From Global Frameworks to Nepali Realities – Nepal Economic Forum

by

Suyasha Shakya | May 19, 2025

Corporate Social Responsibility (CSR) is neither a new term nor practice. With roots in Roman law, CSR essentially refers to the recognition of the idea that a business has certain duties to the world that it operates in and profits from. This may manifest in terms of its responsibility towards society or the environment in which it operates. Today, CSR has become quite the buzz word, with many corporations dedicating departments to this cause, not just due to an understanding of the triple bottom line approach, but also due to increasing consumer awareness whereby customers are motivated to purchase from companies that show an effort to “make the world a better place”. Thus, CSR has also become somewhat of a marketing move in today’s day and age. But what exactly is the definition of CSR, its evolution, and its practice in the world and in Nepal? This article aims to unpack these very questions as it looks at the past, the present, and the future of CSR in Nepal and the world.

The Disputed Definition and Differentiated Practice of CSR

In our part of the world, CSR often manifests itself in terms of philanthropy. But is this all that it is? In order to answer this question, let’s first look at the evolution of CSR. As mentioned earlier, the idea has roots in Roman law and concrete practices of corporate philanthropy dating back as far as 1875, with the American departmental store Macy’s contributing funds to an orphan asylum. However, the modern coining of the term CSR only dates back to 1953, with the publishing of Howard R. Bowen’s book, ‘Social Responsibilities of the Businessman’, leading to Bowen often being cited as the “father of CSR”. In his book, Bowen argues that businesses have an obligation to pursue policies and make decisions that are “desirable in terms of the objectives and values of our society” because of the direct impact of businesses on stakeholders, employees, customers, and society. But this is a rather vague definition, leading to a lack of general consensus regarding CSR’s meaning. Due to this, some have even called it an “essentially contested concept”.

Meanwhile, to make it easier to understand, many have tried to create diagrams to break down the concept of CSR. For instance, Archie B. Carroll sees CSR in terms of a pyramid with the bottom rung being the economic responsibilities, followed by legal responsibilities, ethical responsibilities, and philanthropic responsibilities. On the other hand, a Harvard Business Review video succinctly describes CSR as following the triple bottom line approach of considering profit, people, and the planet, while being broken into four categories – environmental, philanthropic, ethical, and economic.

This contest in the definition of the term has culminated in two different approaches to CSR. One approach considers CSR to be of a largely philanthropic nature. Meanwhile, the other approach sees social responsibility as something to be incorporated into business operations itself. This differentiated approach has even led to different definitions of legal policies regarding CSR. In order to understand these, let’s look at some examples of CSR around the world.

How the World Practices Corporate Citizenship

As mentioned earlier, CSR manifests itself in terms of either philanthropy or an incorporation of social responsibility into business operations. A major trailblazer in corporate philanthropy is Salesforce with its 1-1-1 philanthropic model, whereby they contribute 1% of product, 1% of equity, and 1% of employees’ time to communities and the nonprofit sector. Similarly, Microsoft practices philanthropy through employees volunteering their time and the company donating money to various nonprofit activities. In India, on the other hand, in FY 2022/23 alone, 24,392 companies spent almost INR 300 billion on CSR. Almost all of these were of a philanthropic nature, with companies such as TATA conducting a variety of projects that cover everything from education to healthcare.

On the other hand, numerous companies have also been integrating socio-economic practices into their operations as part of their CSR initiatives. For example, the popular toymaker Lego aims to use environment-friendly materials to create all of its core products and packaging by 2030, and has taken multiple steps to do so. Similarly, many companies such as Disney, Ford, and Coca-Cola have taken steps to reduce their carbon footprint drastically.

