Corporate Social Responsibility Disclosure

This assignment analyzes the challenges and limitations surrounding Corporate Social Responsibility (CSR) disclosure. It examines how existing reporting practices often fail to comprehensively reflect actual CSR implementation, particularly in terms of scheme details, NGO partnerships, monitoring processes, and capacity building within organizations. Additionally, it points out that stakeholder illiteracy can hinder comprehension of complex CSR reports, suggesting a need for simplified content.

FINANCE ACCOUNTING THEORY

CSR
Introduction
Nowadays public and citizens have enhanced demand and awareness for more information and
have depicted an increasing interest in the social framework of business activities. Therefore,
with the enhancement of awareness among the citizens, all companies have reacted to the
demand of their stakeholders by involving in CSR activities and by going beyond their
traditional affairs of concentrating on income and generating value for their shareholders.
Further, in India, CSR is perceived as a philanthropic affair that tends to concentrate on what is
done with the income after they are made. Overall, much CSR practice in India is a relevant
component of responsible business or sustainability as a whole. The CSR practices even support
the theory of legitimacy meaning that the actions of the entity are desirable and as per the norms
with well established values and beliefs.
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Findings
The study mainly focuses on the concept of corporate social reporting. The paper attempts to
highlight the difference between public sector and private sector companies. The main
determinants of the corporate reporting are adequately highlighted. A close understanding on the
CSR elements is vividly discussed and the CSR initiatives are discussed in the report. The report
gave a correct explanation of the CSR activities and helps in benefiting the society at large.
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Reasons why HR and CD is important in CSR disclosure in India
A close understanding on the components of CSR disclosure reflects that community
development (CD) and human resource (HR) are the major stakeholders that must be addressed
through the CSR initiatives. The reason behind this can be attributed to the fact that CSR
activities that are disclosed in the annual reports of organizations reflects more information on
the engagement of companies in community programs, donation, and sponsoring event, art, sport
event, etc. Besides, focus on human resource can be attributed to the fact that such component
can assist organizations in enhancing and improving their competitiveness. Furthermore, various
analysts are also of the view that external consideration of issues allows a company to be more
responsible and accountable to the entire society or community (Benabou & Tirole, 2010).
Legitimacy is the major consideration for any organization because that constructs the destiny of
the organization. It is one of the major area that pertains to social and environmental accounting
area. This further assists the organization to sustain as a proper entity in the future because
community is the most important stakeholder that allows facilitation of relevant investment
decisions. In contrast to this, if internal issues associated with the management of human
resources are not being given due consideration, then the engagement of companies in CSR
activities cannot assist them in attracting and retaining workforce (Hossain & Reaz, 2007).
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Components of CSR disclosure in India
In relation to the components of CSR disclosures in India, it can be seen that there are majorly
four kinds. These components are firstly, human-related information (HR), secondly is
community development information (CD), thirdly is product safety and innovation details (PSI),
and fourthly is environmental related information that further consists of disclosures associated
with greenhouse gases and other energy disclosures. Community development disclosure entails
the actions undertaken by Indian organizations in partnership with the community so that the
general society can be offered with skills, resources, and actions that they require to bring
positive changes in the community (Brammer & Pavelin, 2006). Further, any social affair
undertaken by an Indian entity to groom and retain HR including social performance focused
towards the well-being of corporate employees is the CSR for human resource. Further, any
activity that can pertain to the efficacy of a customer at large can be considered as a CSR activity
under the bucket of product and safety disclosure. Lastly, any kind of activity undertaken by an
organization to avoid environmental degradation including prevention of soil, water, and air
pollution can be considered under the ambit of corporate social responsibility under the bucket of
environmental disclosure. Hence, these are the relevant components of CSR disclosures in India
(Murthy & Abeysekera, 2008).
Mandating CSR disclosure in India
With due passage of the Companies Act 2013 in India, the mandate for CSR has now been
formally implemented to the dashboard of the Indian organizations. Such inclusion of the CSR
compulsion was an attempt to enhance the efforts of government to deliver the advantages of
growth equitably and effectively so that the corporate world could be involved with the
development agenda of the country. Previously, CSR disclosures were not mandatory in India
and therefore, many public sector enterprises sought undue advantage from the same by
restricting their corporate disclosures for the benefit of the users. However, fortunately such CSR
