Corporate social responsibility(‘CSR’) is one of the crucial aspects of a business in the 21st century. Today’s world possesses a threat like never before, that is climate change. As pointed out by the various reports released by numerous international organizations, such as the latest IPCC, 2022 Climate change report which features world-ending statistics. At this time the world looks toward the multi-billion dollar corporate world with a cry for help. The corporates can perform a vital role in mitigating the effects of climate change and that’s where corporate social responsibility comes into play. The profits, the corporate industry makes can play a pivotal role in sustaining a future for the generations to come.
Climate change is the biggest challenge that humanity is facing currently; its effect has been witnessed globally in the past years. From amazon’s forest burning to extreme heat waves to the possible submerging of marshal island by 2035. All these situations point to the undeniable fact that climate change is here. It is an unprecedented fact that the corporate sector produces the most amount of emissions present on the earth. The energy companies are responsible for 71% of industrial emissions produced. The top food and beverages companies produce about630 million metric tons of greenhouse gasses annually. There are various examples of top companies generating concerning levels of greenhouse gases that have irreversible effects on climate and are putting a big question mark on the net-zero target.
The coalition between government and corporations has many targets being set through various international platforms. One such target is Limiting global warming to 1.5 degrees Celsius. If the limit of 1.5 degrees is breached it shall lead to the cessation of all economic activity around the globe. The Alliance of CEOs is part of the world economic forum climate action platform to reduce emissions by 2030 to achieve the target of net zero by 2050. As the name suggests the alliance consists of CEOs of over 90 leading multinational corporations. The alliance was launched in 2014 against the backdrop of the Paris agreement with the India chapter launched in 2022. The alliance forms a unique joint public-private partnership between governments and corporations.
INDIA’S CSR COMMITMENTS
Section 135of The Companies Act, 2013, along with Companies (Corporate Social Responsibility Policy) Rules, 2014 incorporate the regulations dealing with CSR. The regulations bound both private and public, international or domestic companies to CSR. The act provides for the implementation of CSR policies, the formation of designated committees, and the use of net profits for CSR.
Section, 135 of the Companies Act applies to companies having a turnover of over Rs. 1000 crore, a Net profit of over Rs. 5 crores, or a Net worth of over Rs. 500 crores, in the immediately preceding financial year. The company must contribute a minimum of 2% of the average net profits of the company that was made during the three immediately preceding financial years. The corporates can face penalties and punishments to the officers for violating CSR rules. During the Rajya Sabha debate, the Union Finance Minister Nirmala Sitharaman stated that “Gandhiji’s trusteeship principle is that legitimate profit-earning cannot be devoid of social responsibility,” the piece of legislation lawfully ties a corporate to performing their due social responsibility that includes incorporating policies to mitigate climate change as well.
India’s alliance of CEO chapter that had been launched on 23rd May 2022 with the ambitious goal of P.M. Modi’s mission “Panchamrit” which is to achieve net-zero by 2070. Sumant Sinha, Co-Chair, Alliance of CEO Climate Action Leaders India in his address said that “As a major global economy, India’s role in mitigating climate change is critical and India Inc. must add its full weight to the country’s efforts, as well to the global endeavor, against global warming,”
To name a few Indian companies performing active environmental CSR activities, Tata Chemicals launched multiple initiatives and projects to conserve the environment and engaged the local communities in building an eco-friendly ecosystem, Godrej Consumer Products Limited’s policy on taking back plastic packaging, Cummins India Ltd.’s 1.112 Cr budget for creating oxygen hubs i.e. converting non-forest lands to forest lands, BHEL has done various afforestation activities which includes plantation of millions of trees That has resulted in the development of million Square meters of green coverage, and so on.
FAILURES AND PROBLEMS WITH CSR POLICIES
Allocation of funds – the allocation of proper and just funds towards CSR activities is an important factor. There are no proper statutory guidelines as to how much the contributing budget of CSR will be created by the companies. The huge profit-making companies need to make bigger funds for their CSR activities. Similarly, the companies contributing to higher emissions should make larger funds for their CSR activities.
Insufficient targets- the corporation’s targets for their climate action commitment are not sufficient as the targets do not include all the emission-producing aspects of the corporation. It includes the emissions produced during the production of materials to the disposal of the products. The corporates need to assess their targets and focus on the areas which are producing high emissions.
Transparency – there is a lack of transparency in the data presented by the corporations in comparison to the actual ground-level work that is being done. This creates the problem of determining whether the policies are useful or they need a change. In the case of Technicolor India (p.) ltd. v. registrar of companies, the company misrepresented its CSR data, as the actual money spent on CSR activities was quite below the budget for the CSR activities.
Lack of community support – community support is crucial in achieving targets against climate change. The consumer needs to support the initiatives of the corporation that are consumer-centric and requires the participation of the consumer like the case of Levi’s which recycles old jeans deposited by its customers.
Transition – transition to eco-friendly practices is hard for small businesses. Such transition requires a heavy budget and Research and Development (‘R&D’). Thus, small businesses’ environmental CSR activities fall short of achieving the climate action targets.
CSR activities affect the environment as well as the human rights of a citizen. As enshrined in the Indian constitution itself, every citizen has the right to basic environmental rights. If CSR activities are properly conducted they can change the course of climate change. The government needs to actively assess the CSR activities of big corporate firms and also make provision for the inclusion of small business organizations for performing a part in mitigating climate change through their CSR commitments. The government also needs to implement comprehensive guidelines specifically targeting CSR activities towards mitigating climate change and threshold limits for the allocation of the budget specifically for environmental CSR activities. The companies must hire an expert in environmental studies for the division of environmental CSR activities. that can implement more scientifically approved policies to meet the targets.
The corporations are responsible for most of the consumer products and services worldwide. They have a workforce of billions of people across the globe, with trillion dollars in profits. The crisis of climate change cannot be averted without their contribution to mitigating its effects. The policies of CSR need to be drafted in a way that would make a fruitful change. It is time for corporate to own up and work toward a sustainable future for all.
Author(s) Name: Taniya Nagar (JECRC University, Jaipur)