Is the exclusion of “social business projects” from Schedule VII a missed opportunity for the Indian development agenda?

My past year at HEC Paris while pursuing the Masters program in Sustainability and Social Innovation exposed me to the concept of “social business”. At the outset, please note, for the purpose of the initial analysis, I am not referring to a social enterprise, the concept of social entrepreneurship or Mohammad Yunus’s definition of “Social business”. I am referring to the definition of “social business” as adhered to by many big multinational companies which revolves around business strategies consisting of product development, logistics among others, for the bottom of the economic pyramid population. The concept that enables both corporates and NGOs to benefit from the competencies, infrastructure and knowledge of the other to operate in low-income markets, the business case being the identification of business opportunities in catering to poor people so that it is a win-win situation for all.

To say that I was fascinated with this innovative business model that provides an opportunity for interests and capabilities to converge would be an understatement. What made me uncomfortable on a personal level, however, was the underlying corporate agenda to grow new markets at the bottom of the pyramid and the consequent risk of profit-making from the poor overriding all other considerations. But so far the convergence allowed for sustainable development and the accelerated eradication of poverty, it seemed like a very plausible solution to address the biggest developmental challenge plaguing India – Poverty. Provided, of course, that adequate safeguards were put in place.

When I came back to India, motivated by these models and the knowledge of them already being implemented in the country by foreign companies, the most obvious question that I asked was:

Why aren’t the top Indian companies following the same path in pursuance of their CSR policies?

In fact, they should have more than enough reason and opportunity to, considering India is the only country in the world to legally mandate a CSR expenditure of an amount of 2% of the net profit of certain companies for the preceding 3 years. With such enormous funds at disposal, social business projects would seem like the perfect avenue for CSR fund utilization. And since companies would benefit from the new markets for their products and services, they would have sufficient incentives too.

What I had conveniently forgotten was how inconsistent such a concept would be with the inherent philanthropic philosophy of the Indian CSR law as contemplated under Section 135 of the Companies Act, 2013. The law explicitly prohibits a company from engaging in a CSR activity related to its core business or generating profit from it. I also had a misinformed understanding that “social business projects” were still included as potential CSR activities under Schedule VII. The Clause prescribing for the same had, in fact, been deleted by the Government vide a notification dated 27th February, 2014 without giving any specific reason. Furthermore, the clause on the residual powers of the Government to prescribe other permissible CSR activities was also deleted vide the same notification.

If “social business projects” were still to find a place in the Schedule, there are no sources to ascertain the legislative intent behind the insertion of the term in the first drafto determine the scope. Although an interpretation can be derived from the consistent prohibition on profit-generating CSR activities since the initiation of the law in the year 2013.

So should companies in India be allowed to implement social business projects under the CSR mandate?

It appears to be a double-edged sword. One side is the genuine contribution to the developmental agenda through the integration of the poor in the main markets, and the use of corporate competencies to facilitate an on-ground transformation by ensuring affordable access to basic goods and services. The other side is the potential for manipulation of the rural population, of whom one-third are illiterate, by established multi-level marketing networks, convincing them of a need of something which is inconsequential in the face of their basic sustenance challenges. In a country, where people have fallen victim to several schemes run by companies [pyramid schemes, ponzi schemes, marketing shams, etc. ] time and again resulting in the misappropriation of funds, one can’t be careful enough. If wide powers of pursuing business interest with social value through CSR funds are vested in Indian companies legally, there will be substantial scope for exploitation. Furthermore, in view of the lack of elaborate monitoring and accountability mechanisms by the public authorities, maybe it is a good idea to not presently include social business projects as a separate permissible CSR activity for Indian Companies. There is potential for more harm than good. Companies can continue to develop radically affordable products for the poor in pursuance of a business strategy integrating social concerns without a CSR validation.

It is also important that since these limitations may not apply to foreign companies, instead of blindly perceiving the involvement of foreign companies in the apparent solving of the domestic social problems as a boon due to the inflow of funds, timely impact assessments are undertaken at a public level to ascertain the legitimacy of these interventions.

