CSR and Sustainability – CS Professional Study Material

Chapter 16 CSR and Sustainability – CS Professional Governance, Risk Management, Compliances and Ethics Notes is designed strictly as per the latest syllabus and exam pattern.

CSR and Sustainability – Governance, Risk Management, Compliances and Ethics Study Material

Question 1.
Write short note on the following: (Dec 2012, 3 marks)
(i) ISO 26000.
Answer:
ISO 26000 is the international standard giving guidance on social responsibility and is intended for use by organizations of all types both public and private sectors, in developed and developing countries.

This International Standard is not a management system standard. It is not intended or appropriate for certification purposes or regulatory or contractual use. Its intent is to provide organizations with guidance concerning social responsibility and can be used as part of public policy activities.

Question 2.
Write short note on the following. (June 2013, 3 marks)
(i) CSR assessment.
Answer:
CSR Assessment:
CSR audit has yet to gain momentum but the concept aims to give an independent opinion by external auditor on the extent of alignment of CSR objectives with the business goals and level of managerial commitment and performance with regard to attainment of social responsibility objectives defined by the Company’s Board.

Question 3.
Write short note on the following: (Dec 2018, 3 marks each)
(a) Social Accountability International Standard.
(c) Brundtland Commission.
(d) Sustainability Reporting is an intrinsic element of Integrated Report. Elaborate.
Answer:
(a) Social Accountability international Standard
The SA8000 Standard is the leading social certification standard for factories and organizations across the globe.

This is one of the world’s first auditable social certification standard. It is based on ILO, UN and national law conventions, and adopts a management system approach in order to ensure that companies that adopt this approach also comply with it. This standard ensures the protection of basic human rights of workers.

The nine basic elements of this standard include

1. child labour
2. forced and compulsory labour
3. health and safety
4. freedom of association and the right to collective bargaining
5. discrimination
6. disciplinary practices
7. working hours
8. remuneration
9. management systems.

According to SAAS, there are 695 facilities in India that have been accredited.with this standard. Out of these, Aditya Birla Chemicals (India) Limited, Bhilai Steel Plant Steel Authority of India Limited, Birla tyres, Dr. Reddy’s Laboratories Limited and Reliance Infrastructure Limited figure prominently in the list of certified facilities within India.

(c) The Brundtland Commission, formally the World Commission on Environment and Development (WCED), known by the name of its Chairman Gro Harlem Brundtland, was convened by the United Nations in 1983. The Commission was created to address growing concern “about the accelerating deterioration of the human environment and natural resources and the consequences of that deterioration of economic and social development. “In establishing the Commission, the UN General Assembly recognized that environmental problems were global in nature and determined that it was in the common interest of all nations to establish policies for sustainable development. In establishing the Commission, the UN General Assembly recognized that environmental problems were global in nature and determined that it was in the common interest of all nations to establish policies for sustainable development.

(d) Sustainability reporting is an intrinsic element of integrated reporting. Sustainability reporting considers the relevance of sustainability to an organization and also addresses sustainability priorities and key topics, focusing on the impact of sustainability trends, risks and opportunities on the long term prospects and financial performance of the organization. Sustainability reporting is fundamental to an organization’s integrated thinking and reporting process in providing input into the organization’s identification of its material issues, its strategic objectives, and the assessment of its ability to achieve those objectives and create value over time.

Question 4.
Write the short notes on CSR Audit. (Aug 2021, 3 marks)
Answer:
To ensure that the Companies comply with the provisions of Section 135 of the Companies Act, 2013 and rule made thereunder and genuinely spend the CSR amount on the eligible welfare projects, it is imperative to improve governance and transparency in CSR sphere.
Akin to other areas of corporate activity requiring compliance, need for a dedicated independent professional has been felt in the area of social responsibility as well. In this regard, an independent CSR Audit/ Review and issue of CSR Audit / Review Report by the Company Secretaries in Practice shall not only give the existing CSR Mechanism much needed support and give necessary comfort to the Stakeholders, regulators and the society at large that the companies are complying with the legal requirements but will also give authentic information about utilization of CSR Fund by the Companies in specified CSR activities.

The Companies Act, 2013 does not contain any provision relating to CSR Audit. However, monitoring of CSR activities and its reporting is mandatory as per the Companies (Company Social Responsibility Policy) Rules 2014. Also, it is the responsibility of the Company through the CSR Committee to monitor the funds of the Company which are to be utilized as per the CSR Policy of the Company. So, Companies may voluntarily get an Audit conducted of its CSR initiatives and compliances.

Question 5.
Attempt the following: (Dec 2012, 5 marks)
Distinguish between ‘corporate sustainability’ and ‘corporate social responsibility’.
Answer:
Corporate Sustainability
Corporate sustainability indicates new philosophy as an alternative to the traditional growth and profit maximisation model under which sustainable development comprising environmental protection, social justice and equity and economic development are given more significant focus while recognizing simultaneously corporate growth and profitability.

Corporate Social Responsibility
As a corporate citizen every corporate is duty bound to its society wherein they operate and serve. Although there is no hard and fast rules, CSR activities need to be clubbed and integrated into the business model of the company.

Question 6.
Explain the following statement: (June 2014, 5 marks)
Distinguish between ‘corporate-social responsibility’ and ‘corporate sustainability’.

Question 7.
Distinguish between ‘carbon footprint’ and ‘carbon offsetting’. (Dec 2014, 5 marks)
Answer:
Carbon footprint:
A carbon footprint is an estimate of how much carbon is produced to support your lifestyle. Essentially, it measures your impact on the climate based on how much ^carbon you produce. Factors that contribute to your carbon footprint include travel methods and general home energy usage. Carbon footprints can also be applied on a larger scale, to companies, businesses, even countries. The word ‘carbon’ in the phrase ‘carbon footprint’ is often used as a short-cut to describe the main greenhouse gases – carbondioxide (CO₂), methane and nitrous oxide in terms of carbon dioxide equivalents.

Carbon offsetting:
Carbon offsets are used to reduce the amount of carbon that an individual or institution emits into the atmosphere. Carbon offsets work in a financial system where, instead of reducing its own carbon use, a company can comply with emissions caps by purchasing an offset from an independent organization. The organization will then use that money to fund a project that reduces carbon in the atmosphere. An individual can also engage with this system and similarly pay to offset his or her own personal carbon usage instead of, or in addition to, taking direct measures such as driving less or recycling.

Question 8.
“Within the broader concept of corporate social responsibility (CSR), the concept of triple bottom line (TBL) is gaining recognition.” Discuss the need to apply the concept of TBL. (June 2012, 5 marks)
Answer:
Within the broader concept of corporate social responsibility, the concept of Triple Bottom Line (TBL), is gaining significance and becoming popular amongst corporate.
The need to apply the concept of TBL includes:
(a) Increased consumer sensitivity to corporate social behaviour.
(b) Growing demands for transparency from shareholders/ stakeholders.
(c) Increased environmental regulation.
(d) Legal costs of compliance and default.
(e) Concern over global warming.
(f) Increased social awareness.
(g) Awareness about and willingness for. respecting human rights.
(h) Media’s attention to social issues.
(i) Growing corporate participation in social upliftment.

Question 9.
Attempt the following:
(i) Discuss the quantitative methods used to assess the sustainability. (June 2012, 5 marks)
(ii) Narrate briefly the relationship between corporate sustainability and corporate social responsibility. (June 2012, 5 marks)
Answer:
(i) Some of the quantitative methods used to assess sustainability are:
Life Cycle Assessment: Life cycle assessment tracks the environmental impacts of a product from its raw materials through disposal at the end of the useful life. LCA is an important tool for developing an environmental self-portrait and for finding ways to minimize harm.

Ecological Footprints: The ecological footprint is a measure of human demand on the Earth’s ecosystems. It represents the amount of biologically productive land and sea area needed to regenerate the resources a human population consumes and to absorb and render harmless the corresponding waste, given prevailing technology and resource management practice.

Environmental Performance index: Environmental performance Index (EPI) is a method of quantifying and numerically benchmarking the environmental performance of a country’s policies. This Index was developed from the Pilot Environmental performance Index, first published in 2002 and designed to supplement the environmental targets set forth in the U.N. Millennium Development Goals.

(ii) The Concept of Corporate Social Responsibility is different from that of Corporate sustainability. The first recognised contribution in the literature dates back to Bowen, who stressed the responsibilities of businesses and wrote that social responsibility refers to the obligations of businessmen to pursue those policies, to make those decisions or to follow lines of action which are desirable in terms of the objectives and values of our society.

Although Corporate Sustainability and Corporate Social Responsibility have different roots and have developed along diverse theoretical paths, they ultimately converged. This strong complementarities is evident in some recent definitions of corporate social responsibility provided by international organization like the prince of wales International Business Leaders Forum: corporate social responsibility means open and transparent business practices that are based on ethical values and respect for employees, communities and the environment. It is designed to deliver sustainable value to society at large, as well as shareholders.

Sustainable business success and shareholder value cannot be achieved solely through maximising short-term profits, but instead through market-oriented yet responsible behaviour.

