AN ANALYSIS OF CORPORATE ENVIRONMENTAL RESPONSIBILITY
Author: Omkar Apugol
Alliance School of Law, Alliance University, Bengaluru
ISSN: 2582-3655
Abstract
The environment is currently in danger of irreparable damages from human activities such as mining, burning fuels, deforestation, dumping garbage in the oceans, etc. A major reason for this damage is in fact industries and factories, it is estimated that around 70% of the world’s pollution and emission is caused by major industries in the world. The concept of Corporate Social Responsibility adds a sense of responsibility for such companies or corporates to take up liability of the social problems in their vicinity and help in protecting the environment either through direct actions such as afforestation or indirect actions like reduction in the use of freshwater. The Companies Act, 2013 has made CSR mandatory for large companies, Section 135 explains the criterion for CSR. The amendment in 2019 has added penal sanctions against the heads of the companies which do not comply with their CSR initiatives or do not utilize their funds appropriately within the given time duration, the government wants to strong-arm companies into complying with their responsibilities as well as reprimand them for not fulfilling their goals. This paper shall try to explain the concept of CER under the umbrella of CSR. The concept of Triple Bottom Line shall be discussed in the paper and a part of the paper shall look into the CER initiatives of developed nations and compare those initiatives to that of India. The paper shall also shed light on the commendable efforts being carried out by companies in the field of CER on a global as well as a national scale. The paper shall finally provide a critique of the current application of CER and analyze how the 2019 amendment to the Companies Act has impacted CSR.
- Introduction
Traditionally it was believed that the role of protecting the environment and providing amenities to the people was that of the government and authorities of the country. But in the 1950s, social pioneers like Howard Bowen and Peter Drucker coined the term of Corporate Social Responsibility abbreviated to CSR. CSR can be defined as the obligation or responsibility on companies to “give back” to the society by utilising a part of the company’s profits into social causes such as the development of infrastructure, improvement of sanitation, providing free or cheap education and the list can be non-exhaustive as social issues could be umpteen in number. One newer addition to Corporate Social Responsibility is Corporate Environmental Responsibility or CER, one can consider CER to be a subsidiary topic of CSR. Where under CSR the companies aim to utilise a fraction of their profits for social causes, under CER the companies are specifically dedicated to utilising their profits for the betterment of the environment. This betterment can be either by direct methods such as planting trees or indirect methods such as improve the efficiency of the industry or curtail the redundant use of energy.
1.1 Rationale
The environment is the collective surroundings that we humans live in. The actions of humankind have over time deteriorated the environment and currently, we are facing a severe environmental crisis which if not curtailed shall lead to an apocalyptic scenario in the future. The major individual contributors to environmental degradation are industries; it is argued that major industries in the world are responsible for more than 71% of the global emissions since 1988. There is a need to not only hold the polluters responsible for their acts but also to encourage them to find greener alternatives to their methods of business, one such encouragement is provided through Corporate Environmental Responsibility aka CER. CER is a management concept under which businesses/industries try to reduce their carbon footprint. Overtime CERs have become a vital part of the business model of industries as a well-executed CER plan can garner good publicity for the company. Although CSR was conceptualized as management policy, India through the Companies Act of 2013 became the first country to make CSR/CER a mandatory requirement for all companies which fell under the categories mentioned under the Act. Since more and more people have become aware of the environmental problems that are threatening the mere existence of our race, the governments have started proactively implementing the CER in their countries. CER along with strong environmental protection laws can help countries achieve Sustainable Development.
1.2 Scope
This paper shall try to explain the concept of Corporate Environmental Responsibility under the umbrella of Corporate Social Responsibility. The concept of Triple Bottom Line shall be discussed in the paper and a part of the paper shall look into the CER initiatives of developed nations and compare those initiatives to that of India. The paper shall also shed light on the commendable efforts being carried out by companies in the field of Corporate Environmental Responsibility on a global as well as national scale. The paper shall finally provide a critique on the current application of CER and analyse how the 2019 amendment to the Companies Act has impacted Corporate Environmental Responsibility.
