Corporate Social Responsibility in India: Law, Regulation and Politics 9811923035, 9789811923036

Table of contents :
Preface
Contents
1 Introduction
The State and the Corporations: Emerging Relationships
State and Corporations: Understanding Global Governance
Globalization and CSR: Emergence of a New Generation
State and CSR: A Discursive Framework
Regulation and Institutions: The Complexities
CSR in India: Understanding the Paradoxes
The Indian Puzzle
Aim of the Book
Structure of Argument
References
2 Soft Law and Decentred Regulatory Space: The Logic of CSR
Introduction
Contextualizing CSR
The Concept of Soft Law
The Regulatory Space Surrounding CSR
CSR and the Decentred Regulatory Scenario
The Interplay of Regulatory Models
Self-Regulation
Responsive Regulation
Meta-Regulation
Logic of CSR: Exploring the Indian Regulatory and Institutional Framework
References
3 Corporate Social Responsibility in India: International Arena and Social Development
Introduction
Evolution of CSR in International Arena
The Phase of Short-Term Benefits
The Phase of Long-Term Success Strategies
The Phase of Adoption of International Soft Law
Context and History of CSR in India
Predecessors of Modern Day CSR in India
Atrophy of Welfarism and the Rise of Market Economy
Adverse Impacts of Corporate Actions: A Review of Selected Cases
The Case of Coca-Cola India
The Case of Vedanta
Renewed Interest in CSR
Implication of International CSR Instruments in the Indian Case
The United Nations Global Compact
The OECD Guidelines
Social Development and CSR
The Purpose of CSR: A Theoretical Understanding of Voluntary Transfer
References
4 Politics of Corporate Social Responsibility in India
Introduction
Outlining the Sources of the Research and Field Interactions
The Law and Regulatory Transformations
The Outset and Advancement of Section 135
Draft CSR Rules and the Final Rules: A Comparison
Schedule VII of the Companies Act: A Critical Analysis
The Institutional Changes
Advanced Role of IICA
Establishment of National Foundation for Corporate Social Responsibility (NFCSR)
The Role of SEBI and BSE in CSR Regulatory Space
Role of Confederations
Regulatory Transformations and Evolving Paradigm
Three Channels to Collaborative Partnership as Per Section 135
CSR in India: Understanding the Implementation Conundrum
Conceptual Understanding of the Implementation Conundrum in India
Paradoxes and Futuristic Approach
Salient Features of Collaborative Partnership from the Top Spenders
Future of CSR in India
References
5 Conclusion
References
Bibliography
Index

Citation preview

Corporate Social Responsibility in India Law, Regulation and Politics Shuchi Bharti

Corporate Social Responsibility in India

Shuchi Bharti

Corporate Social Responsibility in India Law, Regulation and Politics

Shuchi Bharti Development Consultant New Delhi, India

ISBN 978-981-19-2303-6 ISBN 978-981-19-2304-3 (eBook) https://doi.org/10.1007/978-981-19-2304-3 Jointly published with ANE Books India The print edition is not for sale in India. Customers from India please order the print book from: ANE Books India. ISBN of the India edition: 978-93-90658-90-9 © ANE Books India 2022 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publishers, the authors, and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publishers nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publishers remain neutral with regard to jurisdictional claims in published maps and institutional affiliations. Cover illustration: © Alex Linch shutterstock.com This Palgrave Macmillan imprint is published by the registered company Springer Nature Singapore Pte Ltd. The registered company address is: 152 Beach Road, #21-01/04 Gateway East, Singapore 189721, Singapore

Preface

Corporate Social Responsibility is a dynamic and imperative subject in the contemporary world where businesses have become one of the most significant actors in the governance framework. In the Indian scenario, it becomes increasingly important to look into the regulatory model exploring the attitude change within the socio-political and legal aspects post the enactment of the Companies Bill, 2011. The current international governance arrangements have led to the enhanced recognition of the corporations in the global economic activities (Cerny 1995). Nations play hosts to the operational activities of the corporations. Such activities, on the one hand, are claimed to augment the growth potential and the technological advancement for the host countries, whereas, on the other hand, it has been witnessed as well as argued that the unfettered corporate actions pose significant threat to the communities, resources and larger social development aspects (Banerjee 2007). Therefore, state and supra-state associations globally co-operate to facilitate the self-regulatory corporate behaviour through the promulgation of international frameworks on CSR applicable to corporations operating across nations. The contemporary governance mechanism of any state is classified by two basic aspects. First, there is plurality of participants in the governance arena apart from the state such as civil society and corporations, and second, the regulatory framework of the state has been influenced by the global governance and institutional mechanisms. CSR being an v

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impromptu strategic attribute of the corporations is inherently marked by its need-based emergence which became prominent in the global governance paradigm. The reason for this transformation is directly connected to the changes in the global order and resultant liberalization leading to complex and heterogeneous economic and social demands. The cause of the proliferation of CSR as a relevant concept within the global social development discourse, could be understood with respect to the post-globalized, neoliberal era through the global positioning of the corporations across liberalized states and deregulated markets. Regulation, in the present regime, has several implications. First and most important, regulation will produce changes in behaviour and outcomes. This is a well-recognized empirical phenomenon. Second, its form may have to vary depending on the attitude to regulate towards compliance, an attitude which it can itself affect, again recognized in practice in regulatory literature. Third, no single actor can hope to dominate the regulatory process unilaterally as all actors can be severely restricted in reaching their own objectives. One could see, through this discussion, the three traditional assumptions on centralized regulation could be challenged through modern regulatory parameters pertaining to CSR in India. The assumption of state being at the locus of formulations of collective community goals is challenged by developments of corporate sector initiatives in social, economic and environmental endeavours. Such development endeavours are essentially ‘non-state’ in nature and composition. The corporate sector as a non-state actor has proven to be operating as a resource of social influence as well as a medium of public deliberation. The assumption of the hierarchical nature of the state’s role has also been questioned with the advent of multiple levels and sources of governance functioning simultaneously with the state and intertwined in the state machinery. The third paradigmatic assumption of centrality of rules has undergone alteration at all levels as there has been greater recognition of innovative techniques of policy implementation rather than ‘centrality of command’. The limitations and effectiveness of legal rules are also deliberated which aims towards a decentred approach in regulatory purview. This book is an attempt to understand the interplay of the socio-legal and governance perspectives that have worked around CSR in India. Among many others, I extend sincere gratitude to all the stakeholders who played a vital role in developing multiple aspects of this book. The

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members of academia, government and industry have paved the way for the multiple facets of research involved. New Delhi, India

Shuchi Bharti

Contents

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Introduction The State and the Corporations:Emerging Relationships State and Corporations: Understanding Global Governance Globalization and CSR: Emergence of a New Generation State and CSR: A Discursive Framework Regulation and Institutions: The Complexities CSR in India: Understanding the Paradoxes The Indian Puzzle Aim of the Book Structure of Argument References

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Soft Law and Decentred Regulatory Space:The Logic of CSR Introduction Contextualizing CSR The Concept of Soft Law The Regulatory Space Surrounding CSR Logic of CSR: Exploring the Indian Regulatory and Institutional Framework References

1 1 3 4 6 7 11 13 15 20 22 27 27 29 30 31 42 47

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Corporate Social Responsibility in India:International Arena and Social Development Introduction Evolution of CSR in International Arena Context and History of CSR in India Predecessors of Modern Day CSR in India Implication of International CSR Instruments in the Indian Case Social Development and CSR The Purpose of CSR: A Theoretical Understanding of Voluntary Transfer References

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51 51 54 61 62 76 81 87 90

Politics of Corporate Social Responsibility in India Introduction The Law and Regulatory Transformations The Institutional Changes Regulatory Transformations and Evolving Paradigm Three Channels to Collaborative Partnership as Per Section 135 CSR in India: Understanding the Implementation Conundrum Paradoxes and Futuristic Approach Salient Features of Collaborative Partnership from the Top Spenders Future of CSR in India References

97 97 99 120 135

Conclusion References

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138 140 143 145 148 151

Bibliography

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Index

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CHAPTER 1

Introduction

The State and the Corporations: Emerging Relationships Subsumed under the gambit of Corporate Social Responsibility (CSR), the assumed roles of state and the corporation have been under speculation in the academic debate of the contemporary times (Kakabadse and Morsing 2006). The concept of CSR has an evolutionary history and architecture built on the signals of the market (Mares 2008). The contemporary account of CSR is associated with the globalization debate and the trajectory built on the neoliberal paradigm.1 The definitional domain of CSR has witnessed wavering situations. Encapsulating the framework of 1 See Harvey (2005). The decade of 1970s witnessed emphatic turns towards the neoliberal ideals globally. The political-economic practices started to be based on the features of deregulation, state’s withdrawal from areas of welfare provisions and privatization. In the due course, almost all states and the newly formed ones after the collapse of Soviet Union embraced the neoliberal framework to operate. The developments are marked by voluntary decisions by the states at many instances and as a result of global pressures at many others. Furthermore, the proponents of neoliberal way gradually started to occupy influential positions in the key policy-making bodies internationally and within the countries. The international institutions such as International Monetary Funds (IMF), World Bank, The World Trade Organization and United Nations Organization (UN) evolved to work with the neoliberal underpinnings. Neoliberalism gradually has become pervasive and ‘hegemonic as a mode of discourse’. The process of neoliberalism has transformed existing constructs related to division of labour, welfare provisions, technological perspectives, social relations and overall way of life. The logic of neoliberalism by valuing market

© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022 S. Bharti, Corporate Social Responsibility in India, https://doi.org/10.1007/978-981-19-2304-3_1

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evolution of CSR, it has been observed that the growth of corporations has yielded long winding debates pertaining to the contested meanings and roles of multiple actors of governance in the CSR domain (Ward 2004). Backed by the neoliberal ideals, contemporary developments in the field of CSR urge the academic and practicing fraternities to delve deeper into the aspects of emerging role of corporate sector in the public domain and the strategic role of the state in transplanting CSR into its policies and law (Gunningham 2008). There have been arguments and deliberations from the proponents as well as the opponents that the corporations have both pressures and incentives from multiple quarters that translate into self-regulatory attributes of CSR (Parker 2002). Such attributes are based on the voluntary schemes. The recent development in this arena showcases a shift in the self-regulatory behaviour that aims towards an enhanced public role of the corporations in social development endeavours. The intent to underline such roles is an imperative terrain to explore for academic research, which could address the issues concerning the proliferation of CSR into the global governance regime, CSR and its connections to social development agenda and the changing paradigm. The succeeding part of this introductory chapter attempts to explain the broad framework of interconnectedness of state, corporations and international governance regime, the evolutionary history of CSR, the regulatory and institutional transformations and the paradoxes arising out of the contemporary archetype.

exchange as ‘ethic in itself’ has the ubiquitous capabilities to mentor actions of the governance participants. The ideals of neoliberalism hold that social good is maximized by maximizing the interplay of market actors at a greater rate. According to Harvey, a state whose main focus is to facilitate conditions of conducive existence of profitable market forces embodied by interests of private property owners, corporate actors and financial capital is a neoliberal state. See generally Saad-Filho and Johnston (2005). Globalization presented as inexorable and inevitable benevolent process that leads to justified competition, enhanced social welfare and achievement of democratic ideals across the globe in actuality is an international face of neoliberalism, a global strategy to aim at social discipline through corporate proliferation spearheaded by economically stronger nations with coalitions formed in various nations in order to attain financial goals. Such set-up is marked by forming alliances in countries with the market actors such as Multinational Corporations (MNCs) influencing the political strategies through multiple socio-economic tools formed. See generally Ong (2006) attempts to discuss state sovereignty continue to mutate into novel forms.

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State and Corporations: Understanding Global Governance The current international governance arrangements have led to the enhanced recognition of the corporations in the global economic activities (Cerny 1995). The states play hosts to operational activities of the corporations. Such activities, on the one hand, are claimed to augment growth potential and technological advancement for the host states, whereas, on the other hand, it has been witnessed as well as argued that the unfettered corporate actions pose significant threat to the communities, resources and larger development aspects (Banerjee 2007). Therefore, state and supra-state associations globally co-operate to facilitate the self-regulatory corporate behaviour through the promulgation of international frameworks on CSR applicable to corporations operating across nations. The support to the corporations from the state and supra-state2 forums could be understood to be an outcome of the ever growing stature of corporations in global trade, investment and economic growth (Scherer and Palazzo 2011). The responsive role of the state and suprastate forums has led to the increased focus in the role of corporations in global business regulation and global social development discourse through inclusion of the social responsibility paradigm. As a result, the contemporary scenario of global governance exhibits the process of delineating and implementing multiple frameworks pertaining to public goods, economic aspects and development approaches (Cutler et al. 1999). This is carried out through multilateral and polycentric groundwork with multiplicity of actors and systems. The most prominent being the states, the corporations, international institutions, civil society actors3

2 Post-globalization discourse has focussed on deploying a barrage of distinctly geographical prefixes such as ‘sub’, ‘supra’, ‘trans’, ‘meso’ and ‘inter’ to describe multiple emergent social processes that appear to operate below, above, beyond or between entrenched geopolitical boundaries (Brenner 1999). As the ‘denationalization of state’ facilitated by globalization has significantly decentred the role of the national scale as a self-enclosed container of socio-economic relations, a wide range of supra-state forms of territorial collaboration came into being (Jessop 1997). 3 As per Edward Shils ‘Latterly the term “civil society” has come to be used very loosely as equivalent to ‘liberal democratic society’. They are not entirely the same and the difference between them is significant. In civility lies the difference between a well-ordered and a disordered liberal democracy’ (Shils 1991).

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and citizenry (Braithwaite and Drahos 2000). The novel forms of global governance framework from above and beyond the state have led to the decline in state-centred governance mechanisms which were earlier based on command and control regulatory paradigm.

Globalization and CSR: Emergence of a New Generation The contemporary governance mechanism of the state is classified by two basic aspects. First, there is plurality of participants in the governance arena apart from the state such as civil society and corporations and second, the regulatory framework of the state has been influenced by the global governance and institutional mechanisms (Lynch 2005). CSR being an impromptu strategic attribute of the corporations inherently that is marked by need-based emergence became overtly prominent in the global governance paradigm. The reason for this transformation is directly connected to the changes in the global order and resultant liberalization leading to complex and heterogeneous economic and social demands. The cause of the proliferation of CSR as a relevant concept within the global social development discourse could be understood with respect to the post-globalized, neoliberal era through the global positioning of the corporations across liberalized states and deregulated markets (Harvey 2005). The cognizance of CSR as an instrument of corporate good practices in the larger international arena is directly proportional to the growth in the operations of businesses globally. ‘Corporation’ as a concept, encapsulates organizations of different configurations either producing goods or services, operating in a dynamic environment with economic objects and affecting its surrounding social environment comprising direct and indirect stakeholders (Etcheverry 2005). The attempt to connect corporations with the objective of positive social change is not essentially a new observable fact, albeit the contemporary socio-political, economic

Civil society, in the context of this research work, could be interpreted as ‘a sphere of social interaction between economy and state’. The civil society is institutionalized through subjective rights, self-constitution and self-mobilization with a goal of stabilizing social differences (Cohen 1994). Non-profit sector especially international non-government organizations (NGOs), domestic NGOs, grass-roots organization, etc. are included in the concept of civil society with respect to this work.

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and ideological milieu inflicts diverse impacts on the same. Although seldom confessed by the corporate actors, the precursor of the present CSR such as charity and philanthropy has emerged out of the necessity of the corporations to create conducive environment for them in the space they operated, neutralize the negative impact of corporation’s operations and mark visibility at larger socio-political platform. The attributes of social responsibility historically have been a matter of legitimation. The decade of the 1920s observed corporate portrayal as both indispensable economic actors and willing for social embeddedness across the globe, however, innumerable instances of corporate malpractices have proven the same to be contrary to what was popularly claimed (Mcmillon 2007). The realistic review of the CSR domain has recited the stories of instability and unevenness. As per Greider (2003), the new generation of CSR is an outcome of more interconnectedness among state and corporate actors globally due to the inevitability of state to partner with the corporations and manage the corporate misconduct through state intervention (Greider 2003). The CSR practices in a globalized arena have exhibited attributes of being scattered and operating in three ways. First, it has been witnessed that many CSR programmes are purely based on the whims of the top management. Second, CSR is observed to be outlined under the pressure of reactions for socially or environmentally unacceptable behaviours, and third, the objective of CSR is also related to the creation of sustainable spaces for corporations to aid the process of wealth creation. Despite ubiquitous adherence to the impact of globalization nearly towards each and every aspect of socio-political and economic lives—realtime and virtually, the deliberation of the causes of renewed interest in CSR with respect to globalization remains parochial. More specifically, the investigation into the way CSR has been connected to the social development regime with state and international actors adopting the archetype into their policy, regulatory and legislative framework remains remarkably depleted. The requirement while understanding the new generation of CSR which claims to have distinctly evolved from the perils of charity and philanthropy is to correlate the roles, multiple actors of governance play in transplanting the tenets of CSR into societal realm beyond the corporations that have become the citadels of financial powers. The philosophical disconnect needs to be gauged in between the ideologically diametric objectives of economic wealth creation and social development of the corporations and the conditionality that bring them together through the

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means of CSR. The recent developments in the field of CSR show the acceptance of the concept by state actors along with the corporate sector as they realize—the synergy with corporate actors becomes indispensable precondition for a purposeful survival and attainment of measures of success as the global marketplace requires state’s responsiveness towards economic actors and more precisely, towards the corporations (Mcmillon 2007).

State and CSR: A Discursive Framework The consensus on the meaning of the idea of CSR is difficult to establish in a diverse global scenario. However, the social responsibility agenda in a neoliberal global architecture is framed in a manner that incorporates wider and deeper aspects of corporate-state relations. The attempts have been to bind them in a normative framework that is mutually advantageous for both, in an interconnected market-oriented global structural–functional regime. Such partnerships are aimed to project concerted efforts towards social, environmental and economic commitment through the state’s facilitative attitude towards self-regulatory CSR. The outcomes of such contributions through CSR are heavily debated as to whether they create any positive impact or are merely a strategic synergy between state and corporation to expedite the aspirations of the market-oriented economy. The need, at this juncture, is to investigate the conundrum which features a new paradigm shift, bringing the state into the CSR discourse which earlier used to be especially within the gambit of the corporate sector. In due process, a number of institutional and regulatory transformations take place. It is necessary to understand the significant shifts which provided the revived meaning of CSR in the global scenario emerging out of new forms of regulatory trajectories with respect to public and private roles across nations and corporations (Ward 2004). The nations that have given way to neoliberalism are under constant pressure to attract and sustain business investments. In order to do so, the aim to bring forth legislations and resultant regulatory mechanisms is twofold. First, the regulatory and institutional changes resonate with the neoliberal transplants deeply inspired by international soft law framework, ensuring sizable flexibility and scope for negotiation for the market actors. Second, such transformations operate through a decentred framework where the state becomes a vital participant instead of a centralized rule-maker. Such

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set-up is marked by the scope for the plurality of actors to operate in a decentred regulatory space having salient features of fragmentation of controls and expertise (Black 2007a, b). The transformations in regulatory and structural framework augment the visibility of market actors and to be more specific, of the corporation in the governance arena. Therefore, the focus needs to be based on contextually informed investigation of the evolving architecture of the CSR discourse which has been looked as rhetoric for business cases inherently. Through this book, the attempt is made to analyse the metamorphosis taking place in the global paradigm. This connects CSR to larger governance ambience reaching out to national as well as international actors convolute with the soft law and decentred regulatory schema based on the claims of emboldening ‘social development’ substructure.

Regulation and Institutions: The Complexities The post-globalization zeitgeist indicates whopping modifications in the configuration and the aspiration of law, regulation and institutions worldwide. Three salient characteristics of the law earmarked in a neoliberal atmosphere could be understood as diminishing hierarchical structure, enhanced non-state participation and increasingly being non-coercive (Pariotti 2008). The non-hierarchical attribute of law is primarily witnessed in the international framework. This depicts the reality that enforceability of legal precepts pertaining to the global human rights, trade and investment obligations and supra-national ties are most adequately practical in a non-coercive soft law environment. The soft law features of international legalizations that adopt a multi-level approach have empirically proven to be enhancing effectiveness, legitimacy and transparency through broadening obligations which draw near the borderline between ethics and the law. The preference of soft law in the international arena is due to the fact that the soft law as an innovative instrument addressed two significant factors inherently. Firstly, the whole structural framework of the international governance paradigm worked on the ideals of participation, negotiation, co-existence and co-production and soft law aided such process due to nonappearance of coercive and hierarchical characteristics as present in otherwise hard law framework (Kirton and Trebilcock 2004). Secondly, the international ties worked largely on normative commitments which actually have the potential to considerably affect the

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configuration and disposition of the global governance patterns. Therefore, the soft law instruments although criticised for being contradictio in terminis and not legally binding have been argued to have offered better institutional solutions (Abbot and Snidal 2000) as compared to the hierarchical forms of hard law. Hard law is understood to have a legally binding framework having hierarchical and obligatory dictates through more centralized forms of regulations and adjudication (Skjærseth et al. 2006). However, the benefits and costs of the binding adjudication yield unsatisfactory results in the international legal arena which is rooted through rules of diplomacy, treaties, trade and commerce (Zaring 1998). Transplantation of international soft law framework in the operations of multinational corporations has been inherent to the global governance discourse. The dense connections between the law and the politics give rise to the soft legalization in the international arena specifically pertaining to the corporations operating in transnational space. The international legal framework and its working with respect to corporate entities have focussed on efficient contractual association. The associations are primarily aimed at creation of negotiable covenants and collegial habitat that formulate the success strategies for corporations, state and supra-state associations that are easier and achievable. The soft law instruments pertaining to CSR are available internationally in the forms of treaties, guidelines, codes and standards which essentially aim at formulating effective methods of dealing with uncertainties, facilitating compromise and mutually beneficial for cooperation. Relevant examples of the soft law instruments pertaining to CSR internationally could be United Nations Global Compact (UNGC)—A United Nations initiative with the objective to mainstream CSR framework in the statecorporation synergy globally, The UN Guiding Principles on Business and Human Rights, ILO’s Tripartite Declaration of Principles on Multinational Enterprises and Social Policy, OECD Guidelines for Multinational Enterprises, Global Reporting Initiative (GRI), and Institute of Social and Ethical Accountability: AccountAbility AA1000 series of standards, Social Accountability International (SAI) 8000 Standard (PricewaterhouseCoopers Pvt. Ltd. 2013). These soft law instruments reiterate the fact that corporations have gained immense authority and autonomy in the global economic space creating non-state regulatory architecture which primarily works within networked economy (Braithwaite 2008). In a networked economy, the concept of CSR becomes a catch-cry for the corporations

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to portray their roles beyond financial performance and extended to the domains of public welfare (Orlitzky et al. 2003). The international legalizations pertaining to CSR as primarily based on soft law attracted new forms of regulatory instruments that ensured pluralistic participation of multiple actors resulting into the adoption of CSR attributes to the state’s policy framework. The transformations of these kinds give rise to what Braithwaite (2008) calls ‘networked governance’. States had to attract the market actors for economic growth as the markets ensured the channelization of resources into multiple sectors of the economy (Braithwaite 2008). The efforts to attract market actors who could facilitate economic growth in a post-globalized, neoliberal environment need actions to moderate command and control modes of regulation and sovereign national laws, thus previously enacted Corporate Laws within the state’s architecture underwent alteration to shape up the law’s facilitative role towards market actors (Pettet 2005). Placing the demeanour of CSR into the country-specific national legal regime, it could be observed that there has been direct resonance of the global commitment to CSR in the country-specific CSR regulatory fabrics. Country-specific studies with respect to their nature of commitment to CSR showcase positive correlation between the rise in liberalization and privatization and the withering away of state sovereignty. Emergence of liberalized international structural framework gave rise to the propagation of modern corporate being a prominent member of the social fabric (Idowu and Filho 2009). It has been observed to a great extent, the facet of global governance that has delineated transformative trends in CSR is backed by ‘reputational capital’. The regulatory instructiveness transcends the intellectual stalemate from a strong command and control regulation towards a realigned regulatory archetype, focus on utilization of non-state and market-based regulatory regimes to govern corporations. Such regulations are marked by support and supervisory instruments promulgated by soft law norms (Jackson 2010). As the corporations traverse in the global economy, we observe instances of flouting social development interests within the countries, causing significant adverse impacts. Globalization heralds mutual interdependence of global economy and global civil society that increasingly alert corporations to consider the social dimensions. The states at the same time transcend to create a conducive climate for corporate activities. This set-up demands accommodative relationships between state and the corporate actors. The

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renewed framework in the realm of CSR leads to corporations selfimposing civil regulations in the form of self-regulatory endeavours. Similarly, states, as a result of larger global social contract, endorse CSR through state ratified institutional changes and regulatory advancements fostering soft law primarily (Donaldson and Dunfee 1999). Such regulatory regimes focus on the accord between the social problems posed by the globally integrated markets and the constraints on the state actors to redesign existing centralized regulation in order to enhance competitiveness (Knill and Lehmkuhl 2002). The contemporary scenario calls for harnessing the potential of a strong pedagogical and analytical exploration of the CSR domain which connects the same to the law and regulatory pursuits (Wallace 1982). The corporations’ wherewithal and management perspectives of CSR have been observed to be overlooking the heralds of larger international governance debate which moves towards a paradigm that deeply interconnects state and corporation through the gambit of CSR and is based on the tenets of decentred regulatory space, rather than centralized systems of sanctions. The decentred regulatory mechanisms in the case of CSR have been based on the emergent soft law framework internationally which have evolved as a part of deep-rooted international strategic interest of political, social and market players and not based on parochial or cultural mores (Jackson 2010). The scholars have explored the regulatory framework which has emerged as a result of the neoliberal paradigm that believes in delegating regulatory tasks to multiple actors along with the state. This kind of regulatory archetype is expected to harmonize market efficiency. The regulatory provisions in the case of CSR have dealt with building a reputational accountability for the corporation in order to provide them legitimacy and visibility they need to operate in a nation and lobby internationally. The attempt is to analyse the discourse of CSR within the law and regulatory paradigm investigating the contemporary transformations internationally in CSR space that marks its state oriented translations based on soft legalizations and the resultant regulatory instruments being based on the attributes of responsiveness, collaboration, webs, partnerships and networks including state, corporate, civil society and citizenry. The next chapters would attempt to build up a theoretical framework of contemporary facet of CSR constructing analysis at two levels, first an in-depth exploration would be carried out to assess the way international

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soft law framework has been restructured in the CSR space in a postglobalized scenario and the reasons behind such changes. Second, the exploration into the soft law transplant within a domestic law framework shall be done, that would attempt to demonstrate the hybrid regulatory structure that has evolved as a result of neoliberal paradigm and decentred regulatory space. The regulatory structure could be understood through a hybridized model that intertwines primarily three kinds of contemporary regulatory instruments, namely: self-regulation, meta-regulation and responsive regulation that essentially work through plural governance mechanism and facilitative outlook of law. They are not mutually exclusive and do have their own set of limitations too. CSR in India provides ample reasons to take up a full-fledged examination, incorporating decentred regulatory theory and hybrid regulatory model as India sets a classic example of a state that has endorsed CSR in its legal regime through international soft law transplants and as a result, is transcending away from the centralized forms of regulations.

CSR in India: Understanding the Paradoxes India got exposed to the new global order in the decade of 1990s. The advent of globalization was marked in the country through the structural adjustment policies and resultant liberalization of the economy (Gupta et al. 2009). The implication of globalization could be assessed at multiple junctures in the country. One such vantage point is the renewed interest in CSR that was seen through a strategic attribute of state-corporate relationship. Corporate entities in the present times have evolved to be important actors of economic growth. A country cannot apprehend its survival in the competitive global milieu without the operations of market actors creating avenues for economic growth (Donaldson and Dunfee 1994). The proliferation of corporations is a result of such dependence of nation-state as well as international governance architecture on the market actors that create wealth, maximize profits and cater to the employment and consumer needs. The operations of the corporations in the era of globalization are fraught with the ideas of costs, benefits, transactions and competition. Due to the burgeoning controls of the corporate sector in the economic growth arena, the adoption of CSR as a necessary practice was carried out primarily to neutralize the negative impacts of corporations and brand building. As a result, CSR emerged as a persistent

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‘management fashion keyword’. However, due to the growing inconsistencies and aberrations in the corporate conduct and states’ duties, the international governance arena changed in the realm of corporate responsibility. The greater state control over private corporations could not be a reality in the neoliberal paradigm and thus states had to create an environment where corporations could operate freely. The demands of a globalized environment require a commitment from the states to ratify corporate behaviour and create avenues for corporate legitimacy in the communities and markets they are operating. Therefore, CSR witnessed a transformation primarily in the era where the international avenue was swarming with the stories of state incapability, corporate misconduct and market failures. Indian history narrates the similar illustration, as prominent at the global level. The CSR practices in the current socio-economic and political milieu are considered as a strong strategic instrument which has manifold advantage for corporations and in terms the state. The issues of economic frailty are dealt with by creating space for CSR in policies, programmes and legislations and providing consensual legitimacy for corporate sustainable wealth maximization. This leads to corporations creating market transactions in the state resulting in profit and economic growth. The transplantation of international CSR in India’s structural and regulatory framework indeed is confronted with many paradoxes. The paradoxes in the Indian case of CSR should be of the attention in the academic debates and practising fields. It has traversed into a new schema wherein the state has taken cognizance of the fact that social responsibility from the side of corporations could be better harnessed through the action-oriented approach as the state brings out legal provision and regulatory transformation to streamline CSR practices initiated by the corporate actors. The results of such actions of the state in India have been brought out in the form of CSR regulatory provisions in the newly enacted Companies Law (Section 135 of the Companies Act 2013) which replaced the 56 years old Companies Law.4 The emergence of Section 135 though explained to be a purely benevolent move from the state dealing with a twofold goal of providing a uniform avenue to corporations and promoting social development has its 4 The Companies Act 1956 is an act of parliament that dealt with various aspects of the companies operating in India. This Act is now in the process of being replaced by Companies Act 2013 passed in the Parliament on August 29, 2013.

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own set of anomalies. The process of incorporating CSR in the Companies Law in India, as uncomplicated it appears, in actuality narrates the story of the overwrought quandary of policy-making, regulatory transplants and techno-economic attributes. The need of an academic enquiry which transcends from the quarters of management fraternity and is rooted in the in-depth exploratory exercises that are multidisciplinary in nature connecting the socio-economic and political perspectives of CSR to law and regulatory fabric is propitious (Arthaud-Day 2005). The country has moved towards ratifying the CSR discourse through legislative enactments, regulatory transformations and structural changes that demand an investigation into the evolutionary history of CSR. Similarly, the contemporary transformations have been witnessed to create tumultuous situations in law, regulatory and social development arena, raising four major questions to explore within the idea of the renewed interest of CSR in India, First, why the country has moved towards a legal adoption of the discourse of CSR wherein it is largely treated as voluntary? Second, how far claims of legally mandating CSR are relevant while explicit inspiration from the international soft law regime is witnessed? Third, how do soft law transplant and resulting decentred regulatory instruments operate in the CSR domain? Fourth, what are the larger objectives of the state and corporations in bringing about regulatory transformations and structural changes through CSR? The questions are addressed in the succeeding chapters.

The Indian Puzzle CSR in India has witnessed unprecedented transformation in the past decade. The proliferation of Multinational Corporations (MNCs) along with headway of the home-grown businesses has been a matter requiring attention that moves beyond the frontiers of business management and delves into the domain of law, regulation and social science. The contemporary CSR agenda and the analysis of the same have been observed to be skewed by the limiting dogma of business centred approach. However, in reality, the standing of CSR has grown to incorporate larger political and regulatory debates. With the advent of globalization and proliferation of the global presence of corporations, it is necessary to understand the dynamics of CSR. The growing economic vitality of corporations made them harness immense political autonomy globally; as a result, they became significant actors in the international governance arena. This

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resulted into creation of international legalizations that were primarily based on soft law framework regulating the corporations. CSR as a case in point has developed as a result of deeper socio-economic and political strategy globally earlier, from the side of corporations and later the international governance framework also endorsed the same. Corporations, although commanding considerable power and control over global markets, faced rebellion for their maleficent behaviours creating negative impact on ecology, communities and larger social development discourse. In order to neutralize the bad impacts that had already been created and for prospective legitimacy, there was a realization for the corporate actors to take up the self-regulatory model of CSR. As the world moved towards a more liberalized super-structure, the need was felt by the International governance framework and the states to protect the interests of corporations to operate in a trouble free environment generating more profit that was an imperative for global economic growth. As a result, there was a pool of instruments and approaches from the side of the state and international governance arena to endorse CSR as an important discourse of social development, claiming that corporations have become a vital aspirant of fulfilment of social development goals. Such claims in international governance milieu have also witnessed country-specific transplants of CSR agenda through legal provisioning, regulatory initiatives and structural advancements which certainly urges to explore this conundrum wherein, on the one hand, we observe technoeconomic advancements claiming the vitality of CSR within a particular nation and international framework and, on the other hand, the regulatory and structural modifications upon critical assessment hint towards barrage of issues which could prove that such changes have not been much useful for the larger social development goals. The Indian case of CSR reverberates a similar story wherein we observe, state ratified CSR provision in the corporate law that claims to have between the expressive and facilitative facet of law. The foregoing focusses on factors responsible for such regulatory and structural changes in the CSR space in India and bringing the same onto the legal purview. The global ushering of the CSR claims the same as an instrument in the social development goal. Such advancements make clear that the corporate functioning is abetted by the state and supra-state partnerships in order to ensure the sustainable market interactions. The legal provisions, regulatory transformations and resulting structural arrangements buttressed for being techno-economic and regulatory exercise bringing

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about the desired changes in social development milieu, the academic investigation of the transformations would attempt to highlight the paradoxes that enunciate the prospective hazards tracking a retrospective account of the nascent developments around the CSR space. This book attempts a twofold exploratory exercise. First, it aims to look into the fundamental thematic delineation of the Indian case of CSR that led to regulatory transformations and structural changes, the aspirations and inspirations. Second, through an analysis of the types of legal, regulatory and structural changes taking place in the CSR arena in India towards the envisaged social development goals, an attempt is made to put this paradigm shift into an archetype and investigate the lacuna and ambiguities of such schema. Moreover, the current researches in the field of CSR fall short of convincing analytical exercises that concretely put CSR into a law and regulatory framework and institutional paradigm. As a result, the existing knowledge about evolving architecture of CSR into larger state-corporate techno-economic discourse remains embryonic and this research is an attempt to expand the existing constrained body of knowledge.

