Strategic Role of Mandated Corporate Social Responsibility: The India Story

Introduction

Corporate social responsibility (CSR) is a topic of ‘particular importance at the present time’ (Aras & Crowther, 2013), not only globally, but especially in India.

The reasons for this current interest worldwide can be credited to globalization and its influences on the role of corporations in society, whereby, concepts such as ‘fair trade’, ‘equal treatment’, ‘environment-friendly production’, and ‘green consumption’ are being integrated into the values of the corporation (also read as company, firm, and organization in this research). The driving forces of this significant transformation are the changing aspirations of societies, enacted by better-informed consumers and investors with a long-term vision, who are empowered by advances in the information and communication technologies (Ertuna & Ertuna, 2013).

India, on the other hand, came into the limelight in the area of CSR with its recently amended Companies Act, 2013, that has mandated the CSR reporting for their large, stable companies having a net worth of (Indian Rupee) ₹5 billion or more, or a turnover of ₹10 billion or more, or a net profit of ₹50 million or more during any financial year. This has transited CSR from a philanthropic and/or voluntary perspective to a more structured, objective, and measurable format for these corporations (Mitra, Akhtar, & Das Gupta, 2018). This Act is slated to affect over 16,300 companies with an estimated flow of approximately ₹200 billion (approximately 2.6 billion Euro @ ₹1 = 0.013 Euro; as on February 12, 2016) annually into the economy every year; thus shaking the foundation of business and society at the same time, affecting the country at a multi-stakeholder level (Mitra & Schmidpeter, 2016). Not only that, this Act has initiated a new field of study on ‘mandated CSR’ post 2013 that has instigated the interest of researchers and practitioners alike, the world over. In fact, India is scheduled to be the birthplace of social, economic, and environmental transformation through financial investments in CSR (Mitra & Schmidpeter, 2016).

Literature Review

The concept of CSR has had a long and diverse history in the literature. Murphy (1978) classified four broad CSR eras that embraced the period before and after the 1950s (Table 1). In fact, the year 1950 is popularly known as the beginning of the modern era in CSR.

In 1979, Carroll proposed a four-part definition of CSR which was embedded in a conceptual model of corporate social performance (CSP), where he defined the social responsibility of businesses as encompassing the economic, legal, ethical, and discretionary expectations that society has of organizations at a given point in time.

During the 1980s, a ‘social responsibility agenda for the 1980s’ was set forth by Frederick (2006) that closely corresponds with, or was slightly ahead of, business concerns and practices during this period.

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Table 1.

Four Broad CSR Eras Before and After Year 1950 Till 1978

Period	Role of CSR
Up to the 1950s	‘philanthropic’ era, in which companies donated to charities more than anything else
1953–1967	‘awareness’ era, characterized by more recognition of the overall responsibility of business and its involvement in community affairs
1968–1973	‘issue’ era, in which companies began focusing on specific issues such as urban decay, racial discrimination, and pollution problems
1974–1978 and, continuing beyond	‘responsiveness’ era, where companies began taking serious management and organizational actions to address CSR issues

Source: Adapted from Carroll (2008).

The prominent themes which continued to grow and take center stage in the 1990s included CSP, stakeholder theory, business ethics, sustainability, and corporate citizenship (Carroll, 2008), that is apparent from Table 2.

An analysis of 50 CSR definitions, concepts and models as published by various researchers at various times post 1990s and in the 25 years between 1991 and 2016 alone have provided with varied results, that has been summarized in Table 2. Year 2017 has not been taken into consideration as the single-most important concept of 2017 is Chatterjee and Mitra’s (2017) research on ‘CSR should contribute to the National Agenda in emerging economies’, that has been studied in detail later.

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Table 2.

Select CSR Definitions, Concepts and Models (1991–2016)

