ABSTRACT:
The following article deals with the idea of CSR (Corporate Social Responsibility), what is CSR, and how companies are legally bound to carry out specific functions to maintain the balance in society. The legal obligations of the Company and its impact in India.
INTRODUCTION:
WHAT IS CSR?
Corporate social responsibility is the concept that a business has a responsibility to the society that exists around it. It is a concept that reflects the ethical and socially responsible behavior of businesses beyond their primary objective of profit maximization. It encompasses a company’s voluntary actions and initiatives to contribute positively to the social, economic, and environmental well-being of the communities and societies in which it operates.
CSR involves a commitment to balancing economic success with social and environmental considerations, acknowledging the broader impact of business activities. Corporate Social Responsibility (CSR) in India is guided by both legal provisions and a growing recognition of the importance of businesses contributing to societal well-being. The key legal provisions for CSR in India are outlined in section 135 of the Companies Act, 2013.CSR describes a company’s efforts to improve society in some ways mentioned in schedule vii of the Act.
In addition to the Companies Act, several other laws and regulatory bodies in India play a role in promoting and overseeing Corporate Social Responsibility (CSR) initiatives such as SEBI’s Business Responsibility and Sustainability Report (BRSR),National Voluntary Guidelines (NVGs) on Social, Environmental, and Economic Responsibilities of Business, Ministry of Corporate Affairs (MCA) Guidelines and Circulars, Public Sector Undertakings (PSUs) Guidelines, Tax Benefits for CSR Spending etc.
LEGAL FRAMEWORK OF CSR
As per Section 135(1) of the Companies Act, 2013 in India, the criteria for companies that are obligated to undertake Corporate Social Responsibility (CSR) activities are as follows:
A company is required to spend on CSR if, during any financial year, it meets any of the following conditions:
- Net Worth Criteria: The company has a net worth of Rs 500 crore or more
- Turnover Criteria: The company has a turnover of Rs 1000 crore or more.
- Net Profit Criteria: The company has a net profit of Rs 5 crore or more.
If a company fulfills any one of these criteria, it is mandated to constitute a CSR committee comprising 3 directors out of which one is an independent director and if the company is private and does not have an independent director then the CSR committee shall be comprised of 2 directors, and this CSR committee shall formulate a CSR policy, and spend at least 2% of its average net profits over the preceding three financial years on CSR activities.
It’s important for companies meeting these criteria to comply with the CSR provisions outlined in the Companies Act, including the establishment of a CSR committee, formulation of a CSR policy, and reporting on CSR activities in their annual reports. The CSR activities should focus on areas specified in Schedule VII of the Act, which includes activities related to eradicating hunger, promoting education, healthcare, environmental sustainability, and other social development goals. If a company fails to meet the prescribed conditions for carrying out Corporate Social Responsibility (CSR) activities for three consecutive years, it is relieved from the obligation to engage in CSR.
FUNCTIONS OF CSR COMMITTEE:
- Formulate and recommend the CSR policy recommended in the vii schedule to the Board Of Directors of the company.
- Recommend the amount of expenditure.
- Transparent monitoring mechanism.
- Monitor CSR policy from time to time.
LEGAL OBLIGATIONS:
Companies Act, 2013:
Section 135(1) of the Companies Act, 2013 mandates certain classes of companies to spend a minimum percentage of their profits on CSR activities, a company with a net worth of Rs 500 Cr or more or a company with a turnover of Rs 1000 Cr or more or a company with a net profit of Rs 5 Cr or more.
Companies meeting the above financial criteria are required to constitute a CSR committee, develop a CSR policy, and spend at least 2% of the average net profits of the preceding three financial years on CSR activities.
CSR Committee:
Eligible companies (mentioned above) are required to form a CSR Committee comprising at least three directors, with at least one independent director.
CSR Policy:
The CSR policy must outline the company’s approach to CSR and the activities it plans to undertake. It is subject to the recommendations of the CSR Committee and approval by the Board.
CSR Reporting:
Companies are required to disclose their CSR activities in their annual reports, including the amount spent and the impact of the initiatives.
IMPACT:
Impact on Social Development Through CSR Initiatives in India
Education:
School Infrastructure: Many companies invest in building and upgrading school infrastructure, providing students with better learning environments.
Scholarship Programs: CSR initiatives often include scholarship programs, facilitating access to education for underprivileged students.
Healthcare:
Medical Facilities: Companies may contribute to the establishment of medical facilities, clinics, and hospitals, improving healthcare access in underserved areas.
Health Awareness Campaigns: CSR initiatives often involve awareness campaigns on healthcare practices, disease prevention, and wellness.
Environmental Sustainability:
Tree Plantation and Conservation: Companies contribute to environmental sustainability by engaging in tree plantation drives and conservation initiatives, promoting a greener environment.
Waste Management: CSR projects may focus on waste management and recycling, addressing environmental concerns, and promoting sustainable practices.
Poverty Alleviation:
Livelihood Programs: CSR initiatives often include skill development and livelihood programs, empowering communities to generate sustainable incomes.
Microfinance Initiatives: Companies may support microfinance projects, helping individuals in marginalized communities to establish small businesses and improve their economic conditions.
Skill Development and Employment:
Vocational Training: CSR activities may involve vocational training programs, enhancing the employability of individuals, and bridging skill gaps in the workforce.