2.0 Definitions
The International Standards Organisation explains social responsible as the responsibility of an organisation for the impacts of its decisions and activities on society and the environment through transparent and ethical behaviour that:
- Contributes to sustainable development, including the health and welfare of society
- Takes into account the expectations of stakeholders
- Is in compliance with applicable law and consistent with international norms of behavior, and
- Is integrated throughout the organization and practiced in its relationships.[1]
Social Responsibility consists of 7 core subjects of governance and one among them is environment, according to the International Standards Organisation there are certain aspects of environmental social responsibility like-
- Prevent pollution; reduce emissions of pollutants into the air, water and soil as much as possible
- Practice green procurement – evaluate suppliers of goods and services on their environmental impacts
- Use sustainable, renewable resources whenever possible
- Conserve water in operations
- Practice life-cycle approach(including disposal) – aim to reduce waste, re-use products or components, and re-cycle materials[2]
2.1 What is Corporate EnvironmentalResponsibility and its relation to Corporate Social Responsibility?
Corporate Environmental Responsibility is a part of Corporate Social Responsibility (CSR). Now there is no set definition of Corporate Social Responsibility but the common ones are
“CSR is about how companies manage the business processes to produce an overall positive impact on society”[3]
Or
“Corporate Social Responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large.”[4]
Corporate Social Responsibility is inclusive of the shareholders, the society, the local communities, NGOs and the Environment in general. Companies can choose one or multiple parts of what contains CSR; CSR as a concept varies from country to country for instance in the European Union CSR is focused on operating the core business in a sustainable and socially responsible manner, this is complemented with investments in communities for solid business. In the United States, CSR has been seen through the concept of philanthropy rather than responsibility because in a capitalistic country like the USA, companies make profits without any barrier to do so other than to pay their taxes, these companies then donate their profits to charitable causes, this is seen by most companies as a marketing strategy than an act of genuine philanthropy. Among the two concepts the European concept is more inclusive to CSR as they believe to inculcate CSR in their business model, which helps improve efficiency of the companies and also makes sure that the growth is much more sustainable in nature.
But when it comes to CSR, we ca0nnot follow a ‘one shoe fits all’ concept as every country will have different requirements because of economic strength and social backgrounds and the companies will also priorities their goals based on the country they are carrying out business in.
2.2 CSR in India
In 2013, the government of India passed the Companies Act of 2013, this Act made it mandatory for companies to utilise at least 2% of their profits for CSR based projects. Section 135 of the Act says-
Every company having a net worth of rupees five hundred crores or more, or turnover of rupees one thousand crores or more or a net profit of rupees five crores or more during any financial year shall constitute a Corporate Social Responsibility Committee of the Board consisting of three or more directors, out of which at least one director shall be an independent director.
2. The Board’s report under sub-section (3) of section 134 shall disclose the composition of the Corporate Social Responsibility Committee.
3. The Corporate Social Responsibility Committee shall,—
a. formulate and recommend to the Board, a Corporate Social Responsibility Policy which shall indicate the activities to be undertaken by the company as specified in Schedule VII;
b. recommend the amount of expenditure to be incurred on the activities referred to in clause (a); and
c. monitor the Corporate Social Responsibility Policy of the company from time to time.
4. The Board of every company referred to in sub-section (1) shall,—
a. after taking into account the recommendations made by the Corporate Social Responsibility Committee, approve the Corporate Social Responsibility Policy for the company and disclose contents of such Policy in its report and also place it on the company’s website, if any, in such manner as may be prescribed; and
b. ensure that the activities are included in the Corporate Social Responsibility Policy of the company are undertaken by the company.
5. The Board of every company referred to in sub-section (1), shall ensure that the company spends, in every financial year, at least two percent. of the average net profits of the company made during the three immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy:
Provided that the company shall give preference to the local area and areas around it where it operates, for spending the amount earmarked for Corporate Social Responsibility activities:
Provided further that if the company fails to spend such amount, the Board shall, in its report made under clause (o) of sub-section (3) of section 134, specify the reasons for not spending the amount.
Explanation.—For the purposes of this section “average net profit” shall be calculated in accordance with the provisions of section 198.[5]
Countries such as Sweden, Australia, Norway, Netherlands and France all have a CSR mandate for the companies based out of their countries, but India became the first country to make it a statutory provision for companies to implement the CSR initiative.