Sl. No.	Researcher(s), Year	Perspective	Key Findings
1	Carroll, 1991	Corporate citizenship	‘For CSR to be accepted by a conscientious business person, it should be framed in such a way that the entire range of business responsibilities are embraced. Four kinds of social responsibilities constitute total CSR - economic, legal, ethical and philanthropic, that forms a pyramid’ (Carroll, 1991).
2	Frederick, Post, & Davis, 1992	Sustainability	‘CSR can be defined as a principle stating that corporations should be accountable for the effects of any of their actions on their community and environment’ (Frederick et al., 1992).
3	Kay, 1993	Corporate social performance	‘Reputation, closely related to brand awareness, aids in brand differentiation and ultimately helps a company gain (through a good reputation) or lose (through a damaged reputation) competitive advantage. CSR aids in reputation building’ (Kay, 1993).
4	Reder, 1994	Corporate citizenship	‘An all encompassing notion,[corporate] social responsibility refers to both the way a company conducts its internal operations, including the way it treats its work force, and its impact on the world around it’ (Reder, 1994).
5	Elkington, 1994	Sustainability	‘First coined the term, triple bottom line(TBL), that strove to measure sustainability by focusing on comprehensive investment results - that is, with respect to performance along the interrelated dimensions of profits, people and the planet’ (Elkington, 1994).
6	Hart, 1995	Sustainability	‘Proposed a natural-resource based view of the firm, based upon the firm’s relationship to the natural environment. Three interconnected strategies (pollution prevention, product stewardship and sustainable development) were presented in detail along with accompanying propositions concerning their connections to sustained competitive advantage’(Hart, 1995).
7	Mitchell, Agle, & Wood, 1997	Stakeholder theory	‘Managing stakeholder relationships is challenging because of power, legitimacy, and urgency of diverse stakeholders’ sustainability interests’ (Mitchell et al., 1997).
8	Hopkins, 1998	Stakeholder theory	‘CSR is concerned with treating the stakeholders of the firm ethically or in a socially responsible manner. Stakeholders exist both within a firm and outside. Consequently, behaving socially responsibly will increase the human development of stakeholders both within and outside the corporation’ (Hopkins, 1998).
9	Maignan, Ferrel, & Hult, 1999	Corporate citizenship	‘Market oriented cultures along with humanistic cultures lead to proactive corporate citizenship, which in turn is associated with improved levels of employee commitment, customer loyalty and business performance’ (Maignan et al., 1999).
10	World Business Council for Sustainable Development, 1999	Corporate citizenship	‘CSR is the commitment of business to contribute to sustainable economic development, working with employees, their families, the local community and society at large to improve their quality of life’ (World Business Council for Sustainable Development, 1999).
11	Khoury, Rostami, & Turnbull, 1999	Stakeholder theory	‘CSR is the overall relationship of the corporation with all of its stakeholders. These include customers, employees, communities, owners/investors, government, suppliers and competitors. Elements of social responsibility include investment in community outreach, employee relations, creation and maintenance of employment, environmental stewardship and financial performance’ (Khoury et al., 1999).
12	Woodward-Clyde, 1999	Corporate citizenship	‘CSR has been defined as a “contract” between society and business wherein a community grants a company a license to operate and in return the matter meets certain obligations and behaves in an acceptable manner’ (Woodward-Clyde, 1999).
13	Kilcullen & Kooistra, 1999	Business ethics	‘CSR is the degree of moral obligation that may be ascribed to corporations beyond simple obedience to the laws of the state’ (Kilcullen & Kooistra, 1999).
14	Piacentini, MacFadyen, & Eadie, 2000	Business ethics	‘CSR is the voluntary assumption by companies of responsibilities beyond purely economic and legal responsibilities’ (Piacentini et al., 2000).
15	Business for Social Responsibility, 2000	Corporate citizenship	‘Operating a business in a manner that meets or exceeds the ethical, legal, commercial and public expectations that society has of business. Social responsibility is a guiding principle for every decision made and in every area of a business’ (Business for Social Responsibility, 2000).
16	Commission of the European Communities, 2001	Sustainability	‘CSR is a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis’ (Commission of the European Communities, 2001).
17	Jackson & Hawker, 2001	Stakeholder theory/sustainability	‘CSR is how a Company treats its employees and all its stakeholders and the environment’ (Jackson & Hawker, 2001).
18	Marsden, 2001	Corporate citizenship	‘CSR is about the core behaviour of companies and the responsibility for their total impact on the societies in which they operate. CSR is not an optional add-on nor is it an act of philanthropy. A socially responsible corporation is one that runs a profitable business that takes account of all the positive and negative environmental, social and economic effects it has on society’ (Marsden, 2001).
19	McWilliams & Siegel, 2001	Business ethics	‘CSR are the actions that appear to further some social good, beyond the interests of the firm and that which is required by law’ (McWilliams & Siegel, 2001).
20	Foran, 2001	Stakeholder theory/sustainability	‘CSR can be defined as the set of practices and behaviours that firms adopt towards their labour force, towards the environment in which their operations are embedded, towards authority and towards civil society’ (Foran, 2001).
21	Pinney, 2001	Corporate citizenship	‘CSR or corporate citizenship can most simply be defined as a set of management practices that ensure the company minimizes the negative impacts of its operations on society while maximizing its positive impacts’ (Pinney, 2001).
22	UK Government, 2001	Stakeholder theory	‘CSR recognizes that the private sector’s wider commercial interests require it to manage its impact on society and the environment in the widest sense. This requires it to establish an appropriate dialogue or partnership with relevant stakeholders, be they employees,
			customers, investors, suppliers or communities. CSR goes beyond legal obligations, involving voluntary, private sectorled engagement, which reflects the priorities and characteristics of each business, as well as sectoral and local factors’ (UK Government, 2001).
23	Lea, 2002	Stakeholder theory	‘CSR is about businesses and other organizations going beyond the legal obligations to manage the impact they have on the environment and society. In particular, this could include how organizations interact with their
			employees, suppliers, customers and the communities in which they operate, as well as the extent they attempt to protect the environment’ (Lea, 2002).
24	Andersen, 2003	Sustainability	‘We define CSR broadly to be about extending the immediate interest from oneself to include one’s fellow citizens and the society one is living in and is a part of today, acting with respect for the future generation and nature’ (Andersen, 2003).
25	Strategis, 2003	Sustainability	‘CSR is generally seen as the business contribution to sustainable development, which has been defined as development that meets the needs of the present without compromising the ability of future generations to meet their own needs, and is generally understood as focusing on how to achieve the integration of economic, environmental and social imperatives’ (Strategis, 2003).
