Corporate Social Responsibility (CSR) broadly refers to the work and activities undertaken by corporates towards issues related to social causes and development, environment, disaster relief and community support.
The Corporate Social Responsibility was made mandatory for companies in India by an Act in the year 2013. The Act named Companies Act 2013 also made it mandatory for companies to publish their CSR report along with their annual report and Business Responsibility Report (BRR).
The Ministry of Corporate Affairs also keeps a track of CSR related expenditure done by those companies which fall in the ambit of Companies Act 2013.
There are multiple aspects to CSR. This article explains different dimensions of CSR related to following queries:
- What is the definition of CSR?
- Which companies need to spend on CSR?
- What do companies need to do regarding their CSR obligation?
CSR Definition
The concept of CSR rests on the ideology of businesses giving back to society as they grow and benefit. Companies take resources in the form of raw materials, human resources etc from the society. By performing the task of CSR activities, the companies are giving something back to the society.
The CSR concept is not new to Indian companies. The very basis of renowned brands like TATA rests on community trusts developed basis shared value created by the company over the years. The corporate social responsibility does not only fulfil the social obligations of the businesses, it also helps them bring sustainable growth with its customer eventually becoming loyal for their social commitments.
As commonly misunderstood, the 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 Definition as per Companies Act
In India, the Ministry of Corporate Affairs, Government of India notified the Section 135 of the Companies Act, 2013 along with Companies (Corporate Social Responsibility Policy) Rules, 2014.
Moreover, while proposing the Corporate Social Responsibility Rules under Section 135 of the Companies Act, 2013, the Chairman of the CSR Committee mentioned the Guiding Principle as follows: "CSR is the process by which an organization thinks about and evolves its relationships with stakeholders for the common good, and demonstrates its commitment in this regard by adoption of appropriate business processes and strategies.
The mandatory CSR provisions were made effective from 1st April, 2014 for companies with a certain profit, turn-over or valuation.
CSR Definition by United Nations
As per the United Nations Industrial Development Organization (UNIDO), the Corporate Social Responsibility (CSR) is generally understood as being the way through which a company achieves a balance of economic, environmental and social imperatives ("Triple-Bottom-Line- Approach"), while at the same time addressing the expectations of shareholders and stakeholders.
Who needs to spend on CSR
The companies which fall in the ambit of have of the following three criteria are required to spend on CSR. Such companies are required to do CSR spend amounting to 2 % of their average annual profit over last three years. Here are the criteria for CSR eligibility for the companies.
- Net worth of the company to be Rs 500 crore or more; or
- Turnover of the company to be Rs 1000 crore or more; or
- Net profit of the company to be Rs 5 crore or more.
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