The concept of sustainable development has been transposed frorrv the macro to the corporate dimension. According to management theory, the attempt to include sustainability issues in the managerial framework can be divided into two separate issues: Corporate Sustainability and Corporate Social Responsibility.

Question 10.
Discuss briefly the following:
(i) Corporate citizenship (Dec 2012, 3 marks)
Answer:
(i) Corporate citizenship is a commitment to improve community well-being through voluntary business practices and contribution of corporate resources leading to sustainable growth. It means moving from supply driven to more demand led strategies keeping in mind the welfare of all stakeholders, more participatory approaches to working with communities; balancing the economic cost and benefits with the social and finally dealing with processes rather than structures. The ultimate goal is to establish dynamic relationship between the community, business and philanthropic activities so as to complement and supplement each other.

Question 11.
Attempt the following:
(i) “Sustainable development is a broad concept that balances the need for economic growth with environmental protection and social equity.” Elucidate this statement. (Dec 2012, 5 marks)
Answer:
(i) Sustainable development is a broad concept that balances the need for economic growth with environmental protection and social equity. It 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. Sustainable development is a broad concept and it combines economics, social justice, environmental science and management, business management, politics and law.
Four acceptable fundamental principle of sustainable development are:

1. Principle of intergenerational equity: Need to preserve natural resources for future generation.
2. Principle of sustainable use: Use of natural resources in a prudent manner without or with minimum tolerable impact on nature.
3. Principle of equitable use or intergenerational equity: Use of natural resources by any state/country must take into account its impact on other states.
4. Principle of integration: Environmental aspect and impacts of socio-economic activities should be integrated so that prudent use of natural resources is ensured.

Attempt of the following:
(ii) Elaborate the key aspects on which companies are required to focus as a good corporate citizen. (June 2013, 5 marks)
Answer:
As a good corporate citizen, the companies are required to focus on the following key aspects:

• Absolute value creation for the society.
• Ethical corporate practices.
• Worth of earth through environmental protection.
• Equitable business practices.
• Corporate social responsibility.
• Innovate new technology/process/system to achieve eco-efficiency.
• Creating market of all.
• Switching over from stakeholder dialogue to holistic partnership.
• Compliance of statutes, rules and regulations, standards.

Question 12.
Explain the following statements: (Dec 2013, 5 marks each)
(i) Kyosei philosophy reflects a confluence of social, environmental, technological and political solutions.
(ii) ‘Sustainable development’ and ‘corporate sustainability’ are intermingled.
(iii) ‘Ecological footprint’ is a measure of human demand on the earth’s ecosystems.
Answer:
(i) Kyosei philosophy reflects a confluence of social, environmental, technological and political solutions. It believes that peace, prosperity and social and environmental improvement come through positive action.
It works in five stages:

1. Economic survival pf the company.
2. Cooperating with labour.
3. Cooperating outside the company.
4. Global activism, and
5. Making the governments a Kyosei partner.

(ii) Sustainable Development: As per the world commission on Environment and Developments “Sustainable Development is the development that meet the needs of the present without compromising the ability of future generations to meet their own needs”.
Corporate Sustainability: Corporate sustainability is a business approach that creates long-term consumer and employee value by not , only creating “a green strategy aimed towards the natural environment, but taking into consideration every dimension of how a business operates in the social, cultural and economic environment. Also formulating strategies to build a company that fosters longevity through transparency and proper employee development.

Looking above we can say that sustainable development and corporate sustainability are intermingled as per Elkington developed the concept of Triple Bottom Line which proposed that business goals were inseparable from the societies and environments within which they operate.

(iii) The ecological footprint is a measure of human demand on earth’s ecosystems. It represents the amount of biologically productive land and sea area needed to regenerate the resources a human population consumes and to absorb and render harmless the corresponding waste, given prevailing technology and resource management practice.

Question 13.
Discuss in brief the following:
(i) Tripple bottom line approach of corporate social responsibility [Old Syllabus] (June 2014, 3 marks)
Answer:
Triple Bottom Line Approach of CSR: Within the broader concept of corporate social responsibility, the concept of Triple Bottom Line (TBL) is gaining significance and becoming popular amongst corporates. Coined in 1997 by John Ellington, noted management consultant, the concept of TBL is based on the premise that business entities have more to do than make just profits for the owners of the capital, only bottom line people understand. “People, Planet and Profit” is used to succinctly describe the triple bottom lines. “People” (Human Capital) pertains to fair and beneficial business practices toward labour and the community and region in which a corporation conducts its business. “Planet” (Natural Capital) refers to sustainable environmental practices. It is the lasting economic impact the organization has on its economic environment. A TBL company endeavors to benefit the natural order as much as possible or at the least do no harm and curtails environmental impact. “Profit” is the bottom line shared by all commerce. Space to write important points for revision

Question 14.
(a) “Government regulations and public policy tend to bring the bare minimum involvement by the corporate towards their corporate responsibilities. Beyond this legal framework, initiatives by corporates should come-up voluntarily.” Elaborate.
(b) “Greenwashing is a form of corporate misrepresentation.” Explain. (June 2014, 5 marks each)
Answer:
(a) Government regulation and public policy tend to bring the bare minimum involvement by the corporates towards their corporate responsibilities beyond this legal framework should come up voluntarily:

The laws in India takes care of the basic CSR through various legislations under labour laws such as Factories Act, 1948, ESI Act, 1948, Employees Compensation Act, 1923, Contract Labour (Regulation and Abolition) Act, 1970, Equal Remuneration Act, 1976, The Minimum Wages Act, 1948, Employees’ Provident Fund and Miscellaneous Provisions Act, 1952, environment protection laws such as the Water (Prevention and Control of Pollution) Act, 1974, the Air (Prevention and Control of Pollution) Act, 1981 and the Environment Protection Act, 1986.

The main object of the Factories Act, 1948 is to ensure adequate safety measures and to promote the health and welfare of the workers employed in factories. The Act also makes provisions regarding employment of women and young persons (including children and adolescents), annual leave with wages etc.

The Employees’ State insurance Act, 1948 provides for certain benefits to employees in case of sickness, maternity and employment injury and also makes provisions for certain other matters in relation thereto.

The Employees Compensation Act, 1923 is a social security legislation. It imposes statutory liability upon an employer to discharge his moral obligation towards his employees when they suffer from physical disabilities and diseases during the course of employment in hazardous working conditions.

The Act also seeks to help the dependents of the workmen rendered destitute by the ‘accidents’ and from the hardship arising out from such accidents.
In 1972, the Department of Science and Technology set up a National Committee on Environmental Planning and Coordination to identify and investigate problems of preserving or improving the human environment and also to propose solutions for environmental problems. In 1977, by an amendment to the Constitution, Article 48A was introduced imposing a duty on the State to protect and improve the environment and safeguard the forests and wildlife of the country. Article 51A also, provides for the protection and improvement of the natural environment including fores’3, lakes, rivers and wild life and to have compassion for living creatures.

The Water (Prevention and Control of Pollution) Act was enacted in 1974 and the Air (Prevention and Control of Pollution) Act was passed by the Union of India in 1981.
In 1986, the Government enacted the Environment Protection Act to provide for the protection and improvement of environment and the prevention of hazards to human beings, other living creatures, plants and property.
However, over reliance on regulation can stifle corporate creativity and innovation.

Corporate citizenship is a commitment to improve community well being through voluntary business practices and contribution of corporate resources leading to sustainable growth. Corporate responsibility is achieved when a business adapts CSR well aligned to its business goals and meets or exceeds, the ethical, legal, commercial and public expectations that society has of business.

The term corporate citizenship implies the behaviour, which would maximize a company’s positive impact and minimize the negative impact on its social and physical environment. It means moving from supply driven to more demand led strategies, keeping in mind the welfare of all stakeholders, more participatory approaches to working with communities, balancing the economic cost and benefits with the social and finally dealing with processes rather than structures. The ultimate goal is to establish dynamic relationship between the community, business and philanthropic activities so as to complement and supplement each other.

(b) Green Washing
Green washing is a form of corporate misrepresentation where a company will present a green public image and publicize green initiatives that are false or misleading. A company might release misleading claims or even true green initiatives while privately engaging in environmentally damaging practices. Companies are trying to take advantage of the growing public concern and awareness for environmental issues by promoting an environmentally responsible image. Green washing is used by companies to win over investors (especially those interested in socially responsible investing), create competitive advantage in the market place and convince critics that the company is well intentioned. There is a profit driven motive to green washing as well green products are among the fastest growing segments in the market. Internationally, the increase in green advertising claims has become a cause for concern.

Question 15.
The Japanese concept of Kyosei reflects spirit of cooperation. Formulate a note on how to implement Kyosei in an organisation. (June 2014, 5 marks)
Answer:
Kyosei works in five stages
(a) First is economic survival of the company
(b) Second is cooperating with labour
(c) Third is cooperating outside the company
(d) Fojrth is global activism, and
(e) Fifth is making the government/s a Kyosei partner.

