Introduction:
It would not be wrong to give a metaphorical representation to the previous ‘laws’ regulating companies as water and the ‘concept’ of human rights as oil since it was difficult to find the correlation between two of them. Back then, the only objective of the companies, businesses and organisations used to be to gain as much profit as they can which was completely opposite with the one of Human Rights system. But after 20th century, the wave of change took place which made the protectors and promoters of human right system to start building the nexus between two of them. It used to be a rock solid competition for the companies those were working only with the objective of money making and were not interested in creating good relations with the society or human beings. International Trade Organisations and leaders were engaged in planning an atmosphere which would create a healthy bond between business and society and came up with the conclusion that the world needs the companies to take responsibility of the welfare and upliftment of the human society. As a matter of fact, Companies and business gets their pocket filled by the society that acts like a consumer and which is why the companies and businesses holds the liability and responsibility to serve the society a better living environment, healthy atmosphere, improved living standards and security to their lives and rights.
Today the traditional concept that only State would be held liable for the violation of the human rights is clearly becoming outdates, because of the fact that Company is also an Integral part of the society and being a part of the society they all are also responsible for society welfare.[1] Society has always been an ultimate consumer of any corporate or business process and hence both of them are interdependent on each other or we can say the one is of no good than the other. Corporate have obligations to back the society and the contents of the society for the better and safe world for their living. The study hereinafter is going to deal with the matters corresponding to the concept of Corporate Social Responsibilities and its nexus with the human rights standards.
What is Corporate Social Responsibility?
The numerous definitions came up defining the concept but none of them agreed to be the exhaustive one. Defining in general terms, Corporate Social Responsibility is a concept where companies and organisations works for the well-being of the society and it’s relating components along with the profit making objectives. Corporate social responsibility (CSR) occurs when a business firm consciously and deliberately acts to enhance the social well-being of those whose lives are affected by the firm’s economic operations.[2] More precisely, CSR by the Journal of Management studies is “situations where the firm goes beyond the compliance and engages in actions that appear to further some social good, beyond the interests of the firm and that which is required by law.[3] It would not be wrong to say that Corporate Social Responsibilities are basically Public Relation (PR) tools that are used by the corporations and businesses to maintain connections with the outer world and human society.
As per The World Business Council for Sustainable Development, “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 the local community and society at large”.[4] The field of CSR is not restricted to these aspects; it is still evolving and developing with changing world trends and needs of society. Previously, only top-level businesses or we can say multinational companies used to use this tool for the business benefits and enhancement of the scope of the business, but with the change of time, the competition for corporate world has increased and thus every corporate entities whether it is a three tier company or a local business mart in the city, has included the concept in its business policies. The multinational and transnational companies are engaging its core strategic mind in evolving the ideas in the field of fulfilling the social responsibilities and because the concept approaches the three major aspects of social, economical and environmental, it is also considered as a “triple bottom line’.
Corporate Social Responsibility has its own significance in business management strategies as the concept is found to be helpful in improving the financial performance of the business and most importantly, it aids in creating a reputation and brand image of the company which not only is beneficial for the life of the company but it also helps in complying the statutory regulations formed by the government.
Effects of Corporate Social Responsibility on the rights of human being:
Human right is a universal phenomenon and same is the concept of corporate social responsibility. In understanding the growing ideology of CSR and its effect on human life as well as rights, it is necessary to understand the factors like social, economical, political and environmental etc that CSR touches. Social factors includes: consumer protection and awareness, rights against exploitation, fair price concept, labour rights and protection, sustainable growth of the society as well as individual etc. Economical factors can be considered as investments, charity, supply chain, subsidies, production and consumption of goods etc. Similarly, the political factors may include: conflicting interests, bureaucracy, corruption, political pressure, leadership, governmental and non-governmental organisations etc. and finally, health, safety, environmental protection, pollution control, global environmental crises, waste management, climate change, and likewise are the environmental factors that influences and marginalise the working mechanism of Corporate Social Responsibilities. A growing number of leading companies understand the equal corporate opportunities and thus they are committed to using a human rights framework to help shape more principles and profitable corporate behaviour.[5]
Human rights standards fundamentally includes four major aspects which are, Individual (civil) rights, Political rights, Economical and Social rights, Rule of Law and Rights of Communities. Corporate and business entities consider these human rights standards as milestones which need to be crossed to stand the actual test of CSR.