How else can the CSR funds be utilized in an innovative manner to address the developmental challenges in India?

An alternative to allowing companies to pursue their core business interests for the disbursal of the CSR funds through a direct involvement in the social business projects, would be the insertion of a clause in Schedule VII allowing for the utilization of the funds to set up incubators for social businesses and social enterprises. The definition of a “social business” should preferably be restricted to those businesses that are driven by a social cause, and are motivated to make money so they can continue to deliver on their social mission. This could include:

  1. A non-loss, non-dividend company devoted to solving a social problem and owned by the investors who re-invest all profits in expanding and improving the business.
  2. A profit making company dedicated to a predefined social cause which uses the profits to solve the social problem.

Schedule VII already contemplates the utilization of funds for incubators, only the scope is restricted to: technology incubators located within academic institutions which are approved by the Central Government. This does not allow the utilization of the funds to foster social entrepreneurship or social innovation at the grass-root level. Where companies are unable to actively design and implement programs dedicated to addressing developmental challenges, CSR funds should be used as an enabling and empowering financing mechanism for individuals/enterprises dedicated to solve a particular social or environmental problem. The corporate’s role should be limited to providing assistance to these entities.

Corporate social responsibility in India has largely taken the color of donations or philanthropy. The exceptions to this are companies that are committed to designing and implementing social projects consistent to their core values through their Trusts and Foundations. The CSR law in India, still at its nascent stage, leaves ample scope for funds to be diverted for CSR activities enlisted in Schedule VII with the sole objective of regulatory compliance and without any intention of a sustainable impact. This is despite the inclusion of prohibitions on one-off-events and the requirements of identification of beneficiaries, activities and projected outcomes to ensure that a activity is carried on in a project mode. Due to the absence of appropriate enabling provisions, a failure to effectively and efficiently utilize the CSR funds at disposal will definitely be a missed opportunity for India’s developmental agenda.

REFERENCES:

  1. https://hbr.org/2007/02/cocreating-businesss-new-social-compact
  2. http://www.mca.gov.in/Ministry/pdf/CompaniesActNotification3_2014.pdf
  3. http://www.mca.gov.in/SearchableActs/Section135.htm
  4. http://www.nishithdesai.com/fileadmin/user_upload/pdfs/Research_Papers/Corporate_Social_Responsibility___Social_Business_Models_in_India.pdf
  5. http://www.motherjones.com/politics/2012/05/government-corporations-profit-poor-people/
  6. https://www.csmonitor.com/World/Making-a-difference/Change-Agent/2014/0115/Ziqitza-ambulances-make-money-while-serving-India-s-poor
  7. http://www.moneylife.in/article/qnet-ldquoit-is-a-chain-where-a-person-is-fooled-and-then-he-is-trained-to-fool-others-to-earn-moneyrdquo-says-bombay-hc-order/46857.html
  8. http://www.bbc.com/news/business-29916178
  9. https://scroll.in/article/603226/5-pyramid-schemes-india-fell-for
  10. http://www.moneylife.in/article/will-a-new-law-to-check-pyramid-schemes-work/47970.html

[All views are personal and do not reflect the views of any organization]

 

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Like it or not, the link between CSR & Marketing is undeniable

LogoLast week I completed my summer program on ‘Strategic Marketing’ at Imperial College Business School, London. One of the main reasons why I had opted for this course was infact, one of its modules on Business Sustainability, and my desire to explore the link between marketing and corporate social responsibility. Needless to say, I found this session, taught by Professor Colin Love, the most interesting, which was in essence a reassurance for me and my belief in the immense potential of having a 360 degree approach towards corporate sustainability in the future.

The primary stakeholder for a company is always the consumer. The rest of the stakeholders’ only care about the profit and the same is also not unfounded, considering profit is also an important component for a company to become and remain sustainable. Consequently, the objective has to be to build a brand awareness which has a value on the balance sheet, satisfying all stakeholders.