Question 16.
Discuss and elaborate the following:
(i) Corporate philanthropy. (Dec 2014, 3 marks)
Answer:
Philanthropy means the act of donating money, goods, time or effort to support a charitable cause with regard to a defined objective. Philanthropy can be equated with benevolence and charity for the poor and needy. Philanthropy can be any selfless giving towards any kind of social need that is not served, under served or perceived as unserved or under served. Philanthropy can be done by an individual or by a corporate.

Question 17.
Explain briefly the following:
CSR Standard – ISO 26000. (Dec 2014, 3 marks)
Answer:
CSR Standard – ISO 26000:
ISO 26000 is the international standard giving guidance on social responsibility and is intended for use by organizations of all types both public and private sectors, in developed and developing countries. It provides guidance on principles of social responsibility, the core subjects and issues pertaining to social responsibility and on ways to integrate socially responsible behaviour into existing organizational strategies, systems, practices and processes.

It intends 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. ISO 26000 is hot a management system standard. It is not intended or appropriate for certification purposes or regulatory or contractual use.

Question 18.
Discuss in brief the principles recommended in the National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business. (Dec 2014, 5 marks)
Answer:
National Voluntary Guidelines on Social, Environmental & Economic Responsibilities of Business:
The Ministry of Corporate Affairs had released Voluntary Guidelines on CSR in 2009 as the first step towards main streaming the concept of Business Responsibilities. Keeping in view the feedback from stakeholders, it was decided to revise the same with a more comprehensive set of guidelines that encompasses social, environmental and economical responsibilities of business. Accordingly, MCA issued a new set of National Voluntary Guidelines on Social, Environmental & Economic Responsibilities of Business in July 2011.

The Guidelines emphasize that businesses have to endeavor to become responsible actors in society, so that their every action leads to sustainable growth and economic development. Accordingly, the Guidelines use the terms ‘Responsible Business’ instead of Corporate Social Responsibility (CSR) as the term ‘Responsible Business’ encompasses the limited scope and understanding of the term CSR.
The Guidelines have been articulated in the form of nine (9) Principles with the Core Elements. A suggested approach for adopting these guidelines, the steps for building a strategy for responsible business as well as business responsibility reporting framework, have been prescribed under the Guidelines.

Question 19.
Attempt the following:
(i) “Since its incorporation, a corporate entity consistently endeavours to better and in long run eyes towards achieving excellence.” In the light of this statement, discuss the concept of corporate sustainability and explain how a corporate entity should venture to secure corporate sustainability. (Dec 2014, 5 marks)
Answer:
The word sustainable is derived from sustain or sustained. The synonyms of the word sustained as per the Collins Thesaurus include perpetual, prolonged, steady. Two phrases, i.e. Sustainable development and Corporate sustainability are intermingled. If we consider first one as a universal set, Corporate sustainability is one of the significant sub-set of such universalset.

Sustainable development is a broad concept that balances the need for economic growth with environmental protection and social equity. It 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. Sustainable development is a broad concept and it combines economics, social justice, environmental science and management, business management, politics and law.

It indicates development that meets the needs of the present generation without compromising the ability of the future generations to meet their needs. The principle behind it is to foster such development through technological and social activities which meets the needs of the current generations but at the same time ensures that needs of the future generation are not impaired. For example, natural energy resources like Coal, Petroleum etc., should be prudently used and wastage should be avoided so that future generation can have these energy resources for their survival also.

Question 20.
What are the areas a company should focus upon so as to be a good corporate citizen? (June 2015, 5 marks)
Answer:
As a good corporate citizen, the companies are required to focus on the following key aspects:

• Absolute Value Creation for the Society
• Ethical Corporate Practices
• Worth of Earth through Environmental Protection
• Equitable Business Practices
• Corporate Social Responsibility
• Innovate new technology/process/system to achieve eco-efficiency
• Creating Market for All
• Switching over from Stakeholders Dialogue to holistic Partnership
• Compliance of Statutes.

Question 21.
Mention any ten sustainability terminologies. (June 2015, 5 marks)
Answer:
Ten Sustainability Terminologies:
1. Carbon footprint:
A carbon footprint is an estimate of how much carbon is produced to support your lifestyle. Essentially, it measures your impact on the climate based on how much carbon you produce.

2. Carbon offsetting:
Carbon offsets are used to reduce the amount of carbon that an individual or institution emits into the atmosphere. Carbon offsets work in a financial system where, instead of reducing its own carbon use, a company can comply with emissions caps by purchasing an offset from an independent organization.

3. Carbon Neutral:
Through carbon offsetting organisation to individual are counterbalancing the emissions they produce to make themselves carbon neutral.

4. Cradle to grave:
The life of a product, from creation to end use.

5. Cradle to cradle:
Using an end use product for the source of a new product.

6. Energy Star:
Energy Star is a program that evaluates the energy efficiency Of appliances, house fixtures and other home utilities.

7. Ethical consumerism:
The purchasing of products that do not harm or exploit the workers that f help produce a product and to minimise the impact on the environment.

8. EUI:
EUI, or energy use intensity, is a unit of measurement that describes a building’s energy use. EUI represents the energy consumed by a s building relative to its size.

9. Greenhouse effect:
Gases produced naturally and by human activities that have contributed to the warming of the planet, known as Global warming, by trapping the suns rays.

10. Life Cycle Assessment:
Life Cycle Assessment tracks the environmental impacts of a product from its raw materials through disposal at the end of its useful life. LCA is an important tool for developing an environmental self-portrait and for finding ways to minimize harm.

Question 22.
“Sustainability is an emerging mega trend and is a measure of gpod Corporate Governance.” Explain. (June 2015, 5 marks)
Answer:
Sustainability is an emerging mega trend and is a measure of good corporate governance. Over the years, environmental issues have steadily encroached on businesses’ capacity to create value for customers, shareholders, and other stakeholders. Globalized workforces and supply chains have created environmental pressures and attendant business liabilities. The rise of new world powers has intensified competition for natural resources (especially oil) and added a geopolitical dimension to sustainability. “Externalities” such as carbon dioxide emissions and water use are fast becoming material-meaning that investors consider them central to a firm’s performance and stakeholders expect companies to share information about them.

These forces are magnified by escalating public and governmental concern about climate change, industrial pollution, food safety, and natural resource depletion, among other issues. Consumers in many countries are seeking out sustainable products and services or leaning on companies to improve the sustainability of traditional ones.

Question 23.
Explain the following:
CSR Standard – ISO 26000. (Dec 2015, 5 marks)
Answer:
ISO 26000 is the international standard giving guidance on social responsibility and is intended for use by organizations of all types both public and private sectors, in developed and developing countries. It provides guidance on principles of social responsibility, the core subjects and issues pertaining to social responsibility and on ways to integrate socially responsible behaviour into existing organizational strategies, systems, practices and processes.

It intends to assist organizations in contributing to sustainable development. It is intended to encourage them to do 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.

Question 24.
(i) Justify why ‘corporate sustainability’ and ‘corporate social responsibility’ have different background and different theoretical path although scholars and practitioners often interpret corporate sustainability and corporate social responsibility as being nearly synonymous.
(ii) Every company is required to constitute a CSR Committee under the Companies Act, 2013. Do you agree? Explain with the relevant provisions of the law. (Dec 2015, 5 marks each)
Answer:
(i) Although Corporate Sustainability and Corporate Social Responsibility gave different roots and gave developed along diverse theoretical paths, they ultimately converged. This strong complimentary is evident in some recent definitions of Corporate Social Responsibility provided by international organizations like the prince of Wales International Business Leaders Forum: Corporate Social Responsibility means open and transparent business practices that are based on ethical values and respect for employees, communities and the environment. It is designed to deliver sustainable value to society at large, as well as to shareholders.

The concept of sustainable development has been transposed from the macro to the corporate dimension. Companies, in fact, are a productive resource of our socio-economic system and key to the eventual implementation of sustainability. According to management theory, the attempt to include sustainability issues in the managerial framework can be divided into two separate issues: Corporate Sustainability and Corporate Social Responsibility. The actualization of the theoretical pillars of SD (Sustainability Development) within Corporate Sustainability/Corporate Social Responsibility seems crucial to effectively respond to the challenges posed by sustainability.

(iii) Corporate Social Responsibility [Section 135 – Companies Act, 2013]
Every Company having net worth of ₹ 500 crores or more, or turnover of ₹ 1,000 crores or more or a net profit of ₹ 5 crores or more during the immediately preceding financial year shall constitute a Corporate Social Responsibility Committee of the Board consisting of 3 or more directors, out of which atleast one director shall be an independent director.

Question 25.
“Corporate Boards are also involved in women empowerment.” Comment. (June 2016, 5 marks)
Answer: ‘
The corporate boards are involved in promoting women empowerment. Woman directors can play a significant role in board room quality decision making. The Companies Act, 2013 has taken a positive step in this direction by providing for mandatory appointment of women director on corporate boards. Section 149(1) of the Companies Act, 2013 provides that certain classes of companies must have .least one woman director. Rule 3 of the Companies (Appointment and Qualification of Directors) Rules, 2014 specifies following classes of Companies:

• every listed company
• other public companies having a paid-up share capital of ₹ 100 crore or more or turnover of ₹ 300 crore or more.