3.0 Corporate Environmental Responsibility
CER is concerned with the environmental aspects of CSR. CER consists of ideas such as waste eliminations, lowering emissions, improve efficiency and increase productivity of the use of natural resources which are harmful to the environment. Along with the aforementioned concepts, companies under their CER initiatives can also engage in activities such as afforestation and water conservation.
Globally, companies have adopted alternative concepts such as
- Energy Efficient technology
- Waste disposal and management
- Sustainable procurement of raw materials
- Transportation of goods through efficient means
- Environmental Management Systems
These alternative concepts are not a direct correlative of CER but try to negate the effects of the manufacturing processes of the company.
· Why should a company engage in CER?
There are many direct and indirect benefits that a company may acquire should they plan on investing in CER initiatives.
One major reason and a heavily influential factor is that by investing in environmentally friendly technologies or efficient systems the companies involved can help curb their energy consumption or carbon output which is rewards by the government in the form of subsidies or tax and tariff reductions.
As more and more people are educating themselves regarding environmental degradation and global warming, the onus is on companies to prove that they are environmentally friendly and are doing their bit to reduce the mass degradation of the environment. This is exemplified by successful green campaigns which earned the companies good coverage by the media, in turn helping as a form of advertisement for the company.
The company’s shareholders, employees, partners along the consumers have become vary about their carbon footprint, hence a comprehensive CER initiative and environmental management will only help the company gain accolades.
A positive green initiative also helps build a company’s reputation in the industry. As more people are preferring brands that are environmentally committed, a good green plan helps the brand build a customer loyalty base. Increasingly demanding customers are aware of environmental issues, gaining a green reputation can help the company differentiate from other companies.
3.1 Sustainable Management System- Triple Bottom Line
Triple bottom line is a framework used by companies consisting of social, environmental and financial parts. The triple bottom line framework helps organizations to evaluate their performances in a wider perspective and helps create better business values[6]. The term triple bottom line was coined by John Ellington in the year 1994.
Triple bottom line consists of:
- People (the social equity bottom line)
- Profits (the business bottom line) and
- Planet (the environmental bottom line)
Under the Planet bottom line companies try to expand their accounting principles to the environmental performance of the company along with their financial performance.
The companies under EBL try to implement sustainable environmental practices, these companies try to earn profits but also to cause as little harm to the environment around them. An endeavor of such sorts helps the companies reduce their ecological footprint by carefully managing the company’s consumption of energy (non-renewable) and decreasing manufacturing wastes and also reduce the toxicity of wastes through processes before releasing it into the environment.
TBL businesses conduct a life cycle assessment of their products to analyze the true environmental cost of their products from acquiring raw materials to manufacturing and finally when the product is disposed of by the consumer. Currently, the cost of disposal of non-degradable or harmful products is taken care of by the government and the ill effects of such disposal are suffered by the nearby residents of the disposal site. In the TBL companies which make a product that creates waste problems should not be accepted or allowed by society or government. Businesses should be held accountable for their wastes and if any company sells a product that has toxic effects then the cost of the disposal of such a product must be borne by the company itself.[7]
Triple Bottom Line has been accepted by various companies, since many companies are now multinational entities they wish to conduct themselves in a socially viable manner and there has been higher demand from the consumers and investors to make sure that the company takes into account its social and environmental impact, either through fair trade and ethical practices and use of sustainable materials from their suppliers as well as service providers.
The fact that the planet’s carrying capacity is at a risk and if we wish to avoid any major natural catastrophe then we need a highly conclusive reform of our global financial institutions and the TBL helps direct us towards a sustainable path.
Any argument along the lines that TBL in fact eats into the company’s profits has been debunked by various examples, for instance, Whole Foods (a major retail store chain in the United States) devoted 5 percent of its profits to charities, the company received praise and goodwill for their actions and this, in turn, helped build customer loyalty and increase the company’s profits.[8]
3.2 Examples of companies with appreciable CER
Many companies have done a commendable work with their corporate environmental responsibilityinitiatives across the world and in India. Globally companies have been playing their part to reduce their emissions and reduce their carbon footprint-
- McDonald’s
McDonald’s is among the largest fast-food chains in the world and as a result, they have taken up the responsibility of going green by incorporating the outcome of fast food on human health as well as the company’s overall energy usage. The company has started using energy-efficient appliances in their restaurants which helps them reduce the company’s energy usage. McDonald’s in various countries has set up permeable concrete that absorbs water and helps in rainwater harvesting. The company also acquires their meat from farms which keep in mind animal rights and follow ethical trade practices.
