Corporate Social Responsibility Legislation Research Articles

An analysis of the possibility to implement a CSI tax levy in South Africa: Lessons from Mauritius

"The voluntary approach to corporate social responsibility has failed in many cases."1 The Mauritius corporate social responsibility (CSR) landscape changed profoundly in 2009 with the addition of sections 50K and 50L to the Income Tax Act 16 of 1995 (Mauritius), making contributions to a CSR fund mandatory. Before 2009, the Mauritius government repeatedly called on the private sector for assistance to overcome unemployment, poverty, and other challenges in their country. Due to an unsatisfactory response to their request and factors such as poverty, and high unemployment levels, the government made the drastic decision to implement mandatory CSR legislation. The main objective of this study was to investigate the factors contributing to the enactment of mandatory corporate social responsibility (CSR) legislation in Mauritius and the possibility to implement similar legislation in South Africa. An analysis of the Mauritius tax legislation and relevant government publications scrutinised, by way of a literature review, revealed that what is referred to as mandatory CSR, is in fact mandatory corporate social investment (CSI). The study further indicated that the same socioeconomic factors as those present in Mauritius prior to 2009 and worse apply to South Africa. An analysis of South African CSI practices and contributions indicated that an additional R3.111 billion could have been raised if a 2 per cent CSI levy was applied to after-tax profits of certain categories of companies, as in Mauritius. This represents 1.2 per cent of the South African Department of Social Development's 2022/2023 budget. It is recommended that similar legislation should be considered for South Africa. It will ensure that all profitable companies in South Africa contribute to CSI and that more funds will be available to address some of the socio-economic needs. The study addressed the gap in empirical research done in Mauritius after 2018 and 2020 and is also the first comparative study conducted on this topic regarding South African law.

Impact of COVID-19 on corporate social responsibility in India – a mixed methods approach

PurposePrior research studies have discussed the role of corporate social responsibility (CSR) during crisis situations in increasing the resilience and sustainability of the companies. There are two basic models of crisis management – reactive and proactive. When a crisis occurs, suddenly firms tend to act reactively and progressively take proactive steps to manage the crisis. CSR can also be reactive and proactive during crisis situations. Against this backdrop, this paper aims to explore whether CSR during the COVID-19 pandemic moved from a reactive to a proactive stance, with specific focus on CSR legislation, corporate CSR response and corporate thinking about CSR.Design/methodology/approachThis paper adopts a mixed methods approach, using both qualitative and quantitative research designs. This study draws upon both primary and secondary data.FindingsThe results highlighted the change in the CSR approach from being reactive to being proactive as the pandemic progressed. This was observed through the increase in frequency of CSR legislation, and the shift in the intent of CSR legislation from “prompting to donate” to “prompting to volunteer.” Similarly, the shift in reactive to proactive CSR corporate response was observed through the increased spending on CSR and improved COVID-related CSR reporting.Practical implicationsThis study recommends companies to manage crises by becoming more proactive. CSR activities need to be closely aligned with national developmental objectives, and collaborate with various stakeholders to achieve the intended outcomes of the activities.Originality/valueTo the best of the authors’ knowledge, this research paper is one of the few to study the impact of COVID-19 pandemic on CSR in India at a time when India went through three waves of the pandemic. This study corroborates with other studies in terms of managing crisis.

Corporate social responsibility and cost of capital: The moderating role of policy intervention

Corporate social responsibility (CSR) and cost of capital (COC) have been investigated in the past but not in tandem with policy intervention. This paper examines the impact of CSR on COC together with the policy intervention of mandatory CSR. This study uses a sample of 512 nonfinancial firms in India as a case and the costs of debt (COD) and equity (COE) as measures for COC. The findings indicate that (1) higher CSR performance decreases COD and increases COE and that (2) mandatory CSR legislation moderates their relationships such that it increases COD and COE. Therefore, consistent with signaling theory, we conclude that mandatory CSR spending signals a loss of discretionary power of CSR spending and signal intentionality and an implicit increase in agency costs.

Does CSR Expenditure and Sustainability Reporting Improve Firm Performance? Mandatory CSR Regimes in India

This paper aims to investigate whether firms that comply with corporate social responsibility (CSR) expenditure and undertake voluntary sustainability reporting will have lower systematic risk and higher stock returns—the proxies for measuring firm performance—in mandatory CSR regimes in India. The instrumental approach of stakeholder theory asserts that firms considering stakeholders’ interests, including societal interest, are likely to show better firm performance compared to others. Therefore, on the basis of such a theory, this study attempts to link sustainability reporting and CSR compliance with firm performance. One-way Analysis of Variance (ANOVA) and post-hoc tests were used to examine the proposed hypotheses and analyze the results for firms meeting the criteria of CSR provisions and are listed in the National Stock Exchange (NSE) of India. The period of study covers four financial years from 2015–16 to 2018–19, after India mandated CSR expenditure on April 1, 2014. Results reveal that markets value those firms that meet the mandatory CSR expenditure requirement but do not undertake voluntary sustainability reporting. The findings offer important implications for firms, investors, and policymakers of countries, including those that are planning for CSR legislation.