26	Van Marrewijk, 2003	Sustainability	‘In general, corporate sustainability and CSR refer to company activities—voluntary by definition—demonstrating the inclusion of social and environmental concerns in business operations and in interactions with stakeholders’ (Van Marrewijk, 2003).
27	Kanter, 2003	Corporate social performance	‘Now companies are viewing community needs as opportunities to develop ideas, locate and cater to new markets, and solve long overdue business problems’ (Kanter, 2003).
28	Goodpaster & Matthews, 2003	Business ethics	‘Corporations that monitor their employment practices and the effects of their production processes and products on the environment and human health show the same kind of rationality and respect that morally responsible individuals do’ (Goodpaster & Matthews, 2003).
29	IndianNGOs.com, 2003	Corporate citizenship	‘CSR is a business process wherein the institution and the individuals within are sensitive and careful about the direct and indirect effect of their work on internal and external communities, nature and the outside world’ (IndianNGOs.com, 2003).
30	Ethical Performance, 2003	Business ethics	‘At its best, CSR is defined as the responsibility of a company for the totality of its impact, with a need to embed society’s values into its core operations as well as into its treatment of its social and physical environment. Responsibility is accepted as encompassing a spectrum—from the running of a profitable business to the health and safety of staff and the impact on the societies in which a company operates’ (Ethical Performance, 2003).
31	Global Corporate Social Responsibility Policies Project, 2003	Business ethics	‘Global CSR can be defined as business practices based on ethical values and respect for workers, communities and the environment’ (Global Corporate Social Responsibility Policies Project, 2003).
32	CSRwire, 2003	Stakeholder theory	‘CSR is defined as the integration of business operations and values, whereby the interests of all stakeholders including investors, customers, employees and the environment are reflected in the company’s policies and actions’ (CSRwire, 2003).
33	Ethics in Action Awards, 2003	Stakeholder theory	‘CSR is a term describing a company’s obligation to be accountable to all of its stakeholders in all its operations and activities. Socially responsible companies consider the full scope of their impact on communities and the environment when making decisions, balancing the needs of stakeholders with their need to make a profit’ (Ethics in Action Awards, 2003).
34	Daugareilh & Isabelle, 2008; Sobczak, 2004	Stakeholder theory	‘Employees’ participation in framing CSR policies cannot be ignored because OECD guidelines on employment and industrial relations and ILO Tripartite Declarations specify the same; Companies should be cautious in using CSR tools, such that while protecting consumer rights, labour rights should not be compromised’ (Daugareilh & Isabelle, 2008; Sobczak, 2004).
35	Chapple & Moon, 2005	Corporate citizenship	‘Community involvement is the largest part of established form of CSR in India. This is now being followed by socially responsible production process and employee relations’ (Chapple & Moon, 2005).
36	Prahalad, 2006	Corporate social performance	Propounded the ‘bottom of the pyramid’ model, where he argued that one must ‘stop thinking of the poor as victims or as a burden and start recognizing them as resilient and creative entrepreneurs and value-conscious consumers, a whole new world of opportunity will open up’ (Prahalad, 2006).
37	Sen, Bhattacharya, & Korschun, 2006	Stakeholder theory	‘Stakeholders from consumption, employment and investment domains react positively to a company’s CSR initiatives’ (Sen et al., 2006).
38	Collier & Estebban, 2007	Corporate social performance	‘Many businesses understand that the willingness to assume responsibility for people and the environment can determine the achievement of the company’s profitability’ (Collier & Estebban, 2007).
39	Sirsly & Lamertz, 2008	Corporate social performance	‘CSR initiatives of a company can lead to a sustainable fist-mover advantage provided it is central to the company’s mission, provides company specific benefits and is made visible to external audiences’ (Sirsly & Lamertz, 2008).
40	Visser, 2008	Corporate citizenship	‘The formal and informal ways in which business makes a contribution to improving the governance, social, ethical, labour, environmental conditions of the developing countries in which they operate, while remaining sensitive to prevailing religions, historical and cultural contexts’(Visser, 2008).
41	Peterson & Jun, 2009	Corporate social performance	‘A company which has incorporated CSR philosophy in its business model has better reputation and this leads to better financial performance, since both are closely related’ (Peterson & Jun, 2009).
42	Doh, Howton, Howton, & Siegel, 2010	Corporate social performance	‘Institutional intermediaries (nongovernmental organisations—NGOs, rating agencies, certifying agencies, think tanks, public institutions etc. appear to influence market assessments of a company’s social responsibility’ (Doh et al., 2010).
43	Kapoor & Sandhu, 2010	Corporate social performance	‘There is significant positive impact of CSR on corporate profitability and insignificant positive impact on corporate growth’ (Kapoor & Sandhu, 2010).
44	Kitthananan, 2010	Corporate social performance	‘Successful corporate responsibility requires an integration of CSR into business’s strategy as well as its inprocess operations. Business should be able to deliberately identify, prioritize, and address the social causes that matter most, or at least the ones on which it can make the highest impact to society and business’s future’ (Kitthananan, 2010).
45	Porter & Kramer, 2011	Corporate social performance	Propounded the concept of ‘creating shared value’, that states: ‘Companies could bring business and society back together if they redefined their purpose as “creating shared value”—generating economic value in a way that also produces value for society by addressing its challenges. A shared value approach reconnects company success with social progress’ (Porter & Kramer, 2011).
46	Stephen, Gregory, & Matten, 2012	Business ethics	‘The institutional theory stated that corporate social activities are not only voluntary activities but it is a part of interface between business and society. Regulation/governance are necessary for enhancing the corporate performance of businesses through CSR. The theory also suggested that in what form companies should take its social responsibilities whether historical, political or legal form’ (Stephen et al., 2012).
47	Eccles & Serafeim, 2013	Corporate social performance	Contend that by ‘focusing on the environmental, social and governance (ESG) issues that are most relevant—or “material”—to shareholder value, firms can simultaneously boost both financial and ESG performance’ (Eccles & Serafeim, 2013).
48	Mitra, 2014	Corporate citizenship	‘In an emerging country like India, the ideal model, would be to generate the continuous “cycle of conversion” and transform the population to reap demographic dividend through a mutually beneficial relationship with the Government and the Corporation’ (Mitra, 2014).
49	Rangan, Chase, & Karim, 2015	Corporate social performance	‘Companies’ CSR activities are typically divided among three theatres of practice, viz., focusing on philanthropy, improving operational effectiveness and transforming the business model’ (Rangan et al., 2015).
50	Örtenblad, 2016	Business ethics	‘The motives behind CSR initiatives have both moral and strategic imperatives’ (Örtenblad, 2016).

