Corporate Social Responsibility Issues and Sustainabilty

The corporate social responsibility rules, which came into force from April 2014, make it mandatory for large Indian firms to set aside at least 2% of their average net profit for socially responsible expenditures. CSR is a term describing a company's obligation to be accountable to all of its stakeholders in all its operations and activities. The Companies Act, 1956 is replaced with the Companies Act, 2013 and CSR has been made mandatory for a particular class of companies. There has to be an all-inclusive growth of the companies. Perhaps keeping this in mind, Indian law makers brought this law. This paper aims to provide an assessment of the response by firms to these rules. It examines the extent to which these rules have led firms to comply and the extent to which their implementation over the financial year 2014-15 has contributed additional funds towards the social development of the country. The analysis is based on firm-level data sets of Indian firms for 2010-15. We find that following the implementation of these rules there has been an increase in the number of firms that are spending on CSR initiatives as well as the total amount spent on CSR activities. However, the distribution of CSR expenditures amongst firms is extremely unequal