Identifying The Role Of Corporate Social Responsibility In Developing Countries: A Case Study Of India

Research Rational

The title for this research is to identify the role of Corporate Social Responsibility in developing country: in context of India.

This topic has been chosen for this research because the corporate social responsibility is being provided much importance at global level for sustainable development of the businesses. The CSR is used as strategy the business in developing, under developed and developed countries for ensuring the sustainability. The main reason of choosing this topic for research is that developing economies support and stimulates globalization, shows strong growth, and have huge amount of businesses that puts effect on the environmental and social aspects (Boulouta and Pitelis, 2014). The main aim of this researcher is to identify the role of CSR in the developing country. Therefore, this is the reason to choose this topic to identify the how the CSR strategies leads growth of the developing country. With the respect of this, The main reason to choose India is that India is a developing and emerging economy as the foreign firms are investing in this country at large extent to grab the business opportunities. But at the same time, the concerns of people towards CSR are also increasing that has raised the need for the firms to involve in CSR activities to develop brand image. So, this research is based on the Indian economy that is creating requirement of adopting CSR practices in developing countries significantly. 

Apart from this, corporate Social Responsibility policies by the government in developing countries are towards the social wellbeing and environment greening that helps in sustainable development of the developing countries with the businesses, which are major base for the developing countries. The CSR plays vital role in improving the governance, labor condition, morale of employees, environmental condition in the developing country which leads effective operation of business. Along with this, the corporate social responsibility is important for ensuring the positive outcome from business by capitalization. CSR is driving the globalization and internationalization today that is why it may be better topic for the research (Brown et al, 2010). Today every country and organizations in countries are using initiatives and polices of the corporate social responsibility for ensuring the sustainability development of their business in highly competitive market.

The main objectives of this research are

• To identify the role and importance of the Corporate Social Responsibility in developing countries: In context of India
• To assess the impact and implication of the Corporate Social Responsibilities on the growth of developing countries.
• To analyze the evolution of Corporate Social Responsibility in India.
• To identify the role of the government in promoting the implementation of the CSR

The role of implanting CSR in developing country is assessed by the following questions:

• What is the major role of Corporate Social Responsibility in Developing Countries?
• What impact does the Corporate Social Responsibility has on the growth of developing country: in context of India?
• What is the role of government in implementing Corporate Social Responsibility?
• What initiatives the government has taken to promote the Corporate Social Responsibility: in Context of India?
• How the concept of Corporate Social Responsibility has evolved over the years?

Role of CSR in Developing Countries: 

Research Objectives

According to Su and Jie (2015), CSR is the obligation and responsibility of the organizations to pursue the decisions, actions, and policies desirable for social wellbeing. The actions towards social being by the corporate are the policies and actions in CSR. There are four types of CSR, which are legal CSR, economic CSR, Ethical CSR, and philanthropic CSR. They argued that all the four type of CSR has to be fulfilled by the businesses for ensuring their sustainable development.

Chandler, (2016) stated that the economic responsibility of the businesses is that they have to provides products and services to meet the needs of society and have to sell out the products or service at profit for ensuring sustainability in the market. The legal responsibility obliges business to abide by all the laws and regulations in the economy. The ethical responsibility defines the responsibility of the companies for fair trade and actions considering the societal needs and legal regulations.

According to Dong et al (2014), CSR establishes the effective relation between company and its stakeholders such as customers, employees, suppliers, managers, lenders, government, and communities. In support of this, Eccles et al, (2014) argued that businesses have responsibility for groups and individuals and its stakeholders, which put impacts on the performance and productivity of the company. It is because the effective CSR influences the relationship between businesses and its stakeholders.

According to CESD (2013), the corporate social responsibility assesses the impact of corporate or businesses on the society and on the environment. It brings favorable conditions to the businesses for their sustainable development. The effective practices of CSR in the country attract investment in the companies that provides financial benefit in the developing countries.  Along with this, Epstein and Buhovac (2014) stated that the corporate social responsibility improves the efficiency of operations of businesses in developing country. The efficiency in business operation is achieved by reducing operation cost, improving reputation, and empathy with government.

