Introduction:

As the corporations exist in a symbiotic relation with their environments1 (the term environment
here refers to all components of the external environment and not to ecological environment
alone) where their exchange with the larger environment determines to a larger extent how well
they do in their profit symbiotic endeavors.

The concept of Corporate Social Responsibility makes it possible to establish a symbiotic

relation between the corporation and its environment as the environment meaning defined above.
When we approaches to define it we found that in present day in 21st century it is no longer just
fashionable but a business requirement to be socially responsible.

Corporate Social Responsibility can be simply and broadly defined as the ethical role of
corporation in the society. The main aim of corporate social responsibility is to increase long
term profit and shareholder trust through positive public relation and high ethical standards to
reduce business and legal risk by taking responsibility of corporate actions. It is not enough for
companies to generate mere profits and meet merely the letter of law in their business operations.

1
https://www.managementstudyguide.com/corporate-social-responsibility.htm
2
https://www.fiverr.com/eudiusriri/create-a-good-csr-project-for-you
Corporate social responsibility strategies encourage the company to make positive impact on
environment and stakeholders that is all the parties who have a stake in the performance and
output of the corporation. Stakeholders include the company's employees, unions, investors,
suppliers, customers, local and national governments, and communities that may be affected by
corporate activities such as construction, manufacturing, and pollution.3 For some companies,
CSR means manufacturing their products in a way that doesn't harm the environment and
protects the consumer from potentially hazardous materials. Corporate Social Responsibility
(CSR)can be defined as a Company’s sense of responsibility towards the community and
environment (both ecological and social) in which it operates.4 Companies can fulfill this
responsibility through waste and pollution reduction processes, by contributing educational and
social programs, by being environmentally friendly and by undertaking activities of similar
nature. CSR is not charity or mere donations. CSR is a way of conducting business, by which
corporate entities visibly contribute to the social good. Socially responsible companies do not
limit themselves to using resources to engage in activities that increase only their profits. They
use CSR to integrate economic, environmental and social objectives with the company’s
operations and growth. CSR is said to increase reputation of a company’s brand among its
customers and society.

History and evolution of Corporate Social Responsibility:-

In the time of 1920s the American President said that " the chief business of the American people
is business." It was a popular observation in a time of economic prosperity, when issues such as
energy security and climate change were practically nonexistent.5

Almost a century later, things are very different. Now the private enterprise also called upon
exercise social responsibility, especially when it comes to environment. This trend reflects the
view that companies ought to do more than simply meet the letter of law and bare minimum
ethical business behavior. Now a days we know it as the "Corporate Social Responsibility." After
that period even the president Coolidge, like many American presidents before and since, kept
government out of affairs of business as much as possible. But in the starting of 1960s and

3
https://courses.lumenlearning.com/boundless-business/chapter/social-responsibility/
4
http://www.businessdictionary.com/definition/corporate-social-responsibility.html
5
Philip Levine Reads “What Work Is” at the Library of Congress, Corporate Social Responsibility in America
,by the U.S. Department of State's Bureau of International Information Programs.
1970s, the environmental impact of an ever expanding economy was generating more or more
protests from citizens. The result was a wave of legislation designed to reduce the pollution
produced by business activity. Those laws had positive effects and are now vital parts of
American regulatory framework. But despite these regulation, controlling pollution continues to
be a challenge. And now there are even larger problems on the horizon. Even though business
today are more efficient and use fewer resources to make goods but still many ecosystems
continue to suffer. Starting a few years ago, many citizens in the U.S and around the world began
call for more action from private enterprise on these social issues-beyond compliance with
regulations and traditional charity related work. The result was a new movement known as
corporate social responsibility, or CSR6.

Governing provisions regarding Corporate Social Responsibility:-

Section 135 of the Companies Act 2013, incorporates the provisions regarding the said concept
and Schedule VII provides the appendix that ensures the areas where the CSR fund will be use.

