STATEMENT OF PROBLEM :

Through my research, I intend to examine the effects of governance systems on the concept
of corporate social responsibility. I intend to portray how the companies maintain a balance
of resisting the ethical and political ideologies as they characterise their position in society for
progressing towards the amalgamation of analytical and normative viewpoints in business as
well as society. This research also demonstrates how corporate accountability and
responsiveness are both facilitated and restrained by governance systems.1
If we take a look at the past, we notice that in the past several years that various businesses
and organisations have been compelled to file for bankruptcy. This tendency has made the
concept of corporate governance and corporate social responsibility more significant in the
past few years. 2 This research analyses the importance of concepts like corporate governance
and corporate social responsibility in a company’s growth.
Corporate Social Responsibility or CSR refers to the obligations of a corporation or business
entity which relate to the community and the environment at large. In today’s times, mostly
all multinational firms and business entities place a lot of importance on CSR. CSR is built
on the fundamental principles of “ giving and receiving “. 3The obligation to give back
something good to society arises when businesses use raw materials and human resources
from all over the world and society.
The Indian Government is taking many initiatives to spread CSR awareness as well as
incorporate these governance principles in the corporate world. 4 As a result of the same, the
government is using CSR programmes to seek the support of businesses with the aim to
enhance society.5 Keeping these strategies in mind, the Indian government has made it
mandatory for businesses to now incorporate CSR norms according to the Companies Act,
2013. In accordance with the same, Section 135 of the Companies Act, 2013 and Schedule
VII of the Act and Companies ( Corporate Social Responsibility Policy ) Rules, 2014 .6
1
Frank Jan de Graaf and J. W. Stoelhorst, “ The Role of Governance in Corporate Social
Responsibility “ (2009) Volume 52, Issue 2
2
Ibid
3
Ibid
4
Ibid
5
Ibid
6
Companies Act, 2013, Schedule VII of the Act and Companies ( Corporate Social
Responsibility Policy ) Rules, 2014
This study also lays emphasis on the reasons for companies and businesses to engage in CSR
policies, how these policies are implemented and how CSR has an impact on the performance
of a company financially. 7
I have chosen this topic because “ good governance “ is the need of the hour. It is very
important for society as well as corporations and business entities. Both CSR and corporate
governance are interlinked and it becomes crucial for us to understand what connection exists
between the two and what function it actually serves. 8
An effective corporate governance system raises public trust and faith in businesses. These
days, corporate social responsibility and environmental, social and governance issues are
receiving a lot of attention which enhances the accountability of the organisations and thus
corporations and other business entities are laying more emphasis to improve their approach
towards a good corporate governance system. This is done as this eventually enhances their
capability to survive and succeed. 9

HYPOTHESIS :

The adoption of CSR strategies and governance principles has a great influence on a
company’s corporate image and market strategy10 :

In today’s times, it becomes very important for a company to build their brand image as a
socially aware and progressive organisation. A company’s positive reputation serves as a key
asset which serves it apart from its rivals. A reputable business generates competent
personnel which leads to significant client dealings. 11In every corporation and entity, brand
profitability and success depend a lot on the company’s reputation. Social initiatives adopted
by the companies strengthen the cooperative structure which raises the technical expertise
and boosts the brand image of the company. In this manner, corporations and business

7
Kezia Farnham, “ The Relationship Between Corporate Governance and Sustainability “
(2022)
8
Ibid
9
Ibid
10
Lijuan Wu and Shanyue Jin, “ Corporate Social Responsibility and Sustainability: From a
Corporate Governance Perspective “
11
Ibid
entities can create a genuine and lasting presence to achieve sustainable development for their
business. 12
A company’s image can only be solidified if it has a sound identity. Though it is not easy to
build a brand’s reputation in the marketplace if it is implemented properly, gradually a
positive reputation is built. It is believed that a strong reputation creates a successful brand
and also at the same time gives the company a strong competitive edge. A company’s brand
reputation can also be developed if the company engages in charitable giving or creating top-
notch goods and services. The shareholders’ and investors’ perceptions of great, mediocre or
poor activities determine the reputation of a corporation.13
The market value of a company is measured by the company’s marketing strategy. Brands are
the most important assets for a company which increases its financial value. 14

RESEARCH QUESTIONS :

