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CORPORATE SOCIAL RESPONSIBILITY

By: Amrita Sachidanandan, Advocate​

WHAT IS CORPORATE SOCIAL RESPONSIBILITY

The concept of Corporate Social Responsibility (CSR) holds that businesses should examine how their actions may affect the environment and society. It is strongly related to sustainability, which is the process of generating benefits for the economy, society, and environment, as well as to ESG, or environmental, social, and governance. All three concentrate on non-financial aspects that businesses, big and small, should take into account when making choices.

The most effective CSR strategies make sure that Companies respect the environment and marginalise communities while still adhering to legal requirements. Also, CSR should be sustainable, i.e., involve initiatives that a company can maintain without compromising its business objective.

There are several reasons why companies pursue CSR. Here are some few potential benefits:
  • more effective talent acquisition, retention, and productivity
  • lower prices and less wastage
  • improved consumer loyalty, branding, and community support

CORPORATE SOCIAL RESPONSIBILITY IN INDIA

India became the first country to mandate CSR in corporate sector companies. The Ministry of Corporate Affairs (MCA) of the Government of India governs and regulates the corporate sector companies, under the Companies Act, 2013. Section 135 of the Companies Act, 2013 talks about the Corporate Social Responsibility that certain companies meeting the mentioned criteria are required. 
Indian businesses have been fairly wise in implementing CSR activities and integrating them into their operational procedures. It has gradually become more prevalent in the Indian corporate environment as companies have realised how critical it is to develop ties with the community at large to build their companies.
Suggested Areas of Activities for companies to implement their CSR in PROJECT MODE are: (as per Schedule VII)
  1. Eradicating hunger, poverty and malnutrition, ‘promoting health care including preventinve health care and sanitation including contribution to the Swach Bharat Kosh set-up by the Central Government for the promotion of sanitation and making available safe drinking water.
  2. promoting education, including special education and employment enhancing vocation skills especially among children, women, elderly and the differently abled and livelihood enhancement projects.
  3. promoting gender equality, empowering women, setting up homes and hostels for women and orphans; setting up old age homes, day care centres and such other facilities for senior citizens and measures for reducing inequalities faced by socially and economically backward groups.
  4. 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 the Clean Ganga Fund set-up by the Central Government for rejuvenation of river Ganga.
  5. 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;
  6. measures for the benefit of armed forces veterans, war widows and their dependents;
  7. training to promote rural sports, nationally recognised sports, paralympic sports and olympic sports
  8. contribution to the prime minister’s national relief fund or any other fund set up by the central govt. for socio economic development and relief and welfare of the schedule caste, tribes, other backward classes, minorities and women;
  9. Contribution to incubators funded by Central Government or State Government or any agency or Public Sector Undertaking of Central Government or State Government, and contributions to public funded Universities, Indian Institute of Technology (IITs), National Laboratories and Autonomous Bodies (established under the auspices of Indian Council of Agricultural Research (ICAR), Indian Council of Medical Research (ICMR), Council of Scientific and Industrial Research (CSIR), Department of Atomic Energy (DAE), Defence Research and Development Organisation (DRDO), Department of Biotechnology (DBT), Department of Science and Technology (DST), Ministry of Electronics and Information Technology) engaged in conducting research in science, technology, engineering and medicine aimed at promoting Sustainable Development Goals (SDGs).
  10. rural development projects
  11. slum area development.
  12. disaster management, including relief, rehabilitation and reconstruction activities.

APPLICABILITY OF CSR

SR is applicable to 
  •  Companies with an annual net worth equal to or more than Rs 500 crore or,
  • Companies with an annual turnover equal to or more than Rs 1000 crore or 
  • Companies with an annual net profit of Rs 5 crore or more.
during the immediately preceding financial year shall constitute a Corporate Social Responsibility Committee.

CSR COMMITTEE

 Companies that meet the aforementioned requirements must establish a “CSR Committee” in order to comply with the CSR Regulations. A minimum of three members should be on the Committee, and one of them must be an independent director.
The key functions of a Corporate Social Responsibility Committee in India are listed below.
  • To frame a Corporate Social Responsibility Policy which includes activities like the ones listed in Schedule VII of the Companies Act, 2013.
  • Propose the required expenses for the CSR activities. 
  • Describe the working of the company to achieve its CSR goals
  • Monitor and/or modify the CSR policy of their company.
Companies are required to follow CSR norms, form a CSR committee, as long as they meet the said requirements. 

PENALTY

 If a company is in default in complying with the CSR provisions, the company shall be liable to a penalty of twice the amount required to be transferred by the company to the Fund specified in Schedule VII or the Unspent Corporate Social Responsibility Account, as the case may be, or one crore rupees, whichever is less, and every officer of the company who is in default shall be liable to a penalty of one-tenth of the amount required to be transferred by the company to such Fund specified in Schedule VII, or the Unspent Corporate Social Responsibility Account, as the case may be, or two lakh rupees, whichever is less

AMENDMENT

 Earlier, if a company was unable to fully spend its CSR funds in a given year, it could carry the amount forward and spend it in the next fiscal, in addition to the money allotted for that year.
According to the CSR changes made under the Companies Act 2013, companies must now deposit any CSR funds that have not yet been used into a fund specified in Schedule VII of the Act by the end of the fiscal year. If the money are not used within three years of the transfer date, they must be put into one of the designated funds.
The Ministry of Corporate Affairs has notified companies that expenses made to combat the COVID-19 (coronavirus) epidemic will qualify as CSR initiatives. Funding may be used for a variety of COVID-19-related activities, including disaster management, sanitation, and the promotion of healthcare, especially preventative healthcare.