See discussions, stats, and author profiles for this publication at: https://www.researchgate.

net/publication/333161843

Should CSR be mandatory, voluntary or both?

Research · May 2019

DOI: 10.13140/RG.2.2.34532.42887

CITATION READS
1 11,005

2 authors, including:

Alejandra Adriana Montiel Justo

Maastricht University
1 PUBLICATION   1 CITATION   

SEE PROFILE

Some of the authors of this publication are also working on these related projects:

corporate social responsibility View project

All content following this page was uploaded by Alejandra Adriana Montiel Justo on 17 May 2019.

The user has requested enhancement of the downloaded file.

Should CSR be mandatory, voluntary or both?
Corporate Social Responsibility
Maastricht
2019

Alejandra Adriana Montiel Justo

 LIST OF ABBREVIATIONS

CA – Companies Act

CSR – Corporate Social Responsibility

EC- European Commission

GOI – Government of India

MNC - Multinational Corporation

NGO – Non Governmental Organization

[2]
INDEX

LIST OF ABBREVIATIONS ..................................................................................................................... 1

INTRODUCTION ...................................................................................................................................... 4
1. UNDERSTANDING THE CONCEPT OF CORPORATE SOCIAL RESPONSIBILITY ..................... 5
2. THE “VOLUNTARY” CSR APPROACH ............................................................................................ 7
2.1 Advantages ....................................................................................................................................... 7
2.2 Disadvantages ................................................................................................................................... 8
3. THE “MANDATORY CSR” APPROACH .......................................................................................... 10
3.1 Advantages: An analysis based on the Indian example ................................................................... 10
3.2 Disadvantages ................................................................................................................................. 11
4. GOING BEYOND THE MANDATORY V. VOLUNTARY DEBATE .............................................. 13
5. CONCLUSION ..................................................................................................................................... 14
APPENDIX 1 ........................................................................................................................................... 15
REFERENCES ......................................................................................................................................... 16

[3]
 INTRODUCTION

The process of globalization has provided a fertile ground for international trade. As corporations continue
to grow exponentially and operate virtually in every part of the world, they have been re-baptized as
multinational corporations (MNCs).

These MNCs have brought economic prosperity, and some have been ranked alongside some States as the
largest economies worldwide. However, this abundance and prosperity have not been equally distributed
among society. Corporate social responsibility (CSR) has emerged as a response to the power imbalances
that the non-stopping process of globalization has brought.

Whilst there is no universally accepted definition of CSR, it was considered in its infancy as philanthropic
activities performed by corporations voluntarily. Nowadays, the perception of CSR has been evolving to
current trends that start routing CSR towards the legally-binding realm.

One of the most controversial issues regarding CSR is whether it should be mandatory or voluntary. The
research question of this paper is whether CSR should be voluntary, mandatory, or both? This work will
provide an overview of the “voluntary v. mandatory CSR debate” by establishing the pros and cons of each
approach and later by analyzing the latest measures taken by the Government of India regarding CSR
regulation. The aim is to determine which approach is more effective to implement and enforce CSR
practices.

[4]
 1. UNDERSTANDING THE CONCEPT OF CORPORATE SOCIAL RESPONSIBILITY

The lack of a universal definition and operationalization of CSR have unquestionably affected the empirical
research and consistent findings regarding CSR.1 A manifold of aspects is comprised in CSR2, and this
range of issues and its constant expansion makes it difficult to ascertain whether CSR ‘as a whole’ should
or should not be included in the law.3

Additionally, at least four different agendas are trying to define CSR from different perspectives: the
government, political parties, academics and businesses themselves.4 All of them of course with different
approaches, backgrounds, and needs.

