Martini, M., Sancino, A., Zola, P., & Cavenago, D. (2021). Corporate social responsibility actions and organizational legitimacy at the peak of COVID-19: A sentiment analysis. Corporate Governance, 21 No(6), 1043–1058. https://doi.org/10.1108/CG-09-2020-0389
Grigoroudis, E., & Siskos, Y. (2004). A survey of customer satisfaction barometers: Some results from the transportation-communications sector. European Journal of Operational Research, 152(2), 334–353. https://doi.org/10.1016/S0377-2217(03)00028-6
Guha, P. (2019). Going to Scale: A Case Study of an Indian Educational NGO. Voluntas 30, 1365–1379 (2019). https://doi.org/10.1007/s11266-019-00099-3
Gupta, A. (2013). Mandatory CSR in the companies’ bill, 2011: Are we there yet?. NALSAR Student Law Review, 8.
Gupta, R., & Chakradhar, J. (2022). The consequences of mandatory corporate social responsibility expenditure: An empirical evidence from India. Business and Society Review, 127(1), 49–68. https://doi.org/10.1111/basr.12251
Gupta, R., & Kumar, P. (2022). Analysis of the actual CSR expenditure: A quantitative study on NIFTY 100 companies. International Journal of Indian Culture and Business Management, 25(2), 182–212.
Hazami-Ammar, S., & Gafsi, A. (2021). Governance failure and its impact on financial distress. Corporate Governance, 21 No, 1416–1439. https://doi.org/10.1108/CG-08-2020-0347
Iglesias, O. (2022). The End Of CSR (As We Know It) And The Rise Of Businesses With A Conscience. Retrieved 15 September 2023 from https://www.forbes.com/sites/esade/2022/12/01/the-end-of-csr-as-we-know-it-and-the-rise-of-businesses-with-a-conscience/?sh=129ff5217f16
Infosys Limited (2020). Annual Report 2020. Retrieved 9 July 2021, from https://www.infosys.com/investors/reports-filings/annual-report/annual/documents/infosys-ar-20.pdf
Jain, T., & Jamali, D. (2016). Looking inside the black box: The effect of corporate governance on corporate social responsibility. Corporate Governance: An International Review, 24(3), 253–273. https://doi.org/10.1111/corg.12154
Jain, A., Kansal, M., & Joshi, M. (2021). New development: Corporate philanthropy to mandatory corporate social responsibility (CSR)—a new law for India. Public Money & Management, 41(3), 276–278. https://doi.org/10.1080/09540962.2020.1714280
Jayaraman, A., D’souza, V., & Ghoshal, T. (2018). NGO–business collaboration following the indian CSR Bill 2013: Trust-building collaborative social sector partnerships. Development in Practice, 28(6), 831–841. https://doi.org/10.1080/09614524.2018.1473338
Joshi, H. (2018). Corporate risk management, firms’ characteristics and capital structure: Evidence from Bombay Stock Exchange (BSE) Sensex Companies. Vision, 22(4), 395–404. https://doi.org/10.1177/0972262918803172
Jouber, H. (2021). Is the effect of board diversity on CSR diverse? New insights from one-tier vs two-tier corporate board models. Corporate Governance, 21 No(1), 23–61. https://doi.org/10.1108/CG-07-2020-0277
Jumde, A. (2021). The law on CSR in India: An analysis of its compliance by companies through corporate disclosures. Journal of Corporate Law Studies, 21(1), 253–282. https://doi.org/10.1080/14735970.2020.1834265
Karhu, J. (2015). Corporate social responsibility and the law: Ideas for developing dynamic elements in mandatory CSR. Review of Market Integration, 7(1), 62–74. https://doi.org/10.1177/0974929215593877
Karnani, A. (2013). Mandatory CSR in India: A Bad Proposal. Stanford Social Innovation Review. Retrieved 7th July 2021 from https://ssir.org/articles/entry/mandatory_csr_in_india_a_bad_proposal
Kaushik, C. P., & Ray, S. (2021). A comprehensive analysis on CSR expenditure by PSUs during Rising Regulations after COVID-19 in India. Social Governance Equity and Justice, 1, 125.
Kim, S., & Sekyung Oh. (2019). Corporate social responsibility, business groups and financial performance: A study of listed indian firms. Economic research-Ekonomska istraživanja, 32(1), 1777–1793. https://doi.org/10.1080/1331677X.2019.1637764
Krishnan, A. (2018). Comparative analysis study on CSR expenditure in india: The case of manufacturing and service industries. International Journal of Pure and Applied Mathematics, 118(9), 421–443.