In 1994, John Elkington came up with the concept of Triple Bottom Line and advocated that the companies should prepare three different & separate bottom lines including profit account (classical financial reporting), people account (measure of social responsibility) and planet account (measure of environmental responsibility). A company producing a Triple Bottom Line is considered to have taken the account of the full cost involved in doing business. CSR has, further, been defined as a form of corporate self-regulation integrated into a business model with the CSR policy functioning as a built-in, self-regulating mechanism whereby a business monitors and ensures its active compliance with the spirit of law, ethical standards, and international norms.

If a company is known to be green, ethical within a consumer group of 15-40, it’s a positive for the company in terms of brand value and can be termed as a ‘Green Benefit’ to it. As evidence suggests, an increase in sales, brand value and brand recognition will lead to an enhanced share value in the long term. [I was actually surprised at the number of people who confirmed that their purchase decisions were influenced by a company’s ethical behavior.]

Most often CSR gets attributed to marketing under PR, running the danger of being mistaken as just a PR exercise, window dressing or a greenwash. Here the marketing departments in coordination with the CSR teams have a major role to play. A CSR policy should be highlighted and communicated only when some work has already been done under it [For instance, recently the Mahindra Group met its CSR objective of constructing a targeted number of toilets in rural areas and communicated it on digital platforms]. Green-washing will only spoil the environment in which the company operates in, in terms of public relations and media. Thus, it becomes the responsibility of a marketing professional to prevent such damage to the brand by ensuring the communication of only the relevant information.

As evident by the CSR practices and trends, social responsibility has both a social component and a business component. A company practicing Triple Bottom Line also has to make money. There is growing evidence to suggest that ethical practices build sustainable businesses which are corporately responsible and the benefactors include the shareholders, staff, suppliers, the economy, the planet and the society. Corporate Responsibility has been recognized as the necessary cost of doing business which gives a company a distinctive position in the market. The business benefits to a company having a defined corporate-responsibility policy have been found to include- better brand reputation, better decisions for the business in the long term, attractiveness to potential & existing employees, meeting of ethical standards required by the customers, better relations with the regulators and lawmakers and higher revenue as compared to that in the absence of it.  The positive commercial reputation garnered, thus, also contributes to the HR reputation of a company and their ability to attract and retain employees. Citizenship responsibilities, a requirement for global companies, further, ensure positive social reputation through environmental stewardship, education, community projects and philanthropic ventures. While these may be difficult to define or measure, they are likely to feed commercial reputation of the company.

It’s no longer surprising that the trend is gradually shifting from corporate social responsibility to business sustainability. Corporations are now in a position to effectively control resources, technology and have global reach at the same time, ultimately controlling the motivation to achieve sustainability. Sustainable Development is, therefore, increasingly indicating a market in which the strong and successful accept their responsibilities, showing vision and leadership.

For managing sustainable business & corporate responsibility, communication of the business case is very important, bringing the topic of CSR communications to the forefront. Along with it, inter-firm initiatives, an understanding of benefits, quantification of tangible evidence, adoption of systems to include initiatives, disclosure, stakeholder involvement and an ever evolving business case/strategy are the key requirements of any successful sustainable business practice. The drivers of CSR, key issues, stakeholders, functions required to support the program, company systems/culture/organisation, HR, matrix management, and budgets and resources also have to be managed for an effective implementation of any CSR program. A way to do it, of course, is by setting up a CSR function as a department, educating and empowering the management to collectively manage the process (esp. the marketing & business communications dept.), and fostering ownership (for instance, by having bonus schemes that reward CSR initiatives pursued by employees). The secret to managing sustainability involves understanding the business case, what to do and how to do it. This has to be supplemented with the preparation of a culture of change, environmental management systems, measures and communication plans. What starts with small steps, mostly internal to the company will lead to huge leaps externally consisting of cleaner production/design, service synergies and industry symbiosis.

Corporate Responsibility is increasingly being given a very high priority nowadays. Some of the global priorities for the next 5 years are posed to include the environment, safer products, retirement benefits, health-care benefits, affordable products, human-rights standards, workplace conditions, job losses from outsourcing, privacy and data security, ethically produced products, investment in developing countries, ethical advertising & marketing, political influence of companies, executive pay and opposition to freer trade among others. Models of corporate sustainability will involve those across logistics, supply chain, operations, technologies, services, HRM, marketing and sales. For instance, to be able to say that everything a company purchases is “sustainably sourced” is a marketing masterstroke. Marketing and sustainability, hence, have to be made the two sides of the same coin with the objective – ‘You can do well by doing good.’