Q1. Whether businesses benefit from the incorporation of sustainability in their

strategic planning? 15

Businesses should consider ways to include sustainability in their strategic planning. All over
the world, people are becoming more conscious to preserve the planet’s natural environment
and resources so that they can last longer. The utility of many natural resources is being made
by businesses so that they can operate as sustainably as possible without sacrificing the
effectiveness of their operations. 16 Companies have eliminated paper use, reduced emissions
and engaged in many other environmental initiatives. Companies are now discovering that
incorporating conservation ideas into their vision, their philosophy and their long-term
planning is an effective method to achieve this. 17
Businesses are working to create an environment where everyone is encouraged to conserve
fuel, to lower expenses, minimise waste and improve other environmental concerns.

12
Ibid
13
Ibid
14
Ibid
15
Johanna Carlson and Richard Akerstom, “ Corporate Social Responsibility- a case of
Orhlings Price water House Coopers
16
Ibid
17
Ibid
There are numerous advantages to including these strategies. The society benefits from the
combined efforts of businesses and individuals who try to conserve energy and resources.
Consumers these days are placing a high value on sustainable strategies which is prompting
corporations to modify their sourcing practices.
Businesses also discover that the cost savings that the economic gain they achieve through
conservation initiatives allow them to explore new areas, giving them an advantage over their
rivals. Companies gain from the advancement of environmentally friendly activities as it
draws in work- personnel, investors and customers who share their value. The majority of
businesses discover that their initiatives enhance the public’s perception of them which
directly affects their financial results.
Companies are constantly required to review their corporate governance procedures and
policies in order to make the necessary improvements. These initiatives will provide the
company with more credibility and a strategic edge.

Q2. Do environmental, social and governance disclosures exist in a sufficient amount in

businesses? 18

Transparency and disclosure norms are required for businesses to thrive. The customers,
distributors, work – personnel, investors and the regional local organisations call for
disclosure and openness from businesses. To report financial and corporate activity in a
transparent, reliable and concise way, firms need to establish ways to acquire and evaluate
their data. 19In today’s times, investors and stockholders are mainly concerned about
environmental and social issues such as climate change.
Lately, Mr Larry Fink, the CEO of Black Rock Inc. urged businesses to submit their
strategies for how their business plans can enable a gross–zero market environment by the
year 2050. The SEC also declared the ‘ Climate and ESG Task Force ‘ early this year which
is charged with finding inconsistencies or false statements in corporate disclosures of climate
change-related risks. Through consistent, verified ESG reporting CFOs are better placed to
guide ESG initiatives. 20

Beatriz Jaenicke, “How do Corporate Social Responsibility Policies Creates Value for
18

Companies
19
Ibid
20
Ibid
Q3. Do social policies associated with CSR and Corporate Governance generate utility
for businesses?21

The past two years have been difficult for CSR professionals around the world. Due to the
pandemic, fewer people are working and industry experts are having difficulty explaining
why their programmes should be continued in a challenging time. Many businesses still view
CSR as a ‘pleasant corporate wing’. Investors have found it difficult to understand how
participating in societies or creating social value might also offer value to companies. Most
CSR specialists are also forced to demonstrate their value.22
Companies gain additional clients for the government sector. After the passing of the Public
Services ( Social Value ) Act in the year 2012, corporate governance has taken into account
the impact that public expenditure through private businesses has an impact on the well-being
of the economy. The Procurement Policy Note required all businesses to submit bids for
government contracts to demonstrate their intrinsic worth during the course of the contract.
This gives the businesses a strategic advantage. 23
Social policies also attract more clients. Studies have demonstrated that customers value their
moral obligation to society. Consumer impression, their purchasing intent and CSR activities
are interlinked. 24

METHODOLOGY ADOPTED :

The exploration of the legal field is a characteristic feature of legal research. It is about
looking up and learning laws, their history, how they are used and any other topic that has a
connection with the legal system. To carry out research, various methods are used known as “
research methodology “. 25It is an organized approach of solving a research topic by
collecting data and drawing inferences from the study.

