CHAPTER 1

INTRODUCTION

Friends, together, we can achieve a new phase of globalization-

one that creates inclusive and sustainable markets, builds
development and enhances international cooperation. We each
have a responsibility in moving our agenda forward
- Ban Ki-moon, Secretary General
of the United Nations4
1.1 Introduction

One day, not very far in the future, coming generations will ask their fore-
fathers-what have you people done to this wonderful planet? Are we, the present
generation, really so selfish? Are we so hungry for material things in life that our greed
has actually impacted on the Earth’s atmosphere, oceans and wildlife? Have our
activities pushed the world into a new geological epoch? Look around, ecological
issues, climate change, energy crisis, environmental effects of mining, agricultural
practices, industrialisation, Carbon-dioxide (CO2) emissions; we are living on a
damaged planet and like an overburdened heart, the clock is ticking and time is running
out.

It is not yet too late to listen to the prophetic voices of the ecological scientists
and pro-environment advocates. The world over serious efforts are being made to limit,
if not eliminate this man made threat to Planet Earth and all life on it. It is here that
individuals, governments and corporates have to unite and shoulder the social
responsibility of protecting the environment and strive for sustainable growth. Let no
man put asunder what God has put together!

The Bible says that in the beginning God created the heavens and the earth. The
earth was empty, a formless mass cloaked in darkness. And the Spirit of God was
hovering over its surface. Then God said, 'Let there be light,' and there was light. And
God saw that it was good. Then he separated the light from the darkness. God called the
light 'day' and the darkness 'night'. That was the first day of God's creation.
On the second day, God created the sky.
On the third day, God created the land, the oceans and all the
plants.
On the fourth day, God created the sun, moon and stars.
On the fifth day, God created the birds, fishes and other sea
creatures.
On the sixth day, God created all the land animals and people.5

4
Closing Remarks at the UN Global Compact Leaders Summit, Geneva, July 06, 2007.
1
 In the Mahabharata it is mentioned that if there is but one tree of flowers and
fruit within a village, that place is worthy of your respect6. Hinduism contains
numerous references to the worship of the divine in nature in its Vedas, Upanishads,
Puranas, Sutras, and its other sacred texts. Millions of Hindus recite Sanskrit mantras
daily to revere their rivers, mountains, trees, animals, and the earth. Although the
Chipko (tree-hugging) Movement is the most widely known example of Hindu
environmental leadership, there are examples of Hindu action for the environment that
are centuries old.

Hinduism is a remarkably diverse religious and cultural phenomenon, with

many local and regional manifestations. Within this universe of beliefs, several
important themes emerge. The diverse theologies of Hinduism suggest that the earth
can be seen as a manifestation of the goddess, and must be treated with respect. The
five elements; space, air, fire, water, and earth are the foundation of an interconnected
web of life. Dharma, often translated as 'duty’, can be re-interpreted to include our
responsibility to care for the earth. Simple living is a model for the development of
sustainable economies. Our treatment of nature directly affects our karma.7

Coming to contemporary times, the 1992 Rio Declaration sets out 27 principles
defining the rights and responsibilities of states in relation to human development and
well-being. The Agenda 21 agreement provides guidance for governments, business
and individuals on how to contribute to efforts to make development socially,
economically and environmentally sustainable. Chapter 30 of Agenda 21, the Rio
Declaration on Environment and Development, recognises the value of promoting
'responsible entrepreneurship'. The Millennium Development Goals (MDG) identify a
series of government-agreed targets and timetables in relation to issues such as poverty
reduction, improvement of child health care and education, and the promotion of gender
equality. The Johannesburg Declaration on Sustainable Development, 2002 states that
the private sector has 'a duty to contribute to the evolution of equitable and sustainable
communities and societies', and that 'there is a need for private sector corporations to
enforce corporate accountability'. Its plan of implementation notes the need to 'enhance

5
Holy Bible, NLT, Genesis 1.
6
Harry Eyres, ‘Seeing Our Planet Whole: A Cultural and Ethical View of Earth Observation’,
Springer (2016), p.61.
7
Available at <file:///C:/Users/Downloads/Ten Key Hindu Teachings on Environment.pdf>, accessed
on November 08, 2017 at 1700 hours.

2
corporate environmental and social responsibility and accountability'. In addition, the
UN Framework Convention on Climate Change which entered into force on March 21,
1994 and the Convention on Biodiversity which entered into force on December 29,
1993 have also been signed by a majority of governments. The 2005 World Summit
outcome reiterated the importance of full respect for existing labour, human rights and
environmental commitments and encouraged 'responsible business practices, such as
those promoted by the Global Compact'.8

With regard to CSR, this means investing part of our profits beyond business,
for the larger good of society. CSR is a management concept whereby companies
integrate social and environmental concerns in their business operations and
interactions with their stakeholders. CSR is generally understood as being the way
through which a company achieves a balance of economic, environmental and social
imperatives (the ‘Triple Bottom Line Approach’, discussed later), while at the same
time addressing the expectations of shareholders and stakeholders. In this sense it is
important to draw a distinction between CSR, which can be a strategic business
management concept, and charity, sponsorships or philanthropy. Even though the latter
can also make a valuable contribution to poverty reduction, will directly enhance the
reputation of a company and strengthen its brand, the concept of CSR clearly goes
beyond that.9

1.2 Review of Literature

The dissertation on ‘Environment Sustainability and Corporate Social

Responsibility Law in India: A Study’, involved a deep study of the environment crisis,
reasons for this state of affairs and the corrective measures being undertaken. In
addition, the research involved studying, comparing and analysing various laws,
statutes, acts and provisions relating to environment protection and sustainable growth;
at the national and international level. Being a contemporary topic, a substantial amount
of books, papers and reports on the subject were available. Primary, Secondary and
Tertiary material was referred to including United Nation’s reports, company and
corporate policies, Govt of India documents/stipulations/provisions and acts as well as
numerous court rulings.

8
'Overview of Selected Initiatives and Instruments Relevant to Corporate Social Responsibility',
Annual Report on the OECD Guidelines for Multinational Enterprises 2008, Employment and
Industrial Relations.
9
Available at <http://www.unido.org/csr/o72054.html>, accessed on June 16, 2017 at 1700 hours.
3
 Citations and credits relating to specific data and references have been
included. If any credit for a quote or reference to any previously published work
has not been acknowledged/ mentioned, the same is not by design and is regretted.
The omission will be immediately rectified.

Being constrained by time and the topic being very vast, the researcher was
unable to cover all aspects, the same too is regretted and it is hoped that future research
by more eminent scholars will cover the ‘Grey Areas’ and the facets not adequately
covered.

Of special assistance have been the court rulings in the series of cases related to
environment protection and corporate responsibility. A number of cases dealing with
the topic have been included. To name a few, the Bench of Justices P.N. Bhagwati and
Ranganath Mishra in Rural Litigation and Entitlement Kendra, Dehradun v. State of
Uttar Pradesh10 first introduced the concept of ‘Sustainable Development’ wherein it
was stated that the permanent assets of mankind are not to be exhausted in one
generation and that the natural resources should be used with requisite attention and
care so that ecology and environment may not be affected in any serious way.

Justice Jeevan Reddy in the landmark judgment of Indian Council for Enviro-
Legal Action v. Union of India11 held that the financial costs of preventing or
remedying damage caused by pollution should lie with the undertakings which cause
the pollution by adopting the ‘Polluter Pays Principle’. In T. Damodar Rao v. Special
Officer, Municipal Corporation of Hyderabad12, the Andhra Pradesh High Court
referred to Article 51 A (g) and 48 A. It noted that the protection of environment is the
duty of the citizens as well as the obligation of the state.

As the law relating to CSR evolves, these court cases and judgements, many of
which deal with environment protection, find themselves as the ‘Building Blocks’
related to implementation of hundreds of upliftment schemes being followed by
corporates and organisations as part of their social responsibility towards environment
sustainability.

Here, it would be pertinent to mention two excellent books related to the study.
‘Corporate Social Responsibility in India: Cases and Developments after the legal

10
AIR 1987 SC 2187.
11
AIR 1999 SC 1502.
12
AIR 1987 AP 171.
4
mandate’, edited by Ms. Nayan Mitra (Developmental Consultant, India) and Dr. Rene
Schmidpeter (Dr. Jurgen Meyer Endowed Chair for International Business, Ethics and
CSR, Cologne Business School, Germany), is one book which was of immense help.

This is a book that unveils to the world the implication, implementation and the
way forward of the historical CSR mandate in India. Comprising of thirteen well
thought out chapters, the Book has been published by Springer International Publishing,
Switzerland. The book has a rich anthology of Case Studies from some of the most
eminent Companies in India like Tata, ITC, Jindal Steel, Ernst & Young, authored by
Ms. Sukanya Patwardhan, Dr. Ashesh Ambasta, Brig. Rajiv Williams and Mr. Sridhar
Iyer respectively. The book provides a comprehensive overview of CSR, combining
various stakeholders’ perspectives, policy-makers, consultants, practitioners and
academics through analytical chapters and several case studies. The first part presents
the CSR mandate and its implications, while the second focuses on its implementation
and the third part provides a view on the way forward.

Working on the Indian perspective related to CSR, the book, ‘Corporate Social
Responsibility in India. Trends, Issues and Strategies’, authored by Sateesh Gouda,
A.G. Khan and S.L. Hiremath was very informative. The authors have tried to study the
requirements and satisfaction of the communities in the areas where the corporates
implement CSR (to include environment protection projects). Their study also tries to
measure the impact of CSR activities undertaken by the organizations in a way to have
the sustainable development down to village level.

For specific case studies and expenditure figures quoted, web portals of leading
international and Indian companies have a plethora of on-line data and annual
reports/financial statements giving out their CSR policies and outlays. These have been
used extensively in the study. Various UN reports on environment sustainability, social
responsibility and international treaties like the United Nations Framework Convention
On Climate Change, Kyoto Protocol, United Nations Conference on Sustainable
Development, Rio+20, Stockholm Declaration, Basel Convention, Paris Accord etc all
have been studied and incorporated where relevant.

5
1.3 Identification of Problem
How does the CSR law in India impact the characteristics of CSR policies and
initiatives undertaken by corporates and organisations toward environment
sustainability?
Further, as a strategy of international and national commitments, company
reputation and social responsibility, do the CSR Laws in India fulfil the desired aims?
CSR promotes a vision of business accountability to a wide range of stakeholders,
besides shareholders and investors. Key areas of concern are environmental protection
and the wellbeing of employees, the community and civil society in general, both now
and in the future. The concept of CSR is underpinned by the idea that corporations can
no longer act as isolated economic entities operating in detachment from broader
society. Traditional views about competitiveness, survival and profitability are being
swept away. Do our laws cater for this?

The key problem areas that emerge are:

 Approaches to CSR promotion and implementation.

 CSR as business case versus development.
 CSR and corporate identity and ethics.
 CSR, law and accountability.
 Stakeholders’ engagement or partnership.
 Leader and leadership capabilities and competencies for CSR.
 CSR’s challenges and limitations.

1.4 Research Gap

Many studies have been undertaken globally to understand CSR as a subject of
management but there have been very few studies undertaken to understand that
dimension of CSR related exclusively to environment sustainability, especially in India.
This dissertation makes an effort to understand the CSR concept from three dimensions,
firstly, why is environment sustainability a major cause of worry at the international
level, secondly, what are the existing international laws and treaties dealing with this
issue and thirdly, a detailed study of CSR laws related specifically to India with
emphasis on environment sustainability.

6
 In addition, an attempt has been made to identify the policies of corporates,
industries and organisations and their implementing strategies in order to meet the
defined CSR objectives and their efforts towards environment sustainability.
The present study also tries to measure the impact of CSR activities and
expenditure undertaken by corporates/organizations, with the coming into force of the
amended Companies Act. In this context, the present study plays a significant role in
the field of research methodology, the field of management as well as social
responsibility, especially from the environment perspective.
1.5 Importance of Study

The main objective of the study is to examine the evolution of CSR from
philanthropy to a mandatory (law based and legally enforceable) responsibility and also
study the rationale behind making CSR spending mandatory in a country like India with
specific reference to environment sustainability. The study of laws related to CSR and
sustainable development can be a learning paradigm in making the world a better place
to live in. With the current levels of consumption and production, and with the ever-
increasing population, the planet’s resources will not sustain unless something is done to
change the way we treat our planet.

This is but a small contribution in trying to understand the world wide

awakening with respect to the looming environment disaster facing mankind and the
planet. The dissertation’s goal is designed to understand the reasons for environment
degradation, to analyse existing environment protection laws at the national and
international level and to critically examine the efficacy of specific laws pertaining to
CSR and sustainable growth. This goal can be achieved if society, governments,
businesses and organisations all accept their responsibility. The output of this study can
be a source material for researchers, corporates, organisations and students looking
ahead to see how natural resources, climate change, and energy can drive innovation
and inspire new business models, products and services.

For the researcher, the dissertation will also help uncover gaps and weaknesses
in the existing CSR related laws that many researchers have not been able to explore.
For companies, industries and other profit making organisations, the research will help
in understanding that Green not only saves money, it also creates new revenue by
attracting customers who care about a company's environmental footprint. For
governments and leadership, the study should convince them of their accountability in
7
ensuring CSR by offering industry a range of financial incentives for undertaking
environmentally responsible activities. These include investment, production,
consumption based income tax credit, accelerated depreciation for certain capital
expenses, exemptions from state or local sales taxes, and cash grants etc.

1.6 Hypothesis

Businesses, corporates, industry, organisations and Governments are largely

responsible for the worsening ecological state of the planet and have a major role
towards environmental sustainability in accordance with CSR laws.

Considering the above, the following can be predicted:

 Sustainability is a global problem.

 The approach to sustainability has to be at the local, national and
international levels.
 The fast deteriorating environment is to a large extent, due to’un-
sustainable’ practices.
 There is a need for strong laws to ensure that the concept of ‘sustainable
and Green’ practices are imbibed and followed in letter and spirit by all
players.
 The law on CSR has a major role to play in reversing the trend from ‘un-
sustainable’ to ‘sustainable’ growth.

The dissertation focuses on environment sustainability and CSR law in India.

There is no denying the fact that industries and organisations have to work on methods
which help to create a sustainable environment through ‘Green’ practices and
emphasize on mutual benefits of building strong CSR for both; the organisation’s image
and society. With the current situation and existing laws on the subject, organizations
are on the lookout to find techniques and ways to mitigate the ecological footprints in
addition to handling the pressuring economic issues.13

To achieve the objective of making profits and maximizing the shareholder’s

wealth, businesses also need to attain success by considering and concentrating on
environmental and social factors in addition to ‘making money’. Leaders of different

13
Renwick, Redman & Maguire, ‘Green human resource management: A review and research
agenda’, International Journal of Management Reviews, 15(1), 1–14.10.1111/ijmr.2013.15.issue-1.
8
organizations are now prioritizing sustainability issues by integrating the Green
environment corporate strategies to create successful ways in the business.14

1.7 Research Question

What is the role and impact of CSR laws with regard to Environment
Sustainability?

The dissertation thereby also seeks to explore the association between CSR,
governance and sustainability by studying the inter-relationship between these. In the
race for ‘development’, the relationship between CSR and sustainability is critically
examined keeping in view the fact that various organisations and business houses (and
governments) all over the world, are responsible to a large extent, for the extensive
damage to environment.

In specific, the dissertation aims to determine the efficacy of existing CSR law
in India with respect to the quest for sustainable development. It is evident that the
theme of CSR and sustainability should be embedded within the governance practices
of the firms and there is an express need to have strong laws at the national and
international level to ensure the same.

1.8 Research Methodology

The dissertation is conceptual in nature and is an attempt at exploratory research

with extensive use of secondary data sourced from journals, magazines, articles and
media reports. Analytical data based on available literature on CSR and environment
sustainability, to include published books, research papers, newspaper articles and open
information available on the internet has been used. Various annual reports, financial
statements, CSR activities of Indian and international companies including net based
archives and on-line information portals have been referred to. Information and extracts
used from articles, books and the web have been enumerated and recorded.

Considering the requirements and objectives of the study, the research design
employed is of descriptive type and this research design was adopted to have greater
accuracy and ‘in depth analysis’ of the research study.

14
J.P. Cherian, J. Jacob,‘A study of green HR practices and its effective implementation in the
organization: A review’, International Journal of Business and Management, Vol. 7, No. 21.
9
1.9 Chapterisation

A study of the existing material on the subject revealed that many Indian authors
and researchers restrict the laws related to CSR (and environment sustainability therein)
to the newly amended Companies Act and the Corporate Social Responsibility Rules as
such. This impression is incorrect. There are numerous national and international laws,
treaties and conventions which impliedly deal with this subject. A conscious effort has
been made to include all the issues related to CSR and environment sustainability. To
that end, the entire research work has been structured in seven chapters.

Chapter 1, ‘Introduction’ brings out the importance of the study, and states its
objectives and hypotheses. It also includes methodology and limitations. An endeavour
has been made to cover the research gap, namely, CSR as related to the aspect of
environment sustainability and laws on the issue.

Chapter 2, ‘Environment Conservation-Need of The Hour’, is an attempt to

show how the world is hurtling towards an ecological catastrophe. Climate change,
global warming, acid rain, Greenhouse effect, ozone depletion have been discussed
along with the reasons for the imbalance (mainly human related activities) taking place
in our ecosystem and environment. To give an example, Greenhouse gases
concentrations have increased steadily during the 20th century and into the 21st, with
CO2 rising from under 300 ppm (parts per million) to 400 ppm. A large part of the
increase in all Greenhouse gases is attributed to human sources. It is anthropogenic
(hence, the term anthropogenic global warming). Population, affluence per person and
the technology used for exploiting resources therefore, are the factors determining the
impact of anthropogenic activities on environment. It is a known fact that
environmental awareness has increased enormously in recent years and herein lies the
genesis of social responsibility to arrest this downward spiral. The chapter also covers
various international treaties and conventions as well as UN efforts for a sustainable
world. Towards the end, Indian specific laws on sustainability and certain important
court cases have been discussed.

Chapter 3, ‘Sustainable Development-the Way Ahead’, covers the aspect of

sustainable development and the fact that human practices are responsible for
environment degradation. Economic growth and environment sustainability will relate
to each other inversely unless conscious efforts are made to ensure sustainable
development. This is true atleast in the case of growing economies like India and China
10
related to environment responsibility and CSR. ‘Kuznets Curve’ is also explained in
this chapter. The chapter also discusses the major efforts being undertaken by the UN,
the international community and India in particular to control, reduce and alleviate the
scourge of un-planned and un-sustainable growth.

Chapter 4, ‘The Meaning and Scope of CSR’, dwells on the concept of CSR, its
meaning and scope. The issue being as to what exactly is CSR and how does it help in
sustainable growth. The concept expounded by Archie B. Carroll, Professor Emeritus,
University of Georgia, USA known as the ‘Pyramid of CSR’ suggests that CSR is
basically presented by four dimensions, namely, economic, legal, ethical and
philanthropic in their respective order of importance. These have all been examined.
Chapter 4 also covers certain important initiatives and instruments related to CSR and
sustainable growth.

Next, in Chapter 5, ‘Environment Sustainability and Corporate Social

Responsibility Law’, the relationship between CSR and sustainability has been
explained; to be more exact, between CSR and environment sustainability. The
regulations governing CSR and environment sustainability in USA and Europe,
including the UK are discussed here along with some specific instances of CSR
application in well known multi-nationals. Also, covered is the responsibility of
directors of companies to ensure that the company abides by relevant laws and
regulations, including the law on CSR as it now exists.

In Chapter 6, ‘Environment Sustainability and Role of Corporates-Case

Studies’, CSR trends pre and post independence have been covered and thereafter two
companies from the Tata Group (Tata Chemicals Limited and Tata Power) have been
selected for a detailed study and analysis as to how the law related to CSR is being
implemented. The efforts, projects, finances and reports from the company itself and
from independent sources have been analysed.

Finally, Chapter 7, ‘Conclusion & Suggestions’, concludes with a brief

summary and some suggestions related to the topic, leaving some food for thought for
further research related to the effectiveness of the CSR law and environment
sustainability efforts by the corporate world and the governments. Are we heading
towards sustainable growth and a Green environment ?

11
 CHAPTER 2

ENVIRONMENT CONSERVATION-NEED OF THE HOUR

We do not inherit the earth from our ancestors; we borrow it
from our children
- David Brower15

2.1 General
Issues such as climate change, trends in global warming, ozone depletion, acid
rain, deforestation, desertification, toxic wastes and loss of biological diversity have
resulted in increasing global awareness of the problems facing the planet earth.

An unprecedented rise in human population has overburdened ecological and

social systems. The foundations of global security are threatened. The global concern
has been aptly echoed in the preambular assertion made at the Earth Summit in the year
1992.16
The culmination of various international efforts initiated 38 years ago at
Stockholm, where the first historic international conference on Human Environment
was held in 1972. There is a major environmental crisis of a global proportion affecting
the physical, natural and human environment due to pollution of all kinds. It is of
serious concern to the international community that the greenhouse gases emissions
continued to be on the rise. The UN mandated inter-governmental panel on climate
change says that by 2100 the global temperature increases will range between 1.4 to 5.8
degree Celsius (°C). Mean sea levels may rise by 80 Centimetres (cm), inundating low-
lying areas and smaller islands. It has been predicted that there will be more frequent
and severe heat waves, more intense tropical cyclones, changes in rainfall patterns and
melting of ice.

Today the atmosphere level of CO2 , the principal source of global warming, is
26 percent (%) higher than pre-industrial concentration. Enormous amount of gases
and chemicals emitted by the industrial plants and automobiles have led to depletion of
ozone layers which serve as a shield to protect life on the earth from the ultraviolet rays
of the sun. The problems of ‘acid rain’ which is caused mainly by the emission of
sulphur dioxide and Nitrogen oxides from power stations and industrial installations is a

15
Arjun Appadurai, Globalization (Duke University Press (2001), p. 98.
16
Available at <http://apps.who.int/iris/bitstream/10665/171232/ 1/EB91_ Inf.Doc-5_eng.pdf>,
accessed on November 10, 2017 at 1100 hours.
12
graphic example of it. The ill effect of ‘acid rain’ can be found on vegetables, soil,
marine resources, and monuments as well as on humans. Air pollutants and acids
generated by the industrial activities are now entering forest at an unprecedented scale.

It is imperative that the international community should be shaken from its

slumber to be prepared to combat this environmental crisis by taking appropriate
measures, which should be not only for controlling pollution but also for protecting and
promoting environment. The 5th, June of every year is designated as the ‘International
Environmental Day’, as declared at the UN summit on Environment and Development
at Stockholm, in 1972.17

Over the past century, the world has fallen into a pattern of unsustainable
economic growth. Accelerated consumption of fossil fuels and deforestation are only
the most visible examples of how, in the effort to support our lifestyles, we are
exhausting the planet’s natural resources and accelerating climate change, which in turn
threatens life-sustaining ecosystems and the economy. Our situation increasingly
demands a transition to a green economy that does not worsen climate change or
destroy the planet in order to profit. Development of renewable energy and clean
technology sectors must be accelerated to begin the shift to a post-carbon economy. In
parallel, product development needs to adopt closed-loop design in order to more easily
address what to do with them when they are no longer of use. Finally, the worlds of
finance, business and policy need to routinely place an accurate, measurable value on
the services that nature provides our civilization so that those assets will be protected
rather than destroyed. A green economy not only protects ourselves and our planet, but
can provide millions of jobs as we develop and install new technologies, rebuild and
retrofit buildings, and devise new processes and modes of production.

Economists have long recognized that there may be many reasons why the
environment is not used in a sustainable manner. The underlying reason is that the
environment is treated as a free good because of its public good nature. A public good
is one whose use by others cannot be restricted; it is non-excludable and non-

17
Aruna Venkat, 'Environmental Law and Policy', PHI Learning Pvt. Ltd. (2011), p.3.

13
consumptive. None can be excluded from its use, even if they do not pay for it. One
person's use of a public good does not detract from anyones else's use of it.18

Environmental degradation takes diverse forms, ranging from pollution and

destruction of ecosystems to degraded fresh water supplies and arable land. The
international agenda often focuses on broad-based concerns of environmental
degradation such as desertification, climate change and air pollution. However, for the
world's most vulnerable and marginalized groups, issues of environmental degradation
tend to be more localized and immediate in their nature. Degradation of a resource base
can result in decreased production - for example reduced soil fertility may produce
lower yields and deteriorated water quality can impact fishing. Such problems are of
great concern to the poor, with direct impacts on livelihoods, food security and health.
Additionally, although environmental factors are by no means the sole cause of violent
conflicts, environmental degradation, exploitation of natural resources and related
environmental stresses are increasingly understood as drivers of conflict: A reciprocal
relationship wherein conflict, in turn, can further degrade the environment. Projections
in climate change as well as in population growth and distribution present additional
future challenges to environmental sustainability.19

2.2 Climate Change

Because so many systems are tied to climate, climate change can affect many
related aspects of where and how people, plants and animals live, such as food
production, availability and use of water, and health risks. Climate includes patterns of
temperature, precipitation, humidity, wind and seasons. Climate change affects more
than just a change in the weather, it refers to seasonal changes over a long period of
time. Climate patterns play a fundamental role in shaping natural ecosystems, and the
human economies and cultures that depend on them.20

Scientists agree that human activity causes a rise in both average world
temperatures and the occurrence of extreme weather events. Since the beginning of the
industrial revolution, rich countries have emitted the overwhelming share of the
greenhouse gases causing the earth's atmosphere to warm. Yet the world's poor are first

18
Fraser Smith, Environmental Sustainability: Practical Global Applications, CRC Press (1997),
p.215.
19
Available at <https://www.globalpolicy. org/social-and-economic-policy/the-
environment/environmental-degradation.html>, accessed on June 19, 2017 at 1600 hours.
20
Available at <http://www.howtolearn.com/2012/03/how-are-climate-change-and-global-warming-
related/>, accessed on July 15, 2017 at 1800 hours.
14
and hardest hit by the consequences of climate change. Many countries have already
experienced deadly droughts and floods. And climate-induced natural disasters have
displaced hundreds of thousands of people across the world, while global fresh water
resources become increasingly scarce.

Global climate is projected to continue to change over this century and beyond.
The magnitude of climate change beyond the next few decades depends primarily on
the amount of heat-trapping gases emitted globally, and how sensitive the Earth’s
climate is to those emissions. Temperatures will continue to rise, there will be changes
in precipitation patterns and more droughts and heat waves. A National Aeronautics and
Space Administration (NASA) report categorically states,‘Global sea level has risen by
about 8 inches since reliable record keeping began in 1880. It is projected to rise
another 1 to 4 feet by 2100. This is the result of added water from melting land ice and
the expansion of seawater as it warms’.21

Greenland and Antarctic ice sheets are melting. Unless checked, warming from
emissions may trigger the irreversible meltdown of the Greenland ice sheet in the
coming decades, which would add up to a seven meters rise in sea-level over some
centuries. New evidence showing the rate of ice discharge from parts of the Antarctic
means that it is also facing a risk of meltdown. The slowing, shifting or shutting down
of the Atlantic Gulf stream current is having dramatic effects in Europe, disrupting the
global ocean circulation system. Catastrophic releases of Methane from the oceans are
leading to rapid increases in methane in the atmosphere and the consequent warming.

Closer home, from the apple growers in Himachal to the farmers in Vidharbha
and those living in disappearing islands in the Sunderbans are already struggling with
the impacts of climate change resulting in extreme weather events such as heat waves,
droughts and floods. The global incidence of drought has already doubled over the past
30 years. At all scales of climate change, developing countries will suffer the most.22

On the other hand, Bhutan, a country bordering India, with its understanding
and protection of its lands and ecosystems, makes it the only nation to sequester much
more carbon than it emits i.e. it is carbon negative, which means it produces more
oxygen than it consumes. Bhutan generates about 2.2 million t of carbon annually, yet

21
Available at <https://climate.nasa.gov/effects/>, accessed on July 20, 2017 at 1600 hours.
22
Available at <http://www.greenpeace.org/india/ en/What-We-Do/Stop-Climate-Change/Climate-
Impacts/>, accessed on June 20, 2017 at 1300 hours.
15
its forests absorb three times this amount, which creates a carbon sink. Although it
shares the Himalayan landscape with Nepal and the mountain states of India, the
differences among these countries are immediately apparent; vastly cleaner and less
crowded with people and vehicles; and much more continuously forested. With a
population of only 700,000 and almost no heavy industry, Bhutan has escaped the
pollution and land degradation of other South Asian areas. Environmental protection is
written into its Constitution, which, for example, requires 60 % of the land be forested.
Article 5 of the Constitution of Bhutan mandates, ‘Every Bhutanese is a trustee of the
Kingdom's natural resources and environment for the benefit of the present and future
generations and it is the fundamental duty of every citizen to contribute to the
protection of the natural environment, conservation of the rich biodiversity of Bhutan
and prevention of all forms of ecological degradation including noise, visual and
physical pollution through the adoption and support of environment friendly practices
and policies’.

Bhutan brought its philosophy and concerns to world attention at the ‘Climate
Summit for a Living Himalaya’, in 2011, and via a UN Declaration of the Human Right
to Happiness in 2011.23 Bhutan is transcending the classical tension between economic
development and environmental conservation by developing sectors that require
continuing environmental protection to be sustainable. Every government policy is
vetted according to Gross National Happiness (GNH), and what the Bhutanese call the
four pillars: good governance, sustainable promotion of socio-economic development,
preservation of culture and environmental conservation. For Bhutan, GNH is more
important than the Gross National Product (GNP).24 Can India learn from Bhutan? It
can certainly wake up to the connection between forest ecology and water, for instance,
which our planners have long overlooked. The disastrous result: a deforested Western
Ghats, water shortages and riots in Karnataka and Tamil Nadu, smog in the National
Capital Region (NCR) and the Himalayan eco-region under threat. India could
definitely learn from Bhutan’s vigorous afforestation programme: in 108,000 trees were

23
Available at <http://www.worldviewofglobalwarming.org/himalaya_5/index.php>, accessed on
November 16, 2017 at 1000 hours.
24
Available at <http://www.livemint.com/Sundayapp/6VGUYjKmLSPz4XGghgQPKO/How-Bhutan-
became-the-worlds-greenest-country.html>, accessed on November 16, 2017 at 1500 hours.
16
planted in 2016 to celebrate the birth of the new Prince. 25 Bhutan, like India, has a
number of laws and acts governing environment protection and sustainability:26

 The National Environment Protection Act, 2007.

 The Environmental Impact Assessment Act, 2000.
 The Water Act of Bhutan, 2011.
 The Waste Prevention and Management Act, 2009.
 The Biodiversity Act, 2003.
 The Forest and Nature Conservation Act, 1995.
 The Water Act of Bhutan, 2011.

An Assessment Paper on Climate Change Adaptation has been written by

Francesco Bosello, Carlo Carraro and Enrica de Cian and released by the Copenhagen
Consensus Center, subsequently published in the book, 'Global Problems, Smart
Solutions-Costs and Benefits'.27 As per them, they find that the most important impacts
of global warming will be on agriculture and tourism, where nations will lose, on
average, about half a percent of GDP from each by mid-century. However, they point
out that much of this damage will be avoided by people choosing for themselves to
adapt to a change in their environment. Farmers will choose plants that thrive in the
heat. New houses will be designed to deal with warmer temperatures. Taking adaptation
into account, rich countries will adapt to the negative impacts of global warming and
exploit the positive changes, creating a total positive effect of global warming worth
about half a percentage point of Gross Domestic Product (GDP). Poor countries will be
hit harder, however. Adaptation will reduce the climate change-related losses from five
percent of GDP to slightly less than 3%-but this is still a significant impact. The real
challenge of climate change, therefore, lies in tackling its impact on developing nations.
Here, more needs to be done, above and beyond the adaptation that will happen
naturally.

2.3 Global Warming and Greenhouse Effect

Global warming refers to rising global temperatures because of climate change.

It refers only to the Earth’s rising surface temperature, while climate change includes

25
Ibid.
26
National Environment Commission, Royal Government of Bhutan, ‘Bhutan’s Environmental Laws
Global Training Programme on Environmental Law and Policy’ Nairobi 5-13 October 2015.
27
Bjørn Lomborg, 'Global Problems, Smart Solutions', Cambridge University Press, 1st edition
(2013).
17
warming and the 'side effects' of warming-like melting glaciers, heavier rainstorms, or
more frequent drought. Global warming is one symptom of the much larger problem of
human-caused climate change. Climate change includes any change resulting from
different factors, like deforestation or an increase in greenhouse gases. Global warming
is one type of climate change, and it refers to the increasing temperature of the surface
of Earth. According to NASA, the term global warming gained popular use after
geochemist Wallace Broecker published a paper in 1975 titled 'Climatic Change: Are
We on the Brink of a Pronounced Global Warming?’28 Since 1880, the average surface
temperature of the Earth has increased by roughly 0.9 degrees Fahrenheit.29 Greenhouse
gases are those thought to contribute to the greenhouse effect, an overall warming of the
Earth as atmospheric gases trap electromagnetic radiation from the sun that would
otherwise have been reflected back out into space.

The Greenhouse effect is a natural process that traps heat in the atmosphere;
global warming tends to be when additional greenhouse gases are released into the
atmosphere and this causes a warming event. As Greenhouse gases like CO2 , Methane
increase, heat is trapped in Earth's atmosphere.

The natural Greenhouse effect has operated on the planet for over 4 billion
years and is one of the reasons life could evolve on Earth-it basically made the planet
habitable. This was because with a strong enough greenhouse effect, the planet was
warm enough to form liquid water. Once there was liquid water and other essential
biochemicals, life could begin to evolve. Global warming events have occurred in the
geological past when Greenhouse gases get released into the atmosphere and essential
boost the natural Greenhouse effect beyond its normal range (usually from volcanic
eruptions). The current global warming event is due almost entirely to human burning
of fossil fuels with the concurrent release of Greenhouse gases. This in turn is boosting
the natural Greenhouse effect and the planet is warming.30

28
Joseph Romm, 'Climate Change: What Everyone Needs to Know?', Oxford University Press
(2015), p.19.
29
Available at <https://www.epa.gov/climate-indicatorstemperature>, accessed on November 12,
2017 at 1100 hours.
30
Available at <https://socratic.org/questions/what-is-the-relationship-between-global-warming-and-
the-Green house-effect>, accessed on July 20, 2017 at 1600 hours.
18
 Simply put, the atmosphere traps some of solar radiation as a Greenhouse,
which increases the planet's temperature (Figure 1).31

Figure 1-How Are Climate Change and Global Warming Related?