The idea of CSR is rooted in the developed world such as the USA and Europe, and it arose as the
corporations’ voluntary response against criticism and societal pressure to avoid liability or bad corporate
image from their harmful practices.5

However, societies around the globe have different expectations towards CSR, and these will depend on
the specific industry and the cultural values of the society in which they are rooted.6 Research has shown
that CSR expectations in a non-western context differ greatly depending on the political, cultural and
socioeconomic settings. 7 The western ideas on CSR are disseminated throughout the world and then altered
depending on the national context.8

The collective political, religious and cultural beliefs and practices play a crucial role in enacting and
enforcing CSR policy in the domestic realm. An example of this would be the Zakat tax9 in some Islamic
countries, where they believe that businesses must contribute to society. 10

Domestic policies and international legal standards are the cornerstones to highlight the importance of a
subject. At the same time, these policies and laws can influence society and create expectations of corporate
behavior. These societal expectations should work as a beacon towards which companies should organize

1
Williams, Cynthia; Aguilera, Ruth V. (2008): Corporate Social Responsibility in a Comparative Perspective. In
Oxford Handbook of Corporate Social Responsibility (Ed.): Oxford Handbook of Corporate Social Responsibility.
With assistance of Andrew Crane, Dirk Matten, Abagail McWilliams, Jeremy Moon, and Donald S. Siegel, p. 452
2
Among them anti-corruption policies, human rights, international supply chain management, water, diversity,
equality, biodiversity, and other ecosystem services.
3
Lambooy, Tineke Elisabeth (2010): Corporate social responsibility. Legal and semi-legal frameworks supporting
CSR. Zugl.: Leiden, Univ., Diss., 2010. Deventer: Kluwer (Uitgaven vanwege het Instituut voor Ondernemingsrecht,
Rijksuniversiteit Groningen en Erasmus Universiteit Rotterdam, 77), p. 14
4
Gatti, Lucia; Vishwanath, Babitha, Cottier, Bertil; Seele, Peter (2018): Are We Moving Beyond Voluntary CSR?
Exploring Theoretical and Managerial Implications of Mandatory CSR Resulting from the New Indian Companies
Act. In Journal of Business Ethics, pp. 1–33 , p. 3
5
Jamali, Dima & El Safadi, Walaa (2019): Adaptations of CSR in the Context of Globalization the Case of the GCC,
pp. 1–21, p. 2
6
Williams and Aguilera 2008, p. 453
7
Jamali, Dima & El Safadi, Walaa 2019, p. 2
8
Idem
9
Belief systems can have a considerable impact on CSR practices. In this case, Islam requires businesses to enhance
social welfare and preserve environmental ecosystems and this is the reason behind the Zakat tax. However, some
Islamic countries have implemented the Zakat tax in their legal framework whereas others will have it as a simple
aspiration, rendering these practices as fragmented and non-enforceable. See Jamali, Dima & El Safadi, Walaa 2019,
p. 10
10
Jamali, Dima & El Safadi, Walaa 2019, p. 10

[5]
their behavior; once these societal expectations are created, additional actors like investors, NGOs and
consumers, come into play to demand corporations to meet these minimum legal standards. 11

Needless to say, including certain CSR practices in uniform legislation can be very challenging to carry
out. An example of this would be: how much water a company is allowed to extract from an aquifer?
However, some CSR aspects have already been crystallized into positive law, such as the prohibition of
discrimination on the base of gender or race in the workplace.12 Companies have been taking advantage of
the lack of uniform CSR regulation and claim to be complying with CSR when they do anything from a
minor charity donation to invest in eco-friendly projects.

At the outset, most CSR definitions argued for a voluntary approach towards CSR and linked it to actions
that go “beyond what is prescribed by law.”13 However, a significant debate about the relationship between
CSR and the law continues as governments and international actors implement new initiatives to enforce
CSR practices.

The change of perspective from voluntary to mandatory CSR has also been incited by the evolution of the
European Commission’s (EC) regulatory framework on CSR. In 2001 the EC defined CSR as “a concept
whereby companies integrate social and environmental concerns in their business operations and their
interaction with their stakeholders on a voluntary basis.”14 The renewed EU strategy defines CSR as “the
responsibility of enterprises for their impacts on society”, taking away the “voluntariness” of the whole
practice.15

In the following sub-chapters, an analysis will be made about the pros and cons that the voluntary or
mandatory CSR approach have, in order to unravel which regulation could be the most effective to make
companies comply with CSR practices.