Aim of the Book Aim of this book is to explore the specific context of CSR in India and the contemporary developments pertaining to the inclusion of the concept, formally in the Companies Law, institutes an additional level of complexity. We need to note that CSR, understood as a concept of management discipline in common rhetoric, is undergirded by complex socio-political, economic and legal institutional matrix (Chan and Gambino 2008). The introduction of an inherently self-regulatory concept into the legal framework by a state urges attention towards investigating the attributes of socio-political and economic interconnectedness between the state and the corporate sector that could aid exploring the causes of such transformations. While assessing the dynamics of state and corporate sector relationship specifically, an additional altitude of exploration becomes imperative, i.e. the way international legalizations have been formed to operate particularly in the CSR domain. It is witnessed that greater influence by the corporate sector in economic interactions globally leads to the international governance framework pertaining to CSR being primarily based on soft law attributes. Such international soft law regimes uniquely influence the way the

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legal regime around CSR has shaped up in India. The regulatory space and instruments and the structural framework construe the relationship between state and corporate sector. It is necessary to investigate the twofold relationship of state and corporate actors through the influence exerted by the international soft law regime on state’s prerogative in making CSR a legal provision. This activity is carried out to arrive at a comprehensive understanding of the complexities of the relationship that has emerged between the state and corporate sector in the case of CSR. Therefore, the purpose of this book is to take up such a regulatory, institutional and socio-political investigation through studying the case of CSR in India in the backdrop of the transformations taking place in the national arena, its international inspirations and resulting regulatory model that evolve. While there have been considerable academic work on the changing role of state in neoliberal regime and also on CSR in India, there is no full-length analytical research which links the changing regulatory and institutional role of state and corporate sector with respect to CSR and social development interface. There is a deficiency of scholarly work in social science which synthesizes the political, economic and legal aspects of the role of the state and corporate sector with narrowly defined focus of CSR which has the ability to provide a comprehensive broad-brushed account of the larger framework. This book addresses the question as to how CSR in India has transformed over the past decade through analysing the landmark changes. Assessment of the chronological pattern of such changes attempts to explore the primary questions pertaining to why CSR in India is brought under the realm of Companies Law. How it affects the existing regulatory space? What are the implications on the regulatory instruments? The pursuit of the answers would also involve investigation of questions as to how the state-corporate relationship constructed, construed and conducted post-state’s ratification of CSR. What are the reasons for such changes? What implications do the role of politics and corporate strategies have on the renewed interest in CSR? The book explores interconnected patterns with the international soft law regime pertaining to CSR and the Indian version of CSR is also carried out. It explores the reasons for adherence of Indian case to the international soft law regime in redefining the CSR framework. Finally, it deals with the aspects of how this trajectory of interface has been evolving in Indian context in an analytical framework? How the policy frameworks, institutional underpinnings and programme

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envisioning of intertwining the CSR initiatives with the larger goal of social development have been organized? To achieve this aim, assessment of the transformation in the regulatory and institutional behaviour of state and corporate actors and its socio-political and economic implications is carried out. This work analyses diametrically opposite, debatable and paradoxical viewpoints. The investigation of such a domain is not possible without adopting a multidisciplinary qualitative approach that strives to improve the understanding of the issue in hand with intent to contribute into simplification of complexities arising out of that (Denzin and Lincoln 2005). Grounded in a systematic methodology, this book approaches the subject of CSR with the objective of assessing the new causal relationships between law, regulation and social development within the emerging framework in India. This methodology aims at collecting and gathering information for understanding existing problems pertaining to CSR. The goal is to generate newer avenues to the existing body of knowledge and contribute to the theoretical paradigm that is even pragmatically relevant. The selection of sources has aimed to illuminate important aspects of the law and regulatory experience pertaining to CSR in India. As already indicated, there is a conspicuous gap in the literature around the law, regulatory and institutional aspects of CSR in India and its causal relationship with social development especially in terms of any thesis length study. This work, therefore, aims to utilize primary and secondary sources to explore the structural and regulatory regime evolving with respect to CSR in India and its relational analysis with the international governance arena. The sources include extensive exploration of the secondary sources having three levels of investigation. I. At the level of evolving the role of state in the neoliberal paradigm and positioning the corporate sector into the same include the theoretically developed CSR discourses. II. Analytical literature coverage at the level of national legal, policy and institutional instruments addressing CSR aspects channelled through guiding treaties in which state entities are the direct addressees of rights and obligations. This has primarily focussed on theoretical backgrounds pertaining to the evolved role of law and resulting regulatory aspects.

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III. Investigation at the level of the international soft law regime of CSR. The illustrations of ‘soft law’ include the OECD Guidelines, the UN Norms on the Responsibilities of Transnational Corporations and other Business Enterprises with regard to Human Rights, the Preamble to the 1948 Universal Declaration on Human Rights (UDHR), the 1992 Rio Declaration on Environment and Development, the UNGC, GRI and others. From a social science viewpoint, however, CSR cannot be understood in isolation from the wider debate on power and global governance. As Levy and Kaplan argue, the weakness of the business case for CSR suggests that one should not underestimate the political dynamics to engage in CSR (Levy and Kaplan 2007). The study has also extensively assessed source material on policy making from the Ministry of Corporate Affairs (MCA), legislative sources such as The Companies Bill 2012, The Companies Act, 2013, CSR (Policy) Rules, Schedule VII of the Companies Act and other documents such as National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business 2011, Corporate Social Responsibility Voluntary Guideline 2009, Directorate of Public Enterprise CSR Guidelines. In order to analyse the dynamics between CSR, soft law, regulatory practices and social development in the realm of changing relations between state and corporate sector, a step further into primary data collection has been carried out in the due course of research. Nonprobability sampling has been used keeping in mind intensive study wherein each respondent is aimed to typically generate a large amount of information. Selection of sources for primary data collection has been conceptually driven by the theoretical framework which underpins the research question from the outset. The research has taken up a reflexive and explicit approach about the rationale for selection of respondents, keeping in mind ethical and theoretical implications arising from the choices which are made to include particular cases and exclude others; qualitative samples are designed to make possible analytic generalizations (Denzin and Lincoln 2005). Field interactions were carried out in the course of the research for this work. The interactions with key players from the government, corporations and civil society were carried out through a series of events pertaining to CSR. Primarily data included unstructured interviews with

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key actors of public sector, corporations and civil society. Unstructured interviews work on the premise of making sense of a study of the participant’s world, researchers must approach it through the participant’s own perspective and in the participant’s own terms (Corbin and Strauss 2008). In addition, they are most appropriate while working within an interpretive research paradigm, in which one would assume that reality is socially constructed by the participants in the setting of interest. Based on this underlying assumption, the desire is to understand the phenomenon of interest from the individual perspectives of those who are involved with it. Therefore, in case of a law and regulatory exploratory research of CSR, it is useful to allow the interview/conversation to be mutually shaped by the interviewer and the interviewee. Imposing too much structure on the interview inhibits the responses which might result into incomplete understanding of the phenomenon of interest (Zhang and Wildemuth 2009). Discussion analysis is carried out of the committee meeting, conferences, workshops and seminars attended as a participant as well as non-participant observer. The year of 2014 proved to be of paramount significance as a number of transformations were taking place in the domain of CSR in India. The final CSR (Policy) Rules were in the process of being formulated. Schedule VII of the Companies Act 2013 was in process of getting replaced by a revised schedule. I got a chance to spend several days in the Indian Institute of Corporate Affairs (IICA) in the month of February 2013. IICA had evolved into a major institution interpreting CSR and creating multiple attributes around the same during the time of paradigm shift of CSR and its inclusion into Companies Law. A research workshop on retrospect and prospects of CSR in India was attended which also culminated into useful interactions and debates about the evolving facet of CSR in India. The interviews with state, corporate and civil society representatives provided multidimensional viewpoints to embolden the critical perspective of the research. The primary and secondary data analysis is preceded by the holistic theoretical groundwork interconnecting the aspects of soft law, decentred regulatory space and intertwining of novel regulatory instruments in Chapter 2 followed by a chronological account of CSR and its interconnectedness with social development discourse in Chapter 3 followed by the contemporary implications in Chapter 4 followed by a round up in Chapter 5.

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Structure of Argument Primary theme of the book delineates—transforming nature of state and corporate sector relationship in the light of evolving regulatory and institutional aspects pertaining to Corporate Social Responsibility (CSR) in India. The focus is on evaluating the conceptual accounts of law and the regulatory discourses, relevant within the changing institutional paradigm that substantially goes ahead of formal legal control of state towards corporate actors. At this vantage point, it is important to understand the state’s posture towards a changing scenario particularly as the tone is set by regulatory parameters pertaining to CSR to drive the process of engagement with the stakeholders. The tripartite framework intends to focus on finding on the vital interconnected aspects of the CSR provisions (Section 135) of the Companies Act 2013 (The Act) in India, rise of new institutions and the emergence of a hybridized regulatory space. This is earmarked in a neoliberal paradigm; the state is witnessed to perform a responsive function in engendering enhanced public role for the corporate sector. In this overarching framework, the aim is to undertake a causal, exploratory and relational analysis of aspects pertaining law, regulation and institutional transformations. Firstly, focus is drawn on to investigate the relational facets of the advent of law and regulatory framework of CSR. Secondly, in the light of the historical evolution, a causal connection is attempted between globalization, emergence of international soft law framework and the Indian case of CSR. Finally, an analysis of the role of state politics and corporate strategies of CSR delves deeper into the dynamics interplaying between multiple actors of governance archetype and tries to find answers of the wavering relationship between state, market, civil society and citizenry. Chapter 2 focuses to cover technical aspects of law and regulation with respect to CSR. Drawing the excerpts from the major landmarks in the arena of CSR and illustrating the same into evolutionary theoretical history, the chapter argues that CSR in present times is a strategic concept fortified by international soft law framework as the corporations’ economic interests are also guarded by the international ratification of CSR into codes, forums and guidelines. Further, logic of CSR into law and regulatory paradigm is explored by building architecture on existing framework of soft law and decentred regulation. Briefly talking about CSR in India, the argument tries to connect the theoretical backdrop of models of self-regulation, responsive regulation and meta-regulation

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to the contemporary scenario of India and its inspiration from global soft law frame of reference. Chapter 3, dealing with the general contours of CSR and its interconnectedness with the social development discourse, attempts to explore the rationale of such transformations through setting out a historical account. The chronological analysis first evaluates the origin and development of CSR in the western nations wherein the concept is claimed to be germinated due to the nature of businesses being primarily private. The international evolutionary account of CSR is followed by the Indian history of business responsibility which is observed to be dissimilar from that of the west due to their dynastic nature primarily and later through state controlled nature of businesses. The logic behind setting out a western picture first and then followed by the Indian historical scenario culminates in the argument substantiated by examples, that the Indian version of socially responsible behaviour intertwined with the western facet in the post-globalization era as the state moved towards neoliberalism. This step further focussed on creating and expanding markets with minimal state intervention. The debate of interrelation of CSR and social development brought forth in the chapter deals with the questions of bringing the social development discourse into the realm of CSR and the objective of state and supra-state actors towards the same. The chapter also tries to bring in the theoretical strategic rationale behind the concept of CSR which primarily is claimed to be an altruistic and voluntary attribute of corporations. Through the theoretical framework, it brings out the argument that the notion of ‘giving’ is interacting with self-interest attributes. The chronological content of the preceding chapter and the attempt to embed social development genealogy into CSR culminates into Chapter 4 that addresses the questions pertaining to the changes taking place in Indian scenario and further applies the law and regulatory architecture (interpreted in this chapter) into the Indian case of CSR. The changes at the level of law, institutional environment and resulting regulatory space are explored. Through the analysis of newly enacted CSR provision, the chapter is designed to gauge the underlying politics and strategic underpinnings related to CSR in India. This introductory chapter is primarily built on the contemporary empirical account from the existing primary and secondary sources and seeks to build a causal analysis that explains the significance of the role of strategies and politics from the state and corporate actors in bringing out

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CSR into the legal regime. The retrospective investigation of preceding moves from the state in bringing up CSR agenda into forefront of state-corporate relationship, argues that it is a part of larger neoliberal framework in which state’s endorsement to corporate self-regulatory CSR promotes corporate legitimacy through practicing softer legal role in a decentred regulatory space. This development is marked by the metaregulatory and self-regulatory practices of the state. Such an attitude, however, is not a new phenomenon and the previous experiments turned out to be unsuccessful in harnessing potential for the envisaged results as claimed. The roles of misconduct of state agencies, collusive practices and misappropriation of funds in the name of CSR could not be overruled. Therefore, the new prerogative of the state through inclusion of CSR into the law and resulting regulatory experiments, do give rise to the paradoxical scenario of state claiming to be mandating spending of CSR but the discretionary power of such spend wrests in the hands of corporate actors. Law and appended sources, as a result, are implicitly non-binding. Similar attempts as carried out in the past were faced with a set of lacunae and negative issues but the recent development in the CSR discourse in India does not take cognizance of the same. There are no safeguards or protective mechanisms built to address the probable prospective hazards in the working of law and regulatory regime which could plague such transformations in future. Finally, Chapter 5 sums up the arguments set out in the research through brief conclusion of the issues addressed in all the substantive chapters.

References Abbot, Kenneth W., and Duncan Snidal. “Hard and Soft Law in International Governance.” In International Law Classic and Contemporary Readings, by Charlotte Ku and Paul F (eds.) Diehl, 51–75. Boulder: Lynne Reinner Publishers, Inc., 2004. Arthaud-Day, Marne L. “Transnational Corporate Social Responsibility: A Tridimensional Approach to International CSR Research.” Journal of Business Ethics, 2005: 1–22. Banerjee, Subhabrata Bobby. Corporate Social Responsibility: The Good, the Bad and the Ugly. Cheltenham: Edward Elgar Publishing Limited, 2007. Black, Julia. “Contesting Accountability and Legitimacy in Non-state Regulatory Regimes.” Governance. Basel: Basel Institute on Governance, 2007a, 2–11. ———. “Critical Reflections on Regulation.” Australian Journal of Legal Philosophy, 2007b.

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Braithwaite, John. Regulatory Capitalism: How It Works, Ideas for Making It Work Better. Cheltenham: Edward Elgar, 2008. Braithwaite, John, and P. Drahos. Global Business Regulation. Cambridge: Cambridge University Press, 2000. Brenner, Neil. “Beyond State-Centrism? Space, Territoriality, and Geographical Scale in Globalization Studies.” Theory and Society, 1999: 39–78. Cerny, Philip J. “Globalization and Changing Logic of Collective Action.” International Organization, 1995: 595–625. Chan, Naomi, and Anthony Gambino. “Towards a Typology of Corporate Social Responsibility in Different Governance Contexts: What to Do in the Absence of Responsible Country Governance.” Georgetown Journal of International Law, 2008: 655–678. Cohen, Jean L. Civil Society and Political Theory. Cambridge: MIT Press, 1994. Corbin, J., and A Strauss. Basics of Qualitative Research: Techniques and Procedures for Developing Grounded Theory. Los Angeles: Sage, 2008. Cutler, A. Claire, Virginia Haufler, and Tony Porter. Private Authority and International Affairs. Albany: State University of New York Press, 1999. Denzin, Norman K., and Yvonna S. Lincoln. Sage Handbook of Qualitative Research. Sage Publication, 2005. Donaldson, Thomas, and Thomas W. Dunfee. “Toward a Unified Conception of Business Ethics: Integrative Social Contracts Theory.” Academy of Management Review, 1994: 45–63. Donaldson, Thomas, and Thomas W. Dunfee. Ties That Bind: A Social Contracts Approach to Business Ethics. Harvard: Harvard Business School Press, 1999. Etcheverry, Rauil Anibal. “Corporate Social Responsibility-CSR.” Penn State International Law Review, 2005: 493–505. Greider, William. The Soul of Capitalism: Opening Paths to Moral Economy. New York: Simon & Schuster, 2003. Gunningham, Neil. “Environmental Regulation and Non-state Law: The Future Public Policy.” In International Governance and Law: State Regulation and Non-state Law, edited by Hanneke van Schooten and Jonathan Verschuuren, 109–128. Cheltenham: Edward Elgar Publishing Limited, 2008. Gupta, Suman, Tapan Basu, and Subarno Chattarji. Globalization in India: Contents and Discontents. Delhi: Pearson, 2009. Harvey, David. A Brief History of Neoliberalism. New York: Oxford University Press, 2005. Idowu, Samuel O., and Walter Leal Filho. “Global Practices of Corporate Social Responsibility.” In Global Practices of Corporate Social Responsibility, edited by Samuel O. Idowu and Walter Leal Filho, 1–10. Heidelberg: Springer, 2009. Jackson, Kevin T. “Global Corporate Governance: Soft Law and Reputational Accountability.” Brooklyn Journal of International Law, 2010: 43–105.

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Jessop, Bob. “Capitalism and Its Future: Remarks on Regulation, Government and Governance.” Review of International Political Economy, 1997: 561–581. Kakabadse, Andrew, and Mette Morsing. Corporate Social Responsibility: Reconciling Aspiration with Application. Palgrave Macmillan, 2006. Kirton, J.J., and M.J. Trebilcock. Hard Choices, Soft Law: Voluntary Standards in Global Trade, Environmental and Social Governance, 2004. Knill, Christoph, and Dirk Lehmkuhl. “Private Actors and the State: Internationalization and Changing Patterns of Governance.” Governance, 2002: 41–64. Levy, David L., and Rami Kaplan. “CSR and Theories of Global Governance: Strategic Contestation in Global Issue Arenas.” In Oxford Handbook of CSR, edited by Andrew Crane, Abagail McWilliams, Dirk Matten, Jeremy Moon and Donald Siegel. Oxford: Oxford University Press, 2007. Lynch, Philip. “Human Rights and Corpoate Social Responsibility: An Australian Perspective.” The Corporate Governance Law Review, 2005: 403–424. Mares, Radu. The Dynamics of Corporate Social Responsibilities. Boston: Martinus Nijhoff Publishers, 2008. Mcmillon, Jill J. “Why Corporate Social Responsibility? Why Now? How?” In The Debate over Corporate Social Responsibility, by Steve May, George Cheney and Juliet Roper, edited by Steve May, George Cheney and Juliet Roper, 15–29. New York: Oxford University Press, 2007. Ong, Aihwa. Neoliberalism as Exception: Mutations in Citizenship and Sovereignty. Durham: Duke University Press, 2006. Orlitzky, M., F.L. Schmidt, and S.L. Rynes. “Corporate Social and Financial Performance: A Meta-Analysis.” Organization Studies, 2003: 403–441. Pariotti, Elena. “International Soft Law, Human Rights and Non-state Actors: Towards the Accountability of Transnational Corporations?” Human Rights Review, 2008: 139–155. Parker, Christine. The Open Corporation: Effective Self-Regulation and Democracy. Cambridge: Cambridge University Press, 2002. Pettet, Ben. Company Law. Essex: Pearson Education Limited, 2005. PricewaterhouseCoopers Pvt. Ltd. “Handbook on Corporate Social Responsibility in India.” www.pwc.com, November 2013. http://www.pwc.in/ass ets/pdfs/publications/2013/handbook-on-corporate-social-responsibility-inindia.pdf (accessed February 12, 2014). Saad-Filho, Alfredo, and Deborah Johnston. Neoliberalism: A Critical Reader. Edited by Alfredo Saad-Filho and Deborah Johnston. London: Pluto Press, 2005. Scherer, A.G., and G. Palazzo. “The New Political Role of Business in a Globalized World: A Review of a New Perspective on CSR and Its Implications for the Firm, Governance, and Democracy.” Journal of Management Studies, 2011: 900–930.

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Shils, Edward. “The Virtue of Civil Society.” Government and Opposition, 1991: 3–20. Skjærseth, Jon Birger, Olav Schram Stokke, and Jørgen Wettestad. “Soft Law, Hard Law, and Effective Implementation of International Environmental Norms.” Global Environmental Politics, 2006: 104–120. Wallace, Cynthia Day. Legal Contol of Multinational Enterprize. Netherlands: Martinus Nijhoff Publishers, 1982. Ward, Halina. “The Interface Globalization, Corporate Responsibility and the Legal Profession.” University of St. Thomas Law Journal, 2004: 813–856. Zaring, David. “International Law by Other Means: The Twilight Existence of International Financial Regulatory Organizations.” Texas International Law Journal, 1998: 282–327. Zhang, Yan, and Barbara M. Wildemuth. “Unstructured Interviews,” 2009.

CHAPTER 2

Soft Law and Decentred Regulatory Space: The Logic of CSR

Introduction Corporate Social Responsibility (CSR) has gained momentum amidst accelerated processes of liberalization wherein the role of corporate actors increased and the state’s role diminished in the governance arena. At this vantage point, multiple factors have led to a requirement for revamp in the business attitude towards social development goals, responsible use of profits and accountability (Idowu and Filho 2009). As per the UN Industrial Development Organization (UNIDO), CSR is a mechanism to strike a balance between economic, environmental and social imperatives which are more popularly known as ‘Triple Bottom Line’.1 The main aim of CSR is mostly discussed to be addressing the expectations of both direct and indirect stakeholders. This is how CSR strategically goes beyond business management, charity, philanthropy or social marketing in present times (UNIDO 2013). The debates around the structure and functionality of CSR are noteworthy and contemporary across the globe. One such vital debate is on globalization leading to the growth of corporate roles, advent of new

1 ‘Triple Bottom Line’ is a phrase first coined by John Elkington in 1994, which was later used in his book ‘Cannibals With Forks: The Triple Bottom Line of 21st Century Business’ directing towards a new approach of businesses taking into consideration social, economic and environmental accountability.

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parallel centres of power and results of unregulated practices of corporations leading to issues of accountability (Moon and Vogel 2008). Beneath the advent of the neoliberal quarters, it touches the multiple aspects of the social, economic and environmental arena, massively interconnected with the functions of all actors of governance that are transcending towards a law and regulatory framework which is hybrid and noninterventionist. There could be different aspects of CSR in different countries of operation of a corporation. This has led to multiple discussions towards questioning the universality of approach in the field of CSR (Idowu and Filho 2009). With the discussed backdrop, the main focus of this chapter is to conceptualize the phenomenon of CSR within the law and regulation architecture exploring the applicability of innovative and novel regulatory frames that have come into being in a neoliberal environment. The framework of the chapter essentially relies on a theoretical approach to social responsibility through placing it within the apt regulatory frame of reference that prevails in the International CSR domain and in terms translates in a variety of ways into Indian scenario. The focus of the study has been to explore the regulatory and institutional paradigm shift at the level of the corporate and the state in Indian context. The exploratory exercise urges towards adopting a strong theoretical base fortified by empirical inputs that could contextualize the concept of CSR within the emerging law and regulatory scaffold. Therefore the specific focus of this chapter is to evaluate the motivation behind contemporary developments around CSR domain in the global framework as well as in the Indian context through drawing a pragmatic theoretical architecture connecting the scholarly interpretations of CSR to the modern regulatory theories which have emerged in a post-globalized neoliberal governance skeleton. The next sections would attempt to put the concept of CSR within a context of law and regulatory setting with the focus of discussion on soft law and decentred regulatory space that builds on diversified and heterogeneous perspectives on law and regulatory aspects. The chapter discusses the theoretical linkages of the CSR space with the contemporary decentred regulatory space and the relevance of the regulatory theories which do not have overarching coercive attitude. I argue that the CSR space in India is a classic example of the interplay of consensual-based and non-coercive regulatory techniques that are an outcome of harnessing international soft law framework to build up a model that helps binding supranational development, trade and investment aspects for the state and the corporation.

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Contextualizing CSR The story of CSR could be looked through three generations globally. The first generation focussed on the short-term goals of the corporation’s interests, the second on long-term success strategies, the present third generation aims at addressing the role of corporate actors in the realm of social development (Bantekas 2004). During the first two phases, CSR was viewed as more of charity and philanthropy. The third phase marks its advent with fervour of soft law in the same. The soft law flavour to CSR could be understood through various sources available internationally and on country wise analysis. Such sources mark their soft law attribute through the quality of being voluntary in nature. The sources of CSR have strengthened the argument that actors internationally and nationally, deliberately chose softer forms of legalizations as superior institutional arrangements. Soft law is designed many times in such a way that advantages of the hard law are retained but the costs are avoided and they could also have unique features on their own. The reason behind keeping CSR essentially under the soft law regime could be one that this regime offers more effective ways to deal with the uncertainties and facilitate universality of approach (Abbot and Snidal 2004). Understanding contemporary aspects of CSR within the gambit of soft law regime requires moving back and retrospection of the debates that came into picture pertaining to the step beyond the compliance phase. There have been sceptical claims of proponents like Milton Friedman who argue that the discretionary corporate participation in social development endeavours is in opposition to the executive duties of the corporation (Friedman 1970). The other side of the debate has witnessed thinkers such as Archie B. Carroll who proposed that good citizenship is inevitable for corporate actors (Carroll 1981). First generation of CSR earmarks its existence through the framework where it was situated on the peripheries of mainstream business management. The concept of CSR thus presents not only a landscape of theories but also a proliferation of approaches which are many times complex and unclear. Since the second half of the twentieth century, a long debate on CSR has been taking place which has led to emergence of significant avenues connecting multiple actors in somewhat collaborative relationships. This collaborative relationship is built on a decentred regulatory framework wherein state, corporate actors and other relevant actors and systems come in tandem to build a governance structure and both the actors play vital roles (Black 2007a, b).

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Tracing the history of CSR, it carries with itself stories of mounting pressures from multiple development spheres giving rise to regulatory aspects emerging out of normative as well as descriptive framework simultaneously. Analyzing the schema of CSR within the regulatory regime and focussing on the soft law framework, it is necessary to assess the Indian case through the spectrum of decentred regulatory space which essentially works through plurality of actors. The analysis of soft law practises operating within this decentred regulatory space has their aspirations from international law scaffold where the focus of soft law has shifted from traditional manifestations to non-binding declarations, guidelines and institutions. The soft law aspirations could also be traced from the rules issued by law-making bodies that do not have direct relation with the constitutional and other formalities. A law-making body uses a soft law approach because of the plurality of actors, centres and influences of power.

The Concept of Soft Law The existence of soft law in CSR could be assessed at both domestic and international law scaffolds. At the level of domestic law, soft law has been gaining much popularity in terms of extra-constitutional and sub-constitutional norms primarily developed by non-judicial actors and provisions under legal framework that have ways of negotiation. In the International law framework, the focus has been shifted from traditional manifestations such as treaties, opinions and announcements to nonbinding declarations and guidelines such as UDHR, OECD Guidelines, UNGC among many others. The unique nature of the soft law framework which has evolved over a period of time is despite not having any coercive legal status they ultimately have tangible effects by providing the outline for inter-state and inter agency co-operation. The Soft law approach in CSR is aimed to produce behavioural modification (Gjølberg 2011). The international law debates have been associated with thoughts around the possibility that soft law attributes reflect normative commitments which eventually influence the actors such as governments or corporations. Taking the example of UNGC, it asks the companies to embrace universal principles and partner with the United Nations but is not legally binding in a conventional sense. It is merely a strategic policy initiative from the United Nations to align businesses operations and strategies to ten universally accepted principles

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in the areas of human rights, labour, environment and anti-corruption. Presently, it has grown to become a critical platform for the UN to engage with global business and it has a normative commitment. Global Compact has approximately 10,000 participants spread across 145 countries, that way it has become one of the vital forums for corporations to network, engage as a part of UN goals (UNGC 2013). In its broadest scope, soft law labels those regulatory instruments and mechanisms of governance that while implicating some kind of normative commitment do not rely on coercive rules or on regime formal sanctions (Robilant 2006). The concept of soft law mirrors two dominant trends in the gambit of globalization of law. First, it speaks about the multiplication in the sources of law. Second, it emphasizes the role of the private nature of the legal regimes. The proliferation of soft law has given rise to the renewed understanding of legal pluralism. In this manner, soft law could be best understood as rules with scope of negotiation that intuitively track the difference between quasi-legal rules and core political rules. The reason why soft law has tangible implications is due to the fact that they shape an actor’s understanding of what constitutes compliant behaviour with the underlying agreement of being more negotiable than a binding rule. As the obligations depend on the perception of actors, negotiable guidelines may lead to formation of expectations regarding apt and appropriate behaviour. The objective of the soft law is to improve the value created by international rules over time through a non-binding system. One of the very important point of soft law framework is that unlike traditional legal regimes which are primarily enforced through the centralized system of regulatory parameters, it is practised through decentred regulatory and enforcement mechanisms. The current developments in the soft law regime in the framework of globalization of law represent the expectations of various economic communities and civil society (Abbot and Snidal 2000).

The Regulatory Space Surrounding CSR Regulation does not have a universal and static definition or a standard taxonomy. Functionally, regulation could be understood as legal instruments implementing a set of socio-economic policy objectives. These legal instruments work at imposing penalties or subsidies to ensure compliance of an economic agent to a particular behavioural pattern. As the Indian political-economy moves successively towards a neoliberal,

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market oriented regime, there have been moves to formulate regulations pertaining to non-state actors who categorically hold important positions in governance post liberalized scenario in India. The centrality of the welfare state has given way to corporate actors in the governance arena. The new policy level idea is the rise in decentralization (Anant and Singh 2007). The current rolling back of state has created avenues to assess command and control forms of regulation scrutinizing reciprocity and mutuality and given way to new forms of regulatory space. The examination of current literature on regulation provides more interdisciplinary understanding and decentred understanding on regulation. The regulatory space surrounding CSR brings together economic, legal, political and social spheres creating a decentred model wherein the role of corporate actor is clearly observed to be enhanced towards endeavours of social development aspects. The implication of these new kinds of regulatory space demands a detailed analysis of the nature and composition within as well as the legal mechanism which has emerged out of the same, essentially having focus on softer tools and methodologies such as illustrations, codes, standards and guidelines. CSR and the Decentred Regulatory Scenario The burgeoning literature of CSR has long loomed large in the domain of business management and business economics agenda, albeit the same has been characterized by varying degrees of coherence and continuity (Mushkat 2010). However, the law and regulatory focus on CSR has been a recent phenomenon. The emphasis on the regulatory framework to CSR is a result of the disparate insights and ideas that originated from loosely connected sources globally. Such sources providing a scope for regulatory investigation of CSR have been emerging as an outcome of larger globalization and neoliberal discourse. Globally, they have followed multiple paths but also witnessed to have intersecting aspects within the overlapping frameworks. The blueprints of such frameworks, however, are not identical (Kerr et al. 2009). The international legal approaches and their domestic counterparts in the discipline of CSR understandably portrayed conceptual architecture on regulatory space that finds congruence of sub-discipline of regulation that has decentred qualities. The regulatory analysis of CSR thus urges to aim at investigating decentred regulatory space which is marked by hybrid post-regulatory mechanisms based on

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the backdrop of contemporary socio-political relations that impacts the domain of CSR (Lee 2008). Regulation is a concept having multiple scope of inquiries and implications. First, regulation produces changes in behaviour and outcomes (Morgan and Yeung 2007). This is a well-recognized empirical phenomenon in regulation. Second, its form may have to vary depending on the attitude to regulate towards compliance, an attitude which it can itself affect, again recognized in practice in regulatory literature. Third, that no individual stakeholder could monopolize or dictate the regulatory process unilaterally as all actors can be relentlessly restricted in attaining their own objectives by doing so. Emphasizing the social context in which the law operates, law’s instrumental role in shaping social behaviour needs to be analyzed. The effectiveness of any regulatory regime eventually depends on changes in the behaviours that have been brought which in terms follow the ways in which enforcement mechanism intertwines the social context (Morgan and Yeung 2007). Analyzing the contemporary context, it is witnessed that a diverse range of attributes affect the foundation of enforcement of regulations. Although the domestic experience of enforcement of CSR related provisions powerfully illustrates their highly contextual nature such as country-specific voluntary guidelines for the corporations, it is nonetheless possible to identify common areas of tension and difficulty encountered at the level of enforcement design vis-a-vis the legitimacy of any particular kind of practice, for example, how the corporations decipher the enlisted activities enforced through the CSR provisions by the state. Analyzing the evolved regulatory space around CSR, two related still distinct roles of law in regulation could be assessed, namely the facilitative role and the expressive role. In the facilitative role, law deals together with state and market and marks mutual linkages in creating regimes that bring together state, market, communities and individuals. The expressive facet of law’s role is construction of democratic institutions which focus on collective choice ends to meet. In such a role law asserts multiple ways to construct and curtail the autonomy and authority of institutions. The facilitative and expressive aspect of law needs to be assessed in case of CSR wherein there have been regulatory and legal developments in multiple countries (Morgan and Yeung 2007).

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The facilitative and expressive role of law in a contemporary regulatory regime essentially works through multiplicity of actors. The law operating in the decentred space challenges the three traditional assumptions on centralized regulation. The assumption of state being at the locus of formulations of collective community goals is challenged by developments of actors other than state such as civil society and corporations pursuing social, economic and environmental endeavours. Such endeavours are non-state in nature and composition. The corporate sector as a non-state actor has been looked to as operating as a resource of social influence as well as medium of public deliberation. The assumption of hierarchical nature of state’s role has also been questioned with the advent of multiple levels and sources of governance functioning simultaneously with the state and intertwined in the state machinery. The third paradigmatic assumption of centrality of rules has been observed to undergo alternation at all levels as there has been greater recognition of techniques of policy implementation through non-state agents rather than ‘centrality of command’. The limitations and effectiveness of legal rules are also deliberated. The all-encompassing effect of the pressures on the above-mentioned assumptions on state-centric and rule-centric understandings of regulation could be understood through Julia Black’s notion of ‘Decentred Regulation’. Decentred Regulation does not dislodge the vitality of state or law rather it focuses on the interaction between the state and various other actors, institutions and innovative techniques. The decentred regulatory discourse argues to generate new avenues to deliberate upon the changing nature of regulation. This approach claims to focus on the more evolved idea of regulation where there is a need to rethink the idea of state as a top-down rule-maker under the legal perspective on regulation (Black 2007a, b). The discernible shifts in the regulatory pace pertaining to CSR suggest transcend towards the decentred regulatory attribute in two ways. First, CSR as a concept has witnessed refinement in terms of being associated with the ideas of policy, governance and regulatory parameters. Second, the focus of CSR has been shifted from being claimed as normative, moralistic and ethics based agenda for businesses to something which has a broader coverage and explicitly connected to the attitude, actions and performance of state and civil society along with the corporations (Vogel 2006). As per Black, decentred regulation has multiple aspects of analysis. A closer assessment of problems of regulatory paradigm from the lens of decentred framework gives rise to opening up of ‘cognitive frame’ of

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analyzing multiple configurations of state, market, communities and other non-state actors. Decentred regulation questions the fundamental aspects pertaining to the understanding of regulation, consequently the role of state and framework of law. This frame of reference takes a step forward from the comprehension of regulatory state to the concept of regulatory society in which the regulation is not intensified on state machinery but rather diffused in the various other actors of the state-society. It is inevitable to mention the role of globalization in the schema of decentred regulatory aspect. The apologue of ‘decentred’ does find resonance in the globalization debate (Black 2007a, b). The applicability of decentred frame of regulation in the newly emerging CSR space explains the tradeoffs between the state and the corporate sector which becomes necessary within the pluralist understanding of policy and governance (Cotterrell 1995). The initiatives of CSR affect multiple aspects of social development within the boundary of the state and the relationships between state and corporations are shifting with multiple conceptualization being ascribed to regulatory framework moving beyond the command and control architecture. There are five central notions to the concept of decentred regulation: complexity, fragmentation, interdependencies, ungovernability, and the rejection of a clear distinction between public and private. The decentred understanding of regulation focuses on interpreting casual complexity and complexity of interaction (Black 2007a, b) between the multiple actors in a system. This approach also calls for deliberation to the dynamic interaction between actors and systems and to the operations of stimulus which produces a consistent strain between cohesion and unsteadiness within a system. There are modicum differences in the priority of actors in a decentred space, albeit the state still has one of the vital positions. Discussing the five notions of decentred understanding of regulation, fragmentation could be understood in terms of fragmentation of knowledge, control and power. It has been understood that knowledge cannot be enshrined in any single actor which might be required to cater to diverse, dynamic and complicated problems. This clearly sets out the fact that no single actor can possess the overview which is required for effective regulation. At a more radical analysis, it is observed that not only knowledge is fragmented but there is also a social construction of information. Decentred analysis in addition to the notion of fragmentation of knowledge also emphasizes on the aspect of fragmentation of power and control by discussing the fact that government does not have

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a monopoly on the exercise of power and control instead the same is considered to be dispersed among multiple social and non-state actors as well. Further, the regulatory systems existing within social spheres are considered as vital to social ordering as the formal ordering of the state. Analysis of fragmentation gives way to the third focal attribute of the autonomy and ungovernability of actors or systems. Autonomy is not used in the sense of freedom from interference by government, rather it is the idea that actors will continue to develop or act in their own way in the contemporary socio-political milieu. Actors or systems are selfregulating, and regulation cannot take their behaviour as a constant. The aspect of fragmentation and autonomy relates to the fourth central factor of a decentred analysis of interactions and interdependencies. The decentred space has its core in the existence of complexity of interactions and interdependencies between the government and other non-government actors. Regulation is considered to be a multidimensional and multidirectional aspect, between all those involved in the regulatory process, especially the regulator and regulated relationship in the implementation of regulation is said to be ‘co-produced’. The association is not seen to be one in which non-government actors have requirements or problems and the government has capacities or solutions. Each is seen as having both problems and solutions, and as being in a symbiotic relationship. These synergies of credence among each other extend to national and beyond national boundaries (Offe 1984). The decentred notion of regulation mentions different aspects pertaining to interactions and interdependencies that lead to the very vital aspect of the decentred regulation. It is understood as collapse of the public–private divergence in socio-political aetiology. In decentred analyses, regulation is an outcome of interactions and dialogue and not of the exercise of the formal, constitutional, centralized command and control parameters. The collapse of the distinction of public and private does find its vital standing in the law relating to CSR wherein law works as a tool for analyzing governance and partnerships of multiple actors in performing social development endeavours. The social development activities being a part of multiple stakeholders of governance clearly showcase the assimilation and synthesis of public–private. Regulation is manifested in the identification of ‘hybrid’ culture which is devised in a way that combines or networks government, non-government and corporate actors in a variety of ways. The complexity of how corporations have an increased public role could be well understood by this central point.