This differentiated approach to CSR is also reflected in its legalities around the world. While it is mostly assumed to be a voluntary initiative, many countries have now started to include CSR within their legal mandate. Most countries, especially those in Europe, don’t have a specific policy about CSR itself but have laws around the reporting of its components – especially the environmental and ethical ones. At least 64 countries in the world have introduced almost 400 sustainability reporting instruments, out of which two-thirds are mandatory. One of the examples of this is France’s duty of vigilance law, created in 2017, whereby any company with more than 5,000 employees in France or 10,000 employees worldwide must disclose and implement a vigilance plan in order to prevent human rights violations and environmental damage.

On the other hand, a few countries have also created laws directly about CSR, particularly on the philanthropy front. The first country to establish such a regulation was Mauritius which, in 2009, mandated companies to allocate 2% of their profit to a CSR Fund. Similarly, in 2013, India mandated the CSR regime by requiring corporations that fulfill certain criteria to incur at least 2% of their average net profit towards CSR efforts.

The State of CSR in Nepal

Corporate philanthropy in Nepal has been traditionally imbued in the culture, with various corporations or businessmen engaging in philanthropic activities such as being involved in guthis in the Kathmandu valley, setting up resting places for travelers, and donating money to various social causes. In terms of the formalization of CSR, Nepal is one of the few countries that has laws directly about corporate philanthropy, albeit in a scattered manner and only for Banks, Industries, and Financial Institutions  (BFIs). As per the Industrial Enterprise Act (IEA), all industries with an annual turnover exceeding NPR 150 million must allocate a minimum of 1% of annual net profits to CSR. Similarly, according to a circular issued by the Nepal Rastra Bank (NRB) in 2017, all BFIs must allocate at least 1% of net profits to a separate CSR fund. As a result of these laws, in FY 2019/20 itself, BFIs contributed an average of 1.58% of their net profits to their CSR funds. Both of these laws are quite similar, as well as comprehensive regarding what CSR comprises and how philanthropic activities must cover areas affected by the company.

As a result of this, over the years, various Nepali companies have increasingly been involved in CSR activities. For instance, Ncell, following the UN’s Sustainable Development Goals (SDGs), has led more than 100 projects to benefit Nepali education, health, infrastructure, environment, digital inclusion, and disaster response. Similarly, NMB Bank has made various contributions across similar sectors, particularly in heritage conservation. These are only two examples, but most large corporations in the country have visibly increased their philanthropic activities over the years.

Looking Forward

A lot has happened in terms of CSR around the world, as well as in Nepal, and it has become an increasingly important paradigm. However, in order to truly create a sense of compassionate capitalism and do business in a socially responsible manner, a lot is yet to be done. Based on the current scenario, here are some steps that could be taken to increase the effectiveness of CSR:

• Providing a Clear Definition: As discussed above, CSR is a contested concept. While some look at it through the philanthropic lens, especially in places like India and Nepal, most European countries look at it through the lens of incorporating social responsibility into business practices itself. There needs to be a combination of these two ideas to create a comprehensive definition of CSR so that companies become truly socially responsible. Otherwise, if corporations choose to donate philanthropically on the surface and cause social, environmental, and ethical damage through their operations, the positive effect will be completely negated.
• Creating Centralized Legislation Around CSR: While Nepal is part of the limited number of countries with explicit laws around the topic, the laws are fragmented across the Industrial Enterprise Act (IEA) and the NRB circular, both of which are similar in nature. To create a clearer understanding of CSR and thus better implementation of it, developing a centralized CSR policy would ideally help in the implementation and monitoring of it.
• Collaborating Across Sectors: To improve the effectiveness of CSR, there needs to be some collaboration between the private sector, government, and non-government organizations. While the government can create legislation to make it easier to implement CSR, the private sector could work with non-government organizations that work on the ground to understand the requirements of society and hence create programs that actually benefit the people and the planet.

CSR is not just a box to be ticked. It is an opportunity for businesses to meaningfully shape a better world. To make this potential a reality, we must foster ongoing dialogue and take deliberate steps toward a more responsible future.

_{Images are for reference only.Images and contents gathered automatic from google or 3rd party sources.All rights on the images and contents are with their legal original owners.}