The Legal Need For Corporate Social Responsibility Law Essay

Published: November 30, 2015 Words: 4412

All industries are public in nature and enjoy high volume of social powers over the larger society. The wealth and general welfare of thousands, and sometimes, millions of people is undoubtedly impacted by the general and specific actions of such corporations. In this manner they can be termed as an integral part of the society and the growth of the corporations reflects the prosperity of the society. These entities have a great influence over the lives of the people so society has a reasonable expectation from them to contribute for development of the society. Nobody can doubt that the corporations have responsibility towards the society in which they gets nutrition and flourish. No one gets opportunities on an island; obviously it has to have a developed infrastructure roads, water and power supply, information network and so on. When the wider society provides all best possible benefits to these corporations through its organized activities they should make their contribution to that society and must behave in a responsible manner accordingly.

Development of rights, personalities and even reputations of the corporations has taken place over a period of time. The affirmation of legal personality to corporations has generated some unique problems. Corporations are provided with rights of human by Law, but it cannot rely over the corporations to be governed by the internal morals and social check and balance which are more natural to human beings. Companies are human organizations but, it is said that they do not have a moral compass or ethical faculties. It was a trend sometimes ago when the corporations used to escape with no or a very little liability. Companies are social organizations and as such look to society to spell out their responsibilities. In this sense, social norms regulate company behavior, at times communicating expectations about ethics and at times insisting on legal accountability for certain kinds of unethical behavior. Behaviors of citizen governed by the rules, laws prescribed by the state and obey certain unwritten norms prescribed by society as well. Corporations as a member of wider society and citizen expected to respond it in the same way. Besides this corporations exploit natural resources of the society that increases the social responsibility of the corporations. Social responsibility of corporations demands a voluntary commitment to work towards continuous improvement in healthcare, environmental protection and safety and development of wider community.

Corporations are integral part of the society and the growth of the corporations reflects the prosperity of the society. Corporations have a great influence over the lives of the people so society has a reasonable expectation from these corporations to contribute for development of the society. Besides this corporations exploit natural resources of the community that increases the social responsibility of the corporations. Social responsibility of corporations demands a voluntary commitment to work towards continuous improvement in healthcare, environmental protection & safety and development of wider community. The direction of development should ensure social justice with sustainability, equity and ecological stability.

Big corporations in India are taking measures to ensure sustainable development through a proper balance between the protection of environment and the development processes. But there is no any law in India which makes it mandatory for corporations to fulfill social obligations towards environment. But judiciary is playing a vital role in filling these gaps vide its various pronouncements to ascertain the Social Responsibility of the corporations. There is a chain of cases decided by the courts which have widened the ambit of Article 21 of The Constitution of India and increased the scope of responsibility of the corporations towards society.

This paper throws light on the enforcement of the laws and role of judiciary for ascertaining the corporate social responsibility and gives required suggestions for fixing corporate social responsibility to further the main object of sustainable management of natural resources and recognizing fundamental rights of the individuals.

DEFINING CORPORATE SOCIAL LIABILITY

The concept of corporate social responsibility is a contentious subject and must get its understanding for the purpose of extension beyond voluntary and philanthropic activity. To maximize positive impact and minimize negative impact over the society this concept revolves around ethical rather than legalistic behavior and for this purpose the corporations include the promotion and growth of the national economy through increased productivity, effective utilization of material among its objectives.

Corporate social responsibility has become popular and a basis of benefit for many communities and individuals. One thing should be made clear at the very outset that it is not optional, but an obligation to society. For long-term business sustainability corporate social responsibility is a key component. It would be interesting to derive a meaning of the concept with the dissection of each of the words. Corporate social liability is not a difficult concept and can be explained as [1] :

Corporate - refers to organized business;

Social - refers to everything dealing with people, the society at large;

Responsibility - refers to accountability between the two.

By virtue of the above dissection the definition of corporate social liability could be made out as "process of business operations carried out while ensuring compliance with legal requirements, as also linked to ethical values, to an extent". Corporate social liability 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 the society at large as well as to the shareholders' [2] .

Across the global corporate world there is no single, commonly accepted definition of corporate social liability. It refers to business decision making linked to ethical values, compliance with legal requirements, and respect for people, communities and their environments [3] . Corporate social liability is seen as more than a collection of discrete practices and occasional gestures or initiatives motivated by marketing, public relations or other business benefits. Rather, it is viewed as a comprehensive set of policies, practices and programmes that are integrated throughout business operations and decision-making processes [4] .