21
Ibid
22
Ibid
23
Ibid
24
Ibid
25
Mauricio Latapi, Lara Johannesdottir “ A Review of the History and Evolution of
Corporate Social Responsibility “ (2019)
In legal studies, doctrinal and non-doctrinal approaches are used mostly. Doctrinal research is
more conceptual and scholarly in nature while non-doctrinal research adopts an integrated
approach and is more useful and thus is also termed as “ empirical research “. 26

The method of research adopted by me is “ Doctrinal Research”.

The term “ doctrinal research “ is derived from the word “ doctrine” which is a fundamental
guiding idea or a principle.27 It deals with the concepts and ideas that guide the legal system.
The doctrinal legal study entails exploring the legal concepts and principles from numerous
sources like judgements, customs, and legislations to examine them and to come to reliable
findings. 28Doctrinal research can be used for a variety of things such as aiding legislators to
and assisting courts in rendering decisions which are effective and legitimate and preparing
cases. It also helps to create impactful and significant laws create Thus the research adopted
by me is doctrinal research.29 This research methodology is important as it offers the
magistrates and the courts to examine statutes from many angles to analyse them.
Thus the method of research adopted by me is the Doctrinal Method.

LITERATURE REVIEW :

Corporate social responsibility and corporate governance and corporate financial

performance: Bridging concepts for a more ethical business model

This article talks about the significant increase in the professional and educational industry
with issues relating to business comprising mostly of Corporate Social Responsibility or
CSR, principles of good governance and Environmental Social Governance or the ESG
norms. 30
This has also resulted in the creation of theoretical and research-based studies as well as
scholarly and industrial recommendations. Through this article, I aim to include in my
research how the conventional understanding of corporate governance has changed
significantly as a consequence of the shift towards professional research and how at present
corporations and businesses respond to people as opposed to the past.

26
Ibid
27
Ibid
28
Ibid
29
Ibid
30
Afif Hossain Bama, Nazarius Neng, ”The role of Corporate Governance and Corporate
Social Responsibility in Business expansion “
In the past, corporations have laid a lot of emphasis on “financial factors” with the aim to
protect the interests of corporate stakeholders. 31With changing times, the concept of CSR and
good Corporate Governance has only been focusing on economic, social as well as
environmental factors.
The incorporation of ESG principles in the analysis of “sustainable investment portfolios “is
an important example of the same. With the help of this article, I aim to elaborate more on the
interconnection between Corporate Social Responsibility and Corporate Governance and how
these new techniques and tactics shall be analyzed and reviewed. 32

The role of Corporate Governance and Corporate Social Responsibility in Business

expansion

Many firms and big business entities have suffered from great losses in the recent past as well
as well as going bankrupt. The concept of Corporate Governance and Corporate Social
Responsibility has increased significantly in the past few years. Through this article, I aim to
emphasize on the significance, responsibilities, and functions that CSR and CG have in
business expansion. It also highlights the shortcomings of conventional governance systems
and how they lead to bank failures. It also helps to clarify what these concepts are and how
they help in the development of a firm. 33
An international example of the same is the Grameen Bank case study which is a
Bangladeshi-origin bank and how it remained successful over the years regardless of a
financial crisis. I aim to understand how Corporate Governance and Corporate Social
Responsibility principles played a key role to maintain the success of the bank. One can
examine how the visible expansion of the CG and CSR norms with the example of Grameen
Bank in Bangladesh has moved from the conventional banking models and system. 34

The Influence of Corporate Social Responsibility on Business Practice: The Case of

International Certifiable Management Standards

This article examines how Corporate Social Responsibility has an impact on corporate
activities and works towards achieving its goals by following certain International Certifiable

31
Ibid
32
Ibid
33
Ibid
34
Ibid
Management Standards or the ICMS as CSR-related practices. This article gives an overview
of CSR practices and analyzes through surveys how CSR initiatives do not affect business
operations. Firms implement these strategies because of market competition instead of trying
to enhance their CSR practices. 35
This article also helps to bring out the flaws in the system related to CSR and its strategies. It
demonstrates how businesses use CSR strategies to mislead and persuade stakeholders that
their operations fall within social boundaries. From the findings, we also understand that the
purview of CSR development and execution lacks to ensure that the practices are embedded
into the business operations of a firm. Businesses are being urged to go beyond their capacity
and to increase the fiscal aspects of their businesses and take into consideration its
consequences on society and the environment. As a result of the same, various businesses
have altered their procedures and practices.36