- Dell
Dell is a leading computer manufacturer in the world. To curb its environmental impact, Dell has inculcated the safe disposal of their products by setting up efficient recycling stations across the world. Dell accepts laptops, computers, printers and other electronic devices from customers and safely disposes of these devices which reduces the e-wastage causes by direct dumping of these products.
- Hewlett and Packard
Hewlett and Packard (HP) is a computer company that has applied similar undertakings like Dell Inc., the company uses sustainable manufacturing processes to reduce their environmental impact. The company has taken steps to ensure that the materials used in their products are 100 percent recyclable and have also set up e-waste recycling plants across the world.
Google provides its services on servers which produce a lot of heat and they negate their environmental impact by slashing their energy usage and supporting green projects around the world. Google has invested in research and development of efficient data collection centers which has reduced their energy consumption. Google has also set up solar power plants and windmill plants for tapping renewable energy sources.
- Walmart
Walmart is in the first place on the Fortune 500 list of companies. Being one of the world’s largest chain retailers, the company being a trendsetter decided to not accept goods or materials from suppliers who cut corners on their environmental initiatives and have high carbon emissions. The Walmart retail stores utilise 100 percent of renewable energy sources and use fuel-efficient methods on their transportation systems.
- Coca-Cola
Coca-Cola is the largest soda beverage producing company in the world. The company has made multiple strides in their environmental goals, including water preservation, energy, and climate protection and sustainable packaging. The company also is active in community recycling programs, the use of efficient energy in production and greener packaging designs.
- Starbucks
Starbucks is a high-end café which is prominent around the world. The company is going green by enforcing measures such as a bean to cup approach and the use of recycled coffee grounds in their coffee tables set up in the stores. The company makes sure that they use coffee beans from producers who exercise free trade and ethical practices in labour and environmental sustainability.[9][10]
- Nike
Nike had in the past come under heavy scrutiny for not being a sustainable corporation, but an entire overhaul of the company’s inner working has helps Nike become one of the greener companies in the world. The company disclosed their supply chain and their production practices to the world, the company also set up a mobile phone app which helps designers make green choices regarding the materials they use for their products. The company reduced their packaging waste by resizing their packaging boxes. Nike is partnering with NASA and other government agencies to incite innovation in chemistry to make the processing of raw materials into goods a greener process.[11]
Back home, Indian companies have also made considerable head way in their environmental initiatives-
Maruti Suzuki has reduced its groundwater consumption by over 60 percent from the financial year 2015. The company used 13,900 million cubic liters of water between the years 2015 and 2017, they were successful in reducing the usage of water per vehicle by 200 litres. The company was able to do so by increasing the use of recycled water by employing rain water harvesting techniques which they collected in water lagoons created the summer before.Maruti Suzuki meets 95% of its energy requirements through cleaner energy forms like natural gas.
Mahindra has through their ‘Mahindra Rise’ campaign have pledged to reduce their usage of papers and the company also aims to clean the polythene bags (plastic bags) in oceans and landfills.[12] Dabur, a household fast-moving consumer goods (FMCG) company used 11 percent less water and increased its dependence on recycled water by 9 percent. Vedanta, a metal mining company also employed recycled water for their mining process.
