1. Introduction
Historically, Corporate Social Responsibility (CSR) has been closely associated with voluntarism as an alternative to state intervention. Business ethics, which emerged in America in the early twentieth century, was to a large extent about minimizing legally binding regulation of economic activity by putting the virtues of self-regulation and enlightened self-interest forward.Footnote 1 Around the mid-twentieth century, in the wake of the Great Depression, business actors built upon this line of argument and strategically institutionalized CSR as a form of “private governance” to contain state intervention: The public was to hold business corporations, rather than state authorities, responsible for ensuring that commercial operations mind the public interest.Footnote 2
This initial project underlying CSR has been further expanded and sophisticated over the years. The conception of CSR both as a set of voluntary managerial practices and as an alternative to legally-binding regulatory constraints remains predominant.Footnote 3 However, an increasing number of non-business actors have joined the CSR bandwagon and expanded the reach of CSR beyond the purview of firms to make it an integral component of multi-stakeholder governance institutions. As part of this trend, national states and intergovernmental bodies such as the European Union have multiplied public policies in the field of CSR. These policies formally aim to engage companies in societal problem-solving by shaping their CSR behavior through norms (e.g., laws, guidelines, standards) and the provision of dedicated resources (e.g., knowledge platforms, toolkits).
This growing “government of self-regulation” seems like a reassertion of the state and its political objectives in a field that was initially conceived to undermine the regulatory power of public authorities.Footnote 4 However, a closer look reveals more ambiguity. While CSR policies are regulatory instruments that originate from the state, they might also end up transforming the regulatory power of the state by promoting and legitimizing companies' control over the performance of business-relevant regulatory and social welfare redistributive functions. To what extent are CSR public policies reasserting the regulatory power of the state or weakening state intervention by further institutionalizing private forms of governance?
So far, the literature has addressed this question by emphasizing the diversity of cases and configurations, which span a continuum ranging from business-constraining to business-supporting CSR public policies.Footnote 5 Business-constraining measures, such as extra-financial reporting obligations, would provide the state with subtle regulatory resources to get companies to contribute to political objectives, including objectives that diverge from corporate interests. CSR policies consisting in public-private partnerships, which companies can join on a voluntary basis, would provide new opportunities for state and business actors to tackle societal problems on the basis of a win-win formula. At the other end of the spectrum, business-supporting policies would endorse and facilitate the rise of CSR practices that are based mainly on voluntary and profit-driven modi operandi.
Empirical studies suggest that the adoption of business-constraining or rather business-supportive policy measures by governments depends on distinct constellations of interests and power relationships characterizing the conditions of production of these policies in various political-economic contexts. In Spain, for instance, business interest groups were able to dominate the deliberative making of a CSR policy whose initial goal was to strengthen the accountability of corporate actors for the impacts of their commercial operations on society. The result was a policy that provides resources for companies to seize the strategic opportunities of CSR on a voluntary basis.Footnote 6 Such a business-supportive approach also characterizes partnership-based British CSR policies, which were a joint attempt by state authorities and business actors to increase the public acceptability of contentious neo-liberal economic policies.Footnote 7 In the case of the European Union, business interest groups were able to neutralize the initial regulatory ambitions of Brussels, and to turn its CSR policy into a strategic resource for companies. However, in the aftermath of the financial crisis of 2009, a new political context pushed European CSR policies back towards a stronger regulatory agenda.Footnote 8 Such fluctuations also characterize the Danish case, where CSR public policies have oscillated between business-supportive and business-constraining measures, depending on which political party was governing the country.Footnote 9 In short, as business interest groups have a constant preference for voluntarism, the adoption of CSR policies that rather strengthen or that rather weaken the regulatory power of state authorities would depend mainly on the government's policy preferences and/or its ability to withstand business lobbying.Footnote 10
The present paper argues that by emphasizing variations, the literature tends to undervalue commonalities characterizing CSR public policies. These public policies vary at a functional level: CSR public policies tackle various societal problems (e.g., social welfare, sustainability, industrial competitiveness) by involving companies more or less forcefully in the performance of regulatory and redistributive functions. But both “voluntary” and “mandatory” CSR policies generally refrain from exerting major constraints at the operational level, where companies decide how they want to perform these functions. This common persistence of voluntarism at the operational level allows—and often explicitly encourages—companies to participate in regulatory and redistributive functions on the basis of profit-oriented cost/benefit calculations. As a result, both business-supportive and business-constraining CSR public policies introduce institutional structures that are likely to weaken the role of state authorities in the regulation of business, while offering opportunities for companies to control how business-relevant societal problems are selected and processed in society.
A further argument of the paper is that the variations of CSR public policies at the functional level and their common voluntaristic core at the operational level are not solely an outcome of the conditions of their production and the underlying constellations of interests and power relationships. The possibility of variations and the commonalities of CSR public policies can also be traced back to the semantic properties of the CSR concept itself. On the one hand, the CSR concept allows public policy-makers to institutionalize different—including contradictory—meanings of CSR, which are tied to different levels of expectations with regard to what companies could, should, or must do to be considered “socially responsible.” On the other hand, the CSR concept provides state authorities with opportunities of intervention whose thematic scope is broad and flexible, which can relieve political pressure by putting companies in charge of addressing wicked problems, and which can minimize social and political disruptions by emphasizing potential synergies between business expansion, social welfare, and environmental sustainability. As explained below, making use of these semantic resources leads public policy-makers to design CSR policies that safeguard the operational autonomy and the economic interests of firms.
This analysis is based on an in-depth comparative study of two major CSR public policies that have been introduced recently by India's central government. The first policy, called the National Voluntary Guidelines for the Social, Environmental, and Economic Responsibilities of Business (NVGs), was introduced in 2011 by India's Ministry of Corporate Affairs. The second policy consists in a CSR clause known as the “section 135,” which was integrated in India's new Companies Act of 2013. While the NVGs are typical of business-supportive policies, the CSR clause of the Companies Act is located towards the business-constraining end of the spectrum. This constellation makes the Indian case particularly interesting, as both the variations and the commonalities of these two policy types can be examined in a similar political-economic context.
The empirical analysis of India's CSR public policies is guided by a constructivist framework based on Niklas Luhmann's social systems theory.Footnote 11 This framework enables to observe how the concept of CSR supplies political systems with policy options that have peculiar characteristics. This framework also allows to study how political systems exploit these policy options in the course of policy-making processes that define and institutionalize CSR in various ways. Finally, the framework provides conceptual resources to examine how the resulting institutional characteristics of CSR public policies impact the respective roles of state authorities and business organizations in the regulation of corporate conduct and the redistribution of wealth in society.
After a brief theoretical and methodological section, the paper starts the empirical analysis by examining the problems and underlying political-economic conditions which led certain Indian public policy-makers to view CSR as a horizon of promising political opportunities. A second step investigates the policy-making processes that followed the penetration of the CSR concept in India's political system. Focusing on the NVGs and the section 135 of the Companies Act, the study analyzes the conditions and processes through which participants—in particular state authorities, business actors, and experts—negotiated both the meaning of CSR and the related expectations towards companies that were institutionalized. In a third step, a comparative analysis of the two policies explores how they introduce new patterns of interplay between state and business actors in the regulation of corporate conduct. The paper concludes with remarks on how CSR public policies, which participate in the shift from “government” to “governance,” might reduce the possibility of a democratic expression and processing of conflicts opposing business profitability and competing collective interests in society.