Social justice, corporate social responsibility and sustainable development in South Africa

South Africa is a country that is still in the transitioning process of providing an equal, equitable and just society for its previously disadvantaged people. The country faces several socio-economic developmental challenges, ranging from inadequate housing, high crime rates, violence against women and children, ineffectual health facilities, a slowing economy and high youth unemployment, which invariably affect the business community. If South Africa is to achieve sustainable economic transformation, the business community along with other stakeholders must participate in ensuring social justice and socio-economic development for its previously disadvantaged people. This article contributed to the discourse on the assertion that social justice and socio-economic development are central for sustainable development in any society. The article called for the assistance and participation of other stakeholders, particularly the business community, to help build a just, healthy and robust environment, which translates into a strong community and portends a sustainable environment for businesses. Contribution: This article assessed the effectiveness of legislating social justice and corporate social responsibility. The article adopted the European Union’s Better Regulation evaluation methods to evaluate the effectiveness of the country’s social justice and corporate social responsibility legislation and the influence of the legislations on the socio-economic developmental challenges affecting the country.

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.

Mandatory CSR expenditure and firm performance

India has recently mandated corporate social responsibility (CSR) expenditure under section 135 of the Indian Companies Act 2013 – the first national jurisdiction to do so. In line with the “shareholder value maximization” concept, we document the positive impacts of CSR expenditure on firm performance measured by return on asset and cash flow from operations. Additionally, we find that, despite the regulatory requirement, mandated CSR legislation is a significant but not the sole determinant of actual CSR spending by firms; rather, firm-specific economic factors such as size, level of cash balance and cash flow from operations have a moderating effect. We also observe that CSR expenditure contributes to firm performance irrespective of the level of actual CSR expenditure relative to the level of mandatory CSR expenditure. Our findings potentially reconcile conflicting results presented in the literature and provide valuable information for governments and regulatory authorities that are considering the mandatory implementation of CSR expenditure.

Analysis of CSR Legislation in Indonesia: Mandate to Business

Indonesia was one of the first countries in the world to implement legislation mandating businesses to undertake Corporate Social Responsibility (CSR). Different with other countries with their voluntary approach of CSR, the legislation makes CSR as a mandate to business in Indonesia. Through document analysis method, this study analyses six laws related to CSR in Indonesia to define the mandate of CSR legislation in order to understand the form of CSR should be practiced by companies operating in Indonesia. Indonesia as one of the developing countries may require sufficient fund for their local development. CSR may be seen as a source of fund for local development. Therefore, CSR legislation in the country provides mechanism for wealth or resource distribution of companies for local government to develop local communities.

Corporate Social Responsibility (CSR): An Emerging Opportunity or a Forced Liability

A significant number of studies have been conducted on Corporate Social Responsibility (CSR) and its impact on different business organizations. However, no such study has been witnessed so far that could explain the nature of the amount involved in the CSR spending. The main purpose of the study is to analyze the viewpoint of different organizations that how they consider this CSR spending. In a current scenario, organizations have failed to take responsibility for what they are operating, so it is needed to consider the real cost of their functioning which brings a focus toward the environmental and social concerns. On the other hand, CSR also became legitimate spending stipulated in the Indian companies act, 2013. According to the act, every business organization is a responsible player to build an equitable society and for that CSR should be a part of the DNA of every organization. Through this paper, we made an attempt to see the nature of CSR adopted by different organizations, whether it is voluntary or mandatory. We reviewed some survey reports made on CSR before and after the Indian companies act, 2013. These reports provide a perspective on CSR perceptions of different business organizations. For empirical analysis, we have analyzed 100 listed companies’ financial reports to know whether CSR mandate impact their performance or not. Using a difference-in-difference approach, we found that before the legitimation of CSR the performance found to be better than post CSR legislation. This paper is also an attempt to present a conceptual analysis of the CSR spending before and after its legitimation in India which will help us to determine whether it should be treated as an investment opportunity or a forced liability.

