Corporate Social Responsibility | CSR India
- Yogesh Suthar
- Jun 15, 2020
- 5 min read
India is the only country so far, where CSR has been made mandatory.
What is CSR?
Corporate Social Responsibility, or CSR, is a system of self-regulation for a business to become and remain socially accountable to its customers, employees, peers, and community.
Under CSR, a company tracks its effect overall community -- economically, environmentally, legally, and culturally -- during its normal course of business. Beyond the community benefits from social responsibility, the business hopes to improve its brand image and thus profitability.
Understanding Corporate Social Responsibility (CSR)
Corporate social responsibility is a broad concept that can take many forms depending on the company and industry. Through CSR programs, philanthropy (the desire to promote the welfare of others), and volunteer efforts, businesses can benefit society while boosting their brands.
As important as CSR is for the community, it is equally valuable for a company. CSR activities can help forge a stronger bond between employees and corporations; boost morale, and help both employees and employers feel more connected with the world around them.
What activities can be done in C.S.R.?
Under C.S.R. activities, companies have to compulsorily take part in various activities, which are necessary for the welfare of the people of the backward society.
These activities are covered under the Corporate Social Responsibility:
1. To eliminate hunger, poverty, and malnutrition
2. Promote education
3. Improve maternal and child health
4. Ensuring environmental sustainability
5. Measures for the benefit of the Armed Forces
6. Promote sports activities
7. Protection of National Heritage
8. Contribution to Prime Minister's National Relief fund
9. Developmental activities in a slum area
10. Construction of toilets in schools
Applicability
FOR WHOM it is APPLICABLE?
The companies on whom the provisions of the CSR shall be applicable are contained in Sub Section 1 of Section 135 of the Companies Act, 2013. As per the said section, the companies having:-
Net worth of INR 500 crore or more; or
Turnover of INR 1000 crore or more; or
Net Profit of INR 5 crore or more
If any of the above financial strength criteria are met, the CSR provisions and related rules will be applicable to the company.
Note: Corporate social responsibility is a requirement for companies meeting the above criteria. On the other hand, Section 8 companies are incorporated solely for non-profit purposes.
Provisions of CSR apply to foreign branch/project office of a foreign company:-
The Provisions of CSR are applicable to Foreign companies having a Branch office or project in India if it fulfills the above-given criteria. The criteria of [1]Net Profit etc. apply only to business operations in India in case of foreign Company/ Project Office.
Role/ Functions of CSR Committee:
To formulate and recommend to the board of Directors CSR Policy as per activities specified in Schedule VII.
To recommend the amount of expenditure to be incurred on the above activities along with the calculation of the same.
To monitor the policy from time to time.
Prepare a transparent monitoring mechanism for ensuring the implementation of the projects/programs/activities proposed to be undertaken by the company.
Role/ Responsibility of the Board of Directors:
Responsibility:
To approve the CSR Policy recommended by the Committee.
To disclose the contents of the policy in its report & place it on the website.
To ensure that activities reflected in CSR policy are actually undertaken by Company.
To ensure that activities included by a Company in its Corporate Social Responsibility Policy are related to the activities included in Schedule VII of the Act.
Role/Work:
After taking into account the recommendations made by the Corporate Social Responsibility Committee, approve the Corporate Social Responsibility Policy for the Company.
Review activity included in policy undertake by the Company or not.
Check Whether Company is spending the amount if not discuss in the Meeting.
The Board of Director’s report undertakes Section 134(3) of the 2013 Act shall disclose the composition of the Corporate Social Responsibility Committee.
Net Profit Require spending on CSR Activity:
To ensure that at least 2% of the average net profit of 3 immediately preceding financial years to be spent on CSR activities every year.
Example: For Financial Year 2019-20 Calculation: Average net profit of FY 2016-17, 2017-18 & 2018-19 need to be considered.“Net profit” means the net profit of a company as per its financial statement prepared in accordance with the applicable provisions of the Act, but shall not include the following, namely:
i. any profit arising from any overseas branch or branches of the company, whether operated as a separate company or otherwise; and
ii. Any dividend received from other companies in India, which are covered under and complying with provisions of Section 135.
Whether the company can collaborate with another company for CSR activity and project?
A company may also collaborate with other companies for undertaking projects or programs or CSR activities in such a manner that the CSR committees of respective companies are in a position to report separately on such projects or programs.
Activity Doesn’t Include in CSR:
Activities are undertaken in the normal course of business.
Activity undertaken outside India.
CSR projects or programs or activities that benefit only the employees of the company and their families shall not be considered as CSR activities.
Contribution of any amount directly or indirectly to any political party under section 182 of the Act, shall not be considered as CSR activity.
Activity not covered within schedule VII of the 2013 Act.
One-off events such as marathons/ awards/ charitable contribution/ advertisement/ sponsorships of TV programs etc. would not be qualified as part of CSR expenditure.
Expenses incurred by companies for the fulfillment of any Act/ Statute of regulations (such as Labour Laws, Land Acquisition Act, etc.) would not count as CSR expenditure under the Companies Act.
Examples of CSR in India
Tata Group:
The Tata Group conglomerate in India carries out various CSR projects, most of which are community improvement and poverty alleviation programs. Through self-help groups, it has engaged in women empowerment activities, income generation, rural community development, and other social welfare programs. In the field of education, the Tata Group provides scholarships and endowments for numerous institutions.
The group also engages in healthcare projects, such as the facilitation of child education, immunization, and the creation of awareness of AIDS. Other areas include economic empowerment through agriculture programs, environment protection, providing sports scholarships, and infrastructure development, such as hospitals, research centers, educational institutions, sports academy, and cultural centers.
Ultratech Cement:
Ultratech Cement, India’s biggest cement company is involved in social work across 407 villages in the country aiming to create sustainability and self-reliance. Its CSR activities focus on healthcare and family welfare programs, education, infrastructure, environment, social welfare, and sustainable livelihood.
The company has organized medical camps, immunization programs, sanitization programs, school enrollment, plantation drives, water conservation programs, industrial training, and organic farming programs.
Mahindra & Mahindra:
Indian automobile manufacturer Mahindra & Mahindra (M&M) established the K. C. Mahindra Education Trust in 1954, followed by Mahindra Foundation in 1969 with the purpose of promoting education. The company primarily focuses on education programs to assist economically and socially disadvantaged communities.
Its CSR programs invest in scholarships and grants, livelihood training, healthcare for remote areas, water conservation, and disaster relief programs. M&M runs programs such as Nanhi Kali focusing on education for girls, Mahindra Pride Schools for industrial training, and Lifeline Express for healthcare services in remote areas.
ITC Group:
ITC Group, a conglomerate with business interests across hotels, FMCG, agriculture, IT, and packaging sectors has been focusing on creating sustainable livelihood and environmental protection programs. The company has been able to generate sustainable livelihood opportunities for six million people through its CSR activities.
Their e-Choupal program, which aims to connect rural farmers through the internet for procuring agriculture products, covers 40,000 villages and over four million farmers. It’s social and farm forestry program assists farmers in converting wasteland to pulpwood plantations. Social empowerment programs through micro-enterprises or loans have created sustainable livelihoods for over 40,000 rural women.
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