Corporate Social Responsibility Law Research Articles

How does innovation moderate the CSR impact on financial performance? An exploratory study and an empirical validation in the Tunisian context

Purpose This paper aims to examine the effect of corporate social responsibility (CSR) on firm performance (FP) of companies listed on the Tunis Stock Exchange. Design/methodology/approach This paper reports on two empirical studies. The first was an exploratory qualitative study carried out on a sample of 30 Tunisian companies operating in different sectors. The second empirical study used a panel data regression analysis, to examine data from 46 companies listed on the Tunis Stock Exchange during the 2017 to 2021 period. Findings The results of the exploratory qualitative study pointed out the specificities of the Tunisian context as to the importance of CSR. The results highlighted also the importance of the 2018 CSR law in Tunisia, yet it drew attention to the non-implementation of its applying texts, meaning that CSR is not always enforced in the Tunisian context. Moreover, in this qualitative study, most companies confirmed that CSR is a key factor behind good governance practices. By studying the impact of CSR on various FP proxies, the results highlight that CSR has a positive and significant impact on FP measured by ROA as an accounting variable and stock returns as a market-measure variable. In addition, the authors confirm the moderating effect of innovation on the CSR and FP relationship. Indeed, innovation affects corporate FP differently. It hinders accounting-based FP while fostering the market-based one. Practical implications The study provides insights for managers into how CSR approaches can be used to maximize profits, improve its FP and reputation, while considering the corporate innovative capacities. CSR is a real performance lever for companies, a means of improving their economic, environmental and social efficiency. It enables companies to anticipate constraints and prevent risks, reduce certain operational costs, optimize resources, communicate a good image and stand out from the competition, gain easier access to innovation, strengthen their competitive edge, gain easier access to financing and strengthen their territorial and social roots. Originality/value The main contribution of this paper is the adoption of two empirical approaches. These two methods are complementary. The first is an exploratory qualitative approach aimed at better understanding the current state of CSR implementation by Tunisian companies. The second one is quantitative, a panel data regression analysis. Furthermore, the authors test the moderating effect of innovation on the studied link. To the best of the authors’ knowledge, this is the first paper that investigates the moderating effect of innovation on CSR FP in the Tunisian context. Finally, robustness tests were conducted to test the reliability of this study’s results.

Does Ownership Influence Corporate Social Responsibility (CSR)? A Study Of Post-Csr Law Implementation In India

Objective: This study examines the influence of different ownership structures on corporate social responsibility spending in a mandatory CSR regime. Method: We use the CSR data under statutory mandate reported by the top 500 publicly listed Indian firms of the first four years after CSR law implementation in 2014 on Bombay Stock Exchange and the Ministry of Corporate Affairs website. Using institutional and agency theory arguments, we hypothesize that ownership structure influences CSR spending. We use multiple logistics regression for our statistical analyses. Results: In line with our prediction, our results reveal that different ownership structures influence the variation in CSR spending. Foreign firms spend on CSR at par with the statutory mandate. Government firms spend above the statutory mandate, and promoter-owned firms spend below the statutory mandate. Conclusion: Through CSR spending on social development initiatives, firms can contribute to the United Nations' sustainable development goals (SDGs) and build their credibility among stakeholders. Our study explains the influence of different ownership structures on CSR spending in a mandatory CSR regime. This study can help policymakers revisit the CSR law provisions by understanding why some firms are spending more and why some firms are spending less on CSR and encourage firms to spend more on CSR initiatives. We leverage institutional and agency theory to explain our findings.

Money laundering: effectiveness of the corporate social responsibility (CSR) law in the UAE

Purpose The purpose of this paper is to examine the extent to which the corporate social responsibility (CSR) law will help combat money laundering in the United Arab Emirates (UAE). Design/methodology/approach The paper will first focus on examining whether money laundering and CSR are compatible. Such an analysis will then inform decisions on whether to include anti-money laundering in CSR disclosure requirements. Findings Key findings from the analysis have shown that the UAE CSR law does not explicitly mention money laundering as part of CSR disclosure requirements. Anti-money laundering (AML) and CSR are compatible and convergence, but money laundering is not yet an integral element of CSR disclosure requirements. Originality/value There are no clear mechanisms or provisions under the UAE CSR law on how money laundering can be included in CSR disclosure requirements, whether voluntary or mandatory. A pressing challenge now is whether the UAE should regulate AML/combatting the financing of terrorism disclosures under the CSR law. The main concern is that such a move could make mandatory disclosure another technical and regulatory requirement that UAE business must comply, which will be inimical to fostering a strong CSR culture.