Source: Collated from Dahlsrud (2008), Maurya (2013) & Researcher’s Contribution.

A careful analysis of these definitions (Table 2) would reveal that they are more in the nature of micro-definitions. These micro-definitions, more often than not, fall within the macro concepts of CSR, that ‘reflects three distinct, discontinuous perspectives, namely, shareholder value, societal value and stakeholder value’ (Rath & Gurtoo, 2012).

The perspectives of CSR with respect to profit-oriented firms range between two extreme views, namely the classical view and socioeconomic view. Proposed by Friedman (1962, 1970) and argued by authors like Sternberg (1997), Barry (2000, 2002), Jensen (2001), Coelho, McCLure, and Spry (2003), Sundaram and Inkpen (2004), and Henderson (2005) the classical view, also called the shareholder approach, holds that the main purpose of businesses is to maximize profit. This view, also known as the Agency Theory of CSR, implies that directors of an organization are agents of the owners and are duty bound to maximize the interests of those owners, who had made the investment, in the first place (Dvorak, Guth, Landers, & Zaun, 2000; Rappaport, 1998; Rath & Gurtoo, 2012; Shirouzu, 2000; Sternberg, 1994; Taylor, 1999).

Contrary to this is the socioeconomic view of social responsibility, that was argued by theorists like Freeman (1984), Clarkson (1995), Lazer (1996), and Carroll (1999), who believed that businesses owe something back to the society that supports them, and that, this debt is greater than the debt of any individual member of the society. Referred as the social contract approach, and based on the principle of communitarian ethics, it believes that corporations should be socially responsible, both, out of gratitude for their existence and a moral sense of reciprocation for benefits received from the society (Alchian & Demsetz, 1972; Jensen & Meckling, 1976; Rath & Gurtoo, 2012). Ahenkora, Banahene, and Quartey (2013) therefore observes that the societal value antecedent ‘has implication for the model of CSR that is adopted to achieve the business’ strategic objectives. It also adds to the integrative social contract theory by making explicit aspects of the implicit social contract that exists in the relationship between business and society’.

However, the third approach, known as the stakeholder approach, emerged as ‘the most dominant paradigm in CSR’ (Khandelwal & Mohendra, 2010). As put forward by Freeman (1984), it propounds that ‘the 21st Century is one of “Managing for Stakeholders.” The task of executives is to create as much value as possible for stakeholders without resorting to tradeoffs. Great companies endure because they manage to get stakeholder interests aligned in the same direction’. The stakeholder here, in its widest sense, is defined as any identifiable group or individual that can affect the achievement of organizational objectives or who is affected by the achievement of organizational objectives (Clarkson, 1995; Freeman & Reed, 1983; Rath & Gurtoo, 2012).

To take this a step forward, it was in 2007 that Falck came up with the theory of ‘Doing well by doing good’, where he pointed out that the management should employ CSR as a prescriptive instrument in making plans that will satisfy both the stakeholder and shareholder approaches (Figure 1). In other words, he emphasized on a middle path where CSR should be strategically used to deal with the identified stakeholders’ claims. OPEN IN VIEWER

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Table 3.

Explicit and Implicit CSR

Explicit CSR	Implicit CSR
Describes corporate activities that assume responsibility for the interests of society	Describes corporations’ role within the wider formal and informal institutions for society’s interests and concerns
Consists of voluntary corporate policies, programs, and strategies	Consists of values, norms, and rules that result in (often codified and mandatory) requirements for corporations
Incentives and opportunities are motivated by the perceived expectations of different stakeholders of the corporation	Motivated by the societal consensus on the legitimate expectations of the roles and contributions of all major groups in society, including corporations

Source: Matten and Moon (2008).

Yet another macro concept has been put forward by Matten and Moon (2008), where they observe that CSR can be broken down into two broad divisions according to its nature—the explicit and implicit CSR. This can be understood with the help of Table 3.

Research Gaps

Aras and Crowther (2013) observed that although CSR has been one of the most debated management issues, with both academics and practitioners trying to define the concept and justifying why corporations should adopt ethical and socially responsible behavior; it faces a lack of consensus on what the concept means, what it entails, why it should be embraced, how it should be operationalized, what its roles are in achieving organizational effectiveness or performance and lots and lots of issues bordering on the concept.

It becomes more complex, when in the course of study, one finds out that the concept of CSR also varies from developed to emerging economies. Empirical evidence from CSR research in India suggests that there are differences with regard to India’s perceptions, operationalization, and expectations of CSR practices when compared to those of the West (Ghosh, 2014; Kumar, Murphy, & Balsari, 2001; Mohan, 2001). Even in recent times (2016), there are legitimate debates that centers around whether CSR should be voluntary or legislated/mandated.

Opponents of mandatory CSR debate that the efficacy of self-regulation allows each (Multi National Company) MNC to balance profits and social responsibility without unnecessary administrative burdens, supported by suggestions that legislated CSR risk to distort the allocation of resources and actually increase the likelihood of social irresponsibility. Proponents on the other hand, view that CSR must be legislated to end exploitation of human rights, working conditions etc. and that a legislated approach is just fair given that corporations have proven to be foundationally irresponsible (for example in form of the global financial crisis) (Isaksson & Mitra, 2018).

To contribute to the debate, Isaksson, and Mitra (2018), further describes the differences between multinational companies (MNCs) from one developed economy (Sweden) where MNCs voluntarily engage in CSR, in contrast to MNC activities in one emerging economy (India) where CSR reporting is mandatory by law; and outline the respective country’s reasons, beliefs, and practices regarding CSR as a concept. They selected Swedish MNCs since they are among the world leaders in voluntary CSR (KPMG, 2011; Swedish-Institute, 2009; Zadek & MacGillivray, 2008) and India, since it has the latest (2013) and arguably the most comprehensive CSR legislation in the world.