In the words of Lund-Thomsen et al (2016), CSR leads the investment in ensuring effective environment by reducing the wastage and use of energy. The reduction of wastage and effective use of energy may reduce the overall operational cost that improves the efficiency. Boulouta and Pitelis (2014) stated that businesses, which play their responsibility in well manner and in regarding sustainability of the environment, improve the reputation and image of the company. The increased reputation of the businesses in developing country may somehow influence the image of the developing country. Furthermore, the businesses have to take the licenses from the government to operate and to extend the business operation. Effective fulfillment of the social and environmental responsibility by the businesses facilitates the good relation of the corporate with the government departments and agencies.

Research Questions

According to, EY, (2013) CSR is the focal point and well considered in political and social reform process in the developing countries. Companies in India adopted CSR and properly abiding by their responsibilities are achieving good success. TATA group do with its CSR effectively by completing its economic, social, legal, ethical, and environmental responsibilities that ensures its sustainable development. The effective CSR policies concerned on the pollution, roads, power, health, water, security, and education are well considered in India that indicates that growth of India.

CESD, (2013) found that the CSR has improved the condition of India in terms of infrastructure, education, healthy environment and others. Businesses in developing countries can be able to have good skilled and talented human resource if they comply with their social and ethical responsibilities effectively. In support of this, Gugler and Shi (2009) said that CSR improves the financial and non financial performances of the business that is favorable to the developing country like India.

Furthermore, Ramani (2016) stated that CSR foster the sound competition among the businesses in developing countries that improves the quality of product and makes the customers available at lower price. This improves the reputation of the country and attracts investment from abroad. The initiatives of the corporate social responsibility nurture the competitiveness among companies in the economy that in turn urges the companies to focus on the development of innovative and creative actions and policies for getting competitive advantage.  The level of competition and innovation in the country improves its images. Kolk et al (2010) stated that organizations which are focused on the social accountability, they found opportunity for them in country. This increases the foreign currency of the developing countries that increase value of their currency.

According to Raynard et al (2013), government actions and initiatives are required to create an environment for public sector companies, which can diminish the risk, cost, and barriers to the companies and for raising the reward and generating the growth opportunities in order to ensure the economic growth of country. The Indian government focuses on fostering the business activity in India for achieving higher economic growth rate. The government at different level regulates the implementation of CSR initiatives by establishing a standard for business performance.

The government of any country puts great impact on the implementation of CSR strategies and polices. The government of developing country ensures the implementation or execution of the CSR polices. According to Pang et al (2015), the government in developing country takes actions and indulges in the promotion of the firms which are socially accountable and the domestic business regardless engaged in international market or country. The government uses measures for promoting the companies doing social works. For instance, the government promotes NGOs in the country do social work. The government intervenes in the policy and CSR strategy decision of the companies for ensuring the implementation of CSR.

Literature Review

Apart from this, Carroll (2015) stated that the government determines goals and objectives of its policy framework and statements for identifying the possible problems and issues related to social and environmental aspects. This helps businesses in developing the strategic decisions. The government puts efforts to align the business activities in order to achieve its social and environmental objectives. Along with this, the government adopts strategies and develops policies for promoting the corporate social responsibility in the country.  

In the words of Ramani (2016), Government of India developed a policy as Corporate Responsibility for Environment Protection in 2003 for restricting the pollution in the economy. The Indian government imposes these responsibilities on the businesses as their obligation after issuance of National Voluntary Guidelines. National Voluntary Guidelines includes social, economical, and environmental responsibilities in India. It was placed in the new Company Act, 2013. The CSR is become the statutory obligation of the corporate houses registered under the company act. According to this obligation, the companies earn commercial benefit and profit, the part of that profit has to paid or invested on the wellbeing of the communities.

Furthermore, Ramani (2016) identified that the Indian government has fixed 2% of the total net profit of the companies that the companies have to invest in executing social and environmental responsibility. The companies have to invest this amount on the education and healthcare of poor in the society, environmental sustainability, and execution of the social business projects. The government of India developed a High Level Community that advises the measures for improving the monitoring of execution of corporate social responsibility initiatives and policies.

The corporate social responsibility is very important tool for sustaining the environment, social wellbeing, and increasing the competitiveness and sustainability of the company. The meaning, concept, and use of corporate social responsibility changed over the decades drastically. Many of the organizations working at global level and domestic organizations as well have made some alteration in the corporate social responsibility tools and policies (Gugler, P., & Shi, J., 2009). Hence, it is required that every organization necessarily reviews and understands the importance and role of CSR and develop the effective policies and actions to promote CSR in their daily business operation.

