Corporate Social Responsibility

Corporate Social Responsibility is a new concept which assumes its significance under the Companies
Act, 2013. The term Corporate Social Responsibility (CSR) came into use by the late 1960’s and early
1970’s by many multinational companies. Since that time it has attracted attention from a range of
businesses and stakeholders. It is a form of corporate self regulation integrated into a business model.
CSR is also known as corporate sustainability, sustainable business, corporate conscience, corporate
citizenship or responsible business. There is no formal act of legislation for CSR in any country in the
world. The recognized international standard for CSR is ISO 26000.

There is no exact definition for Corporate Social Responsibility. The term has not been defined
anywhere. A wide variety of definitions has been developed with time. Corporate Social Responsibility is
the continuing commitment by the business world to behave ethically and contribute to the economic
development of the country while improving the quality of life of the workforce and their families and
local community and society at large. It focuses on the idea that a business has social obligation above
and beyond making a profit.

Corporate Social Responsibility is a combination of policies, education and practices which extent
throughout corporation operations and into the communities in which they operate. It is achieving
commercial success in the ways that honour ethical values and respect people, communities and the
natural environment. The importance of Corporate Social Responsibility is:-

 It aims at consumer protection.

 It aims at protection of local and global environment.
 It ensures respect for human rights.
 It results in avoiding bribery and corruption.
 It promotes to labour standards by companies and their business partners.
 It encourages the company to make a positive impact on the stakeholders.

Need for Corporate Social Responsibility

1. Better Public Image- Each firm must enchance its public image to secure more customers, better
employees and higher profits and the acceptance of social responsibility may lead to improve in
public image.
2. Conversion of Resistance into Resources-If the innovative ability of business is turned to social
problems than many resistances can be transformed into resources which will increase the
functional capacity of resources.
3. Long Term Business Interest- A better society would produce a better environment in which the
businesses may gain long term mazimization of profits and this can be achieved by
implementing programmes for social welfare.
 4. Avoiding Government Intervention- Failure of businessmen to assume social responsibility
invites government to intervene and regulate or control their activities and therefore to avoid
government intervention a company must adopt social responsibility.

Benefits of Corporate Social Responsibility

1. It increases the productivity and quality of a company.

2. It improves the financial performances of a company.
3. It helps in maintaining its brand image and reputation.
4. It helps to have increase access to capitals.

Corporate Social Responsibility in India

Corporate Social Responsibilty is mandatory in India. Section 135 of the Companies Act, 2013 and
Companies CSR Rules, 2014 provides for Corporate Social Responsibility in India.This Act or Rules also
does not provide for any definition of Corporate Social Responsibility but permits companies to engage
in acitivites or programs with refrence to activities specified in the Schedule or undertaken by the Board
in pursuance of the recommendations of the Corporate Social Responsibility Committee.

Section 135 of the Companies Act, 2013 provides that every company having net worth of five hundred
crore rupees or more, or turn-over of the thousand crore rupees or more or net profit of five crore
rupees or more during any financial year shall constitute a Corporate Social Responsibility Committee of
the Board . This Committee shall consist of three or more directors, out of which atleast one director
shall be an independent director.

The main functions of the Committe are:-

 To formulate policy incuding the acitivities specified in Schedule VII of the Companies Act, 2013;
 To formulate and recommend to the Board the amount of expenditure to be incurred on the
activities specified in Schedule VII;
 It shall monitor the Corporate Social Responsibility Policy of the company from time to time.

The role of the Board of the Company in the Corporate Social Responsibility are the following:-

 Implementing the Corporate Social Responsibilty Policy;

 Dislousre of the comtents on the company’s website;
 To ensure that the company spends atleast two percent of the average net profits in pursuance
of CSR policy;
 To give preference to the local areas around the company where it operates;
 To spend the amount specified for the CSR activities.

The proviso of Ssection 135(4) states that if the company does not spend the specified amount on the
CSR activities than the Board shall in its report specify the reasons for not spending the amount.
Under Schedule VII of the Companies Act, 2013 the following activities are to be perfomed for CSR policy
by a company:-

 eradicating hunger, poverty and malnutrition;

 promoting preventive health care and sanitation;
 making available safe drinking water;
 promoting education;
 promoting gender equality
 empowering women;
 measures for reducing inequalities faced by socially and economically backward groups;
 ensuring environmental sustainability and ecological balance;
 protection of flora and fauna, animal welfare, agroforestry, conservation of natural resources;
 maintaining quality of soil, air and water;
 protection of national heritage, art and culture;
 setting up public libraries;
 promotion and development of traditional arts and handicrafts;
 measures for the benefit of armed forces veterans, war widows and their dependents;
 training to promote rural sports, nationally recognised sports, paralympic sports and Olympic
sports;
 contribution to the Prime Minister’s National Relief Fund or any other fund set up by the Central
Government for socio-economic development and relief;
 welfare of the Scheduled Castes, the Scheduled Tribes, other backward classes, minorities and
women;
 contributions or funds provided to technology incubators located within academic institutions;
 rural development projects;
 slum area development.