11
Williams and Aguilera 2008, p. 454
12
Lambooy 2010, p. 14
13
Gatti et al. 2018, p. 1
14
European Commission, ‘Promoting a European Framework for Corporate Social Responsibility”, Green Paper,
2001, COM (2001) 366 final.
15
European Commission, ‘A renewed EU Strategy 2011-2014 for Corporate Social Responsibility’, 2011, COM
(2011) 681 final.

[6]
 2. THE “VOLUNTARY” CSR APPROACH

Corporations are social agents and belong to a global setting in which their activities have economic, social
and environmental impacts. Globalization and corporate activities have crossed domestic bonds of state
regulation and increased the challenges that governments must face regarding citizens’ needs, quality of
life and local development.16

The demand that corporations become accountable for their actions has been reflected in the increasing
amount of voluntary CSR reporting. 17 However, concern on the extent, quality, and credibility of this
voluntary CSR reporting have made itself present.

In short, the voluntary CSR approach implies that CSR practice is a discretionary act that goes beyond what
is prescribed by the law, guided by ethical values or by the company’s self-interest and in which
governments have a minimal role. 18

The voluntary approach to CSR implies that corporations may or may not apply CSR practices in their
activities as result of a lack of enforceability of CSR standards, which in turn implies that corporations have
a high degree of flexibility in the way they wish to conduct their businesses.19

Some might say that this is the most effective approach to CSR and others dismiss it as utterly useless, the
main arguments in this regard will be explained in the following sub-points.

2.1 Advantages

When companies communicate their CSR contributions, they could gain legitimacy, obtain higher financial
performance and enhance their image. 20 When companies implement CSR practices, they can operate more
efficiently and reduce compliance costs. 21

Banks have also identified CSR as a marketing opportunity to differentiate their product along with a
number of benefits such as customer retention and increased attractiveness to overseas investors. 22The
combination of responding to social and market pressures to protect a brand’s reputation and proactively
seizing cost-saving technics is the so-called “business case” for CSR. 23

Some other supporters of the voluntary approach to CSR, have claimed that managers should be provided
discretionary power concerning CSR practices as they know best how to address and identify the local

16
Jamali, Dima & El Safadi, Walaa 2019, p. 2
17
Jain, Ameeta; Keneley, Monica; Thomson, Diane (2015): Voluntary CSR disclosure works! Evidence from Asia-
Pacific banks. In Social Responsibility Journal 11, pp. 2–18, p. 2
18
Dentchev, Nikolay A.; van Balen, Mitchell; Haezendonck, Elvira (2015): On voluntarism and the role of
governments in CSR. Towards a contingency approach. In Bus Ethics Eur Rev 24 (4), pp. 378–397, p. 378
19
Cominetti, Marta; Seele, Peter (2016): Hard soft law or soft hard law? A content analysis of CSR guidelines
typologized along hybrid legal status. In uwf 24 (2-3), pp. 127–140, p. 127
20
Ibid, p. 2
21
Cominetti and Seele 2016, p. 128
22
Jain et al. 2015, p. 3
23
McBarnet, Doreen (2007): Corporate Social Responsibility Beyond Law, Through Corporate Social Responsibility
Beyond Law, Through Law, For Law: The New Corporate Accountability. In Doreen McBarnet, A Voiculescu, T.
Campbell (Eds.): The New Corporate Accountability. Corporate Social Responsibility and the Law. Cambridge:
Cambridge University Press, pp. 1–63, p. 17

[7]
social issues and develop adequate responses.24 This perspective considers that managers will pursue CSR
as an aspiration that will bring them the personal satisfaction of contributing to society beyond a simple
“duty to comply.”25

It has also been upheld that companies will implement environmentally responsible practices in their
activities as they have discovered that their livelihood depends on the well-functioning of the ecosystem;
an example could be Coca-Cola, which is 100% dependent on water. 26 For them, it would be more than
logical to implement eco-friendly practices that take care of the resources on which the very existence of
the business is based.