This research was conducted between the years 2015 and 2017, barely 2 years since the CSR mandate came into force in India and hence, concerns solely with the new area of study, mandated CSR. By using the term ‘mandated CSR’ in this research, we refer to the Section 135 of the Companies Act, 2013, (Appendix 1) that was introduced in India after replacing the 57 years old Companies Act, 1956.

Research Questions

From the research gaps, we can decipher the research problem as a need to understand the various tenets of CSR in India and thereby its mediating role between strategic management and firm performance.

This leads us to the following research questions:

What is the macro structure of CSR in India?

CSR in India

CSR in India can be studied through two main phases:

CSR in the pre-mandate period

While, there are some models and phases outlined by social scientists in the pre-mandate period, but CSR in the post-mandate period is completely a new area of study, having found its existence post 2013 after the Companies Act was passed. While this research will mainly deal with the later, a brief peep into the former is outlined hereunder:

CSR in the pre-mandate period:

One of the earliest and the most prominent theories of CSR was put forward by Mohandas Karamchand Gandhi in 1931 as the ‘Trusteeship’ model, that he described as ‘India’s gift to the World’, that provided a means of transforming the capitalist order of the society into an egalitarian one. It did not recognize any right of private ownership of property except so far as it may be permitted (deemed harmless) by society (social organization) (Mitra, 2007). He exhorted businessmen to regard themselves as trustees and servants of the poor and therefore, to regulate their commerce for toiling millions and be ‘satisfied with earning an honest penny’ (Mitra & Schmidpter, 2016; Sundar, 2013).

Thus, corporate India has always been proud of its strong tradition of corporate philanthropy and the Indian society had viewed its business leaders as leaders of social development (Ghosh, 2014; Mohan, 2001). Broadly speaking, Arora and Puranik (2004) identified four models of CSR operating in India, as illustrated in Table 4.

In fact, Mohan (2001) pointed out that several practices of ‘CSR of business in India are largely influenced by the context in which the companies operate, that is, the wider socioeconomic environment and the relationship between business, government, and society’.

However, the evolution of CSR development in the corporate culture of India can be traced back to pure philanthropy and charity during industrialization (1850–1914), then to social development during independence (1914–1960), and, yet again, to the ‘mixed economy’ paradigm, bound under legal and regulatory framework of businesses, activities, and the emancipation of public-sector undertakings (PSUs) (1960–1980) and finally to a globalized world in a ‘confused state’, characterized partly by traditional philanthropic engagements and partly by steps taken to integrate CSR into a sustainable business strategy (1980 until the present) (CII, 2013) that came to stay (Mitra & Schmidpeter, 2016).

This state of confusion continued, until a conscious effort was undertaken by the Ministry of Corporate Affairs (MCA), Government of India, to provide a shape and structure to CSR dynamics, through a carefully crafted CSR mandate (known henceforth as ‘the CSR andate’ or ‘the mandate’) for certain companies under the Section 135 of the Companies Act, 2013 (Appendix 1) that is scheduled to drive positive social change as well as contribute to national development at various levels (Mitra & Schmidpeter, 2016).

CSR in the post-mandate period:

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Table 4.

Four Models of CSR Operating in India

Model	Focus	Champions
Ethical	Voluntary commitment by companies to public welfare	Mohandas K. Gandhi
Statist	State ownership and legal requirements determine corporate responsibility	Jawahar Lal Nehru
Liberal	Corporate responsibilities limited to private owners (shareholders)	Milton Friedman
Stakeholder	Companies respond to the needs of stakeholders, customers, employees, communities, etc.	R. Edward Freeman

Source: Adapted from Gautam and Singh (2010).

One of the pioneers in CSR research in the post mandate period is Mitra and Schmidpeter (2016), who documented the entire transition of CSR from philanthropy to structured, mandated CSR in their edited book, CSR in India: Cases and Developments after the Legal Mandate. This book, with its various authors stemming from different walks of life, provided a ‘touch feel’ effect with real life case studies and examples that helped the reader feel the dynamic pulse of India immediately after the passing of the CSR mandate in the Companies Act, 2013. The three parts of the book dealt with CSR Mandate and Its Implications; CSR Mandate and its Implementation; and The Way Forward.

As Dr Bhaskar Chatterjee, also known as the father of modern Indian CSR puts it in the foreword of the book,

This is indeed a first of its kind book and marks a watershed in the journey of CSR. It is an extremely important contribution to the body of knowledge in the area of CSR and Corporate Governance in emerging economies that is driven by a completely different set of challenges, opportunities and requirements from that of developed economies. (Springer, 2016)

In fact, it was this book that unveiled to the world, India’s own exclusive CSR model, the Chatterjee model, its uniqueness, its ‘fit’ to the socioeconomic, environmental needs of India through a 13 point-by-point explanation how the Chatterjee model of CSR is different from any other existing models of CSR like the Porter model, Elkington model, and Prahalad model. Later, the model was published in detail in the International Journal of CSR as a research paper by Chatterjee and Mitra (2017).

The following excerpts have been taken from Chatterjee and Mitra (2017), with due permission.