2. Public policies on Corporate Social Responsibility: An analytical framework
2.1 Contested meanings of Corporate Social Responsibility
While CSR scholars have invested numerous efforts in defining what CSR actually means, CSR remains an “essentially contested concept” which “inevitably involves endless disputes” about its proper meaning.Footnote 12 These disputes extend beyond the sphere of academic debates. They involve business organizations, experts and consultants, NGOs, protest movements, mass media, policy-makers, judicial authorities, and many other participants embedded in a variety of contexts and operating at various (local, regional, national, transnational) scales. CSR public policies directly contribute to this social construction of the meaning of CSR: Actors involved in the making of these policies cooperate and compete to institutionalize certain meanings of CSR rather than others.Footnote 13
Social systems theory provides analytical resources to study these meaning-generating, CSR policy-making processes and their impacts on the political regulation of corporate conduct. In particular, social systems theory distinguishes between the semantic, the operational, and the structural dimensions of social systems.
The semantic dimension of social systems consists in the cultural reservoir of concepts which social systems have generated and retained in the course of their socio-cultural evolution.Footnote 14 This reservoir of concepts supplies social systems with certain distinctions and not others, thereby impacting their operations: it conditions the categories that systems can use when operating in given cultural contexts.Footnote 15 The concept of “CSR,” which emerged in the United States in the early twentieth century and has expanded since then to gain global significance, is part of this cultural reservoir. By providing social systems such as political systems, mass media, law, business organizations, and NGOs with the basic distinction “socially responsible/irresponsible companies,” the concept of CSR impacts the way these systems can observe and describe corporate entities and their relationships to “society.”
However, concepts and their underlying distinctions have no meaning as such. The social meaning of concepts is generated in the operational dimension of social systems, where social systems selectively mobilize distinctions and relate them with one another over the course of their constitutive communication processes. This applies to “CSR,” whose meaning depends on the way social systems connect this concept to other distinctions such as “ethical/unethical,” “substantial/window dressing,” or “useful/not useful” for business development.
More precisely, every time a social system selects “CSR” in the flow of its communicative operations, it introduces a distinction that opens up a horizon of potential other distinctions which could be selected as a meaningful “next step” to pursue the sequence of communication. This meaning horizon of potential “next step” distinctions comprises three dimensions: the material dimension,Footnote 16 in which distinctions refer to things (e.g., high/low levels of pollution), the social dimension, in which distinctions refer to individuals and organizations (e.g., who promotes or benefits from CSR; large companies/SMEs), and the temporal dimension, which comprises distinctions about time (e.g., responsibility for past events/for building a better future). The actual meaning of CSR is generated under various conditions each time social systems mobilize the concept of CSR and select one of the potential “next step” distinctions from within the three-dimensional meaning horizon that was opened up by the distinction “socially responsible/irresponsible company.”
This meaning-generating process which characterizes social communication is interrelated with the structural dimension of social systems. Social systems theory defines structures as more or less formalized expectations that define normal ways of connecting distinctions with one another in the flow of communication. Structures somewhat relieve social systems from the complex task of selecting distinctions over the course of their operations, as these systems can lean on established meaning patterns. By repeating these patterns, social systems contribute to reinforcing prevailing structures. In the Indian case, for instance, associating CSR with traditional philanthropic practices, such as the funding of poverty alleviation projects in rural areas, has been a normal (expected) thing to do, and companies that follow this informal norm contribute to strengthening this expectation.Footnote 17 Conversely, social systems which deviate from established structures contribute to weakening or to displacing them: What used to be expected progressively fades away, and what used to be a deviant course of communication is repeated often enough to become the new norm.
While this institutional process applies to informal structures, formal structures such as CSR laws, guidelines, and standards involve different mechanisms of reproduction and change. Formal structures are established according to specific procedures, and this formalization ensures that expectations remain valid in spite of recurring occurrences of deviance: even a law that is poorly implemented remains valid until it is changed through formalized law-making procedures.
The interplay between semantics, operations, and social structures is not linear.Footnote 18 Semantic evolution can follow structural change, as social systems create new concepts to describe this change. But semantic innovation can also enable or facilitate structural change, as the introduction of new conceptual categories in social systems opens up new possibilities of communication that can induce structural change. This seems to be the case for CSR public policies. By supplying public policy-makers with a new conceptual category, CSR has opened up new horizons for political intervention. In doing so, the CSR concept has enabled the rise of new regulatory structures, such as the Indian NVGs and the CSR clause of the Companies Act.
2.2 Corporate Social Responsibility in regulatory politics: new horizons of intervention
This theoretical perspective enables an analysis of the meaning horizon that is opened up by CSR when this concept is introduced as a policy option in political systems such as India's democracy. In spite of the “essentially contested” nature of the CSR concept, this meaning horizon is not infinite. Its boundaries circumscribe the type of regulatory structures that political systems can craft as they selectively exploit the meaning potential of CSR.
With regard to the material dimension of meaning, “social (ir)responsibility” is not theme-specific. This semantic characteristic of CSR makes it an attractive policy option, as it opens up a broad and flexible horizon of problems which public policy-makers can claim to address at once: child labor, working conditions, gender as well as ethnic and religious discrimination, consumer safety, public health, rights of expropriated farmers and indigenous communities, corruption involving public officials, industrial pollution, industrial hazards, nature conservation, climate change, etc. This characteristic positions CSR as a cure for the deficiencies of more conventional, legally-binding, and issue-specific regulatory instruments (e.g., labor laws, environmental standards). In this respect, the concept of CSR introduces policy options that favor general and flexible regulatory instruments, as opposed to specific and clear legal boundaries within which companies are expected to operate and expand.
With regard to the social dimension of meaning, the concept of CSR shifts the focus away from government responsibility by emphasizing corporate responsibility or by mixing the two. This semantic effect opens up new horizons with regard to the respective roles of state authorities and private business actors in the regulation of corporate conduct and the solution of societal problems. As Susanne Holmström writes, with CSR, “the political system relieves the pressure on own risky decision-making and increasingly sends on the responsibility, in particular to the economic system, by means of political initiatives aiming at internalizing the societal horizon within the business community.”Footnote 19
As for the temporal dimension of meaning, the concept of CSR opens up a forward-looking horizon of progressive opportunities by suggesting that companies can move away from the negative side of the distinction (socially “irresponsible”) towards the positive side (socially “responsible”). This potential movement towards win-win business practicesFootnote 20 is often embedded in “aspirational talk”: CSR derives its power less from the actual realization of what is being promised than from the effects of the promises themselves.Footnote 21 Moreover, by assigning companies a “future-oriented political responsibility” in societal problem-solving, CSR “gives corporations the political power to define what our public problems are and how they should be fixed,” while overlooking the responsibility attributed to companies for the genesis of public problems.Footnote 22 As one of the consequences of this temporal semantic characteristic, CSR tends to favor regulatory instruments that focus on the promises of future consensual solutions rather than on the actual political arbitration of conflicts.Footnote 23
The way this meaning horizon was exploited in India's regulatory politics will be investigated below. This empirical investigation will pay attention to the structural outcomes of these policy-making processes, as well as to how these outcomes were produced and conditioned not only by constellations of interests and power relationships, but also by the semantic characteristics of CSR outlined above. But before, a few methodological remarks will expose the conditions under which this study was conducted.