Changing CSR practices of corporates – a study of institutionalization of mandated corporate social responsibility in India

PurposeGlobally, corporate social responsibility (CSR) has been a voluntary practice, but faced serious limitations in its institutionalization. Resultantly, India, through the Companies Act, 2013, mandates corporates to change voluntary and ad hoc CSR practices into strategic and systematic projects. This paper aims to explore the changes brought in CSR practices by corporates under the influence of CSR law. The goal is to fill the literature gap on qualitative changes brought in CSR practices by the mandate.Design/methodology/approachThis qualitative study used purposive sampling and conducted in-depth interviews of corporate officials, nongovernmental organization (NGO) officials and academicians. The findings are discussed with the theoretical framework of institutional isomorphism.FindingsThis paper presents changes in CSR practices in six themes: ad hoc to project-mode program designing and planning, stricter due diligence of NGOs, multi-stakeholder implementation of impact-driven projects, strict monitoring mechanisms, higher funding and rigorous reporting. These changes contribute to an understanding of the shift from voluntary to mandatory CSR in India, institutionalized through a mix of normative, coercive and mimetic pressures.Practical implicationsIndian corporates can adopt the systematic practices in their CSR programmatic cycle, as presented in this study. NGOs would gain insights into newer requirements of corporates to design effective collaborations. Future studies can be conducted to describe the extent of institutionalization of CSR practices in India.Originality/valueThis paper creates knowledge for multiple stakeholders of CSR in India and other developing countries by presenting changes brought in CSR practices by a legal mandate in comparison to voluntary CSR.

Does doing good help employees perform well? Understanding the consequences of CSR on industrial sales employees

The pandemic, growing environmental crisis, and social inequalities have increased the attention on the relationship between companies and stakeholders. Corporate social responsibility (CSR) is a critical component of dialogue between companies and their stakeholders. Yet, companies lack guidance on CSR implementation, which is all the more important in the Indian context owing to the implementation of the new CSR law. This study aims to develop a scale for CSR measurement for emerging markets and to use stakeholder perspective to provide a more holistic approach to it. The study employs a multistage method to develop a robust scale, and the items are generated via qualitative research and literature review. The work combines qualitative and quantitative methods to understand how CSR is perceived among sales professionals in the Indian manufacturing sector and develops a six-dimensional scale to measure it. The research also provides a framework to examine the role of CSR on sales professionals' performance and commitment to the job. The impact of a company's CSR performance on employee behavior highlights the significance of doing good. This study prescribes CSR as an additional lever to enhance adherence to organizational values and boost employee morale. This research is important for emerging markets in which CSR is a growing phenomenon.

Mandatory CSR in India – A Trailblazer from the East

The paper attempts to trace the evolution of the concept of Corporate Social Responsibility (CSR) and seeks to gather how it turned out to be a boon for the developing nations of the world, particularly countries like India. By the path-breaking promulgation of the Companies Act, 2013, CSR was made mandatory in India, for companies meeting the financial thresholds mentioned in Section 135 of the Act. The author seeks to study the journey of CSR in India, the present law, and the latest amendments made to the same in recent times. The paper evaluates the rationale behind the mandatory CSR law and how it can be a game-changer in India Inc.’s commitment to social causes. The author has also suggested how the mandatory CSR regime in India can be further strengthened to contribute meaningfully, particularly in the fields of education and healthcare, through better project identification, stronger execution linkages, an overhaul of the board committees, flexible and pragmatic government rules, and synchronization of the corporate CSR activities with the lead programmes of the Government of India. These reinforcements can go a long way in making the CSR approach much more effective and value accretive.