Regulation 17(1) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 provides that the composition of board shall have an optimum combination of executive and non-executive directors with at least one woman director. Moreover, the Companies Act, 2013 has also made it mandatory for companies to include activities related to woman empowerment and gender equality in its CSR activities. Thus, India Inc has woken up to the need of taking women seriously in board rooms.

Question 26.
Discuss briefly the Department of Public Enterprises Guidelines on Corporate Social Responsibility and Sustainability for Central Public Sector Enterprises. (June 2016, 5 marks)
Answer:
DPE Guidelines on CSR and Sustainability for CPSEs:
The CSR provisions of the Act, Schedule VII of the Act, and the CSR Rules are inviolable. However, in addition to the CSR provisions of the Act and the CSR Rules, the Department of Public Enterprises (DPE) has formulated Guidelines on CSR and Sustainability (hereinafter referred to as the Guidelines’) which are applicable to CPSEs. It is clarified that the Guidelines do not supersede or override any provision of the Act, or Schedule VII of the Act, or the CSR Rules, but will only supplement them. The Guidelines are in the nature of initiatives or endeavour which the key stakeholders expect of CPSEs in the discharge of their Corporate Social Responsibility. Any possible situation in which there may be a conflict between the CSR Rules and the Guidelines, is not envisaged. However, it is clarified that in case of any perceived conflict between the CSR Rules and the Guidelines, the former shall prevail in all circumstances.

The term Sustainability has been used in conjunction with CSR in the title of DPE Guidelines because CSR activities which are envisaged in the Act and in the CSR Rules can be supplemented with sustainability initiatives as both aim at achieving sustainable development goals. In the Guidelines the need for taking sustainability initiatives is emphasised in addition to the requirement of mandatory compliance with the CSR Rules. The Guidelines are aimed at providing an overarching framework of Sustainability within which CSR is firmly embedded. Therefore, CPSEs are advised to read the CSR Rules together with the Guidelines to clearly understand what is expected of them by the stakeholders.

The Act enjoins all companies to have a CSR policy, and the information which needs to be furnished in the CSR policy is specified in the CSR Rules. There is to be no deviation from the mandatory provisions of the Act and the CSR Rules in this regard. However, the CSR policy document of a CPSE should also include a vision and mission statement of how the CPSE proposes to comply with the Guidelines. The broad sustainability initiatives w„hich a CPSE intends to undertake should also find mention therein. Sir.ce CSR and Sustainability issues are complementary in nature, and both are to be mentioned in the policy document, it is suggested that it may be referred to as ‘CSR and Sustainability’ policy. The change in nomenclature of the policy document and its information expanse would not in any way detract from the CPSE’s commitment to CSR, or dilute its content. Rather, it would only indicate the willingness of the CPSE to voluntarily take a few extra steps to address social, economic and environmental concerns, which may be beyond the realm of CSR as envisaged in the Act and the CSR Rules, but are nevertheless worthy of attention for promotion of sustainable development in its diverse dimensions.

Question 27.
“Greenwashing is an evil practice amongst the corporates.” Comment. (June 2016, 5 marks)

Question 28.
The Triple Bottom Line is made up of social, economic and environmental aspects and indicated by the phrase ‘people, planet and profit’. Elucidate. (June 2016, 5 marks)
Answer:
The Triple Bottom Line is made up of “Social, Economic and Environmental” aspect and is indicated by the “People, Planet, Profit” phrase.
“People” means Human Capital. It implies that fair and beneficial business practices towards labour and the community and region in which a corporation conducts its business would create long-term value. Well being of a corporate, its labour and other stakeholder interests are interdependent. “Planet” means the Natural Capital. It refers to sustainable environmental practices. A company which decides to follow TBL always keep in mind that it does no harm to nature or creates negative environmental impact.

A TBL company, as a corporate policy, debars itself from manufacturing harmful or destructive products, such as weaDons, and those toxic chemicals etc. that are injurious to society as well as nature. Even if they are involved in such activities they ensure to protect nature as well as human society from its hazardous process and the products.

“Profit” means the reflection of economic impact an organization has on its business activities and that too after meeting all costs that would protect society and environment, ii somehow indicates real value addition a corporate makes through its various activities. Space to write important points for revision

Question 29.
(a) “The term Corporate Social Responsibility refers to the concept of business being accountable for how it manages’the impact of its processes on stakeholders and takes responsibility for producing a positive effect on society”. What are the factors influencing corporate social responsibility?
(b) “Sustainable development is a broad concept that balances the need for economic growth with environmental protection and social equity”. Define sustainable development and its principles. (Dec 2016, 5 marks each)
Answer:
(a) Factors Influencing CSR
Many factors and influences, including the following, have led to
increasing attention being devoted to CSR:

• Globalization.
• Governments and intergovernmental bodies, such as the United Nations, the Organisation for Economic Co-operation and Development and the International Labour Organization have developed compacts, declarations, guidelines, principles and other instruments that outline social norms for acceptable conduct.
• Advances in communications technology, such as the Internet, cellular phones and personal digital assistants, are making it easier to track corporate activities and disseminate information about them.
• Consumers and investors are showing increasing interest in supporting responsible business practices and are demanding more information on how companies are addressing risks and opportunities related to social and environmental issues.
• Numerous serious and high-profile breaches of corporate ethics have contributed to elevated public mistrust of corporations and highlighted the need for improved corporate governance, transparency, accountability and ethical standards.
• Citizens in many countries are making it clear that corporations should meet standards of social and environmental care, no matter where they operate.
• There is increasing awareness of the limits of government legislative and regulatory initiatives to effectively capture all the issues that corporate social responsibility addresses.
• Businesses are recognizing that adopting an effective approach to CSR can reduce risk of business disruptions, open up new opportunities, and enhance brand and company reputation.

Question 30.
Answer the following:
(a) Why CSR at all?
(b) What are different stages of KYOSEI? (Dec 2016, 5 marks each)
Answer:
(a) Business cannot exist in isolation; business cannot be oblivious to societal development. The social responsibility of business can be integrated into the business purpose so as to build a positive synergy between the two.

• CSR creates a favourable public image, which attracts customers,
• Corporate Social Responsibility (CSR) activities have its advantages. It builds up a positive image encouraging social involvement of employees, which in turn develops a sense of loyalty towards the organization, helping in creating a dedicated workforce proud of its company.
• The company’s social involvement discourages excessive regulation or intervention from the Government or statutory bodies, and hence gives greater freedom and flexibility in decision-making.
• The internal activities of the organisation have an impact on the external environment, since the society is an inter-dependent system.
• A business organisation has a great deal of power and money, entrusted upon it by the society and should be accompanied by an equal amount of responsibility.
• Companies can better address the grievances of its employees and create employment opportunities for the unemployed.
• Financial institutions are increasingly incorporating social and environmental criteria into their assessment of projects. When making decisions about where to place their money, investors are looking for indicators of effective CSR management.

Question 31.
(a) ‘The Concept of Kyosei is actually integrating business, government and the society and finally aiming at transnational approach.” Can such objective be attained? Explaining the concept of Kyosei justify your answer.
(b) Discuss the core principles of National Voluntary Guidelines on Social, Environmental and Economic responsibility of business (June 2017, 5 marks each)
Answer:
(a) A concise definition of this word would be “living and working together for the common good,” but for some, the definition is broader: “All people, regardless of race, religion or culture, harmoniously living and working together into the future.” Kyosei is a Japanese technique meaning “a spirit of cooperation”.

Kyosei philosophy reflects a confluence of social, environmental, technological and political solutions. It believes that peace, prosperity and social and environmental improvement come through positive action.

(b) Core Principles of National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business are given below:
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: Businesses 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.

Question 32.
Discuss in brief the following:
(b) Government Role in improving Sustainability.
(c) Functions of CSR Committee.
(d) Carbon footprint vis-a-vis Ecological footprint. (June 2017, 3 marks each)
Answer:
(a) Government’s Role in improving Sustainability
Governments are interceding with unprecedented levels of new regulations, like SEBI mandated Business Responsibility Reporting in India for top listed companies besides the voluntary reporting for others, Integrated Reporting in South Africa and many other jurisdictions are placing similar requirement on companies to report about the sustainability aspects in addition to financial information.

In 2011, Ministry of Corporate Affairs (MCA), Govt, of India issued the first voluntary reporting framework for reporting on Business Responsibility in the form of ‘National Voluntary Guidelines (NVG) on Social, Environmental and Economic Responsibilities of Business’. SEBI considering the framework given under the NVG guidelines, inserted clause 55 to the listing agreement to give mandate to top 100 listed companies to adopt the Business Responsibility Framework. The other listed companies are encouraged to adopt the Business Responsibility Reporting voluntarily. The similar regulators initiatives are required in other jurisdiction also to encourage the companies to adopt the Reporting on Sustainability aspects. Over the past 10 years, environmental issues have steadily encroached on businesses’ capacity to create value for customers.

