In 1972, the United Nations adopted various principles at the Human Environment Conference in Stockholm, Sweden, when addressing its relationship between business activities and their effect on the world, one of which was that ‘to achieve more realistic resource management and thus improve the environment, countries should also follow an integrated and organized approach to resource management in order to ensure that growth is consistent with the need to protect and enhance the environment for the benefit of their citizens’. And this is how the Corporate Social Responsibility (CSR) concept came in.
Companies (Corporate Social Responsibility Policy) Rules, 2014 define Corporate Social Responsibility as: “Corporate Social Responsibility ( CSR)” implies and includes but is not limited to I Projects or programs related to activities defined in Schedule VII of the Act or (ii) Projects or programs related to activities performed by the Board of Directors of a Corporation (Board) pursuant to the Rules of Procedure.”
Corporate Social Responsibility (CSR) is defined by the World Bank as “the commitment of companies to contribute to sustainable economic development by working with employees, their families, the local community and society at large to improve their lives in ways that are good for business and development.”
Corporate Social Responsibility Under the Companies Act, 2013
The provisions related to it is given under section 135 according to which
The applicability of the CSR provisions on the certain class of Companies having:
(a) net worth of the company rupees Five hundred crore or more; OR
(b) turnover of the company rupees One thousand crore or more; OR
(c) net profit of the company rupees five crore or more.
In line with its Corporate Social Responsibility Strategy , the organization invests at least 2 per cent of the total net profits of the company generated during the three immediately preceding financial years in each financial year:
Activities of the company shall give preference to the local area and areas around it where it operates, for spending the amount earmarked for Corporate Social Responsibility activities defined under the Schedule VII of the Companies Act 2013.
If the company fails to spend that amount, the Board shall specify the reasons for not spending the amount in its report made pursuant to clause (o) of sub – clause (3 ) of section 134.
The CSR committee shall be constituted with 3 or more directors, out of which at least one director shall be an Independent Director.
|Types of the Company||Board of CSR Committee|
|Listed Companies||3 or More Directors including at least one Independent Director|
|Public Company||3 or More Directors including at least one Independent Director
Note: if the company is not required to independent director then no need of independent director in the CSR committee.
|Private Company||2 Directors|
|Branch and Project Offices of a Foreign Company||At least 2 persons shall be nominated, one person residing in India authorized to accept on behalf of the processing company any notices or other documents served on the company, and another person by the foreign company.|
The composition of the Corporate Social Responsibility Committee is required to be disclosed in the Board’s report prepared under the Act.
CSR Committee’s Functions:
In accordance with section 135 the functions of the CSR committee include:
(a) formulating and recommending to the Board, a CSR Policy which shall indicate the activities to be undertaken by the company as specified in Schedule VII;
(b) Recommend the amount of expenditure on the CSR activities to be incurred.
(c) monitoring, from time to time, of the company’s corporate social responsibility policy.
(d) Further the rules provide that the CSR Committee shall institute a transparent monitoring mechanism for implementation of the CSR projects or programs or activities undertaken by the company.
The CSR Committee shall formulate and recommend to the Board, a policy which shall indicate the activities to be undertaken (CSR Policy); recommend the amount of expenditure to be incurred on the activities referred and monitor the CSR Policy of the company. The Board shall take into account the recommendations made by the CSR Committee and approve the CSR Policy of the company.
Activities that can be Undertaken as CSR Initiatives
The following focus areas are notified under Section 135 of the Companies Act 2013 and Companies (Corporate Social Responsibility Policy) Rules 2014:
- Eradicate hunger, deprivation & malnutrition, encourage preventive health care & sanitation & make healthy drinking water available;
- Promoting education, including special education and employment, to enhance vocational skills, particularly among children, women, the elderly, and otherwise incapable projects to improve their livelihoods;
- Promoting gender equality, empowering women, establishing homes and hostels for women and orphans, establishing old-age homes, day care centers and other facilities for senior citizens and measures to reduce inequalities for socially and economically backward groups;
- Reducing infant mortality and improving maternal health through the provision of good hospital facilities and low cost medicines;
- Providing more focus on clean and good sanitation with hospital and dispensary facilities to fight human immunodeficiency virus, acquired immune deficiency syndrome, malaria and other diseases.
- Ensuring environmental sustainability, ecological balance, flora and fauna protection, animal welfare, agro forestry, natural resource conservation, and soil, air and water quality maintenance;
- Employment improving skills at work;
- Protection of national heritage, art & culture including restoration of historic buildings & sites & artworks; establishment of public libraries; promotion and development of traditional arts & crafts;
- Steps to support veterans of the armed forces, war widows and their dependents;
- Rural sports, nationally known sports, youth & Olympic sports training;
- Contribution to the National Relief Fund of the Prime Minister or any other fund established by the Central Government for the socio-economic growth and relief and welfare of the Scheduled Castes , Scheduled Tribes, other backward groups, minorities & women;
- Contributions or funds made available to technology incubators located within academic institutions authorized by the Central Government;
- Rural development projects, etc.
- Slum area development.
Benefits of corporate social responsibility to the companies
- Improves Public Image
- Increases Media Coverage
- Boosts Employee Engagement
- Attracts & Retains Investors
- More Volunteer Participation
- Forging Corporate Partnership
- Varied Sources of Revenue
Examples of CSR
- Tata Group
The conglomerate of Tata Group in India carries out various CSR projects, the majority of which are programs for community improvement and poverty alleviation. It has engaged in women empowerment activities, revenue generation, rural community development, and other social welfare programs through self-help groups. The Tata Group offers scholarships and endowments for several institutions in the area of education.
- Ultratech Cement
Ultratech Cement, India’s largest cement company is engaged in social work across 407 villages across the country with the goal of building sustainability and self-reliance. Its CSR activities focus on programs related to health care and family welfare , education, infrastructure, environment , social welfare, and sustainable living.
- Mahindra & Mahindra
The K.C. Mahindra Education Trust was established by Indian automobile producer Mahindra & Mahindra (M&M) in 1954, followed in 1969 by the Mahindra Foundation with the aim of promoting education. The company focuses mainly on educational services to help economically and socially vulnerable communities. Its CSR programs invest in scholarships and grants, livelihood training, remote healthcare, water conservation programs, and disaster relief programmes. M&M runs programs such as Nanhi Kali focusing on girls education, Mahindra Pride Industrial Training Schools and Lifeline Express for remote healthcare services.
Amity Law School, Noida 3rd Year student