The concept of legal space: A topological approach to addressing multiple legalities

AbstractThe notion of legal space is increasingly being used to address the challenges of multiple and overlapping spheres of legality that the notion of legal order cannot capture. This article shows how legal space can serve as an alternative (or at least complementary) concept to legal order in view of the limitations of the latter. It sketches out a notion of legal space that is inspired by topology, an approach that analyses the qualitative nature of spaces. It is concerned with understanding the ways in which legalities interact, rather than with ‘measuring’ their spatial dimensions. A topology-inspired approach to legal space can contribute to conceptualizing, in a novel manner, the inner structure of legal spaces, the boundaries of these spaces and their interrelations with other spaces. It offers an analytical toolkit for better understanding multiple legalities, providing categories to characterize sets of legal elements as well as phenomena such as overlaps and hybridity. It is conceptually less constrained than the concept of legal order, and thus allows us to address various bodies of law ranging from classical domestic law, EU law and international law to global administrative law, corporate social responsibility law, platform law and lex sportiva.

Customers’ response to mandatory corporate social responsibility in India: an empirical evidence

PurposeThis paper aims to investigate the customers’ response to mandatory activities as per the corporate social responsibility (CSR) laws of India in the Indian hotel industry. Further, it analyzes the influence of mandatory CSR activities of the companies on the purchase intention (PI) of customers with the mediating role of customer satisfaction (CS). It also examines the link between mandatory CSR activities and the customers’ evaluation of corporate.Design/methodology/approachThe customers of five-star hotels in Kerala, India, were surveyed, and the proposed model is analyzed with factor analysis and structural equation modelling with mediation analysis.FindingsThe study proves three propositions, namely, the mandatory CSR activities influence the PIs of customers, the CS partially mediates the relationship of CSR activities on the PI of the customers and the mandatory CSR activities demonstrate a positive impact on customers’ evaluation of corporate in the Indian hotel industry.Originality/valueThe comprehensive CSR assessment based on hotel customers’ response by considering CSR law in India is a novel outlook. The study will aid in determining the association between mandatory CSR and PI and evaluate the role of mandatory CSR on favorable corporate evaluation.

CSR in Transition: from Voluntary to Mandatory – the Indian Case

The research presented here summarizes the first stage of a large bilateral (Israeli and Indian) academic effort. This scholarly endeavor involves an attempt to explore the impact of the Indian Mandatory CSR (MCSR) law from both practical and theoretical perspectives. We look at this unique legislation as a “pilot” scheme that challenges traditional terminologies such as Corporate Social Responsibility (CSR), with its basic precondition of voluntarism (“beyond compliance”), Corporate Philanthropy, and the role of taxation between the two. Our focus in this study is on the concept of CSR and on a thematic discussion of the literature review’s findings. The two other themes are left for future investigation. The systematic review includes quantitative and qualitative analysis of 47 academic papers regarding MCSR in India. The results provide significant background information for intended further research on the subject matter. For example, 72% of the studies were conducted by Indian scholars, suggesting that the MCSR is not an attractive research topic, possibly because Western researchers do not view it as relevant. Another finding is that most of the studies reviewed (63%) were qualitative, perhaps indicating that they are focused more on managerial interviews, other reviews, and legal articles, and less on financial performance or other statistical measures. Qualitatively, the leading themes were that MCSR is debated as a form of taxation, the 2% spending cap that became a ceiling, the limits of the “comply or explain” approach, corporate fraud, MCSR’s relevance to SMEs, the director’s duties to the stakeholders and last, geographical inequality.