(c) Functions of CSR Committee
The purpose of the Corporate Social Responsibility Committee (the “Committee”) of the Board of Directors (the “Board”) of Infosys Limited (the “Company”) shall be to assist the Board and the Company in fulfilling its corporate social responsibility (“CSR”). The Committee has overall responsibility for:

• identifying the areas of CSR activities;
• recommending the amount of expenditure to be incurred on the identified CSR activities;
• implementing and monitoring the CSR policy from time to time; and
• coordinating with Infosys Foundation or such other agency in implementing programs and executing initiatives as per CSR policy of the Company.

The purpose and responsibilities of the Committee shall include such other items/matters prescribed under applicable law or prescribed by the Board in compliance with applicable law from time to time.
The Committee is also responsible for reporting progress of various initiatives and in making appropriate disclosures on a periodic basis.

(c) A carbon footprint is an estimate of how much carbon is produced to support your lifestyle. Essentially, it measures your impact on the climate based on how much carbon you produce. Factors that contribute to your carbon footprint include travel methods and general home energy usage. Carbon footprints can also be applied on a larger scale to companies, businesses and even countries.

The ecological footprint is a measure of human demand on the earth’s ecosystems. It compares human demand with planet earth’s ecological capacity to regenerate it. It represents the amount of biologically productive land and sea area needed to regenerate the resources a human population consumes and to absorb and render the corresponding waste harmless, given prevailing technology and resource management practices.

Question 33.
(a) “Modern business organizations are; giving higher attention on discharging their social responsibilities.” Elaborate and discuss the factors which led to increasing attention being devoted to’CSR by these organizations.
(b) Why sustainability is considered an imperative in the present age? (Dec 2017, 5 marks each)
Answer:
(a) Many factors and influences, including the following, have led to increasing attention being devoted to CSR:
→ Globalization – coupled with focus on cross-border trade, multinational enterprises and global supply chains—is increasingly
raising CSR concerns related to human resource management practices, environmental protection, and health and safety, among other things.

→ Governments and intergovernmental bodies, such as the United Nations, the Organisation for Economic Co-operation and Development and the International Labour Organization have developed compacts, declarations, guidelines, principles and other instruments that outline social norms for acceptable conduct.

→ Advances in communications technology, such as the Internet, cellular phones and personal digital assistants, are making it easier to track corporate activities and disseminate information about them. Non-governmental organizations now regularly draw attention through their websites to business practices they view as problematic.

→ Consumers and investors are showing increasing interest in supporting responsible business practices and are demanding more information on how companies are addressing risks and opportunities related to social and environmental issues.

→ Numerous serious and high-profile breaches of corporate ethics have contributed to elevated public mistrust of corporations and highlighted the need for improved corporate governance, transparency, accountability and ethical standards.

→ Citizens in many countries are making it clear that corporations should meet standards of social and environmental care, no matter where they operate.

→ There is increasing awareness of the limits of government legislative and regulatory initiatives to effectively capture all the issues that corporate social responsibility addresses.

→ Businesses are recognizing that adopting an effective approach to CSR can reduce risk of business disruptions, open up new opportunities, and enhance brand and company reputation.

(b) Sustainability is an emerging megatrend and is a measure of good corporate governance. Over the years, environmental issues have giddily encroached on businesses’ capacity to create value for the customers, shareholders, and other stakeholders. Globalized workforces and supply chains have created environmental pressures and attendant business liabilities. The rise of new world powers has intensified competition for natural resources (especially oil) and added a geopolitical dimension to sustainability. “Externalities”, such as carbon dioxide emissions and water use are fast becoming materials meaning that investors consider them central to a firm’s performance and stakeholders expect companies to share information about them.

These forces are magnified by escalating public and governmental concern about climate change, industrial pollution, food safety, and natural resource depletion, among other issues. Consumers in many countries are seeking out sustainable products and services or leaning on companies to improve the sustainability of traditional ones.
Further fueling this megatrend, thousands of companies are placing strategic bets on innovation in energy efficiency, renewable power, resource productivity, and pollution control. In the end, it can be concluded that the top management of an orgnisation can no longer afford to ignore sustainability as a central factor in their companies’ long-term competitiveness.

Question 34.
Discuss the following:
(a) Triple Bottom Line Approach of CSR.
(b) Carbon Offsetting. , (Dec 2017, 3 marks each)
Answer:
(a) Triple Bottom Line Approach of CSR
Within the broader concept of corporate social responsibility, the concept of Triple Bottom Une (TBL) is gaining significance and becoming popular amongst corporates. Coined in 1997 by John Ellington, noted management consultant, the concept of TBL is based on the premise that business entities have more to do than make just profits for the owners of the capital, only bottom line people understand. “People, Pianet and Profit” is used to succinctly describe the’triple bottom lines. ‘People” (Human Capital) pertains to fair and beneficial business practices toward labor and thd community and region in which a corporation conducts its business. “Planet” (Natural Capital) refers to sustainable environmental practices. It is the lasting economic impact the organization has on its economic environment A TBL company endeavors to benefit the natural order as much as possible or at the least do no harm and curtails environmental impact. “Profit” is the bottom line shared by all commerce.

(c) Carbon offsets are used to reduce the amount of carbon that an individual or institution emits into the atmosphere. Carbon offsets work in a financial system where, instead of reducing its own carbon use, a company can comply with emissions caps by purchasing an offset from an independent organization. The organization wifi then use that money to fund a project that would reduce carbon in the atmosphere. An individual can also engage himself with this system, and similarfy pay to offset his or her own personal carbon usage, instead of or in addition to, taking direct measures such as driving less or recycling.

Question 35.
(i) Discuss fundamentals principles of sustainable development.
(ii) Green Washing. (Dec 2017, 3 marks each)
Answer:
(i) Fundamental Principle of Sustainable Development agreed by the world community are:

• Principle of Intergenerational equity: Need to preserve natural resources for the future generations.
• Principle of sustainable use: Use of natural resources in a prudent manner without or with minimum tolerable impact on nature.
• Principle of equitable use or intergenerational equity: Use of natural resources by any state/country must take into account its impact on other states.
• Principle of integration: Environmental aspects and impacts of socio-economic activities should be integrated so that prudent use of natural resources is ensured.

(ii) Green washing is a form of corporate misrepresentation where a company will present a green public Image and publicize green initiatives that are false or misleading. A company might release misleading claims or even true green initiatives while privately engaging in environmentally damaging practices. Companies are trying to take advantage of the growing public concern and awareness for environmental issues by promoting an environmentally responsible image. Green washing is used by companies to win over investors (especially those interested in socially responsible investing), create competitive advantage in the marketplace, and convince critics that the company is well-intentioned. There is a profit-driven motive to green washing as well green products are among the fastest growing segments in the market. Internationally, the increase in green advertising claims has become a cause for concern.

Question 36.
(a) What is sustainable development? Discuss principles of sustainable development agreedjupon by the world community: (June 2018, 5 marks)
(b) “Business cannot exist in isolation; it cannot be oblivious to Societal Development.” Elaborate this statement (2018, 5 marks)
Answer:
(a) Sustainable development is a broad concept that balances the need for economic growth with environmental protection and social equity. It is a process of change in which the exploitation of resources, me 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. Sustainable development is a broad concept and it combines economics, social justice, environmental science and management, business management, politics and law.
Four fundamental Principle of Sustainable Development agreed by the world community are:

1. Principle of Inter generational equity: Need to preserve natural resources for the future generations.
2. Principle of sustainable use: Use of natural resources in a prudent manner without or with minimum tolerable impact on nature.
3. Principle of equitable use or intergenerational equity: Use of natural resources by any state/country must take into account its impact on other states.
4. Principle of integration: Environmental aspects and impacts of socio-economic activities should be integrated so that prudent use of natural resources is ensured.

(b) Business cannot exist in isolation; business cannot be oblivious to societal development. The social responsibility of business can be integrated into the business purpose so as to build a positive synergy between the two.
1. CSR creates a favourable public image, which attracts customers.

2. Corporate Social Responsibility (CSR) activities have its advantages.

3. Society gains through better neighborhoods and employment opportunities, while the organization benefits from a better community, which is the main source of its workforce and the consumer of its products.

4. Public needs have changed leading to changed expectations from consumers.

5. The company’s social involvement discourages excessive regulation or intervention from the Government or statutory bodies, and hence gives greater freedom and flexibility in decision-making.

6. The internal activities of the organisation have an impact on the external environment, since the society is an inter-dependent system.

7. A business organisation has a great deal of power and money, entrusted upon it by the society and should be accompanied by an equal amount of responsibility.

8. The good public image secured by one organisation by their social responsiveness encourages other organizations in the neighborhood or in the professional group to adapt themselves to achieve their social responsiveness.

9. The atmosphere of social responsiveness encourages co-operative attitude between groups of companies.

10. Companies can better address the grievances of its employees and create employment opportunities for the unemployed.

11. A company with its “ear to the ground” through regular stakeholder dialogue is in a better position to anticipate and respond to regulatory, economic, social and environmental changes that may occur.

12. Financial institutions are increasingly incorporating social and environmental criteria into their assessment of projects.

13. In a number of jurisdictions, governments have expedited approval processes for firms that have undertaken social and environmental activities beyond those required by regulation.