Businesses could also be interested in implementing CSR as self-regulation because then they have more
flexibility in their regulatory environment whereas an imposed legislative framework tends to be more
stringent.27

Several theories have highlighted the need for voluntary CSR implementation. Integrative theories believe
that corporate management “should take into account social demands and integrate them in such a way that
the business operates in accordance with social values.”28Political theories claim for the new political role
for businesses as a result of the lack of efficiency of legal mechanisms in protecting society from corporate
externalities.29 Ethical theories claim that businesses are part of society and must contribute to the common
good by efficiently providing goods and services, always respecting the dignity and fundamental rights of
the individual.30

As we have seen, many aspects of the voluntary CSR approach seem to be entirely legitimate. However,
years have passed, and scandals like Shell in Nigeria have shown the limitations of this approach. The
current MNCs negligence regarding CSR practices has generated a social outburst that has incited
governments into looking other ways of CSR enforcement.

2.2 Disadvantages

Currently, many have abandoned the idea that CSR should be voluntary. The voluntary approach has been
widely criticized for the impossibility of sanctioning harmful practices and the lack of transparency and
credibility of CSR reports.31 By following the voluntary approach, corporations are given too much leeway
in implementing CSR practices, and they are not even compelled to make periodical reports on CSR
implementation.

The voluntary CSR approach results outdated regarding the current MNCs behavior. Even though some
companies make efforts to be socially responsible and contribute to social welfare, most of them are focused

24
Sheehy, Benedict (2012): Understanding CSR: An Empirical Study of Private Regulation. In Monash University
Law Review 38 (2), pp. 103–127, p. 125
25
Ibid, p. 125
26
Lambooy 2010, p. 7
27
Cominetti and Seele 2016, p. 128
28
Garriga, Elisabet; Mele, Domenec (2004): Corporate Social Responsibility Theories. Mapping the Territory. In
Journal of Business Ethics, pp. 51–71, p. 57
29
Gatti et al. 2018, p. 5
30
Idem
31
Ibid, p. 6

[8]
on obtaining profits and maximizing shareholder value. This idea has been classically represented by
Friedman, who expressed that the only social responsibility of businesses is to increase their profits.32

The governance gaps in the regulatory, judicial, economic and political systems have paved the way to
implement new initiatives to hold MNCs liable for their wrongful behavior. The most urgent situation being
human rights compliance by MNCs and their subsidiaries in developing countries.33

As we know, social media plays an essential role in raising awareness about the imperative need for CSR
implementation. Volkswagen’s emissions cheating, H&M, Zara and the Rana Plaza collapse, the Deepwater
Horizon oil spill, Enron’s accounting fraud and many more are among the most recent scandals that would
not have brought such social outcry if it were not for social media. To the contrary, small and medium-
sized companies could ignore CSR practices as they could feel outside of social media’s scrutiny.

32
Friedman, Milton (2007): The Social Responsibility of Business Is to Increase Its Profits. In Walther Ch Zimmerli,
Markus Holzinger, Klaus Richter (Eds.): Corporate Ethics and Corporate Governance. Berlin, Heidelberg: Springer-
Verlag Berlin Heidelberg, pp. 173–178
33
Business and Human Rights (2007): Improving the Human Rights performance of business through multi-
stakeholder initiatives. Summary report. Business and Human Rights. The Hague, Netherlands., p. 1

[9]
 3. THE “MANDATORY CSR” APPROACH

With the new international and domestic regulatory developments, a new trend towards mandatory CSR
has been born. As previously mentioned, the EC started a whole new conceptualization of CSR including
some binding aspects. The EC mentioned the “need to acknowledge the role that complementary regulation
plays in creating an environment more conducive to enterprises voluntarily meeting their social
responsibility.”34

Furthermore, the EC also recognized the role that public authorities should play through a smart mix of
voluntary policy measures and complementary regulation when needed. 35 Even though the EC still
considers that CSR is voluntary and corporations should lead its development, it recognized the role that
authorities must perform in encouraging and controlling CSR compliance. 36

The mandatory approach aims at making CSR enforceable and legally binding through guidelines that
require a high level of formalization. The mandatory CSR approach involves the establishment of precise
rules that corporations will have to comply along with robust sanctions in case of disobedience. 37

The pros and cons of the mandatory CSR approach will be discussed hereafter. To exemplify the current
trend towards mandatory CSR, the current measures implemented by the Indian government will be
explained.