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The diagnosis of shortcomings of the centralized regulatory regime is highlighted by the decentred analysis. The multi-layered assessment suggests that regulation in contemporary neoliberal scenarios should follow a concerted process of coordinating, steering, influencing and balancing interactions between actors and systems. It should focus on creating new arrangements of interaction that facilitates actors and systems to organize and plan course of actions in partnership fashion. These five central notions to the concept of decentred regulation: complexity, fragmentation, interdependencies, ungovernability and the rejection of a clear distinction between public and private resonate with the space around CSR in India. The amalgam of voluntary guidelines and the legal provisions on CSR gives way decentred understanding of regulatory space helping to comprehend complexity of interaction between the multiple actors in the state-non-state synergy. As we assess the Indian case of CSR through the attempted regulatory model, the dynamic interaction between actors and systems would be aimed to be understood through decentred regulatory space. Regulation occurs in many locations and forays when we analyze regulatory aspects pertaining to the policy and implementation frameworks of CSR at the national and global level. The soft law framework discussed in the preceding section in the arena of CSR explicitly co-relates the nature of such framework and the space where they operate. The CSR international frameworks could be traced to have originated from both state and supra-state sources such as the OECD, The international governance framework sources such as UNGC and finally the private sources such as GRI, ISO 26000 Standards etc. that evidently are transplanted at domestic level through state and corporate actors in modified framework. This aspect showcases the clear application of decentred regulatory framework in CSR domain wherein the narrow conception of regulation as legal rules have dissented to a framework having complexity of actors and systems, fragmentation of knowledge, power and control, Interdependencies of actors and systems as clear in the case of CSR and state-corporate sector synergy, A comprehensible descent from rule centred archetype of governance, which is unequivocal in a neoliberal paradigm provides meaningful inference to the concept of ungovernability. Therefore in a decentred space which surrounds the domain of CSR, a symbiotic relationship between state and corporate sector is witnessed which gives rise to the blurred boundaries between public and private sphere of influence (Braithwaite and Drahos 2000).

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The Interplay of Regulatory Models Understanding of CSR and the regulatory space around the same exhibits salient features of being decentred in nature and functionality with multiplicity of actors and system participating. The plurality of actors opens up a scope for discussion towards the types of regulatory encounters fostering evolution of features of co-operation, co-existence and co-production and being more responsive to the market actors. The study of CSR in a post-globalized neoliberal purview suggests development of new governance structures that precisely are built on the state’s role of being more of a participant rather than a centralized rule-maker. When an attempt is made to understand CSR and the regulatory space around the same specifically pertaining to the developments in Indian case, a deeper analysis of regulatory instruments that operate in a decentred environment is required. The assessment of the Indian story of CSR within a theoretical structure pertaining to law and regulation requires consideration of three pre-existing attributes in Indian scenario. First, India is typically constituted by the public, private and non-profit sector. Second, the Indian economy is a market oriented economy and third, the aspect of neoliberalism in India underlines that the state and corporate actors have to operate in a collegial manner in order to cater to the ambitions and success measures for each other. The three regulatory instruments that aptly find relevance in case of analysis of CSR in an essentially decentred frame are self-regulation, responsive regulation and meta-regulation. Self-Regulation The law’s facilitative role also derives a vital section of regulatory instruments. These types of regulatory instruments primarily base themselves into consensus and co-operation as ways through which regulatory behaviour is formulated. This form of regulation is elaborated and covers a broad spectrum of regulatory arrangements. Such regulatory arrangements specifically referred to as ‘self-regulation’ comprise multiple co-operative and co-productive arrangements between state and nonstate actors in order to achieve the goal of regulating social behaviour (Morgan and Yeung 2007). Self-regulation encompasses myriad regulatory arrangements having multidimensional attributes. The extent of involvement of state and exclusive control on decisions of self-regulatory bodies decide the final outlook of the regulatory strategies. Self-regulatory

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mechanism is contextual in nature. It is often argued that self-regulation is apt if regulated activity calls for expert technical know-how. It is important to understand at this vantage point that the private interests of nonstate actors have considerable benefits if they are allowed to take up vital decisions without much intervention of the other actors. In the theory of Public Choice,2 legislation is considered as a response to the demands of various groups. There could be a critical assumption of regulation too which looks at regulation serving to bestow rents on regulated firms. If regulatory rule-making remains with the legislature or an independent agency, groups representing such firms have the task of having domination on those institutions putting private interest at the centre of affairs. Commissioning of the regulatory powers gives leverage to the actors of the task lesser accountability maximizing the possibilities of rent-seeking. Citing the legal perspective, it is seen as an example of modern ‘corporatism’ (Ogus 2004). The capacity of a corporate actor to make rules governing the activities might comprise misuse if the aspect of democratic legitimacy and essential role of other actors of governance is not present. Ogus points out multiple studies and researches building up the framework to predicting corporate actors’ benefit from self-regulatory regimes. The traditional criticisms, however, are based on a precarious and geriatric understanding of self-regulation which in present context has evolved and hybridized. There is a need to revisit the newer understanding of self-regulation envisioning the role of government and corporate actors (Ogus 2004). At one end, rules could be in-house to a corporate actor as they might be having due approval from state agents. Similarly, the rules, guidelines, standards or codes issued by any actor of governance might have shifting focus and extent of legal force. There could be the possibility of them being obligatory, a guideline, direction and so on having scope of freedom of negotiation from the actors involved. One of the very important aspects of self-regulation could be the varying degree of monopolistic assertion. This to a great extent depends on the actors within a state-market structure. Ogus focuses on the fact that ‘self-regulation’ could have a typical form that could be mutual synergy between actors involved in activities to

2 Public Choice theory argues that there are also such thing as ‘government failure along with “market failure” because of that government interventions do not achieve the desired results’ (Shaw 2012).

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regulate the self-behaviour or creation of some kind of regulatory body. It could be a task of promulgating code of conduct or a guideline. The reinforcement of the regulatory arrangements is likely to include specific mechanisms for dealing with disputes arising between the regulatory body and its members. The law operates as a fall-back mechanism, enabling the parties to have recourse interpreting and enforcing the terms. Seeing CSR in this light, the law’s role could be argued to be fundamentally facilitative as it respects corporate freedom of interpreting the aspects imbibed in the law enabling them to formulate their customized plan of action for socially responsible behaviour, and a scope of negotiation if they fail to do so. The negotiation based mechanism within the law’s facilitative capacity to explain an existing institutional framework wherein the corporate actors have considerable freedom in decision-making. Law plays a role in developing tools ensuring competition and universality of approaches. At some instances, if we fit the Indian example to self-regulatory framework per se, law might be observed to enlist penalty which hints towards reduction of autonomy of the self-regulatory body hinting at the expressive facet of law, however as discussed earlier, law’s role of an umpire providing a frame of reference for the corporation also dominates the regulatory milieu. Understanding the same aspect in detail, regulating the CSR plan of action could be within the peripheries of a corporation, retaining a residual oversight role, such as imposing periodic reporting requirements on the self-regulatory body and by retaining legal responsibilities to issue guidance or directions to corporations concerning the approach in which regulatory task is rendered. The applicability of the self-regulatory attribute in Indian case of CSR shall be looked through empirical understanding of the contemporary scenario in Chapter 4. This would also address the expressive-facilitative dichotomy that prevails in the Indian case. Responsive Regulation Responsive Regulation somewhat stands between the attributes of state regulation and deregulation. The idea of responsive regulation focuses at the juncture wherein it is being deliberated to regulate in a manner that can channel marketplace transactions to less intrusive and less centralized forms of government intervention (Braithwaite 2002). Evolved forms of responsive regulation retain many of the salient features of laissez-faire

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governance without relinquishing government’s responsibility to correct market failure. Responsive regulation should not be expected to have set parameters prescribing a set of rules for the regulatory practices. This form of regulation, instead proposes that there cannot be universal principle applicable for all forms of regulatory aspects. There are a lot of factors on which best strategies to regulate depend—regulatory culture, environment, context and history being some. Responsive regulation draws its inspiration from Nonet and Selznick’s ‘responsive law’ concept (Nonet and Selznick 1978). The attributes of purposive focus on competence, flexibility, participatory citizenship, and negotiation resonate in responsive regulation. Nonet and Selznick wherein provided set boundaries to the applicability of responsive law, responsive regulation moves ahead to the quarters of innovative regulatory potentials. Braithwaite in his book To Punish or Persuade mentions the role of corporate actors in the regulatory interactions. He proposes that a logical regulatory policy could not be formulated without corporate actors being motivated to make profits (Braithwaite 1985a, b). He argues that the role of social responsibility could also act as a tool for corporate motivation. Braithwaite, thus, puts forth that any regulatory strategy based on core persuasion or core punishment could not be efficient. It was argued that core self-regulatory parameters could be subject to exploitation by corporate actors and similarly a core centralized regulation would strangle the other vital actors. Providing the example of CSR, he concluded, if the corporations are not a part of multiple actors of regulation, there is a risk of fulfilling only economic rationality. Similarly, a regulatory strategy based mostly on centrality of command would undermine the sense of responsibility. Meta-Regulation Continuing the review of literature pertaining to the debate of law and regulation connecting to social development endeavour of CSR, a mention of the literature pertaining to concept of meta-regulation is worthwhile as it resonates in its structure and functionality with the tenets of responsive and self-regulation within the decentred space. Metaregulation explains a process whereby the state withdraws as a direct agent of regulation in favour of being an indirect regulator of internal control systems (Parker 2002). The corporate sector responds to general norms rather than to formal prescriptive rules. It does so because it develops an in-house capacity to integrate social values with commercial practices

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which motivates them to invest in social development endeavours. Such regulation clearly provides an edge to the corporate sector corresponding to their self-interest with an add-on value of corporate representation in the regulatory pathway. The construction of a ‘corporate conscience’ (Nonet and Shelznick 1978) thus is a successive roadmap securing a rationale for self-regulation, responsive regulation and meta-regulation in providing moral justification for corporate yearning to profitability (Shamir 2010). Consolidating the discussion of self-regulation, responsive regulation and meta-regulation within a decentring soft law fabric, the case of CSR witnesses a hybridization of regulatory behaviours from state as well as the corporation. The contemporary soft law regime at global level more specifically has the features of consent type of regulation; however, when the same is deduced at the domestic level, the amalgam of decentred form of regulation along with comply of explain model is observed which uniquely keeps the soft law feature intact and essentially works through plurality of actors (Poel and Vanstraelen 2011). An interesting point to deliberate upon and substantiate empirically could be to clear the mystified environment around which law vis-a-vis various novel regulatory parameters work. The questions pertaining to the extent to which law influences the actors, consensual character of agents and complexity of arrangements call for specialized answers. The regulatory arrangements could be formal or informal in nature; they could also be inspired from social norms rather or guided through legally enforceable agreement. To collate the discussion, it could be apt to say that in specific cases of CSR, research could focus on many facets of the decentred regulatory space and soft law essentialism wherein the law considers freedom of association, negotiation, multi-stakeholder and multilateral approach.

Logic of CSR: Exploring the Indian Regulatory and Institutional Framework A holistic understanding of CSR within the regulatory phenomena requires an inter-related analysis exploring contemporary socio-legal framework. The final picture often represents coalesce of distinct regulatory and socio-political phenomena such as self-regulation, metaregulation and responsive regulation within a decentring framework (Sheehy 2012). The regulatory analysis of CSR as a social development

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endeavour moves further from business management descriptive framework to the strategic drivers of CSR, focussing on regulatory pressures, organizational dynamics, public expectations, and economic incentives for acting responsibly. The focus in the social sciences paradigm should be to explore CSR as a phenomenon that intertwines with the attribute of governance. Contemporary scholarly works have attempted exploring the relationship of the CSR with the theories of politics, democracy, and citizenship (Scherer and Palazzo 2007). Socially responsible corporate practices need to be looked through the lens of the regulation and governance literature (Chan and Gambino 2008). Synthesis of existing literature on law and regulation and empirical accounts is required in order to attempt an exploratory exercise. Substantiation of theoretical groundwork and delineating transformative steps of state and corporate sector is necessarily needed. Several factors open up the scope to further analysis of the regulatory territory which is moving more towards a concerted yet decentred paradigm shift inclusive of multiple actors of governance, practising hybrid regulatory regimes such as responsive regulation, meta-regulation and self-regulation with an underlying soft law genealogy. Tracing the pedigree of the present day CSR, within international soft law framework and country-specific cases, various disclosures of within the law and regulatory fabric come into picture. Christine Parker analyzes the outcome of the capitalist crisis of legitimacy which derived public concerns to bring back the multinational corporations to a legal and regulatory sphere from a transnational no-man’s land. According to Parker, the responsibility approach of corporate aims at enhancing corporate accountability and transparency, search for ways to overcome the failures of state-centred command and control regulation through multiplicity of parameters (Parker 2002). It is contemplated to go further towards an exploratory framework to analyze and put in a conceptual design the whole regulatory space surrounding CSR. The paramount inquest would be to delve into the conundrum of state and corporate sector relationship. It is critical to contribute to this morphology and come up with a conceivable regulatory model which answers the sensibility of the existing fragmented decision-making of state as well as corporate actors in the gambit of legal vs. voluntary parameters of CSR. Explaining contemporary developments of CSR in decentred regulatory parlance, one of the important features is the transcendence of the public/private divide through multi-stakeholder task-sharing policy

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initiatives. The basic organizing principles of the decentred framework consist of the governance setup having increased participation of nonstate actors in shaping public policy, public–private collaboration, the interaction of multiple spheres of authority (Rosenau 2007). This facet of decentred space showcases the permeability of both state and corporate actors convoluting with each other. The newer forms of regulatory agenda encompass noteworthy changes from the authoritative position of law to more facilitative one. The mentioned aspects of the CSR in India set out a tone of discursive changes within the law. The provisions of the CSR rules entail law’s relative retreat from centre stage and the ascendance of new forms of legal and quasi-legal arrangement mechanisms focussing more on creation of shared attributes. In the present neoliberal context, as governance becomes the new-fangled orthodoxy, new tools of ordering come to the foray: self-regulation, meta-regulation and responsive regulation as a part of decentred regulatory framework, presumably inspired from various soft law instruments and techniques of regulation. Taking primary cue from Nonet and Selznick’s (1978) evolutionary theory of law, Ayres and Braithwaite (1992) introduced the notion of responsive regulation that could be argued to be a subset of decentred approach and governance. CSR and increased regulatory focus on the same showcase a scenario marked by greater participation of non-state entities in the regulatory process. The inclusion of aspects such as CSR in the law and regulatory regime hints at higher prominence on dialogue and persuasion than sanctions and adversarial methods towards a compliant behaviour. The theory of responsive regulation emboldens self-regulation and accordingly prepares for a regulatory system that is contingent on multiple participants and instruments and being decentred. Responsive regulation focuses on the credibility to the governance paradigm shift by substantiation of the propagation of regulatory architectures having both state and corporate actors at comparable platforms (Braithwaite 2007). At this stage of literary discussion, it is vital to also mention the scholarly works that are critical or sceptical of the traditional regulatory arrangements. They primarily tend to focus on issues of effectiveness, practicability, and functionality. The discourse of the hybrid regulatory aspects surrounding CSR space is nonetheless based on the deep-seated insight of a minimal state (Strange 1996). Such arguments uphold the dogma of state failure in broad-spectrum and the intrinsic inadequacy and weaknesses of its command and control regulatory mechanisms emanating

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out of the hard law. The decentring descendant theoretically and normatively places government and non-state civic and commercial authorities in an inter-related arena and affirms its retreat from assuming primacy in the deployment of political power (Lobel 2004). Moving a step further and analyzing the CSR initiatives primarily pertaining to social development, there have been instances of unstructured and arbitrary initiatives having more self-centred agenda such as developing a code of conduct for international lobbying, CSR reporting and so on. It has been largely observed that specific projects to improve social development have no long-term effects (Banerjee 2007). There seem to be disconnected features within the law and regulation raising questions at the methodology for a more consolidated multi-stakeholder approach. The gaps and missing links within the regulatory framework of a decentred space require an assessment encompassing theoretical frameworks on regulation, stakeholders, and the shape which international soft law has taken at domestic level. The law and regulation approach of CSR range from unfastened soft law arrangements such as the UNGC, with non-binding compliance mechanisms, to more formalized initiatives, like the OECD Guidelines (Gjølberg 2011). Some of the soft law initiatives such as GRI and the Forest Stewardship Council (FSC), at global level can often appear to be hard in their nature and composition whereas the core features of soft law remain intact. Indian example of law and CSR directs towards the analysis of contemporary scenarios to understand the entanglement that exists at multilevel frameworks (Gjølberg 2011). The Companies Act 2013 aims to guide the multiple actors and aims at universality of approach towards CSR (Ministry of Corporate Affairs 2014). CSR in new legislation is described in terms of money spent by the companies for indicative activities listed in the Schedule VII of the Companies Act 2013. This sets out a soft law tone to the enactment leaving a scope for the corporate actors to formulate the activities which are in their best interest. The companies need to reveal projects undertaken and ensure access of the information to the nation at large. The decentred attribute of the regulatory parameters is exhibited by this feature which is explored during the course of the research. It is calculated that approximately 16,000 companies would be influenced by the CSR legal provision. It has been widely discussed by the policymakers that the main aim to make CSR a part of legal provision is to build a forum where one has a unified format and equal level of interactions for companies (Better Healthcare Through CSR: Partnerships and

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Innovations 2013). Dr. Bhaskar Chatterjee, Head of IICA argues that the legislation framework of India concentrates on the main aim to concretize the initiatives so that they are more projects based and have a partnership model wherein if one participant has put in money into a project, more money could flow from other partners and the project goals become easier to attain.3 The provisions on CSR in the new legislation cannot be understood in isolation from the wider debate on decentred approach and global governance. The issue of how CSR, soft law and decentred regulation are actually linked in Indian scenario does draw coherence with the global soft law and decentred regulatory regime. Developments pertaining to such are also referred to as ‘emergent juridification’ of CSR, wherein actors are put under a co-ordinated partnership framework (Buhmann 2011). CSR initiatives at many instances pave the way for soft law, and such transitions from purely self-regulated CSR to a collaborative approach build up representation of analysis of new forms of regulatory scheme. Furthermore, CSR, soft law and decentred regulation are argued to spur cognitive, discursive and normative changes which might have greater impact on governance than do the specific rules and standards set down by these initiatives. In addition, responsive regulation, meta-regulation and self-regulation have the advantage if intertwined with domestic government regulations. The analysis of law, regulation and social development attributes of CSR builds a framework wherein a customized decentred regulatory regime inclusive of attributes of self-regulation, responsive regulation and meta-regulation might lead to enhanced participation, flexibility and feasibility due to their legitimacy among governments and corporate participants. These characteristics within the regulatory and policy changes around the CSR space at domestic level and specifically in India explain vital connections with global neoliberal discourse (Jamali and Mirshak 2007). The focus of the work in successive chapters would be investigating the discourse of CSR in Indian context that could traverse the story of Indian CSR as a phenomenon intertwining with the attribute of social development. The aim would be to assess the contemporary 3 Based on the keynote address by Dr. Bhaskar Chatterjee in the Conference ‘Better Healthcare through CSR: Partnerships and Innovations’ held at India International Centre on September 24, 2014 (Better Healthcare Through CSR: Partnerships and Innovations 2013).

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scholarly enquiry that has been working towards exploring the relationship of the CSR to the tenets of law and regulation (Scherer and Palazzo 2007), substantiate the same with empirical examples of the Indian scenario and identify the gaps and missing links.

References Abbot, Kenneth W., and Duncan Snidal. “Hard and Soft Law in International Governance.” International Organization, 2000: 421–456. Abbot, Kenneth W., and Duncan Snidal. “Hard and Soft Law in International Governance.” In International Law Classic and Contemporary Readings, edited by Charlotte Ku and Paul F. Diehl, 51–75. Boulder: Lynne Reinner Publishers, Inc., 2004. Anant, T.C.A, and Jaivir Singh. “Structuring Regulation: Constitutional and Legal Frame in India.” In Regulation Institution and the Law, edited by Jaivir Singh, 10–26. Delhi: Social Science Press, 2007. Ayres, Ian, and John Braithwaite. Responsive Regulation, Transcending the Deregulation Debate. Oxford University Press, 1992. Banerjee, Subhabrata Bobby. Corporate Social Responsibility: The Good, the Bad and the Ugly. Cheltenham: Edward Elgar Publishing Limited, 2007. Bantekas, Ilias. “Corporate SocialL Responsibility in International Law.” Boston University International Law Journal, 2004: 317–320. Bharti, Shuchi. “Better Healthcare Through CSR: Partnerships and Innovations.” Conference Report. New Delhi: NGOBOX, 2013, 1–19. Black, Julia. “Contesting Accountability and Legitimacy in Non-State Regulatory Regimes.” Governance. Basel: Basel Institute on Governance, 2007a, 2–11. ———. “Critical Reflections on Regulation.” Australian Journal of Legal Philosophy, 2007b. Braithwaite, J. Restorative Justice and Responsive Regulation. New York: Cambridge University Press, 2002. Braithwaite, J., and P. Drahos. Global Business Regulation. Cambridge: Cambridge University Press, 2000. Braithwaite, John. To Punish or Persuade: Enforcement of Coal Mine Safety. Albany: New York Press, 1985a. ———. To Punish or Persuade: Enforcement of Coal Mine Safety. New York: State University Press, 1985b Braithwaite, P. “Improving Company Performance Through Sustainability Assessment.” In Proceedings of the Institution of Civil Engineers-Engineering Sustainability, vol. 160, no. 2, 95–103. Thomas Telford Ltd, June 2007. Buhmann, Karin. “Integrating Human Rights in Emerging Regulation of Corporate Social Responsibility: The EU Case.” International Journal of Law in Context, 2011: 139–179.

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Carroll, Archie B. Business and Society: Managing Corporate Social Performance. Boston: Little Brown, 1981. Chan, Naomi, and Anthony Gambino. “Towards a Typology of Corporate Social Responsibility in Different Governance Contexts: What to Do in the Absence of Responsible Country Governance.” Georgetown Journal of International Law, 2008: 655–678. Cotterrell, Roger. Law’s Community: Legal Theory in Sociological Perspective. Oxford: Clarendon Press, 1995. Friedman, Milton. “The Social Responsibility of Business is to increase its Profit.” New York Times Magazine, 13 September 1970. Gjølberg, Maria. “Explaining Regulatory Preferences: CSR, Soft Law or Hard Law.” Business and Politics, 2011. Idowu, Samuel O., and Walter Leal Filho. “Global Practices of Corporate Social Responsibility.” In Global Practices of Corporate Social Responsibility, edited by Samuel O. Idowu and Walter Leal Filho, 1–10. Heidelberg: Springer, 2009. Jamali, Dima, and Ramez Mirshak. “Corporate Social Responsibility (CSR): Theory and Practice in a Developing Country Context.” Journal of Business Ethics, 2007: 243–262. Kerr, Michael, Richard Janda, and Chip Pitts. Corporate Social Responsibility: A Legal Analysis. Markham: Lexis Nexis, 2009. Lee, Min-Dong Paul. “A Review of the Theories of Corporate Social Responsibility: Its Evolutionary Path and the Road Ahead.” International Journal of Management Review, 2008: 53–55. Lobel, Orly. “The Renew Deal: The Fall of Regulation and the Rise of Governance in Contemporary Legal Thought.” Minnesota Law Review, 2004. Ministry of Corporate Affairs. “Ministry of Corporate Affairs.” Ministry of Corporate Affairs Web site, 22 January 2014. http://www.mca.gov.in/Ministry/ pdf/CompaniesAct2013.pdf. Moon, J., and D Vogel. “Corporate Social Responsibility, Government and Civil.” In Oxford Handbook of Corporate Social Responsibility, edited by J. Moon D. Matten and D. Siegel. Oxford: Oxford University Press, 2008. Morgan, Bronwen, and Karen Yeung. An Introduction to Law and Regulation. Cambridge: Cambridge University Press, 2007. Mushkat, Roda. “Corporate Social Responsibility, International Law, and Business Economics: Convergences and Divergences.” Oregon Review of International Law, 2010: 55–76. Nonet, Philipe, and Philip Selznick. Law and Society in Transition: Towards Responsive Law. New York: Harper and Row, 1978. Offe, Claus. “Contradictions of Welfare State.” Public Law, 1984: 310. Ogus, A. Regulation: Legal, Form and Economic Theory. Oxford: Hart Publishing, 2004.

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Parker, Christine. The Open Corporation: Effective Self-Regulation and Democracy. Cambridge: Cambridge University Press, 2002. Poel, Katrien Van de, and Ann Vanstraelen. “Management Reporting on Internal Control and Accruals Quality: Insights from a “Comply-or-Explain” Internal Control Regime.” Auditing: A Journal of Practice and Theory, 2011: 799– 813. Robilant, Anna Di. “Genealogies of Soft Law.” The American Journal of Comparative Law, 2006: 499–554. Rosenau, J. “Governing the Ungovernable: The Challenge of a Global Disaggregation of Authority.” Regulatory Governance, 2007: 88–97. Scherer, G, and G Palazzo. “Toward a Political Conception of Corporate Responsibility—Business and Society.” Academy of Management Review, 2007: 120. Shamir, Ronen. “Capitalism, Governance, and Authority: The Case of Corporate Social Responsibility.” Annual Review of Law and Social Science, 2010. Shaw, Jane S. Library of Economics and Liberty, 12 December 2012. http:// www.econlib.org/library/Enc1/PublicChoiceTheory.html (accessed January 23, 2013). Sheehy, Benedict. “Understanding CSR: An Emperical Study of Private Regulation.” Monash University Law Review, 2012: 103–127. Strange, S. The Retreat of the State: The Diffusion of Power in the World Economy. Cambridge: Cambridge University Press, 1996. UNGC. United Nations Global Compact, 27 December 2013. http://www.ung lobalcompact.org/. UNIDO. United Nations Industrial Development Organization, 26 December 2013. http://www.unido.org/en/what-wedo/trade/csr/what-is-csr.html. Vogel, David. The Market for Virtue: The Potential and Limits of Corporate Social Responsibility. Virginia: The Brookings Institution Publication, 2006.

CHAPTER 3

Corporate Social Responsibility in India: International Arena and Social Development

Introduction The preponderance of business and management discipline in the theoretical groundwork of CSR has led to gaps and missing links when the deeper analysis is sought in terms of exploring the origins of CSR, its inclusion within specific regulatory arena and the trends that are being imposed with multiple governance fabrics in the contemporary scenario (Carroll and Shabana 2010). Although the growth of CSR processes and practices have been explosive worldwide, there remains minuscule understanding pertaining to critical components such as theoretical framework, contemporary shift and implications of such developments. Through the investigations and exploration incorporated, this chapter specifically aims at an in-depth analysis of the historical disposition to the present-day CSR in order to seek answers pertaining to the changes in the formal welfare regime of the state to regulate corporate behaviour in a deriving market-friendly climate. It is discussed, such changes led to reshuffle the centralized approach to regulatory attributes towards a decentred evolutionary process (Mares 2008). Over the past decade,

Supplementary Information The online version contains supplementary material available at (https://doi.org/10.1007/978-981-19-2304-3_3). © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022 S. Bharti, Corporate Social Responsibility in India, https://doi.org/10.1007/978-981-19-2304-3_3

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CSR has been found to be effectively influencing behaviour of individual companies when it operates at the level of corporation (Jenkins 2005). However, as observed in existing research sources carrying out crosscountry analysis, CSR initiatives lacked planning and intent to be holistic in terms of what was explicitly aimed through the rationale (Aras and Crowther 2009). The cases of CSR initiatives which assuredly asserted to make positive changes in the social development process were often witnessed to be uncoordinated, desultory and erratic towards attainment of such goals (Mallin 2009). The fundamental flaw in CSR initiatives has been observed as insufficient acknowledgement of the structural magnitude of business and society relationship (Lim and Tsutsui 2012). The issues of poverty, inclusion and marginalization are not being seen as the consequence of the hegemony built by the market actors rather it has been buttressed and normalized that globalization can have positive as well as negative consequences leading to an understanding that the poor and marginalized share values are universal (Broomhill 2007). The contemporary picture urges on the necessity to embrace a critical and holistic perspective on the theory and practice of CSR, pertaining to the queries regarding the onset of the discipline and the practising field, the causes that infer its present form, the transformations in the regulatory and governance space that gave rise to the renewed fabric earmarking its presence by primarily formulating a hybridized regulatory structure having international soft law underpinnings (Tulder and Zwart 2006). The nuanced assessment of regulatory and institutional changes in the CSR paradigm recommends a substantive enquiry into the history of CSR in the county and the implication of international development framework. The historical genesis of CSR and the understanding of regulatory and structural fabric surrounding the same in Indian context are attempted to be understood with the analogue of social development. Further, the analysis aims to answer the questions of state actions and corporate strategies pertaining to CSR which would be proffered with scholarly and empirical accounts in the succeeding chapter. The assessment of Indian case with respect to the law and regulatory developments and advent of multiple institutions, partnerships and resources attempts to explore the rationale in bringing out renewed interest in CSR and the entire voluntary, legal and regulatory edifice around the same (Kalirajan, Bhide and Singh 2010).

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One of the indispensable points of deliberation in the case of law and regulatory transformation around the space of CSR and social development could be the assessment of the way international development regime has evolved over the years. The concept of CSR has been shaped in a soft law framework through multilateral agencies, the United Nations as well as other significant countries like the UK, France and Netherlands (Steurer 2010). At this juncture, when the international soft law regime pertaining to CSR is analysed, it is observed that the way it unfolded in India has scant similarity with the international arena but the present framework remains sizably inspired from the international soft law paradigm as other countries (Runhaar and Lafferty 2009). The corporations operating in India felt a need to adhere to the internationally accepted CSR mandates through several forums and guidelines in order to have transnational negotiation power, to exhibit the qualities of good corporate citizens and ensure the perceptibility at the international market, trade and investment (Neve 2009). Eventually, as the nation moved more towards the liberalized economy through shrinking the welfarist approach, the role of the corporate sector enhanced, resulting in the state moving further towards a decentred regulatory space where corporation’s interests are harnessed in the post-regulatory hybrid designs (Wilensky 1975). In a nation where corporations have a vital role to play in economic growth, state rearranges into a system primarily based on self-regulation, self-organization and self-promotion (Graham and Woods 2005). Such arrangements are a result of multiple actors gaining similar relevance and this further creates a situation where no system can straightforwardly act on one another. As highlighted by Tuebner, the actors of a system have the capacity to regulate themselves which leads government standing at a distance to make things effective (Teubner 1988). The studies pertaining CSR which connect the same to the regulatory transformations through the lens of global soft law paradigm are in somewhat embryonic stage (Jackson 2010). The substantive principles of CSR need to be understood with the underpinnings of social development, as the foundations of social responsibility have originated with the guiding propositions of the aims to attain social development (Fox 2004). Although being purely emerged out of the businesses’ necessity of social legitimacy and consensus, the only way out was to endorse the dogma of social development in order to connect to the citizenry that are neither shareholders, nor employees or consumers but have immense impact on the operations of the corporations and vice versa. Therefore,

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the Indian law1 and present-day regulatory transformations pertaining to CSR2 have profound association with the development discourse at large, underlying social development pursuit (Newell and Frynas 2007). This has been explored in the subsequent sections of the chapter.

Evolution of CSR in International Arena This section attempts to set out a holistic picture of the unfolding of CSR discourse internationally. This analysis is carried out in the light of scholarly and empirical work existing in the body of knowledge in CSR space. Along with the secondary research the primary sources providing crucial information were approached. The main aim of understanding the origin of CSR in the international arena is to answer the questions pertaining to its broad brushed and narrow impacts on Indian case of CSR. Assessing a brief historical account, the discussion moves to a more relevant contemporary set-up of CSR at international scaffold. The holistic deliberation towards a comprehensive picture unfolds many aspects that might seem to be prescriptive but are suggestive and based on soft law in actuality. The Indian CSR finds many points of congruence with the international soft law frame, which is explored through this section. The international advancement of CSR is discussed through three phases, namely The Phase of Short-Term Benefits, The Phase of Long-Term Benefits and The Phase of International Soft Law Framework (Bantekas 2004). The mentioned phases have also been discussed in Chapter 23 that contextualizes these phases within a theoretical framework. This section attempts to make a step forward and assess the chronological account of the three phases:

1 The Companies Act, 2013 passed by the Parliament has received the assent of the President of India on August 29, 2013. The Act consolidates and amends the law relating to companies. The Companies Act 2013 has been notified in the Official Gazette on August 30, 2013. Some of the provisions of the Act have been implemented by a notification published on September 12, 2013. 2 Corporate Social Responsibility (Policy) Rules [TO BE PUBLISHED IN THE GAZETTE OF INDIA, EXTRAORDINARY, PART II, SUB-SECTION (i)] (www.mca. gov.in/Ministry/pdf/CompaniesActNotification2_2014.pdf) see( Annexure A). Schedule VII (in exercise of powers conferred by sub-Sect. (1) of Sect. 467 of the Companies Act, 2013 (18 of 2013) central government made amendment in the Schedule VII dated 27 February 2014) [TO BE PUBLISHED IN THE GAZETTE OF INDIA, EXTRAORDINARY, PART II SECTION 3, SUB-SECTION (i)]. 3 See chapter 1 pp. 24–25.

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The Phase of Short-Term Benefits The origin of CSR in the western world primarily in America and Europe could be traced back to the origin of business houses in the western nations and the concept of charity as a voluntary giving to the community came forward as a popular method to attain consensus to operate. The practices of charity first started through the wealthy individual under the influence of the Church. The notion of charity is deeply interlinked to religious preaching set out in the Bible. As the new business institutions emerged, the obligatory need to scale up and move ahead of charitable giving in order to operate freely in the communities took centre stage. Transcendence from charity to philanthropy took place as the businesses got institutionalized. Philanthropy evolved as a more institutionalized form of giving, not only in the form of monetary assistance but services as well. Backed by philanthropic action, newly developed business insisted on the malice of life of communities living on agricultural modes of production and insisted on a need for rapid industrialization (Ostrower 1997). Social, political and intellectual developments globally led to changes in the ideas about responsibility of individuals, organizations and nations towards social development. Such changes worldwide transformed the nature and context of charity and philanthropy (L. Backer 2008). Earliest and most pronounced changes occurred in the western nations due to renaissance, reformation, industrialization, urbanization and the emergence of new liberal doctrines that further proliferated to the different parts of the world (Pinkston and Carroll 1996). The renaissance with its emphasis on rationalism and humanism, unconnected with the religious beliefs, insisted on reducing the importance of religion in people’s life. With the dissolution of religious clerics and confiscation of sectarian properties, religious charity became scarce. The result was secularization of charity and philanthropy. Such action came to be guided by universalistic, ethical and legal norms instead of by religion, tradition and custom (Dicken 2004). Charity and philanthropy even post the social movements mentioned above, focussed on the short-term goals wherein the success could be measured as the immediate result of the charitable and philanthropic move (Salamon 1997).

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The Phase of Long-Term Success Strategies Rapid industrialization that swarmed Europe and the United States in the early nineteenth century resulted into curtailment in the wealth and power of feudal rulers and aggrandizement in the authority of corporations. However, such autonomy and authority caused gross social, economic and environmental violations and miseries to the local communities eventually (Haufler 2001). By the latter half of the nineteenth century, a skilled generation of the industrialists came into existence and industrial wealth began developing in a quasi-aristocratic sense of obligation (Owen 1965). Corporate leaders got more involved into social development activities through philanthropy. David Owen points out that the motivation was not entirely altruistic. The new elites were doing their best to attain the status of aristocracy by using the wealth for philanthropy as stated in his book, ‘[s]uch munificence not only earned the gratitude of society but more concretely assisted in the ascent of the social ladder’ (Owen 1965). The debates that could help to understand the forerunner concepts of CSR intrigued the western world rigorously in 1920s are very enchanting. John Maynard Keynes noticed the ‘tendency of big enterprise to socialize themselves’ (Keynes 1936). Keynes in his Collected Writings,4 as cited by Anand Chandavarkar (2009), has been prophetic in the observations on the economic role of the state. The Keynesian paradigm on scope and rationale of the state’s role rely largely on private enterprise employing a mix of command and compensation (J. M. Keynes 1971–1989). Such practices according to Keynes could include a political and economic set-up which exercised liberalism. For Keynes, the political problem of a nation was to combine economic efficiency, social justice and individual liberty.5 Keynes suggested that the proper role of the state is macroeconomic management to achieve economic efficiency and social justice (Chandavarkar 2009). Extrapolating the Keynesian precept in the contemporary world, the state has a concrete portrayal in the territory 4 Collected Writings of John Maynard Keynes comprises 30 volumes that incorporate his imperative works encapsulating The General Theory, his experiences at the Versailles Peace Conference, and correspondence with relevant economists demonstrating the development of his ideas. (http://www.res.org.uk/SpringboardWebApp/userfiles/res/file/JMK%20D igital%20Keynes/CUP%20Collected%20Writings%20Keynes-Flyer%20&%20Stock.pdf). 5 See generally Liberalism and Labour by John Maynard Keynes (http://www.newrep ublic.com/article/economy/77341/liberalism-and-labor-in-england).