India, designated as one of the world’s ten emerging markets in 1995 by the Clinton administration (USA), has over the years, come to be seen as everyman of emerging nations, an archetype that captures the best and worst tricks of all the most dynamic young economies (Sharma, 1999). India is a subcontinent and its diversity makes it possible to assemble almost any picture of the pitfalls and promise of emerging markets, from the rustic, rural Bharat to the smart cities in urban India. The large states like that of Uttar Pradesh, with a population of two hundred million, would on its own, represent the world’s sixth most populous country; and West Bengal, having a population of ninety million, (Sharma, 2012), make administrative issues complex and multifaceted. Moreover, India has an estimated 269.3 million poor residents (2013), out of which 216.5 million reside in rural India (Rao, 2013), yet, contradicting this, is the fact that Indian stocks move and down more closely in sync with the global emerging-market average than the stocks of most other countries do, because its market is deep and diverse (Sharma, 2012). Hence, there are diversity, complexity and even contradictions in India, as an emerging nation. (Chatterjee & Mitra, 2017)

Moreover, India has its own challenges as an emerging nation. On one hand it has the world’s second largest human population next only to China and predicted to have one of the world’s youngest and thereby the largest working population by 2026; yet, on the other hand, it ranks 135 among 186 countries in the Human Development Index (HDI) (Human Development Report, 2013). This means that India has a great volume of people, who have a low life expectancy, education, and per capita income. (Chatterjee & Mitra, 2017)

Furthermore, the environmental regulations in India lag behind similar regulations in Organization for Economic Cooperation and Development (OECD) countries by almost a decade and empirical evidence show that Multi National Companies (MNCs) in India and other emerging markets do not necessarily have stricter environmental standards than their local counterparts (Sawhney, 2004; Zarsky, 1999; Khan, 2008; Mitra & Schmidpeter, 2016). Hence, not just socioeconomic parameters, but, India also needs to upgrade its environmental indicators to transition into a developed economy.

However, the dilemma lies in the fact that despite such socioeconomic and environmental indicators, India is home to the sixth largest super-rich population (billionaires) in the world. The total billionaire wealth was estimated to be $180 billion (Wealth-X and UBS billionaire census report, 2013), bringing India’s billionaire population to 103 (Mitra, 2014, 2015; Mitra & Schmidpeter, 2016). Therefore, the population is divided between the haves and the have-nots. The country has urban India on one side and rural Bharat on the other.

Although, this rise in inequality, to some extent, is natural in the early stages of economic development (Sharma, 2012), it remains a persistent challenge in many economies today. In Asia and the Pacific, inequality has risen over the last decade despite growth rates that have lowered poverty incidence (Son, 2013). Similarly, in India, although poverty has fallen for every social and religious group in every state and in rural and urban areas, separately as well as jointly between 1993–1994 and 2009–2010 (Panagariya & Mukim, 2014), yet, the incidences of inequalities are high. This inequality can pose a threat to growth if it goes unchecked (Sharma, 2012). (Chatterjee & Mitra, 2017)

This concern for inclusive growth, made policymakers increasingly ask age-old questions about how basic health and education systems can be improved, how regulatory systems can function better, who should provide basic services and infrastructure, and how it should be paid for. This led to a ‘rediscovery’ of underdevelopment, so to speak, and a realization that something is ‘missing’ in the policy framework (Graham & Naim, 1997). Thus inequality, earlier measured in terms of income or consumption, has now got extended to cover many other standard of living dimensions such as inequality of outcomes in health, education, and basic infrastructure, among others (Son, 2013). But, whose responsibility is it to provide for the same?

It could be the responsibility of the Government to provide a conducive environment for equality through its social security measures and other policies; and/or, it could also be the Corporation that takes on the onus in pursuance of their ‘social license to operate’ objectives. This is often an inconclusive debate, where the perspectives often differ between the developed countries to the emerging countries. What one must remember here is that, the very concept of CSR differs between these two economies in terms of its definition as well as implementation. And, there is no comprehensive, ‘one size fits all’ global corporate governance or CSR system, based on western codes and regulations that can be implemented in emerging markets (Peters, Miller, & Kyusik, 2011), hence, it is better to limit our study of CSR to the emerging markets alone for a focused approach. (Chatterjee & Mitra, 2017)

In a developing country like India, it is increasingly appreciated and not least by business, that to become economic players of first-world magnitude, the challenges of a third-world developmental leap have to be addressed. There is also a sense both among business as well as others (particularly civil society and government) that business has to play a leadership role in bringing about this transformation (Mitra, 2007).

Thus, Indian companies have a very important and difficult role to play in the country’s development. It is certainly more complex than the role of corporations in developed economies. Starting much behind their international competitors, both in size and capabilities, Indian companies must rapidly learn to compete with the best in the world. At the same time, they have to compassionately connect with the conditions in their own country and communities around them. This is by no means an easy task (Maira, 2004).

The Private sector, therefore, has responsibilities and a role in creating broad based growth and furthering opportunities for individuals in poverty to move up. Involvement of the private sector in development efforts should be encouraged, not only to promote growth, but to make the state more effective by providing competition, increasing equity, and supplementing the resources of the state (The Aspen Institute Conferences, 1997). This needs to be undertaken by the Company through its robust CSR strategy.

After all, this is a symbiotic relationship. As the state/nation progresses, so does business and vice versa. Any discord in this relationship can cause disequilibrium within the society. (Chatterjee & Mitra, 2017)

It is under this backdrop of an emerging India, with its own challenges and dilemmas, that the Chatterjee conceptual model was formulated to streamline the CSR roles and responsibilities of the Corporations and ensure accountability and transparency in their efforts. The propounder of the model, Dr. Bhaskar Chatterjee argues through this model, that ‘CSR should contribute to the National Agenda in emerging economies’ (Chatterjee & Mitra, 2017).

It was initially launched as the CSR Guidelines for the Public Sector Enterprises of India which became effective from April 1, 2010. Later, Dr. Chatterjee was instrumental in incorporating Section 135 into the Companies Act, 2013 (the Act) (Appendix 1) which made CSR mandatory for certain stable companies having a net worth of (Indian Rupee) INR 5 billion or more, or a turnover of INR 10 billion or more, or a net profit of INR 50 million or more during any financial year. Not stopping there, this Act also laid down a Schedule VII (Appendix 2), detailing the priority areas where such CSR resources needs to be spent.