According to 2010 models cited by NASA, 20 % of the Greenhouse effect is

attributed directly to CO2 and 5% to all other Greenhouse gases. The remaining 75 % of
the Greenhouse effect is thought to be due to water vapor and clouds, which are
naturally-occurring. However, even though CO2 and the other Greenhouse gases are
such a small percentage of the total gas in the atmosphere, they affect when, where and
how clouds form, so Greenhouse gases have some relevance when it comes to 100 % of
the Greenhouse effect. CO2 is thought to modulate the overall climate, like a
atmospheric thermostat. Some Greenhouse gases are produced in natural processes, like
forest fires, animal manure and respiration, or volcanic eruptions. However, the
majority of new Greenhouse gases are produced from industrial processes and energy
production (Figure 2).32

31
Available at <http://image/greenhouse-effect>, accessed on July 10, 2017 at 1200 hours.
32
Available at <http://burnanenergyjournal.com/the-connection-between-greenhouse-gases-climate-
change-and-global-warming/>, accessed on July 20, 2017 at 1700 hours.
19
 Figure 2-Atmospheric CO2 Emission By Year

Noteworthy Greenhouse gases are Methane, Nitrous oxide, CO2,

Hydrofluorocarbons (HFCs), Perfluorocarbons (PFCs), and Sulfur-hexafluoride (SF6).
These gases are thought to affect the climate directly and indirectly, even though they
constitute only a small fraction of the blanket of gases that make up the atmosphere.
Currently, the composition of the atmosphere is mostly Nitrogen and Oxygen, with just
0.033 % CO2 and all other gases accounting for even less.33

Climate change is raising the temperature of the oceans, and sea levels are
predicted to rise about one metre per century.34 Joseph Romm a former United States
Assistant Secretary of Energy and who is a Ph.D. in physics has discussed ‘extreme
weather’ and other 'climate impacts' in his book 'Climate Change: What Everyone
Needs to Know'.35 The author has covered the subject of global warming with extensive
research and statistical data. He has mentioned that current models and data pertaining
to climate change did not fully account for melting/fracturing of Antarctic ice sheets.
This observation becomes all the more alarming now that current satellite data confirms
‘calving’ of a trillion t, 5800 square kilometers (sq km) iceberg from the Larsen C ice
shelf, confirming the dangers of global warming. The trillion t iceberg (Figure 3) was
33
Ibid.
34
Hayley Dunning, 'Warm ocean water is making Antarctic glacier vulnerable to significant melting',
Imperial College London (News), March 16, 2015.
35
Joseph Romm, 'Climate Change: What Everyone Needs to Know', Oxford University Press, USA
(2015), p.ix.
20
found to have split off from the Larsen C segment of the Larsen ice shelf in July 2017
(Figure 3).36 Seen in relation to the splitting of the northerly Larsen A ice shelf in 1995
and Larsen B in 2002, the fear of rising sea levels is no longer imaginary. ‘There is
enough ice in Antarctica that if it all melted, or even just flowed into the ocean, sea
levels (would) rise by 60 metres,’ as per Martin Siegert, Professor of geosciences at
Imperial College London and Co-director of the Grantham Institute for Climate Change
& Environment.37

Figure 3- Breakway Larsen C Ice Shelf

2.4 Important International Environment Protection Laws and Treaties

Since the 1972 conference, there have been many international environmental
agreements. The 1979 Geneva Convention on Long-range Transboundary Air
Pollution; the 1985 Helsinki Agreement (a twenty-one nation commitment to reduce
Sulphur-dioxide emissions); the 1988 Montreal Protocol on Substances That Deplete
the Ozone Layer; and the 1989 Basel Convention on Transboundary Movements of
Hazardous Wastes. It was the world wide awareness to the realm of environmental
sustainability that resulted in the landmark 1992 Rio conference. It would not be wrong

36
'Iceberg twice size of Luxembourg breaks off Antarctic ice shelf', The Guardian, Wednesday, July
12, 2017.
37
'Iceberg twice the size of Luxembourg breaks off Antarctica ice shelf; one of the 10 largest ever
recorded', News Nation Bureau, July 12, 2017.

21
to say that the basic framework for environment protection and sustainable
development evolved between 1972 and 1992 through a series of international
conferences and initiatives.

Relevant timelines are as under:38

 The Maltese Proposal at the United Nations General Assembly, 1967.

 The Convention on Wetlands of International Importance (Ramsar
Convention), 1971.
 The United Nations Conference on the Human Environment, Stockholm,
1972.
 The Convention on International Trade in Endangered Species of Wild
Fauna and Flora (CITES), 1973.
 The Protocol to Amend the Ramsar Convention (Paris Protocol), 1982.
 The Vienna Convention on the Protection of the Ozone Layer, 1985.
 The Montreal Protocol on Substances that Deplete the Ozone Layer,
1987.
 Our Common Future: Report of the World Commission on Environment
and Development (Brundtland Report), 1987.
 The Convention on the Control of Transboundary Movements of
Hazardous Wastes and their Disposal (Basel Convention), 1989.
 The United Nations Conference on Environment and Development, Rio
Earth Summit, 1992.
 The Convention on Biological Diversity, 1992.
 The Protocol on Bio-safety to the Convention on Biological Diversity
(Cartagena Protocol), 1992.
 The Convention on the Protection and Use of Transboundary
Watercourses and International Lakes (Water Convention), 1992.
 The Convention to Combat Desertification in Those Countries
Experiencing Serious Drought and/or Desertification, Particularly in
Africa, 1994.
 The Rio plus Five, 1997.

38
Available at <https://en.wikipedia. international_environmental_agreements>, accessed on
November 12, 2017 at 0930 hours.
22
  The Convention on Access to Information, Public Participation in
Decision-Making and Access to Justice in Environmental Matters
(Aarhus Convention), 1998.
 The Convention on the Prior Informed Consent Procedure for Certain
Hazardous Chemicals and Pesticides in International Trade (Rotterdam
Convention), 1998.
 The Protocol on Water and Health to the Water Convention, 1999.
 The UN Millennium Declaration, 2000.
 The Cartagena Protocol on Biosafety (Cartagena Protocol), 2000.
 The Convention on Persistent Organic Pollutants (Stockholm
Convention), 2001.
 The World Summit on Sustainable Development, Johannesburg, 2002.
 The Nagoya Protocol on Access to Genetic Resources and the Fair and
Equitable Sharing of Benefits arising from their Utilization (Nagoya
Protocol), 2010.

Though the Maltese Proposal tabled at the United Nations General Assembly in
1967 recognised that there was a common heritage of mankind and that this also
required legal protection by the international community. In June 1972, the First UN
(International) Conference on Human Environment was held in Stockholm where it was
declared that 'to defend and improve the human environment for present and future
generations has become an imperative goal for mankind.'39 It was here for the first time
that the world community got together to deliberate seriously on an important issue of
environment protection and sustainable development.
The more important agreements and conventions are discussed below:
2.4.1 Stockholm Declaration: The Declaration of the United Nations
Conference on the Human Environment, or Stockholm Declaration, was adopted June
16, 1972 by the United Nations Conference on the Human Environment at the 21st
plenary meeting as the first document in international environmental law to recognize
the right to a healthy environment. This conference resulted in the ‘Stockholm
Declaration on the Human Environment’. The Declaration, besides preamble, consists
of seven universal truths and twenty-six principles and can be said to be the first serious

39
Available at <http://www.un-documents.net/unchedec.htm>, accessed on November 10, 2017 at
0945 hours.
23
effort of the global community towards sustainable development and environment
protection. The conference which marked a new era in the field of environment finally
came out with a declaration known as the 'Stockholm Declaration'. The declaration is
divided into parts. While the first part proclaims seven truths about man in relation to
his environments, the second part enunciates twenty-six principles. The conference was
a remarkable achievement as 114 nations participated in it and they agreed generally on
declaration of principles and an action plan. These principles are contained in
Stockholm Declaration, which demonstrates that the world has just one environment.
The recommendations from Stockholm were later elaborated in the 1980 World
Conservation Strategy, collaboration between the International Union for the
Conservation of Nature, the World Wildlife Fund (WWF), and United Nations
Environment Programme (UNEP), which aimed to advance sustainable development.
2.4.2 Brundtland Report: 'Our Common Future' (or the Brundtland Report
1987) that provided a stark diagnosis of the state of the environment. The report
popularized the most commonly used definition of sustainable development,
‘Development that meets the needs of current generations without compromising the
ability of future generations to meet their own needs’.40 The Brundtland report provided
the momentum. The publication of ‘Our Common Future’ and the work of the World
Commission on Environment and Development laid the groundwork for the convening
of the 1992 Earth Summit and the adoption of Agenda 21, the Rio Declaration and to
the establishment of the Commission on Sustainable Development.
2.4.3 The Earth Summit: Then in 1992, three major instruments of
environmental governance were established at the Rio Summit: the UN Framework
Convention on Climate Change (UNFCCC), the Convention on Biological Diversity
(CBD), and the non-legally binding Statement of Forest Principles. Following a
recommendation in Agenda 21, the UN General Assembly officially created the
Commission on Sustainable Development (CSD) in 1992 to promote and monitor
international follow-up to the Rio agreements, and review sustainable development
linkages within and beyond the UN system. CSD activity provided the basis for a five
year review (Rio Plus Five) and the Programme for the Further Implementation of
Agenda 21, adopted by the UN General Assembly in 1997.

40
Available at <http://www.un-documents.net/ocf-02.htm>, accessed on November 10 at 1000 hours.
24
 2.4.4 United Nations Framework Convention on Climate Change (UNFCCC):
The UNFCCC is one of the most important international environmental treaties and was
formulated at the United Nations Conference on Environment and Development
(UNCED), (Earth Summit) in June, 1992.41 The treaty is aimed at stabilizing
Greenhouse gas concentrations in the atmosphere at a level that would prevent
dangerous anthropogenic interference with the climate system, commonly believed to
be around 2°C above the pre-industrial global average temperature. The treaty as
originally framed set no mandatory limits on greenhouse gas emissions for individual
nations and contained no enforcement provisions; it is therefore considered legally non-
binding. Rather, the treaty included provisions for updates (called protocols) that would
set mandatory emission limits. The principal update is the Kyoto Protocol, which has
become much better known than the UNFCCC itself.
India signed the UNFCCC on June 10, 1992 and ratified it on November 01,
1993. It acceded to the Kyoto Protocol in August, 2002. In accordance with the
UNFCCC agreement, India had submitted its first National Communication in 2004
followed by the Second National Communication in 2012. Later, in the Conference of
Parties (COP)-16 of UNFCCC held in Cancun (Mexico) in 2010 it was decided that the
developing countries will submit updates in the form of Biennial Update Reports
(BUR). Accordingly, India’s first BUR submitted in January 2016 is an update to the
Second National Communication which was submitted in 2012. BUR has been
prepared by the Union Ministry of Environment, Forest and Climate Change under its
National Communication (NATCOM) project funded by Global Environment Facility
(GEF).
As per BUR, India emitted 2,136.84 million t of CO2 equivalent Greenhouse
gases in 2010. Energy sector was the prime contributor to emissions and with 71% of
total emissions in 2010. Energy sector includes electricity production, fuel combustion
in industries, transport and fugitive emissions. Industrial processes and product use
contributed 8%; agriculture and waste sectors contributed 18% and 3% respectively to
the national GHG inventory. About 12% of emissions were offset by carbon sink action
of forests and croplands, considering which the national GHG emissions are arrived at a
total of 1,884.31 million t of CO2 equivalent.42

41
Available at <https://www.cbd.int/doc/guidelines/ MEAs-negotiators-guide-en.pdf>, accessed on
November 10, 2017 at 1100 hours.
42
Available at <http://pib.nic.in/newsite/Print Release.aspx?relid=135727>, accessed on August 20,
2017 at 1600 hours.
25
 India’s per capita GHG emission in 2010 was 1.56 tons (t) CO2 equivalent,
which is less than one-third of the world’s per capita emissions and far below than
many developed and developing countries.43 A reduction of emission intensity of GDP
by about 12% between 2005 and 2010 has been achieved against our voluntary pledge
to reduce the emission intensity of its GDP by 20–25 % by 2020, compared with the
2005 level.
As on January 13, 2016, twenty three countries other than India, including
Brazil, South Africa, South Korea have submitted their BURs. China, the world’s
largest emitter of Greenhouse gases is yet to submit its BUR. Brazil has submitted its
BUR, but has given only provisional inventory. Developed countries are required to
submit a report known as the Biennial Report (BR), which is to be submitted every
alternate year and is subjected to International Analysis and Review (IAR). Paris
Agreement calls for developing country parties to submit their first biennial update
reports as soon as possible. Prime Minister Shri Narender Modi ratified the Paris
agreement on October 2, 2016 (chosen to coincide with Mahatma Gandhi’s birthday).44
The pact seeks to limit the Earth’s warming to below 2°C (3.6 degrees Fahrenheit).
Incidentally, an Indian national has been selected to a crucial post in the UNFCCC. UN
Secretary-General Antonio Guterres appointed Ovais Sarmad in July 2017 to join the
UNFCCC as the Deputy Executive Secretary.45
At the Paris climate conference (COP 21) in December 2015, 195 countries
adopted the first-ever universal, legally binding global climate deal.46 The agreement
set out a global action plan to put the world on track to avoid dangerous climate change
by limiting global warming to well below 2°C. Governments agreed for a long-term
goal of keeping the increase in global average temperature to well below 2°C above
pre-industrial levels to aim to limit the increase to 1.5°C, since this would significantly
reduce risks and the impacts of climate change.
2.4.5 The Stockholm Convention: Following the Rio Summit and
deliberations/agreements on climate change, in 1995, the Governing Council of the
United Nations Environment Programme (UNEP) also called for global action to be
taken on Persistent Organic Pollutants (POPs), which it defined as 'chemical substances
43
Ibid.
44
'India ratifies historic Paris climate deal' at UN, The Hindu, October 02, 2016.
45
'Ovais Sarmad Appointed New UNFCCC Deputy Executive Seccretary’, UN Climate Change
Newsroom Announcement, May 15, 2017.
46
Available at <http://newsroom. unfccc .int/unfccc-newsroom/finale-cop21/>, accessed on November
10, 2017 at 1900 hours.
26
that persist in the environment, bio-accumulate through the food web, and pose a risk of
causing adverse effects to human health and the environment'. India signed the
Convention in 2002 and ratified it in 2006.
Following this, the Intergovernmental Forum on Chemical Safety (IFCS) and
the International Programme on Chemical Safety (IPCS) prepared an assessment of the
12 worst offenders, known as the ‘dirty dozen’.47
The INC met five times between June 1998 and December 2000 to elaborate the
convention, and delegates adopted the Stockholm Convention on POPs at the
Conference of the Plenipotentiaries convened from May 22-23, 2001 in Stockholm,
Sweden.The negotiations for the Convention were completed on May 23, 2001 in
Stockholm. The convention entered into force on May 17, 2004 with ratification by an
initial 128 parties and 151 signatories. To implement the Convention, Governments are
to take measures to eliminate or reduce the release of POPs into the environment. There
is a commitment on the part of Governments that are parties to the Stockholm
Convention on POPs to implement legal, organizational and environmental
management measures, including substantive technological changes, in order to comply
with the requirements of the Convention. It was accepted that the production and use of
POPs, as well as their presence in the bio-sphere, are causing serious damage to human
health and the environment.
The Convention also channels resources into cleaning up the existing stockpiles
and dumps of POPs that litter the world's landscape. Ultimately, the Convention points
the way to a future free of dangerous POPs and promises to reshape our economy's
reliance on toxic chemicals.
The Stockholm Convention is perhaps best understood as having five essential
aims:48
 Eliminate dangerous POPs, starting with the 12 worst.
 Support the transition to safer alternatives.
 Target additional POPs for action.
 Cleanup old stockpiles and equipment containing POPs.
 Work together for a POPs-free future.

47
Peter H Raven, 'e-Study Guide for: Environment', Cram101 Textbook Reviews (2013).
48
Available at <http://www.unido.org/what-we-do/environment/capacity-building-for-the-
implementation-of-multilateral-environmental-agreements/the-stockholm-convention.html>,
accessed on July 20, 2017 at 1500 hours.
27
 2.4.6 Environment Conservation and UN Industrial Development
Organisation (UNIDO). This Organisation supports countries in their environmental
management efforts, including the implementation of multilateral environmental
agreements and the provision of sustainable energy. It helps create new green
industries, establishing national road maps for greening the supply chain, determining
benchmarks and indicators, disseminating and sharing best practices, running clean
technology programmes, undertaking various capacity-building exercises and
contributing to international forums with the necessary research and expertise.
Pollution, climate change, habitat destruction and over-exploitation of natural resources
such as fresh water and fisheries are doing great harm to human health, wellbeing and
livelihoods, especially among poorer regions, and is undermining the prospects for a
long-term resilient and robust economy. One of the prerequisites for industry to flourish
in a sustainable manner is the availability of an assured supply of affordable and clean
energy, together with improved resource efficiency.
The risks of climate change are well documented and its impacts are already
affecting people and ecosystems. Meeting the climate challenge requires industries and
institutions; both public and private, to be able to assess and understand climate change,
design and implement adequate policies and to work towards resource efficient
societies and low emission growth. 'Decoupling' natural resource use and environmental
impacts from economic growth is a key requirement for overcoming the pressing
challenge of growing resource consumption level (Figure 4).49

49
Available at <http://www.unido.org/what-we-do/environment.html>, accessed on July 20, 2017 at
1400 hours.
28
 Figure 4-Towards Sustainable Development (UNIDO)

UNIDO's services include capacity building, direct technical support to

enterprises and assistance to government institutions on Cleaner Production (CP) policy
matters, as well as the promotion, adaptation and transfer of environmentally sound
technologies and the implementation of advanced CP business models, such as
chemical leasing. Today, the concept of Sustainable Development has been accepted as
a part of the Customary International Law.

2.5 Important Environment Protection Laws-India Specific

In addition to constitutional provisions, India has developed a robust mechanism

of acts, rules, statutes and laws to protect the environment.50 Some of the relevant
provisions are discussed here under

2.5.1 Acts, Rules and Statutes:

 The Water (Prevention and Control of Pollution) Act, 1974 to provide

for the prevention and control of water pollution and the maintenance or
restoration.
 The Air (Prevention and Control of Pollution Act, 1981) to provide for
the prevention, control and abatement of air pollution. The Act includes

50
Available at <http://www.biology discussion.com/environment/top-6-environmental-acts-enacted-
in-india/16775>, accessed on November 10, 2017 at 0800 hours.

29
 the preservation of the quality of air and control of air pollution
provisions.
 The Environment (Protection) Act, 1986 authorizes the central
government to protect and improve environmental quality, control and
reduce pollution from all sources, and prohibit or restrict the setting and
/or operation of any industrial facility on environmental grounds.
 The Hazardous Waste (Management and Handling) Rules, 1989 aims
to control the generation, collection, treatment, import, storage, and
handling of hazardous waste.
 The Public Liability Insurance Act, 1991 and the Public Liability
Insurance Rules, 1991 intend to provide for public liability insurance for
the purpose of providing immediate relief to the persons affected by
accident while handling any hazardous substance.
 The Municipal Solid Wastes (Management and Handling) Rules, 2000
applicable to municipal authorities responsible for the collection,
segregation, storage, transportation, processing, and disposal of
municipal solid wastes.
 The Noise Pollution (Regulation and Control) (Amendment) Rules, 2002
are to reduce noise pollution, permit use of loud-speakers or public
address systems during night hours between 2200 hours to midnight or
during any cultural or religious festive occasions.
 The Indian Forest Act, 1927, Forest Conservation Act, 1980, Forest
(Conservation) Rules, 1981, National Forest Policy, 1988, Forest
(Conservation) Rules, 2003, Forest (Conservation) Amendment Rules,
2004 all intend to consolidate the law related to forest, the transit of
forest produce, and the duty leviable on timber and other forest produce.
 The Factories Act, 1948 and the Factories (Amendment) Act, 2014
express concern for the working environment of the workers. The later
amendment has sharpened its environmental focus and expanded its
application to hazardous processes.
 The Wildlife (Protection) Act, 1972 looks into the management of
national parks and wildlife sanctuaries and protection to scheduled
species, community and conservation reserves.

30
  The National Environment Tribunal Act, 1995 provides for strict
liability for damages arising out of any accident occurring while
handling any hazardous substance and for the establishment of the
National Environment Tribunal for effective and expeditious disposal of
cases arising from such accident, with a view to giving relief and
compensation for damages to persons, property and the environment and
for matters connected therewith or incidental thereto.
 The Biological Diversity Act, 2002 gives guidance on sustainable use of
bio-diversity, Access and Benefit sharing of bio-diversity for
commercial use, identification of species of conservation importance,
documentation of People’s Bio-diversity Registers (PBRs), declaration
of bio-diversity heritage sites, local institutional mechanism in form of
Bio-diversity Management Committees, and financial mechanism in
form of National/State/ Local Bio-diversity Fund.
 The Protection of Plant Varieties and Farmer’s Rights Act, 2001
mandates conservation of plant genetic resources and caters for a
financial mechanism in form of National/State Local Gene Fund.
 The Scheduled Tribes and Other Traditional Forest Dwellers
(Recognition of Forest Rights) Act, 2006 also referred as Forest Rights
Act (FRA), 2006 defines community forest resources, critical wildlife
habitats, provides ownership of minor forest produce to the local
communities and tenurial security for forest dwelling communities. The
functioning of the provisions is also linked with performance of the
ecosystems in terms of delivering the ecosystem services for livelihoods.
 The National Green Tribunal Act, 2010 provides for the establishment of
a National Green Tribunal for the effective and expeditious disposal of
cases relating to environmental protection and conservation of forests
and other natural resources including enforcement of any legal right
relating to environment and giving relief and compensation for damages
to persons and property and for matters connected therewith or
incidental thereto.

2.5.2 The Indian Penal Code, 1860 (IPC): There are various provisions in the
IPC which provide for prevention of pollution of atmosphere and deal with public

31
nuisances related to health, ecology, sanitation and pollution. Chapter XIV of the IPC
containing Sections 268 to 290 deals with offences affecting the public health, safety,
convenience, decency and morals. Its object is to safeguard the public health, safety and
convenience by causing those acts punishable which make environment polluted or
threaten the life of the people. Sections 268 and 290 of the IPC define public nuisance
and provide for punishment of fine upto Indian Rupee (INR) 200 for public nuisance
respectively. Sections 269 and 270 of the IPC further provide, whoever negligently or
malignantly does any act which spreads the infection of disease dangerous to life, can
be controlled by punishing the person responsible for such act with imprisonment upto
six months to six years or with fine or both respectively. Section 277 provides, whoever
voluntarily fouls the water of any public spring or reservoir, so as to render it less fit for
the purpose for which it is ordinarily used, shall be punished with imprisonment for
three months or with fine of INR 500 or with both.

Section 278 provides, whoever voluntarily vitiates the atmosphere in any place
so as to make it noxious to the health of persons dwelling or carrying on business in the
neighbourhood or passing along the public way, shall be punished with fine upto INR
500. Section 284 provides, whoever does, with any poisonous substance, any act in a
manner so rash or negligent as to endanger human life, or to be likely to cause hurt or
injury to any person, shall be punished with imprisonment for a term of six months or
with fine upto INR 1000 or with both.

Under these provisions any act or omissions of a person which caused injury to
another by polluting the environment can be controlled.

2.5.3 The Code of Criminal Procedure, 1973: Section 133 to Section 143 deal
with the subject concerning environment protection. Section 133 deals with cases of
public nuisance, wherein the Magistrate is empowered to pass conditional order for
removal of public nuisance. There are certain categories of cases which can be
redressed under Section 233, these are the following:

 The unlawful nuisance or obstruction to any way, river or channel,

lawfully used by the public or to a public place.
 The construction of any building or the disposal of any substance as is
likely to occasion explosion or conflagration.

32
  The conduct of any trade or occupation, or the keeping of any goods or
merchandise, injurious to health or physical comfort of the community.
An unfenced tank, well or excavation near a public way or place.
 A building, tent and structure, or a tree as is likely to fall and cause
injury to persons.
 A dangerous animal requiring destruction, confinement or disposal.
 By virtue of Section 133, the Magistrate is empowered to exercise its
powers on receipt of a police report or other report if any of the
circumstances is existing as cited above.

2.5.4 The Motor Vehicle Act, 1988 and the Central Motor Vehicle Rules,
1989: Section 190 (2) of the Motor Vehicle Act deals with control of noise and air-
pollution, punishable for the first offence with a fine of INR 1000 and for any second or
subsequent offence with a fine of INR 2000. Further, under the Central Motor Vehicle
Rules, 1989, the noise range for horns has been fixed between 93 decibel (dB) and 112
dB. The decibel is measured at a distance of 7.5 metres from the horn and at a height of
0.5 to 1.5 metres. Rule 115 of the Central Motor Vehicle Rules, 1989 deals with
emission of smoke, vapour, etc. from motor vehicles stipulating that after the expiry of
a period of one year from the date on which the motor vehicle was first registered,
every such vehicle shall carry a valid ‘Pollution Under Control’ (PUC) certificate
issued by an agency authorised for this purpose by the State Government. The validity
of the certificate shall be for six months and the certificate shall always be carried in the
vehicle and produced on demand by the officers referred to in sub-rule (1) of Rule 116.

2.5.5 Constitutional Provisions related to Environment Protection: The

concept of India having a 'living constitution' is most apparent on the interpretation and
amendments made over a period of time, insofar as the provisions related to protection
of ecology and sustainable development are concerned. Though there are many
provisions in the Indian Constitution which relate to sustainable development, for
purposes of this dissertation, major constitutional provisions related to environmental
sustainability alone, are being highlighted. These principles enshrined in the
Constitution of India can be broadly studied in four parts, The Preamble, Fundamental
Rights, Fundamental Duties and Directive Principles.

These constitutional provisions dealing with environment protection, pollution

and sustainable development areas as enumerated below.
33
 2.5.5.1 The Preamble: The Preamble of the Constitution of India
provides that India is based on ‘Socialistic’ pattern of society, where the State pays
more attention to the social problems than on any individual problems. Environmental
pollution which has emerged as one of the biggest social problems is being regarded as
a real problem affecting the society at large and thus state is under an obligation to fulfil
the basic aim of socialism, that is, to provide decent standard of living to all which can
be possible from a pollution free environment.51

2.5.5.2 Fundamental Rights: Under Fundamental Rights (Part-III),

Articles 21, 14 and 19 have been used by judiciary to establish the right to clean
environment as one of the implied fundamental rights. Article 21 which says, no person
shall be deprived of his life or personal liberty except according to procedure
established by law, has been subject to maximum scrutiny by the Supreme Court which
has mandated more than once, that the right to environment free of danger of disease
and infection are inherent in the Article. The right to healthy environment was first
recognized in 1988 by the Supreme Court as inherent in Article 21 in the Dehradun
Quarrying Case.52 In this case, the Supreme Court gave directions to stop quarrying
under the Environment Protection Act, 1986. Similarly, in M.C. Mehta v. Union of
India53, the Supreme Court treated the right to live in a pollution free environment as a
fundamental right inherent under Article 21.

Further, Article 19(1) (g) confers the fundamental right over citizens to practice
any occupation, trade or business. But this fundamental right is subject to reasonable
restrictions and citizens can not practice the business activities that cause health hazards
to public as ruled in Cooverjee B. Bharucha v. The Excise Commissioner and the Chief
Commissioner, Ajmer.54

2.5.5.3 Fundamental Duties: Article 51-A was added under the

Constitution (42nd Amendment) Act, 1976 which deals with ‘Fundamental Duties’
under Part IV-A. Article 51-A actually lays down ten fundamental duties designed for
restructuring and building a welfare society. As part of this amendment, Article 51-A(g)
says that 'It shall be duty of every citizen of India to protect and improve the natural
environment including forests, lakes, rivers and wild life and to have compassion for

51
Dr. Sukanta K. Nanda. Environmental Law, Central Law Publication, Allahabad (2007).
52
AIR 1988 SC 2187.
53
AIR 1987 SC 1086.
54
1954 AIR 220, 1954 SCR 873.
34
living creatures.' The said amendment imposed a responsibility on every citizen in the
form of Fundamental Duty.

2.5.5.4 Directive Principles: Part IV of the Constitution of India

containing Articles 36 to 51, deals with Directive Principles of State Policy. The
directive principles form the fundamental feature and are designed to achieve socio-
economic goals including a healthy life in a healthy environment. Article 47 provides
that the State shall regard the raising of the level of nutrition and the standard of living
of its people and the improvement of public health as among its primary duties. The
improvement of public health also includes the protection and improvement of
environment without which public health cannot be assured.

Article 48 deals with organization of agriculture and animal husbandry. The

Article directs the State to take steps to organize agriculture and animal husbandry on
modern and scientific lines. In particular, it should take steps for preserving and
improving the breeds and prohibiting the slaughter of cows and calves and other milch
and draught cattle.

In 1976, the Constitution (Forty-Second Amendment) Act was passed and the
provisions relating to the protection of environment were incorporated by adding
Article 48-A to the Directive Principles of State Policy. According to Article 48-A, ‘the
State shall Endeavour to protect and improve the environment and to safeguard the
forests and wildlife of the country’.

It is seen that Articles 47 and 48 both emphasise the need of a healthy

environment. Article 47 provides that the ‘State shall regard the raising of the level of
nutrition and the standard of living of its people and the improvement of public health
as among its primary duties’. Protection and improvement of environment is necessary
for improving the public health. Article 48 directs the state to take steps to organize
agriculture and animal husbandry on modern and scientific lines and 48-A lays down a
clear state duty to protect and improve the environment.

2.6 Role of Indian Judiciary and Environment Issues

Over the years, environmental jurisprudence in India has assumed importance

by devising important principles geared towards the attainment of environmental
protection, environment justice and sustainable development. In the post-independence
period Indian environmental law was mainly restricted to claims of tortious nature such

35
as nuisance or negligence. There was no environment specific legislation to address the
problems of environmental degradation. Most of the scholars trace the growth of Indian
environmental jurisprudence to the United Nations Conference on the Human
Environment held at Stockholm in 1972. As time passed by, a major initiative towards
environmental protection and sustainable development in India was undertaken by the
Indian judiciary and the commitment of the judiciary towards social good in general
and environmental protection in particular, led to the emergence of the innovative use
of 'public interest litigation' under Articles 32 and 226 of the Constitution of India, as a
tool for social and environmental justice.55

The Supreme Court of India has laid down that the Precautionary Principle and
the Polluter Pays Principle are essential features of sustainable development. These
concepts are part of environment law of the country. The Precautionary Principle
establishes that a lack of information does not justify the absence of management
measures. On the contrary, management measures should be established in order to
maintain the conservation of the resources. The assumptions and methods used for the
determination of the scientific basis of the management should be presented.

2.6.1 The Precautionary Principle: Principle 15 of the Rio de Janerio

Declaration states that, ‘in order to protect the environment, the precautionary approach
shall be widely applied by States according to their capabilities. Where there is a threat
of serious or irreversible damage, lack of full scientific certainty shall not be used as a
reason for postponing cost-effective measures to prevent environmental degradation.’

The Indian Supreme Court also adopted this principle but modified form i.e. the
Court explained that this principle has led to the special principle burden of proof in
environmental cases where burden as to absence of injuries effect of the actions
proposed is placed on those who want to change the status quo.56

The essential ingredients of the Precautionary Principle are:57

 Environmental measures by the state government and the statutory

authorities must anticipate, prevent and attack the causes of environment
degradation.

55
Available at <http://www.preservearticles.com/201103 314839/judicial-interpretations-ishelping-
towards-sustainable-development-in-india.html>, accessed on June 05, 2017 at 1900 hours.
56
C. S. Shastri, 'Environment Law', 2nd edition, New Delhi, Eastern Book Company (2005).
57
Available at < http://www.legalservicesindia.com/article/article/environmental-laws-and-
constitutional-provisions-in-india-1926-1.html>, accessed on May 20, 2017 at 1500 hours.
36
  When there are threats of serious and irreversible damage, lack of
scientific certainty should not be used as a reason for postponing
measure to prevent environmental degradation.
 The ‘Onus of Proof’ is on the actor or the developer/industrialist to show
that his action is environmentally benign.
 Precautionary duties must not only be triggered by the suspicion of
concrete danger but also by concern or risk potential.

2.6.2 The Polluter Pays Principle: Principle 16 of the Rio de Janerio

Declaration states that, 'national authorities should endeavour to promote the
internationalization of environmental costs and the use of economic instruments, taking
into account the approach that the polluter should, in principle, bear the cost of
pollution, with due regard to public interest and without distorting international trade
and investment'.

It is clear from the above note that, the object of the above principle is to make
polluter liable not only for the compensation to the victim but also for the cost restoring
of environmental degradation.58 Some of the landmark cases pertaining to environment
protection and sustainability are discussed below:

In M. C. Mehta v. Union of India59 (the Oleum Gas Leak case), the Supreme
Court established a new concept of managerial liability ‘absolute and non-delegable’
for disasters arising from the storage of or use of hazardous materials from their
factories. The enterprise must ensure that no harm results to anyone irrespective of the
fact that it was negligent or not.

In Shanti Star Builders v. Narayan Totame60 the Supreme Court held that right
to life is guaranteed in a civilized society would take within its sweep the right to food,
the right to clothing, the right to decent environment and a reasonable accommodation
to live in.

In Subhash Kumar v. State. of Bihar61 the Supreme Court held that right to life
is a fundamental right under Art. 21 of the Constitution and it include the right to
enjoyment of pollution free water and air for full enjoyment of life. If anything

58
C. S. Shastri, 'Environment Law', New Delhi: Eastern Book Company, 2nd edition (2005).
59
1987 SCR (I) 819.
60
1990(1) SCC 520.
61
(1991) 1 SCC 598.
37
endangers or impairs that quality of life in derogation of laws a citizen has recourse to
Art. 32 of the Constitution for removing the pollution of water or air which may be
detrimental to life.

In Vellore Citizens Welfare Forum v. Union of India62 the Supreme Court held
that industries are vital for the country’s development, but having regard to pollution
caused by them, principle of ‘Sustainable Development’ has to be adopted as the
balancing concept. ‘Precautionary Principle’ and ‘Polluter Pays Principle’ has been
accepted as a part of the law of the country.

In Indian Council of Enviro-Legal Action v. Union of India63 (the Bichhri

pollution case), following the decision in the Oleum Gas leak case and based on the
polluter pays principle, the polluting industries were directed to compensate for the
harm caused by them to the villagers in the affected areas, specially to the soil and to
the underground water.

In M.C. Mehta v. Kamal Nath64 the Supreme Court while enunciating the
doctrine of ‘Public Trust' held that resources such as air, sea, waters and the forests
have such a great importance to the people as a whole that by leasing ecologically
fragile land to the Motel Management, the State Government had committed a serious
breach of public trust.

In Narmada Bachao Andolan v. Union of India65 it was observed that

‘Sustainable development means what type or extent of development can take place,
which can be sustained by nature/ecology with or without mitigation’. The issue before
the court was whether the environmental clearance granted by the Union of India for
the construction of a dam had been granted without proper study and understanding of
the environmental impact of the project. Furthermore it was examined whether the
environmental conditions imposed by the Ministry of Environment had been violated
and if so, what was the legal effect of the violations.

62
AIR 1996 SC 2715.
63
1996 3 SCC 212.
64
(1997) 1 SCC 388.
65
1999 SC 3345.
38
 Sustainable development, therefore, depends upon accepting a duty to seek
harmony with other people and with nature, according to ‘Caring for the Earth: A
Strategy for Sustainable Living’, the guiding rules are:66

 People must share with each other and care for the earth.
 Humanity must take no more from nature than man can replenish.
 People must adopt life styles and development paths that respect and
work within nature’s limits.