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of the international organization. In order to have enhanced representation and support from the organizations like IMF and World Bank, the state needs to adopt liberal pattern of governance with more involvement of private enterprises. This kind of set-up claims to ensure comprehensive governance at the international development realm. The Keynesian understanding about the evolving state and private sector relationship attempts to address whether the interest of society was better served by doing business better and passing on the benefits to shareholders, consumers and to the state through taxes or through engaging themselves into social development endeavour (Heald 1970). A formative influence on early forms of CSR in the west could be attempted to be discovered through a relevant example from the United States. Eminent business leader John D. Rockefeller6 in the year 1870 held that business could no longer be thought of simply as a profit-making enterprise. He argued that every thoughtful person must concede that the purpose of business is linked to the advancement of social well-being the way it is to the production of wealth (Sealander 1997). The criticisms of the early forms of CSR were also observed through an analysis of the sources citing historical evidence. There were evidences of denunciations that showed reprove towards the philanthropic drive emerged in those times. Fredrick Gates in his lengthy memorandum sent to Rockefeller in the year 1906 urged that the corporation’s money should primarily be spent for research, ideas or endowments and they should not be used only for constructing concrete structures. He wrote to Rockefeller, ‘Buildings bear the names of the donor and furnishes a splendid family memorial. […] Sentimental people loved to build libraries with their alcoves, their special set of books and their special funds’ (Sealander 1997). The decade of 1900 witnessed the emergence of the concept of managerial trusteeship whereas the notion of social responsibility still remained at the peripheries of business practices and essentially manager driven (Nehme and Wee 2008). Managerial trusteeship was distinct from the primitive individual philanthropy of the wealthy being the in-charge of the corporate wealth (O’Cornell 1987). During the mid-twentieth century, the modernistic developments of the changing socio-economic order differed from the earlier welfare capitalism in going beyond welfare

6 See generally Details about John D. Rockefeller (http://www.pbs.org/wgbh/americ anexperience/features/biography/rockefellers-john/).

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of the organization, employees, shareholders and consumers. The deliberation on propensity towards society at large and encompassing multiple stakeholders in business came into foray. The inducement of the ideas of advanced welfare capitalism was endorsed by corporations through company foundations or directly through companies to charitable organizations. The concept of social responsibility of business came to the centre stage in 1953 in Howard R. Bowen’s book—Social Responsibilities of the Businessman—which referred to the obligation of the businessperson who pursues policies to make decisions which fall in line of actions desirable in terms of objectives and values of the society (Bowen 1953). During the 1960s, the widespread social unrest led to rethink the definition of social responsibility. It became clear to the corporate actors, that the survival and continued profitability depended on systemic involvement in regenerating social good to the local communities which went beyond consumer relations. The concept of giving was itself enlarged to include not only money but also close involvement with skills, facilities, equipment or products, deputation of personnel, marketing and accounting to civil society organizations. In some, being a good corporate citizen was synonymous to doing social good; however, as discussed in the beginning of this chapter, the notion of social good and in terms voluntary giving primarily emerged out of social obligations, financial motivations and needs for sustainable existence (Wettestein 2009). The Phase of Adoption of International Soft Law The analysis of the behaviours of corporate actors has not been a traditional subject of exploration. Historically, the applicability of international law with respect to the purview of corporate actors has been related to obligation of states with respect to trade and investment issues (Zerk 2006). International law whether hard or soft has inherently been applied to regulate the state jurisdictions and other actors within that and not the regulation of corporate entities independently (Abbot and Snidal 2000). At the onset of globalization, concerns regarding the economic, social and environmental impacts of the corporations led to new demands within the domain of international law. With the rising interconnectedness of the ‘regulatory opportunities’ rise in a renewed role of international law was expected.

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The core characteristic of international law to regulate states’ jurisdiction and their diplomatic rights through treaties, declarations, forums and conventions is constructed on ineluctable features of flexibility, negotiation, bargaining suggestion and norms. The aspects of international law which are purely based on hortatory and non-binding attributes fall under the purview of ‘soft law’. Soft law could be understood as such international law mechanisms which might appear to be either emblematic or consolidated based on their appearance but have an important role in shaping the transnational legal order (Giovanoli 2002). CSR largely emerged to be the process driven by international soft law framework with participation of multiple actors such as international development agencies, civil society organization, credit rating agencies and reporting frameworks. Corporations are regulated by the soft law framework internationally because they have become the biggest drivers of economic growth globally and a restrictive and impeditive approach is not viable. Therefore, a more dyadic approach has proved to be more practicable (Zerilli 2010). Companies, therefore, were subjected to a more exposed and interactive environment after globalization had set in cross-nationally. The concerns largely focussed on the potential damage to their reputations that may accrue as a result of public exposure of corporate malpractice. Such entanglements were prescriptive of envisaging CSR with a negative portrayal. As a consequence, corporations’ emphasis was primarily on ensuring that the issues that bring in negative reflection should not be compromised in order to keep the social image intact. Some examples of such nature are violations of human rights, employment of child labour, etc. CSR meant stressing on a list of things that corporations should not do (Utting 2005). Corporate actors within the dialectic of globalization got strongly implanted on the neoliberal archetype of governance at national as well as supra-national levels. Globalization pushed nations to endorse structural adjustment measures, privatization and liberalization in order to ensure survival in essentially interconnected worlds in terms of trade and exchange (Shamir 2008). The new governance framework deconstructs the state’s image as a provider of all welfare measures and gives way to a more decentred space where non-state actors have an enhanced participation. This schema is reached by providing larger and liberal geo-political milieu and greater recognition to corporate actors aiming at social development along with the profit considerations (Vogel 2005).

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Globalization and the resultant transitions to neoliberal paradigm were observed in most of the western nations which once operated on the welfare model (Harvey 2005). Growth of capitalism led to an enhanced role of market actors in the domain of governance and distributive capacities. As a result, the infringements and harms incurred by the operations of the corporate actors were strategized to be balanced in the forms of social development initiatives (Aras and Crowther 2009). Thus it could be argued, as the public domain experienced involvement of the private sector, normative commitments started to get established between the state and the corporations to safeguard each other’s interest, motives and measures of control for a better fulfilment of each other’s goals. As the logic of market economy asserts itself in a neoliberal world, so the logic of CSR finds its place in the a hybridized governance archetype (Bantekas 2004). Internationally, for the past two decades, market failures, gross social, economic and environmental violations and legal issues were observed in terms of operations of corporations which resulted in massive boycotts, shaming and financial repercussions (Carvalho and Rodrigues 2006). The corporate sector, realizing the gravity of such issues, has been more forthcoming for an enhanced public role. The genesis of the inevitable ties between the inexorable interconnectedness of CSR and social development could be clearly understood through the above-mentioned adverse after-effects of the corporate behaviour in the absence of any check and balance mechanisms resulting into social upsurges. Ronen Shamir, in his recent discussion paper ‘The Commodification of Corporate Social Responsibility: An Israeli Test Case’, argues, that the corporations in the neoliberal era adopt the socially responsible behaviour in order to respond to external pressure. The ‘social duties’ of corporations as well as the trajectory of the same largely remain contingent and rhetorical (Shamir 2002). Corporations, as a result of such reverberations, claimed to pledge allegiance to the idea that they are committed to the goal of social development through a robust CSR framework. The notions that emerged in this era marked contrast to previous notions of ethical obligations based on charity and philanthropy and constantly moved towards an approach that provided them social popularity (Castro 1996). The revised approach of corporations towards consolidating CSR for deeper strategic ends led to their evolved role in the international development paradigm. The creation of multiple avenues pertaining to CSR at the international level

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is a classic case of corporations urging to be an aspirant in the international development arena. This becomes clear when new forums such as UNGC, OECD Guidelines, etc. came into existence leading to corporations’ involvement into further development and endorsement of such normative commitments (Dickerson 2002). This set-up clarifies two aspects of the global restructuring that took place with respect to the corporations and international development arena in case of CSR. The corporations became willing to adhere to responsive regulation through participating in social development goals via negotiations and collaborations with non-profit interest groups. This depicts the responsive regulatory role supported by the international development foray in order to address thriving discontent with the ramifications of neoliberalism and the palpable results of uncouth corporate proliferation (J. Braithwaite 2008). The collaborative role being built up on responsive regulatory parameters could not have worked on a centralized system of hierarchical rules; therefore, the adoption of the testament of soft law becomes inevitable. The soft law setup of the international schema of CSR although urges towards a faint legal personality albeit it underlines the negotiable and self-regulatory underpinnings (Bantekas 2004).

Context and History of CSR in India The Indian history of CSR is complex and emerged differently from the western counterparts. Indian businesses inherently have been dynastic (Tripathi 1981). The precursor of contemporary form of CSR has mainly been religious charity by businesses which primarily allowed them legitimacy to operate in a social space and make profit. The manner in which the present-day CSR evolved in the country has not been a linear one; rather, there have been socio-political and cultural intertwining. This section discusses a chronological account of the evolution of CSR in India from its primitive forms followed by an attempt towards the theoretical rationale of the notion of voluntary giving in case of CSR. The historical evolution of CSR in India reveals, the origin and the causes of growth of precursors of CSR were different from that of the west. In the post-globalized world order, as the western facet of CSR evolved to be internationalized, CSR in India resonated a similar picture as it unfolded internationally. The following sub-sections would set out a detailed account about this pattern.

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Predecessors of Modern Day CSR in India Religious charity is the oldest, most acquainted and popular form of altruism (Sunder 2013). It implies giving alms and donations to the socially backward sections of the society to alleviate problems on temporary basis. This form charity has a strong adherence to the religious beliefs and preaching. The dynastic industrialism and even mercantilism quite evidently showcased religious substructure as all religions exhorted the followers to provide charity as a tool to salvation (Morris 1967). Religious charity or ‘daan’ in Indian context encompassed multiple aspects of alms towards poverty alleviation, education, welfare and other initiatives of social significance (Tripathi and Jumani 2013). The existing literature and countrywide academic and professional work in the purview of CSR suggest, while there are undoubted similarities to developments internationally, Indian CSR has an organic evolution from within its own history and culture which sets it apart from the other countries (Brown 1988). The reason for this could be that the origin of the Indian business class was different from the western nations and primarily Europe and the United States which we discussed in the preceding section. In India, the modern corporate sector evolved from traditional business communities and family businesses, in its own political and cultural setting. The rise of modern indigenous corporations in India is considered to be dynastic rather than institutional. Family ownership still continues to characterize Indian corporate sector. The business-community relationship in India could be traced back to the early nineteenth century; however, the nature, extent and potential for contributing to public well-being became explicit focus of attention only from the latter half of the twentieth century (Tripathi 2004). The roots of business-community relationship in India mark out their history from the time of merchant-capitalism (Dasgupta 1979). This engagement continued till the socio-economic and political conditions changed which further induced the business response to social development. The period of 1850–1914 showed evident shifts from the primitive forms of charity of merchants to a more west influenced philanthropic developments. This was the time when many developments pertaining to industrialization were witnessed. The dynastic arrangements of Indian business class began to set up their trusts and endowed modern institutions for the social development cause. Modern capitalism in India has emerged from a large and flourishing merchant class which played an

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important part in its pre-industrial society. Starting with the merchant communities, the business sector has grown over a century and a half to the present phase. Different business communities followed similar philanthropic practices that were based on short-term success strategies like digging a well or building a road. Certain characteristics can be identified which were unique to respective businesses. One of these was a joint family organization which was not only a social characteristic but also the basis of economic activities (Dasgupta 1979). Another characteristic could be observed to be concentric obligation starting with the family and radiating outwards to the caste, religious faith and finally the society at large. Merchant families had all developed several institutional mechanisms such as Panchayats, Basas, Vithutis and Jammats for mutual self-help, economic support, educational, welfare and other needs. Meeting these obligations and providing facilities and charity earned the business goodwill and support from the community and enhanced their status in the society (Sunder 2013). The advent of industrialization could be traced back to the times while India was still a British colony; however, the purpose was purely need based and there was no focus on economic growth of the country (Bayly 1983). The origin of the post-independence era marks the rise of a socialistic democracy that was constitutionally adopted and this led to what has been called a mixed economy (Tripathi 2004). In such set-up, stateowned mega-corporations coexisted with private sector actors, all until the end of twentieth century and the system operated in a state regulated and predominantly command and control environment. The early phase of the corporate involvement in social endeavours earmarks its advent by being influenced by Gandhian Trusteeship ideology. The Indian corporations provided donations for community-oriented programmes through trusts established either by them or they being members to the trusts established by the third party. The concept of Gandhian Trusteeship focussed on creating the common-good and on providing systems of checks and balance within the organization. Mahatma Gandhi suggested the doctrine of trusteeship as a solution to economic inequalities. The corporations that adopted the same were primarily state-owned enterprises and inherent family businesses. The salient features of ‘moral standards’ and a corporation as ‘trustee of wealth’ were two prominent points of influence (Chakrabarty 2011).

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The trusteeship model was criticized for being based on arbitrary objectives and did not have uniformity of approach (Rolnick 1962). While trusteeship did not turn out to be a vibrant way to approach social development endeavours by the corporations, obvious tension between labour and capital and the state leadership were also observed in that era. The state seemed to have underplayed the contradiction. The consequence was an adverse impact on the workforce because the government at that time was not willing to champion the workers’ cause in mills and factories, owned by Indian indigenous business houses (Tripathi and Jumani 2013). The symbiotic relationship between the state and Indian corporations paid has been evident. By supporting the industrialists and not the workers, the government in that era attempted to fulfil its Nehruvian dream of securing India’s economic future after independence. Along with trusteeship, Indian corporate sector got influenced from the notion of philanthropy in this era. Though violations were reported in the case of workers and communities, businesses adopted western model of philanthropy as a tool to conceal the inherent problems of non-compliance (Sunder 2013). Philanthropy is derived from the Greek word philein—to love and anthropos—man, means love for mankind (Sunder 2013). Philanthropy has been defined as ‘creative use of wealth for the long term benefits of the society’ by the proponents. It can be differentiated from charity in multiple ways. Philanthropy is a greater planned, organized use of charitable funds whereas charity is observed too often to be random and arbitrary (Bremner 2000). Charity generally has a religious or a spiritual connotation and focusses at short-term alleviation of a problem. The gambit of philanthropy has been broadened ahead of the financial boundaries to encompass time, technology, skills and labour attributes (Hammack and Heydemann 2009). The new generation of businesses thus began to explore new models of philanthropic actions which aimed to go beyond the palliative action. However, the core focus of wealth maximization remained intact leading to philanthropy being reduced to a tool to obscure problems of corporate wrongdoing. The phase from 1914 to 1960 is marked as the era of advent of Indian capitalism. The evolution of business philanthropy could also be clearly witnessed in this period. The next shift came in the 1960s which ushered in the era of economic and political troubles and led to corporations operating under pressures and constraints. The state also took on many of the obligations such as education, health care, disaster management and

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social welfare which it could not efficiently implement. The mistrust in business started to grow and taxation increased discontent. This phase in the history of CSR could be called a phase of misplaced objectives and stagnant era in the CSR thoroughfare (Chakrabarty 2011). Atrophy of Welfarism and the Rise of Market Economy After independence, the state of India emerged with visions of rapidly catching up with the more advanced nations of the world in socioeconomic and political spheres (Tripathi 2004). It was eventually realized that welfarism will have to give way to liberalism in the country to deal with more complex issues of global competitiveness (Esping-Anderson 1996). There were multiple roadblocks and the state was facing inability to build sustainable welfare measures. Implementation initiatives of plans, pace, flexibility and innovation emerged to be big challenges in front of the state. The advent of corporations, both state led Public Sector Units (PSUs) and private enterprises, took place in the country rapidly (Majumdar 1996). The private sector was observed to have a distinct advantage over government in multiple fields. While government action was advantageous where huge resources and large coverage were necessary, it was not so productive when experimentation with new ideas and direction was needed because of inflexibility, bureaucratic control and redtapism. Therefore, a variety of resources were needed to be harnessed and the corporate sector was seen to have a distinct role for that purpose (Sunder 2000). The decade of 1970s thus saw a renewed flavour of corporate interest in social development paradigm. New distinct phenomena emerged, spurred partly by the realization that supporting community development through philanthropic activities is in their own best interest and partly by a bit of meta-regulatory framework promoting corporate self-regulation from the side of the government. The cynicism and malpractice associated with business operations and with philanthropy as a contrary trend also became visible in the 1970s. It indicated that business attention was shifting from philanthropic giving measured in money terms to more institutionalized forms such as formulation of foundations and partnering with civil society organizations. The main intent of the corporations still appeared away from the social development objectives; rather, the focus was only on social legitimacy to operate despite cases of socio-economic and environmental violations through their operations. Meanwhile, social problems of the country

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increased manifold. Government’s professed socialist policies with their emphasis on poverty reduction led to minuscule results (Bhagwati 1993). During the fourth five-year plan, the actual rate of growth of national income measured in 1960–1961 deteriorated from the targeted growth rate of 5.5 per cent per annum. The per capita income fell from RS 348.6 in 1971 to Rs 235 in 1972–1973.7 Apart from domestic troubles, unfavourable external factors such as escalation in petrol prices and maintenance of ten million refugees after the Bangladesh war also contributed to the dismal performance of the state (Sunder 2013). The state’s dismal performance led to the rise of the third sector in India. The advent of civil society marked by the rise of Non-Government Organizations (NGOs) in the social development domain outside the government network was a relevant development during the late 1970s. State also gave impetus to the growth of the voluntary sector. The need for relief in wake of calamities, inequality and deprivation during the 1960s had brought a fleet of aspirants into the voluntary movement. In the 1970s the intelligentsia class specially the doctors, engineers, economists, lawyers, etc. emerged as a new bandwagon of activists to the voluntary sector (L. Salamon 1994). The voluntary organizations that inherently operated on charity funds evolved their horizons from charity to promoting ‘self-reliance’ and later ‘empowerment’ became the buzzword (Baviskar 2001). There was growing social consciousness among the masses and one such vital example could be when ‘Sarvodya’ leader Jayprakash Narayan started a total revolution movement in mid-1974 having countrywide coverage. The movement resulted in massive social awareness and demanded being marginalized into the mainstream (Hettne 1976). At the same time during the emergency in 1975, the country witnessed a rise of social upsurge and the relevance of the third sector grew. The voluntary or not-for-profit sector which popularized jargons of welfare, development and empowerment turned into a crucial aspirant in the governance arena that was in transition (Sen 2002). The decade of the 1970s witnessed grandiosity of development issues at the international framework too. The initiatives like declaration of International women’s year,8 International

7 See generally Fourth Five Year Plan (http://planningcommission.nic.in/plans/pla nrel/fiveyr/4th/welcome.html). 8 See generally http://www.un-documents.net/a27r3010.htm

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Education Year9 and International Year for Action to Combat Racism and Racial Prejudice10 were major landmarks. Such developments resulted in large-scale validity and legitimacy to the voluntary sector. In the meantime, Indian atmosphere changed and the state began to realize that development strategy through the welfare economy could not result in favourable outcomes. The third sector did draw attention of the government in terms of innovating solutions, marking linkages and attempting to make a positive impact. Such development led to initiatives by the state to come up with the strategy of ‘networking’ that exerted pressure on corporations and civil society (Bebbington and Hickey 2008). The strategy of incentive was introduced to the corporations through urging them to donate to voluntary agencies for social development activities. The confederations and chambers of commerce such as Federation of Indian Chambers of Commerce and Industry (FICCI) and Confederation of Indian Industry (CII) were urged to guide Indian Industries to consider wider public policy goals. Simultaneously, the incentive of tax concessions to motivate industries to take up developmental work as well as to assist the voluntary sector was done (Sunder 2013). In 1977, Sect. 35 CC of the Income Tax Act was introduced to provide for 100 per cent tax deduction to a company with respect to expenditure incurred by it on approved programmes of social development.11 This induced many companies to enter the field of social development. However, due to misuse noted the tax incentives were withdrawn in 1984.12 In the 1990s Indian economy was opened up to transnational corporations joining indigenous corporate sector. The state did not focus on homogeneity in size, origin or style of functioning thus different motivations and different approaches were witnessed. The era of postglobalization earmarked corporate functioning within the framework of revised set of goals and policies. The dialogues between the state and the corporate came out to be related with the economic matters, planning,

9 See generally http://unesdoc.unesco.org/images/0016/001601/160197eb.pdf 10 See generally http://www.un.org/en/ga/search/view_doc.asp?symbol=A/RES/

2544%20(XXIV). 11 See generally for more details http://law.incometaxindia.gov.in/DitTaxmann/Income TaxActs/2006ITAct/sec_035cca.htm). 12 See generally for more details (http://www.nipfp.org.in/media/pdf/books/BK_17/ Chapters/Preface%20%26%20Acknowledgement.pdf).

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the industrial policy, export promotion, regulation of industries and taxation among many others (Nayar 2006). The decade of the 1990s brought forth the tenets of globalization, privatization and liberalization in India that led to multiple guises visible pertaining to the enhanced role of the private sector in the governance domain. The advent of globalization and the evolved portrayal of corporate actors were necessarily constructed as a result of neoliberal regime. Such changes could be linked to the rise of the contemporary phase of business and community engagement. The era allocated its existence with the advent of academic enquiry about the role of the corporate sector and society because the size of corporate actors and especially the private sector has grown exponentially in the 1990s. The debate resulted into reaffirming the need for business to be more involved in social development endeavours. Broadening the concept of CSR in a post-globalized state led to the intersection of the concept of corporate philanthropy with novel conception of sustainable development, corporate governance, inclusion and diversity, shared value, advocacy and action to adopt globally renowned goals in the CSR space. In the era of liberalization and privatization, the state felt the need to involve corporations to anchor the growth process along. As Indian economy started transformation towards a market-oriented economy successively, there was a central dilemma keeping in mind the rearrangements for development initiatives in terms of creation of systems that could have the prominent corporate involvement. The state needed to facilitate the corporate sector. In order to do so, the state accentuated the idea that the corporate sector is enthroned with qualities of independent, innovative and creative thinking and they could be pivotal agents to take the country forward. In a postglobalized set-up, it was deliberated that the support of the market actors was necessary to enable desired growth and development goals (Sunder 2013). The regulatory decisions taken in the wider governance arena liberalized multiple avenues for the corporations to operate with minimum controls and evaluations of the efficacy and non-compliances. However, the results of such developments were not desirable. Gross violation of tenets of human rights, development and environment were witnessed in the country. The new industrial development projects, fast-moving consumer goods (FMCG) growth and corporate profits were alleged to cause mass displacements, environmental degradation, violation of labour

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rights and dispersion of traditional livelihoods. The inequitable distribution of wealth brought forth low Human Development Index (HDI)13 in the country, lack of education, healthcare services and environmental abasement (Tripathi and Jumani 2013). Adverse Impacts of Corporate Actions: A Review of Selected Cases Corporations’ capricious actions being more focussed in creation of wealth and not on sustainable methods to operate led to violations pertaining to social and environmental issues. The maleficent issues related to procurements, market competition, depletion of resources began causing social upsurge from multiple quarters. Whether business behaves responsibly while creating wealth, using resources, managing supply chain gradually became a part of larger global scrutiny. After the 1990s when India adopted the Liberalization Privatization Globalization model (LPG), the uncontrolled behaviours of corporations started coming into public eye globally. Such incidents led to massive unrest from the side of communities, consumers and other stakeholders leading to an attempt of transformation in corporate behaviours from wealth maximization to sustainable wealth creation in a fiercely competitive environment (Campbell 2007). In order to understand the corporations’ transformation towards socially responsible behaviour, it is worthwhile to analyse selected examples of the socio-economic and environmental violations inflicted by leading multinational corporations operating in the country. The succeeding two case studies of the corporate non-compliances and conflict attempt to understand the implications of maleficent actions of the corporations and how it has led to the present-day framework of CSR. The Case of Coca-Cola India The analysis of the case the Coca-Cola Company groundwater pollution and depletion in Kerala reveals the fact that irresponsible corporate behaviour has caused mass unrest leading to financial implications and international shaming to the firm. In 2007 the state government of Kerala issued a show-cause notice to the company 13 The Human Development Index (HDI) is a statistical tool used to measure a country’s overall achievement in its social and economic dimensions. The social and economic dimensions of a country are based on the health of people, their level of education attainment and their standard of living.

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asking why the criminal case should not be filed against them. The Pollution Control Board (PCB) found out the issues of gross environmental non-compliances with large amounts of cadmium in the industrial sludge of the processes, that was contaminating groundwater and making it unfit for human consumption (Torres, et al. 2012). The tests by the British Broadcasting Corporation (BBC) as well as Outlook magazine confirmed the pollution by the Coca-Cola Company in Plachimada, Kerala. The violation resulted in massive social turbulence leading to closure of the Plachimada bottling plant. The closure caused considerable financial losses and brought bad reputation to the company. Another such incident took place in Uttar Pradesh where the Coca-Cola Company had located its bottling plant in Mehdiganj, a rural and agrarian area. Coca-Cola’s bottling plant, which was in operation since 1999, caused severe damage to the groundwater resources in the area–both through over-exploitation as well as pollution of groundwater and the soil. The company faced farce globally as well as mass social unrest locally. The news reports on 20 June 2014 stated: Authorities in northern India have ordered the closure of a Coca-Cola bottling plant at the centre of protests that it is extracting too much groundwater. [...] An anti-pollution official said the Mehdiganj plant in Varanasi in the state of Uttar Pradesh had breached the conditions of its operating licence, prompting the order of closure earlier this month (The Guardian 2014)

The plant, however, was given permission to resume the operations with a condition from National Green Tribunal (NGT) that the stay will be effective if the company keeps its production up to 600 bottles per minute. The company will not be able to increase production capacity till it gets a clearance from the Central Ground Water Authority (CGWA). Otherwise, the stay will not be effective (Business Standard 2014). The Case of Vedanta The multinational firms setting up their business operations in the country have been observed to have gotten into conflicts and

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violations of human rights and environmental regulations (Banerjee 2007). The stories of the mining sector in India resound with this narrative. The case of bauxite mining by Vedanta in the tribal terrains of Rayagada and Kalahandi districts of Orissa led to conflicts in the land rights of the forest communities which caused heavy discontent among indigenous population (Sahu 2008). There have been media reports pertaining to possible collusive practices between multinational companies and the state representatives coming to limelight. Such stories insinuate instances of corruption, kickbacks and malpractices from the side of corporations and state. One such news report from BBC South Asia as cited below reads: Investigations have shown that while the government receives paltry royalties from private mining companies, a few influential oligarchs in collusion with politicians have made massive profits. No wonder that for many in India, mining has come to epitomise the ugly underbelly of economic liberalisation - crony capitalism and rampant loot of natural resources. The mines ministry now admits that mining activities have resulted in little local benefit and, in fact, has been at the cost of environmental degradation. [...] Now the government plans to amend a 54-year-old law to make it mandatory for mining companies to put in place rehabilitation and resettlement programmes for the people affected by their activities and protect the environment. Otherwise, as the government itself concedes, mining will continue to contribute to social dissatisfaction and unrest. India cannot afford to stop mining if its economy has to grow. But it needs stronger regulation and a fair deal to the communities that live on lands rich in minerals (Thakurta 2011)

The role of the media in broadcasting the news of corporate wrongdoing has been witnessed at many instances. The public revelation of such incidents results in global embarrassment and disgrace (Hill 2005). Thus the dynamics of interconnectedness to be understood in this example makes it clear that the issue of non-compliance and violations of basic rights of the communities in which the corporation is operating is no longer a local issue, rather it has global implications on the financial as well as non-financial aspects of a corporate actor. The incidents like such reiterate the corporations to take up CSR as a corrective tool in a self-regulatory manner,

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voluntarily taking up socially responsible behaviour. The foregoing examples suggest that the case of CSR in India and the renewed law and regulatory interest has a vital connection to the multiple stories of violation and non-compliances by the corporations that were noticed in the country. The instances did produce disrepute corporations globally. Renewed Interest in CSR In a marked contrast to older notions of ethical obligations based on a philanthropic spirit, the renewed version of ‘social responsibility’ has been articulated as a fusion of doing morally good with an explicit rational-instrumental approach by the corporations (Post et al. 1996). This has also given social legitimacy to operate and capture markets to the businesses. Several non-economic variables are equally important in determining the nature and the level of business involvement. Similarly, CSR categorically could be related to the notion of voluntary giving underlying the indisputable attribute that the dominant purpose of having a comprehensive CSR practice is building a sustainable environment to exist, operate, grow, compete and maximize wealth through global visibility as a responsible corporate citizen. This is translated and sketched along a sophisticated nomenclature highlighting corporations as one of the vital actors of new governance scaffold. This also claims that the corporations have an altruistic mindset rather focussing on the less preferable ‘social utility’ nomenclature. The counterproductive effects of increased proliferation of corporate actions could therefore be considered an imperative cause of present form of CSR globally and similarly in the Indian context. However, the rise in the corporate jingoism and reduced state intervention in the neoliberal framework required state to leverage facilitative attribute towards the corporate actors though the model of costs and benefits with varying degrees of precision in order to build a sustainable state-corporate relationship ensuring the goals, motives and measures of success are attained for both. Such costs and benefits could be identified through three sub-categories in the CSR space in India. I. The intensity of Compliance: CSR domain in India has been looked through the lens of state as it is the need of the contemporary neoliberal framework. Facilitating CSR space through state

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actions provides advantage to the corporate sector in terms of meeting with their sustainable existence goal coupled with global visibility. The state has to take cognizance of that and build up a CSR model that gets its approval and in terms validation (Parker 2002). The model needs to tread the path of compliance carefully as corporations have become one of the vital actors in the new era of governance. An overarched compliance model could prove to have counterproductive effects on state-corporate relationships. II. Over and under-involvement: The involvement of a state in the CSR space is a proposition attracting much predicament from the side of state and the corporate actors. The globalized substructure exerts pressure on state and corporate actors to be involved in the CSR agora with varying degrees of multiple connections. The state through its policy framework leverages the corporate through dodging interference, relaxing the procedural formalities and alleviating avenues of corporate interest. This is how the state earns a bargaining position in its relationship with the corporation yielding beneficial harvest for both the actors. CSR policy framework in the country in the neoliberal regime has turned out to be one such move. With the advent of National Voluntary Guidelines (NVG), this movement became more evident. III. The implications of rule-making: The regulatory line drawing in the CSR space is the newest development in the state-corporate and social development discourse (Crowther and Nicolas 2008). The purpose of such rule-making needs to be understood within the analogue of the historical progression of the CSR discourse in India. The new era of CSR denominates its visitation after the nefarious instances of corporate irresponsibility in the decades of 1990s and 2000s. The origin of CSR rule-making could be observed during 2008 and succeeding years when the impact of market failure and global slow-down was witnessed. The role of state in reforming corporate imagery becomes an important point of deliberation while analysing CSR paradigm shift. The CSR rulemaking upon analysis encapsulates two findings. First, the rules made in the CSR scaffold in India were primarily in the forms of suggestive guidelines aiming at congruence between corporate actions and its impacts. This trend loomed further in formulations of standards designed to guide the state and the corporate actors with a meta-regulatory approach (Rahim

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2013). The implication of such rule-making primarily deciphered through rendering a set of negotiable rules that outweigh the countervailing issues, arising out of the distinct set of interest of corporations and the state. Therefore, the rules are made on a soft law framework; the tangible impacts are expected due to distinct characteristics of malleability (Abbot and Snidal 2004). Such rule-making has been a reality in Indian context wherein the Companies Act 2013 came up with Section 135 where 2% spend of profit (calculated as per financial statements in accordance with the applicable provision of the Companies Act 2013) of the corporations is earmarked for CSR. The CSR provision is backed by the CSR (Policy) Rules and Schedule VII incorporating an indicative list of CSR activities. All such advancements in the CSR space have been a result of gradual worldwide movement towards the socially responsible behaviour emanating out of charity, philanthropy, trusteeship, reduction of state control, fall of welfarism and corporate misconduct. Most recently, concerning the empirical evidence of decentred regulation accelerating the pace towards superior efficacy of state-corporate synergy, the purpose of state ratified CSR has been to build a structurally responsive market for the overall growth and development impact on state through hybrid regulatory frameworks (Black 2007).

Capitalism gained its legitimacy from the idea that private production would lead to economic growth and in terms social gains. Such legitimacy convinces the actors to get involved in a form of social contract (Carroll 1999). Such social contract was not formally and explicitly recognized or fully formalized in laws and regulations but was only implicit in the stakeholders’ expectations resulting in non-cognizance of the same. Not only are the parts of the social contract unstated, but the contract is also the fluid, constantly changing to meet emergent conditions. Upon chronologic analysis of the origin and progress of CSR, it was explored that ignoring the impacts on stakeholders have resulted in adverse socio-political and economic effects leading to contravening of the social contract and the impact of which have been adverse on the corporate sector also. Due to the negative impacts, the underlined implicit features of the social contract amongst the stakeholders needed to be taken seriously. In a neoliberal regime, the enhanced role of the corporations resulted into the emergent need of revisiting the requirement of fulfilling the inevitable expectations of social responsibility (Scherer and Palazzo 2011).

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The issues that often lead to legislation start out as semi-formal expectations about business which move towards a more advanced form have emerged out of the social obligations in neoliberal environment. The need for sustainable existence in a stricter environment is a result of interconnectedness and past incidents of non-compliance playing decisive roles (Lozano, et al. 2008). As CSR is formalized in the present-day law and regulatory architecture, the social contract between corporations, state, civil society and the citizenry becomes more explicit. However, there still remains much debate regarding the intentions of the state to bring up such a regulatory framework that mandates CSR spending but does not have any decree on methodology or designed goals for the tangible impacts of CSR. The arguments made in this section along with the empirical examples do corroborate the fact that CSR benefits the companies in multiple ways but the critical question of CSR building on plausible justification of making any impact in providing solution to India’s social problems or adding any value to the development indicators remains unanswered. State has indeed ceded space to the private actors; the statement on formalization of CSR leading to scope or potential to become a real tool for social development remains debatable. The decision of bringing CSR in the legal purview to ensure any potential for positive change has a multitude of challenges in a socio-political environment where social development remains a complex and little understood process. The resources and skills required in terms of financial aid, human capital and technical support are so enormous that it is beyond the scope and purpose of any corporation, however large and prosperous. There is a lack of understanding in corporations about the social dynamics of development given that skills of making profit are exceedingly different. A collaborative initiative as proposed by different actors of governance is to partner with non-government organizations has been much acclaimed among the government and corporations. However, the regulatory interplay could clearly be seen to be decentred in nature in such set-up. Presently the circumstances suggest major lacunae in coherence and feasibility of the renewed composition of CSR regulatory space in India (May, Cheney and Roper 2007). The questions of capabilities, processes and the measurement of such values of social responsibility with competitiveness remain an aphetic terrain.

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Implication of International CSR Instruments in the Indian Case The above discussion incorporated a section on three phases of CSR in International scaffold, followed by an overview of Indian history of CSR. The objective of setting out an international history of CSR followed by the Indian chronological account is to present a holistic understanding of the evolutionary history of CSR which originated from the aspects of charity, philanthropy and voluntary giving. The historical overview showcase, although genesis and expansion of CSR in India, has been an indigenous one in the past albeit unique resonance from international CSR framework is witnessed in Indian case in the post-globalized scenario. With the advent of soft law framework in international legalizations, many instruments upholding self-regulatory, meta-regulatory and responsive regulatory practices came into being. This section primarily focusses on two vital international soft law frameworks which have been influential in the Indian case: (1) The United Nations Global Compact (UNGC) (2) The Organization for Economic Co-operation and Development (OECD) Guidelines. The reason for limiting the scope of discussion of the soft law instruments internationally to the two enlisted frames is due to the fact that in the Indian context both voluntary CSR approach and the state’s prerogative of CSR have been observed to be most influenced by these instruments. The focus of this section is to briefly discuss the nature and configuration of these two instruments which have completely different structural framework but do have significant place in the CSR international discourse (McCorquodale 2009). The United Nations Global Compact The Global Compact, as already discussed in the previous chapter, is sponsored by the United Nations and entered into by hundreds of corporations on a voluntary and unenforceable basis. The UNGC enlists corporations to ‘support and respect the nine principles’, guarantee ‘freedom of association and the effective recognition of the right to collective bargaining’, work to ensure ‘the elimination of all forms of forced and compulsory labour and the effective abolition of child labour’, ‘support a precautionary approach to environmental challenges’ and ‘undertake initiatives to promote greater environmental responsibility’ (www.unglob alcompact.org).