According to Rassindren and Hans (2015), there is tradition of philanthropy in the India since the ancient time. Kautilya in India promoted the ethical principles and values in businesses. In the ancient time, the helping of poor in society was seen as social responsibility which was later seen as corporate social responsibility in 19^th century. Philanthropy, religion, and charity in the economy were the most CSR driver in India. In the words of Chatterjee (2016), CSR is not new concept that is used by the organization for their sustainability. CSR is being used since before 1900s. CSR and other its related concepts such as corporate citizenship, corporate social responsiveness, corporate philanthropy, and corporate social performance were cited from the management area.

Role of Government in Implementing CSR

According to Banerjee (2015), in India the concept of CSR was originated before 1850 during the pre-industrialization period, where the merchants shared a fixed part of their revenue with the society by building temples there. The application of the colonial rule in the India changed the concept of the corporate social responsibility. Before the independence of the India, the Tata, Birla, Godrej, Bajaj and other were started and promoted the use of CSR by developing the educational institutions, founding charitable trusts, healthcare institution, and trust for the communities.

In the words of Husted (2015), during the independence time of the India, reach businessmen and industrialists shared their profit and wealth with people in society are very poor after urge of Mahatma Gandhi. This helped in generate social and economic benefit for the society and companies as well. EY (2013) found that after the independence, many public sector undertaking and private sector companies developed. The PSUs helped in doing social and economical wellbeing of the societies. But there were not significant economical benefits to public sectors undertaking that made it unable in doing CSR. Then, the PSUs were shifted in public sector but the governmental involvement in socio economic development. A workshop was held by academicians, politicians, and businessmen in 1965 where the social accountability and transparency were focused.

Banerjee (2015) indentified that since 1980 the corporate social responsibility is being used as a strategy for ensuring the sustainable business development and growth. In the year 1991, the concept of liberalization, globalization, and privatization was introduced that surged up the growth of the country. This led the revolutions in industries and development of number of business and investment in companies generating the competition. This led the companies to be more focused on the corporate social responsibility.

Research methods are all the techniques and tools that are used in the research process. Moreover, the tools and methods used by the researcher for conducting a research can be said as research methods.

There are three type of the research study, which include exploratory research, descriptive research, and hypothesis testing research. Exploratory research the main aim of this research is to discover the hidden things and matters related to the research problem that develop hypothesis and theories (Bettis et al, 2014). This research is best suit in case investigation of the research topic from different aspects. The descriptive study means narrating the facts related to the particular situation or research problems. Almost the all the social research are included in this category(Zikmund, 2013). Moreover, hypothesis testing research as its name defines the research to be conducted for testing the hypothesis made about the finding or about the research problem (Cohen et al, 2013).

The researcher used descriptive research study for conducting the research because it describes the facts and factors concerned with the research problem that can help in deep understanding the role of CSR in developing countries. On the other hand, the exploratory research study and hypothesis testing research are avoided in this research study due to these are inappropriate with this research study.

There are two types of data that are primary data and secondary data. The primary data is the data that is collected by any researcher to use in solving the research problem. The primary data may be collected through the interview, survey, and questionnaire, case study, focus group, brains storming, and field review (Taylor et al, 2015). In contrary of this, the secondary data is the data that can be gathered from the available sources whenever it is required in the research. The secondary data can be collected from the journal, books, newspaper and magazines, literature review, research papers, articles, census, and other private sources (Flick, 2015).

In this research, the researcher collected secondary data regarding the role of CSR in developing countries. For that, I derive the information from books, journals, articles, and other online sources. I use the journals and books available at reliable data base like EBSCO host and Pro Quest. I use the secondary data and secondary research for collecting the information role of CSR in developing countries because there are enough sources available that provides reliable, complete, and quality information required for meeting the purpose of this research.  Apart from this, I do secondary research because the secondary research is very economical in comparison of the primary research (Panneerselvam, 2014). The secondary research is providing the significant and reliable information regarding the research problem very easily, at very low cost, and in very short time period that is almost impossible with primary research to collect the information in short time and at low cost.

This is research is expected to provide the relevant and reliable information about the role of CSR in developing countries so that concept and importance of corporate social responsibility can be understood that will help the businesses in determining their CSR activities and strategies. Apart from this, this research will help in finding the impact of CSR on the growth of country and what actions government takes to promote the CSR. This will help designing the initiatives of CSR by the organizations or businesses in the country. Along with this, it will define the different dimension and parts of corporate social responsibility that must be considered by every organization.