2.3 Methodological remarks
Using a constructivist framework based on social systems theory implies a sociological analysis that sees itself as a scientific observation of the way other social systems operate—an epistemological point of view referred to as second-order observation.Footnote 24 Following this perspective, we proceed by observing how the distinction “socially responsible/irresponsible companies” penetrated India's political system when CSR was mobilized as a policy option, how the CSR concept changed the way India's political system observed opportunities to intervene on corporate conduct, and how the resulting CSR public policies introduced new structures that impactthe respective roles of state authorities and companies in the regulation of corporate conduct and the redistribution of wealth in society.
To inform this analysis, we mobilized qualitative data that was generated over the course of several rounds of field visits spanning from June 2007 to September 2014. Overall, 189 semi-structured interviews were conducted with persons acting in a variety of roles (Table 1). Of these interviews, eighteen were conducted with persons directly involved in India's CSR policy-making processes, fifty-four were conducted with persons who provided information that was directly relevant to the analysis, and 117 were conducted with persons who provided relevant information for the understanding of the broader context in which India's CSR policies were introduced. In addition to these interviews, information was retrieved through documentary sources including official documents related to India's CSR policies, minutes of parliamentary debates, texts produced by business actors and NGOs in the framework of public consultations, reports, press articles, and a filmed “Google Hangout” debate organized in August 2013 by NextGen and CNBC TV18 on the section 135 of the new Companies Act.
Table 1: Interviews conducted on CSR in India, 2007–2014
This data was analyzed to reconstruct the communicative processes involved in the making of India's CSR public policies. Thanks to the triangulation of information provided by interviewees and documentary sources, the empirical analysis reconstructs how participants tried to introduce distinctions on CSR in India's CSR policy-making processes, and how India's political system selectively processed these distinctions while elaborating CSR public policies.
3. The rise of Corporate Social Responsibility as a policy option in India's pro-business setting
3.1. The contentiousness of India's pro-business development policies
Over the past few years, India's central government has adopted a series of public policies that urge companies towards more CSR. It started in 2007, when the Prime Minister Manmohan Singh took the opportunity of a speech held at the General Assembly of the Confederation of Indian Industries (CII) to exhort India's business community to act in a more socially responsible manner. In this speech, the Prime Minister outlined a Partnership for Inclusive Growth consisting of ten guiding principles, which range from fair labor conditions and ethical business practices to socially responsible advertising and the use of environment-friendly technologies.
In 2011, the government carried on with the release of National Voluntary Guidelines for Social, Environmental, and Economic Responsibilities of Business (NVGs). A year later, the Securities and Exchange Board of India (SEBI) issued a circular on Business Responsibility Reports, which requires the hundred largest listed companies by market capitalization to report annually on their social responsibility, along the lines indicated in the NVGs.
In August 2013, yet another step was taken with the adoption of the new Companies Act. Its section 135 requires all companies above a certain size to spend at least 2 percent of their net profit in the pursuance of a CSR policy approved by the Board of Directors. According to official data for the fiscal year 2014–2015, which was the first year of implementation of the Companies Act, 409 listed private companies and fifty-one public sector enterprises declared about ₹40 billion (about $600 million) and about ₹24 billion (about $360 million) on CSR projects under this provision.Footnote 25
This growing mobilization of CSR by India's political system has arisen from deep transformations in the country's political economy over the past decades. In particular, CSR has gained political relevance as a result of a gradual shift from socialist development policies dominated by an interventionist state towards supply-side policies that promote private companies as the primary engine of development.Footnote 26
This shift has been described by Atul Kohli as a “pro-business tilt.”Footnote 27 It was initiated by Indira Gandhi after her return to power in 1979. Departing from her fierce pro-poor and anti-capitalist rhetoric of the 1960s and 1970s, which had been accompanied by a tightening of the political-administrative control of India's private corporate sector, Indira Gandhi introduced gradual economic deregulation to foster private investment. Her son Rajiv Gandhi continued to pursue the dismantling of the previous system of production licenses, quotas, and price and distribution controls. But the pace and extent of reforms was constrained by resistance from multiple corners, including from within the Congress Party. The electoral debacle of the Congress in 1989 further hindered economic reforms, as it was interpreted across the political spectrum as a sanction imposed by the economically poor masses of citizens on a party that seemed to have abandoned its socialist goals to embrace the interests of the country's economic elite.
In 1991, however, a crisis of payment helped Narasimha Rao's reformist government to push unpopular reforms through Parliament. The Indian economy was significantly deregulated and liberalized. Since then, the overall trend characterizing India's national and regional development policies has been to foster private-sector led economic growth by promoting conditions that enhance the profitability of private investment. This trend is illustrated by the Special Economic Zone Act of 2005 and by regional industrial policies, which both try to encourage private investments by providing public resources (e.g., tax holidays, cheap land, tailored infrastructures) while easing regulatory constraints (e.g., labor laws, environmental laws).Footnote 28
As private companies have moved toward the center of India's development policies and processes, the question of relationships between profit-oriented economic activities on the one hand, and the achievement of collective aspirations framed—sometimes in contradictory terms—by the concept of “development” on the other hand, has become a major source of contention.Footnote 29
Policy-makers pursuing pro-business development policies tend to emphasize the positive outcomes of profit-driven investments for “development.” Fast GDP growth (about 8–9 percent between 2002 and 2009) has been largely attributed to economic reforms that stimulate the dynamism of India's capitalists. Since the growth momentum has slowed down, adopting policies that will put it back on track has been a major preoccupation of pro-business policy-makers. Labor laws should be further eased to encourage rapid industrialization, in order to provide employment to the ten to fifteen million people who enter the labor market every year.Footnote 30 Land acquisition must be facilitated for companies to set up plants and for infrastructures required by companies to be constructed.Footnote 31 Environmental clearances should be granted on a fast-track basis to unlock large-scale industrial projects.Footnote 32
Companies, business leaders and employers' associations such as the Confederation of Indian Industries (CII) and the Federation of Indian Chambers of Commerce and Industry (FICCI) contribute to producing these views, while framing profit-oriented investment as a key source of socially inclusive and ecologically sustainable development. As illustrated by a joint report of the CII and the World Wildlife Fund, entitled “Indian Companies with the Solutions that the World Needs: Sustainability as a Driver for Innovation and Profits,” the concept of CSR is a key ingredient of this discourse.Footnote 33
Conversely, other discourses emphasize discrepancies and tensions between profit-oriented investments and “development.” The sharp rise of socio-economic inequalities over the past two decades, as well as low scores on the Human Development Index in spite of fast economic growth, are put forward to denounce economic policies that would cater primarily to the needs and interests of an urban upper-middle class.Footnote 34 Radicalizing concerns for India's “jobless growth,”Footnote 35 trade union federations call for alliances with social movements to counter “an unparalleled attack on working people” by a government which “equates the rights of corporates with the rights enjoyed by citizens,” and whose policies are “clearing land of the poor, dalits, tribals, backwards” while “providing a workforce with low wages and unprotected conditions of work and employment.”Footnote 36
Over the past decade, numerous industrial investment projects such as Vedanta's and POSCO's mining projects in Odisha, Tata Steel's projects in Odisha and Chhattisgarh, Tata Motor's plant project in West Bengal, Lafarge's cement plant projects in Meghalaya and Himachal Pradesh, Areva's nuclear plant project in Maharashtra, and Coca Cola's beverage plants in various parts of the country, to quote but a few high-profile cases, have already been challenged by protest movements in mass media, in public demonstrations, as well as in High Courts and in India's Supreme Court.