It is time to reinvent the role of business in society and in pursuance of it, reinvent the role of marketing.

Marketing CSR will, thus, be ‘marketing to real people by real people.’

The Emergence of a New Area of Legal Practice: Corporate Social Responsibility

Picture2The great debate for lawyers in the coming century is …whether the ascendancy of economics, competition and technology, unrestrained, will snuff out what is left of the nobility of the legal calling and the idealism of those who are attracted to its service.’-The Hon Justice Michael Kirby AC CMG, Legal Professional Ethics in Times of Change, address to the St James Ethics Centre Forum on Ethical Issues, Sydney, 23 July 1996

Most lawyers no doubt welcome the trend [towards extension of formal legal liabilities with new forms of ‘moral liability’], but it is worth asking whether the net result will be improved social and environmental performance on the part of targeted industries and companies, or whether it will be little more than a feeding frenzy for the legal profession – forcing companies back into compliance mode and minimalist solutions.’ John Elkington, Editorial, Sustainability Radar, October/November 2004

‘An evolving challenge that faces lawyers is the need to more securely integrate the litigation and policy dimensions of CSR lawyering – for lawyers to merge their reactive and proactive inclinations. This may of course cause structural as well as cultural clashes within the traditional model of large law firms – as one UK-based litigator has put it to me…ironically it is in the lawyers’ financial interests for their clients to become embroiled in costly litigation.’ -Professor David Kinley, Lawyers, corporations and international human rights law, The Company Lawyer, Volume 25 No. 10, 2004

With India enacting the world’s first corporate social responsibility law two years back, it is time to acknowledge the emergence of a new area of legal practice- Corporate Social Responsibility. Personally, I believe it’s a blessing in disguise for idealistic lawyers like me, who want to work with corporates but have always been hesitant to choose hardcore commercial law jobs over social inclinations (the latter being the reason for opting for the profession in the first place). While I do understand that it’s a niche and an under-developed area of law, I believe that supplemented together with a management background, this can be an ideal profession for someone bent upon going off the trodden path and pursuing societal impact.

The role of corporate social responsibility in corporate governance is increasingly being recognized in a globalized economy. It is at the top of the board of director’s agenda and is also good for business. Attempts are fervently being made to integrate it as a part of the corporate DNA consistent with the corporate assumption of human right responsibilities. Moreover, there is an active search for eco-efficient solutions. Though CSR efforts have generally been viewed as voluntary actions undertaken by corporations, the new CSR model that has emerged in India is a marked departure as it is known in the United States and as it has been developing through global norms. (International organizations such as the UN, the OECD and the ILO have adopted guidelines for good business practice aimed at safeguarding human rights and promoting respect for key social considerations. The White Paper on corporate social responsibility from 2009 and ISO 26000 are other initiatives which are influencing corporate work on social responsibility.)

However, there is still no sign of consensus and clarity on CSR rules, structures, or procedures in India; hence, offering tremendous scope for policy, research and the opportunity to set business precedents. Moreover, the norms that Lawyers draw on in giving their advice to companies are shifting. There is increasingly an ethical case for Lawyers to maximize their contribution to corporate social responsibility beyond the ‘business case’ for action. Uptil now, there has been very little reflection on the nexus between corporate responsibility and the wider public functions of the legal profession. Yet in wake of a statutory obligation concerning the same that is precisely what may now be needed.