Question 37.
Discuss in brief the following:
(a) Life Cycle Assessment.
(b) Global Compact Self-Assessment Tool. (June 2018, 3 marks each)
Answer:
(a) Life Cycle Assessment (LCA)
Life Cycle Assessment tracks the environment impacts of a product from its raw materials through disposal at the end of its useful life. LCA is an important tool for developing an environmental self-portrait and for finding ways to minimize harm. A good LCA can shed light on ways to reduce the resources consumed and lower costs all along the value chain.

A Life Cycle Assessment looks at this complete circle and measures environmental impact at every phase. It provides the foundation for understanding the issues a company must address and clues to help find Eco-Advantage.

(b) The Global Compact Self Assessment Tool is an easy-to-use guide designed for use by companies of all sizes and across sectors committed to upholding the social and environmental standards within their respective operations. The tool consists of 45 questions with a set of three to nine indicators for each question. It consists of a ‘management section’ and four other sections, including human rights, labour, environment and anti-corruption that relate to the principles of the UN Global Compact. The tool is in line with the UN Guiding Principles on Business and Human Rights. For a small company, this tool acts as a measure of the company’s performance in all areas of the UN Global Compact and how well these issues are managed.

Question 38.
(i) The Ministry of Corporate Affairs issued the Corporate Governance Social Responsibility Voluntary Guidelines 2009, which emphasize that every business should design and formulate a CSR policy to guide the strategic planning and a roadmap for its CSR initiatives. Outline the core elements of CSR policy. (2018, 5 marks)
(ii) “Tata steel’s Vision strikes a balance between economic value as well as ecological and societal value”. Comment. (June 2018, 5 marks)
Answer:
(i) The CSR Policy should normally cover following core elements:

• Care for all Stakeholders
• Ethical functioning
• Respect for Workers’ Rights and Welfare
• Respect for Human Rights
• Respect for Environment
• Activities for Social and Inclusive Development

(ii) Yes, Tata Steel’s Vision strikes a balance between economic value as well as ecological and societal value by aspiring to be “a Global Benchmark in Value Creation and Corporate Citizenship”. In the initial years, Tata Steel’s CSR interventions were more as a ‘provider’ to society where the community was given support for its overall needs, both for sustenance and development. Gradually, the shift in approach led to Tata Steel being an ‘enabler’ focusing on building community capacity through training programmes; focusing on providing technical support rather than giving aid. At present, CSR interventions of Tata Steel focus on ‘sustainable development’ to enhance the quality of life of people. It guides the Company in its race to excel in all areas of sustainability.

Guided by this mandate, Tata Steel has for decades uses its skills and resources, to the extent it can reasonably afford, to give back to the community a fair share of the product of its efforts.
Tata Steel’s approach to business has evolved from the concept that the wealth created must be continuously returned to society. The responsibility of combining the three elements of society – social, environmental, and economic is of utmost importance to the way of life at Tata Steel. Today, Tata Steel’s CSR activities in India encompass the Company’s Steel Works, Iron ore mines and collieries, reaching out to the city of Jamshedpur, its peri-urban areas and over 800 villages in the states of Jharkhand, Odisha and Chhattisgarh.

Community involvement is a characteristic of all Tata Steel Group companies around the world. It can take the form of financial support, provision of materials and the involvement of time, skills and enthusiasm of employees. The Group contributes to a very wide range of social, cultural, educational, sporting, charitable and emergency assistance programmes.

Question 39.
(a) You have been recently appointed as a Company Secretary of a large company which has incurred expenditures on various CSR activities during the year. Advise the Board about the particulars to be ensured in Annual Report for disclosureson Corporate Social Responsibility (CSR) under Companies Act, 2013 by the Board. (2018, 5 marks)
Answer:
The companies which are required to constitute a CSR Committee as per Section 135 of the Companies Act, 2013 shall disclose the composition of CSR Committee in its Board Report. It is mandatory for such companies to disclose in Board’s Report, an annual report on CSR. The report of the Board of Directors attached to the financial statements of the Company would also need to include an annual report on the CSR activities of the company. The Company Secretary will advise the Board about the format prescribed for annual report on the CSR containing following particulars:

• 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 or programs.
• The composition of the CSR Committee.
• Average net profit of the company for last three financial years.
• Prescribed CSR Expenditure.
• Details of expenditure incurred on CSR activities during the financial year.
• In case the company has failed to spend the two percent of the average net profit of the last three financial years or any part thereof, the company shall provide the reasons for not spending the amount in its Board report.
• A responsibility statement of the CSR Committee that the implementation and monitoring of CSR Policy, compliance with CSR objectives and Policy of the company.

Question 40.
What do you know about UN Global Compact? Give brief I Introduction and mention Principles as pronounced by the Compact. (Dec 2018, 5 marks)
Answer:
The UN Global Compact is a strategic policy initiative for businesses that are committed to aligning their operations and strategies with ten universally accepted principles in the areas of human rights, labour, environment and, anti-corruption.

The UN Global Compact’s Ten Principles are derived from the Universal Declaration of Human Rights, the International Labour Organization’s Declaration on Fundamental Principles and Rights at Work, the Rio Declaration on Environment and Development, and the United Nations Convention Against Corruption. These Principles are:

Human Rights:
Principle 1: Businesses should support and respect the protection of internationally proclaimed human rights; and
Principle 2: make sure that they are not complicit in human rights abuses. 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;
Principle 5: the effective abolition of child labour; and
Principle 6: the elimination of discrimination in respect of employment and occupation.

Environment
Principle 1: Businesses should support a precautionary approach to environmental challenges;
Principle 2: undertake initiatives to promote greater environmental responsibility; and
Principle 3: encourage the development and diffusion of environmentally friendly technologies.
Anti-corruption
Principle 4: Businesses should work against corruption in all its forms, including extortion and bribery.
Principles to be clubbed under the following headings.

Question 41.
“Social, environmental and economical issues are fundamental to corporate to sustain in long run”. In view of this statement, define Corporate Sustainability and describe key aspects, companies as a corporate citizen, should focus. (Dec 2018, 5 marks)
Answer:
The contribution of sustainable development to corporate sustainability is twofold:

• First, it helps in setting out the areas that companies should focus on i.e., environmental, social, and economic performance.
• Secondly, it provides a common societal goal for corporations, governments, and civil society to work towards ecological, social, and economic sustainability.

However, sustainable development by itself does not provide the necessary arguments for why companies should care about these issues. Those arguments come from corporate social responsibility and stakeholders theory.

Corporate sustainability is a business approach that creates long-term shareholder value by embracing opportunities and managing risks deriving from economic, environmental and social developments. Corporate sustainability describes business practices built around social and environmental considerations.

Corporate sustainability encompasses strategies and practices that aim to meet the needs of the stakeholders today while seeking to protect, support and enhance the human and natural resources that will be the need of the future.
As a good corporate citizen, the companies are required to focus on the following key aspects: .

• Absolute Value Creation for the Society.
• Ethical Corporate Practices.
• Worth of the Earth through Environmental Protection.
• Equitable Business Practices.
• Corporate Social Responsibility.
• Innovate new technology/process/system to achieve eco-efficiency.
• Creating Market for All.
• Switching over from the Stakeholders Dialogue to holistic Partnership.
• Compliance of Statutes.

Question 42.
What is Paris Agreement? Discuss. (Dec 2018, 5 marks)
Answer:
The Paris Agreement builds upon the Convention and for the first time brings all nations into a common cause to undertake ambitious efforts to combat climate change and adapt to its effects, with enhanced support to assist developing countries to do so. As such, it charts a new course in the global climate effort.

The Paris Agreement’s central aim is to strengthen the global response to the threat of climate change by keeping a global temperature rise this century well below 2 degrees Celsius above pre-industrial levels and to pursue efforts to limit the temperature increase even further to 1.5 degrees Celsius. Additionally, the agreement aims to strengthen the ability of countries to deal with the impacts of climate change.

To reach these ambitious goals, appropriate financial flows, a new technology framework and an enhanced capacity building framework will be put in place, thus supporting action by developing countries and the most vulnerable countries, in line with their own national objectives. The Agreement also provides for enhanced transparency of action and support through a more robust transparency framework.

Question 43.
“Businesses should support inclusive growth and equitable development”. Mention core elements of this principle of National Voluntary Guidelines on Social, Environment and Economic Responsibilities of Business 2011. (Dec 2018, 5 marks)
Answer:
The Principle “Businesses should support inclusive growth and equitable development” is recommended by the National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business Guidelines. The principle recognizes the value of the energy and enterprise of businesses and encourages them to innovate and contribute to the overall development of the country, especially to that of the disadvantaged, vulnerable and marginalised sections of society.

The principle also emphasizes the need for collaboration amongst businesses, government agencies and civil society in furthering this development agenda.

The principle reiterates that business prosperity and inclusive growth and equitable development are interdependent.
The core elements of this Principle are:

• Businesses should understand their impact on social and economic development, and respond through appropriate action to minimise the negative impacts.
• Businesses should innovate and invest in products, technologies and processes that promote the well being of society.
• Businesses should make efforts to complement and support the development priorities at local and national levels, and assure appropriate resettlement and rehabilitation of communities who have been displaced owing to their business operation.
• Businesses operating in regions that are underdeveloped should be specially sensitive to local concerns.