Individual (Civil Rights) and (Political Rights): Civil and political rights are those human rights which talks about the protection of individual’s right to life, liberty and dignity against the state, government or any organisation either private or public. These rights include the rights ensuring physical and mental integrity of human being, life, liberty, safety and other freedoms. When it comes to the responsibilities of the corporate bodies in ensuring the protection of civil and political human rights they primarily focuses on right to life of every individual of society. For example, right to life and personal liberty includes right for protection against physical or sexual harassments. Companies like L’Oreal and Hauterfly etc initiates campaigns and programmes to make women aware of their rights and even such companies provide platforms to ensure the immediate remedies to the victims of harassments. Similarly right to clean water and environment is also one of the segment of right to life and evidently, the global giants like Johnson & Johnson, Coca-Cola, Ford Motor Company etc have pledged to increase the energy supplies, reduce pollution and use of greenhouse gas emission, provide renewable energy sources. They have invested billions of money to make sure the above mentioned objectives are achieved.
Social and Economic Rights: Socio-economic human rights are positive rights which talks about State’s obligation to ensure the educational and development rights, housing rights, right to adequate living standard, right to science and technology, right to health and safety, child and women rights, etc. The International Convention on Economic, Social and Cultural Rights (ICESCR) is the primary international legal source of economic, social and cultural rights.[6] The target group of the companies that are willing to choose CRS as the prime responsibility are those who are in demand of social and economic rights in a society. However, in general all the companies and corporate bodies at a larger or smaller scale, efforts in the field of fulfilling the social and economical requirements of the society and that even covers the improvement in the sustainable growth of the society. Google which is the first largest search engine company is trusted not only for its environmentally friendly initiatives but also due to their outspoken CEO Sundar Pichai who stood up against social issues including President Donald Trump’s anti-muslim comments.[7] Similarly, Pfizer raised awareness across the entire globe for the non-infectious diseases and even took initiative to provide the health and care services to women and children who are deprived of such help and support. The big-shutter company named Starbucks have been working hard since its establishments for the social welfare and have targeted to generate around 25,000 job vacancies of the young veterans with the aim of helping to increase the employment opportunities in the world.
Rule of Law: Rule of law is basically a philosophy which holds the founding pillars of just and fair within the society and it has been defined by the Oxford dictionary as “The restriction of the arbitrary exercise of power by subordinating it to well-defined and established laws.”[8] Evidently, both India and international platforms came to the conclusion that the sustainable development is not possible in the absence of ‘Rule of Law’. In the modern society it is ‘justice’ that found to be more important than ‘bread and butter’ in order of priority of needs and which is why, the principle of ‘Rule of Law’ should be prioritized by citizen governments as well as business groups in all their activities. Rule of law basically are rules that needs to be followed by the government and authorities in order to provide the protections to the society at large against the exploitation by the government or authorities. Corruption, Bureaucracy, limitless arbitrary activities are few of such exploitations. Corporations having huge influence in the world come forward and raises voice against such activities.
Right to Communities: Community here is referred to the group of people who shares common goal and who are basically interdependent on the government and policy makers for the fulfilment of their demands and needs. In communities, the community leader is generally responsible for the influence and operations of the people of the community and they work accordingly for its development and growth. Form the above discussion on CSR it is quite understandable that communities also either directly or indirectly gets benefits from the process of CSR and as a results, it engages companies and corporations to fulfil the social commitments and develop relations to the overall community. CSR contributes in different ways for the development and welfare of the communities in the world for example companies and organisations with the help of corporate social responsibility can take advantage of their reputation to attract the potential employers and talented candidates. Closer ties between the corporations and community contributes in transferring the technologies between the multinational, transnational companies and the host countries. It increases the employment opportunities for the people belonging to specific community when the corporations get into the knowledge of the talent and skills of the particular community. For example, the Shell Foundation and Marks & Spencer located in the Flower Valley in South Africa are involved in improvising the local organisations and communities by conduction various CSR projects like establishment of early learning centres for educating the children of the community etc.[9]
The Equality and Human rights Commission has produced a report[10] which talked about five steps that provide a path way to the corporate or company board to establish the relations between the two concepts. The first one is to embed the responsibility of the promotion and protection of human rights to every member of the company by respecting human rights. The second is to identify and understand the salient features that would risk the human rights. Third is to provide the effective remedies after foreseeing such risks to the human rights. Fourth is to approach the people whose human rights are at risk or have been infringed due to unawareness or negligence of the business. And the last one is to create a report on the ongoing situations and the future precautionary measures that company is going to take to ensure the protection of human rights that may be infringed by the business activities.