THE ROLE OF A LAWYER IN CSR

‘The role of the lawyer in the old days involved compassion for the client’s entire predicament, tempered by detachment and also a measure of concern for the public good. The growing ascendancy of the economic view of law and a decline of its self -image as a helping profession, will continue the decline of idealism and professionalism unless this is arrested’. -Hon Justice Michael Kirby, summarizing AT Kronman’s The Lost Lawyer – Failing Ideals of the Legal Profession 

Lawyers need to be given a significant place within CSR because their profession is at the foundations of corporate social responsibility:-

‘..the significant present involvement of lawyers in corporate responsibility (CR) is no accident but directly referable on the one hand to the relevance to CR of legal skills and technical expertise and on the other hand to the fact that the ability to make independent and objective judgements is a core professional attribute of lawyers…It is natural for the lawyers to be involved. CSR is partly about compliance with the law and regulations so it falls naturally within a lawyer’s scope. Many lawyers also have a secondary role, that of conscience of their company.

Using a legal practitioner to develop a CSR strategy makes sense because ‘there are few people whose job it is to see the consequences and the whole picture for the organization that either fails to comply with the law or that complies partly or provides an inadequate response.’

As part of a profession premised on ethics, lawyers can provide advice to clients beyond just compliance and risk management processes,  encompassing the issue of human rights, societal impacts and the leverage a company can use to institute positive change, including communication through its brand, economic leverage and technical expertise. Although there are a multitude of CSR professionals, lawyers have the ability to provide advice on strategic CSR and within the appropriate context.  They can help create company structures to best serve the emerging norms on the corporate duty to respect and for  corporates to go beyond just philanthropy and charity.

CSR and law are not mutually exclusive but are in fact intrinsically interrelated concepts. Lawyers have long held leadership roles in society, whether as leaders of institutions themselves or counselors to those leaders and institutions. For CSR, the lawyers can exercise leadership by seeing, then working for, a vision of more equitable, multi-stakeholder outcomes that respect everyone’s rights and creatively accommodate them in the long-term interests of the company and its stakeholders. CSR emerges from a complex network of social expectations, through the interplay of hard law legislation and jurisprudence, constantly evolving customary and soft law norms, international best practice standards, private regulations, and direct contract-like understandings between corporations and their stakeholders. Comprehension and navigation of such a complex web of rules and expectations is squarely within the competence of legal theorists and practitioners, and cannot be fully understood as simply a branch of ethics or organizational behavior. Transcending notions merely focusing on “zealous advocacy,” modern ethical codes for lawyers expect the lawyer to bring the whole person as an “officer of the legal system and a public citizen having special responsibility for the quality of justice” to representing and advising clients. This includes knowledge of social and legal trends, expectations, and moral concerns that affect how the client actions will affect long–term success and perceptions by society. This context of legal, social, and moral trends, expectations and standards can come from hard law, non–binding yet influential “soft law,” self–regulation by the business itself, and ethical regimes and norms, all of which lawyers must be familiar with and take into account as matters of basic competence these days. Moreover, as with ensuring high–quality, ethical decisions in government, doing so in the context of corporate governance requires attention to good policies, procedures, and checks and balances. Lawyers play critical roles in such areas.  At their best, leading lawyers help clients seize new opportunities, such as constructing new bottom–of–the–pyramid business models, creating positive social value and innovation via social entrepreneurship that conceives of new socially useful products and services, partnering with others in multi-stakeholder initiatives like the UN Global Compact, and engaging in strategic philanthropy that helps solve persistent social problems. Furthermore, CSR is a natural fit for lawyers because it reflects the enormous role that corporations have in all aspects of our economy and the moral imperative to exercise that influence in a way that involves doing well and doing good.  A significant component of that moral imperative is promoting a sustainable future, which means complying with environmental, health and safety laws and conducting business activities in ways that limit the use of natural uses and minimize adverse ecological impacts- all of which requires innovative thinking and strategic planning.

