orporate Social Responsibility (CSR) implies a concept, whereby companies decide voluntarily to contribute to a better society and a cleaner environment – a concept, whereby the companies integrate social and other useful concerns in their business operations for the betterment of their stakeholders and society in general in a voluntary way. 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. Corporate Social responsibility (hereinafter referred as ‘CSR’) is an initiative laid down mandatory for every company that falls under the provisions prescribed by Indian law. What is Corporate Social Responsibility (CSR) in India? Corporate Social Responsibility is made mandatory by Indian law for Companies registered under Section 135 of Companies Act, 2013. CSR is a responsibility that every company registered under the act has to follow. It is a self-regulating model that businesses have to comply with in order to become socially accountable to the company, its stakeholders and towards society. It is mandatory for every company to comply with the Indian laws. CSR activities help in to maintaining a kind impact in the environment. It is a responsibility that companies possess towards the community and environment. As per Indian law, companies falling under the prescribed criteria have to spend at least 2% of the average net profit. CSR gives companies a chance to make a kind impact and show their sincere responsibility in the society. 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. Corporate Social Responsibility (CSR) in India- Objectives One of the major objectives of conducting CSR activity is to give back the community the space and resources that it provides to them. It adds value to the community by organizing activities that are essential for maintaining community standards. It is something that benefits the society. Every contribution made by the organizations brings a fruitful change that society needs. However, if we talk about CSR being a great addition to society. It also serves the purpose of being a great business model for organizations. CSR is a business activity that welcomes your potential customers and increases the investment rate of the company. CSR formulates the business environment in a manner where the organization becomes known and makes business profitable. Advantages of Corporate Social Responsibility (CSR) in India Increases face value of brand Builds positive reputation about the business in society Possesses great abilities to attract new and potential customers Develops employee retention rate and also attracts new employees Gives a chance to companies to showcase their business in the market Makes society a better place to live in Companies that needs to conduct CSR Activities Section 135 of Companies Act, 2013 deals with the provisions of CSR. As per section 135, it is mandatory for every company having either; A net worth of Rs 500 crore or more, Or turnover of Rs 1000 crore or more, Or net profit of Rs 5 crore or more During the preceding financial year should constitute a committee. That committee shall be responsible for CSR activities. Law governs the process of these activities. Role of Board of Directors The role of the Board of Directors in implementing CSRis as follows: After considering the recommendations made by the CSR Committee, approve the CSR policy for the Company. The Board must ensure only those activities must be undertaken which are mentioned in the policy. The Board of Directors shall make sure that the company spends in every financial year, a minimum of 2% of the average net profits made during the three immediately preceding financial years as per CSR policy. In case a company has not completed three financial years since its incorporation, the average net profits shall be calculated for the financial years since its incorporation. The Board’s Report shall disclose: CSR Committee’s composition The contents of CSR Policy In case CSR spending does not meet 2% as per CSR Policy, the reasons for the unspent amount, and details of the transfer of unspent amount relating to an ongoing project to a specified fund (transfer within a period of six months from the expiry of the financial year). Net Profit for CSR Applicability Every company which needs to comply with the CSR provisions have to spend 2% of the average net profits made during the preceding three years as per the CSR policy. The computation of net profit for CSR is as per Section 198 of the Companies Act, 2013. Section 198 provides that while computing the net profits of a company a credit should be given for the subsidies and bounties received from any government, or public authority constituted or authorised on this behalf. For computing net profits, credit cannot be given for the following sums: Profits, by way of premium on shares, unless the company is an investment company. Profits on sales of forfeited shares. Profits of a capital nature, including profits from the sale of the undertaking or any part thereof. Profits from the sale