Kumar, R. (2020). The five strategic building blocks of mandated corporate social responsibility (CSR). Mandated corporate social responsibility (pp. 25–43). Springer.
Manchiraju, H., & Rajgopal, S. (2017). Does corporate social responsibility (CSR) create shareholder value? Evidence from the indian Companies Act 2013. Journal of Accounting Research, 55(5), 1257–1300. https://doi.org/10.1111/1475-679X.12174
Mattera, M., Soto Gonzalez, F., Ruiz-Morales, A., C. and, & Gava, L. (2021). Facing a global crisis - how sustainable business models helped firms overcome COVID. Corporate Governance, 21 No(6), 1100–1116. https://doi.org/10.1108/CG-07-2020-0309
Ministry of Corporate Affairs (2021). CSR Data & Summary Retrieved 9 July 2021, from https://www.mca.gov.in/content/mca/global/en/data-and-reports/company-statistics/csr-data-summary.html
Ministry of Company Affairs (2021). CSR Data & Summary Retrieved 7 July 2021, from https://www.mca.gov.in/content/mca/global/en/data-and-reports/company-statistics/csr-data-summary.html
Ministry of Company Affairs (2021). Companies Act, 2013 Retrieved 7 July 2021, from http://ebook.mca.gov.in/Actpagedisplay.aspx?PAGENAME=17518
Mukherjee, A., & Bird, R. (2016). Analysis of mandatory CSR expenditure in India: A survey. International Journal of Corporate Governance, 7(1), 32–59. https://doi.org/10.1504/IJCG.2016.077982
Mukherjee, A., Bird, R., & Duppati, G. (2018). Mandatory corporate social responsibility: The indian experience. Journal of Contemporary Accounting & Economics, 14(3), 254–265. https://doi.org/10.1016/j.jcae.2018.06.002
Nair, A. K., & Bhattacharyya, S. S. (2019). Mandatory corporate social responsibility in India and its effect on corporate financial performance: Perspectives from institutional theory and resource-based view. Business Strategy & Development, 2(2), 106–116. https://doi.org/10.1002/bsd2.46
Narayanan, S., & Singh, G. A. (2022). Will legalizing corporate social responsibility get businesses to participate in welfare activities – the case of India. Society and Business Review, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/SBR-10-2021-0199
Panwar, R., Nawani, S., & Pandey, V. (2018). Legislated CSR: A Brief Introduction. Corporate Social Responsibility (Business and Society 360, Vol. 2), Emerald Publishing Limited, Bingley, pp. 133–146. https://doi.org/10.1108/S2514-175920180000002004
Pareek, R., & Sahu, T. N. (2021). How far the ownership structure is relevant for CSR performance? An empirical investigation. Corporate Governance: The International Journal of Business in Society, 22(1), 128–147. https://doi.org/10.1108/CG-10-2020-0461
Poddar, A., Narula, S. A., & Zutshi, A. (2019). A study of corporate social responsibility practices of the top Bombay stock exchange 500 companies in India and their alignment with the sustainable development goals. Corporate Social Responsibility and Environmental Management, 26(6), 1184–1205. https://doi.org/10.1002/csr.1741
Pradhan, A. K., & Nibedita, B. (2021). The determinants of corporate social responsibility: Evidence from indian firms. Global Business Review, 22(3), 753–766. https://doi.org/10.1177%2F0972150918814318.