UN Guiding Principles on Business and Human Rights provided in year 2011 are the standards principles that provide the set of guidelines for the corporate entities as well as for the Government. Such guidelines works at both the domestic and international level to ensure the smooth running of the practices of Corporate Social Responsibilities by the corporate and business organisations existing in the world.
Situation in India
The Concept of Corporate Social Responsibility was not new before its enactment under Section 135 of the Company Act, 2013. In the debates of the Lok Sabha that passed the New Company Act 2013 after amending the previous Act of 1956, the intentions of the framers of the draft of new Company Bill were clear as they wanted to provide a new direction to the entire law on companies. Before 2013, there were no specific provisions of Corporate Social Responsibility under the Companies Act and the emergence of the new concept, but now Corporate Social Responsibilities has become the fundamental practice of Indian corporate and businesses and has attracted much focus from the management of large international companies.
The corporate and business have figured that their impact on social, environmental and economical welfare would directly affect their ties with their customers, employees and investors. Big tier companies like Tata, Birla, and Reliance etc of India are investing heavy amounts for performing CRS activities and programs at national as well as international level.
The Company Act 2013 consisting the provision of Corporate Social Responsibility read as “Every company having net worth of rupees five hundred crore or more, or turnover of rupees one thousand crore or more or a net profit of rupees five crore or more during any financial year shall constitute a Corporate Social Responsibility Committee of the Board consisting of three or more directors”[11]. Further it provides that the Board mentioned hereinbefore shall ensure that the company spends at least 2% of the average net profit earned during past three years of the current financial year solely for the CSR activity determined by the committee formed.[12]
This committee shall monitor and recommend the CSR policies and expenditures to the company. In year 2014, the Company Rule (Corporate Social Responsibility) 2014 came into force that provided guiding rules regarding the committee formation, CSR activities, Policies, Expenditures, Reporting and Disclosure of CSR policies by the company. However, the provisions of CSR would not be applicable on a company where neither of the three criteria –the net worth nor turnover nor the profit is being met by the company are being fulfilled in the case of Bilfinger Neo Structo Pvt. Ltd [13] the tribunal even allow the company to revise its report if any incorrect detail or record of CSR expenditure is caught.[14] The determination of the quantum of the CSR responsibility can only be ascertained after the finalization of accounts at the close of the Books of Accounts of particular financial year as held in the case of Mr. Sanjay Shringarpure vs. M/s Hira Power and Steel Limited and Ors.[15]
In India, although smaller numbers of companies are involved into CSR activities however they brought numerous positive changes and developments in the society. These companies with the help of social media and advertisements inform the people to take advantage of such benefits and CSR activities.
Recent Amendments in CSR provisions in India
The Government of India on 22 Jan 2021 has by official notification brought necessary amendments to the CSR rules 2014 and also under the Companies Act 2013 in the specific provision of Section 135.
Activities that are going to be included as Corporate Social Responsibilities which also have impacts on human rights are:
- Activities relating to the contribution in reducing the impact of COVID-19 and safeguarding the lives of patients by providing monetary support or assisting in research and development of medical equipments, vaccination, etc,
- Creation or Acquisition of the capital asset owned by public authority etc. to spend it for supporting self-help groups and public projects.
The excess or unspent CSR amount, if not used within 30 days of the end of FY, then it should be transferred to the ‘Unspent CSR Account’ which every company having the turnover of INR 1,000 Crores or more has to open. And further if the amount transferred in UCSR Account is not spent for any CSR activity prescribed within the next 3 financial years then such amount should be transferred to any fund enshrined under Sch. VII of the Companies Act 2013 for instance, Disaster Management Fund, PM Care Fund, PM National Relief Fund etc.