India’s largest paint manufacturer, Asian paints, was successful in using 22% of its energy through renewable sources. Even service sector companies have taken up greener initiatives, Union Bank switched their ATMs to solar-powered ones to have on electricity consumption. Companies such as Cummins, Karnataka Bank, Tata and Bharat Heavy Electricals Limited (BHEL) have invested their funds in afforestation and maintenance of these forests. Reliance Industries Limited (RIL) has installed photovoltaic modules (converts light to electricity) across their manufacturing plants, CEAT a tyre manufacturing company has opted to use silica instead of carbon black in their tyres, carbon black is harmful to the environment after the tyre has been disposed of.[13]
4.0 Research Questions
4.1 Amendment in the CSR provisions
The current 2019 amendment passed by the incumbent government made amendments in the Companies Act of 2013. The amendment has made certain changes in section 135 of the Act, the amended section reads as follows
In section 135 of the principal Act,—(a) in sub-section (5), —(i) after the words “three immediately preceding financial years,”, the words “or where the company has not completed the period of three financial years since its incorporation, during such immediately preceding financial years,” shall be inserted;(ii) in the second proviso, after the words “reasons for not spending the amount” occurring at the end, the words, brackets, figure and letters “and, unless the unspent amount relates to any ongoing project referred to in sub-section (6), transfer such unspent amount to a Fund specified in Schedule VII, within a period of six months of the expiry of the financial year” shall be inserted;(b) after sub-section (5), the following sub-sections shall be inserted, namely:—“(6) Any amount remaining unspent under sub-section (5), pursuant to any ongoing project, fulfilling such conditions as may be prescribed, undertaken by a company in pursuance of its Corporate Social Responsibility Policy, shall be transferred by the company within a period of thirty days from the end of the financial year to a special account to be opened by the company in that behalf for that financial year in any scheduled bank to be called the Unspent Corporate Social Responsibility Account, and such amount shall be spent by the company in pursuance of its obligation towards the Corporate Social Responsibility Policy within a period of three financial years from the date of such transfer, failing which, the company shall transfer the same to a Fund specified in Schedule VII, within a period of thirty days from the date of completion of the third financial year.(7) If a company contravenes the provisions of sub-section (5) or sub-section (6), the company shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend to twenty-five lakh rupees.
Every officer of such company who is in default shall be punishable with imprisonment for a term which may extend to three years or with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees, or with both.(8) The Central Government may give such general or special directions to a company or class of companies as it considers necessary to ensure compliance of provisions of this section and such company or class of companies shall comply with such directions.[14]
The amendment has now penalised non-spending of the corporate social responsibility fund, any company not complying with the guidelines shall be either imposed with heavy fines and or imprisoned for three years. The amendment has also stated that any company which does not carry out their business or operations in accordance to the company law provisions may also be discarded from the Registrar of Companies (RoC).
Under the new amendment, if a company is not capable of spending their entire amount which is dedicated to CSR in a specified financial year then the company has to spend that amount within three years and in that duration, the amount will be transferred to a CSR account. Even after all this if any amount has not been utilised by any company then the CSR account shall be redirected to any national fund under Schedule VII of the Companies Act, this Schedule includes funds such as the Prime Minister’s Relief Fund, the Clean Ganga Fund and many more.
If we analyse Section 135 when it was passed in 2013, we could see that the mandate provided on the companies was in fact weak and easy to avoid, the section read that 2 percent of the company’s profits would have to be redirected into CSR initiatives and if any company were to underutilise these funds then they would have to justify their reason for non-compliance. When the Act comes into force in 2014, the then Minister Sachin Pilot was asked to explain the enforcement mechanism of the section, Mr. Pilot replied that it is a “comply or explain” process and that if the explanation or justification is acceptable then there would not be any action against the company.
The section in itself was opposed by the companies as it added a burden of 2 percent on them, this seems unfair to the companies as India had a high cumulative tax rate of 34% which was much higher than the global average of 24%.[15]
The concept of ‘comply or explain’ was a very vague in nature. If any company were not to use their CSR initiative funds then they would have to explain to the government the reason why the company has not been able to do so, the acceptable reasons for not utilising a fund can be subjective that is it could change from person to person; what one person feels as an appropriate reason another person may not feel the same. Hence the vague nature of the enforcement was criticized.
Having made the law mandatory on the companies, the section should have had a much stronger enforcement mechanism that would act as a strong deterrent to any company which may fail to comply.
The current amendment has tried to cancel out the loopholes of the initial statute. By instituting a criminal liability on the companies if they do not comply with the CSR mandate, the incumbent government has tried to “bluff” the companies into taking their CSR initiatives seriously. The possibility of the company’s executives being imprisoned may act as an instigator for companies to speed up their CSR schemes or increase their spending on such initiatives.