3.1 Advantages: An analysis based on the Indian example

Defenders of the mandatory approach claim that mandatory CSR can raise awareness, give CSR policy
priority and ease the establishment of regulated CSR indicators.38 The absence of reliable CSR
measurement is a result of the lack of uniform CSR regulation.

In the last decades, businesses start to contribute in ways that go beyond philanthropy towards direct
engagement in the development of disadvantaged communities. 39

Because of the pressing needs of the Indian population, the Government of India (GOI) is getting companies
to help in the development process more proactively. In 2013, the GOI enacted the new Companies Act
(CA) to replace the one from 1956.40

Section 13541 of the CA CSR implementation is addressed directly. The latter is considered as a significant
breakthrough in CSR regulation.

According to the new CA, every company with a net worth of five hundred crores or more must spend 2%
on average of its three-year net profits “in pursuance of its Corporate Social Responsibility Policy” and

34
European Commission,2011
35
Idem
36
Gatti et al. 2018, p. 7
37
Cominetti and Seele 2016, p. 127
38
Gatti et al. 2018, p. 6
39
Das Gupta, Ananda; Das Gupta, Aruna (2008): Corporate social responsibility in India: towards a sane society? In
Social Responsibility Journal 4 (1/2), pp. 209–216, p. 210
40
Gatti et al. 2018, p. 1
41
See Appendix 1

[10]
must establish a CSR committee of the board consisting of three or more directors to monitor CSR
endeavors.42

However, Section 135 of the CA does not prescribe any sanctions for the company that fails to spend the
prescribed amount on CSR. The company then is obliged to specify in its annual board report, the reasons
for not having complied with it. 43 The new CA has been considered as hard law with a low level of
formalization.44 According to Cominetti and Seele’s classification, Section 135 of the CA would consist of
soft-hard law by not having an enforcement method.

CSR regulation can have different levels of formalization and sanction, regardless of the fact of being
voluntary or mandatory.45 The reason above has brought a whole new classification46 of CSR regulation
which goes from soft soft, hard soft, soft hard and hard hard legal status. 47

This classification could be useful, as it shows that even though some CSR guidelines are mandatory, they
lack a robust enforcement method and renders them almost non-binding.

In 2016 around 500 companies (of around 16,000) did not fulfill the norm of spending 2% of their average
net profit.48 Additionally, the smaller companies that implemented CSR practices voluntarily before the CA
entered into force, reduced their spending after 2013.49 Even though some companies increased their
expenditure by almost 30%, the level of expenditure fell short of expectations. 50

Despite the critiques, the statistics show that mandatory CSR may effectively boost the country’s
development and address urgent issues. 51 Currently, around 94% of the companies in India have a CSR
policy, and 97% have a CSR Committee in place. 52 Additionally, there is general support for the
introduction of mandatory CSR expenditure from mostly all types of companies in India. 53

3.2 Disadvantages

One main concern in implementing mandatory CSR standards in developing countries is that it can deter
foreign investment. 54 As it has been happening for decades, developing countries have been competing in