66
Available at <https://portals.iucn.org/library/efiles/documents/cfe-003.pdf>, accessed on November
14, 2017 at 1200 hours.
39
 CHAPTER 3

SUSTAINABLE DEVELOPMENT-THE WAY AHEAD

You cannot escape the responsibility of tomorrow by evading

today
-Abraham Lincoln67

3.1 General

In the long evolution of the human race on this planet, a stage has been reached
when, through the rapid acceleration of science and technology, we have acquired the
power to transform our environment in countless ways and on an unprecedented scale.
Humanity’s capacity to transform its surroundings, if used wisely and with respect to
the ways of nature, can bring to all communities the opportunity to enhance the quality
of life. Wrongly or heedlessly applied, or applied in iniquitous ways, the same power
can do incalculable harm to human beings and their environment. We see around us
growing evidence of human-caused harm in many regions of the earth the dangerous
levels of pollution in water, air, earth and living beings; destruction and depletion of
irreplaceable life forms and natural resources; major and undesirable disturbances in the
earth’s climate and protective layers; gross deficiencies, harmful to physical, mental
and social health, in the living and working environments of humans, especially in
cities and industrial complexes.

It is important to recognize our dependence on the earth’s natural resources.

Natural resources such as air, water, and land are fundamental to all life forms: they are,
much more than money and economic infrastructure, the base of our survival. To large
numbers of humanity, especially communities that have been termed ‘eco-system
people’ (people depending on the natural environments of their own locality to meet
most of their material needs),68 natural resources are the base of survival and
livelihoods. Their material and economic sustenance largely depends on these. In India
alone, around 70% of the population directly depends on land-based occupations,
forests, wetlands and marine habitats, for basic subsistence requirements with regard to
water, food, fuel, housing, fodder and medicine as also for ecological livelihoods &
cultural sustenance. Given this close interdependence of humans and their environment,

67
Kelly Nickell, ‘Pocket Patriot: Quotes from American Heroes’, Writer's Digest Books, (2005).
68
Available at <http://www.legalserviceindia.com/article/l399-A-Mandate-To-Pollution-Free-
Environment.html>, accessed on June 20, 2017 at 1700 hours.
40
it is not surprising that the culture of societies is so greatly influenced by their
environment.
It is a known fact that the benefits of population growth and of growth in the
rates of consumption of resources accrue to a few individuals; the costs of population
growth and growth in the rates of consumption of resources are borne by all of society.
Sustainability requires that the size of the population be less than or equal to the
carrying capacity of the eco-system for the desired standard of living.69 It is established
that sustainability requires an equilibrium between human society and stable eco-
systems. The destruction of eco-systems tends to reduce the carrying capacity and/or
the sustainable standard of living and the rate of destruction of eco-systems increases as
the rate of growth of the population increases.

The term ‘sustainable development’ was used at the time of Cocoyoc

Declaration on Environment and Development in the early 1970s. In 1972, the UN
Stockholm Conference on the Human Environment marked the first great international
meeting on how human activities were harming the environment and putting human at
risk. Since then, it has become the trademark of international organizations dedicated to
achieving environmentally designed or beneficial development. 70 To be sustainable,
development must possess both economical and ecological sustainability. Environment
and development are means not ends in themselves. The environment and development
are for people, not people for environment and development.

As originally articulated, ‘sustainable’ captured the environmental issues,

assumed to centre on the needs of future generations, while ‘development’ captured the
economic/poverty issues, assumed to centre on the needs of the present generation. The
concept has since been broadened, in recognition of even the non-environmental
aspects of sustainability like health, and also the non-economic aspects of development.
The concept of sustainable development is an elusive one, highly complex, variable and
subject to a large number of interacting factors which influence the relationship. We are
only now starting to come to terms with this complexity, and to understand what the
implications are. There are no simple solutions for the myriad of problems we face-and

69
Available at <http://dieoff.org/page39.htm>, accessed on June 19, 2017 at 1400 hours.
70
Michael Radcliffe, ‘Sustainable Development-Exploring the Contradictions’, Routledge; 1st edition
(1987), p.32.

41
no single issue can be tackled successfully by experts in a single field or a single sector
of society.71
On the other hand, an ‘unsustainable situation’ occurs when natural capital (the
sum total of nature's resources) is used up faster than it can be replenished.
Sustainability requires that human activity only uses nature's resources at a rate at
which they can be replenished naturally. Inherently the concept of sustainable
development is intertwined with the concept of carrying capacity. Theoretically, the
long-term result of environmental degradation is the inability to sustain human life.
Such degradation on a global scale could imply extinction for humanity
3.2 Concept of Sustainable Development
The publication of ‘Our Common Future’ and the work of the World
Commission on Environment and Development laid the groundwork for the convening
of the 1992 Earth Summit and the adoption of Agenda 21, the Rio Declaration and to
the establishment of the Commission on Sustainable Development.
The United Nations Report of the World Commission on Environment and
Development, 'Our Common Future, Chapter 2: Towards Sustainable Development', is
one of the first comprehensive documents which gives out the concept of sustainable
development in great detail. The Report explains the concept of sustainable
development. A society may in many ways compromise its ability to meet the essential
needs of its people in the future - by overexploiting resources, for example. The
direction of technological developments may solve some immediate problems but lead
to even greater ones. Large sections of the population may be marginalized by ill-
considered development. Sustainable development, environment protection and
economic growth have an inter-dependent relationship. As a concept, sustainable
development includes a number of activities and the idea of limitations imposed by the
state of technology and social organization on the environment's ability to meet present
and future needs, as explained in the following sub-para's:72
3.2.1 Agriculture and Human Practices: Settled agriculture, the diversion of
watercourses, the extraction of minerals, the emission of heat and noxious gases into the
atmosphere, commercial forests, and genetic manipulation are all examples or human

71
Available at <http://www.who.int/mediacentre/events/HSD_Plaq_02.6_def1.pdf> accessed on
November 10 at 1400 hours.
72
Louis P. Pojman, Paul Pojman, Katie McShane, ‘Environmental Ethics: Readings in Theory and
Application’, Cengage Learning (2016), 7th edition.

42
intervention in natural systems during the course of development. Until recently, such
interventions were small in scale and their impact limited. Today's interventions are
more drastic in scale and impact, and more threatening to life-support systems both
locally and globally. This need not happen. At a minimum, sustainable development
must not endanger the natural systems that support life on Earth: the atmosphere, the
waters, the soils, and the living beings.
3.2.2 Pressure on Limited Resources: Growth has no set limits in terms of
population or resource use beyond which lies ecological disaster. Different limits hold
for the use of energy, materials, water, and land. Many of these will manifest
themselves in the form of rising costs and diminishing returns, rather than in the form
of any sudden loss of a resource base. The accumulation of knowledge and the
development of technology can enhance the carrying capacity of the resource base. But
ultimate limits there are, and sustainability requires that long before these are reached,
the world must ensure equitable access to the constrained resource and reorient
technological efforts to relieve the presume.
3.2.3 Growth and Fragility of Eco-systems: Economic growth and
development obviously involve changes in the physical ecosystem. Every ecosystem
everywhere cannot be preserved intact. A forest may be depleted in one part of a
watershed and extended elsewhere, which is not a bad thing if the exploitation has been
planned and the effects on soil erosion rates, water regimes, and genetic losses have
been taken into account. In general, renewable resources like forests and fish stocks
need not be depleted provided the rate of use is within the limits of regeneration and
natural growth. But most renewable resources are part of a complex and interlinked
ecosystem, and maximum sustainable yield must be defined after taking into account
system-wide effects of exploitation.
3.2.4 Over use of Fuels: As for non-renewable resources, like fossil fuels and
minerals, their use reduces the stock available for future generations. But this does not
mean that such resources should not be used. In general the rate of depletion should
take into account the criticality of that resource, the availability of technologies for
minimizing depletion, and the likelihood of substitutes being available. Thus land
should not be degraded beyond reasonable recovery. With minerals and fossil fuels, the
rate of depletion and the emphasis on recycling and economy of use should be
calibrated to ensure that the resource does not run out before acceptable substitutes are

43
available. Sustainable development requires that the rate of depletion of non-renewable
resources should foreclose as few future options as possible.73
3.2.5 Loss of Bio-diversity: Development tends to simplify ecosystems and to
reduce their diversity of species. And species, once extinct, are not renewable. The loss
of plant and animal species can greatly limit the options of future generations; so
sustainable development requires the conservation of plant and animal species.
3.2.6 Depletion of Natural Resources: So-called free goods like air and water
are also resources. The raw materials and energy of production processes are only
partly converted to useful products. The rest comes out as wastes. Sustainable
development requires that the adverse impacts on the quality of air, water, and other
natural elements are minimized so as to sustain the ecosystem's overall integrity.
In essence, sustainable development is a process of change in which the
exploitation of resources, the direction of investments, the orientation of technological
development; and institutional change are all in harmony and enhance both current and
future potential to meet human needs and aspirations.
An often quoted definition of sustainable development is defined in the report as
development that meets the needs of the present without compromising the ability of
the future generation to meet their own needs. The definitions contains within it two
key concepts. The concept of ‘needs’ in particular, the essential needs of the world’s
poor, to which over-riding priority should be given and the idea of ‘limitations’
impressed by the state of technology and social organization on the environment’s
ability to meet present and future needs. Thus the goals of economic and social
development must be defined in terms of sustainability in all countries–developed or
developing, market oriented or centrally planned. Interpretations will vary, but must
share certain general features and must flow from a consensus on the basic concept of
sustainable development and on a broad strategic framework for achieving it. In
essence, sustainable development is a process of change in which the exploitation of
resources, the direction of investments, the orientation of technological development,
and institutional changes are all in harmony and enhance both current and future
potential to meet human needs and aspirations.74
Sustainability is also the ability to continue a defined behavior indefinitely. In
2005, the World Summit on Social Development identified three core areas that
73
Available at <http://www.un-documents.net/ocf-02.htm>, accessed on November 10, 2017 at 1300
hours.
74
Paramjit S. Jaswal and Nishtha Jaswal,‘Environmental Law’, Allahabad Law Agency (2015).
44
contribute to the philosophy and social science of sustainable development. These
“pillars” in many national standards and certification schemes, form the backbone of
tackling the core areas that the world now faces.
The principle of 'The Three Pillars of Sustainability' says that for the complete
sustainability problem to be solved all three pillars of sustainability must be sustainable.
The three pillars are social sustainability, environmental sustainability, and economic
sustainability (Figure 5).75

Figure 5 - Three Pillars of Sustainable Development

Dominic McGoldrick has suggested that sustainable development can be

structurally conceived as having pillars like the following structure (Figure 6):76

75
Available at < http://www.thwink.org/sustain/glossary/EnvironmentalSustainability.html>, accessed
on May 30, 2017 at 1400 hours.
76
Dominic McGoldrick, ‘Sustainable Development and Human Rights: An Integrated Conception’,
International and Comparative Law Quarterly, Vol. 45, 796-97, (1996).
45
 Figure 6 – Three Pillars of Sustainable Development (Dominic McGoldrick)

As per Dominic McGoldrick, the three pillars are composed of international

environmental law, international human rights law and international economic law.
According to him, the attractiveness of such a simple structure is that it presents
sustainable development as integrating and interactive. It has elements of an objective
comprising a process and a principle. It overarches a broad range of disciplines yet it is
separate. The integrated structure of sustainable development is such that it requires a
support from each of the pillars. Its central pillar is international environmental law, a
discipline of international law that has seen enormous growth in the recent decades.77

Most national and international problem solving efforts focus on only one pillar
at a time. For example, the United Nations Environmental Programme (UNEP), the
Environmental Protection Agencies (EPA) of many nations, and environmental NGOs
focus on the environmental pillar. The World Trade Organization (WTO) and the
Organization for Economic Cooperation and Development (OECD) focus mostly on
economic growth, though the OECD gives some attention to social sustainability, like
war reduction and justice. The United Nations attempts to strengthen all three pillars.78
Environmental sustainability occurs when processes, systems and activities reduce the
environmental impact of an organizations facilities, products and operations. With the
awareness level of consumers regarding environment protection and sustainable
development slowly rising, many multinationals and conglomerates now make a

77
Ibid.
78
Available at <http://www.thwink.org/ sustain/ glossary/ThreePillarsOfSustainability.htm>, accessed
on July 25, 2017 at 1600 hours.
46
conscious effort to have the 'Environmental Pillar of Sustainability' as one of their key
result areas.

Corporate houses across the globe are strengthening the Environmental Pillar of
Sustainability. Walmart, an American multi-national retailing corporation that operates
as a chain of hypermarkets, discount department stores, and grocery stores. Its
environmental initiatives include increasing imports from green and yellow factories, a
goal of zero waste, plastic bag reduction, and initiatives to reduce carbon footprint by
managing energy consumption. Nestle, one of the world's largest food and Beverage
Company, identified four priority areas to manage their environmental sustainability:
water, agricultural raw materials, manufacturing and distribution, and packaging
specific to their food and beverage business. Verizon, an American multi-national
telecommunications conglomerate and the largest U.S. wireless communications
service provider has taken numerous initiatives towards environment sustainability
including electronic gear and telecom equipment recycling, reducing energy use by
providing employees with flexibility in where they work, reductions in carbon intensity,
finding more efficient and eco-friendly solutions for its fleet, greener packaging, using
alternative sources of energy for its cell towers, and many other initiatives to reduce the
impact on the environment.79

To add, the concept of ‘Green chemistry’ was created by Paul Anastas from the
EPA and John Warner from the University of Massachusetts as a set of principles that
reduces or eliminates the generation of hazardous substances in the design, manufacture,
and application of chemical products. This specifically relates to the pharmaceutical
industry which is devoted to discovering and developing new medicines that enable patients
to live longer, healthier, and more productive lives. Sustainability and environmental health
are important to the industry for its environmental, economic, and social performance. The
ultimate aim of industry being to have the 'molecules' that they produce go out into the
environment completely degraded to innocuous entities, and must have them stable in the
dosage form and in the patient’s body until they get to the site of biological activity without
degrading.80

79
Available at <https://www.frontstream.com/the-three-pillars-of-sustainability/>, accessed on August
15, 2017 at 1900 hours.
80
‘Global Environmental Health in the 21st Century: From Governmental Regulation to Corporate
Social Responsibility: Workshop Summary’, Institute of Medicine (US), Roundtable on
Environmental Health Sciences, Research, and Medicine, Washington (DC): National Academies
Press (US); 2007.
47
3.3 Environment and Sustainable Development

True sustainable development, therefore, means an integration of development

and environment imperatives, it means development in harmony with environmental
consideration. To be sustainable, development must possess both economic and
ecological sustainability. It is a development process where exploitation of resources,
direction of investment, orientation of technology development and institutional
changes are all in harmony. Sustainable development also implies local control over the
resource use, and is the only path for conserving and promoting socio-economic well
being in a democratic form.

'Eco-development’ is a related concept. It is a process of ecologically sound

development, of positive management of environment for human benefits. For example,
banning tree felling in reserve forests and permitting harvesting of minor forest
products by rural poor and tribal; development of community or common lands for rural
subsistence needs of industries, towns and villages. These are the components of the
‘new development strategies’. The component of eco-development also includes
alternative development strategies; biogas, substitute for natural resources, social
forestry, micro irrigation and recycling of waste to prevent pollution.

Human survival and well-being depends on success in elevating sustainable

development to a global ethic. Critical objectives for environment and development
policies that follow from the concept of sustainable development include:81

 Reviving growth.
 Changing the quality of growth.
 Meeting essential needs for jobs, food, energy, water, and sanitation.
 Ensuring a sustainable level of population.
 Conserving and enhancing the resource base.
 Reorienting technology and managing risk.
 Merging environment and economics in decision making.

Companies now try to include environment related 'good practices' in their

functioning and also earmark resources towards environment protection. A good
example of incorporating most of the environment sustainability elements enumerated

81
‘Our Common Future’ Annexure to United Nations document A/42/427 (Development and
International Co-operation: Environment), ‘Report of the World Commission on Environment and
Development’.
48
above is found in an 'approach paper' of the Taiwan Optical Platform Co. Ltd., a
Taiwanese based media company. Publicized as 'Corporate Social Responsibility Best
Practice Principles,82 it has three Articles relevant to the issues being discussed:

 Article 15: The Company shall take into account the effect of business
operations on ecological efficiency, promote and advocate the concept of
sustainable consumption, and conduct research and development,
procurement, production, operations, and services in accordance with the
following principles to reduce the impact on the natural environment and
human beings from their business operations:

▪ Reduce resource and energy consumption of the products and

services.
▪ Reduce emission of pollutants, toxins and waste, and dispose of
waste properly.
▪ Improve recyclability and reusability of raw materials or
products.
▪ Maximize the sustainability of renewable resources.
▪ Enhance the durability of products.
▪ Improve efficiency of products and services.
 Article 16: To improve water use efficiency, the Company shall
properly and sustainably use water resources and establish relevant
management measures. The Company shall construct and improve
environmental protection treatment facilities to avoid polluting water, air
and land, and use their best efforts to reduce adverse impact on human
health and the environment by adopting the best practical pollution
prevention and control measures.
 Article 17: The Company shall monitor the impact of climate change on
their operations and shall establish company strategies for energy
conservation, Carbon and Greenhouse gases.

82
Available at <http://en.topmso.com.tw/downloadarea/20170214181011.pdf>, accessed on July 26,
2017 at 1600 hours.
49
3.4 Environmental Kuznets Curve

The Environmental Kuznets Curve (EKC), shows the relationship between

economic progress and environmental degradation through time as an economy
progresses. It describes that as countries develop initially, pollution increases. But later,
as the economy achieves further development, pollution decreases. Empirical studies
show that usually environmental factors like water, air etc. shows this path for several
countries. The basis for this view is the idea that environmental quality comes only after
basic needs such as food and housing are met. So, countries should focus initially on
economic growth even if it comes at the expense of environmental quality. As countries
become richer, they can afford to clean up pollution from the past and as public demand
for cleaner environment increases, governments can enact and enforce stricter pollution
control regulations. This is the EKC hypothesis and is supposed to explain why
environmental quality has improved in richer countries. The argument is simple:
‘pollute first; clean up later.’83

When the stages of economic development are expressed on the X axis and

Environmental degradation on the Y axis, the EKC gives an inverted ‘U’ shape (∩).

The curve shows the relationship between economic development and the level of
economic degradation (Figure 7).84

Figure 7 - Environmental Kuznets Curve

83
A. Kahuthu, ‘Economic Growth and Environmental Degradation in a Global Context’, Volume 8,
Issue 1, Kluwer Academic Publishers (2006).
84
Available at <https://en.wikipedia.org/wiki/Kuznets_curve>, accessed on July 10, 2017 at 1600
hours.
50
 The EKC shows an increasing pollution with initial development. But further
economic progress brings down pollution. Reason for this decline in pollution with
economic progress is that at low incomes, people tend to value development over
environmental quality. They exploit resources and nature. With wealth accumulation,
they are willing care more about environmental quality and its improvement.

The basis for this view is the idea that environmental quality comes only after
basic needs such as food and housing are met. So, countries should focus initially on
economic growth even if it comes at the expense of environmental quality.85
However, not all agree with this hypothesis. Certain limitations of the EKC can
be summed up as under:86
3.4.1 Empirical evidence is mixed: There is no guarantee that economic
growth will see a decline in pollutants.
3.4.2 Pollution is not simply a function of income: Many factors impact
pollution.For example, the effectiveness of government regulation, the development of
the economy and population levels.
3.4.3 Developed economies: Developed economies have seen a reduction in
industry and growth in service sector, but they are still importing goods from
developing countries. In that sense they are exporting environmental degradation.
Pollution may reduce in UK, US, but countries who export to these countries are seeing
higher levels of environmental degradation. One example is with regard to
deforestation. Higher income countries tend to stop process of deforestation, but at the
same time they still import meat and furniture from countries who are creating farmland
out of forests.
3.4.4 Industrialisation and Degradation: Some economists argue that there is
a degree of reduced environmental degradation post-industrialisation. But, if the
economy continues to expand, then inevitably some resources will continue to be used
in greater measure. There is no guarantee that long-term levels of environmental
degradation will continue to fall.
3.4.5 Corelation between GDP and pollution: Countries with highest GDP
have highest levels of CO2 emission. For example, the US has CO2 emissions of

85
Rama Mohana, R. Turaga, 'Economic growth vs Environmental Sustainability', Livemint, Saturday,
April 16, 2016.
86
Available at <http://www.economicshelp.org/ blog/14337/environment/environmental-kuznets-
curve/>, accessed on May 21, 2017 at 1400 hours.
51
17.564 t per capita. Ethiopia has by comparison 0.075 t per capita. China’s CO2
emissions have increased from 1,500 million t in 1981 to 8,000 million t in 2009.87
Writing about his book, 'How Societies Choose to Fail or Succeed', Pulitzer
Prize winning author Jared Diamond, in Chapter 14 of his book asks a question- ‘How
could any society fail to recognize that big problems are looming up, and why doesn’t
the society take measures to alert disaster?’88 In a nutshell, Jared Diamond lists twelve
environmental problems facing human-kind today, which are as under:
 Deforestation and habitat destruction.
 Soil problems (erosion, salinization, and soil fertility losses).
 Water management problems.
 Overhunting.
 Overfishing.
 Effects of introduced species on native species.
 Overpopulation.
 Increased per-capita impact of people.
 Anthropogenic climate change.
 Buildup of toxins in the environment.
 Energy shortages.
 Full human use of the Earth’s photo-synthetic capacity.

Herman Daly, one of the early pioneers of ecological sustainability, looked at

the problem from maintenance of natural capital viewpoint. In 1990, he proposed that:89
 For renewable resources, the rate of harvest should not exceed the rate of
regeneration (sustainable yield).
 For pollution, the rates of waste generation from projects should not
exceed the assimilative capacity of the environment (sustainable waste
disposal).
 For non-renewable resources, the depletion of the nonrenewable
resources should require comparable development of renewable
substitutes for that resource.

87
Available at <https://www.economicshelp.org/blog/14337/environment/environmental-kuznets-
curve/>, accessed on November 14, 2017 at 1900 hours.
88
Available at <http://www.jareddiamond.org/Jared_ Diamond/ Collapse. html>, accessed on June
20, 2017 at 0700 hours.
89
Available at <http://econpapers.repec.org/article/eeeecolec/v_3a2_3ay_3a1990_3ai_3a1_3ap_3a1-
6.htm>, accessed on August 16, 2017 at 1600 hours.
52
3.5 The Millennium Development Goals for Sustainable Development
In 2000, 189 nations made a promise to free people from extreme poverty and
multiple deprivations. This pledge became the eight Millennium Development Goals
(MDG) established by the UN to be achieved by 2015. In September 2010, the world
recommitted itself to accelerate progress towards these goals. The eight MDG – which
range from halving extreme poverty rates to halting the spread of HIV/AIDS and
providing universal primary education, all by the target date of 2015 – form a blueprint
agreed to by all the world’s countries and all the world’s leading development
institutions. They have galvanized unprecedented efforts to meet the needs of the
worlds poorest.
All UN member states had agreed to meet the MDG by 2015. To achieve the
goals, rich countries had agreed to designate 0.7% of their gross national income as
Official Development Assistance (ODA). Ultimately, only five donor countries have
met this target. Key indicators are not progressing towards set targets and the global
financial crisis has made matters worse. The UN has touted some successes, including
progress in China, but methods used to measure key indicators are too narrow. It
appears that little, if any, overall progress has occurred.

Figure 8 -The Eight MDG

Goal 7 of the MDG dealt specifically with environment sustainability (Figure 8

& 9).90 Eighteen targets were set as quantitative benchmarks for attaining the goals. The
United Nations Development Group (UNDG) in 2003 provided a framework of 53
indicators which are categorized according to targets, for measuring the progress
towards individual targets. A revised indicator-framework drawn up by the Inter-

90
Available at <http://www.who.int/topics/millennium_development_goals/about/en/>, accessed on
July 12, 2017 at 1200 hours.
53
Agency and Expert Group (IAEG) on MDG came into effect in 2008. This framework
had 8 Goals, 21 targets and 60 indicators. India had not endorsed this revised
framework. India’s MDG framework is based on the 2003 framework and includes 8
goals, 12 of the 18 targets relevant to India and 35 indicators.91

Figure 9-MDG Report Card India

In February 2015, an analysis was prepared by a UNESCAP team led by

Nagesh Kumar, Head of UNESCAP-SSWA Office and comprising Ivana Brnovic,
Shiladitya Chatterjee (adviser), Christopher Garroway (since moved to UNCTAD),
Matthew Hammill, Swayamsiddha Panda & Wanphen Sreshthaputra pertaining to India
and the MDG. It was basically a report card giving out the progress on these goals as

91
Available at <https://www.thequint.com/news/india/has-india-achieved-the-millennium-
development-goals>, accessed on November 10, 2017 at 1500 hours.
54
far as India was concerned. Highlights of the report specifically pertaining to
environment sustainability (Goal 7) are as under:92

 Forests and bio-diversity: Although India has slightly improved its

aggregate forest cover between 1990–2013, declines have occurred in
some states. Also, India’s forests have changed from multi-product and
multi-layer to timber oriented, limiting gathering of non-timber forest
products by forest-dependent communities. India’s progress in granting
community rights under the Forest Rights Act has been minimal. India
has, however, taken major strides in biodiversity conservation and will
achieve the MDG biodiversity target. An immediate task is to expand
afforestation by focusing particularly on reversing the loss of multi-
purpose trees from large forested states and increasing gatherable
biomass and non-timber forest products.
 Greenhouse gas emissions: India’s progress in controlling greenhouse
gas emissions can be considered satisfactory if the carbon intensity of
GDP is taken as an indicator, but not if CO2 emissions per head is
considered. India has committed, to reducing the carbon intensity of its
GDP by 20-25% by 2020 in support of international climate change
efforts.93 India has the opportunity to leapfrog into low carbon growth
paths using advanced technology as it industrializes and urbanizes
rapidly in the coming decades. ‘Grow first and clean-up later’ is not an
option.
 Terrestrial and marine eco-systems conservation: Apart from the core
MDG related concerns, mentioned above, India will need to confront
other environmental challenges to its sustainable development which are
addressed more comprehensively under the proposed SDG. These
include conservation of terrestrial and marine ecosystems. Some of
India’s major challenges in this area include pollution of its inland rivers
and waters; depleting fresh water sources through melting of Himalayan
glaciers and depleting groundwater; land degradation, estimated at 20%

92
Available at <http://www.unescap.org/sites/default/files/India_and_the_ MDG_0.pdf>, accessed on
August 09, 2017 at 1500 hours.
93
‘COP 21 in Paris: India vows to reduce carbon dioxide emission’, The Economic Times, November
10, 2017.

55
 of land area; and damage to coastal and marine ecosystems with loss of
34% of mangroves between 1950–2000.94
 Climate change mitigation: India upholds the principle of “common but
differentiated responsibilities” in climate change matters, but is aware
that it needs to take several measures in this area in its own interest as
well. These include energy efficiency measures particularly in
incentivizing use of LED lights, as the Government is doing and
benchmarking appliances for energy efficiency, and encouraging Indian
industry to move to more sustainable production patterns and waste
recycling. The Government is putting heavy emphasis on renewable
energy by focusing on solar, wind, geothermal and small hydroelectric
plants including through quintupling the target under the National Solar
Mission to 100,000 megawatts (MW) by 2022.95 However, as coal will
continue to be a dominant source of energy for many years, access to
advanced technologies such as carbon capture and storage (CCS) would
be critical. Apart from public action, encouragement of the private sector
to support sustainability efforts, particularly by undertaking investments
for clean energy deployment, must be a priority.
 Government’s initiatives: The National Action Plan on Climate Change
which focuses on both climate change mitigation and adaptation
measures is the Government’s major initiative on climate change. It also
has initiated measures and campaigns in other environment areas such as
Namami Gange for Ganga conservation, revamping the National
Disaster Management Authority, more ambitious solar mission, and the
100 Smart Cities initiative.96 Other measures need to be initiated in
particular for conservation of marine and coastal ecosystems and for
improving air quality in cities.
 International Assistance: India both receives and provides development
assistance. While development assistance received by India has been
important, it is small in proportion to its GDP, and evaluations suggest

94
Available at <https://www.greenfacts.org/en/india-millennium/index.htm> accessed on October 13,
2017 at 1300 hours.
95
‘Govt raises Solar Power target to 100,000 MW by 2022’, The Hindu, June 17, 2015.
96
Shivani Gupta, S. Nikhil Gupta, Naveen Gupta, ‘Redefining Clean India V. Sustainability
Development Goal’, Journal of Social Welfare and Management, Volume 7, Number 4, October-
December 2015.
56
 that there is scope for improving its effectiveness. India for its part has
helped developing countries through technical assistance, capacity-
building support, economic assistance, and market access to least
developed countries as a part of its development partnership activities
that have benefitted over 160 countries. India’s development assistance
at US $1.4 billion a year in nominal terms and US $5.3 billion in PPP
terms is significant for its level of development and can use.

As per statistical data, India has made some progress and is on track towards
achieving the Seventh MDG of ensuring environmental sustainability. Forest cover has
increased to 21.23 %, an increase of 5871 sq km, and protected areas cover to about
4.83 % of the country’s total land area. Reducing the energy intensity of GDP growth
through higher energy efficiency will be the key to achieving energy security. India is
on-track for achieving the MDG target for sustainable access to safe drinking water.
The overall proportion of households having access to improved water sources
increased from 68.2 % in 1992-93 to 90.6 % in 2011-12.97

As a whole, progress to attain the MDG targets has been rather slow. Take just
one example, despite the ‘Swach Bharat Abhiyan’, and Prime Minister Shri Narendra
Modi’s ambitious target of declaring India open-defecation free by October 2019, India,
which is one of the most densely populated countries in the world, has not recorded
similar progress in improving sanitation facilities over the last decade. Undoubtedly,
there has been a marked improvement to achieve various goals which comprise
sustainable development, but more is required as reflected in Figure 10.98

97
Available at <http://www.mospi.gov.in/sites/ mdg_India_Country_report_1aug14_1.pdf>, accessed
on October 21, 2017 at 1700 hours.
98
Available at <http://www.in.undp.org/content/india/en/home/post-2015/mdgoverview.html>,
accessed on August 10, 2017 at 1600 hours.

57
 Figure 10-Goal 7: Progress Report ‘India’-Environmental Sustainability

As the MDG era came to a conclusion, it saw the official launch of the bold and
transformative 2030 Agenda for Sustainable Development adopted by world leaders
last September at the United Nations. None the less, the final assessment of regional
progress towards the MDG presented an optimistic picture of how far the region has
come. Yet, it underlines the crucial need to address ongoing challenges in the post-2015
development agenda.

3.6 Sustainable Development Goals

The 2030 Agenda comprises seventeen new Sustainable Development Goals

(SDG), which will guide policy and funding for the next 15 years, beginning with a
historic pledge to end poverty everywhere, permanently (Figure 11).99

99
Available at <http://www.undp.org/content/ gcp/en/home/2030agenda.html>, accessed on
November 19, 2017 at 1500 hours.
58
 Figure 11- Sustainable Development Goals

Pope Francis once said that the best and simplest measures to implement the
sustainable development goals will be ‘effective, practical and immediate access for all
to housing, dignified work, adequate food and drinking water, education, and religious
and spiritual freedom’.100 These pillars of integral human development have a common
foundation, which is the right to life and, more generally, what we could call the right to
existence of human nature itself. Governments, then, must do everything possible to
provide conditions that allow for people to create and support families, at minimum
through access to lodging, labor, land and spiritual freedom. He also spoke against
financial agencies that imposed ‘oppressive lending systems’ on people that generate
greater poverty, exclusion and dependence. The Sustainable Development Goals were
adopted following Pope Francis’ address to the 193-member UN General Assembly, in
which he said the ‘right of the environment does exist’ and that ‘any harm done to the
environment is harm done to humanity.’

100
Available at <https://catholicclimatemovement.global/global-sustainable-development-goals-
catholic-enough/>, accessed on November 21, 2017 at 1300 hours.
59
 Keeping in mind the above, the Sustainable Development Goals aim to achieve
the following cycle (Figure 12):101

Figure 12-Global Sustainable Development Goals

3.7 Government of India Programmes and Policies: Sustainable

Environment

In its quest for sustainable development and to be part of the global mission to
protect the environment, India is a signatory of almost all the major treaties and
conventions related to environment protection and sustainable development. India
became a party to the Vienna Convention for the Protection of Ozone Layer on June 19,
1991 and the Montreal Protocol on substances that deplete the ozone layer on
September 17, 1992. Consequently, it ratified the Copenhagen, Montreal and Beijing
Amendments in 2003.102

A detailed Country Programme for phasing out ozone depleting substances

(ODSs) was prepared in 1993, supported by regulatory and fiscal measures as specified
in the Montreal Protocol with financial and technical support received from the
Multilateral Fund (MLF). The Ministry of Environment and Forests established an
Ozone Cell and a steering committee on the Montreal Protocol to facilitate

101
Ibid.
102
Available at <http://www.moef.nic.in /sites/default/files/ Final% 20Book% 20Roadmap_2.pdf>,
accessed on June 13, 2017 at 1800 hours.
60
implementation of the India Country Programme for phasing out production of ozone
depleting substances and has met with considerable success.

India is also a party to the Rotterdam Convention on the Prior Informed Consent
Procedure for Certain Hazardous Chemicals and Pesticides in International Trade.103
This convention was signed in 1998 and became effective from 2004. It is a multilateral
treaty to promote shared responsibilities in relation to import of hazardous chemicals.
In addition, India ratified the Basel Convention in 1992 on the Control of
Transboundary Movements of Hazardous Wastes and their Disposal.104 The Convention
has 175 parties and aims to protect human health and the environment against adverse
effects resulting from the generation, management, trans-boundary movements and
disposal of hazardous and other wastes.
As per the Twelfth Plan document, India has taken upon itself the voluntary
target of reducing the emission intensity of its GDP by 20-25 per cent, over the 2005
levels, by 2020.105 India has been active in all international forums relating to
environmental protection and has acceded to almost all major multilateral
environmental agreements and has undertaken a number of initiatives in this
direction.106
3.7.1 Green India Mission: The Ministry of Environment, Forests and
Climate Change, Government of India has launched a comprehensive Mission, the
‘National Mission for a Green India’ as part of National Action Plan for Climate
Change through a consultative process involving relevant stakeholders.107 The Green
India Mission (GIM) recognizes that climate change phenomena will seriously affect
and alter the distribution, type and quality of natural resources of the country and the
associated livelihoods of the people. GIM acknowledges the influences that the forestry
sector has on environmental amelioration through climate mitigation, food security,
water security, biodiversity conservation and livelihood security of forest dependent
communities. The GIM proposes a holistic view of greening and focuses not on carbon

103
‘Inter-Ministerial Delegation to Participate in Basel, Rotterdam, Stockholm Conventions in Geneva’
Press Information Bureau, Government of India, Ministry of Environment and Forests, Press
Release dated April 21, 2017.
104
Ibid.
105
Available at <http://planningcommission.nic.in/>, accessed on July 05 2017 at 1300 hours.
106
‘Millennium Development Goals India Country Report 2015,’ Social Statistics Division Report,
Central Statistics Office Ministry of Statistics and Programme Implementation,Wing-6, West
Block-8, R. K. Puram, New Delhi-110066.
107
Available at <http://www.dst.gov.in/sites/default/files/NMSKCC_July_2010.pdf>, accessed on
November 10, 2017 at 1900 hours.