Corporate Social Responsibility and Corporate Governance

Corporate Social Responsibility or CSR is a concept of corporate governance that expands

the scope of contractual rights and obligations of the firm from meeting the firm as well as
the stakeholders' obligations. 37This article helps in demonstrating that CSR is a social
regulation which originates as an agreement between shareholders and investors which is an
initial step in the decision-making process of a corporate governance entity. This acts as a fair
directive for the board of directors, striving to maintain a balance among shareholders. Social
regulations influence corporate governance and play a key role in determining the stable
activities that are accepted. 38The social contract is applicable when it includes “a veil of
social ignorance.” The goal of this article is to introduce CSR as an expansive system of
governance in which businessmen, managers, owners, and directors have some sort of
obligation to both investors and non-controlling decision-makers. This article aims to
describe CSR as a social norm that includes both legal regimes as well as social progressive
changes which have the intention to restructure corporate governance so that the individuals

35
Konstantinos Iatridis, ” The Influence of Corporate Social Responsibility on Business
Practice: The Case of International Certifiable Management Standards”
36
Ibid
37
Lorenzo Sacconi,” Corporate Social Responsibility and Corporate Governance”
38
Ibid
and management have a distinct contribution to human resources which are at the level of
capital spending. 39

The Corporate Social Responsibility Regime

Corporate Social Responsibility or CSR basically refers to the idea that business entities
should take into consideration societal interests by being accountable for how their operations
have an influence on clients, work personnel, shareholders, investors, and the environment.
Organizations are expected to commit and go beyond boundaries to comply with the law to
improve the standard of living for society. 40
This article states that corporate social responsibility is taking on the responsibilities of
“corporate citizenship “and making sure that the company’s principles are matched between
improving and increasing the company’s wealth with the aim of improving the environment.
These concepts urge business entities to adopt initiatives beyond financial ones. The nature
and the extent of CSR for a business entity can depend on the nature of the entity.
This article further goes on to examine how CSR aids in the formation of strong moral values
among clients. It is very important for firms and business entities to establish trustworthiness
and good performance which is useful for professional services that they offer attracting more
and more clients. Thus, companies take greater initiatives towards sustainable practices. 41

Corporate Governance and Corporate Social Responsibility: Discretion to Obligation

This article states that CSR revolves around the notion that corporations and entities should
be mindful of the needs and considerations of all stakeholders. The shift in paradigm around
the concept of CSR and CG has been that it now is “a legal requirement on a global scale
“instead of just being a discretionary responsibility of all corporations. Towards the end of
the 20th century and the beginning of the 21st century, a lot of focus was given to the shifting
dynamics towards corporations and society. 42 The diverse effects of corporations on different
aspects of society have been subjected to a lot of discussions recently. The Bhopal Gas
Tragedy, the labour issue in Burma, and the Shell crisis in Nigeria are all examples of the
39

40
Saurabh Gaur,” Corporate Social Responsibility Regime ”
41
Ibid
42
Tassawar Zahoor, “ Corporate Governance and Corporate Social Responsibility: Discretion
to Obligation”
same. The main goal of this research is to demonstrate that Corporate Social Responsibility is
not anymore just a matter of business discretion but instead is a reflex of business entities and
corporations to society. 43

A Strategic Approach to Corporate Social Responsibility

This article basically describes the Strategic Approach to Corporate Social Responsibility.
CSR is a part of the corporation’s strategy which is interconnected with its business goals to
provide an economic advantage to the country and enhance social betterment in an everyday
corporate structure. This article describes the concepts of “sustainable development, global
citizenship, value-driven business “ etc. which provides a clear understanding of corporate
social responsibility. 44
This article further goes on to talk about marketing, operating efficiencies, management
consulting etc. which are explored and proven “benefits of an effective CSR “. It is a system
where the work personnel is satisfied, loyal to the corporation with a good track record of
corporate responsibility “.45 CSR may be utilized as a constructive strategy to attract top
talent which has positive effects on the corporation or entity. All corporations focus on CSR
initiatives to generate new sources of revenue. Studies indicate that over 54% of corporate
executives believed adopting CSR policies started to give them an edge over their main
rivals. 46

43
Ibid
44
Kellie McElhaney,” A Strategic Approach to Corporate Social Responsibility “
45
Ibid
46
Ibid