This Schedule VII of the Act, through repeated amendments, since its formulation, helps prioritise the areas of intervention for the most rapid developmental results and creates the possibility of delivering high impact outcomes while achieving stringent CSR norms and goals. Thus, this CSR mandate has been created ‘FOR INDIA, BY INDIA, IN INDIA’, keeping in mind the unique Indian context and is ‘LINKED TO The Inclusive Development Agenda of the Nation’. (Chatterjee & Mitra, 2016, 2017)

This mandate brought in a lot of debate among the corporate sector and a need was felt to investigate the role of CSR between strategic management and firm performance.

(Variable) Corporate Social Responsibility As a Mediator Between Strategic Management Dimensions and Firm Performance

To understand this mediating relationship of (variable) corporate social responsibility (VCSR) between strategic management and firm performance, an extensive research was conducted among 312 large companies in India through a self-administered questionnaire. This formed a part of the holistic PhD thesis by Mitra (2018), titled, ‘Corporate Social Responsibility: A Study of Strategic Management and Performance in Large Indian Firms’.

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Figure 2.

Source: Mitra (2018).

The conceptual model in this research is shown in Figure 2.

The variables in Figure 2 can be understood with the help of Table 5. The dependent variable is the most important variable to be studied and analyzed in the research study, whereas any variable that can be stated as influencing or impacting the dependent variable is referred to as an independent variable hypothesis (Chawla & Sondhi, 2011).

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Table 5.

Key Constructs of the Study

Stage	Independent Variables	Dependent Variable
1	Strategic management Internal orientation (CSR intent, CSR management, industrial standards, and CSR communication) and External orientation (market orientation, community orientation, and supply chain orientation)	VCSR
2	VCSR	Firm performance
3	Strategic management Internal orientation (CSR intent, CSR management, industrial standards, and CSR communication) and External orientation (market orientation, community orientation, and supply chain orientation)	Firm performance

Source: Mitra (2018).

In other words, in this research, VCSR also acts as a mediator variable, that is, the variable that causes mediation in the dependent and the independent variables. In other words, it explains the relationship between the dependent variable and the independent variable (Statistics Solution, n.d.).

Different abbreviations and connotations used to denote the variables of the conceptual model are listed Table 6.

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Table 6.

Guide to Abbreviations and Connotations of Variables Used in Conceptual Model

Variables	Abbreviations	Connotation in this Conceptual Model
CSR intent	VCSRI	The mention of CSR or any of its functions in the ‘vision and mission statement that communicates in explicit form as to what is important for the organisation and what it cherishes’ (Verma, 2004).
CSR management	VCSRM	The organizational structure responsible for managing (planning, organizing, implementing, controlling) CSR.
Industrial standards	VINST	The CSR standards of GRI, AA1000 series and ISO26000 considered/ adopted as a part of strategic management decision by the firm.
CSR communication	VCOM	‘The process of communicating the social and environmental effects of organizations’ economic actions to particular interest groups within society and to the society at large’ (Gray, Owen, & Adams, 1996).
Market orientation	VMO	‘An organisational culture that fosters those activities that create superior value for customers’ (Ellis, 2010; Narver & Slater, 1990; Slater & Narver, 1994, 1995, 2000).
Community orientation	VCO	Company’s ‘commitment to improve community well-being through discretionary business practices and contributions of corporate resources’ (Kotler & Lee, 2005).
Supply chain orientation	VSCO	The orientation of the company toward ‘multi-tiered networks that involves various types of suppliers across various demographical, socio-political and geographic sprea’ (Giblin, 2013; Mitra, 2017).
(Variable) Corporate social responsibility	VCSR	‘The formal and informal ways in which business makes a contribution to improving the governance, social, ethical, labour, environmental conditions of the developing countries in which they operate, while remaining sensitive to prevailing religions, historical and cultural contexts’ (Visser, 2008). Here, the context is India.
Firm performance	VFP	Non-financial performance; ‘intangible benefits for the company such as corporate reputation and image’ (Schwaiger, 2004).

Source: Mitra (2018).

Mediator Analysis Hypothesis

In order to analyze the mediating role of VCSR as a mediator between strategic management dimensions (CSR intent, CSR management, industrial standards, CSR communication, market orientation, community orientation, and supply chain orientation) and firm performance (VFP), the PROCESS program developed by Hayes (2013) was used.

The hypotheses derived for this are as follows:

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H 6	VCSR mediates the relationship between internal orientation and firm performance.
H 6.1	VCSR mediates the relationship between CSR intent and firm performance.
H 6.2	VCSR mediates the relationship between CSR management and firm performance.
H 6.3	VCSR mediates the relationship between industrial standards and firm performance.
H 6.4	VCSR mediates the relationship between CSR communication and firm performance.
H 7	VCSR mediates the relationship between external orientation and firm performance.
H 7.1	VCSR mediates the relationship between market orientation and firm performance.
H 7.2	VCSR mediates the relationship between community orientation and firm performance.
H 7.3	VCSR mediates the relationship between supply chain orientation and firm performance.

Mediator Analysis Results

Simple mediation framework (model 4) of the PROCESS program was used to get the results of mediation. The results show the indirect effect of strategic management on firm performance with VCSR as mediator.

If the range of Lower Control Limit (LCL) and Upper Control Limit (UCL) for indirect effect contains 0 values, it signifies no mediation; but if the range of LCL and UCL for indirect effect contains no 0 values, it signifies mediation role. The findings are discussed in Table 7.