The intent of the legislature is comprehensible, as they want more and more companies to be environmentally and socially coherent and to profess that no individual is alone responsible for protecting the environment. While the intentions of the government are laudable, the concept of CSR or CER has been that these are voluntary actions of the corporates who wish to give back to the society or do their bid in protecting the environment, these actions are done by the company as they are conscious of their actions and what harm the industries or companies cause to the environment. Twisting the figurative arm of the companies perhaps may not result in what the government wishes to achieve. CSR initiatives especially environmental initiatives require an intensive study before they are implemented by the companies, simply passing the baton to the companies and expecting them to carry out responsible environmental care is the most basic flaw of the Act. The law may improve the overall spending by the companies and increase the initiatives as well, but it will not ensure any responsible behavior by the companies and it would also not ensure any improved ethics of the company. The companies are not required to be transparent in their green initiatives or be accountable to the environment or towards consumers or laborers.
In fact, what was needed was not more CSR funds, but more responsible behavior, and that would require more than simple money spend.[16]
4.2 Does CER initiative and environmental regulations help in the development of greener technology?
CER along with environmental regulations requires businesses to take actions they may not have taken with the market forces alone. Any compliance with regulations helps in reducing the damage that is done to the environment mainly the air, land, water bodies and living creatures that would have been affected by the business activities of the industry. The benefits and positive impact of CER and the regulations is hard to calculate because the changes are not immediate.
Technological innovation is a major incentive for companies as it helps reduce costs, improve efficiency and reduce production processes. These innovations help in improving the living standards in the society and one can attribute long term economic development to technological innovation.
Experts are not completely on board that CER schemes and regulations, in fact, help in greener technology as they believe that there is an inherent difference between environmental regulations and green technology. The experts believe that concepts like CER and regulation deter the companies from taking risks that might possibly lead to innovation. When companies have to comply with regulations and the CER initiatives, they use well-understood methods to minimize uncertainty, these methods may, in fact, be a heavy expenditure for the company. The experts also argue that compliances might deter alternative investments in technology that may have been considerably much greener. [17]
On the other hand, there is a group of experts who argue that regulations and environmental projects by the companies are complementary to technological improvements. The experts believe that the requirement to comply with regulations and CER stimulates businesses to explore alternative technological paths which helps in the development of newer and improved products and efficient processes. The strongest point that these experts make is that CER initiatives and regulations help in causing a win-win situation for both the regulatory authorities and the general public since the resulting technological innovations reduce the cost of products and even eliminate a major chunk of the pollution[18]. Neither of the group of experts is completely accurate in finding or not finding a relation between technological innovation and regulations.
But multiple regulations and well-implemented CER initiatives have seen considerable improvement in the general environment. For instance, a study conducted by the Cowles Foundation for Research in Economics at Yale University[19] explained that the major influence in the improvement of the environment is in fact the regulations and well-implemented CER initiatives. Using an economic model the study compared the regulations and company policies from 1990 to 2008 and found that various factors affected the air pollution of the manufacturing sector of the United States; foreign competition, consumer expenditures, domestic productivity, and environmental regulations. The study found that only the environmental regulation alone lead to an approximate 60 percent decrease in the emissions from the manufacturing industries in the time duration meanwhile manufacturing output increased by more than 30 percent.
Taking the above-mentioned point into consideration it is no surprise that in early September the incumbent government decided to allow the companies falling under the CSR spending capacity to utilise their 2 percent profits or CSR funds for research and development purposes. Companies have also been given permission to transfer their CSR funds to any central or state government-funded incubators or any of the central or state Public Sector Undertaking (PSUs)[20].
The companies are allowed to make contributions to government-funded universities such as the IITs, national laboratories and autonomous factions of the government (established under the auspices of ICAR, ICMR, CSIR, DAE, DRDO, DST and Ministry of Electronics and Information Technology).[21]
The government’s Finance Minister Nirmala Sitharaman explained that the government has the capacity to fund research in green technology and is doing its bit and will also increase it in the future. But currently there is a larger need for investment in R&D and large sums of capital is required for it and through CSR the government hopes the capital shall be sufficed.