has become mandatory for every company in India. The mandatory guidelines framed for the
companies assist in mandating a specific percentage of the company’s post-tax profits for the
projects of CSR so that a direction can be offered regarding the monitoring, implementation, and
reporting of social disclosures. This is the reason why studies have shown that mandating CSR
practices in India have made such measures more strategic nature instead of more philanthropic.
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The major reason behind this can be attributed to the fact that CSR is considered strategically
relevant to both the private and public sectors of Indian economy, and this has been possible by
the government of India’s attempt in mandating the CSR disclosure measures (Scott, 2009).
Report choices for CSR disclosure in India that emphasize Legitimacy theory
While the quantum of reporting under CSR has become mandatory with the development of
section 135 (Companies Act), there is also some kind of inflexibility in the inbuilt law associated
with the reporting choices of a company’s CSR activities. This is because the act instead of
rigidly explaining the boundaries of CSR specifies in annexure VII that the company has free
choice to potentially undertake such CSR activities, thereby making such disclosure attempts
discretionary on the part of them (Kruger, 2015). In simple words, as far as section 135 is under
consideration, the law undertakes explain or comply approach that does not specify any penalties
for non-compliance. Overall, it can be seen through the evaluation of various surveys in India
that even though several companies have taken on board the concept of CSR reporting within
their framework, yet such CSR reporting seems to be in a confused state (Bauer & Hann, 2010).
This is because individual companies have defined their own reporting choices for CSR that
ultimately transforms all activities undertaken in the name of CSR to be philanthropic in nature.
Nonetheless, it seems that the CSR reporting choices in India has been evolving in the
framework of profit distribution as a whole (Wicks & Colle, 2010). This implies that
contributions to the legitimacy theory have been done and this theory is a powerful mechanism
that stress upon the social and environmental disclosures.
Benefits of CSR disclosure in India
As the business environment is getting complicated, good CSR practices can assist in providing
the following benefits. Firstly, various CSR initiatives allow companies in India to invest in
developing community livelihood by accommodating them into their respective supply chain.
This can assist in benefiting the communities by enhancing their level of income. Besides, this
also assists in offering these companies a secure and additional supply chain. Secondly, CSR
disclosure practices in India can also assist in generating a favorable image and other branding
advantages to the companies that will continue to prevail until such companies carry on with the
CSR programs (Albuquerque et.al, 2013). Furthermore, this also allow the companies to position
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themselves as effective and responsible citizens of the corporate world. Lastly, various studies
have also provided that human resource programs in the framework of CSR disclosure can play a
key role in retaining, attracting, and motivating employees. This is done by interlinking the
company’s ability of undertaking such steps with their respective CSR commitments.
Limitations to the present study on CSR disclosure
Based on various studies, it has been seen that professionally managed organizations are very
aggressive in corporate social and disclosure measures. This is because they involve
professionals in all three phases of such measure (introduction, implementation, and assessment).
Besides, some professional entities also engage in CSR by themselves, as they possess limited
focus within their affairs (Thomas, 2016). In addition to such limitation, it has also been
witnessed that most of the social and disclosure practices of corporations tend to confine
reporting their respective schemes and other details but do not even appropriately reflect the
actual issues in the implementation of CSR at several phases of economic growth (Adams,
2002). In simple words, no organizations reflect how they carry on their CSR practice, or how
they recognize and select NGO’s and strategic partners. Furthermore, no details of CSR
monitoring can also be found in the reporting measures. In addition, it is also unknown whether
organizations pursuing special CSR departments have in reality undertaken any capacity building
on CSR and its disclosure (Paradise & Rogoff, 2009). Another limitation to the existing study of
CSR disclosure is that since stakeholders are illiterate that prevents them from comprehending
the CSR details, it may be better if the content of such reporting measures had been restricted to
the scheme details.
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Conclusion
Business entities all over the world are now realizing their stake in the community together with
involvement in several environmental and social affairs. The only requirement of the hour is to
frame effective strategic policies and instruments based on the history of the company, its
content, peculiarity in interconnection with its respective stakeholders so that the implementation
of CSR can be undertaken towards its defined goals, that is sustained social, economic, and
environmental growth.
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References
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