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Corporate Social Responsibility

21 March 2020   

Corporate social responsibility (CSR) is a self-regulating business model that helps a company be socially accountable—to itself, its stakeholders, and the public. By practicing corporate social responsibility, also called corporate citizenship, companies can be conscious of the kind of impact they are having on all aspects of society, including economic, social, and environmental.

To engage in CSR means that, in the ordinary course of business, a company is operating in ways that enhance society and the environment, instead of contributing negatively to them.

Corporate social responsibility is a broad concept that can take many forms depending on the company and industry. Through CSR programs, philanthropy, and volunteer efforts, businesses can benefit society while boosting their brands.

As important as CSR is for the community, it is equally valuable for a company. CSR activities can help forge a stronger bond between employees and corporations; boost morale, and help both employees and employers feel more connected with the world around them.

With the enactment of Companies Act, 2013 by the Ministry of Corporate Affairs, Government of India was one of the world's largest experiments of introducing the CSR as a mandatory provision by imposing a statutory obligation on Companies to take up CSR projects towards social welfare activities. This has made India the only country that has regulated and mandated CSR for some select categories of companies registered under the Act. This CSR Initiative will push the nation towards the achievement of sustainable development goals and public-private partnerships in transforming India. 

The Corporate Social Responsibility concept in India is governed by Section 135 of the Companies Act, 2013 and Rules made thereunder wherein the criteria has been provided for assessing the CSR eligibility of a company, Implementation, and Reporting of their CSR Policies. India having the most elaborated CSR mechanism and implementation strategy has started its journey to set a benchmark in attaining sustainability goals and stakeholder activism in nation-building.

The CSR ambit is getting bigger and for upcoming years it would turn as a unique knowledge base for analyzing and achieving sustainability goals as among various large economies India is a country which has assured by mandating CSR through its legislative action.

The provisions of CSR as per Section 135 of Companies Act 2013 are as follows:

(1) Every company having

  • net worth of rupees five hundred crore or more,
  • or turnover of rupees one thousand crore or more or
  • a net profit of rupees five crore or more during any financial year

shall constitute a Corporate Social Responsibility Committee of the Board consisting of three or more directors, out of which at least one director shall be an independent director.

(2) The Board's report under sub-section (3) of section 134 shall disclose the composition of the Corporate Social Responsibility Committee.

(3) The Corporate Social Responsibility Committee shall,—

(a) formulate and recommend to the Board, a Corporate Social ResponsibilityPolicy which shall indicate the activities to be undertaken by the company as specified in Schedule VII;

(b) recommend the amount of expenditure to be incurred on the activities referred to in clause (a); and

(c) monitor the Corporate Social Responsibility Policy of the company from time to time.

(4) The Board of every company referred to in sub-section (1) shall,—

(a) after taking into account the recommendations made by the Corporate SocialResponsibility Committee, approve the Corporate Social Responsibility Policy for thecompany and disclose contents of such Policy in its report and also place it on thecompany's website, if any, in such manner as may be prescribed; and

(b) ensure that the activities as are included in Corporate Social ResponsibilityPolicy of the company are undertaken by the company.

(5) The Board of every company referred to in sub-section (1), shall ensure that thecompany spends, in every financial year, at least two per cent. of the average net profits of the company made during the three immediately preceding financial years, in pursuance ofits Corporate Social Responsibility Policy.

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