The Annual assessment has to be done on the mandatory basis by every company that spends INR 10 Crores or more in past 3 financial years over CSR policies.
On non-compliance of the mandatory CSR guidelines and provision would cost a huge monetary penalty of not less than 1 Crores or twice the amount required to be transferred to the Unspent CSR A/c.
The amendments have also been made for implication of CSR policies on Banking and Insurance sectors which are not covered in this study. The new CSR policies and guidelines consists a pragmatic approach and it is desired to see the positive changes in the Human Rights domain too.
Conclusion
After studying the concept of Corporate Social Responsibility and its contemporary issue, it would not be wrong to say that the concept is spreading its wings in the world and the world is positively accepting the process. What needs improvement is ‘the proper implementation of the concept’. The mere initiation of the process is not enough, its resistance and existence in the corporate norms is the important task. The private corporative bodies needs a supporting infrastructure of statues and provisions and to be more specific, the consent of authorities to operate the continuous activities of CSRs. Companies objecting profits and gains only usually deceives the world by creating a fake image of operating CSR activities rather they engages in some unethical and immoral activities behind the veil of the company. The legislative and executive body needs to be stricter regarding transparency and openness about the business activities. As companies faces themselves in the context of globalisation, they are increasingly aware that CSR can be direct economic value, although the prime goal of a company is to generate profits, companies can at the same time contribute to social and environmental objectives by integrating corporate social responsibility as a strategic investment into their business strategy.[16]
Corporations ideally work on the principle to please its internal and external factors which has major influence on the augmentation and depletion of the company. The internal component or factors are investors, employees, support staffs, operational teams etc. and they could be easily pleased by providing incentives, bonuses, promotions, profits etc. However the bigger task is to please the external component which is society. As above discussed that the society is an ultimate buyer of any corporate activity, it needs to be taken care of by the companies. In order to make the society satisfy, the corporate bodies requires working foot to toe for the welfare and development of the members of the society. These activities include protecting and promoting their basic human rights. Corporate entities are now a day’s focusing more on the human rights aspects of the societal need and the results are positive.
[1] Yadav Anita, Corporate Social Responsibility and Human Rights, Challenging Strategies for Business Management, (2014) Pp. 416. http://repository.christuniversity.in/6008/
[2] https://books.emeraldinsight.com/resources/pdfs/chapters/9781787542600-TYPE23-NR2.pdf
[3] https://www.researchgate.net/publication/4913897_Corporate_Social_Responsibility_Strategic_Implications
[4] https://growthorientedsustainableentrepreneurship.files.wordpress.com/2016/07/csr-wbcsd-csr-primer.pdf
[5] https://www.scribd.com/book/59488709/The-A-to-Z-of-Corporate-Social-Responsibility
[6] United Nations Human Rights, Office of the High Commissioner, ICESCR, 1966. https://www.ohchr.org/en/professionalinterest/pages/cescr.aspx
[7] George K. Varghese, “We must support Muslims and other minority community: Pichai” ,The Hindu 24 Mar 2016. https://www.thehindu.com/archive/web/2016/03/24/
[8] www.oxfordreference.com see for the definition of ‘Rule of Law’.
[9] https://www.united.ac.in/samiksha/previous/paper%2011.pdf
[10] https://shiftproject.org/wp-content/uploads/2020/01/business_and_human_rights_web.pdf
[11] Section 135 (1), The Company Act, 2013.
[12] Section 135 (5), The Company Act, 2013.
[13] Bilfinger Neo Structo Pvt. Ltd vs. N/A National Company law Tribunal, SCC Online NCLT 108, CP No. 54/441/NCLT/MB/MAH/2018. (2019).
[14] Technicolor India (P.) Ltd. v. Registrar of Company 2020 (7) TMI 423.
[15] CP No. 2727/441/NCLT/MB/MAH/2018.
[16] http://www.iosrjournals.org/iosr-jbm/papers/Vol16-issue4/Version-3/O0164396101.pdf