3.2. The promising horizon of CSR as a regulatory instrument
Far from being limited to the fringes of India's political system, discourses and collective mobilizations that challenge India's “pro-business” development policies are often enmeshed with party politics and electoral competition. The political use of peasant protests against Tata Motor's plant project in West Bengal by the Trinamool Congress Party in 2007, which helped propel its leader Mamata Banerjee to the post of Chief Minister in 2011, is a case in point. More generally, as India's growth model has de facto primarily benefitted upper-middle and upper classes,Footnote 37 the growing political mobilization of lower castes and classes has strengthened the significance of “inclusive development” as a central theme in Indian politics.Footnote 38 As Zoya Hasan puts it, “reconciling the welfare of the people at large with economic liberalization alongside political pressures for distribution was the greatest challenge confronted by the Congress after it returned to power in 2004.”Footnote 39
In this context, India's government became increasingly interested in the horizon of political opportunities opened up by the concept of CSR. The broad and flexible scope of material problems covered by CSR was making it an attractive instrument to deal with such a wide and multifaceted problem as the relationship between “business” and “development.” As explained by a senior bureaucrat of the MCA:
We realize that the government alone is not equipped to solve the social problems like education, health, local infrastructure, etc., on its own. We need the business sector to work with us, so as to make sure that the benefits of development reach the bottom of the pyramid.Footnote 40
CSR seemed all the more relevant as it could pretend to palliate the ineffectiveness of a wide range of issue-specific regulatory measures:
In India, we have a large number of laws, rules, regulations, that companies have to follow. On environment, pollution, labor. But the compliance of so many laws is an issue. Our laws in India are good laws, and there is a law for everything. But you know, as for other countries, we have a problem in implementation and enforcement. The corporate sector raises the issue of compliance cost very strongly.Footnote 41
With regard to the social dimension of meaning, CSR was also providing state authorities with the opportunity to relieve political pressure by encouraging companies to weaken the wave of protest movements and popular discontent by themselves. Asked about the problems that the government was trying to address with CSR, a senior bureaucrat of the MCA mentioned
… instances where local communities have raised issues and sometime have strongly opposed industrial projects. The now very famous case of the Nano project of Tata Motors is a good example.Footnote 42
An executive of the National Thermal Power Corporation (NTPC), who was closely involved in the design of India's CSR policies, explained, “At that time, the perception of the people regarding companies was getting negative, and the government wanted CSR to become something which companies would do systematically, not just according to the good will of the CEO.”Footnote 43 This objective was also shared by Members of Parliament who participated in the making of CSR public policies:
The first purpose is that it will decrease and appease the discontent of localities where people have to part on a permanent basis with their land, their forests and their livelihood. And the second purpose is that it will commit the local people to the company. They will come to the company to discuss about these CSR projects, and it will create an interface. It will help minimize the turmoil.Footnote 44
Finally, the forward-looking temporal dimension of the meaning horizon opened up by CSR seemed politically advantageous. The Congress-led government of the United Progressive Alliance had won the national elections of 2004 and 2009 thanks to an electoral program focusing mainly on “inclusive growth” and the problems of the aam admi (the “common man”). Hence, the rising opinion according to which its policies were in fact catering to the interests of the country's elite were a political threat that needed to be tackled rapidly. By formulating public policies that encourage companies to join the CSR movement, the government could display rapid action that was pointing to promising possibilities of a gradual convergence of “business” and “development.”
While CSR was supplying India's political system with promising opportunities of intervention, exploiting these opportunities required a definition of what CSR actually meant as a regulatory instrument. The following section compares how this meaning-generating process unfolded in India's two major CSR policy initiatives, the NVGs and the section 135 of the Companies Act.
4. NVGs versus section 135? The common core of CSR public policies
4.1. The National Voluntary Guidelines (NVGs): defining CSR as a business case
The policy initiative which led to the formulation of the NVGs by the Indian Ministry of Corporate Affairs (MCA) in 2011 is a direct follow-up of the Partnership for Inclusive Growth presented by Manmohan Singh at the CII in 2007. The same year, as the proposed Partnership seemed to have little effects, the Union Cabinet mandated the MCA to explore further CSR policy options.
Previous exchanges between the MCA and the German international cooperation agency Gesellschaft für Internationale Zusammenarbeit (GIZ) had already revealed an opportunity for collaboration: The GIZ was running a program designed to promote CSR in developing countries as an instrument to boost “business success” and “competitiveness” by involving companies as partners for “economically feasible, socially fair and ecologically stable development.”Footnote 45 Building on this program, the MCA and the GIZ launched an Indo-German Corporate Social Responsibility Initiative in 2008, which resulted in the development of the NVGs.Footnote 46 Three characteristics of the policy-making process shaped the way it gave meaning to CSR by relating the concept of CSR with certain distinctions and not others.
First, at least partly as a result of the involvement of the GIZ, the initial policy goals of this initiative were informed by the global mainstream CSR discourse of the 2000s. In particular, the MCA and the GIZ adopted the view that CSR can most effectively enhance the contribution of companies to socially inclusive and environmentally sustainable “development” when it is inscribed in the core business activities of firms.Footnote 47 Following this perspective, the predominant conception of CSR among Indian companies, according to which being “socially responsible” primarily means carrying out philanthropic activities such as community development projects in the vicinity of production units, appeared as outdated. To leverage the opportunities provided by CSR, the state needed to get companies envisage CSR as being about inventing “socially responsible” ways of doing business.
In addition, both the MCA and the GIZ conceived of CSR as being a discretionary domain of corporate management.Footnote 48 This premise meant that public authorities could intervene as a facilitator, but not dictate what companies should do with regard to CSR: “Since CSR should be voluntary, since only the management of a company can decide if the company should adopt CSR or not, the government can only incite companies, encourage them, upskill them.”Footnote 49 A further consequence of this premise was that to change the CSR practices of companies through voluntary means, public authorities would need to stick to an approach of CSR that benefits the financial bottom line of companies.
Against this backdrop, the MCA and the GIZ decided to organize a multi-stakeholder deliberation, whose role would be to adapt this CSR approach to the Indian context and to specify its content with a set of voluntary CSR guidelines. In July 2008, a multi-stakeholder Guidelines Drafting Committee (GDC) was constituted. Formally, members of the GDC were selected so as to involve representatives of all relevant institutional stakeholders. But in practice, the MCA and the GIZ hand-picked the GDC's members from within a small epistemic community based primarily in New-Delhi.Footnote 50 To insure that the guidelines would fit with the initial policy goal, these members were chosen not only for their expertise but also for their commitment to the vision of CSR outlined above.Footnote 51 Trade Union leaders and activists who were more critical towards CSR were not invited.