42
Parliament of India (2013): The Companies Act
43
This is the so-called ‘comply or explain’ approach which requires companies to formulate CSR policy and establish
the details of its CSR spending to proof that it complied with the minimum standards.
44
Gatti et al. 2018, p. 21
45
Cominetti and Seele 2016, p.127f
46
According to them, CSR guidelines are characterized by different levels of enforceability. Hard law is characterized
by imposing a legal obligation and therefore being binding. On the other hand, there is soft law which is characterized
by its low level of formalization and no sanctions in case of non-compliance. However, there are other stages of
regulation between them both and its categorization will depend on their level of obligations and sanctions.
47
Cominetti and Seele 2016, p.127f
48
Gatti et al. 2018, p. 21
49
Mukherjee, Abhishek; Bird, Ron (2016): Analysis of mandatory CSR expenditure in India. A survey. In IJCG 7
(1), p. 33
50
Ibid, p. 56
51
Gatti et al. 2018, p. 21
52
Idem
53
Mukherjee and Bird 2016, p. 56
54
Williams and Aguilera 2008, p. 455

[11]
the so-called “race to the bottom” through governmental deregulation, meager labor rights, mediocre safety
standards, uneven welfare distribution, and neglectfully environmental behavior.

Developing countries worldwide have been willing to compete in the race to the bottom to lure MNCs in
establishing subsidiaries in their territory. Even though the race to the bottom is by no means something
positive for society, developing countries are also in need of foreign investment that can bring new
employment opportunities for the people, which indeed is also necessary.

Another disadvantage of the mandatory approach is that businesses will implement CSR because they are
compelled to do so, and then managers could have a reactive approach instead of a proactive approach
towards CSR. 55 In this situation, managers will not implement CSR practices in their businesses activities
for the personal satisfaction of contributing to society and will only “tick the boxes” regarding what is
prescribed by the law.

55
Gatti et al. 2018, p. 6

[12]
 4. GOING BEYOND THE MANDATORY V. VOLUNTARY DEBATE

New definitions of CSR start to recognize the relevance of the mandatory and voluntary aspects of CSR
regulation. As an example, Sheehy defines it as a “socio-political movement which generates private self-
regulatory initiatives, incorporating public and private international law norms seeking to ameliorate and
mitigate the social harms of and to promote public good by industrial organisations.”56

Furthermore, it is inaccurate to believe that mandatory and voluntary CSR cannot co-exist. CSR regulation
can include self-regulation, private regulation, and public regulation.57

Another solution can be provided through meta-regulation, which requires organizations to implement
practices that are aimed at making sure they internalize their externalities, being the corporations, the most
qualified to determine the adequate processes to reach that goal.58 Meta-regulation acknowledges the fact
that legislators might not know the best practices that are to be performed by the specific business. 59

Meta-regulation also recognizes that other aspects such as consumer activism, voluntary industry codes,
protection of business reputation and so on are also relevant tools to motivate and even enforce CSR. 60

Governments have been fostering CSR indirectly through tort law or contract law, using old tools on
creative ways to make CSR enforceable. The Government of the UK encourages CSR practices, and it is
no surprise that corporations in the UK have higher rates of CSR reporting and stakeholder engagement
than companies in the rest of the European countries except Norway.61

The European situation shows that labor relationships and environmental issues are incorporated into the
regulatory framework, whereas social and environmental information, responsibility for subsidiaries’
behavior or supply chain are still gaps to be filled with voluntary CSR. 62 The aforementioned shows that
some aspects covered by CSR have already been crystallized into positive regulation and this does not work
in detriment of voluntary practices.63

56
Sheehy, Benedict (2015): Defining CSR. Problems and Solutions. In J Bus Ethics 131 (3), pp. 625–648, p. 639
57
Gatti et al. 2018, p. 8
58
Parker, Christine (2007): Meta-regulation: legal accountability for corporate social responsibility. In Doreen
McBarnet, A Voiculescu, T. Campbell (Eds.): The New Corporate Accountability. Corporate Social Responsibility
and the Law. Cambridge: Cambridge University Press, pp. 207–237, p. 217
59
Idem, p. 217
60
Idem, p. 218
61
Williams and Aguilera 2008, p. 455
62
Idem, p. 456
63
Eijsbouts, A. J. A. J. (2011): Corporate responsibility, beyond voluntarism. Regulatory options to reinforce the
licence to operate. Maastricht, Maastricht: Maastricht University Press, p. 25

[13]
 5. CONCLUSION

The doctrinal discussion regarding voluntary v. mandatory CSR is no longer relevant, and other issues start
to become more important. The question to be ask is rather: which CSR issues are to be regulated and by
which sort of regulation?

