CSR and The Menace of Climate Change

What is CSR?

Corporate Social Responsibility is a form of self-regulation integrated into business model, that considers a company's social and environmental impact in addition to profits. The term was coined by Howard Bowen in 1953. 

It is traditionally divided into four types: environmental, philanthropic, ethical and economical responsibility.  With the ever-widening need of environmental protection, the study of environmental responsibility becomes important for us. It is basically the idea that organizations should work in a manner, least detrimental to the environment. Reducing harmful practices by decreasing pollution, greenhouse gas emissions, wastage of natural resources, regulating energy consumption are some of the approaches to it, among others.

Legal Framework

Voluntary earlier, the CSR provisions were made mandatory under section 135 of The Companies Act, 2013, with effect from 1st of April, 2014. 

As per section 135, of The Companies Act, 2013, all the companies having:

•  a net worth of rupees five hundred crore or more, or

• a turnover of rupees thousand crore or more, or

• a net profit of rupees five crore or more during the immediately preceding financial year,

shall spend at least 2% of the net profit of three immediately preceding financial years. Schedule VII of the Act provides a list of activities in furtherance of which CSR expenditure can be made.

 Ensuring environmental sustainability, ecological balance, protection of flora and fauna, animal welfare, agro-forestry, conservation of natural resources and maintaining quality of soil, air and water including contribution to the Ganga fund are some activities expressly mentioned in the said schedule.[1]

About Climate Change

Climate is the average weather condition for a specific area over a long period of time. Climate change refers to long term shifts in temperature and weather patterns. The WHO projects 2,50,000 additional yearly deaths due to climate change by 2030. With rising temperature, more severe storms, rising ocean levels and countless health hazards, the call for combating climate change is more alarming than ever before.

Large scale manufacturing, power generation, deforestation, transportation and other activities undertaken by corporates lead to greenhouse gas emissions which in turn cause climate change. As per a report by Carbon Disclosure Project since 1988, just 100 companies have been responsible for 71% of global greenhouse gas emissions. However, in recent times the role of business initiatives in the form of CSR practices in mitigating climate change has assumed great significance. 

Threefold Link Between Business Responsibility and Climate Change

Climate change affects not just the environment but also has impact on social and economic fronts. Most of the developing countries like India are battling with poverty, hunger, loss of livelihood and pollution. In a welfare state, the theory of stewardship demands participation of business in development of society and mitigation of such hazards.

Also, business activities which directly or indirectly lead to exploitation of nature and environmental degradation come with the ‘Social cost’ of restoring the environment to its actual position.

In addition to the above, the ancient Indian tradition also advocate environmental ethics and emphasize on giving back to the society and mother nature.

In view of the above factors, the objects of business no longer remain profit maximization alone, rather it concentrates on Environmental, Social and Governance (ESG) and the same is apparent from the corporates like Infosys, which has achieved carbon neutrality in 2020, Wipro 75% of whose electricity in India comes from renewable sources and many more.

How CSR Can Be Leveraged to Mitigate Climate Change

Following are a few ways of employing CSR to mitigate climate change, which can be adopted by businesses and in pursuance of SDG 13 pertaining to climate action,

1. Clean Energy Programs: Organizations can invest in clean energy programs by investing in renewable energy sources such as solar power projects. An example of the same can be the U.S. based company Johnson and Johnson, which has purchased a privately owned energy supplier which has provided the company a renewable alternative.

2. Waste Management Projects: Businesses can endeavour to reduce wastage thereby supporting the environment. One such organization is Coca-Cola which has unveiled 100% plant based plastic bottles with the aim of ‘A World Without Waste’

3. Carbon Neutrality: In line with the Paris agreement's goal of reaching net zero by the year 2050, a number of businesses achieving carbon neutrality. Ford Motor company has increased investment in electrification by $22 billion in pursuance of its target of reaching carbon neutrality by 2050.

4. Afforestation: Enhancing the green cover is an effective climate action leading to carbon sequestration, reducing soil erosion and enhancing soil health and groundwater levels. ITC's afforestation programme, cumulatively covering 1.1 million acres of land, can be an example.

5. Education and Awareness: UNESCO recognises climate change education as an important step to address the impact of climate crisis. Pune based Marpu foundation has been involved in spreading awareness about climate change and serves as a good example.

AI and Climate Action

Today, the presence of Artificial Intelligence (AI) spans across every field, climate change is no exception. The perfect example of this can be Google Inc, which pursuant to its CSR policy is on a mission to tackle climate change using AI. Some of its remarkable initiatives are:

• Implementation of fuel-efficient routing in Google maps.

