Author: Kratika Khandelwal, B.Com., M.K.H.S. Gujarati Girls College, Indore, and institute of company secretaries of India
corporate social responsibility is also called corporate citizenship or corporate responsibility. Generally ,CSR is understood to be the way forms integrated social ,environmental and economic concerns into their value culture decision making strategy and operations in a transparent and accountable manner and their by established better practices within the firm create wealth and improve society
What exactly is the meaning of corporate social responsibility?
As the name indicates it is the responsibilities that the corporates have towards society. Whenever we talk about corporate social responsibility always remember the words of Mohandas Karamchand Gandhi. In his works whatever funds the company has it belongs to the societies so company must strive that the funds should be used for the beneficial of society.
Corporate social responsibility is a strategy that looks at how the business can benefit the wider society. Firms engage incorporate social responsibilities for a number of reasons which includes :-
Improving employee morale
Better forms brand image
Benefit the wider society
Corporate social responsibility is necessarily and evolving term that does not have a standard definition or a fully recognised set of specific criteria.
Corporate social responsibility is nothing but an organisation does to positively influence the society in which it exists. It could take the form of community relationship, volunteer assistant programmes, special scholarships, reservation of cultural heritage and beautification of cities.psychologically is basically to return the society what it has taken from it in the course reservations for the creation of wealth.
CSR is generally understood to be the way a company achieves a balance or integration of:-
Supreme court of India through a case study has defined the importance of corporate social responsibility. The case name is National textile workers v P.R.Ramkrishnan and the preservation 1983 SCR (1) 9
The supreme court of India ,in the case of National Textile Workers v P.R. Ramkrishnan and others 1983 SCR (1) 9 has encapsulated the whole genesis and significance of the concept of ‘corporate social responsibility’.
“ The concept of a company has undergone radical transformation in the last few decades. The traditional view of a company was that it was a convenient mechanical device for carrying on Trade and industry, Ameer legal framework providing a convenient institutional container for holding and using the powers of company management. The company low was at that time concieved merely as a statute intended to regulate the structure and mode of operation of a special type of economic institution called company.this was the view which prevailed for a long time in juristic circles all over the democratic world including United States of America, United Kingdom and India. Today social scientists and thinkers regard a company as a living vital and dynamic , social Organism with form and deep rooted affiliations with the rest of community in which it functions….A company according to the new social economic thinking is a social institution having duties and responsibility towards the community in which it functions.
Rule 2 (1) (d) of the companies (corporate social responsibility policy)
Corporate social responsibility means the activities undertaken by the company in persuons of its statutory obligation let down in section 135 of the act in accordance with the provisions contained in these rules but shall not include the following, namely:-
Activities Undertaker in persons of normal course of business of the company provided that any company engaged in research and development activity of new vaccine drugs and medical devices in their normal course of businessman Undertaker research and development activity of new vaccine drugs and medical devices related to covid-19 for financial year 2020- 21 , 2021-22,2022- 23 subject to the conditions that
(a) Search research and development activity shall be carried out in collaboration with any of the institutions or organisations mentionedin item (ix) of schedule VII to the Act;
(b) Details of search activity shall be disclose separately in the Annual
report on CSR included in the board's report
Any activity undertaken by the company outside India except for training of Indian sports personal representing any state or union territory at National level or India at international level;
Contribution of any amount directly on indirectly to any political party under section 182 of the act;
Activities benefiting employees of the company as defined in clause (k) of section 2 of the code on wages, 2019(29 of 2019)
Activities supported by the companies on sponsorship basis for deriving marketing benefits for its products or services;
Activities carried out for fulfillment of any other statutory obligation under any law in force in India.
This definition is the changed and expanded definition inserted by the companies ( corporate social responsibility policy) Amendment Rules,2021 dated 22.01.2021 effective from 22ndJanuary 2021. This amendment has changed the entire rule regarding the definition.
CSR policy should be inconsistent with activities given under schedule VII of The Companies Act 2013:
A. Towards eradicating poverty, hunger and malnutrition, sanitation, and making available clean drinking water.
B. Promoting education, vacation skills, special education for children, women and elderly.
C. Promote gender equality, women empowerment, setting up old age homes, hostels, orphans, day care centers and other facilities for senior citizens and economically backward people.
D. Ensure sustainable environment, protection of flora and fauna, animal, soil, air water and all other natural resources.
E. Protect national heritage, art and culture, setting up libraries, protection and development of traditional art and handicrafts.