Role as a CSR strategy consultant

A field like CSR is of immeasurable value to all professionals and academic in relevant fields of law, policy and business. And with CSR becoming a statutory obligation in India, Lawyers have a even more vital role to play in designing and implementing effective CSR policies and procedures. Lawyers can advice the company on the scope of an effective CSR program permissible under Section 135 and Schedule VII of the Companies Act, the disclosure and reporting requirements while ensuring that they are adhered to along with legally required Board reports concerning the CSR activities to be submitted as part of the financial statements. Lawyers can play a significant role in CSR strategy chiefly because of their expertise in understanding relevant concepts and because of their legally protected role as confidential advisors. In India, an effective CSR strategy has to attend to both legal and stakeholder concerns. So CSR is as much about good business as it is about legal compliance. When it comes to establishing a monitoring mechanism, Lawyers once again can play the primary role in overseeing the development of an effective CSR strategy, incorporating legal insights and legal protections without sacrificing stakeholders, while relaying on diverse groups on corporate staff and independent consultants to implement it. A Lawyer can not only play the role of an information manager but also that of an intermediary between the company and any third parties involved in CSR implementation.

Companies should make Lawyers a part of CSR committees and develop the program incorporating their recommendations, sensitive to legal and reputational risk to be implemented, as appropriate, for the company’s different functions. Legal expertise ensures that businesses accurately understand the scope of relevant legal requirements and business responsibility as well as particular legal risks they need to address. By appointing a lawyer incharge, the company can ensure control over the information flowing from CSR due diligence. Independent consultants can be retained to advise on stakeholder concerns and reputations risks, develop appropriate due diligence and report indicators based on definitions of core terms, train company executives and staff on CSR policies and procedures, prepare independent reports on the company’s impact and market it in order to value.  Although this is the reason why I would recommend a Lawyer with a management background for the role of an external sustainability/CSR consultant in an organization, i.e., to ensure a multi-disciplinary and 360 degree approach towards the formulation and execution of a CSR program without increasing the team numbers leading to varied perspectives. Further, getting external/independent CSR strategy consultants on board will help preserve the legitimacy before stakeholders and ensure effective engagement.

The functions that a Lawyer can perform in a CSR Committee can include the following and more:

For long-term assignments:

  • Analyse strengths, weaknesses, opportunities and threats (SWOT-analysis) of a given company in relation to CSR;
  • Design CSR policies;
  • Design a strategy for the company to address CSR adequately; (It is recommended that longer-term tasks be performed in co-operation with either in-house or external competencies in organisation management – including crisis management, communication, human resources, training etc. depending on the objectives of the client.)
  • Integrate CSR under existing risk management and compliance programmes;
  • Design and implement concrete projects under CSR;
  • Create CSR screening systems for investments;
  • Develop a framework for supply chain management systems with due regard to the participation of SME’s;
  • Develop a framework for CSR as part of Quality Management;
  • Implement in-house training on CSR; and
  • Integrate CSR into existing risks and quality management schemes and compliance programmes.

For short-term assignments:

  • Consider the ‘what, why and how’ of a CSR approach – its challenges, dilemmas and opportunities;
  • Undertake CSR assessments of affiliates, branches, investment opportunities, suppliers, licensees or other partners;
  • Undertake CSR assessments as part of due diligence;
  • Respond to media or NGO criticism;
  • Provide assurance statements on CSR reporting in relation to scope, relevance and compliance with international standards;
  • Undertake assessment of concrete CSR projects;
  • Network with other companies and/or associations;
  • Coordinate and supervise the CSR work of the company; and
  • Assess the legal implications of CSR reporting and advertising.

Therefore, Lawyers can advice on all aspects of an effective CSR strategy, from the operationalisation of the company’s CSR efforts at management level to the implementation, reporting and compliance within the organisation. The goal is to help businesses stay ahead, and help ensure that CSR becomes a value-added element in the business.

Role as an in-house counsel

Traditionally, it is the in-house lawyers within large businesses who lead development and supervise implementation of compliance programmes reflecting the business’s core values or operating principles. For in-house counsels attempting to understand and implement a CSR agenda, what will be more of relevance is (1) what a CSR mandate should entail, and (2) how it should be carried out? The internalization of a CSR mandate; initiation of conscious stakeholder engagement; development of reporting and transparency processes; implementation of best practices beyond compliance with minimum legal expectations; development of review, auditing, and accountability systems, and; defining the appropriate role of community investment within the scope of CSR  will be essential high points of any serious CSR program. However, despite in-house counsels already being deeply involved in CSR – more may still need to be done to place the legal function at the heart of strategic decision-making. The boundaries of what lawyers can realistically do to promote corporate responsibility are determined by the culture in which they work and their ability to position themselves as more than ‘legal facilitators’; by the extent of the ‘business case’ for responsible action on the part of their employer or clients; and in the case of external legal advisors, by the extent to which they may themselves be subject to ‘drivers’ or incentives to integrate CSR-related considerations into the delivery of advice.