Nowadays, it is more relevant to have a look into the modern CSR practices and developments that can
give direction for future legislation or inspire private actors in framing CSR in their businesses.

As previously exposed, CSR is not “one single norm” but several norms that cover a wide variety of issues.
This makes it rather impossible to determine whether CSR -as a whole- should be mandatory or voluntary
because we are talking about a plurality of issues that need to be addressed separately.

Despite the years of strenuous debate, it has been shown that mandatory and voluntary CSR approaches
can complement each other. They are now intertwined and the role that public authorities are playing is
essential to the development of modern CSR practices.

[14]
 APPENDIX 1

SECTION 135 OF COMPANIES ACT 2013 - Corporate Social Responsibility

(1) 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, out of
which at least one director shall be an independent director.

(2) The Board's report under sub-section (3) of section 134 shall disclose the composition of the Corporate
Social Responsibility Committee.

(3) The Corporate Social Responsibility Committee shall,

(a) formulate and recommend to the Board, a Corporate Social Responsibility Policy which shall indicate
the activities to be undertaken by the company as specified in Schedule VII;

(b) recommend the amount of expenditure to be incurred on the activities referred to in clause (a); and

(c) monitor the Corporate Social Responsibility Policy of the company from time to time.

(4) The Board of every company referred to in sub-section (1) shall,

(a) after taking into account the recommendations made by the Corporate Social Responsibility Committee,
approve the Corporate Social Responsibility Policy for the company and disclose contents of such Policy
in its report and also place it on the company's website, if any, in such manner as may be prescribed; and

(b) ensure that the activities as are included in Corporate Social Responsibility Policy of the company are
undertaken by the company.

(5) The Board of every company referred to in sub-section (1), shall ensure that the company spends, in
every financial year, at least two per cent. of the average net profits of the company made during the three
immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy:

Provided that the company shall give preference to the local area and areas around it where it operates, for
spending the amount earmarked for Corporate Social Responsibility activities:

Provided further that if the company fails to spend such amount, the Board shall, in its report made under
clause (o) of sub-section (3) of section 134, specify the reasons for not spending the amount.

Explanation—For the purposes of this section “average net profit” shall be calculated in accordance with
the provisions of section 198.

[15]
 REFERENCES

-Business and Human Rights (2007): Improving the Human Rights performance of business through multi-
stakeholder initiatives. Summary report. Business and Human Rights. The Hague, Netherlands. Available
online at https://www.business-humanrights.org/sites/default/files/media/bhr/files/MSI-Consultation-6-7-
Nov-2007.pdf, checked on 3/10/2019.

-Cominetti, Marta; Seele, Peter (2016): Hard soft law or soft hard law? A content analysis of CSR guidelines
typologized along hybrid legal status. In uwf 24 (2-3), pp. 127–140.

-Das Gupta, Ananda; Das Gupta, Aruna (2008): Corporate social responsibility in India: towards a sane
society? In Social Responsibility Journal 4 (1/2), pp. 209–216.

-Dentchev, Nikolay A.; van Balen, Mitchell; Haezendonck, Elvira (2015): On voluntarism and the role of
governments in CSR. Towards a contingency approach. In Bus Ethics Eur Rev 24 (4), pp. 378–397.

-European Commission, ‘Promoting a European Framework for Corporate Social Responsibility”, Green
Paper, 2001, COM (2001) 366 final.

-European Commission, ‘A renewed EU Strategy 2011-2014 for Corporate Social Responsibility’, 2011,
COM (2011) 681 final.

-Eijsbouts, A. J. A. J. (2011): Corporate responsibility, beyond voluntarism. Regulatory options to reinforce

the licence to operate. Maastricht, Maastricht: Maastricht University Press.