It is found from Table 7 that, apart from community orientation, VCSR has a mediating effect between the various dimensions of strategic management (i.e., CSR intent, CSR management, industrial standards, CSR communication among the internal orientation; and market orientation and supply chain orientation among the external orientation) and firm performance. In other words, except for H_7.2, which states that VCSR has a mediating role on the relationship between community orientation and firm performance, all the rest of the hypotheses are accepted and VCSR does play a mediating role between strategic management and firm performance.

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Table 7.

(Variable) Corporate Social Responsibility as a Mediator Between Strategic Management Dimensions and Firm Performance

H	Mediator	Relationship	Indirect Effect		Role
			LCL	UCL
H 6.1	VCSR	VCSR1-VCSR-VFP	0.0240	0.0973	Mediation
H 6.2	VCSR	VCSRM-VCSR-VFP	0.0245	0.0879	Mediation
H 6.3	VCSR	VINST-VCSR-VFP	0.0082	0.0445	Mediation
H 6.4	VCSR	VCOM-VCSR-VFP	0.0257	0.0978	Mediation
H 7.1	VCSR	VMO-CSR-VFP	0.0158	0.0693	Mediation
H 7.2	VCSR	VCO-CSR-VFP	−0.0061	0.0545	No mediation
H 7.3	VCSR	VSCO-CSR-VFP	0.0211	0.0804	Mediation

Source: The author.

In fact, CSR has been touted as an effective management tool to strengthen the organizations’ performance through a better image in stakeholder’s mind and because of their responsible behavior toward society and environment (Barnett & Salomon, 2006; Orlitzky, Schmidt, & Rynes, 2003).

Limitations and Way Forward

The limitations of the study are as follows:

It considers the CSR mandate of India alone and not of any other country.

It restricts itself to literature review of scholarly papers alone and not case studies.

It is based only on literature review and not any empirical research.

In fact, what is the limitation is also the scope for future research. It is worthwhile to plug in with the research of other countries like Indonesia and Malaysia that also has a 2 percent mandate; as well as upgrade with case studies and empirical findings in this post-mandate period.

However, the contribution of this research in management study is huge as this forms the basis of future CSR researches in the post-mandate period. Moreover, with India’s growth rate projected to hit 7.3 percent in 2018 and 7.5 percent in the next 2 years, as per the World Bank (The Economic Times, 2018), India’s CSR spent is also expected to increase. This is indeed a very hopeful projection as with every little bit of contribution from anywhere will only make this world a better place for generations to survive and perpetuate. Moreover, this research also acknowledges the mediating role of CSR between strategic management and firm performance, which should have a very strong effect on the operations management of the large Companies.

Appendix 1: Schedule VII in the Companies ACT, 2013 (latest—post-amendment on May 30, 2019)

Eradicating hunger, poverty, and malnutrition; promoting healthcare including preventive health care and sanitation including contribution to the ‘Swachh Bharat Kosh’ set up by the central government for the promotion of sanitation and making available safe drinking water.

Promoting education, including special education, and employment enhancing vocational skills especially among children, women, elderly, and the differently abled and livelihood enhancement projects.

Promoting gender equality and empowering women; setting up homes and hostels for women and orphans; setting up old age homes, day care centers, and similar facilities for senior citizens; and measures for reducing inequalities faced by socially and economically backward groups.

Ensuring environmental sustainability, ecological balance, protection of flora and fauna, animal welfare, agroforestry, conservation of natural resources, and maintaining quality of soil, air, and water including contribution to the ‘Clean Ganga Fund’ set up by the central government for rejuvenation of river Ganga.

Protection of national heritage, art, and culture including restoration of building and sites of historical importance and works of art; setting up public libraries; promotion and development of traditional arts and handicrafts.

Measures for the benefit of armed forces veterans, war widows, and their dependents.

Training to promote rural sports, nationally recognized sports, Paralympic sports, and Olympic sports.

Contribution to the Prime Minister’s National Relief Fund or any other fund set up by the central government for socioeconomic development and relief and welfare of the Scheduled Castes, the Scheduled Tribes, other backward classes, minorities, and women.

Contributions or funds provided to technology incubators located within academic institutions which are approved by the central government.

Rural development projects.

Slum area development.

Disaster management, including relief, rehabilitation, and reconstruction activities.

Appendix 2: Section 135 of the Companies Act, 2013 (with updated amendments)

Every company having a net worth of ₹5 billion or more, or a turnover of ₹10 billion or more, or a net profit of ₹50 million or more during the immediately preceding financial year shall constitute a corporate social responsibility (CSR) committee of the board consisting of three or more directors, out of which at least one director shall be an independent director; provided that where a company is not required to appoint an independent director under sub-section (4) of Section 149, it shall have in its CSR committee two or more directors.

The board’s report shall disclose the composition of the CSR committee.

The CSR committee shall:

formulate and recommend to the board, a CSR policy which shall indicate the activities to be undertaken by the company in areas or subject, specified in Schedule VII

recommend the amount of expenditure to be incurred on these CSR activities

monitor the CSR policy of the company from time to time.

The board of these companies that shall:

after taking in account the recommendations made by the CSR committee, approve the CSR policy for the company and disclose the contents of such policy in its report and place it on the company’s website, if any, in such manner as may be prescribed; and

ensure that the activities are included in their CSR policy and are undertaken by the company.

The board of these companies shall ensure that the company spends, in every financial year, at least 2 percent of the average net profit the company made during the three immediately preceding financial years, in pursuance of its CSR policy. For the purposes of this section ‘net profit’ shall not include such sums as may be prescribed, and shall be calculated in accordance with the provisions of Section 198.

Moreover, Section 135 also provides a direction to these companies to give preference to the local area and areas around it where it operates, for spending the amount earmarked for CSR activities.

However, the law also states that if the company fails to spend such amount, the board shall, in its report, specify the reasons for not spending the amount.