Section 135:- Corporate Social Responsibility:-

(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 Responsibility Policy 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

6
Philip Levine Reads “What Work Is” at the Library of Congress, Corporate Social Responsibility in America
,by the U.S. Department of State's Bureau of International Information Programs.
 (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 Social Responsibility Committee, approve
the Corporate Social Responsibility Policy for the company
and disclose contents of such Policy in its report and also
place it on the company’s website, if any, in such manner as
may be prescribed; and
(b) ensure that the activities as are included in Corporate
Social Responsibility Policy of the company are undertaken
by the company.
(5) The Board of every company referred to in sub-section (1),
shall ensure that the company 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
of its Corporate Social Responsibility Policy:
Provided that 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:
Provided further that if the company fails to spend such amount,
the Board shall, in its report made under clause (o) of sub-section
(3) of section 134, specify the reasons for not spending the amount.7

Applicability of CSR Provisions:

On every Company including its holding or subsidiary having:

 Net worth of Rs. 500 Crore or more, or

 Turnover of Rs. 1000 crore or more, or

7
section 135 of Companies Act, 2013.
 Net Profit of Rs. 5 crore or more
 during the immediately preceding financial year
A foreign company having its branch office or project office in India, which fulfills the criteria
specified above.However, if a company ceases to meet the above criteria for 3 consecutive
financial years then it is not required to comply with CSR Provisions till such time it meets the
specified criteria.

CSR Committee:

Every Company on which CSR is applicable is required to constitute a CSR Committee of the
Board:

 Consisting of 3 or more directors, out of which at least one director shall be an independent
director. However, if a company is not required to appoint an independent director, then it shall
have in 2 or more directors in the Committee.
 Consisting of 2 directors in case of a private company having only two directors on its Board
 Consisting of at least 2 persons in case of a foreign Company of which one person shall be its
authorised person resident in India and another nominated by the foreign company
Functions of CSR Committee:

The CSR Committee shall—

 Formulate and recommend to the Board, a CSR Policy which shall indicate the activities to be
undertaken by the Company
 Recommend the amount of expenditure to be incurred on the activities referred to in clause (i)
 Monitor the CSR Policy of the company from time to time
 Institute a transparent monitoring mechanism for implementation of the CSR projects or
programs or activities undertaken by the company.
Responsibility of Board of Directors (BOD):

The BOD of every company on which CSR is applicable shall:

 after considering the recommendations made by the CSR Committee, approve the CSR Policy
for the Company and disclose contents of such Policy in Board report.
 ensure that the activities as are included in CSR Policy of the company are undertaken by the
Company
 shall disclose the composition of the CSR Committee in Board Report
 ensure that the company spends, in every financial year, at least 2% of the average net profits of
the company made during the 3 immediately preceding financial years, in pursuance of its CSR
Policy. The CSR projects/programs/activities undertaken in India only shall amount to CSR
Expenditure.8
CSR Policy

The CSR Policy of the company shall, inter-alia, include the following namely :-

 A list of CSR projects or programs which a company plans to undertake specifying modalities of
execution of such project or programs and implementation schedules for the same
 Monitoring process of such projects or programs
 A clause specifying that the surplus arising out of the CSR projects or programs or activities
shall not form part of the business profit of the company.

CSR Activities

 The CSR activities shall be undertaken by the company, as per its CSR Policy, excluding
activities undertaken in pursuance of its normal course of business.
 The BOD may decide to undertake its CSR activities approved by the CSR Committee, through
 a section 8 company or a registered trust or a registered society, established by the company,
either singly or along with any other company, or
 a section 8 company or a registered trust or a registered society, established by the Central
Government or State Government or any entity established under an Act of Parliament or a State
legislature
 a section 8 company or a registered trust or a registered society, other than those specified in
clauses (a) and (b) above, having an established track record of 3 years in undertaking similar
programs or projects;
 collaboration with other companies,
for undertaking projects or programs or CSR activities in such a manner that the CSR
Committees of respective companies are in a position to report separately on such projects or
programs.

8 https://www.nseprimeir.com/z_BlueDart/files/BlueDart_Roles_and_Responsibility_of_the_Board_committees.
 The CSR projects or programs or activities not to be considered as CSR Activities:
 Expenses for the benefit of only the employees of the company and their families
 Contribution of any amount directly or indirectly to any political party.
Display of CSR Activities on its Website

The BOD shall disclose contents of CSR policy in its report and the same shall be displayed on
the company’s website, if any.

