CORPORATE SOCIAL RESPONSIBILITY
Corporate Social Responsibilityalso known as CSR in India is the outcome of the Companies Act 2013. India is one of the fewnations in the world to have a devoted CSR. In fact, it is first to put in legislation to incorporate CSR programs, followed by the United Kingdom.
WHAT IS CSR?
CSR relates to the notion that companies ought to engage in socially and environmentally important issuesto connect and run with parties that have an interest in the company's operation.
DEFINITION OF THE TERM CSR
The word CSR has been specified in compliance with the CSR rules, which involve but is not limited to
Projects or projects related to the tasks listed in the Schedule;
Projects or services related to activities conducted by the Board according to the guidelines of the CSR Committee as specified in the CSR policy, subject to the requirement that such policy covers the subjects mentioned in the Schedule.
The Ministry of Corporate Affairs has recently notified Section 135 and Schedule VII of the Companies Act as well as the rules of the 2014 Corporate Social Responsibility Rules (CRS Rules) which came into effect on 1 April 2014.[i]
Section 135 of the Companies Act lays down the criteria for the applicability of the CSR to the Company, i.e. (a) the net value of the Company to be Rs 500 crore or more; (b) the turnover of the Company to be Rs 1000 crore or more; (c) the net profit of the Company to be Rs 5 crore or more. Further to the CSR guidelines, the terms of the CSR refer not only to Indian companies but also to subsidiaries and project offices of a foreign corporation in India.[ii]
NEED OF CSR
CSR is responsible for providing a great deal of goodwill among businesses, either specifically or indirectly. They contain-
To make employees more committed and to help businesses hold them in the long-term.
To allow businesses more credible and to enable them to achieve exposure to a larger market share.
Promote the reputation of corporations among the public and contribute to improving their market image.
Help to restrict state interference in business relations as self-regulating corporations and behave as the most ethical.[iii]
The CSR regulation of the organization shall contain, inter alia, the following:-
A list of CSR projects or programs that the organization aims to conduct detailing the modalities of execution of these projects or programs, and the timelines for completion of these projects or programs for the same purpose.
Management of these projects or programs
A provision stating that the benefit resulting from CSR projects or programs or activities are not part of the company's business profit.[iv]
ACTIVITIES UNDER CSR
Activities that may be pursued by the company to fulfill its CSR commitments include addressing global hunger and malnutrition, encouraging education, fostering gender equality and empowering women, minimizing infant mortality and enhancing maternal well-being, fighting human immunodeficiency virus, acquired immune deficiency syndrome, malaria, and other diseases, maintaining environmental protection, contribution to the National Relief Fund of the Prime Minister or to some such fund set up and to any such matters that may be prescribed.[v]
Every company to which the CSR applies shall establish a CSR Committee of the Board of Directors:
Composed of three or more directors, of whom at least one director is an independent member. Nevertheless, if a corporation is not required to appoint an independent director, it shall have two or more directors in the committee.
Consisting of two directors in the case of a private corporation having just two directors on the board;
Consists of at least two individuals in the case of a foreign corporation, one of whom is an authorized individual residing in India and another nominated by a foreign company.[vi]
FUNCTIONS OF CSR COMMITTEE
The CSR Committee shall—
Formulate and propose to the Board a CSR strategy specifying the tasks to be performed by the Company;
Track the company's CSR program from time to time
Institute with a consistent reporting system for the execution with CSR initiatives or services or events undertaken by the company.[vii]
In India, CSR is legislated in the expectation that it will bring about a shift in the mindset of corporate organizations that will give society back in a great way because it was the society whose needs enabled them to flourish in the first place. Similarly, it is thought that the community will also be improved, because the government has been found lacking in its attempts to support the local people in a variety of ways.
[i]MansukhlalHiralal& Company, Corporate Social Responsibility- Indian Companies Act 2013, Mondaq, (August 4th, 2020, 1:00 P.M.), https://www.mondaq.com/india/corporate-governance/366528/corporate-social-responsibility--indian-companies-act-2013
[iii]Saurabh Kumar, Corporate Social Responsibility under Companies Act, Ipleaders, (August 4th, 2020, 2:47 P.M.), https://blog.ipleaders.in/csr-laws-india/
[iv]AnkitaSingla, Corporate Social Responsibility (CSR) as Per Companies Act, 2013, TaxGuru, (August 4th, 2020, 3:15 P.M.), https://taxguru.in/company-law/corporate-social-responsibility-csr-companies-act-2013.html
[v]Supra at note i.
[vi]Supra at note iv.