This particular setting led to a second characteristic of the policy-making process, which is the strong cohesion among the members of the GDC, which a former member described as “something of a club.”Footnote 52 As the GDC deliberated on the principles that should structure the CSR guidelines, in sub-groups and during plenary sessions, this common ground facilitated collaboration while allowing dissent.Footnote 53 For instance, one member tried to convince the committee that the entire NVGs should be based on Human Rights, because “rights are a substantial thing, which people can lean on, and you have multiple human rights which exist, which have been formulated.”Footnote 54 To reinforce this proposal, he collected letters of support from about one hundred civil society organizations. After discussions, the idea was rejected for being too at odds with the economic interests of companies, which also needed to be taken into consideration. However, owing to the importance of the topic Business & Human Rights in the field of CSR, the committee agreed to dedicate one of the guidelines' principles to this theme.
In another case of contention, some members of the GDC proposed to tackle the topic of legitimate/illegitimate business lobbying and political influence in the guidelines. Members of the GDC who were affiliated to the business associations CII and FICCI objected that their superiors would not allow them to support this idea, as this topic was too sensitive. Other members opposed the idea on the ground that the NVGs should not legitimize lobbying, which they perceived as a threat to democracy. But a series of scandals involving collusion between large companies and high-level politicians and bureaucrats (e.g., 2G spectrum allocation scam, coal block allocation scam, illegal mining scam in Karnataka), which triggered large-scale social mobilizations, created favorable conditions for a compromise: A principle was included in the guidelines, which recognizes the right of businesses to influence government and public opinion, but which emphasizes that “policy advocacy must expand public good rather than diminish it or make it available to a selected few.”Footnote 55
The third characteristic of the policy-making process underlying the NVGs was the ability of the GDC to avoid direct external interferences from political actors and business interest groups. While arguments within the GDC were mostly based on “the current literature and knowledge,”Footnote 56 members of the GDC mobilized other resources against external interferences to secure the approach to CSR that they were committed to and for which they had been initially selected.
Soon after the initiation of the drafting process by the GDC, a new Minister took office at the MCA, whom former members of the GDC describe as being close to business interest groups. In November 2009, the MCA suddenly announced that the Minister would release the CSR guidelines in December on the occasion of India Corporate Week. The GDC presented a first draft, which had been put together on short notice. But the MCA put the committee aside and solicited an alternative document from experts close to the CII and FICCI. The resulting CSR Voluntary Guidelines 2009 translate the policy preferences of the MCA. A single “fundamental principle” states that “each business entity should formulate a CSR policy […] which should be an integral part of overall business policy and aligned with its business goals.” Moreover, the social responsibility of “Indian entrepreneurs” is presented not as an objective but as an existing characteristic rooted in “India's ancient wisdom.”Footnote 57 This political move took most members of the GDC by surprise.Footnote 58 However, in early 2010, negotiations with the MCA enabled the GDC to be reconstituted and to resume its work under the Indo-German CSR Initiative.
After this first victory of the GDC, the MCA insisted it should design a flexible document, which should be easy for companies to follow. In spring 2010, the MCA strongly opposed the intention of the GDC to submit its first draft of the guidelines to a consultation open to a variety of civil society actors in Delhi, Mumbai, Bangalore, and Kolkata. The ministry suggested that the consultation be narrowed down to exchanges with business actors. But again, the GDC succeeded in imposing its preferences: The government receded when the GDC threatened to disclose the MCA's position in a public letter that would be communicated to the press.
Yet another conflict arose when members of the GDC tried to get the MCA to introduce a mandatory CSR reporting framework for large companies that would be based on the guidelines. The ministry refused, and released the NVGs in July 2011 without such a mandatory component. But some members of the GDC turned to SEBI, which is the Indian financial market regulator. Interested in an opportunity to upgrade Indian rules to international accounting standards, SEBI issued a circular in August 2012 on Business Responsibility Reports, which requires the hundred largest listed companies by market capitalization to report annually on their social responsibility along the lines indicated in the NVGs.
As a result of this policy-making process, in the NVGs, CSR is defined as a field of opportunities for companies to conduct business operations that “harmonize” their financial performance with “the expectations of society, the environment and the many stakeholders [they] interface with in a sustainable manner.”Footnote 59 A series of concrete expectations are outlined in the document, which comprises nine principles.Footnote 60 But the NVGs explicitly suggest that companies should consider these expectations depending on their own strategic priorities and the economic benefits they can expect from CSR.
The NVGs were welcomed both by reformist CSR experts, i.e., experts who believe CSR can enhance the contributions of business to the well-being of society at large, and by most of the Indian business community. Business associations, in particular, considered the NVGs to be a useful contribution to their agenda that promotes self-regulation and frames business as a driver of social welfare and environmental sustainability. Core institutions of India's political system, however, were already engaged in a different process of CSR policy-making, which ended up overshadowing the NVGs.
4.2. The section 135: defining CSR as material contributions to “development”
The introduction of a CSR clause in India's new Companies Act constitutes the second main CSR policy adopted by the central government. The conditions of production of this policy, and the conception of CSR that this policy institutionalized, depart from the NVGs on a number of points.
First, unlike the initial premises underlying the NVGs, which emphasized the superiority of global business-related CSR over Indian philanthropic CSR, the section 135 originated from actors whose view on CSR was deeply embedded in this Indian philanthropic approach. More precisely, the origin of the section 135 goes back to the mid-2000s, when major programs of rehabilitation and resettlement conducted by the public enterprise National Thermal Power Corporation (NTPC) were coming to an end. These programs comprised mainly local development initiatives implemented among village communities neighboring NTPC's power plants. To avoid conflicts with these communities, NTPC decided to continue providing peripheral development in the name of its social responsibility. This decision was picked up by the central government, which envisaged to extend CSR to all central public sector enterprises (CPSE). In the late 2000s, CPSE knew that the government would soon require them to spend part of their profit on such kinds of CSR activities, and they asked the government to impose a similar constraint on their private competitors.
In a context where CSR was increasingly considered by the government as a relevant policy option, this idea resonated favorably among the Union Cabinet and within the leadership of the Congress Party. In 2009, it was caught on by members of the Parliament (MPs), who were reviewing a Companies Bill that the MCA had introduced earlier in the law-making process in order to modernize corporate governance law in India. As the Standing Committee on Finance (SCF), a permanent parliamentary committee, was examining the bill, the idea emerged to recommend that the government add a CSR clause in the legal text. Such a clause would require companies to spend a share of their net profit for CSR activities. This idea was welcomed by most members of the SCF, irrespective of their party affiliation.
A second difference between the two policy-making processes is that unlike the NVGs, the section 135 was crafted in the midst of India's parliamentary institutions through a process driven primarily by political calculations.