61
sequestration targets alone, but on multiple ecosystem services, especially, bio-
diversity, water, biomass, etc., along with carbon sequestration as a co-benefit. Key
innovations include:
 Focus on quality of forests.
 Focus on ecosystem services.
 Focus on democratic decentralization.
 Creating a new cadre of Community Youth as Foresters.
 Adoption of Landscape-based Approach.
 Reform Agenda as conditionality.

3.7.2 National Afforestation Programme: The National Afforestation

Programme (NAP) continues to be the flagship scheme of National Afforestation and
Eco-Development Board (NAEB), in so much as it provides support, both in physical
and capacity building terms, to the Forest Development Agencies (FDA) which in turn
are the main organs to move forward institutionalization of Joint Forest Management.108
The FDA has been conceived and established as a federation of Joint Forest
Management Committees (JFMC) at the Forest Division level to undertake holistic
development in the forestry sector with people’s participation. This is a paradigm shift
from the earlier afforestation programmes wherein funds were routed through the State
Governments. This decentralized two-tier institutional structure (FDA and JFMC)
allows greater participation of the community, both in planning and implementation, to
improve forests and livelihoods of the people living in and around forest areas. The
village is reckoned as a unit of planning and implementation and all activities under the
programme are conceptualized at the village level. The two-tier approach, apart from
building capacities at the grassroots level, significantly empowers the local people to
participate in the decision making process. Under Entry Point Activities, community
assets are created with a ‘care and share’ concept.
3.7.3 Conservation of Bio-diversity: India has established six national bureaus
dealing with genetic resources of plants, animals, insects, microorganisms, fish and soil
sciences. These are the National Bureau of Plant Genetic Resources (NBPGR), with a
total of 4,08,186 plant genetic resource accessions; the National Bureau of Animal
Genetic Resources (NBAGR),which has a total holding of 1,23,483 frozen semen doses
from 276 breeding males representing 38 breeds of cattle, buffalo, sheep, goat, camel,
yak and horse for conservation; the National Bureau of Agriculturally Important

108
Available at <http://naeb.nic.in/ documents/ NAP_intro.l>, accessed on November 11, 2017 at
1900 hours.
62
Microorganisms (NBAIM), with a repository of 4,668 cultures, including 4,644
indigenous and 24 exotic accessions; and the National Bureau of Agriculturally
Important Insects (NBAII), with 593 insect germ-plasm holdings. The National Bureau
of Fish Genetic Resources (NBFGR), with a repository of 2,553 native finfishes and
Fish Barcode Information System were updated with 2,570 microsatellite sequences. In
terms of fish diversity, the Zoological Survey of India (ZSI) has also recorded 3,022
species in India, constituting about 9.4 % of the known fish species of the world.109
In 1999, the Government of India prepared the national policy and macro level
action strategy on bio-diversity through a consultative process. This document was a
macro level statement of policies and strategies needed for conservation and sustainable
use of bio-diversity. Thereafter, the Ministry of Environment Forests and Climate
Change implemented an externally aided project, the National Bio-diversity Strategy
and Action Plan (NBSAP), from 2000 to 2004. India was one of the first countries to
have a proactive legislation and enacted the Bio-diversity Act, 2002 to implement the
provisions of Convention on Bio-diversity (CBD). The Bio-diversity Rules were
notified in 2004. The Act is being implemented through a three-tier structure, National
Bio-diversity Authority (NBA) at the national level, State Bio-diversity Boards (SBB)
at the provisional level, and Bio-diversity Management Committees (BMC) at the local
level. Following India’s adoption of the National Environment Policy (NEP) in 2006,
the NBAP was prepared by revising and updating the National Policy and macro level
Action Strategy on Bio-diversity, developed in 1999, and the National Bio-diversity
Action Plan (NBAP-2008) outlined broad actions and detailed actionable points
generally aligned with the targets laid down by the five Strategic Goals of Strategic
Plan for Bio-diversity (SP) 2011-2020 and the corresponding 20 Aichi Bio-diversity
Targets.
India is among the select countries in the world that have developed their own
National Bio-diversity Targets aligned with the Aichi Bio-diversity Targets. A
monitoring framework with indicators, agencies responsible for monitoring and
reporting and frequency of monitoring/ reporting has been developed for monitoring the
trends and reporting progress in implementation of the National Bio-diversity Targets.
The National Bio-diversity Targets and monitoring framework have been developed on

109
K.P. Laladhas, Preetha Nilayangode, Oommen V. Oommen, ‘Biodiversity for Sustainable
Development’, Springer (2016).
63
the basis of consultations with a range of stakeholders and a review of the programmes
and activities being undertaken by relevant Ministries/Departments, and NGOs.
3.7.4 Ease of doing Business and Environment Sustainability: One of the
major factors related to the ease of doing business in a country pertains to its
environment policies, amongst other things. India's low rank on the World Bank’s Ease
of Doing Business index is raised often in the media and people at the highest levels of
government set out to improve our ranking. High-powered committees comprising top
bureaucrats and industry leaders are commissioned to write reports on streamlining and
speeding up regulatory approvals, especially those related to the environment and
forests. Soon after 'Doing Business 2017' report, Prime Minister Shri Narendra Modi
had asked officials to ramp up the efforts to introduce reforms and push for India's
improved rankings.110 India jumped 30 spots to secure a place among the top 100
countries on World Bank's ease of doing business ranking list in 2017. Historically
India had been in the range of 130-140. This is the highest jump any country has made
in World Bank's ease of doing business ranking. Eight areas in which the World Bank
counted reform impact include starting a business, dealing with construction permits,
getting credit, protecting minority investors, paying taxes, trading across borders,
enforcing contracts and resolving insolvency. The other two areas considered were
getting electricity and registering property (Figure-13).111

Figure-13: World Bank Annual Report on the Ease of ‘Doing Business 2017:
Equal Opportunity for All’

110
Available at <http://etvfutures.com/2017/10/31/india-ranks-100-in-world-banks-ease-of-doing-
business-list/>, accessed on November 10, 2017 at 1700 hours.
111
Available at <https://economictimes.indiatimes.com/news/economy/ indicators/reform-booster-
india-breaks-into-top-100-in-world-bank-ease-of-doing-business-
rankings/articleshow/61376612.cms>, accessed on 15 November, 2017 at 1100 hours.
64
 Another worrying aspect is India’s low ranking in the Yale University’s
Environmental Performance Index (EPI) rating. No government official comes forward
and nor are any questioned by the media on what the government is planning to do to
improve India’s ranking on Yale University’s Environmental Performance Index (EPI),
which had ranked India 155 out of 178 countries in 2014. On air quality, the survey
had ranked India 174 out of 178.112 In fact, it is common for the government to respond
to such surveys by questioning their methodology or, worse, motives. As far back as in
May 2014, the World Health Organization (WHO) had declared Delhi the city with the
worst air quality in the world, the fallout of which has now been realised by the
government and citizens after the un-precedented environment crisis plaguing the
national capital since October, 2017. It was as though the common man was not aware
of how polluted the city was. As per the latest 2016 Yale University Report, China, the
world’s second biggest economy, is ranked 109, up from 116th place in 2012. Its
performance has improved nearly 13 % over the past decade, its air quality and
sanitation and waste water treatment efforts have led to gains over the past decade. And
India, one of the the world’s most populous countries, is in 141st place, slipping from
125th place in 2012, but improving 20 % over the past decade, largely because of its
improvements in sanitation and waste water treatment.113

3.7.5 National Voluntary Guidelines: The National Voluntary Guidelines

(NVG) on Social, Environmental and Economic Responsibilities of Business were
released by the Ministry of Corporate Affairs (MCA) in July 2011, by Shri Murli
Deora, the then Union Minister for Corporate Affairs. The national framework on
business responsibility is essentially a set of nine principles that offer businesses an
Indian understanding and approach to inculcating responsible business conduct. Non-
financial metrics such as those relating to environmental, social and governance factors
need to be captured by companies and thus the need for a standardized reporting
framework. UN Global compact, Global Reporting Initiative (GRI) and Carbon
Disclosure project are internationally accepted reporting frameworks which provide a
platform for companies to disclose their sustainability practices and policies. However,
till now there had been no Indian guidelines/framework which took into account the

112
Available at <http://www.business-standard.com/article/news-ians--/india-ranked-155th-on-yale-s-
environmental--performance/-/-index-114012700970_1.html>, accessed on November 10, 2017 at
1200 hours.
113
Available at: <https://www.huffingtonpost.com/jared-green/2016-environmental-
perfor_b_9316004. html>, accessed on October 10, 2017, at 1400 hours.
65
needs of the Indian stakeholders. The process started in end 2009 by establishment of
Guidelines Drafting Committee (GDC), which submitted its final recommendations of
the draft NVG to the MCA in November 2010.

The NVG consist of nine core principles, namely:114

 Principle 1: Businesses should conduct and govern themselves with

Ethics, Transparency and Accountability.
 Principle 2: Businesses should provide goods and services that are safe
and contribute to sustainability throughout their life cycle.
 Principle 3: Businesses should promote the well-being of all employees.
 Principle 4: Businesses should respect the interests of, and be responsive
towards all stakeholders, especially those who are disadvantaged,
vulnerable and marginalized.
 Principle 5: Businesses should respect and promote human rights.
 Principle 6: Business should respect, protect, and make efforts to restore
the environment.
 Principle 7: Businesses, when engaged in influencing public and
regulatory policy, should do so in a responsible manner.
 Principle 8: Burinesses should support inclusive growth and equitable
development.
 Principle 9: Businesses should engage with and provide value to their
customers and consumers in a responsible manner.

The primary objective of all these guidelines is to encourage adoption of

sustainability reporting and mainstream disclosure on environmental, social and
governance metrics. It is based on the premise that you can’t change unless you
measure. NVG provide businesses a framework which enables them to move towards
responsible decision making and urges them to adopt the ‘Triple Bottom-line’
Approach.115

The Triple Bottom Line is one of the main systems being used by businesses to
assess the profits they are making through their corporate sustainability solutions. The
Triple Bottom Line method see’s beyond the traditional bottom line of business to the

114
Available at <http://www.sustainabilityoutlook.in/content/national-voluntary-guidelines-india-inc-
csr-responsible-business>, accessed on November 18, 2017 at 1300 hours.
115
Available at <https://info.era-environmental.com/blog/bid/40788/ sustain ability-management-
system-the-triple-bottom-line>, accessed on November 14, 2017 at 1300 hours.
66
profits that a business makes socially, environmentally, and economically. Measuring
business using the Triple Bottom Line is one of the best markers of how sustainable a
business is, and how profitable it really is!

The Social Bottom Line measures business profits in human capital, including
its position within local society. Social bottom line is increased by having fair and
beneficial labour practices and through corporate community involvement. The social
bottom line questions the belief that the less a business pays its work force the longer it
can afford to operate. Instead, the social bottom line measures the long-term
sustainability of business human capital, with the understanding that a business that is
also a desirable workplace will always be able to operate. Essentially, corporate
interests and labour interests are seen as interdependent.116

The Environmental Sustainability Bottom Line takes the view that the less
impact a business has on the environment and the fewer natural resources it consumes,
the longer and more successful the business will be. Controlling the Environmental
Bottom Line means managing, monitoring, and reporting your consumption and waste
and emissions.117

The Economic Sustainability Bottom Line approach means that economic

capital must be measured in terms of how much of an impact the business has on its
economic environment. The business that strengthens the economy it is part of is one
that will continue to succeed in the future. Of course, a business needs to be aware of its
traditional profits as well, and the Triple Bottom Line accounts for this as well.118

Unlike the traditional method, the Triple Bottom Line allows one to see business
as a social and environmental entity and measure it along the given parameters
parameters.

3.7.6 Role of Securities and Exchange Board of India (SEBI) in CSR: As

per the Securities and Exchange Board of India (SEBI), the country’s top 100 listed
companies (by market capitalization) will have to report certain critical information to
their shareholders as per the latest SEBI circular. The circular has a special mention of
CSR, asking companies to declare how much percentage of their net profit is being
spent towards CSR. The companies will also have to share the number of stakeholders’

116
Ibid.
117
Ibid.
118
Ibid.
67
complaints received and resolved, details of any pending case filed by a stakeholder
against any unfair trade practice, irresponsible advertising or anti-competitive
behaviour adopted by the company.119 According to SEBI, the move will enable the
shareholders to have a better understanding of the manner in which their companies
function and make a strong case for adopting responsible business practices. As per the
SEBI circular, companies have been directed to follow the national voluntary guidelines
on social, environmental and economic responsibility formulated by the MCA in July
2011. Information like number of employees hired on temporary or contractual basis,
any legal notices received from pollution control boards and number of consumer
complaints pending at the end of the fiscal will all come in public domain if the circular
is strictly followed.

Further, such companies will have to provide details of the framework under
which their Business Responsibility Report (BRR) has been prepared. Under the
format, companies will have to provide general information about themselves, financial
details like total turnover, profit after taxes and total spending on CSR and details about
their subsidiary and whether the subsidiary has participated in business responsibility
initiatives. Also, firms need to disclose about details of the director responsible for
implementation of the BRR policy.120

119
Available at <http://causebecause.com/sebi-makes-csr-reporting-compulsory-december-31-is-the-
date/4292>, accessed on November 10, 2017 at 1500 hours.
120
Available at <https://timesofindia.indiatimes.com/business/india-business/Sebi-comes-out-with-
business-responsibility-disclosure-format/articleshow/49662128 .cms>, accessed on November 13,
2017 at 1900 hours.
68
 CHAPTER 4

THE MEANING AND SCOPE OF CORPORATE SOCIAL

RESPONSIBILITY
O man! Procure wealth with one hundred hands and distribute it
with one thousand hands. Thus you attain perfection of the work
done and to be done
- Artharva Veda121
4.1 Understanding CSR and its Significance
CSR can be defined as a concept whereby firms integrate social and
environmental concerns in their business operations and in their interaction with their
voluntary and mandatory activities for the good of society and environment in general.
While there may be no single universally accepted definition of CSR, each definition
that currently exists underpins the impact that businesses have on society at large and
the societal expectations of them. It can also be defined as a movement aimed at
encouraging companies to be more aware of the impact of their business on the rest of
society, including their own stakeholders and the environment.
CSR is a business approach that contributes to sustainable development by
delivering economic, social and environmental benefits for all stakeholders. A concept
with many definitions and practices, the way it is understood and implemented differs
greatly for each company and country. Moreover, CSR is a very broad concept that
addresses many and various topics such as human rights, corporate governance, health
and safety, environmental effects, working conditions and contribution to economic
development. Whatever the definition is, the purpose of CSR is to drive change towards
sustainability. There have been increased demands from employees, customers and
government bodies for businesses to be more open about their activities and to reach,
and maintain, acceptable standards in their business practice.122
For employers, CSR is now seen as an important way to increase competitive
advantage, protect and raise brand awareness and build trust with customers and
employees

121
A.K. Sharma, Balvir Talwar ‘Corporate Social Responsibility: Modern vis‐à‐vis Vedic Approach’,
Measuring Business Excellence, Vol. 9, Issue: 1, Emerald Group Publishing Ltd., (2005), pp.35-45.
122
Available at <http://lexicon.ft.com/ corporate-social-responsibility--CSR>, accessed on
on November 10, 2017 at 1000 hours.
69
Figure 14, very neatly shows how a good CSR model aligns various components, goals,
performance and activities of stakeholders with the practices of sustainability. 123

Figure14-Components of CSR

Although the roots of CSR lie in philanthropic activities (such as donations,

charity, relief work, etc.) of corporations, globally, the concept of CSR has evolved and
now encompasses all related concepts such as triple bottom line, corporate citizenship,
philanthropy, strategic philanthropy, shared values corporate sustainability and business
responsibility.124
The beginning of corporate involvement in environmental responsibility can be
traced to the environmental movement of the 1960’s. The 1960’s exploded with public
outrage over the environmental damage resulting from the business practices of various
industries. In the late 1960’s and early 1970’s, a few corporations began to respond to
public concern though the adaptation of codes of ethics and CSR principles.

123
Available at <https://blogs.ubc.ca /gordiedutka/ 2011/11/19/effective-csr-plans-5-elements/>,
accessed on November 10 , 2017 at 1800 hours.
124
Anupam Singh and Dr. Priyanka Verma, ' From Philanthropy to Mandatory CSR: A Journey
towards Mandatory Corporate Social Responsibility in India ', International Journal of Business
and Management Invention, Volume 3 Issue 8, August, 2014.
70
Understanding the importance and role of CSR had received an impetus in the 1960s by
such writers as Keith Davis, Joseph McGuire, Adolph Berle, William Frederick, and
Clarence Walton who introduced corporate citizenship, corporate stewardship, business
ethics, stakeholder management, conscious capitalism, creating shared value, and
sustainability in business models.
As environmental catastrophes continued to occur-pollutant fires on rivers in
Cleveland and Buffalo, children exposed to toxins at Love Canal, the Union Carbide
gas leak in Bhopal, the nuclear power plant meltdown in Chernobyl, and the Exxon
Valdez oil spill-corporations began to be held responsible for the environmental effects
of their actions, socially, politically and legally. Responding to growing pressure,
corporations developed self-regulating codes and strategic policies on environmental
management, environmental certification programs, self-monitoring practices, as well
as voluntary participation in monitoring by independent auditors. In addition to the
tenets of CSR, the notion of a Triple Bottom Line (people, planet and profits),
Stakeholder Theory, Environmental Management Systems (EMS), Life Cycle
Assessments (LCA), biomimicry, and other corporate movements emerged in the
1990’s. These concepts sought to change corporate culture and management practices
by placing a new importance on the environment.125
In 2008, Bill Gates spoke at the World Economic Forum at Davos about
something which he termed as ‘creative capitalism’. Gates mentioned that ‘in many
crucial areas, the world is getting better...but it's not getting better fast enough, and it's
not getting better for everyone.’ He said that companies, especially the biggest ones,
can improve the lot of the world's least privileged by better aligning their self-interest
with the good of society. ‘There are two great forces, self interest and caring for
others,’ he said. But he also stated that profits are not always possible when business
tries to serve the very poor.126 Impliedly, he put forth a viewpoint that engagement with
the world's problems, especially by its largest companies, regardless of near-term profit
is a social responsibility of corporates, companies, institutions and conglomerates.
The Global Hunt Foundation, a New Delhi based non profit organisation which
helps and assists in developing and implementing sustainable models, has very aptly
explained the responsibility of all stakeholders (society, governments, citizens,

125
Available at <https://www.andrew.cmu.edu/course/99-522/ejbackground.html>, accessed on July
01, 2017 at 1600 hours.
126
Remarks by Bill Gates, Chairman, Microsoft Corporation World Economic Forum 2008, ‘A New
Approach to Capitalism in the 21st Century’, Davos, Switzerland January 2008.
71
corporates, NGO's, business houses, industries etc.) not only with each other but with
other elements and strata of society to build a sustainable world for the future.
4.2 Carroll's Pyramid of Corporate Social Responsibility
An explanation of the modern definition of CSR can be found in Archie
Carroll’s ‘Pyramid of Corporate Social Responsibility’ (Figure 15). 127 The Pyramid
shows four types corporate social responsibilities encompassing the economic, legal,
ethical, and discretionary (philanthropic) expectations that society has of organizations
at a given point in time. These can be explained as mentioned in the succeeding paras.

Figure 15-Archie B Carroll 'The Pyramid of Corporate Social Responsibility'

4.2.1 Economic Responsibility: It concerns the responsibility of business of

producing goods and services needed by society and selling them making a profit.
Companies have shareholders who demand a reasonable return on their investments,
they have employees who want safe and fairly paid jobs, and they have customers who
demand good quality products at a fair price. So, here comes the first responsibility of
the business as it is to be a properly functioning economic unit and stay in business.
And this is the base of the pyramid, where all the other layers rest on.128

4.2.2 Legal Responsibility: The legal responsibility of corporations demands

that businesses abide by the law and play by the rules of the game. Should companies
choose to “bend” or even ignore their legal responsibilities the price can be very high
for the business. It is a well known fact that US software giant Microsoft has faced a
long running anti-trust case in Europe for abusing its monopolistic position to

127
Archie Caroll, ‘The Pyramid of Corporate Social Responsibility: Toward the Moral Management of
Organizational Stakeholders’, Business Horizons (1991).
128
V. Balachandran, V. Chandrasekaran, ‘Corporate Governance, Ethics and Social Responsibility’,
PHI Learning Pvt. Ltd. (2011).
72
disadvantage its competitors which resulted in tough settlements against the
company.129

4.2.3 Ethical Responsibility: The main concept of ethical responsibility as

defined and expressed by Carroll (1991) is that the ethical responsibility consists of
what is generally expected by society over and above economic and legal expectations.
Ethical responsibilities of companies cover its wide range of responsibilities. Ethical
responsibilities are not necessarily imposed by law, but they are expected from ethical
companies by the public and governments And this case was seen in the example of
Shell, where the decision of the government was reversed for disposing of oil platform
after a campaign and disagreement by the society and public.130

4.2.4 Philanthropic Responsibility: As it is in the top of the pyramid, it

focuses on more luxurious things such as improving the quality of life of employees,
local communities and ultimately society in general. Some points of the philanthropic
responsibilities of the businesses can be controversial and requires separate studies
aimed to it. For example, who should decide on what cause to spend the money, how
much, and on what basis these decisions should be made.131

According to the United Nations Principles for Responsible Investment

(UNPRI), over $34 trillion (approximately 15 %) of the world’s investment assets are
managed by signatories to the UNPRI who have committed to adopting policies and
procedures that factor ESG issues into investment decisions. While not all investors and
financial market analysts are convinced that environmental sustainability delivers
shareholders value, there is growing belief that companies that are successful in
avoiding environmental risks while taking advantage of ESG opportunities will
outperform over the long term. The UNPRI economic marketplace statistics support
this investment trend.132
It appears a virtual certainty that environmental sustainability will increasingly
move from voluntary to legally mandated initiatives, including sustainability reporting
requirements. The critical inquiry for business is no longer if, but how and when to
launch a meaningful environmental sustainability program. There is a growing business

129
Andrew Crane, Dirk Matten, ‘Business Ethics: Managing Corporate Citizenship and Sustainability
in the Age of Globalization’, Oxford University Press (2007).
130
Ibid.
131
Ibid.
132
E Lynn Grayson, Gary P. Kjelleren, ‘ The Business Case for Environmental Sustainability’,
Business Law Today, January, 2015.
73
case for environmental sustainability. It is an added bonus that addressing these
business challenges not only will enhance financial performance over time, but is
simply the right thing to do as well.133
4.3 Scope of Corporate Social Responsibility
Global guiding principles requiring businesses to meet specific standards on
environmental protection, health, safety and labor working conditions have been
instrumental in directing company efforts in meeting their social responsibilities. The
UN Global Impact, World Business Council for Sustainable Development Vision to
Action, International Business Leaders Forum, International Chamber of Commerce
Business Ethics Tools, UN Guiding Principles on Business and Human Rights and
International Labor Organization Tripartite Declaration of Principles Concerning
Multinational Enterprises and Social Policy are all examples of global principles
governing CSR.134
Corporate sustainability starts with a company’s value system and a principled
approach to doing business. This means operating in ways that, at a minimum, meet
fundamental responsibilities in the areas of human rights, labour, environment and anti-
corruption. Responsible businesses enact the same values and principles wherever they
have a presence, and know that good practices in one area do not offset harm in
another. By incorporating the Global Compact principles into strategies, policies and
procedures, and establishing a culture of integrity, companies are not only upholding
their basic responsibilities to people and planet, but also setting the stage for long-term
success. The aim is to offer solutions to ensure sustainable development by using
energy more efficiently while reducing greenhouse gas emissions and tackle the climate
challenges of the 21st century.
4.4 Key Issues of Corporate Social Responsibility
CSR promotes a vision of business accountability to a wide range of
stakeholders, besides shareholders and investors. Key issues of concern are
environmental protection and the wellbeing of employees, the community and civil
society in general, both now and in the future. These include:135

133
Ibid.
134
Available at <http://smallbusiness.chron.com/laws-businesses-76661.html>, accessed on November
12, 2017 at 1900 hours.
135
Saprem Shirvoikar and Satyam Shirvoiker, ‘ An Overview Of Corporate Social Responsibility’,
International Journal of Current Advanced Research, Vol 4, Issue 8, August 2015, pp. 228-233.
74
 4.4.1 Poverty Elimination: Poverty is major issue of the country. The
implementation of CSR policy makes it mandatory for Corporate to work for the
elimination of poverty. Unemployment is one of the main reasons for poverty and by
providing jobs to the locals the poverty can be reduced.
4.4.2 Labour Rights: The labours are the vulnerable and exploited group of the
society. The rules and regulations put forth under the labour laws are partly followed in
terms of wages, working period of hours, etc. Even an offence when committed such as
child labour are not detected due to lack of knowledge, fear of undesired results, lack of
employment opportunities etc.
4.4.3 Human Rights: Human rights are the basic natural rights inherent to all
human beings without discrimination. These rights are sometimes violated such as
remuneration, leisure time, equal pay for equal work, livelihood, education etc.
Implementation of CSR makes these rights to be enjoyed by every person who is in
relation to CSR.
4.4.4 Environmental Condition: The environmental condition is degrading
day by day making it difficult to live. The policy of CSR makes it compulsory for the
Corporate to maintain the environmental condition. The CSR policy makes it
compulsory for the Corporate to work towards the protection of environment.

4.5 Overview of Selected Initiatives and Instruments Related to Corporate

Social Responsibility
As far back as 2002, the Johannesburg Declaration on Sustainable Development
(2002) stated that the private sector has ‘a duty to contribute to the evolution of
equitable and sustainable communities and societies’, and that ‘there is a need for
private sector corporations to enforce corporate accountability’. Its Plan of
Implementation notes the need to ‘enhance corporate environmental and social
responsibility and accountability’.
Over the past few decades, a number of international guidelines have been
developed that aim to persuade corporations to assume responsibility for the social,
ecological and economic consequences of their activities. For example, the
Organisation for Economic Co-operation and Development (OECD) Guidelines for
Multi-national Enterprises, the United Nations Global Compact and ISO 26000
Guidance on Social Responsibility, together with the United Nations Guiding Principles
on Business and Human Rights and the International Labour Organization’s (ILO)
75
Conventions, are often referred to as the ‘core set of internationally recognised
principles and guidelines regarding CSR’. The OECD report provides an overview of
the unique status and characteristics of the OECD Guidelines for Multinational
Enterprises, the ILO Tripartite Declaration of Principles Concerning Multinational
Enterprises and Social Policy and the UN Global Compact. In addition, there is the
Kyoto Protocol 1997 and the 2015 Paris Agreement which mark the latest steps in the
evolution of the UN climate change regime/environment sustainability with inherent
mandates for governments, industry and corporates to accept social responsiblity.136
These instruments complement privately-developed CSR initiatives and are key
expressions of the broader systems of public and private governance from which the
private initiatives emerge.137 Some of the important instruments, treaties and
agreements which identify and put the onus of CSR on the corporate world are as
under:
4.5.1 The Universal Declaration of Human Rights and Corporate Social
Responsibility: The Universal Declaration of Human Rights (UDHR) states that ‘every
individual and organ of society’ has the responsibility to strive ‘to promote respect for
these rights and freedoms’ and ‘by progressive measures, national and international, to
secure their universal and effective recognition and observance’. As important ‘organs’
of society, businesses have a responsibility to promote worldwide respect for human
rights. India signed the UDHR on December 10, 1948.138
4.5.2 The International Labour Organisation Conventions and Corporate
Social Responsibility: The International Labour Organisation (ILO) establishes norms
covering all aspects of working conditions and industrial relations. Some of the most
important cover core labour standards to include basic human rights in the workplace
and the right to freedom of association, the right to organise and to collective
bargaining, and freedom from forced labour. ILO conventions are binding on all
countries that have ratified them. The ILO Tripartite Declaration of Principles
Concerning Multinational Enterprises and Social Policy is a global instrument designed
to provide guidance to government, employer and worker organisations in areas of
employment, training, conditions of work and industrial relations. All core labour

136
‘Annual Report on the OECD Guidelines for Multinational Enterprises 2009’, OCED 2010.
137
Available at <https://www.oecd.org/corporate/ mne/40889288.pdf>, accessed on May 10, 2017 at
2000 hours.
138
Available at <http://www. un.org/en /universal-declaration-human- rights/>, accessed on November
10, 2017 at 1700 hours.
76
standards are covered. Although it is a non-binding instrument, its implementation is
nevertheless the object of regular reviews. The ILO Declaration on Fundamental
Principles and Rights at Work is based on the core labour standards outline in the ILO
Conventions. The Declaration is not binding but applies to all ILO member states. As
part of a strategy to help countries to have well-functioning labour markets, it provides
for a mechanism for annual review of the efforts made by member states that have not
yet ratified the core labour standards. The Declaration also reinforces the application of
core labour standards in private voluntary instruments. India has ratified 47
Conventions and one Protocol.139
4.5.3 The Rio Declaration and Corporate Social Responsibility: As already
covered, the Rio Earth Summit included the Rio Declaration, Agenda 21, Forest
Principles, UNFCCC, the Convention to Combat Desertification and the Convention on
Biodiversity. Taken together, these documents laid the ground for much of today’s
environmental architecture. The Rio Declaration sets out 27 principles defining the
rights and responsibilities of states in relation to human development and well-being.
The Agenda 21 agreement provides guidance for governments, business and individuals
on how to contribute to efforts to make development socially, economically and
environmentally sustainable. Chapter 30 recognises the value of promoting ‘responsible
entrepreneurship’. It was signed by more than 170 countries including India.140
4.5.4 The Millenium Development Goals and Corporate Social
Responsibility: In 2000, the UN established the MDG. It was the first time that the
global system tried to create a vision of what the world should look like. The MDG
identified a series of government-agreed targets and timetables in relation to issues such
as poverty reduction, improvement of child health care and education, ensure
environment sustainability and the promotion of gender equality. India signed it in
September 2000.141
4.5.5 The Sustainable Development Goals and Corporate Social
Responsibility: The year 2015 was a landmark year for global development-the MDG
reached their December 2015 deadline.142 Some goals were achieved, some were not.

139
Available at <http://www.ilo.org/global/about-the-ilo/newsroom/news/ WCMS_ 557295/ lang--
en/index.htm>, accessed on November 10, 2017 at 1000 hours.
140
Available at <https://sustainabledevelopment.un.org/content/documents/1126SD21
%20Agenda21_new.pdf>, accessed on November 13, 2017 at 1400 hours.
141
Available at <https://www.linkedin.com/pulse/csr-uns-sdgs-role-private-sector-profs-michael-
hopkins-hopkins>, accessed on November 10, 2017 at 1400 hours.
142
Ibid.
77
The world then adopted a new set of transformative and universal SDG. In 2015, the
UN introduced the 17 SDG comprising 169 targets.143 The creation of these goals
involved civil society, and local and national governments. It was a hugely participative
process, which brought together various stakeholders, including businesses, to think
about a better future for the world. India too is a signatory of the SDG.
4.6 Relevance of ISO 14000 and International Environment Standards
To use resources as efficiently as possible, today most multi-nationals are
constantly searching for ways to reduce raw material use, energy consumption and
waste. Intelligent systems have been developed to utilise production waste. The
majority of them are certified in accordance with the international environmental
standard ISO 14000. ISO 14000 is a family of standards related to environmental
management that exists to help organizations achieve the following:144
 Minimize how their operations (processes, etc.) negatively affect the
environment and cause adverse changes to air, water, or land.
 Comply with applicable laws, regulations, and other environmentally
oriented requirements and continually improve the same. The current
version of ISO 14001 is ISO 14001: 2015.