Job Creation: Some companies actively participate in job creation initiatives, contributing to reducing unemployment rates in specific regions.
Community Development:
Infrastructure Development: CSR projects may encompass the development of community infrastructure, including roads, water supply systems, and sanitation facilities.
Community Centers: Companies may establish community centers that serve as hubs for social and cultural activities, fostering community cohesion.
Education and Awareness:
Digital Literacy Programs: Companies may support initiatives that promote digital literacy, ensuring that communities have access to information and technology.
Health and Hygiene Awareness: CSR initiatives often include campaigns on health and hygiene practices, contributing to improved overall well-being.
Women Empowerment:
Skill Training for Women: CSR projects may focus on empowering women through skill development and entrepreneurship training.
Support for Women-Owned Businesses: Companies may provide support to women entrepreneurs, fostering economic independence and gender equality.
Disaster Relief and Rehabilitation:
Emergency Response: CSR activities often include disaster relief efforts, providing immediate assistance and support to communities affected by natural disasters.
Rehabilitation Programs: Companies may engage in long-term rehabilitation programs to help communities recover and rebuild after disasters.
Access to Basic Amenities:
Clean Water Projects: CSR initiatives may include projects that provide access to clean and safe drinking water, addressing a fundamental need in many communities.
Sanitation Facilities: Companies contribute to improving sanitation facilities, and promoting better health and hygiene practices.
COMPANIES ENGAGED IN CSR:
Numerous companies in India actively engage in Corporate Social Responsibility (CSR), contributing to social, environmental, and economic development. Here are examples of CSR initiatives undertaken by companies in India:
Tata Group:
Tata Medical Center: Tata Group has established the Tata Medical Center in Kolkata, a world-class cancer care facility providing treatment to patients irrespective of their financial backgrounds.
Reliance Industries:
Reliance Foundation: Reliance Industries, through its philanthropic arm Reliance Foundation, has undertaken various initiatives in areas such as education, healthcare, rural development, and disaster response.
Infosys:
Akshaya Patra Foundation: Infosys supports the Akshaya Patra Foundation, which runs mid-day meal programs in schools to address the issue of childhood hunger and promote education.
Hindustan Unilever Limited (HUL):
Project Shakti: HUL’s Project Shakti empowers rural women by training them to become micro-entrepreneurs, selling HUL products in their communities.
Wipro:
Wipro Cares: Wipro’s CSR initiatives cover areas like education, healthcare, and community development. Wipro Cares supports projects related to education for the underprivileged and healthcare access.
Mahindra Group:
Project Nanhi Kali: Mahindra Group, through its social initiative Nanhi Kali, focuses on providing education to underprivileged girl children, aiming to empower them through education.
ICICI Bank:
ICICI Foundation for Inclusive Growth: ICICI Bank’s CSR initiatives include the ICICI Foundation, which works on projects related to education, healthcare, and sustainable livelihoods in rural and underserved areas.
Adani Group:
Adani Foundation: Adani Foundation is involved in various CSR activities, including education, healthcare, sustainable livelihoods, and community infrastructure development.
HCL Technologies:
Power of One: HCL’s Power of One initiative focuses on environmental sustainability and community development. It includes projects related to education, healthcare, and environmental conservation.
ITC Limited:
Social Investments: ITC Limited invests in social development projects related to agriculture, water management, education, and rural development through its CSR initiatives.
JSW Group:
JSW Foundation: JSW Group’s CSR arm, JSW Foundation, is involved in projects related to education, healthcare, rural development, and environmental sustainability.
Bharti Enterprises:
Bharti Foundation: The Bharti Foundation focuses on education initiatives, running schools in rural areas, and providing scholarships to underprivileged students.
CONCLUSION:
In conclusion, Corporate Social Responsibility (CSR) in India is a multifaceted commitment that transcends legal obligations, encompassing ethical, social, and environmental responsibilities. The legal framework, primarily defined by Section 135 of the Companies Act, 2013, mandates certain companies to allocate a minimum percentage of profits to CSR activities.
This framework reflects a recognition of the role businesses play in contributing to societal well-being.The CSR landscape extends beyond mere compliance, with additional regulations from bodies like SEBI and guidelines from the Ministry of Corporate Affairs further shaping and refining CSR practices. The inclusion of Business Responsibility and Sustainability Reports (BRSR) adds a layer of transparency and accountability.
The impact of CSR initiatives on social development in India is substantial, covering education, healthcare, environmental sustainability, poverty alleviation, and more. Companies are actively contributing to community development, women empowerment, and disaster relief, demonstrating a commitment to holistic societal advancement.
However, challenges persist in the implementation of CSR. Compliance and monitoring demand careful attention, especially in the face of diverse regulatory requirements. Resource allocation and measuring impact present complex decision-making processes, with the need for effective stakeholder engagement and a nuanced understanding of cultural variations in a globalized context. Overcoming these challenges requires a strategic, adaptive, and transparent approach.
Companies need to continuously evaluate and refine their CSR strategies, engaging stakeholders, and employing innovative solutions. The long-term success of CSR initiatives lies in their ability to address the dynamic and evolving needs of both businesses and the communities they serve. As businesses navigate the intricate landscape of CSR, the principles of accountability, transparency, and sustainability will remain paramount for fostering positive social change.