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UNGC aimed to bring forth a uniform platform in order to promote international CSR. The objectives of UNGC have been purely to act as a responsive regulator promoting corporate self-regulation. This is aimed through encouraging transparency, public disclosures, promoting and governing CSR through quasi-legal mechanism of codes and guidelines. The forum like UNGC from the side of the United Nations is criticized as a public relation exercise designed to improve image and conceal corporate wrongdoing (Sethi 2002). The ratification to the concept of CSR by UN through UNGC has been also looked through the lens of neoliberal discourse. Corporations perceive ‘social responsibility’ a strategic demeanour having sociological significance necessary for the sustainable economic aims. The corporate membership of the UNGC further legitimizes the idea that corporations, by bearing social and moral obligations, have greater role to play in the governance arena. Thus, although the popular rhetoric considers CSR to be designed as voluntary good corporate citizenship behaviour, the intended consequence of enhancing its role in the socio-economic and political governance through a neoliberal state and supra-state framework is fulfilled by the UNGC. The idea of corporations having responsibilities that go beyond the duty to satisfy shareholders is reiterated deeper into public consciousness and paves the road to greater corporate autonomy and authority. The OECD Guidelines The OECD Guidelines came into existence in the year 1976.14 The origin and source of OECD Guidelines have been quite different from the UNGC. In terms of geographical coverage, the OECD Guidelines were originally limited to the territory of OECD member states.15 The reasons for this were both legal (i.e. concerns about the extent of the OECD’s mandate in relation to the subject matter covered by the guidelines) and political (i.e. concerns about the propriety of extending the standards set

14 See generally 1976 OECD Declaration on International Investment and Multinational Enterprises, 21 June 1976; (1976) 15 ILM 967. (The Guidelines are reproduced at (1976) 15 ILM 969). 15 See generally List of OECD Member countries - Ratification of the Convention on the OECD (http://www.oecd.org/about/membersandpartners/list-oecd-member-countr ies.htm).

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out in the guidelines to areas ‘where different socio-economic and political circumstances might prevail’). The decision was made to extend the scope of the guidelines to non-member countries as part of Revision 2000 (Coglianese 2012). Whereas the guidelines were previously addressed to multinationals operating in the territories of member states, Revision 2000 has removed this reference to a territorial connection, adding: [s]ince the operations of multinational enterprises extend throughout the world, international co-operation in this field should extend to all countries. Governments adhering to the Guidelines should encourage the enterprise operating on their territories to observe the Guidelines wherever they operate, while taking into account the particular circumstances of each host country. (OECD 2000)

OECD Guidelines consider that international investment is imperative to the world economy and has considerably contributed to the development of the countries. It is argued that multinational corporations play an important role in this investment process. The guidelines prompt that the international co-operation creates a conducive foreign investment climate and therefore suggests to invigorate the intensity of involvement of the multinational corporation that could result in economic, social and environmental advancement. Such co-operation as per the OECD would minimize and resolve difficulties which may arise from their operations. It works on the ideal that the benefits of international co-operation are enhanced by addressing issues relating to international investment and operations of multinational enterprises through a balanced framework of inter-related instruments (OECD 2000). OECD Guidelines provide voluntary principles and standards for responsible business conduct consistent with applicable laws. The guidelines aim to ensure that the operations of these enterprises are in harmony with government policies, to strengthen the basis of mutual confidence between enterprises and the societies in which they operate, to help improve the foreign investment climate and to enhance the contribution to sustainable development made by multinational enterprises. The guidelines are part of the OECD Declaration on International Investment and Multinational Enterprises the other elements of which relate to national treatment, conflicting requirements on enterprises and international investment incentives and disincentives.

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Upon analysis of the development of the last decade, OECD has been observed to be one of the vital avenues influencing corporations to abide by the guideline through a self-regulatory framework. It has also been observed through empirical evidence that the corporations have been working towards developing internal programmes, guidance and management systems that claim the corporate commitment in the domains of ‘good citizenship’, ‘good practices’ and ‘good business and employee conduct’ (L. Backer 2008). There has been a rise in consulting, auditing and certification services which explicitly show the demand expertise in these areas. As reverberated by many corporations operating in the country during the course of research,16 the endorsement to the OECD Guidelines have promoted social dialogue on what constitutes good business conduct. Multiple sources that have been brought out by the state17 set out that the OECD Guidelines have been in the backdrop of designing the contemporary CSR structural–functional archetype. OECD Guidelines clarify the shared expectations for business conduct of the states adhering to them and provide a point of reference for the corporations. The interaction with the state actors who played a decisive role in the formulation of a new governance framework in the CSR revealed that it was considered that the OECD Guidelines both complement and reinforce private efforts to define and implement responsible business conduct. During the course of research, three national conferences18 on CSR were attended and upon interaction with the key players; it was found out that the reason behind taking up OECD as frame of reference in formulating the indigenous guidelines such as National Voluntary Guidelines and DPE Guidelines were the configuration of OECD Guidelines is to build an architecture of co-operation which envisaged strengthening of the international legal and policy framework in which business and states operate.

16 Based on interactions with CSR representatives during the Conferences attended as the part of fieldwork. 17 The CSR Voluntary guidelines, DPE Guidelines, Sect. 135, CSR (Policy) Rules and Schedule VII. 18 Conference of Better Healthcare through CSR: Partnerships & Innovations held on September 24, 2013, Conference on ‘CSR, Healthcare and Partnerships’ held on February 20, 2014. Conference on ‘Better Education through CSR’ held on February 24, 2014.

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In addition to the two vital international frames of reference in the field of CSR which have been prominently observed to be transplanted in Indian cases at multiple instances, there are several other outlines of the international soft law scaffold which are either directly concerning CSR or related indirectly. The Indian case witnesses multiple instances of the corporate self-regulatory CSR patterns as well as state’s meta-regulatory CSR arrangements. Some prominent examples are: 1. ILO’s tripartite declaration of principles on multinational enterprises and social policy 2. Institute of Social and Ethical Accountability: AccountAbility’s AA1000 series of standards 3. Social Accountability International (SAI): SA 8000 Standards 4. ISO 26000: Social Responsibility 5. OECD CSR Policy Tool 6. The LBG Model 7. The Global Reporting Initiative 8. The SROI Network. The actual way in which corporations and the state embark upon shaping the idea of CSR through above-mentioned soft law instruments cardinal internationally is crucial in understanding the role of state and corporate in the trajectory of global capitalism (O’Laughlin 2008). As it has been avowed by the corporations across the globe, the idea of CSR is infused into corporate culture, there is a requirement to understand multiple models that are being created, assigning scope and meaning to concepts such as ‘responsibility’ and ‘social development’ in ways that ultimately rework them as a discourse of neoliberal commitment to the cultures globally to adjust to the projected realities of global capitalism. In other words, the idea of CSR becomes pervasive through cultural presence of corporations and their satellites (Shamir 2004). Thus, corporate response to popular demands opens up an interesting space of inquiry concerning the conundrum and contingent tension between concepts of social responsibility and the concepts of social development. On the one hand, adhering to the idea of CSR potentially equips corporations with a powerful legitimizing moral tool as well as with a branding device (Shamir 2005, 92–117). On the other hand, this idea provides a point of leverage that allows the state to develop a symbiotic

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relationship with the corporations and thereby professing to incrementally co-work for social development goals that in actuality concerns the re-distributive obligations of capitalist market players (DeWinter 2001).

Social Development and CSR The analyses set out in the previous sections indicate the inherent interrelationship of CSR and social development paradigm. It could be argued that the renewed focus of CSR claims to rest on the tenets of social development goals (Fox 2004). The corporate malevolent image did witness solace in the social development agenda. Similarly, the rolling back of the state gave way to the market actors. In the post-globalization era, states realized the need to partner with the market actors as it lacked bandwidth, capability and resources to manage its activities solely (Newell and Frynas 2007). Thus the state of India also promoted the dialectic of CSR with an affirmation to the fact that CSR aids social development goals. However, the dynamics behind the same, as explored through the study, has other socio-political and economic underpinnings. The state is in transition and there was a need for the government to have greater reliance on private actors to operate with the state. In order to interact more effectively with the corporate actors towards embedding and shaping new framework of governance in a neoliberal paradigm, it was necessary to jointly endorse set of common agendas which moved ahead of financial matters for corporations and political matters for the state and social development proved to be one of the relevant and imperative agenda which eventually transmitted to the CSR discourse. The relevance and acceptance of social development agenda could be very prominently seen to be transplanted at state level and from the multilateral levels as well (Prieto-Carron et al. 2006). The concept of social development cannot be defined in a watertight frame, however, the most prominent indicators to assess could be structural change, socio-economic integration, institutional development and institutional renewal while deliberating the crucial discourse of social development. The materialization of CSR with the goal of social development needed to be holistically seen in the context of the shifting aspects of the actors on the main objectives of development and the best means of bringing it about. Over the past few decades, the need to enhance the worldview pertaining to development has been felt continuously. The paradigm shift of gauging development in terms economic growth

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is neither practical nor correct. The dominant emphasis on the social dimensions of development as exemplified by the creation of the Human Development Index by the United Nations Development Programme, the idea of social development found its context. This shift culminated in the adoption of the UN Sustainable Development Goals (SDGs). The diminishing notion of the role of the state as an agent for development could also be witnessed as an actor for changing view of social development. The vivid illustration of the same could be observed through the emergence in the 1980s of the ‘Washington Consensus’, with the prominence of minimal regulation, curbed reduced role for the state and liberalization of developing economies—and a correspondingly greater role for the private sector. By the late 1990s, however, the evident inadequacies of the Washington Consensus could be seen this era is marked by the realization that the market alone was not sufficient. A major plank of the critique of free market policies was the significance of market failures in developing countries. Market failures did prevent business operating in a socially responsible fashion. If corporations are driven by short-term financial profitability, they may not make the longterm investments necessary to promote social development or benefit the poor therefore the role of state in the larger CSR agenda found its way in the deliberations and debates pertaining to social development. Enhanced attention of the co-productive regulatory environment in the CSR space with the paramount focus on social development is the outcome of the global expansion of this idea in a neoliberal overstep (Jenkins 2005). The post-globalized era has witnessed an increasingly pertinent role of the corporate sector in the development discourse. The causes for such transformations could be linked to the downturn of welfare measures of state and global deregulation. The key social development functions which have been traditionally interlinked to the state, gradually witnessed to have been performed by market and civil society actors. Understanding the role of business in social development is an integrative process. The linkages of the role of businesses in social development endeavours could be drawn to the times of global restructuring and changes in the notion of traditional development functions which were essentially associated with the state in the past. The World Bank and United Nations eventually took up the issue of CSR in embracing social development goals. Citing the statement of per Department for International Development UK ‘By following socially responsible practices, the growth generated by private sector shall be more inclusive, equitable and poverty reducing’ (DFID), it

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could be ascertained that such mindsets at the international development forums clearly underline increased cognizance of the corporate sector as a valid actor in the social development discourse. Looking at the current generation of CSR, the aspects of social development mentioned within the same and the roles of corporations in the initiatives such as the provision of basic infrastructure and enabling access to water, electricity, health and education, etc. are witnessed to be increasingly resonate with the social development aims of the state; however, the sustainability, tangibility and success have always been criticized. The Indian experiences of the existing CSR framework provide dismal pictures of the social development initiative and are purported to be mere facade as the initiatives through CSR could not find measurability of making a difference in any development indicator. The way CSR in India operated raised multiple charges of being arbitrary and lacking any real purpose of change. The main aim to restructure CSR with the explicit list of social development goals which are inspired from multiple sources internationally, such as Millennium Development Goals, UNHCR, clearly sets out the causal relation between development priorities, synergic relationship of the state-corporate sector and extensive autonomy and authority to the corporations. In a neoliberal paradigm, the state cannot have the capabilities to carry forward all the responsibilities on its own thus it aims to bring corporations into centre stage due to their economic empowerment. Social development roles have become necessary to provide legitimacy to the corporations to operate in a socio-political space. In contemporary global scenario, it is impractical to understand the transformation in world politics without understanding the role of the modern corporate enterprise, for it has become one of the significant actors in global platform (Haufler 2001). In the times of intense debate over costs and benefits of globalization, liberalization and privatization, it is intriguing to explore how the private sector is getting into the domains of the public. William Greider, (1998) in his book One World, Ready or Not and David Korten (1996) in his book When Corporations Rule the World mention that the power is shifting dramatically in the hands of corporate enterprises (Greider 1998; Korten 1996). The conceptualization of CSR in the domain of changing perspectives of the discursive role of state requires being integrative in three ways. First, the theoretical perspective of CSR debate and soft law regime needs to reconcile some normative and descriptive aspects of extant corporate social performance research. Second, based on ‘meta-analytic methodology’ (Hunter and

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Schmidt 2004), in contemporary globalized scenario, a deeper analysis of the accumulated evidence on the complementary relationships between the construct of corporate sector and state actors is imperative. Third, the framework of private sector performance is to be studied in multidimensional framework (M. Orlitzky 2006) particularly in the decentred regulatory frame of the state-corporate-civil society relationship. Such an integrative approach to corporate social responsibility places at least two demands on the research. Integration in this context means that theory and methodology should inform each other. The effort to demonstrate that sound theory and rigorous methodology are both important for intellectual progress in this burgeoning field of CSR through statecorporate sector relations (Bosch-Badia et al. 2013). By definition, this kind of integration requires an incorporation of existing theoretical and empirical research relevant in understanding the ambiguity and paradox of state’s role with respect to corporate sector in neoliberal paradigm. The relationship between the corporate sector and social development has traditionally been a subject of intense disagreements and debates within the development paradigm. During the late 1990s, the gradual shift in the re-conceptualization of state-corporate sector relationship changed the mindset about the role of corporate in fostering or undermining development through CSR initiatives. This re-conceptualization is partly because although corporate is often attracted to developing countries because of their abundance of natural resources, cheap labour and soft governance structures, globalization of communications also means that a business approach by a corporate is no longer risk free, given that corporate misdemeanours broadcasted have led to unpropitious results. Prabhat Patnaik in his paper, ‘On Some Theoretical Premises Underlying the Advocacy of State Intervention’, raised gamut of questions on the role of state interventionist state in the contemporary globalized world. The author argues that the state in question is considered coterminous with the geographical jurisdiction of the nation. The debate lies in the ‘closed’ universe the theoretical issues of what the market can achieve, whether the state needs to intervene and how it should do so. However, the question of state intervention in the contemporary world cannot be adequately discussed unless there is awareness and realization that the market is question of international nature, while the state is a nation-state. The prominent aspect of bypass of the liberalization debate is observed in the eclectic propositions of—state and market both are needed. In a neoliberal economy, the state should continue to provide

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and even step up investment, infrastructure and it should continue to incur and even step up expenditure on education, health, social safety net and on social sectors generally. To do all this, however, the state needs resources (Patnaik 2008). But a neoliberal economy necessarily restricts the ability of the state to raise resources. It cannot in such an economy raise much direct tax revenue. Since it has to compete with other countries to attract FDI it must tax foreign capital lightly. From this vantage point, it is important to understand the state’s posture towards the changing global scenario particularly as a tone set by regulating private players to drive processes of engagement with stakeholders. More affirmatively, a corporate actor’s ability to exhibit an ‘attuned’ relationship with its stakeholder environment needs to be understood in a more critical manner with the help of an undergirded theoretical framework that criss-crosses the vital aspects of changing dynamics of state, corporate sector and global international legal regime. The empirical evidence conveyed through the study suggests that the reason for the kind of attuned relationship changes of state and corporate sector of a mutually reinforcing association between CSR and social development is due to the post-liberalized global milieu having extensive impact on the state. It is vital to discuss the scenario in a globalized world, where, emergence of knowledge is not only based on structural but functional facts. A CSR model could only be workable if the consolidation takes interdependencies of multiple actors of globalization into account. Economic paradigm and social paradigm may not coincide at all points of time, but there is no way that they can be conceived and developed without being inter-related. Economic development is greatly associated to the scaffold of social relationships in that enable economic activities to strive, thrive and mutually reinforce. When dealing with the subject of CSR, the economic and social aspects of knowledge assessments during the course of changes, helps uncover conundrum related to the concepts and standards of assessment which might later be used to develop theories of knowledge production and use in the domain of CSR, regulation and institutions (Fisher and Forester 2002). The realignment of contemporary CSR models primarily expect responsive attitudes interested of states towards the role of CSR, willingness of the civil society become an important stakeholder with selfregulatory corporate sector and a decentred regulatory space with soft law structure to provide an enabling environment for CSR. The strong appeal to adopt coherent CSR models that could be adaptable in the country of

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operation of business has been observed, albeit, the exploratory attributes suggest the Indian transformations in the realm of CSR present a more collaborative regime having salient features of complexity of interactions, fragmentation of knowledge control and power, interdependencies of all the sectors, a clear dissent from command and control regulatory measures and blurring boundaries between public and private. Interconnectedness of Social development in CSR needs to be analysed in the light of prevailing local political and social conditions of the country in order to find the logic behind prioritizing a set of activities over others in CSR space. Despite the enhanced state’s role in renewed understanding of CSR in India, emphasis still remains on voluntarism and self-regulation. CSR has been linked to social development in multiple ways in India. It has also been observed that the social development goals for CSR have been legally enshrined in Schedule VII of the Act. Schedule VII underlines the expectations in terms of CSR activities which apply to corporate actors wherever they operate, regardless of sector. The instruments aimed at aiding social development goals. There is a need to understand why the set of activities have been encapsulated in Schedule VII. The closer analysis of sources available at the national level explores the attention to a range of informal, often localized, strategies of accountability adopted by corporate actors. One could observe many initiatives thriving in terms of partnerships between the state and the corporations, both at the national and supra-national levels, within the United Nations system, interactive international boarder corporate coalitions such as the World Business Council for Sustainable Development (WBCSD) or the International Business Leaders Forum (IBLF). Many other initiatives such as international seminars and conferences, research projects and workshops, multiple standardization systems, labels and related monitoring mechanisms, fair trade initiatives, socially responsible supply chain as well as socially responsible investment funds have been observed to further the cause of social development. The ruling economic paradigm, however, remains that national or global markets deal with efficiency in resource allocation, mutual competition as a tool of economic dynamism and about productivity gains that translate into lower costs and higher profitability. Companies, through seeking to maximize their profits, ensure that economies grow for a better market to come into being, consumer demand is met and economic development processes are set in motion and the role of CSR becomes imperative to ensure social legitimacy,

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consensus of all actors including citizenry to operate and large-scale visibility. In order to harness the maximum utility out of CSR for the respective motives of state and the corporate sector, the social development cause of CSR is augmented as it binds together state and corporate actors towards a better synergy ensuring the interest of both the actors in a neoliberal regime emanating a new governance framework moving towards decentred regulatory space. The purpose of CSR thus could be said to be more deep-rooted and strategic than it appears superficially. A theoretical understanding on the purpose of CSR after the investigations into the historical and empirical domains has been attempted in the next section. The research has delved into the theoretical groundwork in order to explore how the notion of CSR is connected to the notion of voluntary giving or gift. The analysis also makes it clear that the autocratic gifts in the primitive societies resonate with the intent of CSR. The evolutionary history and the connections of CSR to social development do culminate into introspection of the purpose of CSR and the succeeding section attempts to answer the conceptual groundings pertaining to the purpose of CSR.

The Purpose of CSR: A Theoretical Understanding of Voluntary Transfer The idiosyncrasies of early charity and philanthropy could be analysed with respect to social obligation and strategy (Watt and Mann 2011). The contemporary CSR traces its evolution in the debate of private wealth versus public good (Besley 2007). The gathering versus distribution of wealth has been a debatable issue ever since humans have been accumulating private property (Baron 2001). The maximization of wealth without any threat of accusation of exploitation of resources was a major challenge in front of the early forms of Indian businesses. This eventually led to the adoption of the mechanisms of charity and philanthropy (Sunder 2013). In order to understand the logic behind endorsement of CSR by the businesses in early times, the aspiration behind altruist behaviour and voluntary transfer needs to be interpreted through factual analysis of purpose and intent of CSR shaped from ancient times. The next section attempts to explore the purpose of voluntary giving and its relevance in the concept of CSR. As discernible in academic research, the path to connect a practice-based concept of CSR which historically has not emerged out of strong academic rostrum to a robust theoretical

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underpinning unavoidably fraught with issues of relevance, applicability and correctness. Much precaution is taken to connect the practising realities of CSR to a disciplinary super-structure of the faculties of law, regulation and social science in order to answer the meta-physical and logical purport of the origin, advancement and transformations in the present context. Assessing CSR as an archetype of voluntary transfer and the motivations behind the same propose a nuanced theoretical analysis of the purpose of ‘voluntary giving’. The forms and nature of voluntary transfers are rooted in the notion of ‘morality’ within a particular cultural realm, and it could be best understood through deliberating on the historical account of the origin and intent of voluntary giving. This cultural sphere could be very well understood through the notion of ‘Gift’ as mentioned by Marcel Mauss in his book ‘The Gift: Forms and Functions of Exchange in Archaic Societies’. Mauss focusses on the agenda of social obligation expressed in benevolent and voluntary giving of all forms of benefit— physical, moral, ethical and religious to persons who are in need of them. As per Mauss, the necessity is to understand the reason behind such social obligations in case of actors who do change over the years with changing social, political and economic scenarios (Mauss 1966). Mauss in his writings explains the rationale behind the idea of ‘gift’, so to say, the voluntary giving. In theory, such gifts are voluntary but factually they are given and repaid under obligation. A generous gift given categorically has an underlying attitude that is unequivocal in terms of masking the real purpose of having self-interest and deceives the same for being socially altruist in nature. In reality, as argued by Mauss, the transaction in itself rests on economic self-interest.19 Assessing the origin to the present-day movement of CSR within the theoretical schema of the notion of ‘Gift’ by Marcel Mauss, it could be understood that the question of morality connected to voluntary giving is embedded within the fabric of obligation and economic functionality and not spontaneity. As we move on in the post-modern era, citing the example of corporate law and regulations related to the same, it appears

19 The notion of Marcel Mauss’s ‘Gift’ was introduced into the realm of ‘Business Ethics’ and ‘Corporate Governance’ for the first time by Dr. Jaivir Singh at Joint University of Sydney & Jawaharlal Nehru University Roundtable on ‘Investment, Markets and Business Ethics’ held on November 27, 2012, at Centre for the Study of Law and Governance, Jawaharlal Nehru University.

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that the purview of law is in conflict with the notion of morality, however, a close analysis reveals that the moral question of being socially responsible derives clearly from economic ambitions and strong desire to pursue what have been socially purposeful behaviour for sustainable existence. The ancient principles as quoted in ‘The Gift’ hold significant relevance in the present regulatory changes globally which justifies socially responsible behaviour of the corporations. The rise in the formulation of codes and conducts, guidelines as well as institutions, is being felt upon. The law in India has been in the process of reformulation and returning to the theme of noble expenditure of the past (Tripathi 2004). The conception of gift cannot be thought to have a precise meaning, it is a complex concept that inspires the economic action that is neither purely free nor gratuitous. It is not purely based on self-interest and exchange, it is a kind of hybrid which emerges out of somewhat utilitarian ethos that arise within both interest and disinterestedness of the actors. Mauss cites Malinowski’s research of the ancient societies and concludes that gifts are not spontaneous, they are the most part counter presentations made not solely in order to give back but also to maintain a profitable alliance which it would be unwise to reject. Thus it is clear that the mystical and practical forces reside, which bind the actors together and at the same time keeps them separate. This divides their activities and still keeps constraints on them to exchange. These phenomena are at once legal, economic and semantic. They concern individual and collective rights, co-ordinated as well as dispersed morality, that could be absolutely obligatory simply to approve or disapproval. They could be political, social and economic at the same juncture for the notions of value, utility, interest, wealth, acquisition and accumulation. Primitive society chiefs behaved somewhat like modern-day corporations who know how to spend money at the right time to build profitability. The aspects of ‘Interest’ and ‘disinterestedness’ analysed simultaneously enables the explanation of the circulation of wealth as well as the circulation of the tokens of wealth (Mauss 1966). Therefore, as explored in succeeding subsections, the analysis of predecessors of modern-day CSR in India set out an evident resonance with the notion of ‘gift’ or voluntary giving that has an underlying purpose. The trends of voluntary giving in case of CSR are observed to be similar as enunciated by Mauss for the archaic society and hold immense relevance in case of modern Indian society as well. Citing Mauss’s notion of gift or voluntary giving at this juncture holds paramount relevance as

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his argument of the agenda of social obligation expressed in benevolent and voluntary giving leading to economic functionality and sustainable existence. In the backdrop of the preceding discussion, the next chapter discusses the contemporary scenario of CSR in India. The analysis would make clear the impact of historical genealogy and theoretical underpinnings of the strategy of voluntary giving and in terms CSR through looking at current regulatory and institutional changes and the role of politics and strategies.

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CHAPTER 4

Politics of Corporate Social Responsibility in India

Introduction An inquiry into CSR and regulatory paradigm attempts to answer far more pertinent questions rather than only focussing on the factors of economic value creation. An analysis of the role of state politics and corporate strategies of CSR delves deeper into the dynamics interplaying between multiple actors of governance archetype and tries to find answers of the wavering relationship between state, market, civil society and citizenry. Undertaking such investigation in this research has aimed at providing a framework which could positively find causal factors and the dynamics of the conundrum which exists in the CSR arena both at international and at the domestic levels (Broomhill 2007). This chapter attempts to seek critical and analytical answers to the questions pertaining to why corporations seek to deliver socially responsible behaviour and what makes state to take up hybrid regulatory frameworks to promote CSR. At this vantage point, the paramount inquisition factor is the extent and desirability of the business case for social development goal. A deep-rooted scrutiny of the transformed behaviours of state and

Supplementary Information The online version contains supplementary material available at (https://doi.org/10.1007/978-981-19-2304-3_4). © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022 S. Bharti, Corporate Social Responsibility in India, https://doi.org/10.1007/978-981-19-2304-3_4

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enhanced role corporate in social development actions is sought through narrow focus of the Indian case of CSR in the succeeding sections. It is followed by attempting a nuanced analysis of state actions and corporate strategies through the factual information, empirical evidences and observational attributes, which were gathered in the due course of research work. Such methodology facilitated a matured understanding of the most important non-negotiable business value that is sustainable wealth formation and contextualizing the logic of CSR within that archetype. An exploratory involvement into law, regulation and social development characteristics interlinked within the CSR discourse through in-depth interpretive exercise initiates the pursuit of germane answers to the crux of the new shift in the Indian case. There are plausible reasons to pay attention to the mystifying aspects pertaining to the law, regulatory and structural transformations in the country that is the substantive cause of taking up this work. Outlining the Sources of the Research and Field Interactions As informed in the preceding chapters, primary as well as the secondary sources were consulted to undertake an exploratory exercise to build up an analytical research framework. The process of collection of data has primarily involved review of the contextual literature, participant observation in important events held such as committee meetings, workshops and conferences and unstructured interviews with key informants. The interviews were knowingly kept unstructured to elicit regulatory and institutional complexities of CSR perceived by the respondents while being spontaneous in their interactions (Arksey and Knight 1999). Interpretive analysis of the important sources such as CSR section of the Companies Act 2013, the appending rules and schedules, documents from stakeholders, policy, programmes, guidelines, codes and other administrative records, documentary evidence and cases was carried out. The interviews, conversation analysis, participant and non-participant observations, contextual literature and the interpretive analysis enhanced the capacity of the study to investigate the socio-political and economic underpinnings of CSR in India. This exercise helped find patterns of transformations and explore the paradigm shift and complexity of approaches and behaviours (Corbin and Strauss 2008). The selected method of the research required a significant amount of time to collect the needed information (Patton 2002). The commencement of this research work dates

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back to September 2013 which still continues and the book yearns to gain knowledge in the CSR scaffold. The initial work was dedicated to develop rapport with key players, get access to interviewees, be a part of relevant events and collect all possible documentary sources.

The Law and Regulatory Transformations The Companies Act 2013 which is said to be a reformed version of the Companies Act 1956 got the accent of the Indian Parliament on August 29, 2013, and was notified in the Official Gazette on August 30, 2013. The preceding Companies Bill 2012 was formulated with an aspiration of elucidating aspects of governance, disclosures, compliance and audits along with the new additions like small company, one person company, dormant company etc. In a marked advancement from the existing Companies Act 1956, the new Act focuses on the provisions of corporate governance and brings forth the concept of CSR into the legal regime through Section 135 of the Act. Section 135 of the Companies Act, 2013 seeks to provide that every company having net worth of Indian Rupees (INR) five hundred crores or more or a turnover of INR one thousand crore INR or more, or a net profit of INR five crores or more, during any financial year shall constitute the corporate social responsibility committee of the board of the company. This committee has the basic requirement to comprise three or more directors, out of which, at least one director should be an independent director. The composition of the committee shall be included in the board’s report. The committee is also expected to recommend the amount of expenditure to be incurred and monitor the policy from a time-to-time (PricewaterhouseCoopers 2013). The board is also guided to disclose the contents of the policy in its report, and place it on the website, if any, of the company. The provision explains that the companies would be required to spend at least 2% of the average net profits1 (Annexure B) of the immediately preceding three years on CSR activities, and if not spent, explanation for the reasons thereof would need to be given in the annual report. The committee shall formulate the policy, getting inspirations from the activities specified in Schedule VII of the 1 Part I Section 3 (d) of the Draft CSR Rules explains ‘Net Profit’ for the Section 135 and these rules shall mean, net profit before tax as per books of accounts and shall not include profits arising from branches outside India (Annexure B).

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Companies Act 2013. Schedule VII of the Act initially had two versions. The first version was replaced with the final version on February 27, 2014. The appended rules to the Section 135 were released in the draft form on September 9, 2013, however, due to criticisms and difference of opinions of the key actors, the Final CSR Policy Rules that came into force on February 27, 2014, provided a broad scope of negotiation and interpretation to the aspects of defining CSR, planning CSR and calculation of CSR spend. An amended version of the same came up in January 2021. These rules are Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021. According to the amended rules, each company meeting the requirements as per Section 135 of the Act has to spend at least 2% of their average net profits of preceding the three previous financial years towards the Corporate Social Responsibility (CSR) in the current financial year. Net profit shall not include any profit arising from overseas branch/branches of the company, whether operated as a separate company or otherwise. It does not include any dividend received from another company in India covered under and complying with Section 135 of the Act. There have been minor amendments pertaining to the CSR expenditure and declaration too. The amended rules also guide that there should be no exceeding of the administrative overheads beyond 5% of the total CSR expenditure for the respective financial year. It also elucidates ‘the surplus arising out of the CSR activities will not form part of the business profit of a company and shall be transferred to the Unspent CSR Account or ploughed back into the same project’. Such unspent CSR amount is to be further spent in pursuance of the annual action plan. One of the vital point to critically analyse is the set off the excess spend in immediate three succeeding financial years. Such ongoing developments in the technicalities of definitions and implementations are routine processes of any provision. In order to understand the relevance of contemporary developments, it is required to assess the history of the new developments in the legal regime. There are two imperative developments that need to be assessed along with the analogue of the law and regulatory fraternity of CSR. The assessment of the National Voluntary Guidelines and the DPE Guidelines aids the study of genealogy of CSR in the Indian context and clarifies that the assessment of legal advancement of CSR alone cannot demonstrate the gradual movement from state’s obliviousness to state recognition and finally to state endorsement of self-regulatory CSR (Ministry of Corporate Affairs 2013).