• Development of a flood hub platform to prepare for and respond to floods.

• Contrail forecast maps which enable pilots to avoid creating contrails.

The tech giant aims to achieve net zero by the year 2030 and is transitioning towards a circular economy.

Real Life Examples

Let us now analyse, a company’s CSR policy, which is remarkable in terms of climate action, 

ITC Limited, is a multi-business Indian enterprise with presence in FMCG, paper, packaging, agribusiness and IT and is a global sustainability exemplar. Key elements of the company’s CSR policy are,

• Social Forestry: ITC’s initiative brought forest cover has positively impacted over 1.75 Lakh households.

• Water Stewardship Programme: Under this initiative the company brought 1.36 lakh acres under watershed leading to water security and drought proofing.

• Biodiversity Conservation: This program focused on rekindling ecosystem services and improvements in carbon stocks and floral/faunal biodiversity across states have been confirmed by studies.

• Climate Smart Agriculture: The program led to facilitation of over 9.5 lakh linkages, aimed at de-risking farming from erratic weather.

• Waste Management: ITC aimed at creating scalable models for waste management, eliminating disposal of waste in landfills.

Various other environmental initiatives such as livestock development, sanitation, etc also turned out to be fruitful. Not just ITC, the shift of approach towards climate action can be seen in the CSR policies of big players such as Reliance Industries Limited, JSW Steel Limited, Godrej Consumer Products and the list goes on.

Emerging Trends in CSR, in Context of Climate Change

The following trends can be observed from company's recent CSR policies,

1. From Philanthropy to Strategy: Earlier the concept of social responsibility was viewed as philanthropy, involving charitable donations and the scope was limited. However, today a corporate's actions are strategically planned and professionally executed. For example, Unilever has inculcated sustainability into its business model with the introduction of Unilever sustainability living plan.

2. Measuring Impact: For authenticity and genuineness of CSR action, provisions relating to ‘Impact Assessment’ with respect to CSR contribution have also been added to the Companies Act, 2013. 

In terms of the said provisions, every company having average CSR obligation of ten crore rupees or more, in the three immediately preceding financial years, shall undertake impact assessment, of their CSR projects having outlays of one crore rupees or more, and which have been completed not less than one year before undertaking the impact study.[2]

3.     Community Engagement: Companies today are trying to align company’s values with that of the customers, gaining their loyalty and at the same time contributing to sustainability. The perfect example would be Patagonia's ‘1% for the Planet’ campaign, whereby it contributed 1% of its sales proceeds for environmental causes.

The Way Forward

In the context of climate change, corporates play a dual role, they are the contributors as well as the mitigators of climate change. One of the major concerns faced is lack of transparency. There are many businesses at the grassroot level which make limited efforts to reveal data about their programs, impact assessment and utilization of funds, while some corporates do it only for the sake of appearance and not meaningful impact. The same creates a need for precise legislation and checks to ensure compliance in relation to CSR. There is an overarching need for a system to compare the extent to which a company has made contribution to the mitigation of climate change against the adverse climatic impacts it has led to, only then can there be ‘Effective’ CSR contribution. With increasing awareness and measures to climate change, more and more organizations are expected to integrate climate action in their CSR policies. By,

Rajan Saboo,

II BBA LLB,

Rank 2 in Blog Writing Competition 2025.

ILS Law College, Pune

References:

1.      Tim Stobierski, Types of Corporate Social Responsibility to Be Aware Of, HBS Online (Apr. 8, 2021), https://online.hbs.edu/blog/post/types-of-corporate-social-responsibility.

2.      16 Brands Doing Corporate Social Responsibility Successfully, Digital Marketing Institute (Nov. 10, 2022), https://digitalmarketinginstitute.com/blog/corporate-16-brands-doing-corporate-social-responsibility-successfully.

3.      How is Corporate Social Responsibility evolving in the age of climate change?, https://vorecol.com/blogs/blog-how-is-corporate-social-responsibility-evolving-in-the-age-of-climate-change-155895.

4.      Yossi Matias, Accelerating climate action with AI, (Nov. 20, 2023), https://blog.google/outreach-initiatives/sustainability/report-ai-sustainability-google-cop28.

5.      100 companies are responsible for 71% of GHG emissions, https://www.activesustainability.com/climate-change/100-companies-responsible-71-ghg-emissions/.

[1] Companies Act, 2013, § 135, No. 18, Acts of Parliament, 2013 (India).

[2] Companies (Corporate Social Responsibility) Rules, 2014, Rule 8.