The ISO 14000 family of standards provides practical tools for companies and
organizations of all kinds looking to manage their environmental responsibilities. ISO
14001:2015 and its supporting standards such as ISO 14006:2011 focus on environmental
systems to achieve this. The other standards in the family focus on specific approaches
such as audits, communications, labelling and life cycle analysis, as well as environmental
challenges such as climate change.145
The ISO 14000 family includes most notably the ISO 14001 standard, which
represents the core set of standards used by organizations for designing and implementing
an effective Environmental Management System (EMS). Other standards included in this
series are ISO 14004, which gives additional guidelines for a good EMS, and more
specialized standards dealing with specific aspects of environmental management. The
major objective of the ISO 14000 series of norms is ‘to promote more effective and
efficient environmental management in organizations and to provide useful and usable

143
Available at <http://www.in .undp .org/content/india/en/home/post-2015/sdg-overview.html>,
accessed on October 20 at 1600 hours.
144
Available at <https://www.iso.org/iso-14001-environmental-management.html>, accessed on
October 10, 2017 at 1100 hours.
145
Ibid.
78
tools; ones that are cost-effective, system-based, (and) flexible, and reflect the best
organizations and the best organizational practices available for gathering, interpreting, and
communicating environmentally relevant information’.146
ISO 14000 series is based on a voluntary approach to environmental regulation.
The series includes the ISO 14001 standard, which provides guidelines for the
establishment or improvement of an EMS.147 The standard shares many common traits
with its predecessor, ISO 9000, the international standard of quality management, which
served as a model for its internal structure , and both can be implemented side by side. As
with ISO 9000, ISO 14000 acts both as an internal management tool and as a way of
demonstrating a company’s environmental commitment to its customers and clients.
BIS is the National Standards Body of India and is a founder member of ISO. BIS
represents India, in ISO. The Technical Committee (TC) number 207 (ISO/TC 207), and
its sub-committees are responsible for the development of ISO 14000 standards. Industry
experts from India including BIS officers nominated by BIS participate in the meetings of
the Technical Committee ISO/TC 207 and its Sub-committees. ISO 14001 ‘Environmental
Management Systems-Specifications with Guidance for use’ is a standard and adopted by
BIS as IS/ISO 14001. IS/ISO 14001 is the exact replica of ISO 14001. It is a requirements
standard. It contains a set of requirements to define the operation of the Environmental
Management System. Since the requirements are expressed in a general form, it has the
flexibility to be applied to any organization.
There is no difference between ISO 14000 standards and IS/ISO 14000 standards.
They are exactly the same. BIS had adopted the above mentioned ISO 14000 series of
standards and these are numbered as IS/ISO 14000, IS/ISO 14001, IS/ISO 14004. These
standards published by BIS are exact replica of ISO 14000 series of standards. BIS also
provides certification against IS/ISO 14001 under its Management Systems Certification
activity.
4.7 Relevance of ISO 26000 and International Environment Standards
ISO 26000 is the international standard developed to help organizations effectively
assess and address those social responsibilities that are relevant and significant to their
mission and vision; operations and processes; customers, employees, communities, and
other stakeholders; and environmental impact. The ISO 26000 standard provides guidance
on the seven core subjects and issues pertaining to social responsibility. They are
146
Avaialable at <https://en.wikipedia.org/wiki/ISO_14000>, accessed on June 19, 2017 at 1300 hours.
147
Michal Szymanski, Piyush Tiwari, ‘ ISO 14001 and the Reduction of Toxic Emissions’, The
Journal of Policy Reform, Volume 7, Number 1, March 2004, pp. 31-42(12).
79
organizational governance, human rights, labour practices, the environment, fair operating
practices, consumer issues, and community involvement and development. ISO 26000
integrates international expertise on social responsibility and issues that an organization
needs to address in order to operate in a socially responsible manner. ISO 26000 is a
powerful tool to assist organizations to move from good intentions to good actions.148
ISO 26000 was developed before the UN Agenda 2030 and the SDG, and offers
more than 450 recommendations related to its main principles and core subjects of social
responsibility that help organizations contribute to the SDG goals. ISO 26000 offers
practical guidance to any organization, anywhere in the world, wishing to contribute to
sustainable development. It helps them to understand how they currently impact society
and contribute to sustainable development and to identify, engage and respect their
relevant stakeholder expectations. It assists them to be in compliance with applicable laws
and consistent with international norms of behaviour and to integrate responsible
behaviour throughout their organization and relationships.149
ISO 26000, Guidance on Social Responsibility helps businesses and organizations
contribute to sustainable development. Developed with the consensus of more than 450
experts from 99 countries and 42 international liaison organizations, it is the repository of
good practice and expertise from industry, government, labour organizations, non-
governmental organizations and consumers. The ISO national members bodies of the
following 83 countries (the acronyms of the NSBs appear in brackets) ), including India
had nominated experts to participate (Table 1).150

148
Available at <http://www.fosterms.com/ ISOConsultants/ ISO_26000_2010>, accessed on October
16, 2017 at 2200 hours.
149
‘Contributing United Nations sustainable development goals with ISO 26000’, International
Organization for Standardization, ISO Central Secretariat Ch. de Blandonnet 8 Case Postale 401,
Geneva Switzerland,,
150
‘ISO 26000 project overview’, International Organization for Standardization ISO, Central
Secretariat 1, chemin de la Voie-Creuse Case postale 56 CH, Genève 20 Switzerland.
80
 Table 1-ISO 26000: 83 Participating Countries

ISO 26000 provides guidance on how businesses and organizations can operate
in an ethical and transparent way that contributes to sustainable development while
taking into account the expectations of stakeholders, applicable laws and international
norms of behaviour. ISO 26000 provides guidance to all types of organizations,
regardless of their size or location, on:151

 Concepts, terms and definitions related to social responsibility.

 The background, trends and characteristics of social responsibility.
 Principles and practices relating to social responsibility.
 The core subjects and issues of social responsibility.
 Integrating, implementing and promoting socially responsible behaviour
throughout the organization and, through its policies and practices,
within its sphere of influence.
 Identifying and engaging with stakeholders.

151
Available at <https://www.iso.org/obp/ui/#iso:std:iso:26000:ed-1:v1:en:sec:3>, accessed on
October 10, 2017 at 1000 hours.
81
  Communicating commitments, performance and other information
related to social responsibility.

ISO 26000 is intended to assist organizations in contributing to sustainable

development. It is intended to encourage them to go beyond legal compliance,
recognizing that compliance with law is a fundamental duty of any organization and an
essential part of their social responsibility. It is intended to promote common
understanding in the field of social responsibility, and to complement other instruments
and initiatives for social responsibility, not to replace them. ISO 26000 provides
guidance rather than requirements.

4.8 The UN Global Compact

Initially an initiative of the UN Secretary-General, the UN Global Compact has

since been repeatedly recognised by the UN General Assembly. In the most recent GA
resolution addressing the UN Global Compact (A/RES/62/211), the Global Compact
Office was given a strengthened mandate. Every two years the Global Compact Office
prepares the Secretary-General’s report to the General Assembly on global partnerships,
which also addresses the role of the UN Global Compact.

The UN Global Compact’s ten principles are derived from the UDHR, the ILO’s
‘Declaration on Fundamental Principles and Rights at Work’, the Rio Declaration on
‘Environment and Development’, and the UN ‘Convention against Corruption’.
Principles 7, 8 and 9 specifically relate to environment protection and its sustainability.
The ten principles are as under:

4.8.1 Human Rights

 Principle 1: Businesses should support and respect the protection of

internationally proclaimed human rights.
 Principle 2: Make sure that they are not complicit in human rights
abuses.

4.8.2 Labour

 Principle 3: Businesses should uphold the freedom of association and the

effective recognition of the right to collective bargaining.
 Principle 4: The elimination of all forms of forced and compulsory
labour.

82
  Principle 5: The effective abolition of child labour.
 Principle 6: The elimination of discrimination in respect of employment
and occupation.

4.8.3 Environment

 Principle 7: Businesses should support a precautionary approach to

environmental challenges.
 Principle 8: Undertake initiatives to promote greater environmental
responsibility.
 Principle 9: Encourage the development and diffusion of
environmentally friendly technologies.

4.8.4 Anti-Corruption
 Principle 10: Businesses should work against corruption in all its forms,
including extortion and bribery.

The UN Global Compact is a strategic initiative call to companies to align

strategies and operations with universal principles on human rights, labour,
environment and anti-corruption, and take actions that advance societal goals.
As on 2016-17, there are 12,000 plus signatories in 170 countries, both
developed and developing, representing nearly every sector and size.152
It is interesting to note that as per published data under the aegis of the UN
Global Compact, there are 25 Indian companies/organizations participating in what has
been called 'The World's Largest Corporate Sustainability Initiative' (Table 2):153

Company Type Sector Country Joined on

Charities Aid NGO Local Not Applicable India 2016-11-09
Foundation India
Peace India NGO Global Not Applicable India 2016-07-20
Orana India Pvt. Small or Beverages India 2016-06-07
Ltd. Medium-sized
Enterprise
Centre for NGO Local Not Applicable India 2016-04-20
Advanced
Research &
Development

152
Available at <https://www.unglobalcompact.org/what-is-gc/partici pants>, accessed on May 10,
2017 at 1800 hours.
153
Ibid.
83
 (CARD India)

Signet Rubber Small or Automobiles & India 2015-07-13

(INDIA) Pvt. Ltd. Medium-sized Parts
Enterprise
All India Council NGO Global Not Applicable India 2014-11-13
of Human Rights,
Liberties & Social
Justice
Public Advocacy NGO Local Not Applicable India 2014-09-03
Initiatives for
Rights and Values
in India (PAIRVI)
FXB India NGO Local Not Applicable India 2014-02-13
Suraksha
Infinity Data Company Software & India 2013-05-08
Center India Pvt. Computer
Ltd. Services
Klang Indian Business Not Applicable Malaysia 2013-02-12
Chamber of Association
Commerce- Local
Dewan
Perniagaan India
Klang, Selangor
Brazil, Russia, Business Not Applicable Brazil 2012-03-13
India, China, Association
South Africa Global
CARE India NGO Local Not Applicable India 2011-11-30
GAIL (India) Company Oil & Gas India 2011-05-23
Limited Producers
ArcelorMittal Small or Industrial India 2010-09-16
India Limited Medium-sized Metals &
Enterprise Mining
Coal India Company Industrial India 2010-06-02
Limited Metals &
Mining
Samuel NGO Local Not Applicable India 2010-05-18
Foundation
Charitable India
Trust
Transparency NGO Local Not Applicable India 2010-05-05
International
India
HUMAN NGO Local Not Applicable India 2009-03-23
Network INDIA
Leadership for NGO Global Not Applicable India 2008-12-29

84
Environment and
Development
(LEAD) India
Moser Baer India Company Technology India 2008-04-09
Limited Hardware &
Equipment
Steel Authority of Company Industrial India 2007-06-13
India Limited Metals &
Mining
AIMA - All India Business Not Applicable India 2003-05-21
Management Association
Association Local
Rallis India Company Chemicals India 2003-01-03
Limited
Oil India Limited Company Oil & Gas India 2001-07-06
Producers
The Shipping Company Industrial India 2001-03-01
Corporation of Transportation
India Ltd.

Table 2-Indian Companies/Institutions-UN Global Compact Participation

CSR grows at different rhythms. CSR varies from continent to continent,

country from country, sector from sector and corporation from corporation. The
Responsible Competitive Index (RCI) from the UK NGO Accountability and the
Brazilian Business School, Fundaçao Dom Cabral, looks at how countries are
performing in their efforts to promote responsible business practices and issues
periodical indexes about such performances. The RCI’s index for 2007 analysed 108
countries (96% of global GDP). The analysis shows that more advanced economies do
better in this area. The top 20 countries, by the ranking order of best performance, were
the following: Sweden, Denmark, Finland, Iceland, UK, Norway, New Zealand,
Ireland, Australia, Canada, Germany, Netherlands, Switzerland, Belgium, Singapore,
Austria, France, USA, Japan, and Hong Kong. However, it is important to bear in mind
that advanced economies have often moved their more dirty industries to other parts of
the world where there are less stringent environmental and social standards. As a result,
other countries may be polluting on their behalf, and the indexes do not factor those
in.154

154
Simon Zadek and Alex MacGillivray, ‘The state of responsible competitiveness 2007:
making Sustainable Development count in Global Markets’, Emerald Group Publishing nn n
Ltd., (2016).

85
 Businesses are increasingly developing codes of conduct, environment, health
and safety standards, best practices guidelines and socially conscious programs in a bid
to become more socially responsible. Companies target their CSR programs towards
their stakeholders, including employees, consumers and the surrounding community.
Aside from establishing standards, companies engage in philanthropy, participate in
creating shared value with their stakeholders and benchmark their CSR initiatives
against that of other businesses in their industry to ensure the effectiveness of their
efforts. With the consumer base now aware of how the earlier 'only for profit' attitude of
business houses and corporates was one of the major causes of environmental
degradation, the discerning customers brand loyalty today is more aligned to business
houses which follow the principles of sustainable development good social practices.

A 2015 Nielsen Global Survey on CSR polled 30,000 consumers in 60 countries

to understand how passionate consumers are about sustainable practices when it comes
to purchase considerations; which consumer segments are most supportive of ecological
or other socially responsible efforts; and, which social issues/causes are attracting the
most concern. One key finding is that fifty-five % of global online customers are
willing to pay more for products and services provided by companies that are
committed to positive social and environmental impact.155

CSR can be described as the economic, legal, social, ethical and discretionary
expectations that society has regarding the activities of private sector corporations. As
this legal landscape evolves, corporations face increased exposure to and extended
liabilities related to CSR.156

155
Available at <https://www.americanbar.org/publications/blt/2015/01/03_grayson.html>, accessed
on June 20, 2017 at 2100 hours.
156
Available at <http://www.fasken.com/corporate-social-responsibility-law,/> accessed on May 12,
2017 at 1900 hours.
86
 CHAPTER 5

ENVIRONMENTAL SUSTAINABILITY AND CORPORATE

SOCIAL RESPONSIBILITY LAW

5.1 Defining Environment Sustainability

What exactly is environmental sustainability? While it may seem that

environmental sustainability and sustainable development are one and the same, there
are quite a few ways in which they diverge in their goals. They do have the same
overall goal; that of conserving natural resources and creating more energy efficient
projects and practices. Sustainable development is the practice of developing land and
construction projects in a manner that reduces their impact on the environment by
allowing them to create energy efficient models of self-sufficiency. This can take the
form of installing solar panels or wind generators on factory sites, using geothermal
heating techniques or even participating in cap and trade agreements.

On the other hand, environment sustainability is a state in which the demands

placed on the environment can be met without reducing its capacity to allow all people
to live well, now and in the future. On the other hand, environment sustainability is a
state in which the demands placed on the environment can be met without reducing its
capacity to allow all people to live well, now and in the future. Renewable resource
harvest, pollution creation, and non-renewable resource depletion is controlled at rates
that can be continued indefinitely.

The biggest criticism of sustainable development is that it does not do enough to

conserve the environment. On the other hand, the goal of environmental sustainability
is to conserve natural resources and to develop alternate sources of power while
reducing pollution and harm to the environment. For environmental sustainability, the
state of the future – as measured in 50, 100 and 1,000 years is the guiding principle.
Many of the projects that are rooted in environmental sustainability will involve
replanting forests, preserving wetlands and protecting natural areas from resource
harvesting. The biggest criticism of environmental sustainability initiatives is that their
priorities can be at odds with the needs of a growing industrialized society.157

157
Available at <http://www.conserve-energy-future.com/what-is-environmental-sustainability-and-
sustainable-development.php>, accessed on June 06, 2017 at 1800 hours.
87
 To further understand environmental sustainability, we must first define
sustainability. Sustainability is the ability to continue a defined behavior indefinitely.
Herman Daly,158one of the early pioneers of ecological sustainability, looked at the
problem from a maintenance of natural capital viewpoint. In 1990 he proposed that:

 For renewable resources, the rate of harvest should not exceed the rate
of regeneration (sustainable yield).
 For pollution the rates of waste generation from projects should not
exceed the assimilative capacity of the environment (sustainable waste
disposal).
 For non-renewable resources the depletion of the nonrenewable
resources should require comparable development of renewable
substitutes for that resource.

The goal of environmental sustainability is to conserve natural resources and to

develop alternate sources of power while reducing pollution and harm to the
environment. Sustainable development is the practice of developing land and
construction projects in a manner that reduces their impact on the environment by
allowing them to create energy efficient models of self-sufficiency. This can take the
form of installing solar panels or wind generators on factory sites, using geothermal
heating techniques or even participating in cap and trade agreements.

The United Nations World Commission on the Environment and Development

is credited with developing these concepts in its 1987 Brundtland Commission report
'Our Common Future'. In that report, the World Commission defined sustainable
development as development which ‘meets the needs of the present without
compromising the ability of future generations to meet their own need’. Sustainability is
based on a simple principle, ‘Everything that we need for our survival and well-being
depends, either directly or indirectly, on our natural environment’.

5.2 Environment Sustainability and Corporate Social Responsibility

To promote economic, environmental, and social advancement for purposes of

sustainable development, companies and corporates jointly adopt certain principles to
be followed to contribute to the economic development of the country, to improve the

158
Available at <http://www.sciencedirect. com/science/article/pii/092180099090010R>, accessed on
July 12, 2017 at 1200 hours.

88
quality of life of employees, the community and society by acting as responsible
corporate citizens. Today, a major part of these practices and principles relate to
environmental sustainability.

Before delving into the law related to CSR, it is interesting to study the
evolution of the very concept of CSR and to note how from a voluntary and
philanthropic activity, it slowly metamorphosed into a concept enforceable by law in
most countries.

It was in 50's that attention slowly started being paid to the realm of corporates
and their responsibility towards society. The publication in 1953 by Howard R Bowen
of his book 'Social Responsibilities of the Businessman,159 is considered the foundation
for the study of CSR. The book was amongst the first comprehensive discussions of
business ethics and social responsibility. It created an awareness by which business
executives and academics could consider the subject of social responsibility as part of
strategic planning and managerial decision-making. The point that Bowen raised was
'what responsibilities to society may businessmen reasonably be expected to assume'?
Many consider Bowen as the 'father'160 of the concept of CSR because of his concern
with the idea social responsibility viz-a-viz corporates.

Till the 70's it was generally accepted that 'there was only one social
responsibility of business-to use its resources and engage in activities designed to
increase its profits so long as it stays within the rules of the game, which is to say,
engage in open and free competition, without deception or fraud.161

Just before World War II, German industrialist Walter Rathenau claimed that
business corporations had become very large and that they had grown to be a significant
part of the society. According to Rathenau, even though fundamentally a corporation’s
intent is the pursuit of private interests and profits for owners of the company, they are
increasingly bearing the marks of an undertaking and, to an increasing degree, have
been serving the public interest. Further, philosophers John Dewey and James H. Tufts,
in their book Ethics, raised the concept that it is not sufficient to view companies as

159
Howard Rothmann Bowen, 'Social Responsibilities of the Businessman', University of Iowa Press,
(2013).
160
Available at <http://www.academia.edu/ 419517/Corporate_Social_Responsibility_
_Definitional_Construct>, accessed on July 23, 2017 at 1700 hours.
161
Available at <http://www.biology.iupui.edu/biocourses/Biol540/pdf/ WholeFoodsJohn
MackeySR.pdf> accessed on June 15, 2017 at 1500 hours.
89
purely economic machines and that companies should be involved in public duty as
well.162

Subsequently, Joseph W. McGuire in his book, Business and Society, stated,

‘The idea of social responsibilities supposes that the corporation has not only economic
and legal obligations but also certain responsibilities to society which extend beyond
these obligations.’163

Maignan and Ralston164examined how US and European businesses

communicate CSR on their websites. They studied the websites of 400 firms within the
US, France, the Netherlands, and the UK. They evaluated the extent to which
businesses attempt to convey a socially responsible image and the nature of the
motivation, processes, and issues considered in attempting to paint a portrait of good
corporate citizenship. The research found that the UK and US websites featured CSR
principles more so than their French and Dutch counterparts. The UK and US firms
were much more willing to address CSR principles, processes, and issues than either the
French or Dutch firms. Maignan and Ralston’s research indicates that the inclusion of
CSR on websites is not associated with any particular industry. Maignan and Ralston’s
study found that each country favored different motivating CSR principles. The US
firms presented social involvement as reflective of their core values. In contrast, this
was the justification used least by European businesses.165

According to the study, European firms discussing CSR on their websites

promoted CSR as value-driven. This research found that performance-driven CSR was
the second most frequently named motivation within the US. The UK favored
performance-driven CSR. This view, deeming CSR good business, was adopted by
quite a few French and Dutch organizations as well. The study found that European
firms introduced CSR in their firms in response to stakeholder scrutiny and pressures.
In France and the Netherlands, they found that fewer businesses mentioned CSR. These
countries differentiated their stated motivations more so than either the US or the UK.

162
Christine Coussens, Myron Harrison, 'Global Environmental Health in the 21st Century: From
Governmental Regulation to Corporate Social Responsibility: Workshop Summary, National
Academies Press (2007).
163
Joseph W. McGuire, 'Business and Society', McGraw-Hill Education, Europe (1963).
164
I.S.J. Maignan, D. Ralston,'Corporate Social Responsibility in Europe and the US: Insights from
Business Self-Presentations', Journal of International Business Studies, Volume 3, 2002.
165
‘Corporate Social Responsibility in The United States and Europe: How important is it ? The Future
Of Corporate Social Responsibility’, International Business & Economics Research Journal, July
2013 Volume 12, Number 7, Almerinda Forte, St. John’s University, USA.
90
In summary, the value-driven approach led within the US. The performance-driven
perspective, mixed with the stakeholder-driven view, dominated in the UK. Finally,
while the value-driven perspective found popularity in the US, it was not as popular
there as it was in the European countries that participated in this study. Maignan and
Ralston found that the US and UK were likelier to list ethics codes as CSR processes
than either France or the Netherlands. The US companies discussed giving primarily to
their communities through philanthropic programs.166

The scope of corporate responsibility varies country by country, region by

region, interest group by interest group. At a minimum, it includes environmental issues
but it also takes on social, ethical, governance, health, and other issues. Potentially, it is
a very broad concept to cover, and it is a challenge for the business community.167

For purposes of this study, the American, European and the Indian models
related to CSR with special reference to environment sustainability are discussed as
under.

5.3 The American Corporate Social Responsibility Model

Because of the nature of American entrepreneurship based on the maximum

freedom of subjects, many spheres of social relations are still very controlled. In
particular, the employment relationship is employer-employee (bilateral agreement),
voluntary health insurance. At the same time, America has developed numerous
mechanisms for the participation of business in social support society through corporate
funds aimed at addressing various social issues through business (sponsorship of
professional education, pension and insurance sectors for the staff). The responsible
social behavior and corporate philanthropy encouraged by the relevant tax exemptions
and offsets enshrined in law.168

It must be kept in mind that US companies are not as heavily regulated as those
in other developed nations, and corporate responsibility is not addressed as a regulatory
compliance issue but rather from a social and moral choice perspective. In the US, the
notion of a triple-bottom-line approach to business success has always been a voluntary

166
Ibid.
167
'Global Environmental Health in the 21st Century: From Governmental Regulation to Corporate
Social Responsibility: Workshop Summary', Copyright 2007, National Academy of Sciences,
Bookshelf ID: NBK53982.
168
Firuza Madrakhimova, ‘History of Development of Corporate Social Responsibility’, Journal of
Business and Economics, USA June 2013, Volume 4, No. 6, pp. 509-520, Academic Star Publishing
Company (2013).
91
one. So while stakeholders’ expectations that companies adopt more sustainable
business practices that benefit people and society in addition to profits are growing, the
truth remains that companies are not obliged to participate.169 Certain important federal
laws which relate to environment protection, environment sustainability and govern the
CSR activities of US companies and corporates are discussed below.

The National Environmental Policy Act, 1969 (NEPA) committed the US to

sustainability, declaring it a national policy 'to create and maintain conditions under
which humans and nature can exist in productive harmony, that permit fulfilling the
social, economic and other requirements of present and future generations'.

In the years since NEPA was enacted, the public’s interest in sustainability has
broadened. According to the National Research Council, there are many additional
drivers for sustainability. In the areas where the US has seen considerable progress in
sustainability, a common driver for sustainability efforts is citizens and other
stakeholders concern. In addition, sustainability practitioners are becoming more
ambitious in their sustainability efforts and are working together to share best practices
to ensure the greatest environmental, economic and social impact.

Aligning with, or perhaps because of, non-compulsory corporate responsibility

practices, corporate activities encompassing corporate responsibility in the US go
beyond environmental, legal and workplace issues to ones that best enhance a
company’s external reputation. Philanthropy and employee engagement, aka employee
volunteerism, are key areas of a company’s corporate responsibility platform.

The trend toward CSR policies that promote good corporate citizenship has
greatly accelerated over the past decade in the US. For example, Harvard University's
Kennedy School of Government launched a CSR Initiative in 2004 based on the
'underlying premise that while governments ultimately bear the responsibility for
ensuring public welfare, there is a need to construct a new understanding of the roles,
responsibilities and boundaries of the private sector, especially major corporations, and
to explore new types of partnership, and new governance and business models for
creating public value'.170 In recent years a number of large companies have joined the

169
Available at <http://www.triplepundit.com/2011/03/case-study-corporate-social-responsibility/>,
accessed on August 10 at 1500 hours.
170
Jane Nelson,'Leadership, Accountability, and Partnership: Critical Trends and Issues in Corporate
Social Responsibility, 'Report of the CSR Launch Event (2004), Corporate Social Responsibility
92
'Ethical Trade Initiative' (ETI), which has established corporate codes of practice
implementing human rights, ethical labor practices and environmental protection
standards.171 Some companies also have agreed to implement the CSR principles of the
United Nations Global Compact, which promotes 'ten universally accepted principles in
the areas of human rights, labour, environment and anti-corruption'.172

The Environment Protection Agency (EPA) is another American body which

deals with environment protection and its guidelines form the basis of 'ethical practices'
followed by US companies towards sustainable development. The EPA is an
independent US government agency with jurisdiction over existing and under-
development chemicals such as pesticides that affect the environment. It regulates their
manufacture, processing, distribution and use, and sets tolerance levels of their presence
in food and feed. The EPA has wide ranging punitive powers, and also screens all
chemical products before their commercialization to assess their effect on health and
environment.

The EPA has the responsibility of maintaining and enforcing national standards
under a variety of environmental laws, in consultation with state, tribal, and local
governments. It delegates some permitting, monitoring, and enforcement responsibility
to US states and the federally recognized tribes. EPA enforcement powers include fines,
sanctions, and other measures. The agency also works with industries and all levels of
government in a wide variety of voluntary pollution prevention programs and energy
conservation efforts.

The following laws and Acts help to protect human health and the environment.
The EPA is charged with administering all or a part of each. Many of the CSR activities
of American companies related to environment follow these laws.

 The Atomic Energy Act, 1954.

 The Beaches Environmental Assessment and Coastal Health Act, 2000.
 The Chemical Safety Information, Site Security and Fuels Regulatory
Relief Act, 1999.
 The Clean Air Act, 1963.

Initiative, Report No1’, Cambridge, MA: John F. Kennedy School of Government, Harvard
University.
171
Available at <http://www.mondaq.com/ unitedstates/ /174834/Corporate+Company+Law/
+Compliance>, accessed on August 10, 2017 at 1800 hours.
172
Available at <http://www.unglobalcompact.org/AboutTheGC/index.html>, accessed on August 10,
2017 at 1500 hours.
93
 The Clean Water Act, 1972.
 The Comprehensive Environmental Response, Compensation and
Liability Act, 1980.
 The Emergency Planning and Community Right-to-Know Act, 1986.
 The Endangered Species Act, 1973.
 The Energy Independence and Security Act, 2007.
 The Energy Policy Act, 1992.
 The EO 12898: Federal Actions to Address Environmental Justice in
Minority Populations and Low-Income Populations, 1994.
 The EO 13045: Protection of Children From Environmental Health
Risks and Safety Risks, 1997.
 The EO 13211: Actions Concerning Regulations That Significantly
Affect Energy Supply, Distribution, or Use, 2001.
 The Federal Food, Drug, and Cosmetic Act, 1938.
 The Federal Insecticide, Fungicide, and Rodenticide Act, 1996.
 The Federal Water Pollution Control Amendments-(Clean Water Act),
1948.
 The Food Quality Protection Act, 1996.
 The Marine Protection, Research, and Sanctuaries Act (also known as
the Ocean Dumping Act), 1972.
 The National Environmental Policy Act, 1970.
 The Noise Control Act, 1972.
 The Nuclear Waste Policy Act, 1982.
 The Occupational Safety and Health , 1970.
 The Oil Pollution Act, 1990.
 The Pesticide Registration Improvement Act, 2012.
 The Pollution Prevention Act, 1990.
 The Resource Conservation and Recovery Act, 1976.
 The Safe Drinking Water Act, 1974.
 The Shore Protection Act, 1988.
 The Comprehensive Environmental Response, Compensation, and
Liability Act, 1980.
 The Superfund Amendments and Reauthorization Act, 1986.
 Toxic Substances Control Act, 1986.
94
 Although there is no specific legislation governing CSR, there are laws that
touch on it. For example, the Dodd-Frank Wall Street Reform and the Consumer
Protection Act, 2010 requires public companies that trade on a major American
exchange to report the use of conflict minerals in their products and also work force
diversity statistics to ensure equality and sustainability. Changes in the federal tax code
to encourage companies to make charitable deductions of up to 5% of their income
have also served to foster business social responsibilities.

The CSR team in the Bureau of Economic and Business Affairs leads the
Department’s engagement with US businesses in the promotion of responsible and
ethical business practices. The mission of the CSR office is to:173

 Promote a holistic approach to CSR to complement the Bureau’s mission

of building economic security and fostering sustainable development at
home and abroad.
 Provide guidance and support for American companies engaging in
socially responsible, forward-thinking corporate activities that
complement US foreign policy and the principles of the Secretary’s
Award for Corporate Excellence program.
 Build on this synergy, working with multinational companies, civil
society, labour groups, environmental advocates, and others to
encourage the adoption of corporate policies that help companies do well
by doing good.

In March 2015, President Obama had issued Executive Order 13693, 'Planning
for Federal Sustainability in the Next Decade'.174 It replaced and updated a number of
Executive Orders and Memorandums, most notably the Executive Order 3514, 'Federal
Leadership in Environmental, Energy, and Economic Performance,' in 2009. This Order
has specific relevance to corporations who are already providing or in a position to
provide goods and services to federal agencies. The Order expands upon existing green
purchasing requirements and is part of broader efforts, such as the EPA’s
Environmentally Preferable Purchasing (EPP) Program, to use the federal government’s
buying power to stimulate demand for sustainable products.

173
Available at <https://www.state.gov/e/eb/>, accessed on November 10, 2017 at 1000 hours.
174
Available at <https://obamawhitehouse.archives .gov/the-press-office/2015/03/19/executive-order-
planning-federal-sustainability-next-decade>, accessed November 13, 2017 at 1300 hours.
95
 The Order provides federal agencies with a series of targets and deadlines
through 2025, including requiring federal agencies to reduce greenhouse gas emissions
by 40% by 2025. Agencies are to set annual targets for the number of contracts to be
awarded with bio-preferred and bio-based products until the agency achieves at least
ninety-five percent compliance with the bio-preferred and bio-based purchasing
requirement. The Order outlines that agencies are to promote sustainable acquisition
and procurement by ensuring they are meeting statutory mandates that require purchase
preference for the following:175

 Recycled content products designated by EPA.

 Energy and water efficient products and services qualified and Federal
Energy Management Program (FEMP) designated products, identified
by EPA and the Department of Energy (DOE).
 Bio-preferred and bio-based designated products designated by the US
Department of Agriculture.

To this end, it would not be incorrect to state that over a period of time, a
transition from voluntary CSR measures to hard law by means of the codification of
CSR-related societal norms and the advent of CSR-related law and regulations in the
United States and around the globe. Yet until relatively recently, although many firms
took advantage of tax-related and other marketplace incentives for greening their
operations and supply chains, regulatory compliance was not high on the list of forces
shaping the CSR movement. Although a growing number of firms have been adopting
CSR programs and policies over the course of the last decade as voluntary measures
with reference to various rationales, we are now witnessing From the SEC’s conflict
minerals rules, to California’s Transparency in Supply Chains Act, to the recently
adopted European Union directive requiring nearly 7,000 companies in the EU to report
on non-financial sustainability matters it is impossible to ignore the fact that CSR is
now inherently legal.176 The two examples of American firms (Xerox Corporation and
the Bank of America) are discussed to give an overview of their efforts towards
environment sustainability as part of their CSR liability:

175
Available at <http://www.csrandthelaw.com/2015/05/26/new-executive-order-on-federal-
sustainability-promo tes-responsible- government-procurement-policies/>, accessed on July 20,
2017 at 1600 hours.
176
Available at <https://www.fenwick.com/publications/pages/corporate-social-responsibility-is-now-
legal.aspx>, accessed on May 20, 2017 at 1300 hours.
96
 5.3.1 Xerox Corporation

Xerox Corporation is an American multinational global corporation that sells

document solutions and services, and document technology products in more than 160
countries. As part of their CSR towards environmental sustainability, Xerox has a
waste-free strategy. The strategy started out with waste-free facilities, expanded into
waste-free products, and, ideally, it plans to allow its customers to be waste free as well.
As per a 2007 report, Xerox avoided approximately 1.5 billion pounds of landfill waste.
The calculations on the amount of hazardous materials (solid waste such as lead,
chromium, mercury, and cadmium after it is separated from recyclable waste) are about
0.3 %. Avoiding landfill and the use of raw material is energy efficient and helps reduce
CO2 emissions.

Xerox is trying to discover a way to use paper responsibly. Xerox does not
manufacture paper; it buys finished and already packaged paper and distributes it.
Manufacture of paper is a highly energy-intensive industry; it takes 10 watts to produce
every sheet of paper; creating that energy contributes to pollution. Even though the
manufacturing of the paper is technically not in the company’s control, Xerox requires
that various paper suppliers’ operating policies and manufacturing procedures are
consistent with the company’s reputation of its brand and environmental values and
encourages them to be more environmentally responsible. Today, 82 % of the 60
suppliers worldwide that Xerox uses for paper are in compliance with the requirements.
Cultural and trade barriers around the world may make this approach challenging;
however, the company is trying to do what it can to minimize the risks and conduct its
business appropriately.177

5.3.2 Bank of America

As part of its commitment to sustainable development and social responsibility,

in November 2016, the Bank of America issued its third and largest green bond for $1
billion in aggregate principal amount, furthering the company’s commitment to
advancing renewable energy generation. The bond will help to fund renewable energy
projects under the company’s $125 billion multi-year environmental business
commitment to accelerate the transition to a low-carbon economy through lending,

177
Christine Coussens, Myron Harrison, 'Global Environmental Health in the 21st Century: From
Governmental Regulation to Corporate Social Responsibility: Workshop Summary', National
Academies Press (2007).
97
investing, capital raising, advisory services and developing financing solutions for
clients around the world.178

This issuance follows $600 million corporate green bond offering by the Bank
in 2015 and their first corporate green bond issuance for $500 million in 2013. The
Bank of America has played a pivotal role in developing the green bond market, both as
an issuer and as an underwriter. To date, they have issued a total of $2.1 billion in three
separate offerings, including a $1 billion offering in November 2016. Through these
offerings, they are advancing renewable energy generation by financing new projects,
such as a multi-state residential solar portfolio and a utility scale wind farm in
Oklahoma.

In the words of the Bank of America Vice-Chairman, Anne Finucane, ‘Our

responsible growth strategy includes the belief that we have an important role to play in
funding the future of clean energy and using our expertise in global banking to help
clients fund their organization’s environmental and sustainable initiatives’. In addition
to issuing its own bonds, the Bank of America Merrill Lynch (BofAML) was the top
underwriter of green bonds in 2014, 2015 and 2016. In 2016 it underwrote more than
$25 billion in green bonds on behalf of 27 unique clients, and led offerings for clients
including the Chinese automobile company Zhejiang Geely Holdings ($400 million),
the New York Metropolitan Transportation Authority ($588 million), Banco Nacional
de Costa Rica ($500 million) and the European Investment Bank (five bonds in 2016
totalling $3.6 billion). Proceeds from these bonds are helping to finance various
emissions reducing projects.179

Almost three-quarters of the US companies on the S&P 500 publish corporate

sustainability reports according to research from the Governance & Accountability
Institute. Despite growing pressure from green investor groups and organizations like
the Global Reporting Initiative (GRI), sustainability reporting in any meaningful way
remains a largely voluntary effort on the part of American companies. New European
Union requirements for sustainability reporting going into effect in 2017 will convert
these voluntary efforts into legally mandated ones.180

178
Bank of America Corporation, Annual Report (2016).
179
Ibid.
180
E. Lynn Grayson, Gary P. Kjelleren,' The Business Case for Environmental Sustainability', Business
Law Today, American Bar Association, January 2017.
98
5.4 The European Corporate Social Responsibility Model

The European Union (EU) has been the continent that first became a convert to
the CSR movement. Several reasons fare for this. Although innumerable abuses took
place along its history, in Europe there have been traditionally more CSR consistent
values, norms and perceptions than in other areas of the world; European corporations
have tended to hold stronger and broader approaches to stakeholder relations; and that
network is being established to help many companies share and diffuse relevant
information about CSR.181 Important time lines pertaining CSR in Europe are as
under:182

 1995, the European Business Manifesto Against Social Exclusion, when

the President of the European Commission (EC) and a group of
European companies launched a manifesto and defined a level playing
ground for businesses. This manifesto led to the creation of a European
Business Network.
 1998, the first CSR Europe Advisory Board, including IBM, Johnson &
Johnson and Shell is created.
 1999, the European Parliament resolution calling for a binding code of
conduct to govern EU companies’ environmental, labour and human
rights compliance world-wide.
 2000, the Lisbon Summit, where the EU heads of state made the
commitment to ‘make Europe the most competitive and dynamic
knowledge-based economy in the world, capable of sustainable
economic growth with more and better jobs and greater social cohesion
by 2010’.
 2000, call of EU heads of State for business to support CSR as part of
the Lisbon Agenda.
 2001, the EC Green Paper on Promoting a European Framework on
CSR covering a wide range of topics, including responsible actions
during corporate restructuring, promoting ‘work/life balance’ and
corporate codes of conduct and social rights.

