Gone are the days when firms used to be cold-hearted and focused only on their bottom-line. Today’s firms willingly embrace socially responsible activities, bringing rewards not only to their profits but also to society and the environment.
Take the case of Tata Steel. In the financial year 2022-2023, Tata Steel allocated Rs. 481 crores to its corporate social responsibility (CSR) activities, addressing issues like climate change, among other social issues.
So what changed? What is CSR, and how has it impacted firms?
Corporate Social Responsibility (CSR) is a management concept where companies take into account social and environmental concerns into their businesses, along with a focus on their bottom-line. This way companies are more “responsible”, by showing concern for the environment and society, and not only their bottom-line.
CSR helps socially responsible firms and benefits society at the same time. The notion of CSR has immense potential to transform business growth in this competitive era. India’s CSR regulation is also aligned with the United Nation’s Sustainable Development Goals (SDGs).
Although there is a lot of literature on the impact of CSR activities on firm financial performance, there is not much literature on the impact of CSR activities on the environment.
Therefore, in this study, the authors Mr. Baikunthanath Sahoo, Prof. Krishna Malakar, and Prof. Santosh Kumar Sahu from the Department of Humanities and Social Sciences, Indian Institute of Technology (IIT) Madras, Chennai, India (Prof. Krishna Malakar and Prof. Santosh Kumar Sahu are also affiliated with the School of Sustainability, Indian Institute of Technology (IIT) Madras, Chennai, India), have studied the role of CSR practices on corporate energy efficiency and environmental sustainability in the Indian Iron and Steel firms.
The Indian Iron and Steel firms contribute to 2% of the country’s GDP. It is the second largest crude steel producer after China. However, it is also a resource-intensive and heavily polluting sector under manufacturing, which is why it was chosen for this study.
Data was collected from the Centre for Monitoring Indian Economy (CMIE) prowess database of Indian companies for 2009-2021. Panel regression techniques were used, and it was found that energy intensity and CSR investment had an inverse relationship, which meant that with more CSR investment, the energy efficiency of the firm was also high.
Therefore, it was concluded and supported with data that firms that spend beyond the threshold levels experience a visible impact on energy efficiency. CSR expenditure of R&D (Research and Development)-intensive firms tend to have higher energy efficiency than their counterparts.
Similar studies could be extended to other pollution-intensive sectors, like cement and chemical, or emerging and developing economies, to enhance the generability of the current work’s findings.
Dr. Sanjay K. Singh, from the Economics and Business Environment Area, at the Indian Institute of Management (IIM) Lucknow, greatly appreciated the work done by the authors with the following comments: “This article makes a valuable contribution by examining how corporate social responsibility (CSR) influences energy efficiency in India’s iron and steel sector, an area with limited prior research. The study is well-structured, grounded in stakeholder and resource-based theories, and uses robust econometric methods with a large dataset. Results show that CSR, particularly above-threshold spending and in R&D-intensive firms, enhances energy efficiency, offering important policy implications. Future research could build on this work by examining CSR disclosure quality, cross-industry comparisons, longitudinal effects, and the role of technological innovation in deepening the link between CSR and sustainable industrial growth.”
Article by Akshay Anantharaman
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