Impact of cause-affinity and CSR fit on consumer purchase intention

PurposeThis paper aims to ascertain Indian consumers’ corporate social responsibility (CSR) perceptions; an affinity for stipulated causes and perceived fit between cause and industry in the current mandatory CSR era in India.Design/methodology/approachPrimary data was collected through an online survey from 1,251 consumers via quota sampling and snowballing, across 36 Indian cities.FindingsThe findings indicate no skepticism, positive CSR support and company evaluation. Indian consumers have the greatest affinity for environmental protection. Segments of socially, environmentally and culturally conscious consumers were found. Under quasi-experimental conditions of CSR fit and cause-affinity, positive purchase intention is exhibited across fast-moving-consumer-goods sectors; in which case CSR perceptions cease to have a significant impact on purchase intention.Research limitations/implicationsThis result contributes to understanding Indian consumers’ perspective in the mandatory CSR era and adds to the literature on strategic CSR and communication by segmenting consumers by cause affinity.Practical implicationsCSR practitioners could align with consumer-relevant causes that fit with their company’s core business, as controllable initiatives, instead of depending on positive, but less controllable, CSR perceptions of consumers. Implications of the findings on CSR policymaking by the government are also discussed.Social implicationsThe mandatory CSR law has been viewed as a burden by corporate India. This research implies that it may be possible to look at it as an opportunity for strategic CSR, to create a win-win situation for both business and society.Originality/valueOne of the first studies on cause-affinity and CSR fit among Indian consumers using the government stipulated list of causes.

Legislated Corporate Social Responsibility (CSR) in India: The Law and Practicalities of its Compliance

Abstract When India enacted the Companies Act, 2013, it became one of the few countries of the world to make Corporate Social Responsibility (CSR), a legal obligation for a large number of Indian companies. Using a comprehensive analysis of companies’ CSR disclosures and the interviews of relevant stakeholders, this article provides a bird’s-eye view on the major issues plaguing the current regulatory framework on CSR in India. In addition, this article highlights the major differences between privately owned and government companies on their motivations, approaches and challenges to the implementation and enforcement of CSR law of India. This article finds that the Indian CSR regulations are excessively broad and provide wide flexibilities that are possibly being misused, and hence, need legislative amendments to make them more concise, and improve accountability and transparency. From a broader corporate law perspective, this article finds that while the current company law in India may have adopted a more stakeholder-centric approach by its construction, the approach of many companies towards the enforcement and implementation of CSR and the law remains essentially shareholder centric. In light of the above observations, the article suggests that the existing regulatory framework needs to be strengthened with several legislative measures such as stricter auditing and monitoring measures for third-party implementing agencies and pre-and post-project impact assessment mechanisms.

New development: Corporate philanthropy to mandatory corporate social responsibility (CSR)—a new law for India

ABSTRACT The Indian government’s corporate social responsibility (CSR) law is an attempt at formalizing the philanthropic activities of corporations and utilizing a fixed proportion of company profits for formal CSR activity. This article explains the brief history of this significant CSR regulatory development, its scope, compliance requirements and the penalties for the non-compliance focusing on public sector enterprises. It also provides insights into the potential impacts of the CSR regulation observed through post-regulation research studies. IMPACT This article is directed towards lawmakers contemplating corporate social responsibility (CSR) legislation, as well as to the policy-makers and regulators in government agencies who are overseeing India’s new CSR law. In cases of non-compliance, penalties need to be levied for CSR legislation to be effective. Five years since its inception, this well-crafted law seems to be making a difference to Indian CSR spend targets, but it is too early to judge its real social impact.

Corporate Governance and Corporate Social Responsibility

We study compliance of Indian firms to the 2013 Corporate Social Responsibility (CSR) regulation that mandates qualifying firms to spend 2 percent of the pre-tax profits on CSR. We demonstrate that the formation of CSR committees and the appointment of directors with relevant experience (CSR-Directors) increase compliance to the CSR law by 11 percent. Further, we show that CSR-Directors improves compliance by implementing a cost-effective CSR strategy by reducing the number and geographic spread of CSR projects. CSR directors are more likely to implement a cost-effective CSR strategy for companies in more competitive industries, companies with high debt, and companies with no previous history of CSR. Companies with higher CSR compliance gain in value and have increased creditworthiness.

Heart over Mind? Effect of Perceived CSR on Consumer Buying Behaviour and the Mediating Role of Consumer Emotions

Corporate Social Responsibility (CSR) was considered a fad by most business houses and consumers when it started. Today there has been a marginal shift mandated by the CSR law in India. It is now seen as a fee that corporate has to pay to ensure that they comply with the corporate laws. But this ensures that the bare minimum is done. To get organisations to deepen their pockets and more organisations to spend, CSR in itself must appear to be a profitable proposition. This study conducted in the national capital of India shows that consumer perceives CSR in two dimensions- as benefitting the society and benefitting corporate image. This perceived CSR is seen to influence consumer buying behaviour through the mediating influence of consumer emotions.