The basis of the concept of corporate social liability is that besides public authorities, companies should also take on responsibilities of social issues. Further, corporate social liability is seen as a concept whereby on a voluntary basis social and environmental concerns are integrated in the companies' business operations and in the interaction with their stakeholders. [5] A company can be termed as a socially responsible company when it goes beyond legal compliance and invests in human resources and the environment. An external programme of good deeds will not protect a firm whose actual operations harm its surrounding society. [6]

SOCIAL ROLE OF CORPORATIONS

Nobody can doubt that organized business has responsibility to the society or community in

which it exists and operates. No opportunities are an island. It requires a developed infrastructure roads, water supply, power supply, information network and so on. When a business gets benefits in all these ways from the organized activities of the wider society, it must be surely make its contribution to that society and behave responsible in the society. Every society had certain unwritten norms, value system, behavioral pattern that regulate behavior of member of the society. A behavior of citizen governed by the rules, laws prescribed by the state and obey certain unwritten norms prescribed by society as well. Corporations as a member of wider society and citizen expected to respond it in the same way. A corporation would be a good citizen: first by faithful and full payment of taxes; second by the observance of all laws even those with which it disagree; thirdly by going beyond the letter of the law in the matters like pollution, standards of operational product safety, energy and resource conservation; fourth by promoting worthy causes in the locality and the nation through the judicious use of donations; fifth by directly involved itself in social programs such as rural development and community projects. [7]

MODEL SOCIAL RESPONSIVENESS: MESLOW'S MODEL OF NEED HIERARCHY

There are no standard rules to perform one's social duties or pay an obligation towards wider Community. However, one thing is clear that society do not expect community services by corporation at the cost of non-payment of taxes, unfaithful observance of laws and unethical practices.

Hence, researcher underlying a role model for corporations in the path of zenith of Good Corporate Citizenship. Maslow's model of need hierarchy forms the basis of this model. Like

Maslow's model as individual moves up in hierarchy satisfying his needs down in hierarchy in the same way society expecting that corporations moves up in hierarchy firstly completing his basic duties down in hierarchy and then move up.

The model suggests that a path to zenith start with observance of basic duties that is observance of laws and full and fair payment of taxes. Secondly, by going beyond the letter of law slinking strategy with ethics, institutionalizing ethics. Thirdly, judicious use of donations for social causes. Fourthly; discourse of social responsibility, going beyond philanthropy increasing importance of partnership in social programs and community development projects. This model embarkes upon a conformance with their basic duties to accepting the partnership in the development of community and the nation. [8]

CONSTITUTIONAL PROVISIONS

One finds no mention of the environment in either Part III relating to "Fundamental Rights" or in Part IV relating to "Directive Principles of State Policy" of Constitution of India as was drafted initially in 1950. The federal structure divided the legislative powers over environmental topics among the Center and State. Article 48A was introduced in Part IV in the year 1976 as first environmental provision in the entire Constitution. It provides that "the State shall endeavour to protect and improve the environment and to safeguard the forests and wild life of the country. [9] "

It is true that Part IV is not directly enforceable and does not create any independent procedural rights but Article 37 provides that although the directive principles are not enforceable by any Court, but they are the cardinals in the governance of the country and it shall be the duty of the State to practice these principles in enacting legislations. In the same year Article 51A was also introduced as the Fundamental Duties and clause (g) of it provides that "it shall be the duty of every citizen to protect and improve the natural environment including forests, lakes, rivers and wild life and to have compassion for living creatures [10] ". Both of these Articles are not enforced by any writ or other legal provision. Nevertheless they have played a crucial role in flourishing the Indian environmental law.

DEVELOPMENT OF ENVIRONMENT LAW IN INDIA

In India's federal system, the legislative powers and enforcement authorities are divided between the Central Government and the 28 State Governments. For instance, the Central Government has power to legislate on oilfields, mines and interstate rivers, whereas the State legislatures have the absolute power to legislate on public health and sanitation, water supplies, irrigation and drainage, and fisheries. Town planning, building regulations and zoning laws are State subjects. The Parliament and the State Legislatures have concurring powers to legislate on forests and wildlife protection. However, important environmental laws, such as the Water Act, have been passed under Article 252 of the Constitution, which empowers the Central Government to legislate in a field reserved for States, where two or more State Legislatures consent to a central law; whereas the Central Air Act was adopted by the Parliament under Article 253 of the Constitution to give effect to international agreements. The enforcement authorities are reflective of this federal system.

