Institutionalization of Corporate Social Responsibility (CSR) in India and Its Effects on CSR Reporting: A Case Study of the Petroleum and Gas Industry

Please refer to Appendix A for a snapshot of Section 135, Indian Companies Act 2013.

In his paper, Campbell (2007) argues how whole fields of economic inquiry, such as the study of economic regulations and transaction cost analysis, are based on the assumption that, if the raison d’etre of corporations is to maximize profit and shareholder value as best as they can, then it stands to reason that corporations will do whatever it takes to achieve this goal; perhaps even acting in socially irresponsible ways if they believe that they can get away with it.

In this traditional form of stakeholder theory, the shareholders and the consumers were the main actors and the manager’s responsibility was limited to behaving in the interest of shareholders; social problems being the main concern of the state rather than of company managers (Freeman, 1984).

The Bhopal gas tragedy, a gas leak incident in India—considered the world’s worst industrial disaster—occurred on the night of 2–3 December 1984 at the Union Carbide India Limited (UCIL) pesticide plant in Bhopal, Madhya Pradesh. Over 500,000 people were exposed to methyl isocyanate (MIC) gas and other chemicals. The toxic substance made its way into and around the shantytowns located near the plant. A 2006 government affidavit stated that the leak had caused 558,125 casualties, including 38,478 temporary partial injuries and approximately 3900 severely and permanently disabling ones (The Indian Express, 3 December 2014).

India’s Union Environment Ministry indicted the Oil and Natural Gas Corporation (ONGC), one of the largest domestic petrol and gas companies, for the petrol spill that was reported off the Uran coast near Mumbai in October 2013. The poor maintenance of pipelines and negligence shown by its handlers had led to the spill, causing severe environmental damage to the coastal area. (Times of India, 2/4/13).

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In Europe, national regulators in countries such as Denmark have promoted integrated reports (IR) by making IR mandatory for largest companies on comply or explain basis. In the USA, use of GRI reporting guidelines for CSR is more prevalent with only a few organizations following SASB’s standards. European Union’s Directive 2014/95/EU requires all European Union countries having more than 500 employees to report their CSR performance.

The DPE Guidelines define CSR as ‘a company’s commitment to operate in an economically, socially and environmentally sustainable manner, while recognizing the interests of its stakeholders’ (DPE guidelines on CSR, India, 2010). While the earlier DPE guidelines focused mainly on CSR activities for external stakeholders, the revised ones also took internal stakeholders, particularly employees, into account. For the first time, the new CSR guidelines also included a section on sustainability reporting and disclosure.

The nine principles of the NVGs are: Businesses should conduct and govern themselves with ethics, transparency and accountability; businesses should provide goods and services that are safe and contribute to sustainability throughout their life cycle; businesses should promote the wellbeing of all employees; businesses should respect the interest of and be responsive towards all stakeholders, especially those who are disadvantaged, vulnerable, and marginalized; businesses should respect and promote human rights; businesses should respect, promote and make efforts to restore the environment; When engaged in influencing public and regulatory policy, businesses should do so in a responsible manner; businesses should support inclusive growth and equitable development; businesses should engage with and provide value to their customers and consumers in a responsible manner.

The safety performance of organizations in the industry is evaluated every year through a safety award scheme instituted by the Ministry of Petroleum and Natural Gas (MoPNG). The evaluation of performance is carried out by the Oil Industry Safety Directorate (the OISD) and involves safety awards in numerous safety-related categories.

(i) Eradicating hunger, poverty and malnutrition, promoting healthcare—including preventive healthcare and sanitation, including contribution to the Swach Bharat Kosh set up by the Central Government for the promotion of sanitation and making safe drinking water available; (ii) promoting education, including special education and employment enhancing vocation skills, especially among children, women, the elderly, and the differently abled, and livelihood enhancement projects; (iii) promoting gender equality, empowering women, setting up homes and hostels for women and orphans; setting up old age homes, day care centres and such other facilities for senior citizens and measures for reducing any inequalities faced by socially and economically backward groups; (iv) ensuring environmental sustainability, the ecological balance, the protection of flora and fauna, animal welfare, agroforestry, the conservation of natural resources and maintaining the quality of petrol, air and water, including contributions to the Clean Ganges Fund set up by the Central Government for the rejuvenation of the river Ganges; (v) protection of national heritage, art and culture including restoration of buildings and sites of historical importance and works of art; setting up public libraries; promotion and development of traditional arts and handicrafts; (vi) measures for the benefit of armed forces veterans, war widows and their dependents; (vii) training to promote rural sports, nationally recognized sports, Paralympic sports and Olympic sports; (viii) contribution to the Prime Minister’s National Relief Fund or any other fund set up by the Central Government for the socio-economic development, relief and welfare of the Scheduled Castes, the Scheduled Tribes, other backward classes, minorities and women; (ix) contributions or funds provided to technology incubators located within academic institutions approved by the Central Government; (x) rural development projects; (xi) slum area development.

The areas of advocacy of most of these bodies are inclusive social and community development, energy security and economics (taxation and pricing policies for the sector, subsidies in petrol and gas products).