Such political calculations motivated a large majority of the thirty-one members of the SCF to support the idea of mandating private companies to spend more for CSR. This strong support might reflect a certain conception of public interests. As explained by a parliamentary member of the SCF:
I have seen the amount of exploitation [of people and natural resources] going on, and the discontent of the people. Other MPs too. This is from where the initiative comes. […] The country needs industry, and the local people need to be satisfied. Both have to function together. The balance has to be maintained.Footnote 61
But mandating private companies to increase CSR spending was also opening promising perspectives in terms of power politics. Indeed, CSR in India is not only a national issue but also a regional and local one. Concretely, getting more companies to spend more money for local development projects would increase resources that MPs and their local affiliates can use for patronage. Patronage refers to candidates who obtain votes by promising to reward supporters, if they are elected, through the channeling of public resources extracted for instance from social welfare programs. The ability of candidates to convince voters in their respective constituency that they can be resourceful patrons is a strategic asset in Indian elections.Footnote 62 Peripheral development initiatives implemented by companies as part of their CSR programs are usually part of this patronage system: Companies secure the support of elected representatives by letting them influence the allocation of CSR resources in their constituency, while elected representatives improve their popularity by displaying this influence in public, for instance during speeches in inauguration ceremonies of CSR-funded projects.Footnote 63
Political calculations also favored the positive reaction of the central government towards the proposal of the SCF. Policy-makers in favor of this measure argued that a greater involvement of the private sector in development initiatives would help India achieve the Millennium Development Goals. In a context of rising socio-economic inequalities, higher CSR spending would also help improve the perception of companies among the general public.Footnote 64 In a context where protest movements such as those against Tata Motor's car factory in West Bengal and Vedanta's bauxite mines in Odisha were “on the minds of policy-makers,”Footnote 65 upscaling CSR was also expected to minimize such conflicts, which were hurting the investment climate of the country and the popularity of the government's pro-business development policies. The request of CPSEs were a further “deciding factor” in exchanges between the SCF and the MCA, as “the argument became: if the public sector has to do it, so the private sector should do it as well.”Footnote 66
This constellation of political interests led the SCF and the MCA to officially agree in the summer of 2010 that the section 135 of the Companies Bill may now require every company above a certain financial size to formulate a CSR Policy and to ensure that every year, at least 2 percent of its average net profit during the three preceding financial years are spent on CSR activities.Footnote 67 A “comply or explain” mechanism of implementation was chosen, according to which companies that fail to comply with this requirement would need to provide “suitable reasons” in the report of the Board of Directors, which is attached to the yearly financial statement of companies.
A third difference between the NVGs and the section 135 is that while experts of the GDC limited interference from political and business actors in the making of the NVGs, in the section 135, it was politics that limited the interference of business actors and experts in the policy-making process.
The project of introducing a mandatory CSR clause in the Companies Bill triggered strong opposition from Indian business interest groups. During consultations organized by the SCF as part of its examination of the Companies Bill (2009), both the CII and FICCI argued that only voluntary CSR was appropriate, and that companies operating in India would already be spending significant amounts in this domain. However, while business interest groups usually achieve to exert significant influence over the Indian law-making process, for instance by colluding with MPs,Footnote 68 in this case, most members of the SCF were too interested in the political resources provided by the CSR clause to change their position.Footnote 69
The MCA also refused to withdraw the proposed CSR clause from the bill. When business interest groups asked the government to make a tax instead of mandating large companies to spend 2 percent of their profit for CSR, the MCA replied: “We look for corporate social responsibility, not for government social responsibility. That's what I told them: we do not want to make a new tax, we want you to do your projects, to give back to society, to take your responsibility.”Footnote 70
However, the MCA was more receptive than most MPs to the pleas of business actors. While revising the Companies Bill (2009), which became the Companies Bill (2011), it tried to soften the terms of the CSR clause which had been agreed upon by the ministry and the SCF: The requirement that companies shall “ensure” to spend at least 2 percent of their average net profit on CSR became “shall make every endeavor to ensure.” Beside the MCA's reputation of being rather receptive to concerns of private sector companies, its partial responsiveness toward the demands of business interest groups also reflects the central government's political interest in this matter. While the MPs were interested mostly in the material resources that a CSR spending requirement would provide for patronage, the central government was primarily interested in the symbolic resources such a policy could provide. By appearing to “mandate” large companies to invest more in the country's development, the government could display itself as a political authority that withstands the opposition of business interest groups for the benefits of the Indian people. The ambiguous formula “shall make every endeavor to ensure” could secure this symbolic resource, while giving companies leeway to determine how much they would actually spend for CSR.
The mandatory CSR policy also met with criticism and resistance from members of the GDC, who were working in parallel on the NVGs. They perceived the mandatory CSR clause as defeating the very purpose and potential of CSR, as they understand it: “We were against the 2 percent, because what matters is how you make your profit, not how you distribute your profit.”Footnote 71 Concerns were also raised about practical effects of the mandatory CSR clause. For instance, within large companies, CSR departments would be incentivized to focus on the spending of CSR budgets rather than on inducing changes in the core operations of their company, such as improving working conditions or designing eco-friendly products. Moreover, the management of small and medium enterprises might deduce from such a law that CSR is only relevant to large companies.
Members of the GDC tried to defend these positions within the MCA, but the ministry was now following another path, in which the NVGs had become a secondary concern. Evoking attempts to convince a senior bureaucrat of the MCA in charge of the section 135, a member of the GDC explained:
He has been avoiding me for the past five years. Anyway, the government has not discussed this CSR policy. They have elaborated it behind closed doors, with just a handful of experts to advise them.Footnote 72
The GDC also asked the MCA to consider referring to the NVGs in the section 135. But the ministry refused to do so. Conversely, promoters of the CSR clause within the MCA saw the NVGs with a critical eye:
These other people from the former guidelines drafting committee, they come from a previous era. What they will tell you is that CSR and the NVGs were a broader framework than the CSR of the Companies Act, that CSR is now restricted to the 2 percent. But bringing CSR into the legislation, it is something very different. Here we talk about companies investing their money for the development of the country. Not principles, but actual money, rupees that you can count.Footnote 73
In short, opposition from business actors and CSR experts failed to derail or substantially alter the policy-making process, which moved forward as per the law-making procedures. The final version of the section 135 was negotiated in a debate that took place in the Lok Sabha, the lower house of Parliament, before the Companies Bill was put to a vote. Most MPs who intervened on CSR in the debate suggested that the law be strengthened. Propositions were made to increase the required CSR spending above 2 percent of net profit, to provide for the monitoring of or even the steering of CSR spending by a dedicated administrative structure, and to replace the “comply or explain” mechanism with a clear binding mandate. But the Minister of Corporate Affairs argued in favor of the flexible comply or explain mechanism, while rejecting the idea of a direct oversight of companies' CSR spending by the government.Footnote 74
In the end, the Companies Bill was passed with an amended section 135. The formulation “shall make every endeavor to ensure” introduced earlier by the MCA was replaced by “shall ensure,” and a sentence was added which expects the CSR policy of each company to “give preference to the local area and areas around it where it operates.” The section 135 was debated when the bill was put to a vote in the Rajya Sabha (the upper house of the Indian Parliament). But its formulation remained untouched, and on 29 August 2013, it became law as part of the new Companies Act.