-Friedman, Milton (2007): The Social Responsibility of Business Is to Increase Its Profits. In Walther Ch
Zimmerli, Markus Holzinger, Klaus Richter (Eds.): Corporate Ethics and Corporate Governance. Berlin,
Heidelberg: Springer-Verlag Berlin Heidelberg, pp. 173–178.

-Garriga, Elisabet; Mele, Domenec (2004): Corporate Social Responsibility Theories. Mapping the
Territory. In Journal of Business Ethics, pp. 51–71. Available online at
https://link.springer.com/content/pdf/10.1023%2FB%3ABUSI.0000039399.90587.34.pdf, checked on
3/9/2019.

-Gatti, Lucia; Vishwanath, Babitha, Cottier, Bertil; Seele, Peter (2018): Are We Moving Beyond Voluntary
CSR? Exploring Theoretical and Managerial Implications of Mandatory CSR Resulting from the New
Indian Companies Act. In Journal of Business Ethics, pp. 1–33. Available online at
https://www.researchgate.net/publication/322627927, checked on 02/03.

-Jain, Ameeta; Keneley, Monica; Thomson, Diane (2015): Voluntary CSR disclosure works! Evidence from
Asia-Pacific banks. In Social Responsibility Journal 11, pp. 2–18. Available online at
www.researchgate.net/publication/273490691, checked on 3/10/2019.

-Jamali, Dima & El Safadi, Walaa (2019): Adaptations of CSR in the Context of Globalization the Case of
the GCC, pp. 1–21. Available online at
https://www.researchgate.net/publication/330949349_Adaptations_of_CSR_in_the_Context_of_Globaliz
ation, checked on 3/2/2019.

[16]
 -Lambooy, Tineke Elisabeth (2010): Corporate social responsibility. Legal and semi-legal frameworks
supporting CSR. Zugl.: Leiden, Univ., Diss., 2010. Deventer: Kluwer (Uitgaven vanwege het Instituut voor
Ondernemingsrecht, Rijksuniversiteit Groningen en Erasmus Universiteit Rotterdam, 77).

-McBarnet, Doreen (2007): Corporate Social Responsibility Beyond Law, Through Corporate Social
Responsibility Beyond Law, Through Law, For Law: The New Corporate Accountability. In Doreen
McBarnet, A Voiculescu, T. Campbell (Eds.): The New Corporate Accountability. Corporate Social
Responsibility and the Law. Cambridge: Cambridge University Press, pp. 1–63.

-Mukherjee, Abhishek; Bird, Ron (2016): Analysis of mandatory CSR expenditure in India. A survey. In
IJCG 7 (1), p. 32.

-Parker, Christine (2007): Meta-regulation: legal accountability for corporate social responsibility. In
Doreen McBarnet, A Voiculescu, T. Campbell (Eds.): The New Corporate Accountability. Corporate Social
Responsibility and the Law. Cambridge: Cambridge University Press, pp. 207–237.

-Parliament of India (2013): The Companies Act. Available online at

http://www.mca.gov.in/Ministry/pdf/CompaniesAct2013.pdf, checked on 3/9/2019.

-Sheehy, Benedict (2012): Understanding CSR: An Empirical Study of Private Regulation. In Monash
University Law Review 38 (2), pp. 103–127. Available online at
https://heinonline.org/HOL/P?h=hein.journals/monash38&i=401, checked on 3/7/2019.

-Sheehy, Benedict (2015): Defining CSR. Problems and Solutions. In J Bus Ethics 131 (3), pp. 625–648.

-Williams, Cynthia; Aguilera, Ruth V. (2008): Corporate Social Responsibility in a Comparative

Perspective. In Oxford Handbook of Corporate Social Responsibility (Ed.): Oxford Handbook of Corporate
Social Responsibility. With assistance of Andrew Crane, Dirk Matten, Abagail McWilliams, Jeremy Moon,
and Donald S. Siegel., p. 452-472. Available online at
https://digitalcommons.osgoode.yorku.ca/cgi/viewcontent.cgi?referer=https://www.google.com/&httpsred
ir=1&article=1329&context=scholarly_works, checked on 3/2/2019.

[17]

View publication stats