Internal and vendor employees’ unethical behaviors in the supply chain: the case of India

PurposeThe purpose of this paper is to examine the impact of a corporate ethical policy, such as a code of ethics, on the unethical behavior of internal and vendor employees in the supply chain in India. It also aims to find whether International Standards Organization (ISO) certification of vendors affects the result and any significant relationship between management commitment and unethical behavior can be supported by the findings as well.Design/methodology/approachEmpirical analyses were conducted on a survey consisting of 43 questions comprising 181 valid responses. Multiple regression analysis that includes four independent variables – code of ethics, management commitment, supply chain principles and personal values taking unethical behavior as dependent variable – was used to find the significance of the relationship.FindingsThe implementation of a code of ethics, management commitment, supply chain principles and personal values all have a negative association with unethical behavior. Personal values, measuring a firm’s financial aspects for non-compliance to ethical behavior, have a positive association with unethical behavior. The relationships of top management commitment, personal values with internal employees’ unethical behavior are significant. The significant relationship between management commitment and unethical behavior can be supported by the findings as well. It was also found that ISO certificates and firm size as the control variables did not have any effect on the relationship between the independent variables and unethical behavior. The analysis also shows that ISO 26000 certificate, the international standard for socially responsible operations, does not impact this relationship.Research limitations/implicationsMeasuring substantial managerial effort for corporate social responsibility (CSR) practices by asking questions like, “how committed employees think top management is to social responsibility,” may not fully measure substantial managerial effort for CSR practices. To improve the results of the current study, future research can use the CSR index or disclosure as a measure to better reflect management commitment and practice for social responsibility. Second, the current study is limited to measuring how many occurrences of unethical behavior are witnessed by employees instead of what specific unethical behavior is more often witnessed. Considering India has the second largest population in the world, 181 responses may not represent the true practices in the business environment in India for generalization.Practical implicationsThe findings suggest that management should put more of an emphasis on improving the commitment of upper-level managers to decrease the overall unethical practices of their employees. The study finds that employees’ personal values influence their ethical behavior. Therefore, communications and training of employees at all levels should emphasis on improving personal values.Social implicationsBusinesses should influence academics to incorporate personal value building in course curricula. The Indian CSR law should incorporate the holistic view of CSR taking care of needs of all stakeholders under the provision of the regulation. In 2015, India became the first country in the world to legislate CSR practices in corporations but it misses the opportunity to sensitize the management and employees on ethical practices as it mainly identified philanthropic expenses as mandatory CSR spending and silent on ethical business practices.Originality/valueThe present study contributes to the literature by bringing supply chain context to the effect of different factors on unethical behaviors and interaction of internal and vendor firms in terms of ethical practices. There are several studies on business ethics in different countries including China, but in the case of India similar studies are not much. The present study fills the gap.

A Wolf in Sheep’s Clothing? Corporate Social Responsibility as Corporate Political Activity

The purpose of this paper is to explore corporate social responsibility (CSR) as part of a firm’s nonmarket strategy. Drawing on the legitimacy perspective, we argue that in institutional contexts, such as the developing world, where traditional CPA strategies are severely limited or prohibited, and where extensive pressures for CSR engagement prevail, firms may adopt disguised ways to increase access to political circles. One possible way is employing CSR as a political tool to address social issues preferred by the government. Utilizing the experiment of the 2013 Indian CSR law, our results based on 540 CEO statements over 9 years (2007 to 2015) demonstrate that firms’ CSR narrative significantly shifts after the implementation of the CSR law, both in intensity and in content, and mirrors government’s signalling on preferred social issues. We also find that this phenomenon is prevalent across firms of all ages, and specifically pronounced in the case of non-state owned firms. We argue that such an intentional re-alignment of the CSR narrative results in the employment of CSR as a political tool, providing political legitimacy to firms. Through this paper, we make contributions to both CSR and CPA literatures.