181
‘Sustainable socio-economic system and CSR’, Global Industrial and Social Progress Research
Institute (Japan), Research Committee Report.
182
Ramon Mullerat, ‘International Corporate Social Responsibility: The Role of Corporations in the
Economic Order of the 21st Century'’, Kluwer Law International (2010).
99
 2002, the EC First Communication on CSR, ‘a business contribution to
sustainable development’ that laid the foundation for a common
understanding of CSR in Europe which was aimed at delivering the
objectives of the Lisbon Strategy. ‘Companies integrate social and
environmental concerns in their business operations and in their
interaction with stakeholders on a voluntary basis’.
 2002, the European Parliament votes for a new legislation to require
companies to publicly report annually on their social and environmental
performance, to make board members personally responsible for these
practices and to establish legal jurisdiction against European companies’
abuses in developing countries.
 2002, the EC launches the EU Multi-stakeholder Forum on CSR to
exchange good practices and assess common guidelines.
 2003, a Council Resolution calls upon Member States (MS) to promote
CSR at a national level, to continue to promote dialogue with social
partners and civil society, to promote transparency of CSR practices, to
exchange information and experiences and to integrate CSR into national
policies.
 2004, the EC embarks on a consultation process inviting the European
Multi-stakeholder Forum on CSR reports on common principles of CSR
in the EU. Since the Forum excluded all reference to regulation and
mandatory measures, trade unions and NGOs, the Forum is boycotted.
 2005, the EC organises a conference on SME.
 2006, the Second EC Communication entitled ‘ Implementing the
partnership for growth and jobs: Making Europe a pole of excellence on
CSR’, which led to a greater interaction between the EU and the
Alliance. It added two important initiatives, namely the Multi-
stakeholder Forum and an integration of CSR into European policy.
 2007, a EU Parliament Report answering the EC Communication and
calling the Commission to implement a more pragmatic approach to
CSR taking measures that actually work, either voluntary or mandatory,
to address specific issues.
 2007, the First High Level Meeting of the European Alliance in which
commissioners met with business leaders to discuss progress. The
100
 European Alliance for CSR is an open partnership focusing on providing
support for companies in the developing world of CSR.
 2007, UNDP/EU ‘Conference on CSR in the New Europe: Challenges
and Solutions’.
 2008, the EC presents the Sustainable Consumption and Production and
Sustainable Industrial Policy Action Plan with a series of proposals to
contribute to improving the environmental performance of products and
increase the demand for more sustainable goods and production
technologies.
 2009, the EC convenes a meeting of the European Multi-stakeholder
Forum on CSR, with 250 key stakeholders to review the progress made
on CSR and to discuss future initiatives.
 2011, the EC publishes a new policy on CSR. To fully meet their social
responsibility, enterprises ‘should have in place a process to integrate
social, environmental, ethical and human rights concerns into their
business operations and core strategy in close collaboration with their
stakeholders.
 2012, two studies were conducted for the EC. The first deals with the
state of the art in CSR reporting in the EU. The second provides an
overview of issues with regard to responsible supply chain management.

The European Commission describes CSR as 'a concept whereby companies

integrate social and environmental concerns in their business operations and in their
interaction with their stakeholders on a voluntary basis'. The World Business Council
for Sustainable Development defines CSR as 'the continuing commitment by business
to behave ethically and contribute to economic development while improving the
quality of life of the workforce and their families as well as of the local community and
society at large'.

The European Commissions CSR strategy is built upon guidelines and

principles laid down by the United Global Compact, United Nations Guiding Principles
on Business and Human Rights, ISO 26000 Guidance Standard on Social
Responsibility and OECD Guidelines for Multinational Enterprises. The strategy
includes:

 Enhancing the visibility of CSR and disseminating good practices.

101
  Improving and tracking levels of trust in business.
 Improving self and co-regulation processes.
 Enhancing market reward for CSR.
 Improving company disclosure of social and environment information.
 Further integrating CSR into education, training and research.
 Emphasising the importance of national and sub-national CSR policies.
 Better aligning European and global approaches to CSR.

In addition to the rules and regulations being enforced by the EU, most European
countries have their own set of national rules and objectives related to CSR. In the UK,
CSR is a part of Corporate Governance. The Companies Act, 2006 of the UK has now
added to those pressures by requiring directors to have regard to community and
environmental issues when considering their duty to promote the success of their
company and by the disclosures to be included in the Business Review. CSR is, now, an
integral part of good governance, for bigger companies in particular. In UK, Section
172(1) of the Companies Act, provides duties of directors to promote the success of the
company:

 Section 172(1)-Duty to Promote the Success of the Company: A director

of a company must act in the way he considers, in good faith, would be
most likely to promote the success of the company for the benefit of its
members as a whole, and in doing so have regard (amongst other
matters) to:

▪ The likely consequences of any decision in the long term.

▪ The interests of the company’s employees.
▪ The impact of the company’s operations on the community and
the environment.
▪ The desirability of the company maintaining a reputation for
high standards of business conduct.
Here, it is interesting to note the difference between Section 172(1) of the (UK)
Act and Section 166(2) of the (Indian) Companies Act, 2013. Section 172(1) says
‘having regard to the interests of employees, suppliers, customers, community and
environment’. The words ‘having regard to’ only denote discretion and do not cast any
mandatory obligation. On the other hand, Section 166(2) of the (Indian) Companies Act
is worded differently. Section 166(2) provides that ‘A director of a company shall act in
102
the best interests of the company, its employees, the shareholders, the community and
the protection of environment’.
5.5 The Indian Corporate Social Responsibility Model
In India, there is a growing realization that business cannot succeed in isolation
and social progress is necessary for sustainable growth. An ideal CSR practice has both
ethical and philosophical dimensions, particularly in India where there exists a wide gap
between sections of people in terms of income and standards as well socio-economic
status.183 The world over, India included, many countries like France, Denmark, South
Africa and China have a mandatory reporting obligation on the amount spent on CSR
activities.184
5.5.1 Historical Background: Though it was the Companies Act, 2013 that for
the first time mandated private corporations to join public sector firms in annual
donations for CSR, it would not be incorrect to state that some sort of corporate
philanthropy and donations for the public good existed from times immemorial.
Philosophers like Kautilya from India and pre-Christian era philosophers in the
West preached and promoted ethical principles while doing business. The concept of
helping the poor and disadvantaged was cited in much of the ancient literature. The idea
was also supported by several religions where it has been intertwined with religious
laws. Hindus follow the principle of Dhramada or getting salvation Moksh and forms
an integral part of almost all Hindu rituals. Similarly in Sikhism, provision of free
langar- food and shelter in the Gurudwaras has been another illustration of
institutionalized philanthropy. Zakaat, followed by Muslims, is donation from one’s
earnings which is specifically given to the poor and disadvantaged. 185. The earliest
industrialists as far back as the 19th Century had launched the practices of corporate
giving via trusts, and endowed institutions controlled by members of business
families.186
The modern concept of CSR as understood today really developed after
independence as is evident from Table 3.187

183
Available at <http://www.ficci.com,>accessed on August 30, 2017 at 1900 hours.
184
Available at <https://blog.ipleaders.in/corporate-social-responsibility-csr-laws-around-the-
world/>, accessed on June 20, 2017 at 1400 hours.
185
Available at <http://shodhganga. inflibnet. ac.in/bitstream/10603/15950/12/12_chapter%203.pdf>,
accessed on June 20, 2017 at 1800 hours.
186
Available at <http://www.gatewayhouse.in/a-brief-history-of-indian-csr/>, accessed on June 20,
2017 at 1900 hours.
187
Ibid.
103
Time period Economic State role Corporate CSR
currents
1850-1914 Industrialization Colonial, extraction Dynastic charity

1914-1947 Trade barriers for Colonial, Support freedom struggle

new industries exploitative

1947-1960 Socialism, Five year plans Support new state; launch

protectionism own rural initiatives

1960-1990 Heavy regulations Licence raj; Corporate trusts

development
failures
1991-2013 Liberalisation Shrinking in Family trusts, private-
production; public partnerships, NGO
expanding in social sponsorship
provision
2013-present Globalisation Need to manage Introduction of
inequality; new mandatory 2% rule
reforms to
liberalise further

Table 3-CSR Evolution: Indian Context

JRD Tata was one of the pioneers in the field of CSR in India. JRD always
strongly advocated the business, to go beyond conducting themselves as responsible
citizens. He felt that there were many ways in which industrial and business enterprises
can contribute to public welfare He advised that apart from donating funds to good
causes, the business may use its own financial, managerial and human resources to
provide task forces for undertaking direct relief and reconstruction measures. Slowly, it
began to be accepted, at least in theory that business had to share a part of the social
overhead costs of. Earlier, the business used to discharge its social responsibility
through providing assistance for education, health, scientific research and others. The
significant change at that time was that industry accepted social responsibility as a part
of its management practices. The community development occupied that top position in
the agenda of discharging social responsibility by industry. The TATAs are considered
as pioneering business house in propagating and discharging social responsibility in an
effective way.188

188
Mrs. P.S. Swathi, 'A Study on the Evolution of the Concept of Corporate Social Responsibility in
India From Charity to Legal Compliance', Journal of Exclusive Management Science, July 2016,
Vol 5 Issue 7.
104
 In the 1990s, the Indian government initiated reforms to liberalize and
deregulate the Indian economy by tackling the shortcomings of the mixed economy and
tried to integrate India into the global market. Consequently, controls and license
systems were partly abolished, and the Indian economy experienced a pronounced
boom, which has persisted until today. This rapid growth did not lead to a reduction in
philanthropic donations; on the contrary, the increased profitability also increased
business willingness as well as ability to give, along with a surge in public and
government expectations of businesses. Against this background, India has meanwhile
become an important economic and political actor in the process of globalization. This
new situation has also affected the Indian CSR agenda.189

5.5.2 The Companies Act, 2013-Overview: The Companies Act, 2013 as

passed by the Parliament received the assent of the President of India on August 29,
2013. The new Act consolidates and amends the law relating to companies and was
notified in the Official Gazette on August 30, 2013. The 2013 Act for the first time,
introduced some new concepts such as: one person company, small company, dormant
company and CSR. It introduced significant changes in the provisions related to
governance, e-management, compliance and enforcement, disclosure norms, auditors,
mergers and acquisitions, class action suits and registered valuers. The Act is now in
force w.e.f. April 01, 2014 and has more than 450 sections, 7 schedules and 29
chapters.

Subsequently, the Government of India (GOI) received several representations

from industry stakeholders for amending various provisions of the Companies Act,
2013 to ensure ease of doing business in India. Towards this, the Companies
(Amendment) Act, 2015 received the assent from the President of India on May 25,
2015 after both the houses of the Parliament approved the Amendment.. The
Amendment has been published in the Official Gazette on May, 26, 2015, though there
are several other concerns which are yet to be addressed by the GOI. The Central
Government is authorised to appoint different dates for implementation of different
provisions in the CA Amendment 2015. Accordingly, while most provisions have
become effective from May 29, 2015, certain amendments are yet to be notified.

189
M. Sateesh Gouda, A.G. Khan, S.L. Hiremath,‘Corporate Social Responsibility in India. Trends,
Issues and Strategies’, Anchor Academic Publishing (2017).

105
 Further, in July 2017, the Lok Sabha passed the Companies Amendment Bill,
2016, which had been introduced in March 2015. The Bill amends more than 40
provisions of the Companies Act, 2013. The Bill was based on the suggestions received
from various stakeholders on the Companies Law Committee Report, which was
published in February 2016 suggesting certain reforms to the Act. Clause 36 of the Bill
had proposed to amend Section 135 of the Act to allow composition of CSR committee
with two or more directors in case the company is not required to appoint independent
director under Section 149. Further it also proposed to empower the Central
Government to prescribe sums which shall not be included for calculating ‘net profit’ of
a company under Section 135. It also seeked to modify sub-section (3) of the Section to
refer to subjects in Schedule VII within which CSR activities could be taken up by an
eligible company. In this chapter, Section 135 and relevant amendments to the Act
related to the CSR provisions only are being discussed.

Post 2013, the CSR policy is governed mainly as per directions and stipulations
as specified in:

 Section 135 of the Indian Companies Act, 2013 (refer Appendices A and
B).
 Companies (Corporate Social Responsibility Policy) Rules, 2014 (refer
Appendix C).
 Schedule VII (refer Appendix D).

5.5.3 Section 135, the Companies Act and the Companies (CSR Policy)
Rules, 2014. To put the study in the right perspective, it may be kept in mind that the
concept of CSR is governed by Section 135 of the Companies Act, 2013 and the
Companies (Corporate Social Responsibility Policy) Rules, 2014 and both are to be
read in conjunction to each other. Operative provisions of Section 135, the CSR Rules
and Schedule VII dealing with CSR are discussed in this Chapter.

To give an overview before going into a detailed study, a summary of the

various provisions of the 2013 Act as regards CSR are as under:

 Section 166(2)-Duties of Directors.

 Section 135(1)-Companies required to comply with mandatory CSR
provisions.
 Section 135(1)-Composition of CSR Committee.

106
  Section 135(2)/134(3)(o)-CSR Disclosures required in Board’s report.
 Section 135(3)-Role of CSR Committee.
 Section 135(4)-Formulation of CSR Policy by Board.
 Section 135(5)-Mandatory CSR Spends.
 Schedule VII-Activities which may be included by Companies in their
CSR Policy or on which CSR spends may be made.

The various provisions of the CSR Rules are as under:

 Rule 1(2)-Commencement of CSR Rules.

 Rule 2(1)(c)-Definition of Corporate Social Responsibility.
 Rule 2(1)(e)-Definition of CSR Policy.
 Rule 2(1)(f)-Definition of Net Profit.
 Rule 3-Companies to which CSR applies.
 Rule 4-CSR activities.
 Rule 5-CSR Committees.
 Rule 6-CSR Policy.
 Rule 7-CSR Expenditures.
 Rule 8-CSR Reporting.
 Rule 9-Display of CSR activities on its website

It has been clarified that the government has no role to play in monitoring
implementation of CSR by companies and neither has it any role to play in engaging
external experts for monitoring the quality and efficacy of CSR expenditure of
companies.

The new laws are aimed at not only easing the process of doing business in
India but also aimed at improving corporate governance by making companies more
accountable. The Parliamentary Standing Committee Recommendations, 2009-10 (Part
II of the Report of the Parliamentary Standing Committee on Finance on the Companies
Bill), had explained the rationale for mandatory CSR spends provisions later
incorporated in Section 135 of the Companies Act, 'corporates in general are expected
to contribute to the welfare of the society in which they operate and where from they
draw their resources to generate profits'. Accordingly, the Committee recommended
that Clause 135(5) of the Bill mandating CSR be modified by substituting the words
‘shall make every endeavour to ensure’ with the words ‘shall ensure’. Further, the

107
Committee recommends that the said clause shall also provide that 'CSR activities of
the companies are directed in and around the area they operate.'

Unless otherwise mentioned 'Section' would mean Section 135 of the

Companies Act, 2013 and 'Rule' will refer to the Companies (Corporate Social
Responsibility Policy) Rules, 2014. For a more analytical approach and ease of
understanding, the main provisions of the Act and the Rules related to CSR are covered
in the succeeding paras.

5.5.3.1 What constitutes CSR? Though activities and valid CSR

expenditures as per Schedule VII are discussed separately, at the outset it is important
to understand as to what constitutes CSR in the Indian context ? Rule 2(1)(c) explains
this. CSR means and includes but is not limited to projects or programs relating to
activities specified in Schedule VII to the Act or projects or programs relating to
activities undertaken by the board of directors of a company (hereafter referred to as
‘board’) in pursuance of recommendations of the CSR Committee of the board as per
declared CSR policy of the company. CSR activities should not be undertaken in the
normal course of business and must be with respect to any of the activities mentioned in
Schedule VII of the 2013 Act. Contribution to any political party is not considered to be
a CSR activity and only activities in India would be considered for computing CSR
expenditure. Also, under the Companies Act, preference should be given to local areas
and the areas where the company operates. Company may also choose to associate with
two or more companies for fulfilling the CSR activities provided that they are able to
report individually.

As per Rule 4, a company may collaborate with other companies for

undertaking projects or for CSR activities in such a manner that the CSR committees of
the relevant companies are in a position to report separately on such projects in
accordance with the prescribed Rules. The CSR Committee shall also prepare the CSR
Policy in which it includes the projects and programmes which is to be undertaken,
prepare a list of projects and programmes which a company plans to undertake during
the implementation year and also focus on integrating business models with social and
environmental priorities and process in order to create share value.

General Circular No. 21/2014 of the Ministry of Corporate Affairs (MCA) dated
June 18, 2014 clarifies that Contribution to Corpus of a Trust/ Society/Section 8
companies etc. will qualify as CSR expenditure as long as the Trust/Society/Section 8
108
company etc. is created exclusively for undertaking CSR activities or where the corpus
is created exclusively for a purpose directly relatable to a subject covered in Schedule
VII of the Act.

The Act is expected to affect over 16,300 companies with an estimated flow of
approximately INR 200 billion into the economy every year, thus shaking the
foundations of business and society and impacting the country at multiple stakeholder
levels. As a result, India is likely to become the birthplace of social, economic, and
environmental transformation through financial investments in CSR.190 As the new law
applies to companies registered in India with net worth of Rs 5 billion (approximately
$80 million); turnover of INR 10 billion at least ($160 million); or net profit that
exceeds INR 50 million ($830,000), as per the Economic Times, about 8,000 Indian
companies meet this definition, which would equate to INR 12,000-15,000 crore
annually in giving (or nearly $2 billion).191 In any case, it is a quantum jump in what
was earlier being 'voluntarily' being spent by corporates.

5.5.3.2 Applicability of the CSR Provisions: Section 135 of the

Companies Act is applicable to every company meeting the specified criteria. As per
section 2(20) of the Companies Act, ‘company’ means a company incorporated under
the Companies Act or under any other previous company law. This would imply that
companies set up for the purposes of CSR/public welfare are also required to comply
with mandatory social spending. The Act, per se, necessitates large Indian businesses to
adopt CSR as a part of their business objectives. The concept of CSR rests on the
ideology of give and take. Companies take resources in the form of raw materials,
human resources etc from the society. By performing the task of CSR activities, the
companies are giving something back to the society. Further as per Rule 3(1), the
provisions of CSR are not only applicable to Indian companies, but also applicable to
branch and project offices of a foreign company in India.

Rule 8(2) specifies that in case of a foreign company, the balance sheet filed
under Section 381(1)(b) shall contain an Annexure regarding report on CSR. However,
being a holding or subsidiary company of a company which fulfils the criteria under
Section 135(1) doesn’t make a company liable to comply with Section 135, unless the
190
Nayan Mitra, René Schmidpeter, 'Corporate Social Responsibility in India-Cases and Developments
After the Legal Mandate’ Springer (2017).
191
Available at <https://www.forbes.com/sites/eshachhabra/2014/04/18/corporate-social-
responsibility-should-it-be-a-law/#7cd81ee13736>, accessed on July 07, 2017 at 1300 hours.

109
company itself fulfills the criteria. Applicability has to be decided qua legal entity.
Similarly, Section 8 companies have no specific exemption given with regard to
applicability of Section 135, hence Section 8 companies are required to follow CSR
provisions.

5.5.3.3 Threshold Limit: Section 135(1) provides the threshold limit for
applicability of the CSR. Every company having firstly, net worth of INR 500 crore or
more (about $80 million) secondly, turnover of the company to be INR 1000 crore
($160 million) or more and thirdly, net profit of the company to be INR 5 crore
($830,000) or more during any financial year shall constitute a CSR Committee of the
board consisting of three or more directors, out of which at least one director shall be an
independent director.

Any 'Financial year' referred under Section 135(1) of the Act read with Rule
3(2) implies any of the three preceding financial years.

5.5.3.4 CSR Committee: Sections 135(1) and (2) and Rule 2(i)(d)
mandate that Companies within the threshold limit of applicability, during any financial
year, shall constitute a CSR Committee of the board. The committee shall consist of
minimum 3 directors out of which one shall be an independent director. So, minimum
directors should be three and at least one of them should be an independent director.
Section 135(2) stipulates that the board’s report under of Section 134(3) shall disclose
the composition of the CSR Committee.

Provided that an unlisted company or private company which is not required to

appoint an independent director shall have CSR Committee without the such director.
Further, in accordance with the amendment, if a private company is having the two
directors on its board, it shall have a CSR Committee with such two directors.

Section 166(2) requires a director of a company to act in good faith to promote

the objects of the company for the benefit of its members as a whole, and in the best
interests of the company, its employees, its shareholders, the community and for the
protection of environment. The words 'its employees, its shareholders, the community
and for the protection of environment' were introduced based on the suggestion of the
Institute of Company Secretaries of India (ICSI) before the Parliamentary Standing
Committee viz-'Specific reference for duty of directors towards shareholders,
employees, environment and community should be given.'

110
 5.5.3.5 Functions of the CSR Committee: Section 135(3) enumerates
the functions of the CSR Committee:

 Formulate and recommend to the Board, a CSR Policy which shall

indicate the activities to be undertaken by the company (Rule 2(i)(e) also
refers).
 Recommend the amount of expenditure to be incurred on the activities.
 Monitor the CSR Policy of the company from time to time.

5.5.3.6 Responsibility of the Board of Directors: Section 135 (4)(a) and

(b) and Rule 8(1) lay down the responsibility of the board as follows:

 The board, after taking into account the recommendations made by the
CSR Committee, approve the CSR Policy for the company and disclose
contents of such policy in its report and also place it on the company’s
website, if any, in such manner as may be prescribed (Rule 9).
 The board will also ensure that the activities as are included in CSR
Policy of the company are undertaken by the company.
 The board’s Report pertaining to a financial year commencing on or
after the 1st day of April, 2014 shall include an annual report on CSR
containing particulars specified in Annexure.

5.5.3.7 Amount to be spent on CSR: Section 135(5) and Rule 2(1)(f)

mandate the minimum amount to be spent on CSR. Out of the several new clauses that
had been included in the amended Companies Act, 2013, Section 135 and Schedule VII
of the Companies Act as well as the provisions of the Companies (Corporate Social
Responsibility Policy) Rules, 2014, specifically laid down the legislation mandating
that companies give 2% of average net profits of the last three financial years for CSR
activities (by an Indian company). There was no provision along these lines for
mandatory CSR policy and CSR spends in the 1956 Act. The Board is free to decide
whether any unspent amount is to be carried forward to the next year, and the same
shall be over and above the next year’s CSR allocation equivalent to at least 2% of
average net profits of the company. Any shortfall in spending in CSR shall be explained
in the directors’ report and the board shall state the amount unspent and reasons for not
spending that amount. Any shortfall is not required to be provided for in the books of
account.

111
 It needs to be appreciated that CSR concept as such is in the developing stage in
India and lacks in several aspects which may require much development & amendments
in the CSR policy in the future. Recently, it has been clarified that any excess amount
spent cannot be carried forward to the subsequent years and adjusted against that year's
CSR expenditure. There is no provision for carrying forward the excess CSR
expenditure spent in a particular year. Any expenditure over 2% could be considered as
voluntary higher CSR spend for that year.
Contribution in kind can be monetised to be shown as CSR expenditure as long
as the company has spent the amount to classify the same as expenditure incurred
towards CSR. It would mean that the amount spent on purchase of an equipment
completely unrelated to the Company’s business, solely for the purposes of donation,
would qualify as CSR.
As per Rule 9, the Board’s Report of a company qualifying under Section 135
shall include an annual report on CSR, containing particulars specified in Annexure to
CSR Rules. Reporting of CSR policy of the company in the Board’s Report is a
mandatory requirement. If the disclosure requirements are not fulfilled, penal
consequences may be attracted under section
5.5.3.8 Profit Calculation/Computation: The net worth, turnover and
net profits are to be computed in terms of Section 198 of the 2013 Act as per the profit
and loss statement prepared by the company in terms of Section 381(1)(a) and Section
198 of the 2013 Act. While these provisions have not yet been notified, it is has been
clarified that if net profits are computed under the Companies Act, 1956 they needn't be
recomputed under the 2013 Act. Profits from any overseas branch of the company,
including those branches that are operated as a separate company would not be included
in the computation of net profits of a company. Besides, dividends received from other
companies in India which need to comply with the CSR obligations would not be
included in the computation of net profits of a company. Computation of net profit for
Section 135 is as per Section 198 of the Companies Act, 2013 which primarily is net
profit before tax. As mentioned earlier, the MCA, has clarified that computation of net
profits for Section 135 is as per Section 198 of the Companies Act, which primarily
considers profit before taxes. Explanation to Section 135(5) itself states that ‘average
net profit’ shall be calculated in accordance with Section 198 of the Act. In terms of
Section 198(5)(a) of the Act, in computing net profits, income-tax and super-tax

112
payable by the company under the Act shall not be deducted. Therefore, the net profit
criterion in Section 135(5) is net profit before taxes.
(Note: Every Company which ceases to follow the three threshold conditions for three
consecutive financial years shall not be required to follow the provisions of Section
135).
5.5.3.9 Expenditure Not Exempt From Tax: No specific tax exemptions
have been extended to CSR expenditure per se. The Finance Act, 2014 also clarifies
that expenditure on CSR does not form part of business expenditure. While no specific
tax exemption has been extended to expenditure incurred on CSR, spending on several
activities like contributions to the Prime Minister’s Relief Fund, scientific research,
rural development projects, skill development projects, agricultural extension projects,
etc., which find place in Schedule VII, already enjoy exemptions under different
sections of the Income Tax Act, 1961.
Memorandum to Finance (No. 2) Bill, 2014 provides that CSR expenditure
which is of the nature described in sections 30 to 36 of the Act shall be allowed
deduction under those sections, subject to fulfilment of the specified conditions. It is to
be noted that 100% of the contribution to the Prime Minister’s Fund is eligible for
deduction under section 80G of the Act. For other contributions to approved
institutions, deduction may be claimed under sections 80G and 80 GGA to the extent
allowable.
5.5.4 Schedule VII of the Companies Act: The indicative activities which can
be undertaken by a company under CSR have been specified under Schedule VII of the
Act as amended. General Circular No. 21/2014 dated June 18, 2014 of the MCA has
clarified that the statutory provision and provisions of the CSR Rules, 2014, is to ensure
that while activities undertaken in pursuance of the CSR policy must be relatable to
Schedule VII of the Companies Act, 2013. However, the entries in the said Schedule
VII must be interpreted liberally so as to capture the essence of the subjects enumerated
in the said Schedule.
The items listed in Schedule VII of the Act, are broad-based and are intended to
cover a wide range of activities. It is to be noted that Circular No. 21/2014 also contains
specimen illustrative of items covered under Schedule VII. However, the clarification
should not be construed to give permission to travel beyond Schedule VII, the activities
should come under the broad purview of Schedule VII. General Circular No. 21/2014
provides an illustrative list of activities that can be covered under CSR, and similarly,
113
many more activities could be covered. The Board of the company should take a call on
this.
Vide notification dated September 12, 2014, the MCA has clarified that Clause
(iv) of Circular No. 21/2014 stands deleted, and thus salaries paid by companies to
regular CSR staff as well as to volunteers of companies now do not qualify as CSR
expenditure towards the cost of CSR projects. It should be noted that salary paid by the
companies to regular CSR staff as well as employees, who render their services for
CSR will be part of Administrative Overheads and should not exceed 5% of the total
CSR expenditure as per Rule 4(6).
Also, the amount spent by a company towards CSR cannot be claimed as
Business Expenditure. The Finance (No. 2) Act, 2014 (Income-tax Act, 1961) provides
that expenditure incurred by the assessee on activities relating to CSR referred to in
Section 135 of the Companies Act shall not be deemed to be the expenditure incurred
for the purpose of business or profession. Nonetheless, a grey area which requires to be
clarified is whether provisions of Explanation 2 to section 37(1) are applicable where an
assessee incurs amounts in excess of the limits specified, or in cases where Section 135
does not apply, to expenses incurred on activities covered in Schedule VII of the
Companies Act.
After amendments, following activities may be included by companies in their CSR
policies:
 Eradicating hunger, poverty and malnutrition, promoting health care
including preventive health care and sanitation including contribution to
the Swach Bharat Kosh set-up by the Central Government for the
promotion of sanitation and making available safe drinking water.
 Promoting education, including special education and employment
enhancing vocation skills especially among children, women, elderly,
and the differently able and livelihood enhancement projects.
 Protection of national heritage, art and culture including restoration of
buildings and sites of historical importance and works of art; setting up
public libraries: promotion and development of traditional arts and
handicrafts.
 Measures for the benefit of armed forces veterans, war widows and their
dependents.
 Training to promote rural sports, nationally recognized sports,
Paralympics sports and Olympic sports.
114
  Contribution to the Prime Minister’s National Relief Fund or any other
fund set up by the Central Government for socio-economic development
and relief and welfare of the Scheduled Castes, the Scheduled Tribes,
other backward classes, minorities and women.
 Contributions or funds provided to technology incubators located within
academic institutions which are approved by the Central Government.
 Rural development projects.
 Slum area development.

Expenditure incurred on disaster relief that can be appropriately shown under

various items listed in Schedule VII includes:192Medical aid can be covered under
‘promoting health care including preventive health care.Food supply can be covered
under eradicating hunger, poverty and malnutrition. Supply of clean water can be
covered under ‘sanitation and making available safe drinking water.
To further clarify, as per the Companies (Corporate Social Responsibility)
Rules, 2014, a company can implement its CSR activities through the following
methods:
 Directly on its own.
 Through its own non-profit foundation set- up so as to facilitate this
initiative. Through independently registered non-profit organizations that
have a record of at least three years in similar such related activities.
 Collaborating or pooling their resources with other companies. Point to
note, only CSR activities undertaken in India will be taken into
consideration.

A pictorial representation of CSR activities as per Schedule VII is shown in

Figure 16:193

192
Available at <http://www.mca.gov.in/MinistryV2/faq+on+csr+cell.html>, accessed on August 12,
2017 at 1900 hours.
193
Anupam Singh, Dr. Priyanka Verma, 'From Philanthropy to Mandatory CSR: A Journey towards
Mandatory Corporate Social Responsibility in India', International Journal of Business and
Management Invention, Volume 3 Issue 8, August, 2017.
115
Figure 16-Valid CSR Activities Under Schedule VII of the Company’s Act, 2013

5.5.5 Invalid CSR Activities and Expenditure: To sum up, any

project/programme which benefits the employees or their family is not treated as CSR
activities in accordance with Section 135 of the Act (refer Rule 4(5) of CSR Rules,
2014). One-off events such as marathons/awards/charitable contribution/ advertisement/
sponsorships of TV programmes etc. would not be qualified as part of CSR
expenditure. Expenses incurred by companies for the fulfillment of any Act/Statute of
regulations (such as Labour Laws, Land Acquisition Act etc.) would not count as CSR
expenditure under the Companies Act. Contribution of any amount directly or
indirectly to any political party shall not be considered as a CSR activity as also
activities undertaken by the company in pursuance of its normal course of business.

CSR funds of the company cannot be used as a source of funding Government

Schemes. It has, however, been clarified that the Board of the eligible company is
competent to take decisions on supplementing any government scheme permitting
corporate participation, and if all provisions of Section 135 and Rules thereunder are
complied with by the company.

5.5.6 Penalties and Legal Provisions: It is primarily the responsibility of the

board to ensure that the activities included in CSR policy of the company are
undertaken by the company. There is no ambiguity in the law that a company shall
spend at least two percent of its average net profit made during the three immediate
preceding financial year in CSR and the company is required to give preference to the
116
local area where it is operating to undertake the activities of CSR. If company fails to
spend on CSR then the board has to give reason why they have not spent the amount.
Though no specific penal provisions exist for non-compliance, penalties can be levied
under the following provisions:

5.5.6.1 Under Section 166(7) of the Companies Act: This provides that if
a director contravenes the provisions of Section 166 such director shall be punishable
with fine which shall not be less than one lakh rupees but which may extend to five lakh
rupees. Thus, if director violates his specific CSR duty towards company’s employees,
community and environment under Section 166(2), he shall be punishable under
Section 166(7).194

5.5.6.2 Under Section 134(3)(o) and Section 134(8) of the Companies

Act: Section 134(3)(o) mandates for disclosure of all the relevant information about a
companys CSR policy and its implementation on an annual basis. If a company fails to
comply with Section 134 as regards CSR disclosures in Board Report, it comes in the
purview of Section 134(8) which lays down penalties for not discharging the duty as
mentioned above. This can be a fine, not less than INR 50,000 may extend to INR
25,00,000; and every officer of the company in default shall be punishable with
imprisonment for a term which may extend to three years; or with fine which shall not
be less than INR 50,000 but which may extend to INR 5,00,000, or with both.

5.5.6.3 Under Sections 450 and 451 of the Companies Act: These
provisions give out the general penalties for flouting the rules and repeat offences. A
fine under Section 450 may extend to INR 10,000 and where the contravention is
continuing one, a further fine to INR 1000 for every day after the first during which
contravention continues. As per Section 451 the defaulter is punished either with fine or
with imprisonment and where the same offence is committed for the second or
subsequent occasions within a period of three years, then, that company and every
officer thereof who is in default shall be punishable with twice the amount of fine for
such offence in addition to any imprisonment provided for that offence.

194
Available at <http://www. taxmann. com/ commentaries/samples/Volume3_SampleChapters.pdf>,
accessed on July 20, 2017 at 1700 hours.
117
5.5.7 Important Court Decisions:

 In Mohd. Ahmed (Minor) v. Union of India,195 it was held that a

.pharmaceutical company donating drugs or medicines is within Section
135 of the Companies Act 2013, read with schedule VII of the Act and it
is a CSR activity.
 In Infosys Technologies Ltd. v. Joint Commissioner of Income Tax196 the
Karnataka High Court held that, the expenditure incurred by the assessee
on installation of traffic signals at Baneerghata (in Bangalore) as the
expenditure having incurred by the assessee in discharge of its CSR.
 In N.H.P.C Limited v. Punjab State Power Corporation,197 the Central
Electricity Regulatory Commission (CERC) held that the expenditure
incurred in creation of infrastructure for supply of reliable power rural
households within a radius of 5 km of power station if, the generating
company does not intend to meet such expenditure as a part of its CSR.