The prime authority is the Central Ministry of Environment and Forests. Although the Central Pollution Control Board (CPCB) and State Pollution Control Boards (SPCB) were initially set up under the provisions of the Water (Prevention & Control of Pollution) Act, 1974, their present mandate is much wider. The CPCB and SPCBs also carry out the functions under the Air (Prevention & Control of Pollution) Act, 1981. In 1986, the Environment (Protection) Act, an umbrella Act with a wide coverage of several aspects of environment protection, was adopted. The CPCB and the SPCBs/PCCs are expected to perform all additional functions under this Act, as well as all Rules promulgated under this Act. This includes subject matters such as hazardous wastes, hazardous chemicals, hazardous micro-organisms and genetically engineered organisms, noise pollution, plastic usage, biomedical waste, municipal solid waste management, etc. Hence, the CPCB/SPCBs are the prime environmental authorities in India, albeit not the only. For instance, the relevant authorities for the supervision of coastal zone regulations are the National Coastal Zone Management Authority and State Coastal Zone Management Authorities. At times, specialized authorities are set up by the Supreme Court of India, such as the Central Empowered Committee which supervises all forest-related matters and timber-related industries. The judiciary, in particular the Supreme Court of India and the various State High Courts, have played a pivotal role in the development of environmental law, adopting new environmental principles, supervising the pollution control boards, and taking suo moto notice of various environmental infringements. Many environmental writ petitions have been filed via the Public Interest Litigation route by concerned citizens or non-governmental organizations. As per the Indian Constitution, Supreme Court judgments become law of the land.

Though India has panoply of environmental laws, closely guarded and supplemented by the Supreme Court of India, it is generally felt that the environmental authorities fail to adequately perform their mandate, though there are State-wise differences. A recent Report submitted to the Supreme Court of India by a High Powered Committee (HPC) concluded that that one of the principal weaknesses of the environmental protection regime arises from the constitution and functioning of these Boards. The HPC further observed that the executive positions are held largely by persons who do not have the technical knowledge required to discharge the functions of the numerous environment laws and statutes. The pollution control boards, with few exceptions, are not effectively enforcing environmental laws. The National Environment Policy, 2006 argues for the formation of a Cabinet or a Cabinet monitored Committee to review the implementation of the Policy on a yearly basis.

ROLE OF JUDICIARY IN ENVIRONMENTAL LAW ENFORCEMENT

The highly creative judiciary of India by adopting new strategies like public interest litigation has developed a role model for the members of international community with respect to effective implementation of environmental law. The same has highly influenced The International Treaties of United Nations to which India is a party.