Role in policy, research and law-making

There are exciting times for CSR and sustainability in India with there being a radical change in the landscape ever since the enactment of section 135. The participation of the company in CSR policy-making at such times can be an asset to the organization. As it is, CSR not only assumes legal compliance, it also influences public policy and law-making on a more hidden and indirect way. When giving advice on CSR matters to clients, Lawyers can participate in the tailoring of their CSR policy and normative framework. This role is of extreme importance as the CSR commitments undertaken by companies are going to be evaluated under the prescribed Act, and may form a basis for an explanation, even if the law is not yet penal. Businesses of all kinds are generally comfortable with the idea that lobbying public policy makers to uphold their commercial interests is an acceptable activity. Thus, corporate responsibility could spur Lawyers to play a positive advocacy role in public policy processes that touch on the sphere of influence of the legal profession. Lawyers are also likely to be called upon to assist companies in compliance. Law firms are no exception. It won’t be long before law firms start establishing teams, even that of a multidisciplinary nature, to answer these demands. And the contributions that Lawyers and law firms make to public policy debates – for example consultations on proposals for new legislation – may on occasion expressly be framed to further the commercial interests of their clients. This can serve the incidental purposes of drawing the attention of potential clients to the suitability of individual Lawyers or law firms as advisers.

Even though the contours of the role of a lawyer in corporate social responsibility in India are still unclear with companies mostly relying on accounting professionals for the implementation of their CSR programs, the fact that lawyers have always been considered invaluable to this field is affirmed by their assuming this responsibility even in countries that only endorse voluntary CSR. The need for viewing CSR from a legal perspective: as a stakeholder-oriented form of lex mercatoria (customary commercial law), and as a form of “enforced self-regulation in the shadow of the law” encompassing the  seven legal principles of Integrated, Sustainable Decision-Making; Stakeholder Engagement; Transparency; Consistent Best Practices; Precautionary Principles; Accountability and Community Investment has already been recognized. With a rise of ‘voluntary’ corporate responsibility tools internationally, lawyers are already deeply embedded within the corporate responsibility agenda. And now with India becoming the first country in the world to provide for a mandatory CSR obligation, it has become the legitimate field of study for lawyers and legal theorists. Now we have a law that promulgates CSR obligations which legal practitioner can use to apply CSR in a legal context. It can be identified in the course of advice or advocacy as an obligation that can guide or justify corporate behavior.

Clearly, the field of CSR is growing and is a potential growth area for lawyers- especially those with an interest in working around the world. Commercial law firms around the world are explicitly beginning to take up corporate responsibility in their own practices. It is expected that CSR, in its own right, will engage lawyers more and more in the years to come. In India, it is an area of the law that is still in its infancy, so any decision that is made  will in some way establish precedents and best practices for others in the industry. While the vision is clear, the means to get there is still under discussion. Far reaching duties for the legal profession regarding CSR are being suggested and it is important that the legal profession determines its own future in the area and develops policies and practices which are fit for the purpose, proportionate and take account of the imperative of our role, consistent with the regulatory regimes. It is the Lawyer’s role to assist their clients in positioning their business successfully in this new legal landscape. And they need to address this role with humility, so that the essential vibrancy and innovation inherent in corporate social responsibility can be sustained. And this Lawyers need to do immediately, before the role of the legal practitioner as a strategic advisor to business in a globalized world becomes obscenest.  Specially, practitioners of law interested in staunching the trend of proliferation of CSR consultancies staffed by accountants and management advisors with little or no legal training, and preserving the Lawyer’s role of strategic importance within corporate management structures need to start acting now.