Prakash, A., Kumar, K., Khan, W., & Siddiquei, M. I. (2023). Self-Induced Versus Structured Corporate Social responsibility: The indian context. Measuring sustainability and CSR: From reporting to decision-making (pp. 167–178). Springer International Publishing. https://doi.org/10.1007/978-3-031-26959-2_17
Prasad, M. D. (2018). Companies Act, 2013: Incorporating stakeholder theory approach into the indian corporate law. Statute Law Review, 39(3), 292–302. https://doi.org/10.1093/slr/hmx016
Rajeev, P. N., & Kalagnanam, S. (2017). India’s mandatory CSR policy: Implications and implementation challenges. International Journal of Business Governance and Ethics, 12(1), 90–106. https://doi.org/10.1504/IJBGE.2017.085240
Ramya, S. M., & Baral, R. (2021). CSR during COVID-19: Exploring select organizations’ intents and activities. Corporate Governance, 21 No(6), 1028–1042. https://doi.org/10.1108/CG-09-2020-0426
Rendtorff, J. D. (2019). The Principle of responsibility: Rethinking CSR as SDG Management. Philosophy of management and sustainability: Rethinking Business Ethics and Social responsibility in Sustainable Development (pp. 205–220). Emerald Publishing Limited. https://doi.org/10.1108/978-1-78973-453-920191016
Rueth, R. (2017). CSR in India—Between tradition, Cultural Influence, Social structure, and economic growth: A Status Quo Analysis on CSR Engagement in India and a critical evaluation of the New CSR Law. In N. Mitra, & R. Schmidpeter (Eds.), Corporate social responsibility in India. CSR, sustainability, Ethics & Governance. Springer. https://doi.org/10.1007/978-3-319-41781-3_3
Satapathy, J., & Paltasingh, T. (2019). CSR in India: A journey from compassion to commitment. Asian J Bus Ethics, 8, 225–240. https://doi.org/10.1007/s13520-019-00095-2
Sharma, R., & Aggarwal, P. (2021). Impact of mandatory corporate social responsibility on corporate financial performance: the Indian experience. Social Responsibility Journal, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/SRJ-09-2020-0394
Sharma, B., Sharma, B., & Kaushik, A. (2020). Cooperate social responsibility in India: Issues and challenges. International Journal of Management (IJM), 11(5), https://doi.org/10.34218/IJM.11.5.2020.155
Singh, V. V., Pandey, M., & Vashisht, A. (2016). Sector wise comparison of corporate social responsibility by companies in India. International Research Journal of Management IT and Social Sciences, 3(5), 30–37. https://sloap.org/journals/index.php/irjmis/article/view/364
Sriram, M. (2018). Board characteristics and firm performance-a study of S&P BSE SENSEX in India. Afro-Asian Journal of Finance and Accounting, 8(3), 336–349. https://doi.org/10.1504/AAJFA.2018.093482
Subramaniam, N., Kansal, M., & Babu, S. (2017). Governance of mandated corporate social responsibility: Evidence from indian government-owned firms. Journal of Business Ethics, 143, 543–563. https://doi.org/10.1007/s10551-015-2804-0
Sukhramani, P. (2012). Corporate Social Responsibility and Indian Law. Available at SSRN 2020228. https://doi.org/10.2139/ssrn.2020228
Sun, S., Xu, H., He, M., Xiao, Y., & Niu, H. (2022). An alternative globalization barometer for investigating the trend of globalization. Applied Sciences, 12(15), 7896. https://doi.org/10.3390/app12157896
Tamvada, M. (2019). The dynamics of CSR, mandatory CSR laws, and corporate social performance in India. Corporate social responsibility in developing and emerging markets: Institutions, actors and sustainable development, 168–190.
Thacker, H. (2019). CSR Policies Around The World. The CSR Journal. November 2019. Retrieved 7th July 2021 from https://thecsrjournal.in/csr-policies-around-the-world/
United Nations (2022). THE 17 GOALS | Sustainable Development. [online] Sdgs.un.org. Available at: <https://sdgs.un.org/goals [Accessed 10 June 2022].
Varottil, U. (2018). Analysing the CSR spending requirements under indian company law. Globalisation of corporate social responsibility and its impact on corporate governance (pp. 231–253). Springer.
World Health Organization (2015). [online] Apps.who.int. Available at: <https://apps.who.int/ethics/nationalcommittees/NEC_full_web.pdf Accessed 28 June 2022.
Wu, M., & Kong, K. (2021). Business strategies responding to COVID-19: Experience of chinese corporations. Corporate Governance, 21 No, 1072–1099. https://doi.org/10.1108/CG-10-2020-0475
Funding
No external funding was obtained for the purpose of this research.
Author information
Authors and Affiliations
Corresponding author
Ethics declarations
Conflicts of interest/Competing interests
We declare that there is no conflict of interest or competing interest of any sort with any individual or organization.
Additional information
Publisher’s Note
Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.
Rights and permissions
Springer Nature or its licensor (e.g. a society or other partner) holds exclusive rights to this article under a publishing agreement with the author(s) or other rightsholder(s); author self-archiving of the accepted manuscript version of this article is solely governed by the terms of such publishing agreement and applicable law.
About this article
Cite this article
Kumar, A., Brar, V., Chaudhari, C. et al. Review of the compliance of the mandatory corporate social responsibility (CSR) by the Indian corporate sector. Asian J Bus Ethics 12, 469–491 (2023). https://doi.org/10.1007/s13520-023-00182-5
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s13520-023-00182-5