The real genesis of environmental law, much before the Rio Treaty of 1992, and without reference to such concepts as "sustainable development" and the "precautionary principle" or the "polluter pays principle", can be traced to the Supreme Court decision in the "Ratlam Municipal Council case [11] which arose from proceedings before a magistrate and order of the High Court of Madhya Pradesh. Thereafter, the growth of environmental law started with the Supreme Court entertaining Public Interest Litigations under Article 32 of the Constitution. The traditional concept of standing and locus standi was relaxed for diffused rights on the environment and particularly of the deprived sections of the people. Case by case, the principles contained in international law was enforced in domestic law by the superior Courts with the aid of Article 21 of the Constitution. By interpreting Article 21 of citizens' "Fundamental Right to Life", the Supreme Court expanded its meaning to read several basic human rights into it. This jurisprudence fully developed with the decision of the Supreme Court in the case of Francis Mullin. [12] Article 21, thereafter, began to expand in many directions to include implicitly within it the "Right to Livelihood" [13] and "Right to Potable Water". [14] The Court is now more concerned not only with the '"Right to Life" but with "Quality of Life". With the expansive interpretation in Article 21 of the "Right to Life", environmental issues are being resolved under its new dimensions. The first case which came to be decided with reference to Article 21 was of Rural Litigation & Entitlement Kendra vs. State of Uttar Pradesh. [15] The petitioner sought the closure of limestone quarries in Doon Valley on the grounds that it would cause soil erosion, deforestation and river silting. The Supreme Court then took support of Article 21 to hold that the "right of people to live in a healthy environment with minimal disturbance of ecological balance" is also a fundamental right and the relief was granted. Reading together Article 21, Article 48A and Article 51A (g), the Supreme Court has been entertaining petitions based on complaints about alleged disturbance of ecological balance. The Court also ruled that the fundamental duty in Article 51A (g) extended not only to citizens, but also to instrumentalities of the State. Article 51A was interpreted as a right of the citizen to move the Court for the enforcement of the duty cast on the State. Supreme Court gradually moved to take a view that under Article 32, the petition would lie for "removing the pollution of water or air if such pollution endangers or impairs the quality of life in derogation of laws." Two decisions of the Supreme Court, the case of Charan Lal Sahu v. Union of India [16] in which the constitutional validity of the Act passed for Bhopal gas victims was challenged, and the case of Shriram Industries [17] in which poisonous gas escaped causing serious threat to the life of people living around, seem to indicate that the Apex Court considers freedom from pollution of water or air as essential elements of the "Right to Life". The Supreme Court continues to entertain petitions under Article 32 on environmental issues and has been internationally appreciated for the directions it issued in many cases, like one to control vehicular pollution in Delhi metropolitan city by insisting on the use of CNG fuel, and by others such as directing relocation of polluting industries out of Delhi and tanneries out of Calcutta or Agra. It has also taken up issues like the protection of historical monuments including the Taj Mahal by directing relocation of industries to a safe distance from them. The Supreme Court has also tried to monitor the construction of large dams for all-round development of the region and taking effective measures for maintaining ecology and environment, and also to provide a nearly similar life to the oustees and displaced persons. The direct recourse to citizens and citizens' groups, who have serious concern for ecological balance, to the High Courts under Article 226 and Supreme Court under Article 32 of the Constitution is presently seen as the most effective remedy. The encouragement of Public Interest Litigation on environmental issues by the superior courts has rendered other statutory remedies under the environmental law of less frequent resort.

The Supreme Court of India has in some cases, in sheer frustration with the malfunctioning of the executive organs, taken upon itself to closely supervise the implementation of environmental laws and standards, such as when it imposed on the public transport sector in Delhi to convert to CNG-driven vehicles, or when it set up the Central Empowered Committee, comprising of technical experts, to monitor all wood-based industries and which must regularly report to the Supreme Court on the nation-wide state of affairs.

ENVIRONMENTAL LAWS - CRITICISM

These various environmental laws are under criticism because their implementation is inconsistent and haphazard. Many major industries like coal, petroleum, electricity, iron and steel, agro-chemicals, and heavy machines are in the public sector. Pollution Control Boards have seldom prosecuted government nominees on the management boards of such public undertakings. The statistics show that the Central Water Pollution Control Board has achieved convictions of only 2.8% and only under the Air Act. Only in Tamil Nadu has the conviction rate been 60.8%. The other States have not secured any convictions. The critics say that "the risk of penalties is so low that it is more cost effective for industries to pollute than to invest in emission control measures".

The Air, Water and Environment Acts are not comprehensive enough to cover in great detail the environmental impact of large projects like dams and marine life. Particularly in India, most of the environmental conflicts do not much concern pollution but rather relate to resource degradation including systematic problems of soil erosion, deforestation, declining water tables and the loss of flora and fauna and the consequent subsistence economies. Resorts to the remedies under environmental law are also inhibited by the provisions of Official Secrets Acts. The persons and parties adversely affected by industrial use of natural resources have no means of access to the information leading to the undertaking of developmental activities based on natural resources. In environmental law, although great public interest is involved, there are few provisions for public participation. The citizens' groups have no role in setting statutory environmental standards.

The "consent" granted under the Act to the industries to pollute are not published. There is no right of access and public enquiry into polluting activities. These are some of the issues which should be addressed by the legislature to allow more and more public participation in environmental issues which affect peoples' life to a great extent. These are some of the shortcomings of the present legislation on the environment. Therefore, more and more people and action groups approach the High Courts and Supreme Court with public interest litigations on environmental issues. So far the courts have responded positively and tried to balance the rights of the conflicting parties.