5.5.8 Critical Appraisal: The new law regarding CSR as such came into force
only in 2013, but the concept of CSR in India was still existing prior to this. All major
companies were involved in a plethora of social work and responsibilities which they
were highlighting in their annual returns, advertisements, board meetings and company
reports. With a structured Act in place, the entire gamut of CSR is now expected to be
more genuine, responsible, recorded and with the force of law behind it. It would
discourage companies and corporates from doing mere lip service or fudging their
reports. Though it would be unfair to make any sweeping deductions about the attitude
and compliance of Indian conglomerates from the 2012-2013 CSR expenditure data, it
is pertinent to note that a 2012 study conducted by CSR identity in association with the
Forbes India Magazine revealed some interesting facts.

Despite the hype about consistent CSR spending by Indian companies, actual
figures show that they were way behind the 2% profits after tax (PAT) mandate. The
study by CSR identity considered the revenues and PAT figures of the top 100
companies during the FY 2011-12. Based on that, the actual spend indicated by various

195
W.P.(C) 7279/2013.
196
2006 103 ITD 399 Bang, (2006) 105 TTJ Bang 802.
197
Petition No. 230/GT/2014.
118
companies stood at an average of INR 32.09 crore per company, while the 2% PAT
mandate turns out to be INR 61.84 crore as shown in Table 18.198

Table 4-CSR Report Card, 2012

What is being brought out is that despite the decent CSR spend indicated,
companies have to double their spending in order to catch with the mandated figures.
Tata Steel stands as a stalwart among top 100 companies with INR 146 crore spent on
CSR in FY 2012 as compared to the mandated INR 78 crore. Similarly, Jindal Steel and

198
Available at <http://ajmjournal.com/HTML_ Papers/Asian% 20Journal %20of%20
Management__PID__2013-4-4-14.html>, accessed on June 20, 2017 at 1800 hours.

119
Power has spent INR 88 crore on CSR in FY 2012 as compared to the mandated INR
76 crore. Apart from these two companies, there are a few other companies that spend
cross 100% of the mandated figure. They are, Jaiprakash Associates, Hindustan
Petroleum Corp, Jindal Steel and Power, JSW Steel and MMTC, which have spent
anywhere between INR 3 crore to INR 88 crore in FY 2012.199

Notwithstanding the criticism, it is on record that many companies do take up

activities such as child education, poverty alleviation, healthcare, etc, which are not
actually directly linked to their business activities. Activities such as integrated rural
development by Deshpande Foundation, child education by Azim Premji Foundation,
sports scholarship by Tata Steel are good examples for CSR changing the perception on
Indian companies. India is the first country in the world to enshrine corporate giving
into law. According to independent reports, the private sector’s combined charitable
spend jumped from an estimated INR 33.67 billion (£357.5 million) in 2013 to around
INR 250 billion (£2.63billion) after the law’s enactment.200

Strangely, the Act suggests a way to escape penal provisions if a company fails
to spend the stated amount on CSR activities. The Board only needs to explain reasons
for noncompliance in its report, the so called ‘comply-or-explain’ clause. Explanations
provided by the largest 100 firms from their Business Responsibility reports201 showed
that out of 53 firms with usable data, about one third spend 2% or more, while virtually
all the rest provide explanations (as required by Section 135). Thus, even among the
largest firms, explaining rather than spending 2% is common. The explanations
provided are generally not very detailed and often not particularly compelling. Some
common themes include the novelty of the CSR requirement and the difficulty of
identifying worthy causes on which to spend in the limited time available. A number of
firms promise to carry forward their shortfall by spending more than required in future
years.

199
Ibid.
200
Available at <https://www.theguardian.com/sustainable-business/2016/apr/05/india-csr-law-
requires-companies-profits-to-charity-is-it-working>, accessed on August 10, 2017 at 1100 hours.
201
Dhammika Dharmapala, S.Vikramaditya, ‘The Impact of Mandated Corporate Social
Responsibility: Evidence from India's Companies Act of 2013 (October 30, 2016)’, University of
Chicago, Public Law Working Paper No. 601; University of Chicago Coase-Sandor Institute for
Law & Economics Research Paper No. 783; University of Michigan Law & Econ Research Paper
No. 16-025; University of Michigan Public Law Research Paper No. 526.

120
 The CSR law is that while organizations are expected to provide an explanation
of non-implementation of the CSR law, the validity of such explanations has not been
determined which offers ample scope for corruption or unethical practices.

Moreover, the mandatory CSR could also result in forced charity.

Organizations can also provide fraudulent data to indicate compliance or manipulate
financial data to avoid allocating 2 per cent for CSR activities. Another concern is that
the CSR mandate may give rise to corrupt or fraudulent forms of spending, for instance
where the firm directs funds towards a fraudulent organization that then returns most of
the money. If such ‘kickbacks’ were returned to the firm, we would not observe (as we
do) a substantial negative market reaction. Perhaps the most egregious form of non-
compliance by firms would be to falsely claim CSR expenditures that they had not
actually made.202

The next question that arises is whether the CSR policy is really democratic?
Allocating 2% of the net profits for CSR should preferably be done through
shareholders voting and not through any legislative powers. All the efforts taken by the
government seems to be like forcing the companies to contribute, rather than it being
voluntary. The above point makes it corporate compulsion responsibility and not
corporate social responsibility.

Another point worth considering is whether Section 135 of the Act violates
Article 14 of the Constitution. Article 14 of the Constitution guarantees to every person,
equality before law and equal protection of law within the territory of India. Moreover,
Article 14 allows reasonable classification of the legislation. In the case of Re Special
Courts Bill,203 the Supreme Court has consistently ruled that classification is valid only
if it is founded on an intelligible differentia and the differentia has a rational relation to
the object sought to be achieved by the statute in question.

By the same yardstick, it can be said that Section 135 violates Article 19 (1)(g)
of the Constitution of India which vests freedom of trade, commerce and profession. As
per Article 19(1)(g) of the Constitution (Ministry of Law and Justice, 2007), a
fundamental right is granted to practice any occupation, business or profession. The

202
Available at <https://www.law.umich.edu/centersandprograms/>, accessed on June 15, 2017 at
1800 hours.
203
AIR 1979 SC 478.
121
mandatory CSR restricts the ability of organizations to spontaneously pursue or execute
any trade or business.204

By Section 135 of the Companies Act, 2013, CSR activity is made mandatory to
certain companies which meet the required criteria. This can be interpreted to mean that
Section 135 constitutes a restriction since it requires the company to divert the money
which could have otherwise been reinvested into the company’s business for
incremental returns or paid as dividend to shareholder, for being spent on CSR
activities.205

Next, CSR spending is made mandatory to only company form of organisation.

CSR is not applicable to partnership firm or LLP or any other form of organisation,
even though it’s net worth or profit or turnover is more than the prescribed limit.

As per Section 135(1), once a company has met any one of the thresholds
relating to net worth, turnover or net profits, it comes within the purview of Section
135. Thus a company which does not meet the thresholds at a future point in time
would nevertheless continue to be obliged to spend on CSR activities. Also the
explanation to Section 135 states that ‘average net profits’ shall be computed in
accordance with the provisions of Section 198. Section 198 (4)(l) permits only
accumulated losses incurred after the date of effectiveness of the said Section (but not
for periods prior to such effectiveness) to be set-off against net profits for arriving at
‘average net profits’ for the purposes of Section 135. Thus, a company which has
earned profits during the preceding three financial years but is yet to recoup its carried
forward losses relating to the period prior to effectiveness of Section 198 will be
required to spend on CSR.

In view of the above, some other key concerns can be summarized as under:206

 The threshold limit of INR 5 crores net profit for applicability of CSR
requirements seems, in comparative terms, to be on the lower side vis-à-
vis net worth and turnover thresholds of INR 500 crores and INR 1,000

204
Available at <http://www.corporateresponsibilitynetwork.com/wp-content/uploads/topics-
corporate-responsibility-society/regents_151018_indian-csr-law.pdf>, accessed on July 20, 2017 at
1300 hours.
205
Amudha Murthy, 'Constitutional Validity of CSR', Law Mantra Online Monthly Journal.
206
Available at <http://www. janalakshmi.com/wp-content/uploads/evolution_of_csr_in_india.pdf>,
accessed on June 10, 2017 at 2000 hours.
122
 crores respectively. This may result in companies getting covered under
CSR even when they do not meet net worth/ turnover criteria.
 It is not absolutely clear whether a company will need to create a
provision in its financial statements for the unspent amount if it fails to
spend 2% on CSR activities in a particular year.
 Such a failure can lead to penalties and government action.
 What happens to development projects when companies make losses?
According to one estimate, of the 5,138 firms listed on the BSE, the total
number of companies qualifying under Section 135 has come down from
1,500 in FY 2010 to 1,372 in FY 2012. So has the number of total
qualifying companies with profit after tax greater than zero from 1,457
to 1,265.
 It is possible that companies would prefer to spend on activities
specified in the Act, (such as protection of national art, heritage and
culture, promotion of sports, contribution to the Prime Minister’s
National Relief Fund), which have a lower long-run social impact,
ignoring real problems like inter-regional inequality or particular social
stigmas.

Section 135 also relates to the linking of a company’s profit-making with the
development of local areas. Companies are required to spend 2% of their average net
profits from the preceding three years and focus on local areas around which they
operate. This is an absurd proposition as it will increase inter-state disparities in social
indicators.

For instance, states like Gujarat, Maharashtra, Odisha and Andhra Pradesh, with
their large number of industrial units, are likely to see greater social development on
account of higher CSR spend by the private sector.

Though the government has enacted and enforced the law, there has been no
discussion or definition on a suitable mechanism that can be implemented to ensure that
the CSR policy is diligently followed by organizations. Nor has there been a thought as
to the consequences that could arise out of non-compliance.

123
 As a matter of fact, successfully implementing this law can prove to be a major
challenge as many of the existing laws in India are easily flouted or cunningly
circumvented.

124
 CHAPTER 6
ENVIRONMENTAL SUSTAINABILITY AND ROLE OF
CORPORATES-CASE STUDIES
The principle of common but differentiated responsibilities is the
bedrock of our enterprise for a sustainable world
- Prime Minister of India, Shri Narendra Modi207

6.1 CSR Trends: Pre and Post Independence

As mentioned in Chapter 5, the Companies (Corporate Social Responsibility
Policy) Rules, 2014 were notified with effect from April 01, 2014, but CSR as a concept
was already being followed by many Indian companies and MNC's pre and post
independence. JRD Tata, the then Chairman of the Tata Group made the pioneering effort
in creating a socially responsible business model. Tata Iron & Steel Company was the first
Indian company to set up an entire township for its workers complete with residential
quarters, hospitals, schools, parks and other civic amenities. Similarly, in the public sector,
Steel Authority of India Ltd. had built townships and ensured all employee benefits and
civic amenities were available to its workers and their families as well. The first steel
township built around the Rourkela Steel Plant in 1959 has been ranked 14th best city in
terms of sanitation and cleanliness by the Union Urban Development Ministry in 2010.
Apart from engaging itself in the production and marketing of steel, the company also has
welfare schemes for its employees including housing, hospitals, schools, concessional
transport, recreational and cultural activities, and canteen facilities.208 Subsequently,
liberalisation, privatisation and globalisation , together with a comparatively relaxed
licensing system, led to a boom in the country’s economic growth has made it possible for
companies to contribute more towards social responsibility. Forbes India had published a
paper 2013, i.e. before the new law came into force, listing notable work by some well
known companies.209
 Bharat Petroleum Corporation Ltd.: Its rain water harvesting project
‘Boond’, in association with the Oil Industries Development Board,

207
Prime Minister Narendra Modi addresses the 2015 Sustainable Development Summit, at the United
Nations headquarters at the 70th session of the General Assembly on September 25, 2015, Indian
Express, September 26, 2015.
208
Avaialble at <https://www.academia.edu/7492295/Impact_of_ CSR_mandate_on_ Indian_
companies>, accessed on May 20, 2017 at 1300 hours.
209
Available at <http://www.forbesindia.com/article/real-issue/csr-report-card-where-companies-
stand/34893/1>,accessed on June 15 2017 at 1500 hours.

125
 selects draught-stricken villages to turn them from ‘water-scarce to
water-positive’. Some of BPCL’s other social programmes include
adoption of villages, prevention and care for HIV/AIDS and rural health
care.
 Ashok Leyland Ltd.: Operates a ‘FunBus’ in Chennai and New Delhi.
This bus, equipped with a hydraulic lift, takes differently abled children
and those from orphanages and corporation primary schools on a day’s
picnic. The company also runs AIDS awareness and prevention
programmes in its Hosur factories for about 3.5 lakh drivers.
 Axis Bank: The Axis Bank Foundation runs ‘Balwadis’ which are
learning places for children living in large urban slum clusters. It also
conducts skill development programmes like ‘Yuva Parivartan’ in motor
driving, welding, mobile repairing, tailoring etc, for the youth in
backward districts.
 Hindalco Industries Ltd.: Its CSR activities are concentrated in 692
villages and 12 urban slums, where it reaches out to about 26 lakh
people. It has constructed check dams, ponds and bore wells to provide
safe drinking water. In education, it awards scholarships to students from
the rural schools it supports. Its other interests include women’s
empowerment and health care, in which it treats patients in hospitals,
runs medical camps and operates rural mobile medical van services.
 Indian Oil Corporation Ltd.: It runs the Indian Oil Foundation (IOF), a
non-profit trust, which works for the preservation and promotion of the
country’s heritage. IOCL also offers 150 sports scholarships every year
to promising youngsters. Some of its other initiatives lie in the domains
of clean drinking water, education, hospitals and health care.
 Infosys: The Infosys Science Foundation, set up in 2009, gives away the
annual Infosys Prize to honour outstanding achievements in the fields of
science and engineering. The company supports causes in health care,
culture and rural development. In an interesting initiative undertaken by
it, 100 school teachers in Karnataka, who were suffering from arthritis,
underwent free surgery as a part of a week-long programme.
 Mahindra & Mahindra Ltd.: ‘Nanhi Kali’, a programme run by the KC
Mahindra Education Trust, supports education of over 75,000
126
 underprivileged girls. The trust has awarded grants and scholarships to
83,245 students so far. In vocational training, the Mahindra Pride School
provides livelihood training to youth from socially and economically
disadvantaged communities. The Company also works for causes related
to environment, health care, sports and culture.
 Oil & Natural Gas Corporation Ltd.: It offers community-based health
care services in rural areas through 30 Mobile Medicare Units (MMUs).
The Company’s ‘Eastern Swamp Deer Conservation Project’ works to
protect the rare species of Eastern Swamp Deer at the Kaziranga
National Park in Assam. The Company also supports education and
women empowerment.
 Tata Consultancy Services Ltd.: Its Computer Based Functional Literacy
(CBFL) initiative for providing adult literacy has already benefited 1.2
lakh people. The programme is available in nine Indian languages.
Besides adult education, TCS also works in the areas of skill
development, health care and agriculture.
 Tata Steel Ltd.: It comes out with the Human Development Index (HDI),
a composite index of health, education and income levels, to assess the
impact of its work in rural areas. Health care is one of its main concerns.
The Tata Steel Rural Development Society aims to improve agricultural
productivity and raise farmers’ standard of living.

India being a developing country with numerous socio-economic problems to deal

with, private companies have a plethora of issues to choose for formulating a CSR policy.
Diverse issues such as healthcare, education, rural development, sanitation, microcredit,
women empowerment, etc. are chosen for carrying out CSR activities across India. While
some companies consider their interaction with stakeholders and impact of its business on
society as significant for choosing issues, most of them work in various social issues
simultaneously. Among them education is the most prominent with almost all Indian
companies having some focus on this theme. A survey as far back as 2008 by Taylor
Nelson Sofres, India, a market research and market information group (TNS India)
indicated that 82% of companies chose to work in primary and higher education,
healthcare stood second with 77% companies choosing it. Environment (66%), livelihood

127
promotion (57%) and women empowerment (55%) were the major thrust areas covered
under various CSR initiatives.210
Another set of data compiled by the Assocham Eco Pulse study on CSR by Indian
companies in 2009 had found that FMCG and Chemical sectors were the leaders in terms
of number of CSR initiatives. Chemical companies led with 12.11% share of CSR
activities in environment and education areas. FMCG companies stood a close second with
10.15% share of CSR activities in community welfare and education. Textiles and IT
sectors followed next with 8.5% share in the number of initiatives. While leading sectors in
CSR spend such as oil & gas, metal & mining lag behind in the 10th and 11th positions.
This variance in data clearly indicates that a company’s CSR spend itself does not depict
the ground reality about its actual CSR activities (Table 5).211
Rank Sectors active in CSR areas Share (%)
1 Chemicals 12.11
2 FMCG & Consumer Durables 10.15
3 Textiles 8.67
4 Software & ITES 8.18
5 Construction 8.02
6 Cement 7.86
7 Power 7.86
8 Engineering 7.36
9 Fertilizers 5.89
10 Oil and Gas 5.56
11 Metal 4.42
12 Automobiles 4.09
13 Logistics 3.6

Table 5-Leading Sectors in CSR Initiatives

Though the data above pertains to the period before 2013, it is seen that despite the
emergence of individual thought leaders, sustainability is still not at the forefront of CSR
activities among a majority of Indian companies.
Data analysed by the MCA for CSR expenditure of all Indian companies in 2014-
15 showed that 14 percent (INR 1,213 crore) of total CSR spending in India was made on
activities focusing on conserving the environment. It was the third highest expenditure on a
social impact issue after education (32%) and health (26%) and was greater than the
amount spent on rural development (12%). The CSR expenditure of top 50 CSR spending

210
Truptha Shankar, Dr. H. Rajashekar, ‘Impact of the proposed Corporate Social Responsibility
mandate in the new Companies Bill 2012 of India’, Asian Journal of Management, Volume: 4,
Issue: 4, 2014.
211
Available at <https://www.academia.edu/7492295/Impact_of_CSR_mandate_on_ Indian_
companies>, accessed on June 10, 2017 at 2100 hours.

128
companies for the years 2014-15 and 2015-16 was INR 4634 crore and INR 6538 crore
respectively.212
These figures highlight that companies today have an increasingly broad
understanding of the risks and opportunities that climate change poses to their strategies
and operations and that larger issues of sustainability triggered by climate change are
becoming an integral component of dialogues with the major stakeholders. At the same
time, verifiable corporate and partners’ accountability and reporting have proven to be key
drivers to CSR getting embedded in the mainstream of strategy and business operations of
companies.
A study conducted by NextGen to analyse the CSR expenditure of the top 100
companies for FY 2015-16 supports this trend. Among these companies (Indian Tobacco
Company, Indian Oil Corporation Ltd., National Thermal Power Corporation of India,
Hindustan Lever Ltd., Wipro and Axis Bank), the top spenders in environment
conservation were primarily from the following three sectors:213
 Fast Moving Consumer Goods (FMCG): ITC (INR 72 crore), HUL
(INR 22 crore).
 Energy companies: NTPC (INR 44 crore), IOCL (INR 30 crore).
 IT and financial services companies: Wipro (INR 48 crore), Axis Bank
(INR 28 crore).

Only about a third of the top 100 companies spent a significant portion of their
CSR budget on environment-related activities, with such projects accounting for a mere 10
percent of the total number of CSR projects carried out in FY 2015-16, as per the study
conducted by NextGen to analyse the CSR expenditure of companies.214
Though big industry, with its high level of emissions, waste generation, and fossil
fuel consumption has traditionally been viewed as the chief villain in the fight against
climate change, CSR programmes being undertaken by several large companies in India
suggest that they have started thinking about their impact on the environment and are
striving to become responsible corporations.

212
Government Of India, Ministry Of Corporate Affairs, ‘Rajya Sabha Unstarred Question No. 2227’,
answered on Tuesday, March 21, 2017, ‘CSR Spending by Companies’.
213
Vishal Sikka ,‘CSR and sustainable development: Do Indian companies care about the
environment?’, India Forbes, published on January 05, 2017.
214
Ibid.
129
 The ‘India CSR Outlook Report (ICOR),215 an annual research publication of
Renalysis Consultants Pvt Ltd., (Figures 17, 18 and 19) provides an in-depth analysis of
CSR spend of 250 major Indian companies in FY 2015-16.
The report visualizes a few important curves of CSR landscapes in India, entirely
based on actual CSR spending data of these companies. While at the time of its release on
September 27, 2016, this is the first such analysis of CSR spend of this large number of
companies in the FY 2015-16.
These 250 companies account for more than 1/3rd of total CSR spend in India,
making it a big sample size for any such study and analysis (No. of companies in the study
250; total number of projects implemented 2862; No. of public sector enterprises 22; PSU
share in total actual CSR spend-30% approximately i.e. INR 2140 Cr).
The 250 companies presented in this report were selected on the basis of following
few criteria:
 The prescribed CSR spend for FY 2015-16 was more than INR 1 Cr.
 Availability of the last year’s annual report of the company by 30th Aug
2016.
 Representation of all the sectors (as per the BSE listing) in the sample
size.
 Availability of the required data in the annual report (as some
companies have not disclosed vital information of CSR projects in their
Director’s report.

Figure17 gives a snapshot of the CSR spending trend of these companies (proposed
and actual), Figure 18 shows the ‘theme’ of the CSR spending and Figure 19 gives a
comparison of the actual amount spent on CSR by these companies viz the prescribed
amount.

215
Available at <http://ngobox.org/media/India%20CSR% 20Outlook% 20Report% 202016-
NGOBOX.pdf>, accessed on August 26, 2017 at 2000 hours.
130
Figure 17-India CSR Outlook Report (ICOR: A Snapshot of
CSR Spend in FY 2015-16)

131
 The breakdown/priorities of the expenditure as projected in the report is as
under:

Figure 18-India CSR Outlook Report: Snapshot of CSR Spend

FY 2015-16

132
Figure 19 below shows the 10 companies which actually spent a total of INR 3350
Crore on CSR whereas their prescribed CSR was INR 3064 Crore. This is almost 9%
more than what Section 135 asks for.

Figure 19-India CSR Outlook Report (ICOR: A Snapshot Of

CSR Spend in FY 2015-16)

The analysis clearly shows that there is substantial improvement in the actual
amount spent on CSR compared to the prescribed amount in FY 2015-16. While it was
79% in FY 2014-15, it has increased to 92% in FY 2015-16. 58% of the companies
have spent either exactly as the prescribed CSR or more than the prescribed CSR. This
is a good improvement from the FY 2014-15 where this percentage was 48%.

Renalysis Consultants Pvt. Ltd. (NGOBOX) had published a pre-report analysis

in July, 2017 before the India CSR Summit and Exhibition which was held in

133
Gurugram in September, 2017. The Report summarises data of financial year 2016-17,
pertaining to100 BSE listed companies. Highlights of the report are as as under:216

 Actual CSR spend increased by 20% .

 36% Companies could not meet the CSR compliance while this number
was 44% in FY 2016 while the same was 86% in FY 2016.
 Almost 1/3rd of the companies spent more than the prescribed CSR.
 21% companies (same set of companies) spent more than the prescribed
CSR in both FY 2017 and FY 2016.
 55% of CSR spend is through implementing partners.
 Almost 1/3rd Of CSR fund was spent on education projects while
another 1/3rd was spent on rural development and healthcare projects.
 Addressing hunger and malnutrition and environment sustainability
related projects are gaining new rounds as there seems to be substantial
increase in CSR spend in these areas.

The question arises as to why some companies could not spend their stipulated
CSR fund? The responses of 36 companies that could not spend the prescribed CSR
showed that many of them (almost 1/3rd) were still setting up internal processes or
were confused about what and where they need to focus on. There are companies who
managed to spend the remaining fund of previous year but could not spend the CSR
amount allocated for 2017. It may be kept in mind that as per the report of Renalysis
Consultants Pvt. Ltd., these are initial numbers and represent one-third of CSR fund in
the country. More insights and deeper data-sets are being collated and collected by the
firm.

6.2 CSR: Tata Group of Companies

For this dissertation, two major companies of the Tata Group (Tata Power and
Tata Chemicals) have been selected to examine their social responsibility ethos,
policies, expenditure and practices specially relevant to environment sustainability and
CSR.

Long back, when Tatas decided to set up their chemical works in 1939 in the
semi-arid Mithapur area of Gujarat, their innovative genius yielded significant water

216
Available at <http://ngobox.org/full-news_CSR-Spend-in-India-in-FY-2017--Rise-in-Actual-CSR-
Spend,-Mild-Improvement-in-Compliance-NGOBOX_21638>, accessed on September 18, 2017 at
1300 hours.
134
conservation initiatives that supported not only the new soda ash plant, but also a
township of over 10,000 people. When Tata Motors built its new automotive plant in
1966 in Pune, a lake was created next to the plant with water entirely supplied by the
plant’s effluent treatment system; this is now a haven for many species of rare
migratory birds.

India’s ‘Top companies for Sustainability and CSR’, an annual excercise

undertaken by IIM Udaipur, Futurescape and The Economic Times, now in its third
year, attempts to examine companies, 217 of them, through the CSR microcosm and
also on larger issues of sustainability.

It is pertinent to mention here that four Tata Group companies have secured top
ranks in CSR for the second consecutive year in an Economic Times Survey, report
published on September 15, 2016. There are four Tata group companies in the top ten
list. Tata Power retains its position. Compared to the previous study, it has jumped two
places. Mahindra & Mahindra the top ranked company in 2014 has dropped three ranks
to be placed fourth. Ultratech Cement and Shree Cements are surprise entrants in the
top ten. Interestingly no foreign companies made it to the top ten list- a trend that
follows from 2014.217

In the wake of the Rio Summit, Tatas became founding donors for the
establishment of the Environment Division at the Confederation of Indian Industry
(CII), with the charter to create awareness around environment assessment, planning
and management.The Tata Group was also ranked first in a recent sustainability
leadership survey conducted across Asia for advancing the sustainable development
agenda. The UN system’s set of 17 SDG is now being woven into the development
frameworks of countries, and also corporations.218

In recent years, the Tata Group’s annual spending on CSR alone has exceeded
INR 600 crore. Across the Tata group, there has been considerable progress in terms of
developing abatement strategies, increasing awareness and determining best practices.
Tatas, responding to climate change makes for both ethical and business sense. The
group's CSR activities are rooted in the knowledge that businesses have a duty to enable
all living beings to get a fair share of the planet's resources. The Tata Group is amongst

217
'Tata Leads in Latest ET CSR Ranking', India CSR Network, September 18, 2016, available at
<http://indiacsr.in/tata-leads -et-csr-ranking/>, accessed on August 20, 2017 at 1900 hours.
218
Ibid.
135
the top ten corporate volunteering programmes in the world with respect to CSR and
environment related initiatives. Amongst the core principles related to CSR pertaining
to the Tata Group, ‘all CSR interventions will follow sustainable development
principles- they will factor social, human rights and environmental impacts in their
design and execution’.219

This resulted in a two-pronged approach. At one level, a behaviour change

among Tata companies has been initiated by incorporating climate change in the Tata
Code of Conduct. At another level, a series of plans, policies and initiatives have been
drawn up for companies by setting up a Climate Change Steering Committee in 2008.
The policy helps Tata companies to integrate sustainability considerations into all
decisions and key work processes, mitigating future risks and maximising
opportunities.

The Tata group became part of the Prime Minister's low carbon committee and
was a member in the steering committee of the 'Caring for Climate' initiative of the
United Nations Global Compact and United Nations Environment Programme. Ahead
of the crucial global climate change talks that concluded in Paris, global corporate
leaders signed an open letter on climate change, including the former Chairman of Tata
Sons. The coalition, CEO Climate Leaders, comprising CEOs from 79 companies with
operations in over 150 countries and territories, and facilitated by the World Economic
Forum, believes the private sector has a responsibility to actively engage in global
efforts to reduce greenhouse gas emissions, and to help lead the global transition to a
low-carbon, climate-resilient economy.

Presently, Dr Mukund Rajan, Chairman, Tata Global Sustainability Council

(TGSC), is one of the two Commissioners from India for the Energy Transitions
Commission (ETC) along with Mr Ajay Mathur, Director-General of The Energy
Research Institute (TERI). The ETC brings together a uniquely diverse group of
individuals and organisations from across the energy landscape investors, incumbent
energy companies, industry disruptors, international organisations, NGOs, research
institutes from across the developed and developing world. It aims to accelerate change
towards low-carbon energy systems that enable robust economic development and limit

219
Available at <http://www.livemint.com/Companies/cFyGLrBfG39BNx0jBolZAO/The-Tatas-
sustainability-journey.html>, accessed on August 27, 2017 at 1600 hours.

136
the rise in global temperature to well below 2°C. Lord Adair Turner, Chairman of the
Institute for New Economic Thinking (INET) in the UK, chairs this initiative.

In sync with the group’s focus on sustainability, a new organization, the Tata
Sustainability Group (TSG) was formed in 2014. Besides partnering Tata companies on
their ongoing CSR initiatives, TSG has evangelized volunteering across the Tata group
through Tata Engage, which now delivers over a million volunteering hours a year. To
ensure that key sustainability messages cascade across the group, a Global
Sustainability Council with the chief executives of various Tata companies has been
constituted.

The TGSC, which comprises CEOs and heads of functions of the biggest Tata
companies, meets twice a year to discuss policy related issues. One of the things put in
place is the Tata Group Sustainability Policy (TGSP) which was formulated by the
TGSC. A set of key performance indicators which cover all the aspects the policy talks
about, including climate change and its impact, have been identified and implemented.
Companies have been asked to give relevant data about their use of carbon, energy,
water, etc to be able to understand the progress achieved by the Organisation as a
group.220

In the words of Mr. Shankar Venkateswaran, Tata Group Chief, Tata

Sustainability Group (TSG), ‘We now have a Tata Global Sustainability Council
(TGSC), which comprises CEOs and heads of functions of our biggest companies. It
meets twice a year to discuss policy-related issues. We definitely believe that
humankind has contributed to climate change and it must therefore take steps to fight it.
One of the things we have put in place is the Tata Group Sustainability Policy which
was formulated by the TGSC. We have defined a set of key performance indicators
which cover all the aspects the policy talks about, including climate change and its
impact’. 221

Mr. Shankar further adds, ‘we are asking companies to give us relevant data
about their use of carbon, energy, water, etc. Our companies know how to measure this
data. Once we have the relevant data from our companies, we will be able to understand
the progress we have achieved as a group. One of the most predicted outcomes of

220
Shankar Venkateswaran, Chief, Tata Sustainability Group (TSG), interview by Cynthia
Rodrigeuez, 'The threat of climate change looms over the planet. What is the Tata group approach to
combating climate change?', Tata Review April-May 2017.
221
Ibid.
137
climate change is that the severity of weather and climate-related disasters will be much
bigger in the future. If we are to tackle climate-related events, we need to first
understand the intensity of the severity’.222

For the past seven years, the month of June has been celebrated as Tata
Sustainability Month, to embed ‘sustainable thinking’ at the core of the Tata group’s
strategy and encourage employees to embrace Sustainable Meaningful Actions for a
Responsible Tata (SMART) actions in lifestyle and business decisions. While almost 40
Tata companies have undertaken sustainability reporting consistent with global
reporting frameworks such as the United Nations Global Compact and the Global
Reporting Initiative (GRI), Tata Steel has gone a step further and reported under the
new International Integrated Reporting Council (IIRC) framework.

Tata Steel, Tata Chemicals and Tata Power, through their engagement with the
Natural Capital Coalition, are piloting the recently published draft Natural Capital
Protocol (NCP). New sustainability assessment guidelines are being imported into the
group’s in-house business excellence tool, the Tata Business Excellence Model.

6.2.1 Tata Chemicals Limited

Tata Chemicals Limited (TCL) is an Indian global company with interests in

chemicals, crop nutrition and consumer products headquartered in Mumbai, India.
Under the umbrella of Industry Essentials, TCL produces products which serve as
essential inputs to diverse industries such as glass, detergents, sodium silicate, textiles,
food, feed, mining and chemical processing. TCL is the world's second-largest producer
of soda ash, with a global capacity of 4.3 metric tonnes (MT) per annum, with
manufacturing operations in India, USA, UK and Kenya.223

The company also manufactures sodium bicarbonate at Mithapur, India, and in

UK, which is used by industries such as pharmaceuticals, food, feed, dyes, flue gas
treatment and textiles. TCL is the fourth-largest producer of sodium bicarbonate, with a
combined capacity of about 0.2 MT per annum.

The allied chemicals manufactured by the company include caustic soda, liquid
chlorine, liquid bromine and gypsum. TCL manufactures various grades of industrial

222
Ibid
223
Available at <http://www. tatachemicals.com/Asia/Products/Chemicals/Soda-ash/Dense-Soda-ash>,
accessed on November 12, 2017 at 1300 hours.
138
salt at its UK facility. Its various grades include undried vacuum salt, pure dried
vacuum salt, water-softening products, de-icing salt products and bespoke products.

The cement plant at Mithapur, India, was set up to consume solid waste
generated from the manufacture of soda ash. This plant has an installed capacity of
1,500 t per day and produces two varieties of cement Ordinary Portland Cement (OPC)
grade 53 and masonry cement – under the Tata Shudh brand.224 Under the Farm
Essentials segment, the company offers farm inputs, such as fertilisers, pesticides,
speciality nutrients, seeds and agri-services, which are required to improve crop health
and productivity. TCL is also one of the leading manufacturers of urea and phosphatic
fertilisers.

The Company has adopted ISO 140001 and is a signatory to Responsible Care.
The Company follows an integrated approach towards development programs and
follows the policy of Sustainable Development, participatory approach and
transparency. The key thrust areas are natural resource management programs, building
Sustainable Livelihoods, improving the Quality of Life through Health, Education and
Infrastructure Development and Environment Conservation programs. Total spending
on CSR as percentage of profit after tax is 1.4%.225

The strategic initiatives undertaken by the Company are as under:

 Energy Efficiency- PAT (Perform, Achieve, Trade) targets that have

been set for cement business.
 Tightening Emissions norms and monitoring.
 Low carbon footprint/thrust on renewables-Renewable Purchase
Obligation (RPO) Implementation.
 Natural resource conservation, waste management and recycling.
 Almost zero fresh water usage; Augmentation of green belt greening of
settling ponds.

TCL is relying on several abatement levers to bring its emissions down to

targeted levels. Abatement Roadmap is worked out on site basis and is linked with

224
Available at <http://www.tatachemicals.com/About-Us/Businesses>, accessed on November 12,
2017 at 1200 hours.
225
Available at <http://www.tatachemicals.com/upload/content pdf/business responsibility report 2012
13.pdf>, accessed on June 20, 2017 at 1700 hours.
139
target through Long Term Sustainability Planning (LTSP) to mitigate emission. Some
of the projects are:226

 Solar energy in our salt pans to produce salt for soda ash production at
Mithapur.
 Use of solar power for light and water geyser.
 Hot gas air generator at Haldia supplemented with biomass along with
coal fuel, etc.
 Efficient fleet access, full load based transportation, tied up with
customers, reusing Soda ash bags 3 to 4 cycles, optimization of rail/road
transportation, bulker movements deployment of German designed
patented Lupa Bulkers to help reduce carbon footprint by curbing the
usage of plastic bags for packaging, etc.
 Waste management by utilizing solid waste from soda ash ammonia still
effluent solids which is considered as pioneering effort in world
synthetic soda industry.
 Utilization of fly ash in captive cement manufacturing.
 Development project to add value to waste such as Green Bricks.
 Climate change actions to establish and promote consistent climate
policy across the value chain and pursue science based targets.
 Conservation of energy as a part of Responsible Manufacturing Index
(RMI) and to promote renewables and fuel efficiency in the community
and with farmers.
 Conservation of water.
 Waste management to include promoting reduction, reuse and recycling
of packaging and other wastes.
 Nature and bio-diversity to include responsible mining/supply chain
species conservation and commitment to remove commodity driven
deforestation in supply chains.