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The Companies Act 2013 mandates CSR spend in India but the decision-making capabilities on the spend being essentially engendered with the corporate entity is a vital point of deliberation. The guiding principles to CSR are being observed to come into foray at multiple avenues and most dominantly corporate actors are playing all the essential roles of planning, implementing and monitoring. The law focuses on two aspects of CSR which gives essentially ‘soft law’ features to the legislative fabric. First, the minimum 2% spend on CSR clause also mentions, if the company is not able to spend on CSR activities despite qualifying into the category of companies who should take up CSR, they can explain the reason in the annual report (Section 135 a). Secondly, there is a provision of mandatory disclosure of CSR spend in the annual report of the company but not on how the activities should be formulated and put into practice. This certainly shows a shift of the regulatory provision to ‘comply or explain’ model. In such cases, the state plays a responsive role in a meta-regulatory environment which clearly builds on the scores of social legitimacy and social consensus for the corporations through CSR. It can also be argued while witnessing such developments in the statecorporate-civil society dynamics, that CSR is based on the values prepared by businesses to be acceptable and negotiable and state needs to facilitate a hybridized regulatory framework that essentially provides visibility and recognition to the corporate actors as one of the vital participant in the governance framework (Braithwaite and Drahos 2000). The moral dimension pertaining to the corporation’s role in social development has been a part of CSR discourse essentially along with the political and economic dimensions. At the same time, the preceding decade has witnessed implications of globalization on CSR. This has led to formulation of many avenues at global level such as UNGC, OECD Guidelines, ISO 26000 Standard among others which tend to regulate corporate social behaviour (Backer 2008). Thus, it is explored at this juncture that the focus of bringing about the hybrid regulatory structure around the CSR framework has three main causal factors that are connected to the larger international development arena. First, the corporation actors (both Indian and multinational) need to exhibit the salient traits of a responsible corporate citizens at the international level which enables them with the negotiation capacities in the international development, trade, market and investment avenues. Second, within the country, if CSR is institutionalized by law and regulation, like in the Indian case, it provides a social legitimacy to the economic aspirations and leads to

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consensual acceptance to the business-like interpretation of social development, where state, corporation and civil society work as partners. And finally, in the globalized scenario, the international soft law regime pertaining to CSR needs to be taken into account for a country in order to attain visibility (Parker 2002). As a result, the state moves towards a decentred regulatory model which has a responsive role towards corporate self-regulatory attributes (Black 1997). This furthermore facilitates corporate legitimacy and provides enhanced public role to the sector in the arena of social development (Haufler 2001). By doing this, state emboldens the corporate sector ties on one hand through formulating a hybrid regulatory space and endorses the international soft law development framework on the other, to enhance global participation to such lobbies (Abbot and Snidal 2004). Corporations having the pre-existing economic interest in a particular country adopt country-specific CSR in order to establish their presence as a credible actor in the decentred space having strong self-regulatory power facilitated by meta-regulation and responsive role from the side of the state, civil society and in terms citizenry (Blowfield 2005). This paradigmatic framework is explored through the study of actual transformations happening in Indian context. The argument is further strengthened by in-depth analysis of varied aspects and developments witnessed during the course of the book. The vital aspects investigated are set out in the following sub-sections. The Outset and Advancement of Section 135 The CSR space in India has changed in the current scenario. India being an emerging market oriented economy has witnessed changing relationships between state, market, civil society and citizenry (Engle 2004). International financial liberalization and deregulation was the main turning point in the genesis of the new era of CSR which moved beyond the notions of charity and philanthropy. The predominance of legitimacy of resolutions that emerged out of the market actors extensively restructured the governance framework which was inherently led by the state. The cognizance of the fact that state led regulatory regime had limited scope in a liberalized scenario resulted into greater acceptance of ‘internationalized governance’ as a vibrant and participative realm. This gave rise to revived understanding of the ‘regulatory space’ which has shown clear dissent from the centralized forms of regulatory perceptions (Knill and

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Lehmkuhl 2002). This phenomenon fits into the ambience of the ideological movement of neoliberalism. The salient feature of this movement from liberal political economy to neoliberalism sets out the predisposition, that the market is the primary resort to solve the problems arising out of even market operations. The gradual onset of de-statization and the advent of non-state actors led to the new governance paradigm interconnected internationally. The development as such has led to the rise in power of non-public and non-state based entities involved in public roles. This further had led to the emergence of corporate actors as one of the vital aspirants for the new governance regime. Such governance structures have often been set out through the language of law. The nature of law in such cases is most pertinently soft and pluralistic (Giovanoli 2002). The plurality of the nature of law and governance is a consequence of the plurality in participation in the ‘regulatory space’. Such regulatory space is often the decentred one and is marked by encompassing a range of public and private actors, competence, resources and centres of influences and power leading to the new concept of governance as a process that is shared by state, private actors and civil society (Zumbansen 2010). The case of new Companies Law could be analyzed as a classic example of the transition of a centralized regulatory paradigm to a responsive state where state plays the role in bringing about facilitative legislations that assist greater participation as the tenets of a decentred regulatory space is the need of the hour. In this section, focus is concerted on the CSR provision (Section 135) of The Companies Act 2013, which has come out to be one such legislative provision that sets out a clear picture of law’s facilitative role enhancing governance framework towards a decentred regulatory space through adopting hybrid regulatory model resting on the plank of meta-regulation and responsive regulation from the side of the state actor and explicit self-regulatory attribute enshrined to the corporate actors (Lobel 2004). The Companies Act, 2013 dedicates a full-fledged section on CSR named Section 135. This provision is largely bolstered by Indian policy makers to be one of the most innovative steps at the global platform of CSR (Confederation of Indian Industry 2013). Perhaps, India is the only country that has formally brought the prototype of CSR into law and governance regime. Prior to that, European Union had taken concrete steps to institutionalize CSR in the form of structural and regulatory changes (Croquet et al. 2008). The most prominent point in the case of CSR developments in the European Union is that the country clearly

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announces the fact that the legislation is a form of ‘soft law’ and operates on the mission of taking up an active role in encouraging CSR by means of voluntary adoption of codes, resolutions, recommendations and communications. The Indian version of CSR legislation though focuses on the similar tools as EU, the proponents do not explicitly outline the ‘soft law’ inspiration of the provision whereas, all the earlier outputs from the side of the state such as National Voluntary Guidelines and DPE Guideline have been vocal about their inspiration from the global ‘soft law’ framework of CSR. Apart from being silent on its soft law inspiration which could otherwise be observed by closer analysis of the section, the European move and Indian pursuit to bring CSR into law and regulatory gambit vary primarily in two dominant ways. Firstly, EU has not intertwined any provisions pertaining to CSR with the larger Company Law which is the case in India and the second point that comes out of the first one is; European case categorically concentrates on building up a separate institution with dedicated authorities and responsibilities on CSR whereas in Indian case we can clearly witness the involvement of CSR within the basic structural framework of a corporation. The law in India aims at making the CSR discourse a part of deliberation by the board members in the same manner as the other core matters of any company. The question whether Indian law and regulatory model of CSR is better than the other models adopted by other countries or particularly European Union is debatable. In the present situation, when law is in its nascent form, the imperative approach should be to address the question as to why there was a need felt in Indian context to take up CSR to the level of law and formulate a full-fledged legal provision in the form of Section 135. The analyses of the regulatory provisions pertaining to CSR along with multiple sources of information from the former MCA and other stakeholders attempt to address the issue at two levels. Firstly, the role of law in market contexts and secondly its implication and the structure and functionality of the contemporary regulatory paradigm that arises out of the legal provision (Malloy 2004). The 2% mandatory spending clause of Section 135 of the Act is a result of a series of debates and deliberations within the legislative committees appointed in case of formulation of the Companies Bill 2011 (Chakravorty 2014). The unique feature of the executive committees formulated to conceptualize CSR provision of the Act was that they had significant representation from the corporate sector, both private companies and

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the public sector enterprises along with the civil society actors (Chatterjee 2013). The involvement of non-state and civil society actors in law-making sets a perspective that though the paradigm of decentred regulation in the case of CSR legal provision is state oriented, albeit prominent role of other actors harnessed is equally important. The configuration of the drafting committee of Section 135 of the Act grasps a far-reaching system that goes beyond the system of ‘rules backed by sanctions’ (Black 2007a, b). Public sector corporations had prior experience of approaching CSR in similar manner envisaged through the upcoming legal provisions hence their representation during the drafting stage played an important role. The Department of Public Enterprises came up with first version of Guidelines on Corporate Social Responsibility for Central Public Sector Enterprises (DPE Guidelines I) in March 2010. Later the current DPE Guidelines second version was renamed as Guidelines on Corporate Social Responsibility and Sustainability for Central Public Sector Enterprises and came into being with effect from April 2014 (DPE II). Both the versions of DPE Guidelines of CSR categorically mention the neoliberal fervour while explaining the concept of CSR. It sets out the theme of CSR with a preponderance of the legal responsibility of a public corporation to maximize shareholder profit. At the same time, it also mentions the fact that the contemporary globalized scenario exerts considerable pressure on businesses to rethink their image and responsibilities with respect to social expectations. The idea of Triple Bottom Line has been core to the attribute of the DPE Guidelines which in itself is a neoliberal concept coined in 1994 by John Elkington, the founder of a British consultancy called SustainAbility. The inclusion of the Concept of Triple Bottom Line which is generated by an actor which is private in its nature into states policies, clearly sets out a tone that the private nature of the legal regime could not be discarded. Involvement of international concepts such as the Triple Bottom Line clarifies the fact that the state does influence from the internationally generated concepts and takes prerogative to include the same into the policy level framework (The Economist 2009). The DPE Guidelines considered CSR as a corporate commitment to operate in an economically, socially and environmentally sustainable manner by taking cognizance of the requirements of the stakeholders. The DPE Guidelines also gave a revised meaning to CSR that was in sync with the international CSR framework. It recognized the fact that CSR

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extends beyond philanthropic activities and reaches out to the integration of social and business goals achieving sustainable competitive advantage. The change in the perspective of the way CSR is perceived by the state for the PSUs witness an unequivocal movement from CSR being a voluntary aspect for the business to CSR being integrated in the business operations. There is infusion of policy content in a large measure in the revised guidelines. The earlier guidelines focussed mainly on CSR activities for external stakeholders i.e. how social causes and environmental concerns could be addressed through CSR projects funded by an earmarked budget for this purpose. Whereas, in the revised guidelines, CSR and Sustainability agenda is perceived to be equally applicable to internal stakeholders (particularly, the employees of a company), and a company’s corporate social responsibility is expected to cover even its routine business operations and activities. Accordingly, under the revised guidelines, PSUs were expected to formulate their policies with a balanced emphasis on all aspects of CSR and sustainability. It was argued in the DPE Guidelines II that dealing with the concepts of CSR and sustainability separately did not make practical sense from the business standpoint because of their close linkage. Hence, in line with the international practice, in the revised guidelines CSR and Sustainability have been taken together. In a radical departure from the previous guidelines, PSUs were required to have a CSR and sustainability policy approved by their respective Boards of Directors. The CSR and sustainability activities are undertaken by them under such a policy needed to have the approval/ratification of their respective Boards. Thus it is observed within the ambit of these guidelines, the role of the Board becomes imperative. PSUs were expected to integrate and align their CSR and sustainability policies and activities with their business goals, plans and strategies. They were also expected to adhere to the global standards in this regard and commemorate the UNGC and the MDGs. At this juncture, it is necessary to understand the impact of international context on CSR dynamics in India. Building on the empirical evidence from the DPE Guidelines, a line of enquiry is attempted on regulatory and institutional milieu shaping the state’s approach to international CSR frameworks. The corporate pursuit of economic goals and their hazards resulted into the rise in selfregulatory attributes towards CSR. The rise of pressure on businesses to show responsible behaviour was recognized at the level of international

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organizations (Whitehouse 2003). Such cognizance led to the establishment of global CSR frameworks by multilateral and private bodies such as UNGC by United Nations, OECD Guidelines and GRI etc. The launch of the global CSR framework showed essential soft law character and was not legally binding (Pariotti 2008). A number of enforcing soft mechanisms such as shaming, conformity, persuasion, self-interest, opportunity etc. were the main features of such international CSR frameworks (Zerilli 2010). The CSR restructuring in the country raised an important debate concerning institutions and levels of regulatory interactions to be organized. This complex matrix could be understood in three ways. First, the state realized the fact that the range of factions which would be addressed by the corporations would expand inevitably and the traditional regulatory framework thus needed to give way to more pluralistic forms of regulatory commitments. Second, the enhanced regulatory framework for CSR needed to include international ‘soft law’ scaffold which is witnessed to be varied with multiple partners and essentially private sector participants (Kinley and Tadaki 2004). The salient feature of such a soft law framework could be production of ‘norm-like’ codes and guidelines. Third, such regulatory aspects within a country could be wrested in new forms of legislations, institutions and vested on mechanisms which are based on the international soft law framework (Sauvant and Aranda 1994). India has unequivocally observed the impacts of globalization on economic, socio-political and regulatory ambience (Collier 2007). The policy dynamics in CSR space implied the emergence of novel methods and decision-making procedures (Archibugi, Koenig-Archibugi and Marchetti 2012). The legislative, regulatory and institutional transformation are a result of that. The heterogeneous international framework on CSR led the state of India to take up steps forward towards CSR Guidelines and in terms the legislative provision being an outcome of inspiration from multiple models internationally. An unprecedented institutional framework made up of a set of legal competences in which state law is only one of the actors participating in the regulatory process could be witnessed to have emerged in the country. In many fields of law, the traditional domestic actors in the law-making process (e.g. policymakers, politicians, academics, the judicial system) reciprocally interact and eventually compete with an increasing number of actors outside national jurisdiction, creating a complex transnational

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space where decision-making, political and legal processes take place. The point is not simply that some of the leading actors involved in regulation are found outside the borders of the nation-state; it is rather that the burgeoning of sites from which actors and institutions produce and perceive normatively has broken the monopoly of the nation-state over law and policy-making. Along with national actors, transnational, supra-national and non-state actors such as corporations and NGOs are observed to be interlinked and participating in the production of norms and regulations. The legal outcome of this as per Caruso, cited by Fillippo Zerilli, is new ‘institutional alchemy’, that is not a coherent legal doctrine, efforts of the legal and institutional regime to establish a ‘uniform concept of law’ (Gunther 2008). It is a ‘fragmented, displaced, and often contested assemblage of regulations, the producers and beneficiaries of which are closely interlinked, as well as mutually conditioned’ (Zerilli 2010). A comparative analysis of the Section 135 and both versions of the DPE Guidelines become necessary in order to understand the amelioration in the concept and context of CSR over a significant period of time and the probable reasons that led to such stepwise changes. The DPE Guidelines categorically disclose its inspiration from international soft law resources and more precisely from UNGC, MDG and OECD Guidelines. The concepts that originated from non-state bodies internationally—such as Triple Bottom Line, Shared Value2 and Sustainable Development3 find a prominent position in the DPE Guidelines. A straightforward acceptance of the fact that it is essential for the corporation to be interconnected and upgraded with the global trends in the CSR domain is witnessed. The realization of the matter that states also need to 2 As per Michael E. Porter and Mark R. Kramer introduced the concept of shared value—which argued on the connections between societal and economic progress having the power to unleash the next wave of global growth. They defined shared value as ‘The concept of shared value can be defined as policies and operating practices that enhance the competitiveness of a company while simultaneously advancing the economic and social conditions in the communities in which it operates. Shared value creation focuses on identifying and expanding the connections between societal and economic progress’ (Porter and Kramer 2011). 3 Sustainable development, as primarily quoted definition is from Our Common Future, also known as the Brundtland Report ‘Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs. It encapsulates the concept of needs and the idea of limitations’ (http:// www.iisd.org/sd/).

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restructure policies and programs which are in sync with the international development framework which primarily builds on soft law sources is also included in the DPE Guidelines. The DPE Guidelines could be argued to play the role of a regulatory instrument for PSUs, setting out a decent framework including private and non-government participants working in the CSR space. The regulatory framework of the DPE Guidelines has ubiquitously transcended in Section 135 of the Companies Act 2013. Upon analysis, it is observed to have pronounced resonance from the DPE Guidelines. The points of similarity as noticed in DPE Guidelines as well as Section 135 primarily dredged the scope into four spheres namely: A definitive CSR budget; Roles and responsibilities of the Board of a company towards CSR; A comprehensive CSR policy; Mandatory disclosure of CSR activities and spend. One fundamental point of dissent between the DPE Guidelines and Section 135 is that DPE Guidelines are more stringent in their attitude when it comes to regulating the PSUs. Considering that the DPE specifically regulates the state owned PSUs whereas Section 135 covers dominantly the purview of the private sector companies. Although Section 135 overrides the DPE Guidelines but they still hold relevance where Section 135 is not suggestive of the ways. In a market context, we can evidently understand why the state has intentionally decided to be responsive in its approach when Section 135 is formulated which would overarch more than 16,000 companies falling under the purview of the provision (Partners in Change 2013). The points of differences of Section 135 from the DPE Guidelines that answer this particular question can be mainly encapsulated in three arguments. First, the DPE Guidelines set out planning, implementation, monitoring, impact assessment, advocacy and research parameters for the PSUs, however, all the above-mentioned attributes remain essentially selfregulatory for the corporate actors in Section 135. The reason behind keeping the essential features of planning, implementation, monitoring etc. under self-regulatory purview for the corporations is mainly because the law plays a facilitative role which promotes self-regulation through meta-regulatory strategies. Second, the annual disclosure of CSR activities and spend is said to be mandatory in Section 135 but there is a scope of negotiation if a company is not able to spend on CSR. This points out on comply or explains mode of regulation. Third, ‘what is CSR?’— mostly explained in DPE Guidelines but remains essentially broad and on

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the discretion of the companies to define in the case of Section 135. This feature again sets out a theme that the private sector cannot be heavily regulated as much as PSUs and state recognizes a need for a greater decentred regulatory approach. Transcend from the precursor like the DPE Guidelines to a more responsive Section 135 of the Companies Act 2013 is observed to have a meta-regulatory facet. As per Hancher and Moran (1998) the successive regulatory reforms and the emergence of new forms of regulatory models are often a result of regulatory crises in the post-globalized era. The result is often exploration of more effective and pragmatic trajectories in the regulatory policy-making (Hancher and Moran 1998). The movement towards the composition of the New Companies Law could be considered as one such example. The features that Section 135 entails demonstrate their meta-regulatory nature with essential character of facilitating self-regulatory capacities of the corporate sector. Meta-regulation as per Christine Parker (2002) aims to augment the self-regulatory capacity of the corporations. She identified five factors that are metaregulatory strategies. First, Management Commitment which primarily focuses on the relevance and imperative top management of any company would have. This attribute could be observed in the CSR provision of the Companies Act, 2013 wherein the Board of the company is placed at the centre stage of the CSR space. Second, focus is drawn on the External Regulatory Pressures, this factor is of prominence in the Section 135 wherein the annual reporting of all aspects pertaining to CSR is being focussed, it is envisaged that Bombay Stock Exchange would credit rate the corporations based on their quality of reporting and in terms an external regulatory pressure is created on the corporations that aid selfregulatory attribute (Padia and Mehta 2013). Third, the importance of Internal Compliance is being stressed upon. The excerpts from the interaction with head of CSR of a steel manufacturing company4 and a conference address from Dr. Bhaskar Chaterjee5 clearly centre the argument that the key factors leading to internal compliance of a corporation are focussed in the CSR provision through terms and conditions provided for the configuration of a CSR committee, indicative CSR activities,

4 Based on interview held on September 24, 2013, with a CSR head of a Stainless Steel manufacturing corporation. 5 Dr. Bhaskar Chatterjee is the head of IICA, MCA.

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broad framework for the CSR report that are indicated in the provision and allied sources. Fourth, the integration into Operational Procedures is attained through Section 135 of the Act by guiding the Board of the corporation to come up with CSR policy which would ensure the inclusion of techno-economic procedures being embraced through the self-regulatory means within the corporation. Fifth, focus is drawn on interest group involvement and community opinion. This feature is the essential aspect of the decentred space in which meta-regulation operates. The involvement of non-state and community actors is clearly set out in Section 135 and allied resources ensuring stakeholder participation and shared value creation in the self-regulatory feature (Parker 2002). Thus, it could be inferred here that the state’s actions through the formulation of CSR provisions are an attempt to simplify the contextual complexities of command and control methods which could not be feasible in a neoliberal context (Black 1997). Meta-regulation does not have a set pattern rather it works through multiplicity of actors and techniques. Many approaches were explored through scholars in the regulatory models and strategies such as co-regulation (Braithwaite 2000) process or management-based regulation (Coglianese and Lazer 2003), enforced self-regulation (Ayres and Braithwaite 1992) and they are not mutually exclusive.6 The overlap is common in most of the instances and meta-regulation can also have features of the mentioned regulatory models. Analysis of CSR provisions in the light of meta-regulatory models showcases convergence of a range of actors securing normative alliance and techno-economic compliance. Draft CSR Rules and the Final Rules: A Comparison February 2014 was the month that witnessed many transitions in CSR regulatory and institutional structure in the country. The participation in multiple forums in order to collect vital empirical information was planned during this time. As many significant changes were being observed in the domain of CSR and regulatory paradigm in the country,

6 Other forms of regulation are also essentially working through plurality of actors. A detailed mention is beyond the scope of this chapter and only enlisted for broad understanding (Morgan and Yeung 2007).

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interactions with state representatives such as MCA and IICA officials, corporate sector members and civil society members were planned through multiple forums.7 After the Companies Bill 2011 was passed in the parliament, the plan of action to further enunciate the provisions of the Section 135 of the new Companies Act 2013 was taken into account. In the due process, the executive committee on Corporate Social Responsibility under the aegis of MCA with the inputs from Indian IICA came out with the Draft Corporate Social Responsibility Rules (Draft CSR Rules) to further articulate the provisions of Section 135 of the Act (Bharti, Conference Report-Better Education Through CSR 2014). Interview with the former representative from IICA elucidated that the committee proposed Draft CSR Rules in the public domain after the enactment of the Companies Bill 2013 (Ministry of Corporate Affairs 2013). The Draft Rules attempted to put CSR into a context and mentioned that CSR would be defined with respect to Section 135 of the Companies Act 2013 whereas Section 135 did not have any definitive meaning of CSR. This inaccuracy was later rectified and The Companies (CSR Policy) Rules (Final CSR Rules) came out with effect from April 1, 2014. The CSR Rules try to put CSR in a broad-based framework and do not limit it within any definitional boundaries. It refers to the Schedule VII of the Act and describes CSR as any activity relating to the enlisted activities in the Schedule VII. The major point of deliberation here is—Section 2c (ii) of the CSR Rules which sets out in apparent language that CSR could clearly be defined as a set of ‘Projects or programmes undertaken by the Board of Directors of a company’ in pursuance to the recommendation of the CSR Committee of the Board as per declared in the CSR Policy of the company which resonates with the activities enunciated in the Schedule VII of the Act. The focussed group discussions, interview responses and participant observations to committees, workshop, seminar and conferences attended in the due course of research work led to two vital findings in terms of the significant changes made from the Draft CSR Rules to the Final CSR Rules. These rules, however were changed to Companies (CSR Policy) Amendment Rules, 2021.8 7 Based on interviews with the IICA representatives. 8 Based on the CSR committee meeting attended on September 7, 2013, and presen-

tation by Dr. Jaivir Singh followed by the interview held on May 5, 2013, with a CSR representative of a PSU.

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First, it is observed from the evidences that the state while formulating CSR provisions in the Companies Act 2013, tried to be assertive in its approach in order to set out conditions for CSR a corporation needed to adhere to. However, interactions with the key players revealed discontent from the side of the corporate actors towards a legal provision which earlier focussed on the expressive role of law and tried setting out distinctive definitions for CSR. The legal provision on CSR emanated with a role which was suggestive of standing at the junction having both soft and hard features and an evident expressive role. The study explored the hard feature which was claimed by the state actors in the form of stringent compartmentalization of ‘what is CSR?’ and ‘What is not CSR?’ was not endorsed as a welcome move by the non-state actors in a regulatory space which is already decentred. It was argued that such expressive approach of law heavily restricts the self-regulatory ability of corporations which in terms limits the innovative and technological enhancement from the side of multiple stakeholders such as NGOs along with the corporate actors. Section 2(d) of the Companies (CSR Policy) Amendment Rules, 2021, reworks on the definition of CSR and elucidates many novel aspects to define CSR building upon the older Section 2(c) of The Companies (CSR Policy) Rules 2014. Amendment Rules focussed on the question of ‘What is not CSR’ and enunciated that the contribution to political party, employee benefits as per Section 2(k) of the Code on Wages 2019 as well as sponsorship and marketing activities. The new rules clearly set aside any statutory obligation under any law of the land out of the purview of CSR. The expressive function of law which is predominantly applied as a means to institutionalize values through prohibitions and limitations in order to influence socio-political traditions could not be feasible in an already established neoliberal socio-political tradition. Robert Cooter (1998) as cited by Matthew D. Adler, reiterates the role of expressive facet of law being moved by multiple ‘social equilibria’ that further form a focal point towards shaping the system into new equilibrium and creating such focal point is the expressive use of law. The expressive function of law tries to build norms, forms and practices in the socio-political milieu (Adler 2000). The expressive facet of law, however, could only be effective and non-conflicting if the multiple equilibria are intact and stable. In case of Section 135, while the law tried to set out an expressive feature by compartmentalizing CSR, other relevant actors of the CSR space did not have a unanimous agreement. This led to the changes in the nature

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of law due to the exogenous environment while assessing the cost of the envisaged CSR regulated activity (Geisinger 2002). The substantial transformation in the language of law has been observed in the Final CSR Rules which made clear that the expressive dimensions did not work well in the case of CSR, rather it raised the complexity concerning the positive ability to predict the behavioural impacts and preferences. The expressive face of Section 135 of the Companies Act 2013 could not effectively navigate the complexity. A facilitative facet of the law is considered to be more parsimonious in case of CSR wherein the predictive value of marking mutual linkages between the state, corporations, civil society actors and communities proved to be more acceptable for the participant in the regulatory space. Such a role of law in the CSR regulatory space attempts to ensure a framework structured in a way that enables maintenance of free play of choices in the CSR activities towards social development. The leverage and autonomy the state enjoys in the case of DPE Guidelines could not be the same in the case of setting out CSR Rules due to the involvement of non-state actors which have equitable relevance and emphasis in a decentred regulatory space (Black 1997). As a result, law had to take up a pure facilitative role where CSR ubiquitously is observed to be a responsive provision from the side of state categorically enshrined with self-regulatory attributes and unequivocally having a soft law feature after the release of the Final CSR Rules. The time of transition from CSR Policy rules 2014 to CSR Policy Amendment Rules 2021 could be earmarked as one of the times when state and private sector conundrum could evidently be witnessed pertaining to CSR provisions. Citing the excerpts from an important panel discussion held during the time of compilation of the Final CSR Rules, representing the Ex-Minister of Corporate Affairs Mr. Sachin Pilot along with the panellists from the corporate sector and civil society which was broadcasted on the Ministry of Corporate Affairs website, state’s posture to be responsive and non-coercive could be witnessed (Hindustan Times, August 13, 2013). The statement of the erstwhile minister of Corporate Affairs Mr. Pilot explained that the intent of the state is not to mandate CSR, rather it is an avenue for corporate actors’ visibility that the state has facilitated. The main aim of the CSR Rules, as stated by him, would be to make an open and transparent platform to assist companies to have uncomplicated forms of CSR. He urged the participants from the corporate sector and civil society that Schedule VII of the Act should be considered as an indicative guideline of the list of activities in which

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companies could wish to invest. It was further discussed that the provision aims to help companies generate goodwill for themselves through comprehensive CSR activities. A structured format is envisaged through the CSR provision that would provide greater cognizance and organized framework to already existing CSR activities. State through the enactment of the law aims to suggest a participatory model and leveraging technology which ultimately is in the benefit of the corporations to build a strong image globally. The legal regime aims to be based essentially on self-disclosure, self-reporting and any kind of policing mechanism would not be applied. The 2% spend is not a tax/levy or cess rather a company’s own money and state is only urging the corporate to spend on CSR in a way that matches with their business case and exemplifies best practices. The partnerships through which the companies want to operate and even the established trusts and foundations have been welcomed by the state. Sachin Pilot lastly visualized the trust deficit of communities towards corporations that is vindicated at many instances and emphasized on focus trust building. The panel discussion unanimously agreed that the command and control forms of regulation could not be applied in the present scenario where corporations are one of the important aspirants in the governance arena. Through the discussion cited, it can be argued that the state focuses to build a decentred regulatory space ensuring flexibility. The panel discusses the concept of ‘Shared value creation’ (Porter and Kramer 2011) with state and non-state participation as it was agreed upon that the state could not be considered the repository of knowledge, power and control. All these are fragmented among multiple actors of governance in a decentred regulatory space (Panel Discussion on CSR with Sachin Pilot 2013). The change of government post-2013 general elections in India did not mark any change in the approach of the state towards CSR provision. The newly elected United Progressive Alliance (UPA) government of India after winning the general elections has endorsed the decentred regulatory ideals of the erstwhile National Democratic Alliance (NDA) government through aiding corporate self-regulatory practices in a responsive manner. The stand of the state towards CSR and regulatory attributes remains guided through soft law. The soft law approach could be made clear through following excerpt from a national daily newspaper that quoted the stance of the Ministry of Corporate Affairs after the change of government in the country as follows:

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Rules regarding corporate social responsibility should be interpreted liberally so as to capture the essence of the subjects enumerated in the norms. [...] The government has sought to liberalize the activities that companies can undertake to fulfil their CSR obligations. They have told the companies that they can take some liberties and go outside the scope of the activities prescribed under the Act [...]While non-compliance will not be penalized, companies will be required to disclose the reasons for this. (Mint, 20 June 2014)

The preceding aspects of the legal prescription on CSR focus on the interconnectedness of mechanisms and techniques working towards a neoliberal market oriented environment. When we compare the Draft CSR Rules with the Final CSR Rules, a departure of the law from hard to soft prepositions explaining the regulatory legitimacy to decentred space is observed. The exploration into CSR space in India through empirical evidences and theoretical overview, corroborate and substantiate the fact that the emergent juridification (Freeman 1999) of CSR space gave rise to the five central points of deliberation that resonates with Julia Black’s Decentred Regulatory Space (Black 2007a, b). The legal provision of CSR upon analysis demonstrates entrenched components of complexity, fragmentation, interdependencies, ungovernability and rejection of a clear cut distinction between public and private. As the new Companies Law has come into the limelight, the CSR provisions are inferred as a result of causal complexity and complexity of interaction. In an economy where the actors are primarily representatives of the three sector- public sector, private sector and non-profit sector; the motives, control, constraints and measure of success for all actors vary from each other (Malloy 2004). The new governance era has been observed to seek enhanced participation to each of the actors giving rise to the regulatory crisis, thus an era of ‘decentred regulation’ is being witnessed to come in forefront which works on a synergy to address a problem. The causal complexity emerges from this situation and in terms giving rise to complexity of interaction in order to seek participation, shared responsibility, collaboration and accountability (Baldwin and Cave 1999). In CSR space, the law is suggestive of the multiple centres of influence through responsive regulatory strategies which aims at state being attuned to the diverse motivations and objectives of the regulated actors (Ayres and Braithwaite 1992). The CSR provision is responsive in many ways and primarily it does not have a set of prescriptions for the regulated actor that is the corporate sector.

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The law imbibes responsiveness in its attitude to suggest best strategies which could be self-regulatory and depend on fragmentation of knowledge and control vested in plurality of actors such as state led institutions, private regulators, NGOs among many others. As Sigler and Murphy argue in Interactive Corporate Compliance, the law’s responsive attitude is similar to the attitude of interactiveness which could be related to the notion of ‘interactions and interdependencies’ in the decentred regulatory space (Sigler and Murphy 1998). The legal provision pertaining to CSR has been subjected to umpteen avenues where rigorous deliberations were a part of interaction between state, corporate, social actors and civil society. The interactiveness has been a result of interdependencies among the state and non-state actors in a neoliberal framework. This feature, within the CSR space has been utilized to generate ‘co-produced’ (Offe 1985) policy ideas in terms of formulation of CSR committee, role of the Board, CSR policy, CSR disclosures, Role of BSE and IICA. The responsiveness within the CSR regulatory regime focuses on autonomy and ungovernability of actors and systems which do not mean that they are completely free from government interventions rather it emphasizes on the freedom to develop ideas and plan suitable actions with minimal intervention. Foucault as cited by Black mentioned governance to be the ‘conduct of conduct’ thus ungovernability aims at implication on behaviour of the actors and systems which are nurtured without any policing or stringent intervention (Black 2007a, b). Responsive regulation while empowering the corporate actors towards self-regulatory strategies ensures enhancement in compliance through decentred regulatory aspects which provides distinct advantages over traditional regulatory choices through non-binding standards resulting into blurred boundaries between public and private (J... Braithwaite 2002). Section 135 of the Companies Act 2013 and allied sources could be observed as a move to rethink the status of formal centralized authority in regulatory governance. The attempt is on bringing out the desired changes as a product of interactions manifested in multiple channels of control, knowledge and motivations. This manifestly displays a decent framework of the CSR regulatory space marked by interplay of hybrid regulatory models understood as a product of ‘interactions of networks’ and ‘webs of influence’ (Braithwaite and Drahos 2000).

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Schedule VII of the Companies Act: A Critical Analysis Section 135 of the Act is supported by the Schedule VII which elucidated an indicative list of activities a company could take up under the gambit of CSR. The interactions and in-depth analysis of the Schedule VII during the course of study revealed; when the Schedule VII was released in the public domain, it was criticized for reproducing all the MDGs in its original form without any attempt to add value or innovation.9 After the review, the need was felt to revamp Schedule VII and the changes which were brought were primarily of two types. First, core flavour of MDG was kept intact but the language became more generic and broad-based and second, it included aspects of promoting national heritage, sports, academic research and technology and aid to needy families of the armed forces which were more India specific in nature. The Schedule VII of the Companies Act 2013 could be looked through the framework of existing National Voluntary Guidelines on Social, Environmental and Economic responsibilities of Business’ (National Voluntary Guidelines) that was released with an aim to mainstream the subject of business responsibilities in India. The National Voluntary Guidelines claimed to envisage avenues that would fortify and facilitate the Indian corporate sector to advance into a global leader in responsible business (Press Information Bureau, Government of India 2011). The National Voluntary Guidelines take into account excerpts from various international codes of conduct, norms and frameworks, and provide a distinctively ‘Indian’ approach, which claims to enable corporations to balance work through the social development endeavours. The policy makers while releasing the National Voluntary Guidelines emphasized on the fact that the socio-economic issues of the country could be dealt with through the corporate support. It focussed on the fact that the corporate sector should take cognizance of the aim to undertake inclusive development in the country. The National Voluntary Guidelines also emphasized that the responsible businesses could help the nation meet the goal of inclusive and sustainable development. The mention of National Voluntary Guidelines is relevant while analyzing Schedule VII of the Act as it is evident that the ten points enlisted in the Schedule VII reverberate with the nine principles of the National Voluntary Guidelines. By comparing Section 135 with 9 Based on interview with NFCSR representative of IICA held on February 24, 2014.

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the existing DPE guideline and Schedule VII with the National Voluntary guidelines, a clear point of conversion could be seen between all the sources. First, it could be argued that the DPE Guidelines which are based on global soft law framework on CSR (OECD, ISO, and UNGC) worked as a precursor of Section 135 of the Act, which evidently reveals the influence from international soft law framework. Second, National Voluntary guidelines and Schedule VII of the Act emblazon vital points of resemblance that are primarily based on the aspects of ethics, transparency, accountability, sustainability, well-being, responsiveness towards vulnerable and marginalized, promotion of human rights, environment, regulatory policies, inclusive growth and value to consumers. The core elements of National Voluntary Guidelines under the nine principles also enlist the activities which are elucidated in the Schedule VII of the Act. The comparative analysis set out above strengthens the argument that was developed in due course of study proposing; institutionalisation of CSR and engendering the same in the decentred regulatory space has been a gradual process in the backdrop of neoliberal framework. The contemporary CSR legal provision employs the core features of the existing regulatory framework encompassed in the DPE Guidelines and the National Voluntary Guidelines. The point of dissent, however, is that the CSR provision in the Companies Act 2013 remains essentially metaregulatory and responsive in its outlook so that the private corporate actors are facilitated with self-regulatory attributes. The pragmatic work during the course of the research found out that the significant representation of the corporate actors during the formulation and revision of CSR regulatory provision underlines the fact that ambiguities and lack of coordination which could be the hazards of a decentred regulatory space are attempted to overcome by ‘proceduralization’ of governance framework through an interactive and interconnected environment (Black 2001). Finally, as observed in Schedule VII, the first version was an analogous set of activities which coincided with the MDG. The final version of the Schedule has been modified and is a recoiled version of the core elements of the nine principles of the National Voluntary Guidelines. The investigation of NVG brings out straightforward and pronounced influence and inspiration from the international soft law framework. Summing up the discussion on law and regulatory transformations in the CSR space in India, substantial interconnectedness of approaches and likeness of core attributes in the initiatives taken over the years in CSR

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discourse at the national (DPE Guidelines, National Voluntary Guidelines) and supra-national (UNGC, OECD, GRI) levels along with the self-regulatory strategies of the corporate actors could be considered as important factors to shape present day framework of CSR in the country. Nevertheless, there has been a continuum towards a more pro-corporate environment; a developed decentred space and interplay of hybrid regulatory models attract the attention of the CSR scholarly work towards an active correlation between the soft law apparatus and tools at international paradigm and the legal transformations in the CSR arena occurring at the state level (Flood 2002). Interestingly, Teubner (1997) enunciates that the global legal regime including international development framework has to carry the typical characteristic of ‘softness’ and CSR framework internationally is one such example. The advantage soft law in CSR would have to prevent the same from fragility and brittleness as a result of constant pressures and disputes from multiple actors involved (Teubner 1997). There is a paradox in this that is noticed, international soft law framework draws strength from the facet of being non-coercive in nature whereas traditionally the strength of national legal provisions is measured in terms of their authority to command and control. However, the contemporary scenario of CSR somewhat changes the traditional notion in the purview of the logic of neoliberalism that focus is given on more indirect and forms of regulatory strategies and instruments. Thus a transcend from traditional hard law framework to soft and denormalized legal regime is observed to be originating and shaping at the national levels and CSR provisions of the Companies Act 2013 could be investigated with respect to the same (Klabbers 1998). Preceding detailed empirical analysis of specific international soft law inspirations in the regulatory provision of CSR and in terms of the translation of the same into regulatory mechanisms attempted to answer question of origin and evolvement of the novel facilitative legal provision which marks its uniqueness with the soft law facet through transplanting, internalizing and transmitting global CSR scaffold within the state structure (Halliday and Osinsky 2006).

The Institutional Changes The new Companies Law introduced by the state of India has many features which could be distinctly seen as a step forward from the erstwhile Companies Act 1956 that existed for many years in the country.

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The attribute of CSR in Section 135 of the Companies Act 2013 focuses on a multitude of issues that have been relevant signals of market openness (Schreck 2008). There have been arguments for a long time that the state’s responsibility for their inability to take up all the welfare measures could be adjusted in a manner that it pursues a responsive legal regime and structural changes, enhancing the activities of market actors. The rise of CSR could be observed to be subsumed in the law and regulatory transformations which we assessed in the previous section of this chapter. This paradigm shift proposes a deliberation into the enhanced involvement of corporations in Indian socio-economic milieu through a number of institutional transformations that are taking place. The institutional changes are a result of regulatory transformations. Such changes aim to build a negotiable setup in contested state-market space aiming to construct a pro-market, state-corporate relationship which formulates a consultative structural option among state, corporate, civil society and citizenry. The legally negotiable attributes in the transforming face of the law do not focus on the architecture of traditional institutions based on state-centred policy framework. Rather, emphasis shifts on the law setting out a discursive tone featuring essence of negotiation and mutual bargaining for both state and the corporate actors (Arthaud-Day 2005). Such composition, as discussed in the previous chapters, is also supported by international development agencies. The legal and procedural requirements of the CSR provisions of the Companies Act 2013 prove to be helpful for the corporations and happen to be in their best interest too. As the provisions of social reporting, impact assessment and sustainability measures are equally appreciated at the international level. The regulatory technique of disclosure has also been one of the most relevant features that the new transformations in law and structural aspects have brought forth. The structural transformations as a result were observed at many junctures in the due course of the research. In this section, the aim is to explore the institutional changes that are the outcomes of the regulatory transformations, galvanized through a set of policy changes in order to adapt institutional roles assigned. The institutional changes are attempted to be analyzed through the following aspects explored:

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Advanced Role of IICA IICA was established as a capacity building and training institution of subject matters related to corporate governance and regulation. Under the aegis of MCA, IICA came into existence with a core focus on training and orientation in the fields of corporate and competition law, accounting and auditing issues, compliance management, corporate governance, business sustainability through environmental sensitivity and social responsibility, e-Governance and enforcement etc.10 The primary aim of the IICA was to provide a scaffold for interaction and mutual learning activities of governance, corporate sector, civil society, professionals, academicians and other relevant parties. The present circumstances have noted intensification in the function of IICA as a prominent institution taking hybrid regulatory roles in the CSR sphere. The factual scenario of the transforming CSR paradigm in India marked by the rise of IICA turns out to be a noteworthy factor. This change and its further analysis explore many aspects pertaining to regulatory transformation and structural changes which are of paramount significance. Since the year 2008 IICA has been recognized as an institutional structure that combines academic, pedagogic and curricular demeanours through academic council aiding knowledge management that eventually translates into schools and centres. However, the current scenario represents that IICA has moved beyond its traditional roles and taken up the role of an eloquent actor in the CSR space in India. The role of IICA has turned out to be of a governance actor facilitating self-regulatory prerogative. Interviews and interactions conducted at IICA11 revealed that it was established with a plan to operate as a think tank of MCA initially, eventually there was broadening of roles and responsibilities. After the enactment of Companies Act 2013, a wide array of changes were observed that are indispensable with respect to CSR paradigm shift in India. The holistic analysis of metamorphosis in the existing role of IICA concedes significant structural changes which could

10 See generally IICA website for more details (http://www.iica.in/About_Us/about_ us.aspx). 11 Based on Interviews held on February 14, 2014, with Heads of School of Corporate governance and School of Corporate Law at IICA Campus at Two Day Residential National Research Workshop on ‘Corporate Governance Practices in India: Retrospect and Prospects’ see (http://www.iica.in/Images/Two_Day_Residential_National_Research_Wor kshop_brief_report.pdf).