Figure 1: Trend of average CSR expenditure with respect to ownership in India  

[Source: EPW, 2017] 

From the above graph, it can be determined that there is increasing level of the corporate social responsibly in India and most of the firms are looking to do the CSR.

Figure 2: Top CSR spenders in India  

[Source: Banerjee, 2015]

From the above graph, it can be stated that there are different firms in India that are continuously doing the CSR activities that represents that there is increasing level of the CSR in the developing countries and it is one of the only way to get success in the market.

Figure 3: Involvement of people in CSR activities in India according age  

(Source: Statista, 2017)

From the above graph, it can be determined that there is increasing ratio of the people those are involved in the CSR activities in the developing countries. It is because it is one of the major reasons behind to get success in the developing countries and to develop a customer base.  

Figure 4: Companies performance in CSR 

[Source: Chandler, 2016] 

From the above diagram, it can be said that multinational corporation are most ranked companies performing the CSR in China. The multinational corporations among the companies with different kinds of ownership are given higher rank for performing CSR in country.

Figure 5: Performance of bigger size organizations and small and media size enterprises   

[Source: Chandler, 2016]

The above diagram is reflecting that why the bigger size organizations perform their CSR better than Small and Medium Size enterprises. The Bar chart shows that expectation of public, financial and human resources, and pressure from the government are higher to the bigger organizations that make them better in CSR.

Along with the below graph shows that CSR activities in India have covered mostly areas including health, education, livelihood, environment and rural development. The government has significant support in these areas.    

 

figure 6: CSR activities in the different areas in India  

[Source: Epstein & Buhovac, 2014]

 

Figure 7: CRS activities  

[Source: Epstein & Buhovac, 2014]

 

Figure 8: CSR activities in education and health care  

[Source: Epstein & Buhovac, 2014]

From the above graphs, it can be analyzed that the government play a important role in the context of Corporate Social Responsibility.  The involvement of the government in CSR is significant to growth of the country in the different sectors.  In India, according to corporate law, the companies are liable to spend 2% of their three years annual profit in the CSR activities. The CSR rules apply on the companies that have least Rs 5 crore net profit, Rs 1000 crore turnover and Rs 500 crore net worth. The government also play a significant role in the in promoting the implementation of the CSR activities in the country. The government develops and implements effective strategies regarding the corporate social responsibilities. The government also conducts CSR awareness campaigns to promote the CSR in the country.  The government has established soft law to promote the CSR that supports the public and private sector. Therefore, the role of Indian government is vital to promote CSR activities in the country.       

Conclusion and Recommendation for future research  

From the above analysis, it is found that this chapter has included all the research methods used in the research such as research design, data collection methods, types of research study, research questions and others. From the analysis and study of the literature review, it is found that the corporate social responsibility is the responsibility of the corporate house to economy and societies. Moreover, the corporate social responsibility is the obligation and responsibility of the businesses of social being. The corporate social responsibility plays vital role in the sustainable development of the developing countries by fostering the sound economic condition, sound competitive environment, by increased businesses and by attracting the foreign investment.

Furthermore, it is found that the government intervenes in the decision of the businesses regarding CSR activities and strategies that put implication in the execution or implementation of the corporate social responsibility activities and policies. The government promotes the CSR in nation by supporting the NGOs do social work and taking other measures for encouraging the implementation of CSR. From the research, it is found that public sectors companies or units are more indulged in the CSR activities than private companies in India. The top CSR players in India are Cairn India, Tata Motors, Infosys, Coal India, and others. Along with this, from this research it is found that corporate social responsibility in developing countries develop and increase the customer base that is good for the economic growth of the developing countries. However, there is gap between the performances of the developing countries regarding the execution of the corporate social responsibility activities that should be overcome to ensure the effective economic development in developing countries. Therefore, it can be recommended that government in developing countries in context of India should more focus on implementation of the more CSR activities for social wellbeing and developing the market for sound economic growth.

The research is completing the all the objectives of the research however there are some limitation associated with the research that can affects the accuracy and quality of the research. There is limited time available for this research because of that the research is not focused on the detailed analysis of the different dependent and independent variables of the CSR. Along with this, there are limited researches on the role of CSR in developing countries. Along with this, the perception of individual towards CSR in country has not been considered in the research that may affect the completion and accuracy of research. Therefore, the research on the implication of the corporate social responsibility on society and economy of developing country should more focus on the attitude and perceptions of people in developing countries towards the CSR activities. The research study should be focused on the relationship between corporate social responsibility and performance of the business, and business’s performance and economic performance in developing country. Along with this, the programs and policies of government to promote CSR can be more researched and discussed in the research to make the research more detailed and explanatory. Apart from this, the dependent variables can be more researched and more variables can be identified to analyze the role of corporate social responsibility more effectively.