The Tata Chemicals 77th Annual Report, 2015-16, gives a breakdown of the
money spent on various CSR schemes. As per the report, the amount required to be
spent by the Company during the year 2015-16 on CSR was INR 12.34 crore (previous
year INR 11.66 crore) whereas the Company had spent INR 13.97 crore (previous year

226
Ibid.
140
INR 10.20 crore). The Company has spent the following amounts during the period
2015-16:227

Table 6-Tata Chemicals CSR Spend: 2015-2016

6.2.2 Tata Power

Tata Power is India's largest integrated power company with a significant

international presence. The Company has an installed generation capacity of 10613
MW in India and a presence in all the segments of the power sector viz Generation
(thermal, hydro, solar and wind), Transmission, Distribution and Trading. It has
successful public-private partner ships in Generation, Transmission and Distribution in
India namely ‘Tata Power Delhi Distribution Limited’ with Delhi Vidyut Board for
distribution in North Delhi, 'Powerlinks Transmission Ltd.' with Power Grid
Corporation of India Ltd. for evacuation of Power from Tala hydro plant in Bhutan to
Delhi and 'Maithon Power Ltd.' with Damodar Valley Corporation for a 1050 MW
Mega Power Project at Jharkhand. It is one of the largest renewable energy players in
India has developed country's first 4000 MW Ultra Mega Power Project at Mundra
(Gujarat) based on super-critical technology. The Company (including its subsidiaries)
has about 20% of its capacity (in MW terms) in clean and green generation sources
(Hydro, Wind, Solar and Waste Heat Recovery), while the target is to have 30-40% of
its total generation capacity to be from non-fossil fuel based generation sources by
2025.228

227
Tata Chemicals ‘77th Annual Report’, (2015-16).
228
Available at <http://www.business-standard.com/company/tata-power-co-554/annual-
report/director-report>, accessed on July 20, 2017 at 1500 hours.
141
 In July 2016, Tata Power announced that it along with its subsidiaries and joint
ventures spent INR 47.02 crore under CSR initiatives in fiscal 2016. The company
stand-alone spent on CSR was INR 29.01 crore as against the required INR 28.29 crore
as per the CSR law, its subsidiaries and joint ventures spent INR 18.01 crore. Tata
Power group companies have aligned their CSR policy to five thrust areas i.e. Primary
Education with focus on girl child, Health & Drinking Water, Livelihood and
Employability, Social Capital and Infrastructure, and Inclusive Growth. Tata Power
Chief Sustainability Officer Mr. Vivek Talwar had said in the statement,‘Tata Power's
focus on CSR has been on designing and deploying sustainable programmes, where the
community takes ownership of the programs in the true spirit of participatory
development’. There is a sharper emphasis on capacity building of the community,
which has led to better impact of programmes on health, access to affordable energy,
water management and sanitation.229

Every industry, by virtue or vice of the burden its operations place on the
environment, has its own size of cross to carry on global warming. The energy sector
tops the load list. In the words of Mr. Avinash Patkar, Chief Sustainability Officer at
Tata Power, who spent three decades in the US before returning to his home country,
‘There is no quick-fix solution available to the power industry to reduce our carbon
footprint, when 400 million Indians do not have access to power, we as a nation cannot
but continue to build power plants, but we can, of course, reduce our carbon intensity
by building distributed, clean power plants alongside centralised, fossil fuel-based ones.
Tata Power has begun moving away from the business-as-usual scenario of coal heavy
plants to an aggressively renewable portfolio, and it has an ambitious plan mapped out
till 2030. About 20 per cent of our installed capacity comes, as of now, from non-
carbon sources. We expect this to rise to 24 per cent by 2017, 40 per cent by 2025 and
50 per cent by 2030. That’s a gigantic goal but I believe we will get there’.230

The ‘Green Manufacturing Index’ introduced by the company monitors

environmental quality parameters, statutory and non-statutory, at its operating divisions.
It has also developed the ‘Corporate Sustainability Protocol’, applicable to all operating
divisions, communities and offices, to address environmental and social issues. Tata

229
Available at <http://economictimes.indiatimes.com/news/ company/corporate-trends/tata-power-
spends-rs-47-2-crore-on-csr-activities-in-fy16/articleshow/53045344.cms> accessed on August 26,
2017 at 1500 hours.
230
Available at <http://www.tata.in/article/inside/wMKlWPxWFVg=/TLYVr3YPkMU=>, accessed on
July 20, 2017 at 1500 hours.
142
Power is also working on a clean technology interface with American Electric Power
and the European energy major Vattenfall, a leader in the Combat Climate Change
global initiative. The long-term goals are to augment the installed capacity of no-carbon
power sources and reduce carbon dioxide intensity. 231

Exploring options to expand its solar portfolio through greenfield projects and
acquisitions within and outside the country, Tata Power also invested in an Australian
company (Sunengy Pty) to build the first floating solar plant in India, which is
operational.

In 2015, to further strengthen its green energy portfolio, the company

restructured its renewable assets to carve out 500 MW to Tata Power Renewable
Energy and its subsidiaries. Tata Power has been named one of the World’s Most
Ethical Companies for 2016 by the Ethisphere Institute, USA, for the third successive
year. Tata Power’s total installed capacity from clean power stands at 1,630 MW,
which includes energy from hydro, solar, wind, geothermal and waste gas generation.
The company acquired a 30 MW wind power project in Maharashtra’s Sangli district
and is in the process of acquiring land in Maharashtra, Rajasthan, Gujarat, Andhra
Pradesh and Karnataka to develop solar and wind projects.232

Long before the present global ecological concern, Tata Power realised its moral
and corporate responsibility towards environmental protection. Tata Power started off
over thirty years ago with eco-restoration and eco-development programmes in its area
of operation in the Western Ghats, particularly in the catchment areas of the lakes in
Mawal and Mulshi Talukas. Since then, over 70 lakh saplings of 60 tree species have
been planted in the area. The programme was intensified in 1995. Over 6 lakh trees,
mainly evergreen and indigenous species, are being planted regularly, enriching the
flora and fauna of the surrounding hills. A green belt of about one lakh trees has been
raised around the Trombay Thermal power plant and nearby hillsides. The Company
also actively supports pisciculture activities at their hydro stations by assisting in the

231
Available at <https://www.tatapower.com/sustainability/communication.aspx>, accessed on June
23, 2017 at 1500 hours.
232
Available at <http://www.tata.in/article/inside/anil-sardana-tata-power-ethical-practices>,
accessed on June 12, 2017 at 2200 hours.
143
breeding of fishes like the Mahsheer. It has also built and maintains two gardens in
Mumbai Metropolis.233

The Tata Power Sustainability model is ‘Leadership with Care’ with four key
elements:234

 Care for the Environment.

 Care for the Community.
 Care for Customers/Partners.
 Care for People.

Tata Power is also part of a group of 46 leading international companies

working together to develop a global policy framework to combat climate change. The
Combat Climate Change (3C) initiative is a Global Opinion Group consisting of
companies from a broad range of industries demanding integration of climate issues in
markets and trade and was launched on January 11, 2007. 3C commits itself to the
following set of four actions to be undertaken to support development of the transparent
policy framework called for in the Roadmap:235

 Sharing a deep understanding of the industries and identifying the

measures with the most impact and the steps needed to gain their full
effect.
 Working within respective sectors to influence colleagues and push the
development of efficient technology.
 Working hard to reduce emissions in businesses and to act as role
models for other organizations.
 Contribute share to minimizing market failures by being transparent and
by helping customers make informed choices.

In addition, there is Tata Power Renewable Energy Limited (TPREL), a wholly

owned subsidiary of Tata Power. TPREL is Tata Power's primary investment vehicle
for clean and renewable energy based power generation capacity. TPREL's present
operating capacity is 1448 MW, comprising 464 MW wind and 990 MW solar, located

233
Available at <https://www.tatapower. com/sustainability/environmental.aspx>, accessed on June 20,
2017 at 1500 hours.
234
Available at <https://www.tatapower.com/sustainability/ sustainability-tata-power.aspx>, accessed
on May 30, 2017 at 1800 hours.
235
Available at <http://www.tatapower.com/combat-climate-change.aspx>, accessed on June 23, 2017
at 1700 hours.
144
in the states of Maharashtra, Gujarat, Madhya Pradesh, and Rajasthan. The company is
also in the process of implementing nearly 500 MW of renewable power projects at
various locations. In order to aggregate its clean and renewable energy portfolio, Tata
Power has initiated the process of carving out its 500 MW clean energy assets from its
books into TPREL. TPREL is seeking to grow its renewable portfolio in India and in
select international markets through organic and inorganic opportunities. With the
acquisition of Welspun Renewable Energy Pvt. Ltd., and the project pipeline, TPREL's
portfolio grows to about 2.2 GW making it the largest Renewable Energy company in
India. Environment related CSR policies include:236

 Harnessing Hydro Power: The Company has an installed hydro capacity

of 693 MW. Tata Power and Norway-based SN Power entered into an
exclusive partnership to develop hydro power projects in India and
Nepal. The consortium bagged the 240 MW Dugar Hydro Electric
Project in Chenab Valley in Himachal Pradesh, India. The Company has
a joint venture with the Royal Government of Bhutan under which it has
commissioned a 126 MW Dagachhu Hydro Project with Druk Green
Power Company in March 2015. Tata Power, through its subsidiary Tata
Power International Pvt. Ltd., has signed an agreement with Clean
Energy AS (a Norwegian hydro-power company) and IFC InfraVentures
(IFC) for developing hydro projects of an aggregate capacity of 400 MW
in Georgia. The Company is also looking at other opportunities to bid in
the near future.
 Harnessing Solar Energy: Tata Power has a strong portfolio of 933 MW
of solar generation capacity. It commissioned its solar power project of
25 MW in Mithapur, Gujarat in January 2012 and a 28.8 MW solar
power project in Palaswadi, Maharashtra in May 2014. It has also
executed a 3 MW solar photo-voltaic (PV) plant at Mulshi, one of the
largest grid-connected solar projects in the State of Maharashtra. The
Company had set up its first solar power plant of 110 kW, way back in
1996 at Walwhan in Lonavla. A 60.48 kWp solar power plant has been
installed on the rooftop of one of the Company’s offices in Mumbai. The

236
Available at <http://www.livemint.com/Industry/3S90iLOkJaahg270FD55IJ/Tata-Power-to-invest-
90-million-in-renewable-energy-arm-TPR.html>, accessed on August 14, 2017 at 1900 hours.
145
 power generated by these solar panels is expected to take the lighting
load of the entire building.
 Floating Concentrated Solar PV Plant: The Company has partnered with
the Australian company, Sunengy Pvt. Ltd. to build the first floating
concentrated solar PV plant in India. In October 2014, Tata Power
designed and commissioned its own 3.36 kW solar PV plant and on
April 02, 2015, commissioned 30.6 kW solar PV plant. Further
commercialisation of the product is in progress.
 Harnessing Wind Energy: Tata Power has an installed capacity of 1140
MW and plants spread across five states of Maharashtra, Gujarat, Tamil
Nadu, Karnataka and Rajasthan the leading states in promoting wind
power generation in India. Cennergi is a joint venture between Tata
Power and Exxaro Resources, a South Africa-based diversified resources
company. Based in South Africa, Cennergi will focus on the
investigation of electricity generation projects in South Africa, Botswana
and Namibia. The initial project pipeline focuses on renewable energy
projects in South Africa and Cennergi’s strategy is to create a balanced
portfolio of generation assets. Cennergi Pvt. Ltd., the Company’s joint
venture in South Africa, Cennergi (Proprietary) Ltd. achieved financial
closure of 134.4 MW Amakhala Emoyeni Wind Farm and 95.17 MW
Tsitsikamma. Community Wind Farm in May 2013 and June 2013
respectively. The construction of both projects is progressing on
schedule.
 Exploring Geothermal Power: 240 MW Sorik Marapi Geothermal
Project, a consortium led by Tata Power along with Origin Energy Ltd.,
Australia and PT Supraco, Indonesia won the Sorik Marapi geothermal
project in Northern Sumatra, Indonesia. The project is in the exploration
phase. Key contracts for drilling and related infrastructure support have
been awarded.
 Waste Gas Generation: Tata Power has set up various plants at Haldia
and in Jamshedpur based on the blast furnace and coke oven gases which
are waste gases from steel making process which help in reducing
Greenhouse gas emission significantly. Tata Power through its joint
venture company Industrial Energy Limited (IEL), has successfully
146
 commissioned two units of 67.5 MW each of the 202.5 MW
Kalinganagar, Orissa project. The company’s installed generating
capacity from waste gas generation stands at 375 MW.

Tata Power is experimenting with span of unique pilot projects across energy
sources with focus on clean technologies. These activities include:

 Biomass Gasification: An 8 to 14 kW biomass producer gas based

generation system has been developed with the help of Tata Motors and
the Indian Institute of Science Campus (IISc). A pilot plant is being
commissioned at Walwhan. The gasifier for the same has been designed
in-house and is under fabrication.
 Concentrated Photo-voltaic (C-PV): A 13.5 kW pilot unit was developed
in which sunrays are concentrated on PV cells and the assembly floats
on Walwhan lake (Lonavala, Pune District, Maharashtra) in order to cool
the cells. The pilot project is currently under evaluation.
 Solar Powered Telecom Towers: More than 6,00,000 telecom towers in
India use diesel generator sets to provide power to their antennas. Tata
Power Solar Solutions Ltd., a 100% subsidiary of Tata Power is
providing solar PV panels that can replace the gensets on 25 such
installations. This technology can be upgraded to augment power to local
grids. Tata Power has successfully demonstrated similar generation
solution, using thin film technology which overcomes the effect of
shadows from the tower.

Next, over INR 100 crores have been invested on pollution control equipment at
the Trombay Thermal Power Plant to install:
 India’s first-of-its-kind Flue Gas-De-sulphurisation (FGD) plant to
reduce sulphur dioxide emissions in flue gas, based on the sea-water
scrubbing principle.
 Electrostatic Precipitators of 99.5% efficiency.
 Tall Chimneys to limit the ground level concentration of pollutants.

Tata Power has taken a lead in this direction of Environment Education as part
of its environment conservation initiatives and as part of its CSR. Tata Power conducts
a non-formal School Comprehensive Environment Programme (SEEP) with the help of

147
Bharati Vidyapeeth Environment Education and Research Institute, Pune. These
initiatives include:237
 Setting up of an Environment Interpretation Centre to create general
awareness among people.
 Construction of Primary schools in rural areas.
 Constructing of one-room primary education centres in 38 remote
villages in the catchment areas to ensure that at least primary education
is available. Tata Power is also committed to assist in building 4 to 5
schools every year. The Company also provide all necessary help in
running the schools at the power stations at Bhira and Bhivpuri.
 Training to more than two hundred teachers under education awareness
programme.
 Improving the quality of water of village ponds.
 Supplying drinking water from the Company’s lakes to Panchayats and,
on Government request, to drought-prone villages by tankers and
bullock carts.
 Providing medical aid in rural areas by organising medical camps with
the help of Doctors of Rotary Club.

237
Available at <https://www.tatapower. com/sustainability/environmental.aspx>, accessed on June 20,
2017 at 1200 hours.
148
 CHAPTER 7

CONCLUSION AND SUGGESTIONS

If the law fails to respond to the needs of changing society, then
either it will stifle the growth of the society and choke its
progress or if the society is vigorous enough, it will cast away
the law which stands in the way of its growth. Law must
therefore constantly be on the move adapting itself to the fast
changing society and not lag behind
-Justice P.N. Bhagwati238

7.1 Summary

The overall aim of this dissertation was to identify, understand and analyse the
CSR law in India as it relates to environment sustainability. To achieve the research
aim, a research methodology was designed to incrementally fill the gaps in the
boundary of knowledge and realise the research aim. An endeavour was made to
acheive all of these objectives as part of the research.

Good CSR is a tool, which assists the image creating process and nurtures the
relations between a company and its clients. These are important factors for a business
to thrive in todays society. One of the elements that can be helpful in getting a
competitive advantage is being a socially responsible cooperation due to the ethical and
moral nature of this phenomenon.239

Inter-generational equity in economic, psychological and sociological contexts,

is the concept or idea of fairness or justice between generations. It can also be applied
to fairness between generations currently living and generations yet to be born. Inter-
generational equity is a concept that says that humans 'hold the natural and cultural
environment of the Earth in common both with other members of the present generation
and with other generations, past and future'. It means that we inherit the Earth from
previous generations and have an obligation to pass it on in reasonable condition to
future generations.240

The idea behind environment sustainability is not reducing the ability of future
generations to meet their needs, although future generations might gain from economic

238
Amita Singh, Nasir Aslam Zahid,’ Strengthening Governance through Access to Justice’, PHI
Learning Pvt. Ltd.(2008).
239
Ralph Tench, Liz Yeomans,‘Exploring Public Relations’, Financial Times, Prentice Hall; 2nd
edition (2009).
240
Sharon Beder, ‘The Nature of Sustainable Development’, 2nd edition, Scribe, Newham (1996).
149
progress, those gains might be more than offset by environmental deterioration. Most
people would acknowledge a moral obligation to future generations, particularly as
people who are not yet born can have no say in decisions taken today that may affect
them. Hence well formulated CSR laws which insist on social responsibility towards
protection of natural resources are the need of the hour.

In a planetary system of finite resources, human activities motivated by an

attitude of rampant consumerism and unsustainable patterns of production and
consumption have never been as callous towards environment as in the modern era.
Man’s greed attacks nature, environment and ecology and wounded nature backlashes
on the human future.241

Hindu philosophy puts great importance on environment sustainability since

they realised that for a balanced growth of humanity, protection of our environment is
important and said that people polluting the environment were cursed. Accordingly, a
code of conduct (Dharma) was framed to define the ethical relationship with
environment. ‘A person, who is engaged in killing creatures, polluting wells, and ponds
and tanks, and destroying gardens, certainly goes to hell’.242 To conserve the
environment and ensure sustainable growth, the Rigveda243 warns against polluting
space and air, advising to be in harmony with the environment and letting forests grow
as much as possible.
Graze not the sky. Harm not mid-air. Be in accordance with the
earth, For this well-sharpened axe hath led thee forth to great
felicity, Hence, with a hundred branches, God, Lord of the
Forest, grow thou up, May we grow spreading with a hundred
branches

Mandatory CSR is more than fulfilling a duty to the society; it also brings
competitive advantage. All in all, it is an excellent step for the companies and the
societies. The models made proper planning and skill so that the effect is deeper and
wider and effective on ground.for implementation of CSR should be made in
accordance to the legal requirements and with
The incorporation of specific provisions on CSR in the Companies Act, 2013
was, in a way, a vindication and culmination of the efforts of the government to

241
V. R. Krishna Iyer, ‘The Dialectics and Dynamics of Human Rights in India : Yesterday, Today, and
Tomorrow’, Eastern Law House (1999).
242
Available at <http://www.hinduwisdom.info/Nature_ Worship.htm>, accessed on November 10,
2017 at 1200 hours.
243
Rigveda, 5.43.
150
mobilize the support of all key stakeholders to propagate the concept and philosophy of
CSR and ensure its proper implementation. The Companies Act, 2013 made it
mandatory for all companies which fulfil the eligibility criteria based on profitability to
spend at least 2% of their average net profits of three preceding years on CSR. India is
perhaps the first country to make it mandatory by legislation for companies to discharge
their CSR in a prescribed manner. Since CSR and sustainability are dynamic subjects,
the Government is constantly exploring new dimensions of these subjects and devising
new implementation strategies to make CSR and sustainability potent tools for
achieving national development agenda along with sustainable development goals.

7.2 Suggestions and Future Work

A number of drawbacks in the prevailing law as also in its interpretation have

been critically examined in Chapter 5 along with certain recommendations/suggestions.
Though the law as such is not very old, many representations have been made by the
environment seeking amendments to Section 135 pertaining to CSR. This had resulted
in the constitution of a high level committee in June, 2015 to examine implementation
of Section 135, which submitted its report in September, 2015. The report's guiding
principles included balancing the interest of companies, professionals, investors,
regulators and other stakeholders and simplifying processes and doing away with
unnecessary procedures. The aim being to provide ‘greater transparency and disclosures
in view of lesser regulatory interference and greater self-regulation’.

To give one example, there is a school of thought which strongly recommends

amending the clause of average net profit of the preceding three financial years and
replacing it with the preceding year. This is a positive move as in volatile business
environments there can be a situation that a company that was profitable three years ago
is in losses now. As per the existing requirements, it has to shell out already stressed
funds for CSR. If the recommendation is accepted, organisations shall have to worry
about the immediate financial year only. This proposal still awaits ratification from the
Rajya Sabha.244

Since, the mandatory concept of CSR is very new in India, it lacks in several
aspects, thereby it requires much development, planning, monitoring and
implementation processes. Future research could be in the direction and role of various

244
Available at <https://www.saher.org.in/blogs/post/Changes-in-Section-135-of-Companies-Act-CSR-
Laws>, accessed on November 14, 2017 at 1400 hours.
151
agencies NGOs, consulting firms, corporates, government institutes, MNCs etc. in
formulating and implementing CSR policies relating to environment sustainability, in
accordance with the law in India and this law has to be India specific i.e. in consonance
with our ethos, social norms, development needs and prevailing economic conditions.
Secondly, future research may also be towards developing effective CSR
Indexing for corporates, organisations and firms for measuring their social performance
as there is dearth of such study in developing countries. Ultimately, it should be realised
that the law pertaining to CSR is to be interpreted and implemented in a positive way.
Effective CSR can be achieved by aligning CSR initiatives to the extent possible with
business objectives, thereby indirectly, thereby indirectly benifiting and increasing
their own incentive for efficient programming. As far as possible, the CSR initiatives
should be designed in a sustainable manner and should be scalable and result oriented.
Finally, there is a requirement to have more stringent implementation
procedures of various laws relating to CSR. As the law evolves and the public begins to
hold corporates accountable in the field of sustainable growth, researchers will be able
to empirically assess the ‘bottom line’; is the prevailing law effective enough and is it
meeting the global norms for sustainable development and environment protection? Are
we doing enough?

He who knows what sweets and virtues are in the ground, the
waters, the plants, the heavens, and how to come at these
enchantments, is the rich and royal man.
- Ralph Waldo Emerson245

245
Ralph Waldo Emerson, ‘Essays By Ralph Waldo Emerson’, Read Books Ltd. (2017).
152
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167
 APPENDICES

Appendix A

SECTION 135, THE COMPANIES ACT, 2013

Section 135.

(1) Every company having net worth of rupees five hundred crore or more, or
turnover of rupees one thousand crore or more or a net profit of rupees five
crore or more during any financial year shall constitute a Corporate Social
Responsibility Committee of the Board consisting of three or more directors, out
of which at least one director shall be an independent director.

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

(3) The Corporate Social Responsibility Committee shall,—

(a) formulate and recommend to the Board, a Corporate Social

Responsibility Policy which shall indicate the activities to be undertaken
by the company as specified in Schedule VII;

(b) recommend the amount of expenditure to be incurred on the activities

referred to in clause (a); and

(c) monitor the Corporate Social Responsibility Policy of the company

from time to time.

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

(a) after taking into account the recommendations made by the

Corporate Social Responsibility Committee, approve the Corporate
Social Responsibility Policy for the company and disclose contents of
such Policy in its report and also place it on the company's website, if
any, in such manner as may be prescribed; and

168
 (b) ensure that the activities as are included in Corporate Social
Responsibility Policy of the company are undertaken by the company.

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

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

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

Explanation.—For the purposes of this section “average net profit” shall be

calculated in accordance with the provisions of section 198.

169
 Appendix B

GENERAL CIRCULAR No. 21/2014

170
171
172
173
174
175
 Appendix C

COMPANIES (CORPORATE SOCIAL RESPONSIBILITY

POLICY), RULES, 2014

TO BE PUBLISHED IN THE GAZETTE OF INDIA, EXTRAORDINARY, PART II, SECTION

3, SUB-SECTION (i)]

Government of India
Ministry of Corporate Affairs
Notification

New Delhi, dated 27 Feb, 2014

G.S.R. __ (E).- In exercise of the powers conferred under section 135 and sub-sections (1)
and (2) of section 469 of the Companies Act, 2013 (18 of 2013), the Central Government
hereby makes the following rules, namely:-

1. Short title and commencement.

(1) These rules may be called the Companies (Corporate Social Responsibility Policy)
Rules, 2014.
(2) They shall come into force on the 1st day of April, 2014.

2. Definitions. (1) In these rules, unless the context otherwise requires,

(a) "Act" means the Companies Act, 2013;

(b) "Annexure" means the Annexure appended to these rules;
(c) "Corporate Social Responsibility (CSR)" means and includes but is not limited to :-

(i) Projects or programs relating to activities specified 1n Schedule VII to the Act; or

(ii) Projects or programs relating to activities undertaken by the board of directors of a

company (Board) in pursuance of recommendations of the CSR Committee of the Board as
per declared CSR Policy of the company subject to the condition that such policy will cover
subjects enumerated in Schedule VII of the Act.

(d) "CSR Committee" means the Corporate Social Responsibility Committee of the Board
referred to in section 135 of the Act.
176
(e) "CSR Policy'' relates to the activities to be undertaken by the company as specified in
Schedule VII to the Act and the expenditure thereon, excluding activities undertaken in
pursuance of normal course of business of a company;
(f) "Net profit" means the net profit of a company as per its financial statement prepared in
accordance with the applicable provisions of the Act, but shall not include the following,
namely:-
(i) any profit arising from any overseas branch or branches of the company, whether
operated as a separate company or otherwise; and
(ii) any dividend received from other companies in India, which are covered under and
complying with the provisions of section 135 of the Act:
Provided that net profit in respect of a financial year for which the relevant financial
statements were prepared in accordance with the provisions of the Companies Act, 1956,
(1 of 1956) shall not be required to be re-calculated in accordance with the provisions of
the Act: Provided further that in case of a foreign company covered under these rules, net
profit means the net profit of such company as per profit and loss account prepared in
terms of clause (a) of sub-section ( 1) of section 381 read with section 198 of the Act.
(2) Words and expressions used and not defined in these rules but defined in the Act shall
have the same meanings respectively assigned to them in the Act.
3. Corporate Social Responsibility.
(1) Every company including its holding or subsidiary, and a foreign company defined
under clause (42) of section 2 of the Act having its branch office or project office in India,
which fulfills the criteria specified in sub-section (1) of section 135 of the Act shall comply
with the provisions of section 135 of the Act and these rules:
Provided that net worth, turnover or net profit of a foreign company of the Act shall be
computed in accordance with balance sheet and profit and loss account of such company
prepared in accordance with the provisions of clause (a) of sub-section (1) of section 381
and section 198 of the Act.
(2) Every company which ceases to be a company covered under subsection (1) of section
135 of the Act for three consecutive financial years shall not be required to -
(a) constitute a CSR Committee; and
(b) comply with the provisions contained in sub-section (2) to (5) of the said section, till
such time it meets the criteria specified in sub-section (1) of section 135.
4. CSR Activities.
(1) The CSR activities shall be undertaken by the company, as per its stated CSR
Policy, as projects or programs or activities (either new or ongoing), excluding
activities undertaken in pursuance of its normal course of · business.
(2) The Board of a company may decide to undertake its CSR activities approved by
the CSR Committee, through a registered trust or a registered society or a company

177
established by the company or its holding or subsidiary or associate company
under section 8 of the Act or otherwise:
Provided that-
(i) if such trust, society or company is not established by the company or its holding or
subsidiary or associate company, it shall have an established track record of three years in
undertaking similar programs or projects;
(ii) the company has specified the project or programs to be undertaken through these
entities, the modalities of utilization of funds on such projects and programs and the
monitoring and reporting mechanism.
(3) A company may also collaborate with other companies for undertaking projects or
programs or CSR activities in such a manner that the CSR Committees of respective
companies are in a position to report separately on such projects or programs in
accordance with these rules.
(4) Subject to provisions of sub-section (5) of section 135 of the Act, the CSR projects or
programs or activities undertaken in India only shall amount to CSR Expenditure.
(5) The CSR projects or programs or activities that benefit only the employees of the
company and their families shall not be considered as CSR activities in accordance with
section 135 of the Act.
(6) Companies may build CSR capacities of their own personnel as well as those of their
Implementing agencies through Institutions with established track records of at least three
financial years but such expenditure shall not exceed five percent. of total CSR expenditure
of the company in one financial year.
(7) Contribution of any amount directly or indirectly to any political party under section 182
of the Act, shall not be considered as CSR activity.

5. CSR Committees.
(1) The companies mentioned in the rule 3 shall constitute CSR Committee as
under:
(i) an unlisted public company or a private company covered under subsection (1) of
section 135 which is not required to appoint an independent director pursuant to sub-
section (4) of section 149 of the Act, shall have its CSR Committee without such director;
(ii) a private company having only two directors on its Board shall constitute its CSR
Committee with two such directors;
(iii) with respect to a foreign company covered under these rules, the CSR Committee shall
comprise of at least two persons of which one person shall be as specified under clause (d)
of sub-section (1) of section 380 of the Act and another person shall be nominated by the
foreign company.
(2) The CSR Committee shall institute a transparent monitoring mechanism for
implementation of the CSR projects or programs or activities undertaken by the company.
178
6. CSR Policy.
(1) The CSR Policy of the company shall, inter-alia, include the following, namely:
(a) a list of CSR projects or programs which a company plans to undertake falling within
the purview of the Schedule VII of the Act, specifying modalities of execution of such
project or programs and implementation schedules for the same; and
(b) monitoring process of such projects or programs: Provided that the CSR activities does
not include the activities undertaken in pursuance of normal course of business of a
company.
Provided further that the Board of Directors shall ensure that activities included by a
company in its Corporate Social Responsibility Policy are related to the activities included
in Schedule VII of the Act.
(2) The CSR Policy of the company shall specify that the surplus arising out of the CSR
projects or programs or activities shall not form part of the business profit of a company.

7. CSR Expenditure. CSR expenditure shall include all expenditure including contribution
to corpus for projects or programs relating to CSR activities approved by the Board on the
recommendation of its CSR Committee, but does not include any expenditure on an item
not in conformity or not in line with activities which fall within the purview of Schedule VII of
the Act.
8. CSR Reporting.
(1) The Board's Report of a company covered under these rules pertaining to a financial
year commencing on or after the 1st day of April, 20 14 shall include an annual report on
CSR containing particulars specified in Annexure.
(2) In case of a foreign company, the balance sheet filed under sub-clause (b) of sub-
section (1) of section 381 shall contain an Annexure regarding report on CSR.
9. Display of CSR activities on its website. –
The Board of Directors of the company shall, after taking into account the
recommendations of CSR Committee, approve the CSR Policy for the company and
disclose contents of such policy in its report and the same shall be displayed on the
company's website, if any, as per the particulars specified in the Annexure.
(File No. 1/ 15/2013-CL.V)

Renuka Kumar
(Joint Secretary to the Government of India
ANNEXURE

FORMAT FOR THE ANNUAL REPORT ON CSR ACTIVITIES TO BE INCLUDED IN THE

BOARD'S REPORT

1. A brief outline of the company's CSR policy, including overview of projects or programs
proposed to be undertaken and a reference to the web-link to the CSR policy and projects

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or programs.
2. The Composition of the CSR Committee.
3. Average net profit of the company for last three financial years
4. Prescribed CSR Expenditure (two per cent. Of the amount as in item 3 above)
5. Details of CSR spent during the financial year.
(a) Total amount to be spent for the financial year;
(b) Amount unspent , if any;
(c) Manner in which the amount spent during the financial year is detailed below.

(1) (2) (3) (4) (5) (6) (7) (8)

S. CSR Sector Projects or Amount Amount Cumulative Amount
No. project in programs outlay spent on the expenditure spent: Direct
or which (1) Local (budget) projects or up to the or through
activity the Area or project programs reporting implementing
identified project other or Sub Heads: period agency
is (2 )Specify programs (1) Direct
covered the State wise Expenditure
and district on projects
where or
projects or programs
programs (2)
was Overheads
undertaken
1
2
3 Total
*Give details of implementing agency:

6. In case the company has failed to spend the two per cent. of the average net profit of the
last three fmancial years or any part thereof, the company shall provide the reasons for not
spending the amount in its Board report.
7. A responsibility statement of the CSR Committee that the implementation and monitoring
of CSR Policy, is in compliance with CSR objectives and Policy of the company.

Sd/ Sd/ Sd/

(Chief Executive Officer or (Chairman CSR Person specified under
Managing Director or Committee) clause (d) of sub-section
Director) (1) of section 380 of the
Act) (wherever
applicable)

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 Appendix D

SCHEDULE VII

1 The following notifications have been issued for the amendment of Schedule VII:
(a) Notification G.S.R. 130(E) dated March 31, 2014.
(b) Notification G.S.R. 261(E) dated March 31, 2014.
(c) Notification G.S.R. (E) dated August 06, 2014.
(d) Notification G.S.R. 741(E) dated October 24, 2014.
2 After amendments, following activities may be included by companies in their CSR
Policies:
● Eradicating hunger, poverty and malnutrition, promoting health care including
preventive health care and sanitation including contribution to the Swach Bharat
Kosh set-up by the Central Government for the promotion of sanitation and
making available safe drinking water.
● Promoting education, including special education and employment enhancing
vocation skills especially among children, women, elderly, and the differently
able and livelihood enhancement projects.
● Promoting gender equality, empowering women, setting up homes and hostels
for women and orphans; setting up old age homes, day care center's and such
other facilities for senior citizens and measures for reducing inequalities faced
by socially and economically backward groups.
● Ensuring environmental sustainability, ecological balance, protection of flora
and fauna, animal welfare, agro-forestry, conservation of natural resources and
maintaining quality of soil, air and water including contribution to the Clean
Ganga Fund set-up by the Central Government for rejuvenation of river Ganga.
● Protection of national heritage, art and culture including restoration of buildings
and sites of historical importance and works of art; setting up public libraries:
promotion and development of traditional arts and handicrafts.
● Measures for the benefit of armed forces veterans, war widows and their
dependents.
● Training to promote rural sports, nationally recognized sports, Paralympics
sports and Olympic sports.

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● Contribution to the Prime Minister’s National Relief Fund or any other fund set
up by the Central Government for socio-economic development and relief and
welfare of the Scheduled Castes, the Scheduled Tribes, other backward classes,
minorities and women.
● Contributions or funds provided to technology incubators located within
academic institutions which are approved by the Central Government.
● Rural development projects.
● Slum area development.

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