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be argued to be an outcome of the emerging decentred regulatory regime in the country. Establishment of National Foundation for Corporate Social Responsibility (NFCSR) NFCSR has been established as a society under the auspices of IICA with a broad framework of providing a unified platform to the corporate sector and other actors in order to facilitate CSR endeavours. Post the outset of CSR provisions and allied actions as per the Companies Act 2013, NFSCR has evolved as one of the agents playing a pivotal role in bringing together actors and systems of a decentred regulatory space. Presently, NFCSR has been engaged in multifaceted activities, such as Certification Program in Strategic CSR, National CSR Awards, research and assessment projects. The purposive attempts of NFCSR explored since its inception could be divided into three spheres. The first sphere aimed to build a platform in the CSR regulatory arena whereby a databank of ongoing CSR projects of the corporations could be created in order to corroborate all the substantive work in the CSR space. Formar Cheif Programme Executice NFCSR12 mentioned that the purpose of this approach was to facilitate the corporate sector to observe the innovative ideas of the peers and assess themselves accordingly. This platform, as argued by NFCSR also attempts to act as a forum to promote mutual collaboration among corporate actors. The prospective impact of such initiative can only be assessed once the system is set, however, the analysis of present transitions makes one intent from the side of state evident; that the platform to corroborate all the projects at one place would ensure visibility of the CSR initiatives of the corporations at larger supra-national avenues which in a way gets sanction by the state. The second sphere focussed on creation of an ‘NGO hub’. As discussed earlier in this chapter, law and the succeeding activities are indicative of creating a shared value through CSR by involvement of civil society organization into the same. The ‘three-sector economy’ could not ignore it’s not-for-profit sector for the reason that the sector has been partnering 12 Based on the interactions held on February 20, 2014, with Mr. Nikhil Pant after the keynote address of the conference “Conference on ‘CSR, Healthcare and Partnerships’ See generally (http://www.ngobox.org/events/conference-csr-healthcare-partnerships-20feb-2014/#sthash.b3ddlzZ2.dpuf).

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with governments in imparting social development endeavours (Ulleberg 2009). The establishment of the NGO hub aimed to create a pool of ‘credible NGOs’ established through tools to assess the eligible NGOs (Kaura 2014). The interaction with the officials of NFCSR revealed that the reason behind the formulation of a real-time pool of credible NGOs was expected to facilitate the CSR process of the corporate actors. This initiative resonates with the responsive role of state which is enshrined in the legal provisioning, as state is enabling corporate actors to be selfregulatory in selecting the credible civil society partners which are once again approved by the state actor. The work of CSR Hub, however, could not continue for long. The third and most intriguing sphere targets to train a fleet of CSR professionals to cater to the burgeoning demand of skill and innovation of the corporate sector in the CSR space. NFCSR has launched ‘a ninemonth IICA Certificate Programme in CSR (ICP-CSR) for developing trained and certified CSR professionals in the country’ (NFCSR 2014). The certification of the CSR professionals by a state led body IICA underlines the transitions in a market context deconstructing the image of the state as a centralized rule-maker. The strategies of networked governance by the state were witnessed in the preceding discussion about the spheres of institutional change that envisages integrity of practices and autonomy of corporate actors through state ratified CSR projects, approved civil society actors and certified professional armada. The responsiveness of the state intends to build the capacity for corporate self-regulatory attributes whereby deficit attributes of corporate actors could be filled through facilitative initiatives taken through structural changes by the state in the CSR domain (Braithwaite and Drahos 2000). The Role of SEBI and BSE in CSR Regulatory Space The gradual ideological movement of law towards a decentred CSR regulatory paradigm with plurality of actors and interconnected hybridized regulatory models is argued to be an outcome of a sequence of preexisting initiatives and processes in the CSR domain. At this vantage point, it becomes imperative to analyze the impetus to public disclosure of CSR spends and activities was given through the policy directives of the Securities and Exchange Board of India (SEBI). A circular on ‘Business Responsibility Report’ was brought out by SEBI on August 13, 2012, wherein listed companies were asked to include Business Responsibility

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Reports as a part of the Annual Reports. The reports format focussed on the environmental, social and governance (ESG) initiatives of the companies. As a pilot project, such public disclosure was made mandatory for the top 100 companies in terms of market capitalization and was envisaged to be made voluntary to mandatory for other companies in a phasedwise manner. Citing the empirical evidence from Business Responsibility (BR) India Survey—2013, jointly conducted by Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) in partnership with the CIIITC Centre of Excellence for Sustainable Development and published by IICA, it was found out, though the regulatory mandate by SEBI seems to have a positive impact on disclosures, a large gap between intent and performance was observed. It was observed that the companies lacked innovative ways of approaching CSR, strengthening or creation of new institutions, research and debate, and on ground action. Also, it was suggested in the survey; corporations will have to adopt CSR in order to have sustainable existence in an interconnected globalized scenario which also features a number of international frameworks. At the same time to enable corporations to make CSR a core sustainability aspect, the state needs to take up measures to streamline the CSR arena. It was also inferred in the survey that a state’s role in facilitating corporations in CSR endeavours is inevitable in the interconnected market oriented framework however a considerable amount of confusion is exposed in the survey which concludes that it could not be decided whether a mandatory or a voluntary approach to CSR in India would be most feasible. The comprehensible reason behind citing the study in this section is twofold. First, the study presented a state of affairs where mandating the disclosures by SEBI did not have tangible impact on the quality of work carried out in the CSR domain rather there remained sizeable gaps in understanding the concept of CSR and useful spend of budget. Second, disconcert is observed within the report pertaining to the complex issue of the kind of regulation to be adopted in the CSR space. The report mentions that the decisive framework could not be adopted pertaining to the method to regulate and whether voluntary or mandatory strategies are pragmatic. The analysis of the role of SEBI in the regulatory paradigm depicts a softer regulatory attitude unlike the more command and control roles SEBI plays in Mutual Fund Advisory Committee or Takeover Regulations for example. Finally, through the analysis of the Survey Report, it is also observed that the regulatory strategy of SEBI only focussed on the mandatory disclosures of the CSR spends and activities and in no

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manner related to the procedural aspects of CSR which remained selfregulatory and continues to be the same even after the enactment of legal CSR provisions. Understanding the new regulatory role of BSE urges me to relook into the idea of the strategic implications of CSR and its relation to social development, through analyzing the dynamics between ‘Business case’ and ‘Case for business’ (Blowfield 2005). BSE, acting as a credit rating body to assess CSR performance of companies through the annual reports claims to build a robust assessment mechanism to regulate the CSR behaviour of the corporations.13 The attempts however clearly set out a responsive regulatory approach of the BSE wherein the dichotomy of ‘business case’ and ‘case for business’ could be apparently seen that encounters conflicting logics BSE rating as a business tool for visibility of CSR or the development tool towards assessing social welfare activities carried out. The functionality of BSE rating stands at a crossroad wherein assessment of CSR through the documented reports only focus on the reputational accountability being aimed at appeasing international market, trade and development audiences and shareholders and, therefore, focus on particular forms of communication with quantifiable benchmarks of achievement to justify expenditure on CSR activities. Role of Confederations The offshoot of the new changes in institutional pattern has been observed in the case of the existing federation and confederation of industries such as FICCI and CII. Such institutional turn has analytical and constructivist strategies. The role of FICCI and CII has been observed to resonate with what international organizations have been doing at global level. The two most important forums of the industries which used to have vital roles of partnering in the policy-making for a promarket growth now have a greater regulatory role to play in the CSR space. It is imperative to note here that both FICCI and CII and other chambers like NASSCOM and ASSOCHAM are led and managed by the corporate actors therefore any enhancement in the regulatory role to them automatically proves the aspect of state promoting corporate led 13 BSE Media Release “Indian Institute of Corporate Affairs signs MoU with BSE in the presence of Hon’ble Minister Shri. Sachin Pilot to collaborate on developing India’s first CSR Index” dated September 23, 2013 (Padia and Mehta 2013).

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regulatory attributes. Interaction with the head of CSR in FICCI at the Better Health through CSR Conference revealed that these bodies have a ‘significant role to play in streamlining the whole CSR movement in the country’.14 Coming to the role of CII, analysis of two vital outputs is relevant at this juncture. CII came out with a ‘Handbook on CSR’ special consultation with PricewaterhouseCoopers, a private consulting firm. The handbook is considered as a document of paramount significance by all actors in the CSR regulatory space as it encapsulates the global context of CSR along with the Indian aspect. The handbook acts as a source of reference for the actors in clarifying global principles on CSR, the benefit of adopting a robust CSR model in the country and strategic planning of CSR. CII also came up with a ‘guideline for identifying credible NGOs’ for CSR activities post formulation of Section 135 of the Companies Act 2013. The guideline clearly showcased that vital roles of corporate led and managed forums such as CII have yielded important functions in changing the CSR scenario in India. The analytical strategies of the enhanced self-regulatory role of the corporations encapsulate the dynamics of how market actors pursue their strategic interest through the conglomeration that becomes vital in the regulatory space pertaining to CSR. The enhanced role in formulating non-binding codes of conduct and guidelines in case of confederations like CII and FICCI explains the constructivist strategic dimension of corporations in case of CSR. In the constructivist strategic aspect of CSR, the existing institutions could be argued to be fine-tuned through voluntary initiatives and private regulations in order to address the challenges and operations towards the smooth operations of the corporations (Utting 2005). The causal, exploratory and relational analysis of transitions happening around the CSR space in India provides a pragmatic account of the state’s as well as corporations’ strategies in bringing up CSR in the law and regulatory paradigm. The motives of state in bringing out the regulatory and structural transformations and intent of the corporations in agreeing to be a partner in such change have been explored. The need of anchoring CSR in the Companies Law has multiple implications for both state and

14 Based on Interaction with Dr. K. K. Upadhyay, Head—CSR, FICCI at conference Better Health care through CSR: Partnerships and Innovations held on 24 September 2013 (Better Healthcare Through CSR: Partnerships and Innovations 2013).

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the corporations. This section attempts to analyze the extent of justification provided for this perception by the corporations and the state at large through the inclusion of CSR in the law. Various attributes of regulatory transformations and institutional changes were discussed in this chapter, which attempted to illustrate the reasons and implications of the transition in the CSR paradigm in India. It is also argued that CSR regulatory space is a precipitation of the larger transformations happening at the level of economy, polity and society globally. The introduction of Section 135, Schedule VII and the CSR (Policy) Rules are evidently the outcome of the larger discourse of globalization and neoliberal ideals. The legislative provisions like such in a market economy are made to facilitate the social legitimacy of the corporate actors. The regulatory framework which emerges in such circumstances is essentially decentred in nature having a paradigmatic interplay of self-regulation, meta-regulation and responsive regulation which are not mutually exclusive and give rise to hybridized regulatory structure moving away from command and control forms of regulation. In the light of the above-mentioned argument that CSR paradigm shift is an outcome of larger implications of globalization and neoliberal discourse, an in-depth analysis of the state’s posture and corporations intent in the novel regulatory provision of CSR is essential. As discussed at length in Chapter 3, and current chapter, emerging market economy of India developed to be a ‘Three sector Economy’. Corporations, state and the civil society are the representatives of the private sector, public sector and non-profit sector respectively. As we attempt to understand the law and the regulatory changes in a market context, an examination of how the current situation of the nation experiences the mutual relationship between law, regulation and social development becomes imperative. In the neoliberal regime, the market operates as a place of meaning and value formation (Malloy 2004) and indeed is a complex system due to massive participation of individual actors, innumerable degrees of freedom and varied interactions. Such complexity is inherent to the very nature of the market enabling the actors to initiate exchange processes leading to a dynamic environment that facilitates wealth generation. Similarly in a legal system, the dynamism which is a result of neoliberal market economy architecture constructs and implements the rule in such a manner that a sustainable system is ensured. As per Robin Paul Malloy, in a market economy, the attention

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of law is primarily focussed on the process of sustainable wealth formation rather than wealth maximization. This ensures long-term economic growth (Malloy 2004). Inculcating this framework into Indian case, one could noticeably observe India being a market oriented economy wherein state too depends on the market actors and precisely on the corporations. Corporations have been observed to become vital actors in the holistic governance framework; however, they too need to tread a careful path in a complex market environment. In a globalized scenario, the aspiration of global visibility becomes the core focus area for the corporations. The constructive dissent from wealth maximization to sustainable wealth formation in the contemporary interconnected world is inevitable. The horizons have also broadened for the corporate actors in pursuit of enhanced leadership aspirations which push them to consider nonfinancial indicators with equal earnestness as the financial factors. Such advancement from a linear wealth maximization approach also calls for nuanced perspectives of corporations to realize the major difference between ‘seeking to improve one’s position and seeking to maximize one’s wealth advantage’ (Malloy 2004). The paradigmatic rearrangements in the CSR space through the legal provision, institutional structuring and hybrid regulatory milieu focus on the intent of the corporations towards seeking to improve their own circumstances at three levels. First, at the level of the community one works with, second, at the governance level which enumerates state and other non-state actors and most importantly, third, at international development and trade and exchange levels where adhering to CSR parameters and other multilateral frameworks like ISO 26000, UNGC, OECD etc. ensures a spectrum benefits for the corporations. The image of the corporation that they are not only the market actors who focus on the maximization of their self-interest rather also recognize the needs of the community at large and working towards that goal ensures diverse advantages. Creativity and efficiency taken together build a sustainable framework for market operations and social legitimacy (Chan and Gambino 2008). This further gives an edge to those corporations who consider all these factors over those who still concentrate of the archaic tools of wealth maximization. At international levels specifically in case of World Trade Organization (WTO) and General Agreement of Tariffs and Trade (GATT), it has also been observed that focus on social and market exchanges has led the path of international market leadership. Thus from the field interactions and secondary sources, it was clearly found out that no major reluctance

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from the side of the corporations was observed to bring up a facilitative provision on CSR. Interaction with CSR leaders at a conference held by IICA revealed that corporations rather considered legal provisioning of CSR as a welcome move that is envisaged to make the social visibility, legitimacy and consensus simpler for them through providing a uniform framework on spending and reporting which is essentially selfregulatory and there is no state policing. For many of the multinationals, CSR regulatory transformations are seen as the same as international soft law sources as the provision has been majorly inspired from the same.15 Citing anecdotal evidences through interactions, many corporations were observed quoting that they will not have to make additional efforts to organize processes and activities pertaining to CSR as they have already been adhering to the international CSR framework which broadly are indicative of the same set of activities as enlisted in the Schedule VII of the act and more focus is given on public disclosures in terms the CSR reports.16 In another interview conducted, a CSR head from a multinational firm stated, as long as all the vital decisions remain self-regulatory for the corporations, and there is no compulsion from the state, CSR provision is perceived to be of additional advantage for the corporations and the 2% of the profit provision does not have any impact on the overall profit earned by the company.17 Multiple levels of interactions with the corporate actors, civil society representatives and the state agents and presence in the forums gave clarity about the role of corporate strategies in the whole new regulatory transformation of CSR. Interacting with the key players makes clear four essential attributes of the three sector economy are analyzed. Thus the private sector, public sector and non-profit sector need to be compared on the attributes of motive, control, constraints and measure of success. These attributes when put to investigation in a

15 Based on the interview held with CSR representatives from Jindal Stainless Ltd., Intel India Ltd. and Samsung India at the conference—Better Education through CSR 2014 organized by IICA and Partners in Change on February 24, 2014 (Conference Report-Better Education Through CSR 2014). 16 General interaction at Conference on ‘CSR, Healthcare and Partnerships’ on 20 Feb. 2014—See (http://www.ngobox.org/events/conference-csr-healthcare-partnerships20-feb-2014/#sthash.m8TOIjYB.dpuf). 17 Based on the interview conducted on May 23, 2014, with a CSR representative of a corporation.

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contextual paradigm, the causal analysis of the role of politics and the incorporation of CSR in the law and regulatory domain is possible. It becomes necessary to understand the state’s role in the market economy. The structural features of the Indian state post liberalization has been ever changing, however, the primary modus operandi of the state remains a provider of public goods and services but at the same time it is expected to provide a feasible environment to operate for the market actors too. The past experience of Indian case showcases that the state naturally plays an important role in the functioning and development of a modern economy. State’s intent in formulating a precise legal provision of CSR clearly aims at providing the corporations with a legal structure in the form of the corporate law by ensuring self-regulatory rights. This is assured through the responsive regulatory attributes to perform the function of furnishing the economy with legislation, regulation and structural changes. The resultant attempt of law to be expressive and practising stringent rule based processes in the case of CSR (Draft CSR Rules) faced reluctance from corporations.18 The experience of the past with the DPE Guideline has not been as envisaged. Although it was said that the DPE Guidelines would essentially be dealing with CSR provision and there would not be any case of corruption as such but an interview with a CSR representative of a PSU revealed that the money of CSR provisions was misappropriated by the involvement of political parties into the same. The PSUs faced oversight by elected officials as well as the political processes.19 The respondent was of the opinion that the DPE Guideline although set up in the year 2010 did not prove to be a successful innovation as it was envisaged to be and was faced by political overshadows. Interaction with a representative from IICA20 stated, PSUs have involvement from the government at all levels and they do not face pricing processes and the system of the market. There has been little competitive pressure and thus the influence of voter support; election results and political collusion were faced leading CSR provisions not making any tangible and remarkable achievements post DPE regulatory guidelines. It was often accused that the CSR funds were misappropriated 18 Based on the interview held with a representative of NFCSR on February 24, 2014. 19 Based on the interview held with a CSR representative of a leading PSU on October

18, 2013. 20 Based on interaction held with representative of School of Corporate Law, IICA on February 14, 2014.

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by the political fountainheads for the purposes as desired by them (Maira 2013). The apprehension which the new regulatory setup brings in is the risk of political capture or collusive practices by the corporation to the CSR practices. It could be seen that decentred regulatory space is spreading rapidly in different sectors. Regulatory institutions have initially started in the country in a more centralized form like SEBI and moved to infrastructure, telecom power sector etc.; however, the new form of regulatory structure that has been evolving in case of CSR differs from its predecessors (Dubash and Morgan 2012). From the experiences in the past and assessment of the new decentred regulatory space, it could be argued that the main ambition of the set of responsibilities being assigned to the new institution such as IICA, CSR specific role of existing regulator such as SEBI, role of credit rating body to be played by BSE and enhanced CSR regulatory role of coming up with codes and guidelines to confederations like FICCI and CII is to fortify decentred regulatory space which aids larger market oriented interactions. Interviews and secondary sources showed traces that in case of DPE Guidelines that could be considered as a predecessor of Section 135 faced political capture at many instances. The persistent question and debatable issue in case of Section 135 and eventually the regulatory and institutional transformation is how to separate out the CSR decisions and processes from political influences which could lead to collusion between political party and a company for a particular agenda that fulfils the selfish motives of a corporation for example circumventing procedural delays in mining or land acquisition and misappropriating 2% of CSR fund as a kickback to the political party. This point could be made clear by citing Arun Maira, a Planning Commission of India member who argues, ‘If business behaves in a fashion which is sort of getting things for itself in the political system, in the government and the governance system, then it is destroying the institutions on which people fundamentally depend for ensuring justice, fairness and equity’ (The Indian Express 9 October 2012). The idea of decentred regulatory space comes from a cognitive perception that governance would be independent from the political biases and would have participation of non-state-actors which are equally important (Black 1997). The main challenge of the new regulatory structure though based on the novel intertwining of the self-regulation, responsive regulation and meta-regulatory parameters decisions lies in the way decisions would be made on techno-economic grounds and not be politicized. In

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practice, we are yet to observe how in practice such regulatory decisions remain techno-economic and not influenced by techno-economic content. This section aimed to explore an integral proposition of the dynamics of politics and strategies from the side of the state as well as the corporations that have remodelled the Indian CSR into a more institutionalized framework with multiple regulatory nitty-gritties, establishments of newer governing bodies, partnerships and programmes. The idea was to explore the paradigm shift and possible ramifications that have been posited in the move to decentred forms of soft legalities and regulation being a part of neoliberal discourse. Jessop (2002) cited by Shailaja Fennel observes society as a collection of competitive individuals connected through market-like contracts along with the communitarian attributes which envisions social contract being expressed through policy decisions to enhance social inclusion. Fennel argues that such systems though having divergent political groundwork unify in a regulatory framework that becomes responsive to market and resorts to novel forms of governance with corporations having enhanced social roles (Fennel 2007). CSR in India required a deliberative, incorporative way of setting up structure requiring democratic participation through the expressive facet of law aiming at reflecting or changing the social meaning concerned with CSR and social development. The retrospective analysis of past experience of CSR has set out a trajectory wherein the regulatory innovations planned in case of CSR could not yield the desired results and had instances of political capture of the otherwise self-regulatory premise of corporate responsibility (Banerjee 2007). The legal doctrine or decision in case of CSR, as tried to be expressive in its approach through defining CSR in a more formalized manner in the Draft Rules faced the corporate overpower. As a result, the interpretation of CSR through mandatory legal provision remains symbolic in the hands of corporate entities. The expressive element of providing a means for understanding the norm shaping and internalization of the concept through constraining and constructing institutions has not proven to be effective in case of CSR provisions yet (Adler 2000). Dominant facilitative attributes of law building up a decentred regulatory space have somewhat provided an overpowering status to the corporate entities wherein we observe that the expressive aspect of legal provision has reconciled with the autonomy of the corporate actors allowing them to impact the decision of law to stimulate social

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meaning of CSR. Similarly, the other side of the conundrum lays the political capture to the legal regime adversely impacting the illustrative feature of the expressive facet of law that could have otherwise been fructifying results on attitudes and behaviours pertaining to CSR (Engle 2004). In contemporary global scenario, it is impractical to understand the transformation in the world’s politico-economic structure without understanding the role of the modern corporate enterprise, for it has become one of the significant actors in global platform (Haufler 2001). In the times of intense debate over costs and benefits of globalization, liberalization and privatization, it is intriguing to explore how the corporate sector is getting into the domains of the public. William Greider (1998) in his book One World, Ready or Not and David Korten (1996) in his book When Corporations Rule the World, mention that the power is shifting dramatically in the hands of corporate enterprises (Greider 1998; Korten 1996). The recognition of CSR as an important driver for the socio-economic and environmental sustainability goals precipitates out of the global recognition of corporations as powerful actors in the global governance arena. The current international governance arrangements have led to the enhanced recognition of the corporations in the global economic activities (Cerny 1995). The states play hosts to operational activities of the corporations. Such activities on one hand are claimed to augment growth potential and technological advancement for the host states, whereas on the other hand it has been witnessed as well as argued that the unfettered corporate actions pose significant threat to the communities, resources and larger development aspects (Banerjee 2007). Therefore state and supra-state associations globally co-operate to facilitate the self-regulatory corporate behaviour through the promulgation of international frameworks on CSR applicable to corporations operating across nations. Along with the international framework, the corporations also need to showcase responsible social behaviour in the nations where they are having their operations. All such advancements in the CSR space have been a result of gradual worldwide movement towards the socially responsible behaviour emanating out of charity, philanthropy, trusteeship, reduction of state control, fall of welfarism and corporate misconduct. The way CSR has shaped in India is not an emergent one; rather it could be traced through the sequence of events happening prior to the decision of bringing CSR into legal discourse. CSR in India has undergone massive change after the enactment of Section 135 of the new Companies Law which not only

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mandates CSR for the firms falling under certain prerequisite but also shows a planning and implementation roadmap for the firms. Ever since the provisions of the section have been implemented, the CSR space in India has witnessed a better organized and consorted approach to CSR with the companies being more focussed towards allocating funds, developing policies and implementing tangible programmes that could later be a part of public disclosure. The previous government took up this initiative to make CSR as a part of the legal discourse as an initial step to the larger goal of cohabitation of state and corporate sector for the better governance scenario. With the change of government in the centre post enactment of the CSR provisions, the state’s approach towards CSR has been more liberal and responsive. The report cards for the two financial years of the eligible companies are out and the analysis of the same sets out many relevant observations that are attempted in this paper. One of the most vital analyses could be the performance of the companies in the CSR collaborative partnerships. An in-depth study of the legal provisions and the allied developments clearly shows that one of the main aims of CSR in India is to achieve collaborative partnership through decentred regulatory mechanisms (Black, Rules and Regulators 1997). There are five central notions to the concept of decentred regulation: complexity, fragmentation, interdependencies, ungovernability and the rejection of a clear distinction between public and private. The decentred understanding of regulation focuses on interpreting casual complexity and complexity of interaction (Black, Critical Reflections on Regulation 2007b) between the multiple actors in a system. This approach also calls for deliberation to the dynamic interaction between actors and systems and to the operations of stimulus which produces a consistent strain between cohesion and unsteadiness within a system. There are modicum differences in the priority of actors in a decentred space, albeit the state still has one of the vital positions.

Regulatory Transformations and Evolving Paradigm The main aim of the CSR paradigm shift by the state by bringing it into the legal gambit has been expected to be in collaborative partnership. The envisaged planning vis-a-vis the actual performance of the actors in the CSR space in India has shown growth of a regulatory model as discussed in Fig. 4.1. Characterizing and understanding of regula-

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Fig. 4.1 Emerging regulatory paradigm of CSR in India and its implications (Bharti 2016)

tory phenomena emerging around CSR in India conflate a number of factors such as codes, self-regulation and responsive regulation within the decentring space (Sheehy 2012). The deployment of CSR (Policy) Rules 2014 which came into effect from April 1, 2014, entails that the activities may generally be conducted as projects or programmes (either new or ongoing) excluding activities undertaken in pursuance of the normal course of business of a company (Ministry of Corporate Affairs 2013). The CSR Committee constituted under sec. 135(1) is guided to prepare the CSR Policy of the company which advice on the CSR activities to be pursued should not be a part of routine business course. The most important change that could take place from the time of deliberation of the Act and formulation of the Draft Rules to the final CSR (Policy) Rules 2014 is that the ‘Board’ of the company would decide which activities would be a part of the CSR endeavour for them. Collaboration has been given an imperative position in the rules where it has been clearly directed that corporations can co-operate and collaborate in a joint initiative and the parties could individually put that as a part of their CSR activity in the respective annual reports. These aspects of the CSR rules set out

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a tone of discursive changes within the law. The provisions of the CSR Rules entail law’s relative retreat from centre stage and the ascendance of new forms of legal and quasi-legal arrangement mechanisms which focus more on creation of shared value. In the present neoliberal context, as governance becomes the new-fangled orthodoxy, new tools of ordering come to the fore: self-regulation and responsive regulation as a part of decentring framework presumably lead to various soft law instruments and techniques of regulation. The Indian example of law and CSR thus directs towards the analysis of contemporary architecture of the stakeholder participation that exists at multilevel frameworks (Idowu and Filho 2009). The Companies Act 2013 has a distinctive formulation of CSR which guides the multiple actors and aims at universality of approach (Ministry of Corporate Affairs 2014). CSR in new legislation is described in terms of concrete spend by the companies in the activities listed in the Schedule VII of the Act that sets out a soft law tone to the enactment leaving a scope for the corporate actors to innovate and formulate the activities which is in their best interest as well. The companies need to disclose the projects undertaken and ensure access of the information to the nation at large which certainly exhibits the decentred attribute of the regulatory parameters. The 2% spending by the corporations needs to be measurable to be qualified to be called CSR. This paradigm shift showcases the desire of actors of governance architecture to elucidate a forum where a unified format and compatible levels of interactions are the expected outcomes. The regulatory framework exhibits a facilitative and responsive approach aiming towards the collaborative approach in social development endeavours of corporations. Partnership model which is one envisaged result of this focuses on one participant putting in money into a project and the deficit could flow from other partners in order to attain the project goals CSR (Bharti 2013). The provisions on CSR in the new legislation cannot be understood in isolation from the wider debate on decentring approach and global governance. The issue of how CSR, soft law and decentred regulation are actually linked in Indian scenario does draw coherence with the global soft law and decentred regime. Developments pertaining to such also referred to as ‘emergent juridification’ of CSR, wherein actors are put under a co-ordinated partnership framework (Buhmann 2011). CSR initiatives in Indian law and regulatory paradigm are expected to pave the way towards international soft law, and such transitions from purely self-regulated CSR to a collaborative approach and responsive

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regulation exemplify how the new forms of governance would move from pure traditional dispositions to hybrid models.

Three Channels to Collaborative Partnership as Per Section 135 The CSR restructuring in the country raised an important debate concerning institutions and levels of regulatory interactions to be organized. This complex matrix could be understood in three ways. First, the state realized the fact that the range of factions which would be addressed by the corporations would expand inevitably and the traditional regulatory framework thus needed to give way to more pluralistic forms of regulatory commitments. Second, the enhanced regulatory framework for CSR needed to include collaborative partnership scaffold which is witnessed to be varied with multiple partners and essentially private sector participants (Kinley and Tadaki 2004). The salient feature of such a framework could be production of ‘norm-like’ codes and guidelines. Third, such regulatory aspects within a country could be wrested in new forms of legislations, institutions and vested on mechanisms which are based on the international CSR governance framework that focuses on corporate partnership with essentially civil society to implement CSR as they have skill sets to work with the communities (Sauvant and Aranda 1994). India has unequivocally observed the impacts of globalization on economic, socio-political and regulatory ambience (Collier 2007). The policy dynamics in CSR space implied the emergence of novel methods and decision-making procedures (Archibugi et al., 2012). The legislative, regulatory and institutional transformation are a result of that. The heterogeneous international framework on CSR led the state of India to take up steps forward towards CSR Guidelines and in terms the legislative provision being an outcome of inspiration from multiple models. Section 135, Rule 4 of the (CSR Policy) Rules clearly guides the corporations to implement CSR primarily through three diverse models. Namely: The Foundation Model, The In-house CSR Workforce Model and The Non-Profit Partnership Model. These models primarily emerge out of the self-regulatory paradigm which means the state does not practise command and control parameters for CSR but promotes and facilitates a self-regulatory CSR practice and corporations are free to decide which collaborative partnership model suits them the best. During the course of field interaction and secondary research, it was witnessed that the pure

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implementation model as set out in the Section 135 is seldom practised. Corporations rather prefer to hybridize CSR implementation strategies wherein either single or multiple implementing agencies could partner, there are multiple levels of partnerships, aspects of funding, sponsoring or building infrastructure and even direct involvement with the communities and environment through in-house CSR team are present. Citing a relevant example of the corporation’s collaborative models (which are eligible as per Section 135) one can envision how the same works in the Indian case. The CSR at Larsen & Toubro (L&T) has been discussed to have taken advanced steps towards collaborative partnership to. The Inhouse CSR model of L&T has developed the technology to crush the muck and reuse the same in the manufacturing of concrete. That is an example of the in-house CSR. An unprecedented institutional framework made up of a set of legal competences in which state law is only one of the actors participating in the regulatory process could be witnessed to have emerged in the country. In many fields of law, the traditional domestic actors in the law-making process (e.g. policymakers, politicians, academics, the judicial system) reciprocally interact and eventually compete with an increasing number of actors outside national jurisdiction, creating a complex transnational space where decision-making, political and legal processes take place. The point is not simply that some of the leading actors involved in regulation are found outside the borders of the nation-state; it is rather that the burgeoning of sites from which actors and institutions produce and perceive normatively has broken the monopoly of the nation-state over law and policy-making. Along with national actors, transnational, supra-national and non-state actors such as corporations and NGOs are observed to be interlinked and participating in the production of norms and regulations. The legal outcome of this as per Caruso, cited by Fillippo Zerilli, is new ‘institutional alchemy’, that is not a coherent legal doctrine, efforts of the legal and institutional regime to establish a ‘uniform concept of law’ (Gunther 2008). It is a ‘fragmented, displaced, and often contested assemblage of regulations, the producers and beneficiaries of which are closely interlinked, as well as mutually conditioned’ (Zerilli 2010).

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CSR in India: Understanding the Implementation Conundrum Despite the enhanced state’s role in renewed understanding of CSR in India, emphasis still remains on voluntarism and self-regulation when it comes to implementation. The projects that have been implemented in line with the Schedule VII of the Section 135 of the Act, have not shown any trend of collaboration within the corporations which was a high point of the formulation and deliberation of the legal regime on CSR. The IICA, which initially emerged as the think tank of the Ministry of Corporate Affairs was conceived to analyze the fact that partnership at all levels and among all actors becomes paramount when robust changes are expected. The role of IICA however greatly diminished over a perod of time. That precisely means that the partnerships of the CSR implementation not only be limited to the corporate and the civil society partnership, but to jointly build a futuristic model wherein the firms interact and collaborate when it comes to implementing CSR. At present, such futuristic goals in CSR collaborative partnership are yet to become a reality in the Indian case. The mandatory declaration on the National CSR Portal established by the Government of India exhibits the pattern of CSR spend that shall be reflected in the Fig. 4.2 below. It exhibits the CSR sector-wise expenditure breakup for the financial year (FY) 2020–2021. The methodology of implementation as well as the way collaborative partnerships worked have qualitatively not been focussed upon. Conceptual Understanding of the Implementation Conundrum in India The contemporary change in CSR has been linked to development discourse in India. It has also been observed that the development goals for CSR have been legally enshrined in the Schedule VII of the Companies Act, 2013. Schedule VII underlines the expectations in terms of CSR activities which apply to corporate actors wherever they operate, regardless of sector. The instruments are aimed at aiding development goals. There is a need to understand why the set of activities have been encapsulated in the Schedule VII. The closer analysis of sources available at the national level explores the attention to a range of informal, often localized, strategies of accountability adopted by corporate actors. A wide array of initiatives abound in terms of public–private partnerships, both

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Fig. 4.2 CSR SPENT: SECTOR WISE—2020–21 Source National CSR Portal https://www.csr.gov.in/content/csr/global/master/home/home.html

at the country level and within the UN system, cross-border corporate coalitions such as the World Business Council for Sustainable Development (WBCSD) or the International Business Leaders Forum (IBLF); global conferences, studies and workshops, social standards, labels and related monitoring mechanisms, fair trade groups, and socially responsible investment funds do focus on Social development. The ruling economic paradigm has it that markets—whether global or national—are about efficiency in resource allocation, about competition as a source of economic dynamism, about productivity gains that translate into lower costs and/or higher quality. Companies, through seeking to maximize their profits, ensure that economies grow for a better market to come into being, consumer demand is met and economic development processes are set in

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motion and the tool of CSR becomes imperative to ensure social legitimacy, consensus of all actors including citizenry to operate and large-scale visibility. In order to harness the maximum utility out of CSR for the respective motives of state and the corporate sector, the social development cause of CSR is augmented as it binds together state and corporate actors towards a better synergy ensuring the interest of both the actors in a neoliberal regime emanating a new governance framework moving towards decentred regulatory space. The purpose of CSR thus could be said to be more deep-rooted and strategic than it appears superficially. Section 135 of the Companies Act, 2013 seeks to provide that every company having net worth of Indian Rupees (INR) five hundred crores or more or a turnover of INR one thousand crores INR or more, or a net profit of INR five crore or more, during any financial year shall constitute the corporate social responsibility committee of the board of the company. This committee has the basic requirement to comprise three or more directors, out of which, at least one director should be an independent director. The composition of the committee shall be included in the board’s report. The committee is also expected to recommend the amount of expenditure to be incurred and monitor the policy from a time-to-time (PricewaterhouseCoopers 2013). The board is also guided to disclose the contents of the policy in its report, and place it on the website, if any, of the company. The provision explains that the companies would be required to spend at least 2% of the average net profits21 of the immediately preceding three years on CSR activities, and if not spent, explanation for the reasons thereof would be needed to be given in the annual report. The committee shall formulate the policy, getting inspirations from the activities specified in Schedule VII of the Companies Act 2013. Schedule VII of the Act has two versions. The first version has been replaced with the final version on February 27, 2014. The appended rules to the Section 135 were released in the draft form on September 9, 2013, however, due to criticisms and difference of opinions of the key actors, the Final CSR Policy Rules that came into force on February 27, 2014, provided a broad scope of negotiation and interpretation to the aspects of defining CSR, planning CSR and calculation of CSR spend. Apart from the new developments in the legal regime, there 21 Part I Section 3 (d) of the Draft CSR Rules explains ‘Net Profit’ for the Section 135 and these rules shall mean, net profit before tax as per books of accounts and shall not include profits arising from branches outside India.