인도의 기업의 사회적 책임 (CSR) 법제화와 시사점

In 2013, India became the first country in the world to mandate Corporate Social Responsibility (CSR) spending as the new Companies Act of 2013 requires companies of a certain size to invest two-percent of net profits in social welfare activities. While philanthropic CSR efforts have been viewed as discretionary and voluntary engagements undertaken by corporations around the world, a new CSR model is emerging in India.BR This Article analyzes the emerging CSR regime in India and highlights key characteristics of the developing frameworks. It begins an overview of the new Companies Act of 2013, and corporate governance reform to understand backgrounds of CSR regime in India. It, then, reviews CSR requirements under section 135 of the Act. This Article raises questions about why India is moving towards mandatory philanthropic CSR and whether this regime could be a leading model to other countries. By reviewing lessons from Indian example of CSR implementation, it seeks to add to Korean legal debates over CSR regime. Finally, this Article suggests a legislative blueprint for establishing a foundation to effectively implement CSR in corporate jurisprudence.BR Unlike India, Korea does not have explicit CSR legislation in the corporate law context. But while there is no law directly mandating CSR in Korea, numerous regulations governing corporate activities already fulfill the function of implementing CSR. Such individual regulatory statutes, which require or encourage certain “results,” “actions/processes,” and “structures” of corporate activities for protecting various stakeholders in the economic, social, and environmental dimensions, would be an effective mechanism for implementing CSR.BR In this respect, the Indian 2013 Companies Act, which mandates two-percent company spending on CSR, is likely to suffer from a severely delimited consideration of CSR, i.e., as a philanthropic responsibility, if India fails to arrange a systematic legislative framework for improving CSR practice to protect society from corporate abuses. Becoming the first country to incorporate mandatory philanthropic CSR could burnish the image of India as a leader in improving CSR; but it could also isolate the country from the international consensus. Perhaps a more desirable route to becoming such a leader would involve establishing a systemic and effective legal framework considering sphere of influence in CSR with economic, environmental, and social dimensions, in line with a CSR-centric perspective, i.e., economic, legal, and ethical responsibilities before moving on mandating philanthropic CSR by a single regulation.

Globalization of Corporate Social Responsibility Focussing On Indian Markets.

In recent years, scholars and managers have devoted considerable attention to the strategic implications of corporate social responsibility (CSR). CSR can be defined as situations where the firm goes beyond compliance and acts to further some social good, beyond the interests of the firm and that which is required by law. CSR activities have been posited to include incorporating social characteristics or features into products and manufacturing processes (aerosol products with no fluorocarbons, environmentally-friendly technologies), adopting progressive human resource management practices (promoting employee empowerment), achieving higher levels of environmental performance through recycling and pollution abatement (reducing emissions), and advancing the goals of community organizations (working closely with groups such as United Way). In this context I have studied the theoretical aspect of CSR including the Global Reporting Initiative and CSR Legislation norms and globalization of CSR in the including India. I have also studied few specific cases of CSR activity and CSR violation in India.

CSR legislation in France and the European regulatory paradox: an analysis of EU CSR policy and sustainability reporting practice

PurposeThe aim of this paper is to investigate the corporate social responsibility (CSR) policy orientations in the Euopean Union (EU) by focusing on the specific case of the French legislation on compulsory sustainability reporting for publicly‐listed companies.Design/methodology/approachThe approach is mostly exploratory and based on secondary literature review as well as empirical classroom work on reporting.FindingsThis exploratory paper provides findings about the relevance of the French law, thus highlighting some critical aspects of sustainability reporting practices. It also raises the broader issue of the consistency of the European CSR approach.Research limitations/implicationsThis research needs to be completed by field studies on sustainability reporting practices both in France and in all EU members.Practical implicationsThis paper may help firms improve their sustainability reporting practices.Originality/valueThere have been hardly any papers on the impact of the French NRE law so far. Another original feature is the issue raised about the somewhat unclear links between environmental legislation and CSR policy in the EU. The paper provides a case for regulation in CSR, showing the possible positive impacts on corporate behavior.

Golden Expectations: Corporate Social Responsibility and Governance in South Africa's Mining Industry

South Africa has the strictest corporate social responsibility (CSR) legislation in Africa, requiring mining firms to comply with stringent requirements in order to secure and retain their mining licenses. This presentation explores how firms have responded to the complex network of governance initiatives that exist to encourage mining firms to engage with communities through CSR. However, mining companies operating in South Africa face three distinct challenges. The rise of a second mining union has caused unrest among mine workers; second, South African gold and platinum mines face low mine life expectancies; third, the commodity slump has left mining companies hurting with razor-thin profit margins and diminished capital expenditure opportunities. Yet despite these three challenges, firms continue to operate in the South African sphere and moreover, match and often exceed the CSR obligations demanded by the state to redress the inequalities of apartheid. This is a scholarly and policy-oriented puzzle, for if one imagines a corporation to be a rational, profit-seeking entity, then it would be natural for the company to meet the CSR legislation in order to retain their license to operate in South Africa, but it is unexpected that a firm would exceed it. Understanding this phenomenon forms the crux of this investigation and will facilitate a stronger understanding of how mining firms operating in South Africa have responded to the legislated CSR norms and the effect that they have had on both their governance strategies and their engagement/identities with the state and civil society. The presentation will also include the results of my interviews with stakeholders undertaken in South Africa between January and February 2016.