Question 44.
What is the measure of liability of an enterprise which is engaged in a hazardous or inherently dangerous industry, where by any chance an accident occurs, persons die or get injured? Answer with reference to the Oleum Gas leak case by narrating in brief the issues raised by the petitioner and important Judgements pronounced by the Apex court. (Dec 2018, 5 marks.)
Answer:
The Oleum Gas Leak case came into limelight after it got originated in a writ petition filed in the Supreme Court by the environmentalist and lawyer M. C. Mehta, as a public interest litigation.

The petition raised some seminal questions concerning the Articles 21 and 132 of the Constitution, the principles and norms for determining the liability of large enterprises engaged in manufacture and sale of hazardous r products, the basis on which damage in case of such liability should be uantified, and whether such large enterprises should be allowed to continue to function in thickly populated areas and if they are permitted so to function. The pressing issue which the Supreme Court had to decide immediately in the petition, was whether to allow the caustic chlorine plant of Shriram Foods and Fertiliser Industries to be restarted.

On December 4,1985 a major leakage of oleum gas took place from one of the units of Shriram, and this leakage affected a large number of people, I both amongst the workmen and the public in general. This gas leak followed by another disaster i.e., within two days, another leakage took place as result of escape of oleum gas from the joints of a pipe. The Delhi Administration issued two orders, on the behest of Public Health and Policy, to cease carrying on any further operation in the unit, and to remove such chemical and gases from there.

The Inspector of Factories and the Assistant Commissioner (Factories) issued separate orders on December 7th and 24th, 1985 to shut down both the plants.’ Aggrieved, Shriram filed a writ petition challenging the two prohibitory orders issued under the Factories Act of 1948, and sought interim permission to reopen the caustic chlorine plant.

” The Supreme Court, after examining the reports of the various committees that were constituted from time to time to examine the areas of concern and potential problems relating to the plant, as well as the existence of safety and pollution control measures, etc., held that pending consideration of the issue whether the caustic chlorine plant should be directed to be shifted and relocated at some other place, arrived at the conclusion that the caustic chlorine plant should be allowed to be restarted by the management subject to certain specified stringent conditions.

The Apex Court said that it is not possible to adopt a policy of not having any chemical or other hazardous industries merely because they pose hazard or risk to the community. If such a policy was adopted, it would mean the end of all progress and development. Such industries, even if hazardous, have to be set up since they are essential for the economic development and advancement of well-being of the people. We can only hope to reduce the element of hazard or risk to the community by taking all necessary steps for locating such industries in a manner which would pose least risk or danger to the community by maximizing safety requirements.

Question 45.
Describe the following terms:
“Environment, Social, Governance (ESG) Index”. (Dec 2019, 5 marks)
Answer:
Environment, Social, Governance (ESG) Index : ESG describes the environmental, social and corporate governance issues. The ESG index employs a unique and innovative methodology that quantifies a company’s ESG practices and translates them into a scoring system which is then used to rank each company against its peers in the market. Its quantitative scoring system offers investors complete transparency on Environmental, Social & governance issues of a company.
The ESG Performance indicators are:

• Environment – Energy use and efficiency, Greenhouse gas emissions, Water use, Use of ecosystem services – impact & dependence and Innovation in environment friendly products and services.
• Social – Employees, Poverty and community impact and Supply chain management. ’
• Governance-Codes of conduct and business principles, accountability, transparency and disclosure and Implementation – quality and consistency.

Question 46.
Define the term “Sustainable Development”. What are the fundamental principles of Sustainable Development ? (Dec 2019, 5 marks)
Answer:
Sustainable development is a broad concept and it combines economics, social justice, environmental science and management, business management, politics and law. Sustainable Development indicates development that meets the needs of the present generation without compromising with the ability of the future generations to meet their needs. The principle behind it is to foster such development through technological and social activities which meets the needs of the current generations, but at the same time ensures that the needs of the future generation are not impaired. The contribution of sustainable development to corporate sustainability is twofold:

• First, it helps set out the areas that companies should focus on environmental, social, and economic performance.
• Secondly, it provides a common societal goal for corporations, governments, and civil society to work towards ecological, social, and economic sustainability.

Four fundamental Principle of Sustainable Development agreed by the world community are as under:

1. Principle of Intergenerational equity: Need to preserve natural resources for the future generations.
2. Principle of sustainable use: Use of natural resources in a prudent manner without or with minimum tolerable impact on nature.
3. Principle of equitable use or intra-generational equity: Use of natural resources by any state / country must take into account its impact on other states.
4. Principle of integration: Environmental aspects and impacts of socio-economic activities should be integrated so that prudent use of natural resources is ensured.

Question 47.
Explain the concept and need to apply the Triple Bottom approach for CSR. (Dec 2020, 5 marks)
Answer:
The triple bottom line is an accounting framework with three parts: social, environmental (or ecological) and financial. Some organizations have adopted the TBL framework to evaluate their performance in a broader perspective to create greater business value.
The need to apply the concept of TBL is caused due to:
(a) Increased consumer sensitivity to corporate social behaviour
(b) Growing demands for transparency from shareholders/stakeholders
(c) Increased environmental regulation
(d) Legal costs of compliances and defaults
(e) Concerns over global warming
(f) Increased social awareness
(g) Awareness about and willingness for respecting human rights
(h) Media’s attention to social issues
(i) Growing corporate participation in social upliftment

Question 48.
Define the following terms:
(i) Standard and Poor’s ESG India Index . (Aug 2021, 1 mark)
(ii) Sustainable Value Added (SVA) (Aug 2021, 1 mark)
Answer:
(i) Standards and Poor’s ESG India Index:
Standard & Poor’s ESG India index provides investors with exposure to a liquid and tradable index of 50 of the best performing stocks in the Indian market as measured by environmental, social, and governance parameters. The index employs a unique and innovative methodology that quantifies a company’s ESG practices and translates them into a scoring system which is then used to rank each company against their peers in the Indian market. Its quantitative scoring system offers investors complete transparency.

The creation of the index involves a two-step process, the first of which uses a multi-layered approach to determine an ‘ESG’ score for each company. The second step determines the weighting of the index by score. Index constituents are derived from the top 500 Indian companies by total market capitalizations that are listed on National Stock Exchange of India Ltd. (NSE). These stocks are then subjected to a screening process which yields a score based on a company’s ESG disclosure practices in the public domain.

(ii) Sustainable Value Added (SVA):
Sustainable development is a normative concept laid out as the combination of economic prosperity, environmental integrity and social equity. Value is created whenever benefits exceed costs. There are two approaches to measure corporate contribution to sustainability i.e. Absolute Measures and Relative Measures.

Sustainable Value Added takes Into account both, the efficiency and the absolute level (effectiveness) of resource use. It has never been more important for businesses to use their economic, environmental and social resources efficiently. Conceptually, SVA stresses the complementary disposition of economic, environmental and social resources. Sustainable Value Added is the extra value created when the overall level of environmental and social impacts is kept constant.

Question 49.
Explain the Economic Value Added (EVA) and how it is helpful in calculating the true economic profit of an enterprise ? (Dec 2021, 5 marks)
Answer:
Economic Value Added (EVA) is promoted by a consulting firm Stern Steward & Co., which was established in 1982 and pioneered the EVA concept in 1989. EVA is a performance measure that captures the true economic profit of an enterprise. EVA is used by over 300 successful companies. EVA is a value based financial performance measure. It is an investment decision tool and it is also a performance measure reflecting the absolute amount of shareholder value created. It is computed as the product of the “excess return” made on an investment or investments and the capital invested in that investment or investments. “Economic Value Added (EVA) is the net operating profit minus an appropriate charge for the opportunity cost of all capital invested in an enterprise or project. It is an estimate of true economic profit, or amount by which earnings exceed or fall short of the required minimum rate of return investors could get by investing in other securities of comparable risk (Stewart, 1990).”
EVA is net operating profit after tax less capital charge.
Or, EVA = NOPAT- (Invested Capital x WACC)
Where
NOPAT is Net’Operating profit after taxes
WACC is Weighted average cost of capital

Components of EVA
The equation for EVA shows that there are three key components to a company’s
EVA: i.e. NOPAT, Capital invested, and the WACC:

• NOPAT can be calculated manually but is normally listed in a public company’s financials.
• Invested Capital is the amount of money used to fund a specific project.
• WACC is the average rate of return a company expects to pay its investors; the weights are derived as a fraction of each financial source in a company’s capital structure. WACC can also be calculated but is normally provided as public record.

An equation for invested capital often used to calculate EVA is = Total Assets – Current Liabilities, two figures easily found on a firm’s balance sheet. In this case, the formula for EVA is: NOPAT – (Total Assets – Current Liabilities) * WACC.