Lawyers moved quickly to claim a stake as mediators and facilitators, arguing that their problem-solving skills and independence made them well suited to the task. Even so, some commentators questioned whether legal skills and the lawyer’s mindset were in reality sufficiently well-tuned to the consensus-building process of mediation-  ‘The mediation process can be preserved, while still admitting lawyers into mediation, if there are changes. The legal attitude, curriculum and environment must be broadened. Lawyers must learn how to generate creative options. They must understand collaboration. And they must learn how to facilitate, not just evaluate.’ A similar shift may now be required of the legal profession as it seeks to define its space in the corporate responsibility agenda.

It is an opportunity to define leading edge practice for business lawyers. The field is open for pioneering lawyers – wherever they are based – to show the way.

REFERENCES:

  1. Afra Afsharipour & Shruti Rana, The Emergence of new corporate social responsibility regimes in China and India at http://digitalcommons.law.umaryland.edu/cgi/viewcontent.cgi?article=2446&context=fac_pubs
  2. Chip Pitts, Authentic Leadership: the lawyer’s role in corporate social responsibility, business and human rights at http://www.l4bb.org/Blog95A5M8/blog_topic.php?action=view_topic&list_num=1&people_id=John&people_name=Chip%20Pitts&people_title=Lecturer&people_institution=Stanford%20Law%20School%20USA%20&%20Oxford%20University&people_location=Oxford&people_country=United%20Kingdom&formatted_people_registration_date=9%20November%202010&topic_id=2&category_id=&cur_page=0%27);%27);
  3. CCBE, Corporate Social Responsibility and the Legal Profession: Guidance II at http://www.ccbe.eu/fileadmin/user_upload/NTCdocument/EN_CSR_Guidelinespd1_1395048991.pdf
  4. CCBE, Corporate Social Responsibility and the Role of the legal profession: A Guide for European Lawyers at http://www.ccbe.org/fileadmin/user_upload/NTCdocument/EN_CSR_guidelinespd1_1221057092.pdf
  5. Halina Ward, Corporate Social Responsibility and the Business of Law at http://pubs.iied.org/pdfs/G00195.pdf
  6. Katie Vloet, A growing field of law: Corporate social responsibility at http://global.umich.edu/2013/11/a-growing-field-of-law-being-global-and-responsible/
  7. Michael Torrance, Book Note on Michael Kerr, Richard Janda & Chip Pitts, Corporate Social Responsibility: A Legal Analysis (Markham, Ont: LexisNexis, 2009) at http://lawjournal.mcgill.ca/userfiles/other/2094570-Torrance.pdf
  8. Rubi Sandhu, Lawyers, CSR and the “debilitating context” at http://ccbriefing.corporate-citizenship.com/2015/03/09/lawyers-csr-and-the-debilitating-context/

 

Demystifying CSR

Corporate Sustainability/Social Responsibility or CSR refers to the way businesses should be managed to bring an overall positive impact on the communities, cultures, societies and environments in which they operate. The fundamentals of CSR rest on the fact that not only public authorities but even corporates should be responsible for social issues.

With the implementation of the Companies Act, 2013, India became the first country in the world to mandate corporate social responsibility by law. Section 135 of the new Companies Act, read with the CSR Rules, mandates companies meeting certain criteria to set aside two per cent of their net profits for undertaking and promoting socially beneficial activities and projects in India. The act broadly lists CSR areas as: hunger and poverty, education, health, gender equality and women empowerment, skills training, environment, social business projects and promotion of rural and national sports. The entire list can be accessed here. The mandated 2% CSR investment in the new Indian Companies Bill is a novel solution to India’s social problems. However, while a bare reading of the new CSR rules may indicate a simple approach, a close analysis of the fine print leaves ample room for ambiguity at various places. There is still widespread confusion on what exactly counts as CSR  and what benefits can the companies get with the latter still in discussions, trying to figure out a way to create a working model to realize the full potential of the mandate. An absence of an appropriate monitoring mechanism, although, raises the risk of directionless spending.

This platform is dedicated to demystifying CSR from a legal and management perspective through research and analysis of CSR practices prevailing among corporates and social enterprises across the world.