Other Important Points:

 The balance sheet of a foreign company to be filed under section 381(1)(b) of the Act shall
contain an Annexure regarding report on CSR.
 The Board of Directors shall ensure that activities included by a company in its CSR Policy are
related to the areas or subjects specified in Schedule VII (given below) of the Act.
Schedule 7

Activities which may be included by companies in their Corporate Social Responsibility Policies
relating to:

 Eradicating hunger, poverty and malnutrition ,promoting health care including preventive health
care and sanitation including contribution to the Swacch Bharat Kosh set-up by the Central
Government for the promotion of sanitation and making available safe drinking water.
 Promoting education, including special education and employment enhancing vocation skills
especially among children, women, elderly and the differently abled and livelihood enhancement
projects.
 Promoting proper gender equality, empowering women, setting up homes and hostels for women
and orphans; setting up old age homes, day care centers and such other facilities for senior
citizens and measures for reducing inequalities faced by socially and economically backward
groups.
 Ensuring environmental sustainability, ecological balance protection of flora and fauna, animal
welfare, agroforestry, conservation of natural resources and maintaining quality of soil air and
water including contribution to clean Ganga fund set-up by the Central Government for
rejuvenation of river Ganga.
 Protection of national heritage, art and culture including restoration of buildings and sites of
historical importance and works of art setting up public libraries, promotion and development of
traditional art and handicrafts.
 measures for profit of armed forces veterans war windows and their dependents.
 Training to promote rural sports nationally recognised sports paralympic sports and olympic
sports.
 Contribution to the prime minister's national relief funds of any other fund set up by the central
government for socio economic development and relief and welfare of the schedule caste and
tribes and other backward classes minorities and women.
 Contributions or funds provided to technology incubators located within academic institutions
which are approved by the central government.
 Rural development projects.
 Slum area development. 9
Importance of Corporate Social Responsibility:-

It is extremely important that an organization or a company operates in a way that

demonstrate social responsibility. Although it is not a legal requirement, it is seen as a good
practice for company to take into account social and environment issue. Social
responsibility and ethical practices are vital to a company success. The 2015 Cone
Communications Global CSR study found that a staggering 91% of global consumers
expect companies to do more than make a profit, but also operate responsibly to address
social and environmental issues,84% say they seek out responsible products whenever
possible,90% would boycott a company if they learned of irresponsible or unreal
business practices10. The said data shows that, consumers are increasingly aware of
about the importance of social responsibility and actively seek products from business
that operates ethically. CSR demonstrate that a business that takes an interest in wider
social issues, rather than just those that impact only company's margin profit, which will
attract the customers who share the same values. Therefore , it makes a good business
sense to operate sustainably. Thus the CSR concept is important for the satisfaction of
both customers and the company itself.

9
http://ebook.mca.gov.in/Childwindow1.aspx?pageid=17923&type=CA&ChildTitle=Schedules&SearchText=
10
http://www.conecomm.com/research-blog/2015-cone-communications-ebiquity-global-csr-study
Need of Corporate social

 Improved public image.

Each and every organization must enhance its public image to secure more customers,
better employees and higher profit. Acceptance of social responsibility goals lead to
improve public image.

 Increased brand awareness and recognition.

If an organization committed to ethical practices, this news will spread. More people will
therefore hear about that organization brand, which creates an increased brand awareness.

 Cost savings.

When an organization do work on sustainability, such as using less packaging, will help
to decrease that production costs.

 An advantage over competitors.

By accepting CSR, an organization stand out from competitors in that particular

industry. That organization establish itself as a company committed to going one step
further by considering social and environmental factors.

 Increased customer engagement.

If an organization using sustainable systems, that should shout it from the rooftops.
Customers will follow this and engage with the brand and operations.

 Greater employee engagement.

Similar to customer engagement, one organization also need to ensure that the employees
know CSR strategies. It’s proven that employees enjoy working more for a company that
has a good public image than one that doesn’t. Furthermore, by showing that
 you’reccommitted to things like human rights, you’re much more likely to attract and
retain the top candidates.

 More benefits for employees. There are a range of benefits for employees when an
organization accept CSR. The organization will provide a more positive and productive
place to work, and by promoting things like volunteering, an organization encourage
personal and professional growth.11

11
Ellie collier, the importance of corporate social responsibility for your business, January 26, 2018