The Emergence of a New Area of Legal Practice: Corporate Social Responsibility

With India enacting the world’s first corporate social responsibility law two years back, it is time to acknowledge the emergence of a new area of legal practice - Corporate Social Responsibility. It is a blessing in disguise for idealistic lawyers who want to work with corporates but are hesitant in choosing hardcore commercial law jobs over their social inclinations (the latter being the reason for opting for the profession in the first place). Though it’s still a niche and an under-developed area of law, supplemented together with a management background, CSR can be an ideal profession for someone bent upon going off the trodden path and pursuing societal impact.

India's Journey with Corporate Social Responsibility-What Next?

One of the causes for raised eyebrows to the Companies Act, 2013 is Section 135. The provision mandates companies meeting certain requirements to compulsorily contribute to corporate social responsibility (CSR) activities, or explain the failure to do so. While this has been the subject of an ongoing debate ever since the provision was suggested in 2009, the provision in question has been met with considerable resistance from the industry. Arguments against Section 135 range from specific critiques of the semantics of the statute to critiques of the failure of India as a welfare state altogether.What this paper seeks is to attempt a definitive outline of the CSR law and practice in India, its roots in Hinduism, Buddhism and Islam, Gandhian philosophies and the pre-2013 position on CSR. It shall also attempt to provide a critical analysis of Section 135 of the Companies Act, 2013 and how the provision may be ignored, or worse—misused. Three arguments are presented in this regard. Firstly, that Section 135 constitutes a departure from the accepted position that CSR needs to be imbibed into the business and management principles of a company and is heading towards a potentially destructive conversion of the principles of CSR into corporate altruism. Secondly, the provisions of Section 135 make the Board of Directors liable to show to their shareholders—the compliance of the company’s social responsibilities. Instead, if the company is to have and comply with social responsibilities, the same should be ascertained by the society, or at least a representative of society. Finally, there is a slew of extant laws in India which also mandate certain companies to take into account their social responsibilities.

India's Journey with Corporate Social Responsibility What Next?

One of the causes for raised eyebrows to the Companies Act, 2013 is Section 135. The provision mandates companies meeting certain requirements to compulsorily contribute to corporate social responsibility (CSR) activities, or explain the failure to do so. While this has been the subject of an ongoing debate ever since the provision was suggested in 2009, the provision in question has been met with considerable resistance from the industry. Arguments against Section 135 range from specific critiques of the semantics of the statute to critiques of the failure of India as a welfare state altogether.What this paper seeks is to attempt a definitive outline of the CSR law and practice in India, its roots in Hinduism, Buddhism and Islam, Gandhian philosophies and the pre 2013 position on CSR. It shall also attempt to provide a critical analysis of Section 135 of the Companies Act, 2013 and how the provision may be ignored, or worse - misused.Three arguments are presented in this regard. Firstly, that Section 135 constitutes a departure from the accepted position that CSR needs to be imbibed into the business and management principles of a company and is heading towards a potentially destructive conversion of the principles of CSR into corporate altruism. Secondly, the provisions of Section 135 make the Board of Directors liable to show to their shareholders - the compliance of the company’s social responsibilities. Instead, if the company is to have and comply with social responsibilities, the same should be ascertained by the society, or at least a representative of society. Finally, there is a slew of extant laws in India which also mandate certain companies to take into account their social responsibilities.

Mandatory Corporate Social Responsibility as a Vehicle for Reducing Inequality: An Indian Solution for Piketty and the Millennials

We argue that mandatory Corporate Social Responsibility (CSR) could contribute to ameliorating inequality. Instead of the tax increases and other confiscatory proposals advocated by scholars such as Piketty, we put forth a model for legislation in the United States requiring companies (excluding SMEs) to spend 1% of their annual profits on designated CSR activities. Our proposal is based upon India's innovative CSR law but has important differences.The paper provides a detailed analysis of the CSR provisions in the Indian Companies Act and related rules. It also offers an empirical examination of CSR activities of companies in the NSE50 since the adoption of the Companies Act, 2013, showing that companies have broadly embraced the legal mandate although implementation remains patchy due to inadequacies in the legislation.