What Is CSR?
Corporate social responsibility (CSR) is a self-regulating business model that helps
a company be socially accountable to itself, its stakeholders, and the public.
By practicing corporate social responsibility, also called corporate citizenship,
companies are aware of how they impact aspects of society, including economic,
social, and environmental. Engaging in CSR means a company operates in ways
that enhance society and the environment instead of contributing negatively to
them.
Corporate Social Responsibility (CSR) means the voluntary contributions
made by companies to a better society and a cleaner environment. It is a concept
whereby companies integrate social and other useful concerns in their business
operations for the betterment of their stakeholders and society in general.
However, Section 135 of the Companies Act, 2013 ("Act") provides that certain
companies must mandatorily contribute a certain amount towards CSR
activities. As per the Act, 'Corporate Social Responsibility' means and includes
but is not limited to:
Projects or programs relating to activities specified in Schedule VII to The
Act.
Projects or programs relating to those activities which are undertaken by the
Board of Directors of a company in ensuring the recommendation of the
CSR Committee of the Board as per declared CSR Policy along with the
conditions that such policy will cover subjects specified in Schedule VII of
the Act.
Applicability of CSR:
The provisions of CSR applies to every company fulfiing any of the following
conditions in the preceding financial year:
Net worth of more than Rs.500 crore
Turnover of more than Rs.1000 crore
Net profit of more than Rs.5 crore
The Board of Directors of every company for which the CSR provisions apply
must ensure that the company spends in every financial year at least 2% of its
average net profits made during the immediately preceding three financial
years as per its CSR policy. If the company has not completed three financial years
since its incorporation, it must spend 2% of its average net profits made during the
immediately preceding financial years as per its CSR policy.
Importance of Corporate Social Responsibility
CSR is an immense term that is used to explain the efforts of a company in order to
improve society in a significant manner. Below reasons reflect why CSR is
important:
CSR improves the public image by publicising the efforts towards a better
society and increasing their chance of becoming favourable in the eyes of
consumers.
CSR increases media coverage as media visibility throws a positive light on
the organisation.
CSR enhances the company’s brand value by building a socially strong
relationship with customers.
CSR helps companies to stand out from the competition when companies are
involved in any kind of community.
Company Examples:
In its 2022 Environmental and Social Impact Report, Starbucks (SBUX)
highlights taking care of its workforce and the planet among its CSR
priorities through stock grants and additional medical, family, and
educational benefits. The company's goals include achieving 50%
reductions in greenhouse gas emissions, water consumption, and waste by
2030.
Home Depot (HD) has invested more than 1 million hours per year in
training to help front-line employees advance in their careers, aims to
produce or procure 100% renewable energy to operate its facilities by 2030,
and has plans to spend $5 billion per year with diverse suppliers by 2025.5
General Motors won the Sustainability Leadership Award from the
Business Intelligence Group in 2022. The automaker provided $60 million
in grants to more than 400 U.S. nonprofits focusing on social issues, and it
has agreements in place to use 100% renewable electricity at its U.S. sites
by 2025
List of permitted activities:
The Board of Directors shall ensure that the activities included by a company in
its CSR Policy fall within the purview of the activities included is schedule
VII of the Act. The activities specified in Schedule VII which may be included by
companies in their Corporate Social Responsibility Policies are as follows:
1. Eradicating poverty, hunger and malnutrition, promoting health care which
includes sanitation and preventinve health care, contribution to the Swach
Bharat Kosh set-up by the Central Government for the promotion of
sanitation and making available safe drinking water.
2. Improvement in education which includes special education and
employment strengthening vocation skills among children, women, elderly
and the differently-abled and livelihood enhancement projects.
3. Improving gender equality, setting up homes and hostels for women and
orphans, empowring women, 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. Safeguarding environmental sustainability, ecological balance, protection of
flora and fauna, animal welfare, agroforestry, conservation of natural
resources and maintaining a quality of soil, air and water which also
includes a contribution 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 arts and
handicrafts.
6. Measures for the benefit of armed forces veterans, war widows and their
dependents, Central Armed Police Forces (CAPF) and Central Para Military
Forces (CPMF) veterans, and their dependents including widows.
7. Training to stimulate rural sports, nationally recognized sports, Paralympic
sports and Olympic sports.
8. Contribution to the Prime Minister’s National Relief Fund, Prime Minister's
Central Assistance and Relief in Emergency Situations Fund (PM CARES
Fund) or any other fund set up by the Central Government for socio-
economic development providing relief and welfare of the Scheduled
Castes, the Scheduled and backward classes, other backward classes,
minorities and women.
9. Contributions to public funded Universities, IITs, National Laboratories and
autonomous bodies established under DAE, DBT, DST, Department of
Pharmaceuticals, Ministry of AYUSH, Ministry of Electronics and
Information Technology and other bodies, namely DRDO, ICAR, ICMR
and CSIR, engaged in conducting research in science, technology,
engineering and medicine aimed at promoting Sustainable Development
Goals (SDGs).
[Link] development projects.
[Link] to incubators or research and development projects in the field
of science, technology, engineering and medicine, funded by the Central
Government, State Government, Public Sector Undertaking or any agency
of the Central Government or State Government.
[Link] area development. Slum area means any area declared as such by the
Central Government or any State Government or any other competent
authority under any law for the time being in force.
[Link] management, including relief, rehabilitation and reconstruction
activities.