LAWS NEED RETROSPECTIVE AMENDMENTS

Globalization and competitive scenario emphasized, government, for its part, should inanimate a new era of co-operation with industry. This leads to retrospective amendments of badly framed laws by the government and red tapeism. At the same time, put control on unfair trade practices adopted by industry. The apex body of Indian industry like FICCI, CII should jointly set up a Board of Arbitration with participation of nominees from government.

ELEMENT OF ETHICS IN CORPORATE STRATEGIES

Ethics correspond to basic human needs. Manager knows his business affair decision may affect lives of hundreds, thousands of people. Hence in every strategic action a company should be ethical to each five constituencies i.e. stakeholder, employees, customers, suppliers and the community at large. The community and public interest should be accorded the same recognition and attention as the other four constituencies. [18]

For Example The Tata Group has evolved a code of conduct to guide each employee on the values, ethics and business principles expected of him or her. This has been done at two levels - one at the level of the company and other at the level of individual. [19]

INITIATIVES TAKEN BY CORPORATIONS: GOING BEYOND LAW ENFORCEMENT

A good corporate governance demand to go beyond the letter of the laws in matters like pollution, standards of operational and product safety, energy and resource conservation. Ethical behavior is important since government, laws; lawyers cannot do everything to protect society. Technology races ahead much faster than the government can regulate. People in an industry often know the dangers in a particular technology better than the government regulator who sit at a distance. Also often question is asked whether it is possible to maintain an equitable balance in environmental protection. There are many leading corporations which have taken some initiative to fulfill their social responsibility. Big corporations like TATA, Reliance etc. have taken some appropriate steps in the field of Health care, Education, Community Projects and social Programmes voluntarily. It shows that corporations are also going beyond their obligations fixed by different laws.

The Indian Oil Scholarship Scheme is spreading out the light of hundreds of students of economically and socially challenged. Indian Oil is also supporting the creating of educational facilities at significant number of schools. [20]

Reliance carried out healthcare social services work in villages adjoining its Jamnagar and Hazira complexes, to improve the quality of life of people. Some of activities at Jamnagar were blood donation camps, regular health camps, and mobile dispensary services. [21]

Tata Iron and Steel Rural Development Society in India (TSRDS) established by Tata in late 1970's is an example of Social-Business partnership. It functions as an NGO, whose purpose is to funds on education and literacy, health and medical activities, agriculture and irrigation, drinking water, vocational training, etc.

HUL set up a soap factory in Orai in Jalum district of UP. It is a very backward region where malnutrition and diseases are widespread amongst villagers and poverty is rampant. This establishment started a various project aimed at various community development. Five villages have been covered so far where education and medical intervention have resulted in sharp drop in infant mortality. Lessons on mushroom cultivation and animal husbandry have helped the villagers in generating additional income. A formal education program has been started involving primary schools for and also adult literacy through Adult Literacy Centers in the villages. [22]

ARE THERE ANY LAWS TO PROTECT "WHISTLE-BLOWERS" WHO REPORT ENVIRONMENTAL VIOLATIONS/MATTERS?

In 2001 The Law Commission of India proposed that a Public Interest Disclosure (Protection of Informers) Bill be enacted by Parliament, but, to date, the said Bill has not been passed. In this context, the Supreme Court of India has held that the holders of public officers are entrusted with certain powers to be exercised in the public interest alone and, therefore, the office held by them is a trust for the people, and any deviation from "the path of rectitude by any of them amounts to a breach of trust and must be severely dealt with", and if the conduct amounts to an offence it must be promptly investigated. However, an effective sense of protection for whistle-blowers would probably only trickle down once an Act has been passed in this regard.

CONCLUSION

The social responsibility of a corporation is a contentious subject. It must be understood as extending for beyond voluntary and philanthropic activity, and revolve around ethical rather than legalistic behavior. To maximize positive impact on society and minimize negative impact corporate houses should realize that organizational growth imperative with development of the society and community at large. Corporate Houses like Reliance, HUL, Mahindra ... realized this long back and undertaken various social welfare and philanthropic initiatives at their own and also through various governmental and non-governmental organizations.

There is also a need for retrospective amendments for law governing Indian industry. Laws should be clear and unambiguous at the same time reduce red tapeism. Board of arbitration should also be used for amendments of badly framed laws.