References:

Banerjee, R. (2015) Evolution of CSR in India. Retrieved from https://www.janalakshmi.com/wp-content/uploads/evolution_of_csr_in_india.pdf 

Bettis, R., Gambardella, A., Helfat, C., & Mitchell, W. (2014) Quantitative empirical analysis in strategic management. Strategic Management Journal, 35(7), pp. 949-953.

Boulouta, I., & Pitelis, C. N. (2014) Who needs CSR? The impact of corporate social responsibility on national competitiveness. Journal of Business Ethics, 119(3), pp. 349-364.

Brown, D. L., Vetterlein, A., & Roemer-Mahler, A. (2010) Theorizing transnational corporations as social actors: An analysis of corporate motivations. Business and Politics, 12(1), pp. 1-37.

CESD, (2013) Achieving sustainable development through corporate social responsibility. Retrieved from https://www.iz.or.at/images/doku/csr_research_paper_cesd_kas.pdf 

Chandler, D. (2016) Strategic Corporate Social Responsibility: Sustainable Value Creation. USA: Sage Publications. 

Chatterjee, S. R. (2016) Corporate social responsibility in India: From traditional ethos to contemporary transitions. In Key Initiatives in Corporate Social Responsibility (pp. 303-323). USA: Springer International Publishing.

Cohen, L., Manion, L., & Morrison, K. (2013) Research methods in education. UK: Routledge.

Dong, S., Burritt, R., & Qian, W. (2014) Salient stakeholders in corporate social responsibility reporting by Chinese mining and minerals companies. Journal of Cleaner Production, 84, 59-69.

Eccles, R. G., Ioannou, I., & Serafeim, G. (2014) The impact of corporate sustainability on organizational processes and performance. Management Science, 60(11), 2835-2857.

Epstein, M. J., & Buhovac, A. R. (2014) Making sustainability work: Best practices in managing and measuring corporate social, environmental, and economic impacts. USA: Berrett-Koehler Publishers.

 EPW. (2017) [Online] Available at: https://www.epw.in/journal/2014/50/web-exclusives/analysis-corporate-social-responsibility-expenditure-india.html (Accessed: 15 May 2017).

EY, (2013) Corporate social responsibility in India. Retrieved from https://www.ey.com/Publication/vwLUAssets/EY-Government-and-Public-Sector-Corporate-Social-Responsibility-in-India/$File/EY-Corporate-Social-Responsibility-in-India.pdf 

Flick, U. (2015) Introducing research methodology: A beginner’s guide to doing a research project. USA: Sage.

Hegde, D. S. (2015) Essays on Research Methodology. Germany: Springer.

Panneerselvam, R. (2014) Research methodology. UK: PHI Learning Pvt. Ltd.

Ramani, R. (2016) CSR: The Indian Experiment. Retrieved from https://www.financialexpress.com/opinion/csr-the-indian-experiment/200552/ 

Rassindren, M. J. G., & Hans, V. B. (2015) Corporate Social Responsibility-an Evolutionary Outline from an Economic Perspective. Nitte Management Review, 9(2), 54-69.

Raynard, M., Lounsbury, M., & Greenwood, R. (2013) Legacies of logics: Sources of community variation in CSR implementation in China. In Institutional Logics in Action, Part A (pp. 243-276). UK: Emerald Group Publishing Limited.

Singhal, N. (2014) Corporate Social Responsibility-Role of government. International Journal of Computing and Corporate Research, 4(1).

Statista. (2017) [Online] Available at: https://www.statista.com/statistics/555673/opinions-environmental-responsibility-brands-companies-india-by-age-group/ (Accessed: 15 May 2017).

Su, R. J., & Jie, X. W. (2015) Literature Review on Corporate Social Responsibility. Retrieved from file:///C:/Users/pintu/Downloads/3.pdf 

Taylor, S. J., Bogdan, R., & DeVault, M. (2015) Introduction to qualitative research methods: A guidebook and resource. USA: John Wiley & Sons.

Zikmund, W. G., Babin, B. J., Carr, J. C., & Griffin, M. (2013) Business research methods. USA: Cengage Learning.