About: Corporate Social Responsibility?

What is Corporate Social Responsibility?

  • It is a corporation’s initiative to assess and take responsibility for the company’s effects on environmental and social well being.
  • It helps a company be socially accountable — to itself, its stakeholders, and the public.
  • By practicing corporate social responsibility, companies can be conscious of the kind of impact they are having on all aspects of society including economic, social, and environmental.
  • The concept rests on the ideology of give and take. Companies take resources in the form of raw materials, human resources etc from the society. By performing the task of CSR activities, the companies get an opportunity to give back to the society

CSR as per Companies Act, 2013:

  • Section 135 of the Companies Act, 2013, which came into force in 2014, mandates companies to spend on CSR activities.
  • Every company, private limited or public limited, which either has a net worth of Rs 500 crore or a turnover of Rs 1,000 crore or net profit of Rs 5 crore, needs to spend on CSR activities.
    • Their CSR spend must be at least 2% of its average net profit for the immediately preceding three financial years on CSR activities.
  • Profits from any overseas branch of the company, including those branches that are operated as a separate company would not be included in the computation of net profits of a company.
  • In determining CSR activities to be undertaken, preference has to be given to local areas and the areas around where the company operates.
  • Contribution to any political party is not considered to be a CSR activity and only activities in India would be considered for computing CSR expenditure.
  • If companies do not fully spend the CSR funds, they must disclose the reasons for non-spending in their annual report.

Shortcomings in CSR activities:

  • Backward Districts: It has been observed that the CSR expenditure on the country’s most backward districts that require maximum CSR support, remains small.
  • One time activity: Instead of engaging with communities to uplift them, companies do a one-time cheque-signing exercise by transferring CSR funds to government programmes such as Prime Minister’s Relief Fund or PM-CARES.
  • Non-compliance: The Registrar of Companies serves notices on a regular basis for non-compliance with CSR expenditure.