Legislated CSR: A Brief Introduction

Abstract

According to panwar, nybakk, Hansen, and pinkse (2017) and Vogel (2005), private companies voluntarily participate in socially beneficial initiatives, which is known as corporate social responsibility (CSR). Typically, it is not driven by a desire to make a profit (McWilliams & Siegel, 2001), but rather by a sense of social duty on the part of businesses (Wood, 1991). However, a lengthy line of studies has attempted to prove that companies may gain something from CSR (Orlitzky, Schmidt, & Rynes, 2003; Flammer, 2015), hence CSR is being seen more and more via a profiteering perspective. The so-called "business case for CSR" has played a significant role in increasing the adoption of CSR by private companies in industrialized nations. But in the developing countries, many question the validity of the commercial rationale for CSR, and they also question whether or not private companies would voluntarily engage in social responsibility. Companies in developing nations may be hesitant to engage in CSR initiatives because, according to some, markets and institutions there do not incentivize such actions as they do in industrialized nations. Expecting developing-world corporations to go above and beyond regulatory requirements and embrace CSR may be too optimistic, given that many of these companies already fail to comply with standards. The irony is that developing nations have an even greater need for CSR since their governments, already strapped for cash, depend even more on private sector funding to implement a plethora of social initiatives (Yadav, 2013). In this context, nations such as the Philippines, Indonesia, and India have enacted CSR laws mandating that private companies contribute to the welfare of society. More recently, in June 2017, the UAE Ministry of Economy said that legislation is presently being drafted to oblige significant corporations in the UAE to report on their CSR programs. In this chapter, we will introduce readers to what we term legislated CSR (LCSR), a new kind of CSR. In particular, the chapter provides a more in-depth analysis of the CSR laws enacted by the Indian government, which went into effect on April 1, 2014. We start by providing an overview of both voluntary and mandated CSR. At the end of the chapter, we provide our thoughts on where legislated CSR may go from here.