F. Measures towards Development of widows of armed forces people.
G. Promote rural sports, Olympics and Paralympic sports
H. Contribution towards prime minister national relief fund or any other fund set up by the central government.
I. Contribution towards research and development projects in the field of science technology or medicines.
J. Contribution to public funded universities, IITs, DRDO, AYUSH and ICMR etc.
K. Rural development projects.
Companies that trigger any of the afforside conditions must constituted a corporate social responsibility committee of the board to formal letter monitor the CSR policy of the company. It is one of the first complaints is regarding CSR.
The companies (Amendment) Act, 2020 proposes to make the constitution of committee mandatory only where the CS are spend his more than rupees 50 lacs. This provision is made effective from 22nd January 2021.
The provision regarding constitution of the CSR committee is as follows
Listed companies – Three or more directors, out of which at least one shall be an independent director.
Unlisted public companies – Three or more directors, out of which at least one shall be an independent director.
However, if there is no requirement of having an independent director in the company, two or more directors
Private companies – Two or more directors. No independent directors are required as mentioned in the proviso under section 135(1)
Foreign company- At least two persons out of which :
one shall be the authorised person under section 380 of the act, and
another shall be nominated by the foreign company.
The board’s report shell disclose the composition of the corporate social responsibility committee.
Functions of CSR Committee
To formulate and recommend to the board, a CSR policy which would indicate the activities to be undertaken in areas or subject, specified in scheduled VII of the act
To recommend the amount of the expenditure to be incurred on the activities undertaken in persons of the CSR policy.
To monitor the CSR policy of the company time to time
To formulate and recommend to the Board, and annual action plan in pursuance of its CSR policy
Schedule VII of companies Act,2013 describes the following activities to be undertaken as CSR :-
Eradicate hunger, poverty malnutrition,
Promoting gender equalities
Setting up of homes and hostels for women, orphans
Ensuring environmental sustainability ecological balance including contribution to the clean Ganga fund set up by the central government for rejuvenation of river Ganga.
Protection of national Heritage and culture
Measures for benefit for armed forces, war windows and their dependent
Training to promote rural sports.
Rural development projects.
Donating to floods
Reducing child mortality
Contribution to incubators or research and development projects in the field of science technology, engineering and medicine funded by the central government or State government or public sector undertaking or any agency of the central government of state government
Slum area development
Disaster management including relief, rehabilitation and reconstruction activities.
However, in determining CSR activities to be undertaken, preference would need to be given to local areas and the areas around where the company operates.
NOTE: events, awards, charitable contribution, advertisement,sponsorship of TV program etc do not qualify as a part of CSR expenditure. The CSR activities are to be undertaken in project mode and not is a one-off projects
Ongoing projects is the new concept introduced under recent changes.
“Ongoing project” means a multi year project undertaken by a company in fulfillment of its CSR obligation having timelines not exceeding 3 years excluding the financial year in which it was commenced and shell include such project that was initially not approved as multi year project but whose duration has been extended beyond 1 year by the board based on reasonable specification
The following points are to be remembered
Multi- financial year project ( has an identifiable commencement and completion dates)
Maximum period: financial year of commencement ( when work order issued or contractfor execution awarded) + 3 financial years
May not be approved as such but extended latter.
Important concept in case of transfer of unspent CSR amount (required to be made within 30 days of the end of financial year to a special account).
CSR policy relates to the activities to be undertaken by the company as a specified in scheduled VII of the act and the expenditure there on excluding activities undertaken in persuance of normal course of business of company.It is to be made actionable through the annual action plan
Corporate social responsibility applicability
As per section 135 of the companies act 2013, the CSR provision is applicable to companies which fullfils any of the following criteria during the immediately preceding financial year:-
Companies having net worth of INR 500 crore or more, or
Companies having turnover of INR 1000crore or more , or
Companies having a net profit of INR 5 crore or , more.
Further, while calculating “net profit” following exclusions are required to be made
Any profit arising from any overseas branch or branches of the company, whether operated as a separate company or otherwise; and
Any dividend received from other companies in India, which are covered under and compliant with the provisions of section 135 of the act.
Net profit is required to be calculated as per provision of section 198 (which essentially makes it “profit before tax” and excludes capital payments/receipts)
MY OPINION ON CORPORATE SOCIAL RESPONSIBILITY
In my opinion, companies that follow up on corporate social responsibility are one-ways attract a large crowd of the public towards them. Because the leading companies have to dominate shareholding and that's because of the public who are contributing towards them. Directly or indirectly corporate social responsibility contributes not only to the betterment of society but the firm that fulfilling corporate social responsibility requirements and is telling the public that the motto of the company does not end at profit making but we even work for the best of our societies.
Whatever the corporate firms get is the trust of society so they should also maintain the same by contributing to today the leading firms are great examples of the same. These leading firms are even inspirations to those firms who are somewhere only seeing profit-making as their ultimate objective because they are losing people.