Business response to mandatory corporate social responsibility with evidence from India

Abstract

AbstractThere has been a lot of discussion on the shift from voluntary to mandatory corporate social responsibility (CSR) and its impacts in different countries across the globe. India is unique in this context as the reporting and expenditure of a certain amount under CSR has been mandated for companies. This article analyzes the changes and responses of Indian businesses post‐2014, when new CSR rules were enacted. The key objectives of this study are to assess the level of awareness and compliance, thematic and geographical focus areas for CSR projects, and drivers and barriers to the adoption of mandatory CSR. We performed a secondary analysis of the data from 60 companies, followed by extensive primary research through in‐person interviews and offline questionnaire responses with 100 key CSR professionals from different companies in India. A key finding from the study is that the awareness of CSR policy and the pool of CSR funds has increased. The policy mandates have been a good driver in improving transparency and reporting quality. However, there is a predominant focus on four thematic areas of education, healthcare, hunger, and poverty alleviation despite the government's efforts to expand in other areas. The geographical spread of expenditure is limited to a few key industrial states in India, limiting CSR's contribution towards national development. The study adds to the CSR literature associated with institutional and stakeholder theories by looking at the response of legally bound organizations toward society and the environment. Finally, the study provides valuable information for governments and regulatory authorities considering the mandatory implementation of CSR expenditure across the globe.