4.3. The common voluntaristic core of the NVGs and the section 135
A systematic comparative analysis of the NVGs and the section 135 reveals significant variations as to how India's political system exploited the meaning horizon opened up by the CSR concept in these two policy initiatives. Depending on the conditions of production of these two policies, and the underlying constellations of interests and power relationships, CSR was selectively associated with different distinctions such as about profitability, the thematic scope of CSR activities, or the degree of autonomy or constraint with which companies can design their CSR programs. These meaning-generating processes resulted in the production of different regulatory structures. However, the comparative analysis also reveals a series of commonalities, which have consequences in terms of how these CSR policies are set to impact the regulatory power of the Indian state.
With regard to the material dimension of meaning, the NVGs associate CSR with profit-generating business operations, which would be “socially responsible” inasmuch as companies “integrate” and “embed” the guidelines' principles in their “core business processes.”Footnote 75 Conversely, the section 135 associates CSR with the redistribution of profit through the funding of development-related activities. The CSR Rules (2014), which provide legally-binding indications regarding the implementation of the section 135, stipulate that CSR is “excluding activities undertaken in pursuance of [a company's] normal course of business,” and that “the surplus arising out of the CSR projects or programs or activities shall not form part of the business profit of a company.”
However, this does not preclude indirect economic benefits, which are put forward in both public policies. The NVGs claim that implementing the guidelines will “improve the ability of businesses to enhance their competitive strengths, improve their reputations, increase their ability to attract and retain talent and manage their relations with investors and society at large.”Footnote 76 Moreover, the NVGs provide management tools to help companies identify how they can derive economic value out of CSR and shape their CSR strategy accordingly. Similarly, while addressing business executives in a filmed debate that followed the adoption of the Companies Act, the Minister of Corporate Affairs emphasized that the section 135 will “make sure that people in India believe that corporates are not just there looking at bottom lines and quarterly profits, but that they are also concerned with the situation in which these people are living,” and that this “good will” would pay back, also in economic terms.Footnote 77
A further point of comparison in the material dimension of meaning is the thematic scope of issue-areas related to CSR. In the NVGs, the issue-areas distinguished in the list of nine principles are rather connected to business operations. They comprise themes such as ethics, transparency, and accountability; the environmental quality of goods and services; the wellbeing of employees; human rights; inclusive and equitable development; and environmental protection. For the section 135, the Schedule VII of the Companies Act indicates development-related areas in which companies are expected to implement CSR activities, such as poverty alleviation, the promotion of education, gender equality, rural development, the promotion of heritage, and environmental sustainability. However, in both cases, the thematic scope of CSR is defined in such broad and open terms that companies can use CSR to address most societal problems that are of strategic relevance for the development of their business performances and prospects.
With regard to the social dimension of meaning, both policies differ in terms of who between the public regulator and companies is to control what companies do in terms of their “social responsibility.” The NVGs contend that “if a business endeavors to function responsibly, it would have to adopt each of the nine (9) principles in their entirety rather than picking and choosing what might suit them.”Footnote 78 But the voluntary guidelines remain “not prescriptive in nature,” and they only “urge” companies to take the guidelines into consideration.Footnote 79 Moreover, the management tools that are provided explicitly intend to help each company identify which of the guidelines' components are relevant for it in terms of CSR's “business case.” On the contrary, the section 135 is presented as a “mandatory” CSR policy, which is integral part of India's positive law.
However, the section 135 also gives significant discretions to companies. First, the “comply or explain” mechanism provides companies with the possibility to choose the extent to which they want to comply, as long as they provide some sort of justification: Only the absence of any justification exposes a company to sanctions. The MCA justified this flexibility by explaining that it was acting “in good faith, hoping and assuming that [the corporates'] objective and the Government's objective is the same.”Footnote 80 Secondly, the section 135 lets companies choose what CSR projects and programs they want to conduct. While it indicates a preference for projects located near the production units of companies, companies can deviate from this preference. Moreover, while the Schedule VII indicates issue-areas that companies should consider, the CSR Rules state that “CSR means and includes but is not limited to” the Schedule VII and companies' official CSR Policies. As emphasized by the Minister for Corporate Affairs:
It is not up to me to say this is CSR or this is not CSR. It is up to the Board of the company, how they want to use the fund. […] It is not a tax, a cess that companies have to pay to the government. We are only urging companies to spend their own money in the areas they feel most comfortable with through the agencies they are familiar with.Footnote 81
Both CSR policies also present differences with regard to the temporal dimension of meaning. The NVGs conceive of CSR as a forward-looking movement, which both generates and realizes opportunities of synergies between successful business development, social welfare, and environmental sustainability. In this perspective, the guidelines encourage and support companies to “self-steer and regulate their journey towards becoming sustainable and responsible businesses.”Footnote 82 The section 135 is more oriented towards the present. The Companies Act entails a date when the section 135 entered into force, and the section 135 aims at getting companies carry out CSR projects and programs that should make immediate contributions to the country's development. However, from the point of view of the public policy-maker, such contributions were means to attain the same forward-looking objective as for the NVGs: enhance the popularity of its pro-business development policies by steering public opinion towards a more positive perception of business-development relationships.
The differences characterizing the NVGs and the section 135 notwithstanding, the commonalities outlined above have consequences regarding the institutional impact of these two CSR policies on the regulatory power of the Indian state.
At a functional level, both policies aim to transfer a broad and flexible array of societal problem-solving functions to companies. In the case of the NVGs, these functions are mostly regulatory: The guidelines even entail a table that shows how the various principles correspond with India's legally binding regulatory framework. Formally, the guidelines “assume that compliance with the laws of the land is necessary for a business to operate, and this is non-negotiable.”Footnote 83 But this CSR policy was conceived by the government to palliate the deficient enforcement of legally binding regulations (see Section 3.2). The section 135 rather transfers redistributive functions to companies. Here as well, public authorities emphasized the complementary character of such transfer. According to the Minister for Corporate Affairs, “not for a second should anyone believe that the government is abdicating its responsibility, that it will not make roads, schools and electricity.”Footnote 84 Nonetheless, this policy uses a CSR spending requirement rather than a tax to transfer part of the wealth generated by companies to beneficiaries of development projects and programs. In short, while both the NVGs and the section 135 formally aim to supplement existing state-based regulations and social policies, they address the insufficiencies and deficiencies of these regulations and social policies by putting companies in charge.
While doing so, at an operational level, the two policies provide significant discretion to companies regarding the exercise of these regulatory and redistributive functions. The NVGs encourage companies to become full-fledged “responsible businesses,” but companies are also encouraged to conceive of CSR as a “business case,” and to consider societal issues such as labor welfare, human rights, and environmental sustainability accordingly. While the section 135 is more restrictive in terms of organizational and financial means that companies are expected to mobilize, it also leaves companies free to determine the extent of their involvement and the societal problems they want to address on the basis of their own strategic priorities.
Such autonomy does not mean that India's political system renounced to influence the CSR behavior of companies. As interviews with CSR executives of large Indian companies indicate, the adoption of the section 135 did impact CSR within companies, as the core mission of the companies' CSR departments was refocused on how to spend the CSR budget.Footnote 85 Moreover, it is likely that a number of elected representatives will continue to be in a position to influence the CSR spending of companies as part of their local strategies of patronage.Footnote 86 However, unlike state-based social welfare systems, the normative constraints imposed by the political system on the CSR behavior of companies remain flexible, and they allow companies to decide for what the CSR budget will be spent—including for securing the support of elected representatives, which is a strategic resource for profit-driven business development in the Indian context.