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are two imperative developments that need to be assessed along with the analogue of the law and regulatory fraternity of CSR. The assessment of the National Voluntary Guidelines and the DPE Guidelines aids the study of genealogy of CSR in the Indian context and clarifies that the assessment of legal advancement of CSR alone cannot demonstrate the gradual movement from state’s obliviousness to state recognition and finally to state endorsement of self-regulatory CSR (Ministry of Corporate Affairs 2013). The aspects in social development has been a part of CSR discourse across the nations. As discussed in the preceding sections, there has been a movement of multiple standards and guidelines claim to be regulatory towards corporate social behaviour (Backer 2008). The regulatory structure around the CSR ensures social legitimacy to the economic aspirations of the corporations. Such arrangements lead to acceptance to the business-like approach of social development, where state, corporation and civil society have been the stakeholders. The role of soft law regime pertaining to CSR is versatile, and it also helps in building robust image in the global market scenario (Parker 2002). The decentred regulatory model as discussed, thus ensures corporations become prominent stakeholders in the scheme of governance which also provides them locus standi in the governance initiatives (Black 1997). Such newly enhanced public role provides greater legitimacy in the arena of social development (Haufler 2001). India’s step to make CSR regulatory provision, emboldens the corporate sector ties (Abbot and Snidal 2004). Corporations having economic interest in a particular country adopt country-specific CSR in order to establish their presence as a credible actor albeit having self-regulatory power facilitated by meta-regulation and responsive role from the side of the state, civil society and in terms citizenry.

Paradoxes and Futuristic Approach Recapitulating CSR expenditure of 460 listed companies, which have placed their annual reports on their respective websites, indicates that 51 Public Sector Undertakings (PSUs) and 409 private sector companies together spent about Rs. 6337 crores on CSR during 2014–2015 (CSR Portal GOI). It is interesting to note that the breakup of the amount of the total CSR spend is skewed wherein out of 460 listed companies

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that have come out with the CSR disclosure in the annual reports indicates that 409 private sector companies have spent INR 3950.76 (Rs. Crore) and 51 public sector companies have spent INR 2386.60 (Rs. Crore). It is however important to note that only 266 companies could spend 2% of the average profit which they were supposed to. It was also emphasized by the former Finance Minister Late Mr. Arun Jaitely—there were considerable confusions and delays with respect to the formulation of a well-conceived policy, formation of CSR Committee and implementation practices (The Economic Times 2016). At this juncture, therefore, it becomes important to critically analyze the development taking place in this regard. There is a need to attempt a twofold exploratory exercise as the CSR story progresses in the Indian context. First, ascertaining the fundamental thematic delineation vis-a-vis the implementation of CSR that led to regulatory transformations and structural changes. Second, through an analysis of the types of legal, regulatory and structural changes taking place in the CSR arena in India towards the envisaged development goals, an attempt should be made to put this paradigm shift into an archetype and investigate the lacuna in various CSR Collaborative Partnership models mentioned in preceding section. The CSR rules that came out in April 2014, state the three channels of implementation of the CSR- A. Through setting up Company’s own foundation B. By trained in-house team and C. Partnering with the non-profit sector. Initially, IICA emerged as a proponent of the CSR and non-profit sector partnership and diligently undertook the task of enlisting reliable NGOs through the NGO hub. The CSR implementation report card for 2020–2021 showcased on the CSR Portal reflects that the CSR activities have been mostly channelized through the foundations of the companies who have reported. The collaborative partnership governance scenario can also be marked with the expansion of decentred regulatory space (Black, Rules and Regulators 1997) in India. It is not possible to undertake implementation without engaging with the multiple actors belonging to state, civil society and citizenry. The law focuses on an enhanced partnership with the NGOs for the reason that they have a skill set required for the social development endeavours that cannot be fulfilled only in-house. During the financial year 2015–2016 has also been observed that the foundations and the companies mostly are city centric and do not have the actual outreach. The partnership with NGOs however has been a grey area till date when it comes to collaborative implementation. As per an article titled ‘NGOs: The Credibility

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Conundrum’ published by Mint in July 2015, there has been a long history of trust deficit between the NGOs and the corporations from both the sides. In the past, the relationship between the corporate and the NGOs has been mostly confrontational. Nevertheless, some years later, new forms of business-NGO engagement surfaced based on a combination of partnership and collaboration strategies. The NGOs continue with the advocacy and along with engaging and getting funded from the corporations and business associations to implement CSR. In the current post-COVID world, wherein the government funding to the the NGOs have always been a strained area, corporate funding has become one of the vital sources. One needs to assess whether the multi-stakeholder partnership as envisaged through the Section 135 of the Companies Act actually translated into the practical realities and what kind of futuristic working models could be thought of, intertwining the aspects of legitimacy, power, identity and representation of the implementing agency. Graph 4.1 shows top ten spenders of CSR of the year 2020–2021 who have set out their respective CSR disclosure. Looking at the graph of the top 10 companies, one can observe a mix of both public sector and private sector actors. A brief case analysis of 3 out of the 10 companies is set out below keeping in mind the scope of this book. The observations made, showcase of few interesting aspects in the domain of collaborative partnership and its implementation.

Salient Features of Collaborative Partnership from the Top Spenders A closer look at the CSR report of the top 3 spenders namely—Reliance Industries Limited, Tata Consultancy Services Limited and Tata Sons Private Limited as well as ONGC, a PSU shows multiple departure points. To begin with—The Reliance Industries Limited (RIL) annual report of 2019–2020 sets out a breakup of the area on which CSR expenditure has taken place. The CSR philosophy of RIL focuses on inclusive growth and there is a list of thrust areas on which CSR spend has been done, namely- Rural Transformation, Health care, Education, Environment, Protection of National Heritage, Art and Culture,

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Graph 4.1 TOP 10 CSR SPENDERS 2020–21 Source National CSR Portal https://www.csr.gov.in/content/csr/global/master/home/home.html

Disaster Response.22 All CSR activities of RIL are channelized through the Reliance Foundation that further coordinates with grassroots agencies to implement the CSR projects, however, while we look at the innovation in the collaborative stakeholder partnership, most of the work is carried out in-house and spread across states with focus being on the area of operations. Education, skilling, leading to creation of livelihood through employment, and entrepreneurship opportunities. Health and wellness, water, sanitation and hygiene, education and skilling, creation of employment and entrepreneurship (self-employment), basic health and

22 See generally http://www.reliancefoundation.org/.

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wellness—Water, Sanitation & Hygiene (WASH) are the main thrust areas of Tata Group of Companies. ONGC is a PSU and the collaborative partnership model taken up mostly deals with partnering with the NGOs operating in the area where the projects need to be implemented and the impetus is on the specialized skill sets of the partners. For example, Varisthajana Swasthya Sewa Abhiyan is a project by ONGC wherein the organization partners with HelpAge India to provide health care to the elderly population through Mobile Medicare Units. ONGC-GICEIT Computer Centre is another project that partners with the educational institution, Bharatiya Vidya Bhavan. It operates five computer centres providing employment-related computer training to underprivileged youth across different operational areas of ONGC. Project Utkarsh- Livelihood Project in Sibasagar: Initiated in 2011– 2012, this project seeks to expand livelihood opportunities for 400 households in one year through training of women in skills like tailoring, soft toy making etc. with linkages for income generation as well as training the elderly in vocations like goatery, piggery, mushroom cultivation etc. while establishing adequate forward and backward linkage which is mostly done through community organizations.23 In case of Infosys, CSR activities are undertaken through the registered society of Infosys through the Infosys Foundation which primarily spans over sponsoring to multiple organizations to promote local art and culture, funding professionship and scholarships at the institutions and higher education, funding health care and destitute care programme and the to enlist some beneficiaries—Akshaya Patra Foundation, Public health foundation, Parivar Education Society among others.24 These above cases also corroborate the same fact that mostly Indian corporations are dominantly working on three models: (1) Foundations, (2) Civil Society Partnership, and (3) Sponsorship/funding. It has been essentially witnessed that the dominant model of implementing CSR is through corporation’s own foundations. The role of NGOs and other stakeholders starts at tier two of the implementation. Not only is there disconnect in the modes of implementation of CSR, but one can also 23 See generally http://www.ongcindia.com/wps/wcm/OngcHTML/Annual_Report_ 2014_15/Annual_Report.html. 24 See generally https://www.infosys.com/investors/reports-filings/annual-report/ann ual/Documents/infosys-AR-15.pdf.

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argue that the efforts to consolidate CSR for more tangible outcomes and project based synthesizing approach are still not visible. Though there is little bit of organization in terms of policies and committees in place for the eligible corporations, there is not much of difference in the implementation practices after the enactment of Section 135. It has also been witnessed through the field interactions that there is no consensus on how to define and classify the collaborative stakeholder partnerships. The reason for the same could be the apprehensions in the role of NGOs beyond watchdogs (Utting 2005) and conflict of interests between corporations and corporations-implementing agencies. Engaging directly with corporate actors and employing more reformist strategies comes with risks and trade-offs. Corporations are more comfortable with the sponsorship/funding and foundation/in-house models because of the apprehensions that other partners may prove to be dominant in their approach and seek direct access to decision-making that might have impacts on corporate natural profit-making behaviour. Despite the ambitious goals of multi-stakeholder partnership, the futuristic collaborative model in case of CSR wherein multiple corporations as well as NGOs are working on consolidated project is far from reality in the present scenario. The questions of legitimacy, mutual trust, capacity and effectiveness still loom large when it comes to innovative approaches for CSR implementation. There has been ample confusion about striking a balance between CSR and Business Case. It has also been observed that the approaches to partner are more comfort based than being ambitious. Therefore there is a need to create robust models that could take the CSR to the all-new level of development goals.

Future of CSR in India The emerging market economy of India developed to be a ‘Three sector Economy’. Corporations, state and the civil society are the representatives of the private sector, public sector and non-profit sector respectively. In the neoliberal regime, the market operates as a place of meaning and value formation (Malloy 2004) and indeed is a complex system due to massive participation of individual actors, varying degrees of freedom and innumerable interactions. Such complexity is inherent to the very nature of the market enabling the actors to initiate exchange processes leading to a dynamic environment that facilitates wealth generation. Similarly in a legal system, the dynamism which is a result of neoliberal

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market economic architecture constructs and implements the rule in such a manner that a sustainable system is ensured. As per Robin Paul Malloy, in a market economy, the attention of law is primarily focussed on the process of sustainable wealth formation rather than wealth maximization. This ensures long-term economic growth (Malloy 2004). Inculcating this framework into Indian case, one could noticeably observe India being a market oriented economy wherein state too depends on the market actors and precisely on the corporations. Corporations have been observed to become vital actors in the holistic governance framework; however, they too need to tread a careful path in a complex market environment. In a globalized scenario, the aspiration of global visibility becomes the core focus area for the corporations. The constructive dissent from wealth maximization to sustainable wealth formation in the contemporary interconnected world is inevitable. The horizons have also broadened for the corporate actors in pursuit of enhanced leadership aspirations which push them to consider nonfinancial indicators with equal earnestness as the financial factors. Such advancement from a linear wealth maximization approach also calls for nuanced perspectives of corporations to realize the major difference between ‘seeking to improve one’s position and seeking to maximize one’s wealth advantage’ (Malloy 2004). The paradigmatic rearrangements in the CSR space through the legal provision, institutional structuring and hybrid regulatory milieu focus on the intent of the corporations towards seeking to improve their own circumstances at three levels. First, at the level of the community one works with, second, at the governance level which enumerates state and other non-state actors and most importantly, third, at international development and trade and exchange levels where adhering to CSR parameters and other multilateral frameworks like ISO 26000, UNGC, OECD etc. ensures a spectrum of benefits for the corporations. The image of the corporation that they are not only the market actors who focus on the maximization of their self-interest rather also recognize the needs of the community at large and working towards that goal ensures diverse advantages. Creativity and efficiency taken together build a sustainable framework for market operations and social legitimacy (Chan and Gambino 2008). This further gives an edge to those corporations who consider all these factors over those who still concentrate on the archaic tools of wealth maximization. It becomes necessary to understand the state’s role in the market economy. The structural features of the Indian state post liberalization

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has been ever changing, however, the primary modus operandi of the state remains a provider of public goods and services but at the same time it is expected to provide a feasible environment to operate for the market actors too. The current international governance arrangements have led to the enhanced recognition of the corporations in the global economic activities (Cerny 1995). The states play hosts to operational activities of the corporations. Such activities on one hand are claimed to augment growth potential and technological advancement for the host states, whereas on the other hand it has been witnessed as well as argued that the unfettered corporate actions pose significant threat to the communities, resources and larger development aspects (Banerjee 2007). Therefore state and supra-state associations globally co-operate to facilitate the self-regulatory corporate behaviour through the promulgation of international frameworks on CSR applicable to corporations operating across nations. The contemporary governance mechanism of the state is classified by two basic aspects. First, there is plurality of participants in the governance arena apart from the state such as civil society and corporations and second, the regulatory framework of the state has been influenced by the global governance and institutional mechanisms (Lynch 2005). CSR being an impromptu strategic attribute of the corporations inherently that is marked by need based emergence became overtly prominent in the global governance paradigm. The reason for this transformation is directly connected to the changes in the global order and resultant liberalization leading to complex and heterogeneous economic and social demands. The cause of the proliferation of CSR as a relevant concept within the global social development discourse could be understood with respect to the post- globalized, neoliberal era through the global positioning of the corporations across liberalized states and deregulated markets (Harvey 2005). The cognizance of CSR as an instrument of corporate good practices in the larger international arena is directly proportional to the growth in the operations of businesses globally. ‘Corporation’ as a concept encapsulates organizations of different configurations either producing goods or services, operating in a dynamic environment with economic objects and affecting its surrounding social environment comprising direct and indirect stakeholders (Etcheverry 2005). The attempt to connect corporations with the objective of positive social change is not essentially a

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new observable fact, albeit the contemporary socio-political, economic and ideological milieu inflicts diverse impacts on the same. Although seldom confessed by the corporate actors, the precursor of the present CSR such as charity and philanthropy have emerged out of the necessity of the corporations to create conducive environment for them in the space they operated, neutralize the negative impact of corporation’s operations and mark visibility at larger socio-political platform. The attributes of social responsibility historically have been a matter of legitimation.

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CHAPTER 5

Conclusion

The book attempted to offer a renewed basis of understanding of the relationship between CSR, law, regulation and institutions. In this context, the in-depth analysis of the Indian case of CSR tried to explain the rise of the corporate actors to an altitude of authoritative prominence in the economic and in terms socio-political discourse. Consequently, the patterns of international governance framework are argued to be transformed, in order to provide a conducive environment for corporations to operate (Baron 2001). CSR as a case in point, in this socio-political and economic discourse, has a strategic vitality which is intertwined with the objectives of social legitimacy, consensus and sustainable wealth maximization by the corporations. It has a deeper calculated connotation than what appears in the common rhetoric of an exemplary practice of a good corporate citizenship. Understanding CSR in the backdrop of state-corporate relationship which has transformed in the post-globalization scenario to a more market oriented approach provides an interpretive avenue that connects CSR to the larger international governance arena (Aras and Crowther 2009). The reasons for such renewed interest in CSR especially in the past decade hint at multiple changes happening at the level of state, supra-state and at the global level. The International development framework has focussed on building up an archetype incorporating multiple forums, guidelines, standards, codes from the diverse sources. Such prerogative, as closely © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022 S. Bharti, Corporate Social Responsibility in India, https://doi.org/10.1007/978-981-19-2304-3_5

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analysed in this book, exposes an underlying feature of soft law that has been preferred as an option to urge corporate commitment. The soft law instruments are focussed due to the fact that they are uniquely created through the inter-related features of being non-binding, non-coercive, non-hierarchical and having a considerable scope for negotiations (Abbot and Snidal 2004). Soft law framework in the CSR space primarily works through normative commitment. Corporations have become the actors of paramount significance in the economic aspect, albeit they have faced collapses and market failures. The examples of such failures are replete and are marked by incidents of noncompliance, fraud, misconduct, kickbacks, corruption, ecological damage, adverse impacts to communities and livelihoods. The corporate maleficent behaviour and resulting failures have caused critical situations in global order and economic slowdowns. In such scenarios, while restructuring their strategies, the corporations felt the inevitable requirement to bring CSR discourse in the centre stage. The renewed interest in CSR—which is more prominent in the preceding decade and still continuing—is a part of larger business resurfacing for the corporations due to the strategic value attached with CSR. Corporations claim a significant degree of self-regulatory behaviour to ensure social development ends are met through CSR; however, apart from the social development buzzword linked to the concept of CSR, it has always been beneficial for the corporations whether it may or may not make tangible positive impact towards social development goals (Campbell 2007). The endorsement of CSR as a tool to impact social development at the international governance framework reverberates the post-globalization developments where corporations became vital actors in the governance framework due to their economic roles. Therefore, in order to provide recognition to existing self-regulatory CSR, multiple actors at the international level come up with tools, instruments and forums to aid enhancement of reputational accountability through normative commitments that broadly are based on the tenets of soft law. Understanding a country’s prerogative in endorsement of the facets of CSR aiding social development suggests important insights of the new era of regulatory governance which has soft law underpinnings (Morgan and Yeung 2007). The book attempted to understand the contemporary developments of CSR, its reasons and implications through studying the Indian case which is marked by many legal/institutional and governance upturns surrounding the discourse of CSR in contemporary scenarios.

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India has taken the prerogative of embedding CSR into legal discourse. The state, by doing so, has ratified the corporate led CSR into its governance archetype and endorsed the self-regulatory practices of the CSR that claim to have larger social development goals (Parker 2002). The assessment of such move from the side of the state aims at finding multiple answers pertaining to the objective behind bringing CSR in the legal purview through formulating Section 135 of the Companies Act 2013. The research comprised in the book also attempted to address the complexities that exist in the laws and regulatory space. This results into institutional changes through understanding the role that law precisely plays while providing a legal connotation to CSR, creating rules and guidelines and setting out expectations. Consequently, the patterns of legal argument and processes with respect to CSR have been investigated. The analysis of the patterns of legal argument arising in the case of CSR in India showcase an explicit shift from the way regulatory space has traditionally been assumed. The patterns of legal arguments with respect to CSR in India depict an affinity towards normative commitment and reputational accountability that links its deep inspiration from the soft law framework of the international development regime. Applying the soft law frame of reference, the CSR legal provision has been witnessed to be in tandem with the policy rationales and justifications offered by the actors involved. In due course, the added complexity is also witnessed and further analysed that works through the interplay of regulatory instruments. We observe such complexities through comparative analysis of various sources available as a result of legal provisioning of CSR— the transcendence from Draft CSR Rules the Final CSR Rules to the new Companies (CSR Policy) Amendment Rules, 2021 and Schedule VII (version I and II). At the outset, law proposes to have an expressive role in the form of establishment of democratic institutions through a decentred regulatory space, marked by the presence of non-state actors (Black 2007). As the legal provision on CSR progressed towards finalization, the role of law was witnessed to get constrained and restored to be primarily facilitative which could be observed as loosely bound in the present context. Understanding the interconnectedness of facilitative role of Section 135 of the Companies Act 2013, International soft law framework, state-corporate relationship operating in a neoliberal environment, it is argued that the present case of implementation of CSR provision

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is worked out through more negotiable and plural forms of regulatory instruments. The corporate self-regulation that inherently exists in the case of CSR is given paramount significance in the Indian case wherein the law and the appended rules clearly set out that maximum autonomy wrests in the hands of the corporations. The decision-making, sector-wise budgeting, implementation and evaluation are all essentially self-regulatory. By doing so, the state attempts to practice a metaregulatory role wherein it promotes self-regulation of the corporate behaviour (Ogus 2004). Further, as analysed in this book, there have been establishment and restructuring of existing institutions such as NFCSR in IICA that were expected to help construct a ubiquitous platform for the CSR activities to effectively take place. In the present scenario, the role of such state led institutions have diminished largely, reducing them merely to the training and appreciation centres. The ‘comply or explain’ feature of the law is also marked by mandating CSR disclosures of funds and if the funds are not utilized an explanation justifying the same suffices. The amended rules on CSR also pave way to channelize any excess amount spent over and above the mandatory requirement. It sets out—‘Where a company spends an amount above the requirement provided under Section 135(5) of the Act, the company can set off such excess amount up to the immediate succeeding three financial years’. SEBI has also brought out a guideline for mandatory disclosures for the listed companies prior to enactment of the CSR provisions. In 2021, SEBI revamped the disclosure requirements from the listed companies. This is known as Business Responsibility and Sustainability Report (BRSR). The disclosures have to be on the basis of the nine principles set out in the ‘National Guidelines on Responsible Business Conduct’ (NGBRCs). BSE is said to play the role of a credit rating body that is aimed to provide visibility to the corporations in the field of CSR through the rating system. The intent to explore all these attributes related to the larger CSR paradigm shift explains that state is changing the role of being a centralized rule maker to a participant in the regulatory framework through formulating legal provisions such as Section 135. CSR, due to its capacity to create positive results to underlying social development goals, is put as the primary argument by the state as well as the corporations along with the civil society actors in a decentred regulatory space that turns out to be mutually beneficial for all the actors. As argued through the empirical findings and set out through

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law and regulatory framework, state practices responsive regulation that promotes corporate visibility and claims that corporate participation in the governance arena is valuable through CSR practices. The interplay of self-regulation from the side of corporations and meta-regulation and responsive regulation from the side of the state could be understood as a larger socio-political and economic strategic move from both. A retrospective examination was attempted in order to explain the contemporary changes and probable prospective implications of the transformations in law and regulatory arena with respect to CSR. Moving back to the history of CSR in India and connecting the same to history of CSR in the western world, where it was born originally, it is witnessed that the precursors of CSR in India were different from that of the west. The altruistic business behaviour primarily originated from religion and trusteeship in India whereas in the west, the charity and philanthropy were related to obligations. Indian corporations have inherently been dynastic which were later joined by a fleet state led PSUs whereas the western example set out a very early origin of private players. Relatively different histories of Indian and western CSR intertwined in the decade of 1990s being marked by globalization. The privatization and liberalization resulted in massive proliferation of MNCs in the country. This development connected India to the global business milieu and in terms of the more popular way CSR was practised globally. By the 2000s, the practice of international CSR was witnessed by the corporations operating in the country. This could be analysed through the adherence to UNGC, OECD, GRI and many others. The reasons for the state to be more responsive towards such practices of CSR could be clearly correlated to the fact that the country needed to enhance corporate operations in their markets in order to ensure economic growth. However, such pursuit of economic well-being could not be detached from the role of politics in the whole system. The way CSR has shaped in India is not an emergent one; rather, it could be traced through the sequence of events happening prior to the decision of bringing CSR into legal discourse. The present law and regulatory development in India were found out to have a set of preceding activities that have been taking place in India in different contexts. The Corporate Social Responsibility Voluntary Guidelines 2009, released by the MCA in December 2009, could be recalled as the first formal step towards the recognition of CSR by the state as a tool to bring positive change to the social development goals. The guideline document was refined in July

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2011 and was renamed as National Voluntary Guidelines on Social, Environmental and Economical Responsibilities of Business. The reason why it becomes imperative to analyse the two versions of voluntary guidelines on CSR is due to the fact that it demonstrates an unprecedented shift in the attitude of state towards CSR claiming that to be inevitable to meet social development goals in present times. State upholds that corporations have become imperative actors in improving quality of life in the country and prove to have significant and long-lasting impacts on social development goals. Through such actions, a renewed state-corporate symbiotic relationship could be observed wherein the state has endorsed the importance of CSR and proposes a non-binding framework. This framework is argued to be a part of larger strategic exercise wherein the state’s responsive role in promoting CSR also aids corporate legitimacy to operate and carry out sustainable wealth maximization. Critically analysing the creation of such voluntary framework like National Voluntary Guidelines, it was explored through the interviews assessing the present scenario, that the relevance of National Voluntary Guidelines is merely of a reference document and the corporations never took cognizance of diligently following the same.1 The impact of National Voluntary Guidelines has been negligible and not relevant to the structuring of the existing CSR framework as per the guidelines could be observed within the corporate sector. The NVG only has an emblematic value as corporations do claim that they have been adhering to the same. However, in reality, the corporations have mostly been operating through their self-regulatory methodology which was primarily based on international guidelines. One aspect which clearly comes out of this kind of action is that CSR got recognition by the state. Such recognition in a way created conducive space for the corporate operations as the state argued that corporations have become the inevitable actors in ensuring inclusive development in the country. This action could be observed to have deeper political connotations. The recognition of corporate led CSR reveals the state’s adherence to the corporations’ ascendancy in the economic domain. The endorsement of CSR by the state creates a strong position for the corporations to command legitimacy, operate freely and participates in the market transaction as CSR enhances the social visibility and showcases them as an

1 Based on the interview held on February 15, 2019, with a representative of IICA.

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important actors of the governance arena in terms justifying their operations of economic interest that would be for the well-being of the economic growth for the country. The second landmark which could be analysed as a precursor of the present law and regulatory transformation in the case of CSR is the framing of DPE Guidelines by the state that regulated CSR of the PSUs. The schema of the DPE guidelines finds points of similarity in the structure and function with the CSR legal provisions. The comparative analysis of DPE Guidelines with the Section 135 of the Companies Act 2013 has shown, though most of the provisions provided in the DPE guidelines coincide with the CSR Rules but the new paradigm through the enactment of CSR provision has been more decentred and negotiable in the approach than the DPE guidelines. The empirical analysis and interaction in the due course of writing the book proved that the DPE implementation of the guidelines had instances of political capture and kickbacks. It was also revealed through the interviews with the key players that implementation of DPE guidelines did not yield much positive results as envisaged. Typical instances of corruption through the state agents have been the involvement of the political parties and fountainheads in power and influencing the corporations to forward CSR funds to their respective constituencies, party funds, personal utilization, etc. Similarly, the CSR money has also been used as kickbacks at many instances to provide to state agents in the form of bribe to the government officials in lieu of favours. The collusive practices between civil society organizations, corporations and state actors have also been on the rise with respect to CSR funds and projects (Banerjee 2007). The interactions with key persons in the CSR field have helped explore such hazards of the CSR discourse in a state corporate and civil society conundrum giving rise to the paradoxical aspects pertaining to legalization of CSR in India. The two major landmarks within CSR paradigm in India, the National Voluntary Guidelines and the DPE Guidelines upon analysis, do prove to be a part of larger implicit trajectory that does not catch the attention of many while analysing CSR discourse which is now marked by the development of CSR legal provision transforming the regulatory and institutional milieu. In order to understand the transformed arena of CSR space in India, it was essential to delve into preceding developments that complete the picture of the whole trajectory. This analysis resulted into an understanding of transforming CSR space into a continuum and part of a larger spectrum that hints towards the state’s strategic and gradual move

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towards endorsing corporate self-regulatory behaviour in the form of CSR and thereby enabling a state ratified legitimacy to the social role of corporations. The social role of corporations posed in the larger public arena is beneficial for both state and corporate actors. The corporations gain legitimacy to operate in the national and in terms international domain as well as an assertive position to negotiate in global trade and market framework through a strong image of a good corporate citizen. Similarly, state by adhering to the tenets of CSR reiterates the inevitability of corporations to create sustainable livelihoods, economic well-being and overall social development goals. By doing so, the state also approves the neoliberal philosophy derived by economic globalization and moves towards an economy with the ideals of free-market and reduction of government funds on welfare measures. The market oriented approach of the state consequently works through facilitative legalizations towards corporations that lead to a decentred regulatory space with fragmented knowledge, power and controls, complexity of actors and systems, interdependencies towards decision-making leading to ungovernability wherein actors exercise considerable autonomy. In this process, the boundaries between public and private are blurred. The decentred regulatory space that emerged in case of CSR in India has also witnessed state’s endorsement to the corporate self-regulatory regime and further promotion of the same through responsive regulatory and meta-regulatory attributes. Responsive regulation facilitates corporate actors to channel marketplace transactions without much intrusion by the state and CSR provides aids in this procedure. Meta-regulation, on the other hand, limits the state to be the direct regulatory agent and promotes self-regulation. The law and regulatory transformations as understood conceptually through this book, to be operating in case of CSR in India, however, could not be said to be free from malevolent practices from the side of estate agents as well as corporate actors as retrospectively analysed in case of NVG and DPE Guidelines in the country. Through this work, it is explored that the issues of fraud and non-compliance of the corporations have been existing inherently in Indian cases. The situation wherein state agents are in position to carry forward political capture on CSR initiatives, they have managed to do so, similarly, the corporations at many instances have influenced the state and civil society actors to circumvent mandatory requirements, offer kickbacks or initiate collusive practices in the name of growth and development. Therefore, it is argued; the state as well as the corporate actors have harnessed their power, economic autonomy and

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privilege positions to misappropriate CSR for their respective vested interests by politicizing or moving away from core techno-economic goals. The interactions with key players opened up such lacunae in the CSR paradigm shift in India which could be traced back to the year 2009 when state for the first time endorsed corporate self-regulatory behaviour though National Voluntary Guidelines formally. Since then there has not been any extraordinary achievement towards social development ends to meet through CSR and the CSR practice stands at a mystified cross-road which primarily fulfils reputational requirements of the corporations at present. Most of the CSR work in India, even in case of state led PSUs, have been superficial and lacking a holistic approach. The implementation flaws of CSR have been directly proportional to the way such transformations were planned and shaped in the form of National Voluntary Guidelines and DPE guidelines. The next step in CSR discourse in India, marked by the inclusion of the CSR provision in the Companies Act 2013, has been observed to have been influenced by the framework of both DPE Guideline and the NVG. The prominent development that has happened in the case of the law is only that it stands between the attributes of being absolutely non-binding as enshrined in the NVG and strongly binding as enunciated in the DPE guidelines. The CSR provision of the Companies Act 2013 imbibes the international soft law aspirations of CSR as done in both National Voluntary Guidelines and DPE Guidelines, works through multiplicity of actors and systems and promotes corporate self-regulation. However, the law and resulting regulatory and institutional transformations have not addressed the lessons of corporate and state maleficent behaviours from the past. The hazards of the past experience loom large in the renewed agenda of CSR that connects the same to law and regulatory discourse. The prospective challenge of separating the techno-economic and social goals from the political capture, misappropriation by civil society organizations, corporate collusive practices in the prospective milieu still remains paradoxical.

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Index

A Accountability, 10, 27, 28, 39, 43, 86, 116, 119, 126, 140, 158, 159 Autonomy, 8, 33, 36, 40, 56, 77, 83, 114, 117, 133, 160, 164 C Charity, 5, 27, 29, 55, 60–64, 66, 87, 102, 134, 151, 161 Civil society, 4, 10, 18–20, 31, 34, 58, 59, 65, 67, 75, 82, 85, 97, 102, 103, 105, 112, 114, 117, 122, 124, 128, 130, 138, 140, 143, 144, 148, 150, 160, 163–165 Codes, 8, 20, 32, 39, 40, 77, 89, 98, 107, 132, 136, 138, 157 Cognitive frame, 34 Companies Act 2013, 12, 19, 20, 45, 74, 98–101, 103, 109, 110, 112–114, 117–123, 127, 142, 159, 163, 165 Companies Law, 12, 13, 15, 16, 19, 103, 116, 127, 134

Contradictio in terminis , 8 Conundrum, 6, 14, 80, 85, 97, 114, 134, 140, 163 Corporate sector, 2, 6, 11, 15–18, 20, 34, 35, 37, 41, 43, 53, 60, 62, 65, 67, 68, 73, 74, 82–85, 87, 102, 104, 110, 112, 114, 116, 118, 122–124, 134, 135, 142, 143, 162 Corporate Social Responsibility (CSR), 1–22, 27–30, 32–38, 40–47, 51–57, 59–62, 65, 68, 71–77, 79–90, 97–140, 142–151, 157–165 Corporatism, 39

D Decentred regulation, 20, 34–37, 46, 74, 105, 116, 137 Diplomacy, 8

E Embeddedness, 5

© ANE Books India 2022 S. Bharti, Corporate Social Responsibility in India, https://doi.org/10.1007/978-981-19-2304-3

183

184

INDEX

F Facilitative, 6, 9, 11, 14, 33, 34, 38, 40, 44, 72, 103, 109, 114, 120, 124, 130, 133, 137, 159 Fragmentation, 7, 35–37, 116, 135 G Globalization, 1, 5, 9, 11, 20, 27, 32, 35, 52, 59, 60, 83, 161, 164 Governance, 3, 4, 7–11, 13, 14, 27–29, 31, 32, 34–36, 39, 41, 43, 44, 46, 51, 52, 57, 59, 60, 66, 68, 72, 75, 77, 79, 84, 87, 99, 101–103, 115–117, 119, 122, 124, 129, 132, 134, 135, 137, 138, 142, 144, 149, 150, 157, 158, 161, 163 Guidelines, 8, 20, 30–33, 37, 39, 45, 53, 73, 77–79, 89, 98, 106, 107, 127, 131, 132, 138, 157, 159, 162, 163 H Hybridized model, 11 I Interdependence, 9 Istitutional alchemy, 108, 139 J Jurisdiction, 58, 59, 84, 107, 139 K kickback, 71, 132, 163, 164 M Meta-regulation, 11, 20, 38, 41–44, 46, 102, 103, 110, 111, 128, 143, 161, 164

Multinational Corporations (MNCs), 2, 13, 161 N National Voluntary Guidelines (NVG), 18, 73, 79, 100, 104, 118–120, 143, 162–165 Neoliberal, 1, 2, 4, 6, 7, 9, 12, 16, 17, 28, 31, 32, 37, 38, 44, 46, 59, 60, 68, 72–75, 77, 82, 84, 85, 105, 119, 128, 133, 148, 150 Non-compliance, 64, 68–72, 75, 158, 164 Noninterventionist, 28 P Philanthropy, 5, 27, 29, 55–57, 60, 64, 65, 68, 74, 76, 87, 102, 134, 151, 161 Policy, 5, 9, 17, 18, 30–32, 34, 37, 41, 43, 46, 67, 68, 73, 79, 98, 99, 103, 105–107, 109, 111, 117, 118, 121, 124, 133, 138, 142, 144, 159 Public Choice, 39 Public Sector Undertakings (PSUs), 65, 106, 109, 110, 131, 143, 161, 163, 165 R Reputational capital, 9 Responsiveness, 6, 10, 117, 119, 124 Responsive regulation, 11, 20, 38, 40–44, 46, 61, 103, 117, 128, 132, 136–138, 161, 164 S Self-regulation, 11, 20, 38, 39, 41–44, 46, 53, 65, 77, 86, 109,

INDEX

111, 128, 132, 136, 137, 140, 160, 161, 164 Social development, 2–5, 7, 9, 12–19, 21, 27, 29, 32, 35, 36, 41, 42, 45, 46, 52–57, 59–62, 64–68, 73, 75, 80–87, 97, 98, 101, 102, 114, 118, 124, 126, 128, 133, 137, 141–144, 150, 158–162, 164, 165 Soft law, 6–11, 14, 15, 18–21, 28–31, 37, 42, 44–46, 53, 54,

185

59, 61, 74, 76, 80, 83, 101, 104, 107, 109, 114, 115, 120, 137, 158, 159 Supra-state associations, 3, 8, 134, 150

T Techno-economic, 13–15, 111, 132, 133, 165 Transparency, 7, 43, 77, 119