Measuring Corporate Social Responsibility in India: A Composite Indicator Model

Kuriakose, Francis (2021): Measuring Corporate Social Responsibility in India: A Composite Indicator Model.

Abstract

This paper proposes a composite indicator model called CSR index to measure corporate social responsibility practices of Indian companies. The proposed CSR index comprises three dimensions of CSR implementation, stakeholder management and sustainability, which are measured using 39 indicators. Data is collected from annual reports and business responsibility reports for top 100 companies ranked according to market capitalisation in March 2019. The final ranking using the CSR index highlights how Indian companies perform in their CSR practices beyond the legally mandated expenditure recommended by the Companies Act 2013. Robustness analysis shows that the ranking is robust with respect to input factors, data selection and data transformation. Regression modelling of select dimension scores of CSR index with exogenous variables of firm performance such as internal complaint resolution, turnover and profit shows positive correlation. The CSR index helps managers and policy makers to channelize a given company’s efforts at CSR into targeted programmes through resource allocation and monitoring, whilst comparing its relative performance within and across dimensions and industries.

• Item Type: MPRA Paper
• Language: English
• Keywords: Corporate social responsibility, Sustainability, Corporate governance, Business ethics, Corporate citizenship
• Subjects: M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M1 - Business Administration > M10 - General; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M1 - Business Administration > M14 - Corporate Culture ; Diversity ; Social Responsibility; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M2 - Business Economics > M21 - Business Economics

References

Aravossis, K. G., Panayiotou, N., & Tsousi, K. (2006). A proposed methodological framework for the evaluation of corporate social responsibility. In K. Aravossis, C.A. Brebbia, E. Kakaras, & A.C. Kungolos (Eds.) Environmental economics and investment assessment (pp. 87-96). Southampton: WIT Press.

Chatterji, A. K., Levine, D. I., & Toffel, M. W. (2007). Do corporate social responsibility ratings predict corporate social performance? (HBS Working Paper Number:07-051). Boston, Massachusetts: Harvard Business School.

Chen J., Huang Q., Peng H., & Zhong H. (2015). Research Report on Corporate Social Responsibility of China. Current Chinese Economic Report Series. Berlin, Heidelberg: Springer. https://doi.org/10.1007/978-3-662-45363-6_1

D’Aquila, J.M. (2018). The current state of sustainability reporting: A work in progress. The CPA Journal, 88(7), 44-50.

Davis, K. (1975). Five propositions for social responsibility. Business Horizons, 18(3), 19-24. https://doi.org/10.1016/0007-6813(75)90048-8

Delbard, O. (2008). CSR legislation in France and the European regulatory paradox: An analysis of EU CSR policy and sustainability reporting practice. Corporate Governance, 8 (4), 397-405. https://doi.org/10.1108/14720700810899149

Freeman, R.E. (1984). Strategic management: A stakeholder approach. Boston: Massachusetts: Pitman.

Friedman, M. (1970, September 13). The social responsibility of business is to increase its profits. The New York Times Magazine. http://umich.edu/~thecore/doc/Friedman.pdf

Gan, X., Fernandez, I. C., Guo, J., Wilson, M., Zhao, Y., Zhou, B., & Wu, J. (2017). When to use what: Methods for weighting and aggregating sustainability indicators. Ecological Indicators, 81, 491-502. https://doi.org/10.1016/j.ecolind.2017.05.068

Gjølberg, M. (2009). Measuring the immeasurable?: Constructing an index of CSR practices and CSR performance in 20 countries. Scandinavian journal of management, 25(1), 10-22. https://doi.org/10.1016/j.scaman.2008.10.003

Idowu, S.O., & Towler, B.A. (2004). A comparative study of the contents of corporate social responsibility reports of UK companies. Management of Environmental Quality, 15(4), 420-437. https://doi.org/10.1108/14777830410540153

Joint Research Centre, European Commission. (2008). Handbook on constructing composite indicators: Methodology and user guide. OECD.

Matten, D., & Crane, A. (2005). Corporate citizenship: Toward an extended theoretical conceptualization. Academy of Management Review, 30(1), 166-179. https://doi.org/10.5465/amr.2005.15281448

Melé, D. (2008). Corporate Social Responsibility Theories. In A. Crane, D. Matten, A. McWilliams, J. Moon, & D.S. Siegel (Eds.), The Oxford Handbook of Corporate Social Responsibility (pp.47-82). Oxford: Oxford University Press: https://doi.org/10.1093/oxfordhb/9780199211593.003.0003

Ministry of Corporate Affairs (2011). National voluntary guidelines on social, environmental & economic responsibilities of business. Government of India. https://www.mca.gov.in/Ministry/latestnews/National_Voluntary_Guidelines_2011_12jul2011.pdf

Ministry of Corporate Affairs (2015). Report of the high-level committee to suggest measures for improved monitoring of the implementation of corporate social responsibility policies. Government of India. http://www.companiesact.in/mailer/HLC_report_05102015.pdf

Ministry of Corporate Affairs (2019). Report of the high-level committee on corporate social responsibility. Government of India. https://www.mca.gov.in/Ministry/pdf/CSRHLC_13092019.pdf

Reuters, T. (2013). Thomson Reuters corporate responsibility ratings (TRCRR). Thomson Reuters Corporation: New York, NY, USA.

Saisana, M., Saltelli, A., & Tarantola, S. (2005). Uncertainty and sensitivity analysis techniques as tools for the quality assessment of composite indicators. Journal of the Royal Statistical Society: Series A (Statistics in Society), 168(2), 307-323. https://doi.org/10.1111/j.1467-985X.2005.00350.x

The Companies Act (2013), Chapter 9 § 135. https://www.mca.gov.in/Ministry/pdf/CompaniesAct2013.pdf

The Companies (Amendment) Act (2017). http://www.nfcg.in/UserFiles/THE-COMPANIES-AMENDMENT-ACT-2017.pdf

Weber, M. (2008). The business case for corporate social responsibility: A company-level measurement approach for CSR. European Management Journal, 26(4), 247-261. https://doi.org/10.1016/j.emj.2008.01.006