5. Conclusion
In view of the increasing number of CSR public policies adopted by state authorities, “we are, paradoxically, seeing government operate inside the sphere of corporate self-determination.”Footnote 87 This paradox raises the question of how such CSR public policies contribute to transforming the respective roles of state authorities and private business actors in the regulation of corporate conduct and the redistribution of resources for social welfare. The comparative analysis of two Indian CSR public policies, the NVGs, and the section 135, provided opportunities to explore this paradox.
The variety of CSR public policies displayed in the literature suggests that this question cannot receive a straightforward answer. Depending on the conditions of production of these public policies and the underlying constellations of interests and power relationships, some policies allow state authorities to exert constraints on the CSR behavior of companies, while other policies just endorse or facilitate companies' primarily profit-driven CSR practices. Using an analytical framework based on social systems theory, the paper contributes to developing this line of research by taking the semantic dimension of CSR into account. Doing so introduces a new perspective in the study of CSR public policies: While most of the literature looks at how the regulatory interventions of state authorities can impact CSR, integrating the semantic dimension in the analysis enables to also look at how the CSR concept impacts the regulatory interventions of public authorities by providing peculiar policy options. Building on this perspective of interplay between CSR and the political regulation of corporate conduct, the comparative analysis of the NVGs and the section 135 produced three interrelated contributions.
First, the study shows that the semantic properties of the CSR concept precondition the variety of CSR public policies. Indeed, the CSR concept opens up a horizon of potential meanings, which is wide and flexible with regard to its thematic scope (material dimension of meaning), to the articulation of government and corporate responsibilities (social dimension of meaning), and to the time frames in which solutions can be envisaged to tackle societal problems (temporal dimension of meaning). As no consensus has successfully narrowed down and stabilized a meaning of CSR from within this vast array of possibilities, political systems that seize the attractive policy options opened up by CSR must reflectively circumscribe which “social responsibilities” of companies they are referring to. In other words, the semantic openness of the CSR concept makes the outcomes of CSR policy-making processes highly contingent.
This contingency is particularly visible in the Indian case, where in spite of being located in a similar political-economic context, two distinct policy initiatives gave diverging meanings to CSR. Produced in a deliberative setting dominated by experts, the NVGs are mostly rooted in the global CSR doxa. The guidelines associate CSR with issue-areas that are directly connected with companies' core business processes. They also emphasize the voluntary character of CSR, and they attribute the problem-solving potential of CSR to it being a promising movement of convergence between profit-making, social welfare and environmental sustainability. Produced in a parliamentary setting, dominated by the central government and MPs, the section 135 of the Companies Act is rather rooted in India's philanthropic tradition. It associates CSR with issue-areas that are only indirectly connected with companies' core business processes. Unlike the NVGs, it defines CSR in terms of quasi-mandatory obligations, and it attributes the problem-solving potential of CSR to the redistribution of profit in non-profit development projects and programs.
Second, the study shows that in spite of the variety outlined above, the semantic properties of the CSR concept also induce commonalities in CSR public policies. More precisely, the CSR concept provides attractive resources to public policy-makers, but using these resources requires policy-makers to stay within certain common parameters.
With regard to the material dimension of meaning, the wide and flexible scope of CSR enables state authorities to address in one stroke a large number of wicked and multifaceted societal problems. Using this resource leads policy-makers to design CSR policies whose regulatory expectations toward corporate conduct remain general and flexible, if not vague. In the Indian case, both the NVGs and the section 135 cover broad and blurry issue-areas, in which companies can choose strategically which problems they want to address and which problems they want to leave untouched.
With regard to the social dimension of meaning, CSR offers opportunities for state authorities to relieve some political pressure by transferring or sharing responsibilities for societal problem-solving with companies. Using this resource leads policy-makers to design CSR policies that avoid hard constraints, as such constraints would require enforcement mechanisms that increase rather than lower the burden of state authorities. In India, both the NVGs and the section 135 emphasize the responsibility of companies in areas where the state describes itself as insufficient and/or deficient, and both policies avoid bureaucratic enforcement mechanisms based on monitoring and sanctions.
Finally, with regard to the temporal dimension of meaning, state authorities are interested in the ability of CSR to promise a convergence between profit-making and the common good, as such promise might attenuate social tensions and conflicts that are costly not only economically but also politically. Using this resource leads policy-makers to design CSR policies that legitimize profit-making by defining it as an engine of societal problem-solving. In India, while the NVGs point to a movement that can harmonize profit-making, social welfare, and environmental sustainability, the section 135 defines profit-making as a source of corporate contributions to the country's development.
Third, building on this analysis, the paper offers a description of CSR public policies that captures both their variety and their commonalities. At a functional level, CSR public policies can more or less forcefully involve companies in the performance of various regulatory and redistributive problem-solving functions, which are more or less connected with the core business processes of firms. But at the operational level, CSR public policies remain highly flexible with regard to how companies are to perform these political functions. Moreover, they avoid imposing constraints that would hurt profit-making, as profit-making is defined in these policies as a positive source of societal problem-solving.
In view of these findings, it seems that the growing intervention of state authorities in the field of CSR supports rather than corrects the rise of private governance, which involves profit-driven companies in the performance of political functions. It follows that both business-supportive and business-constraining CSR public policies can be compatible with a broader “corporate colonization of government.”Footnote 88
However, assessing the concrete impacts of CSR public policies on the regulatory power of state authorities requires further empirical research, including through cross-national comparative studies. Indeed, CSR public policies are not without consequences for the CSR behavior of companies, and understanding these consequences necessitates in-depth study on the policies' concrete modalities of implementation and outcomes. In the Indian case, for instance, the impact of the section 135 on the CSR practices of companies, including through national and local political interferences, remains to be seen. Besides, assessing the concrete impacts of CSR public policies on the regulatory power of states requires an investigation into how these policies affect other forms of regulatory intervention, such as the making and implementation of labor and environmental laws. More indirect links also need to be considered, as the regulatory impact of CSR public policies involves relationships between companies and social movements. For instance, it is still unclear whether the funds generated by the section 135 will amplify the “de-radicalization” and cooptation of Indian protest movements through CSR,Footnote 89 and how such de-radicalization might impact regulatory politics in India's democracy.
Advancing research in these directions would also provide insights into the consequences of CSR public policies for democracy. The analysis of the shift “from government to governance” as a mutation of the symbolic order of democratic societies opens up perspectives in this regard.Footnote 90 Following Matthias Lievens, the rise of collaborative governance has consequences that are far from being just “symbolic.” By transforming key features of democracy, such as equal citizens (replaced by “stakeholders”), electoral competition for power (replaced by “collaboration” and “partnerships”), and state sovereignty (replaced by issue-based “governance networks”), governance hampers the democratic expression and processing of conflict in society. CSR public policies seem to directly participate in this trend.Footnote 91 Examining empirically how these policies contribute to hindering the democratic processing of conflicts opposing profit-making and competing collective interests in society seems to be a research agenda worth pursuing.