The cost of capital is a weighted average that reflects the cost of both debt and equity capital. Thus, EVA measures the excess of a firm’s operating income over the cost of the capital employed in generating those earnings. It relates operating income to capital employed in an additive operation. This is in contrast to return on assets (ROA = operating income/capital), which compares operating income to capital employed in a multiplicative operation. EVA assesses the performance of a company and its management through the idea that a business is only profitable when it creates wealth and returns for shareholders, thus requiring performance above a company’s cost of capital. EVA as a performance indicator is very useful. The calculation shows how and where a company created wealth, through the inclusion of balance sheet items. This forces managers to be aware of assets and expenses when making managerial decisions. However, the EVA calculation relies heavily on the amount of invested capital, and is best used for asset-rich companies that are stable or mature. Companies with intangible assets, such as technology businesses, may not be good for an EVA evaluation.

Question 50.
Karl-Henrik Robert along with a group of 50 scientists developed four basic, non-negotiable system conditions for global sustainability. What are these conditions? (June 2022, 5 marks)

Question 51.
Tata Motors Ltd. is the leading automotive company in India having global operations. The company started its operations in 1945 and now it is world’s fourth largest truck and bus manufacturer. It is the first Indian company from the engineering sector that was listed in the New York Stock Exchange in 2004. The company has always maintained high standards of professionalism, honesty, transparency, integrity and ethical behaviour and incorporated them while conducting business. The company has structured Corporate Social Responsibility programmes and set out Tata Business Excellence Model (TBEM) as a means to drive business excellence and also track progress on long-term strategic objectives.
In the light of TBEM, write a brief note on each of the following:
(i) Corporate governance
(ii) Corporate social responsibility
(iii) Sustainability reporting
(iv) Environment management
(v) Social management (June 2014, 15 marks)
Answer:
(i) Corporate Governance: Company has always adopted highest standards of professionalism, honesty, integrity and ethical behaviour and incorporated them in the way of conducting business. The Company continues to strengthen its corporate governance practices through implementation of specific models and methods. The Tata Business Excellence Model (TBEM) is a means to drive business excellence and also track progress on long term strategic objectives.

(ii) Corporate Social Responsibilities: Company’s CSR execution process comprises various activities like identification of communities, prioritization of identified needs, designing projects for addressing selected needs, arrangement of resources and implementation of projects, evaluation of the impacts at the end of project. Health education employability and environment are the key areas of Company’s CSR activities. The Tata Code of Conduct (TCoC) plays an important role in infusing the principles of ethics, transparency and responsibility across our operations.

(iii) Sustainability Reporting: The Sustainability Report 2010- 2011 entitled “Sustainability in Motion” is the Company’s seventh Corporate Sustainability Report. Robust management systems, sound work ethics, better fuel efficiency standards, improved passenger safety, increased material recycling, conservation of energy and water, managing wastes, etc. are some of the examples of sustainability in motion at Tata Motors Limited.

(iv) Environment Management: The Company made an aim to create awareness and promote good environmental practices and management systems in its supply chain with the aid of ISO14001 certification for its channel partners. ‘Yugandhara’ is used for creating climate change consciousness amongst the employees. The Company focuses on tree plantation, wasteland development, encouraging usage of bio-gas plants, and rainwater harvesting initiatives. Overall the Company has invested 346.90 million towards environment management activities across operations. The notable initiatives briefly include:
(a) 4.54% of total energy requirement of the Company was met through the Renewable energy, 48,620 tC02e emissions avoided through usage of renewable energy. 2.47% of net turnover was spent on R&D activities by Company.

(b) Company implemented ideas to reduce packaging material and increase use of recycled material as a result of the various programmes conducted, since the inception of this policy.

(c) Elimination of hazardous material as per regulations prescribed by the respective State Pollution Control Board (SPCB) and as per the Hazardous Wastes Management & Handling Rules and reducing their carbon footprint.

(d) Re-cycling of material is best illustrated in the use scrap metal generated externally as well as internally by either using sustainable packaging (replacing wood with metal) or reusing existing packaging (recycling wood).

(e) Company works towards developing low carbon, fuel saving technologies that will help reduce greenhouse gas emissions. Development of CNG vehicles, electric vehicles and hybrids are at the forefront of company. CNG versions of buses and light commercial vehicles, LPG versions of Indica and CNG versions of ACE goods carrier are the one step towards it.

(f) Under the scheme of Green Infrastructure, a new technology of using light pipes as a source of light has been tried in Jamshedpur and planning to be implemented in Lucknow by the first quarter of FY 2011 -12. A pilot solar power project of 25KW, is also set up by the Energy Management Cell to reduce the energy cost.

(g) Through coordination between NEAC (National Environment Awareness Campaign), GVK (Gram Vikas Kendra), and Tata Motors Jamshedpur the Company has been able to network with around 500 NGOs in the State of Jharkhand highlighting the importance of bio diversity conservation.

(v) Social Management: The Company has tremendously made its share in enhancing the standard of living by providing following benefits to employees and the society itself:
(a) Company promotes employee well being during their tenure as well as after their retirement. Benefits such as gratuity, superannuation, Bhavishya Kalyan Yojana (BKY), post retirement medicare scheme, provident fund and compensated absences are provided to employees.

(b) Company has designed climate change mitigation and Sustainability programmes for creating awareness among Employees. Employees who showed aptitude for engineering and management excellence are sponsored for advanced technical/management programmes in reputed institutes.

(c) Safety observations and incidents receive a high priority in the company as top management being directly involved in all such matters. A steering committee is also headed by the Managing Director that addresses safety, health and environment issues on a monthly basis.

(d) Nav Jagrat Manav Samaj (NJMS), a registered society supported by Tata Motors Jamshedpur is part of the community services department, which is dedicated to the cause of identifying, treating and rehabilitating leprosy afflicted persons and their families.

(e) Company has strict policy of not employing children in any of its Companies.

Question 2.
For the purpose of generating employment in Banaras, a leather industry is being started which consumes a large amount of water and discharges waste water containing putrescible organic and toxic inorganic materials into the river resulting in death of all aquatic life. Whether court should allow the owners of the tanneries to continue as it is working in public interest or direct them to stop working? Give reasons. (Dec 2015, 5 marks)

CSR and Sustainability Notes

Sustainable Development:
Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs

Corporate Susiainibilty:
Corporate sustainability is an approach that creates long-term stakeholder value by implementing a business strategy that considers every dimension of how a business operates in the ethical, social, environmental, cultural, and economic spheres.

Triple Bottom Line:
The triple bottom line is an accounting framework with three parts: social, environmental (or ecological) and financial. Some organizations have adopted the TBL framework to evaluate their performance in a broader perspective to create greater business value.

Sustainable Reporting:
A sustainability report is an organizational report that gives information about economic, environmental, social and governance performance.

Global Reporting Initiative:
The Global Reporting Initiative (known as GRI) is an international independent standards organization that helps businesses, governments and other organizations understand and communicate their impacts on issues such as climate change, human rights and corruption.

Business Responsibility Report:
SEBI vide Circular no. CIR/CFD/CMD/10/2015 dated November 04,2015 has prescribed the format for the Business Responsibility Report (BRR) in respect of reporting on ESG (Environment, Social and Governance)1 parameters by listed entities.
In terms of amendment to regulation 34 (2) (f) of LODR Regulations vide Gazette notification no. SEBI/LAD-NRO/GN/2021 /22 dated May 05,2021, it has now been decided to introduce new reporting requirements on ESG parameters called the Business Responsibility and Sustainability Report

(BRSR). Accordingly, for the top one thousand listed entities based on market capitalization, a business responsibility report describing the initiatives taken by the listed entity from an environmental, social and governance perspective, in the format as specified by the Board from time to time. However, the requirement of submitting a business responsibility report shall be discontinued after the financial year’2021-22 and thereafter, with effect from the financial year 2022-23, the top one thousand listed entities based on market capitalization shall submit a business responsibility and sustainability report in the format as specified by the Board from time to time. Further, during the financial year 2021-22, the top one thousand listed entities may voluntarily submit a business responsibility and sustainability report in place of the mandatory business responsibility report. Further, the remaining listed entities including the entities which have listed their specified securities on the SME Exchange, may voluntarily submit such reports The BRSR is accompanied with a guidance note to enable the companies to interpret the scope of disclosures. The format of the BRSR and the guidance note are detailed in Annexure I and Annexure II respectively.

The BRSR seeks disclosures from listed entities on their performance against the nine principles of the ‘National Guidelines on Responsible Business Conduct’ (NGBRCs) and reporting under each principle is divided into essential and leadership indicators. The essential indicators are required to be reported on a mandatory basis while the reporting of leadership indicators is on a voluntary basis. Listed entities should endeavor to report the leadership indicators also.

The BRSR is intended towards having quantitative and standardized disclosures on ESG parameters to enabie comparability across companies, sectors and time. Such disclosures will be helpful for investors to make better investment decisions. The BRSR shall also enable companies to engage more meaningfully with their stakeholders, by encouraging them to look beyond financials and towards social and environmental impacts.

The BRR framework is divided into five sections:
The BRR framework is divided into three sections
The Business Responsibility & Sustainability Report framework is divided into three sections in Annexure I:
(a) Section A: General Disclosures.
(b) Section B: Management and Process Disclosures.
(c) Section C: Principle wise Performance Disclosure