Conclusion
Our environment has been degrading at a very fast pace and we are soon going to reach the point of no return for saving our environment from complete destruction. The major human reasons have all been contributed by major corporations around the world, these companies have a responsibility to help preserve the environment. The Indian government through its legislative powers has tried to enforce the corporations fulfil their responsibilities towards the social and environment as a whole by enacting a section 135 in the Companies Act of 2013, this section adds an onus on the companies to utilise 2 percent of their profits for social and or environment causes, the initial section did not have any enforcement power and the explanations required were vague in nature. The new amendment has been passed in 2019 and has made the non-compliance of CSR initiatives a criminal offence, under this the governing heads of the company could be imprisoned for up to 3 years and fined heavily. The amendment has been made to strong arm the companies into taking the CSR initiative seriously and make sure that they are not trying to find loopholes in the law. The amendment (like the original section in 2014) has been criticized by the people as CSR is an optional concept and companies cannot be forced to implement their initiatives.
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[1]ISO 26000 Social Responsibility ISO 26000: 2010 Clause 2:18; Clause 3.3.5
[2] International Standards Organisation https://www.iso.org/iso-26000-social-responsibility.html accessed on 20/09/2019
[3]Mallen Baker ‘Definitions of corporate social responsibility – What is CSR?’ MALLEN BAKER(Jan. 06, 2004), http://mallenbaker.net/csr/definition
[4]Lord Holme and Richard Watts ‘Making Good Business Sense’ by THE WORLD BUSINESS COUNCIL FOR SUSTAINABLE DEVELOPMENT (Jan. 2000) http://www.ceads.org.ar/downloads/Making%20good%20business%20sense.pdf
[5]Section 135 of the Companies Act, 2013 NO. 18 Acts of Parliament, 2013.
[6]Slaper, Timothy F. & Hall, Tanya J. (2011). The Triple Bottom Line: What Is It and How Does It Work?Indiana Business Review. Spring 2011, (Volume 86, No. 1.)
[7]Triple Bottom Line’THE ECONOMIST (Nov. 17, 2009)
[8] Beth Kowitt, John Mackey: The conscious Capitalist, FORTUNE (Aug. 20, 2015 4:00 PM)
[9]RinkeshTop Companies that are going Green CONSERVE ENERGY FUTURE
[10] Compactors Management Company Nine Companies with great environmental initiativesCOMPACTOR MANAGEMENT COMPANY https://www.norcalcompactors.net/9-companies-great-environmental-initiatives/
[11]CARE 2 Global companies which are environmentally friendly VIRGIN (Jun. 2, 2016) https://www.virgin.com/virgin-unite/10-global-companies-are-environmentally-friendly
[12] ‘Mahindra Rise’ (Jan. 28, 2018) https://www.mahindra.com/
[13]Ashutosh R Shyam India Inc. Green Initiatives for the Long Run (Jan. 03, 2018, 08.14 AM), https://economictimes.indiatimes.com/markets/stocks/news/india-incs-green-initiatives-to-lower-costs-in-long-run/articleshow/62346215.cms?from=mdr
[14] Gazette of India section 27, pg. 6 (Jul 31, 2019)http://www.mca.gov.in/Ministry/pdf/AMENDMENTACT_01082019.pdf
[15]Gireesh Chandra Prasad Corporate Taxes May be Lowered, LIVE MINT(May. 01, 2017, 03:14 PM)https://www.livemint.com/Companies/NTHKD5SbWTfVSFln2zWYMM/Corporate-tax-rate-may-be-lowered-to-25-for-bigger-Indian-c.html.
[16]PushpaSundarPenalising Companies for CSR Non-Compliance Is Like Killing a Fly With a Sledgehammer, THE WIRE, (Aug. 05, 2019) https://thewire.in/business/csr-non-compliance-companies-act
[17]David Hart When Does Environmental Regulation Stimulate Innovation INFORMATION TECHNOLOGY AND INNOVATION FOUNDATION (Jul. 23, 2018) https://itif.org/publications/2018/07/23/when-does-environmental-regulation-stimulate-technological-innovation
[18]Ibid
[19]Cowles Foundation for Research in Economics, YALE UNIVERSITY, (Feb. 07, 2017) https://cowles.yale.edu/
[20]Government widens scope of CSR to include R&D, THE TIMES OF INDIA, (Sep 21, 2019, 14:52)https://timesofindia.indiatimes.com/business/india-business/govt-widens-scope-of-csr-spend-to-include-rd/articleshow/71228027.cms
[21]Firms can use CSR fund for R&D, THE HINDU, (Sept. 20, 2019 23:01)https://www.thehindu.com/business/firms-can-use-csr-funds-for-rd/article29471805.ece