Corporate Social Responsibility in India

Ritika Pandey, a 3rd year from Galgotias University has written this Article on “Corporate Social Responsibility in India”.

INTRODUCTION

Corporate Social Responsibility is a wide concept and can be present in any form in any business. It is a type of responsibility upon a business, toward society and the public. CSR is a way through which companies can disclose their social and environmental records publicly. It is recognized that CSR is a modified form of corporate governance. It is based on the fiduciary obligations owed to all shareholders of the company. Corporations must go above and beyond what is required of them by law as part of their CSR obligations. Corporate social responsibility (CSR) is the duty of businesses to improve society and the environment.

Different definitions of Corporate Social Responsibility.

• According to the Companies (CSR Policy) Rules, 2014-Corporate Social Responsibility means and includes but is not limited to-

(i)Projects or programs relating to activities specified in Schedule VII to the Act or

(ii) Projects or programs relating to activities undertaken by the board of directors of a company (Board) in pursuance of recommendations of the CSR Committee of the Board as per declared by the CSR Policy of the company subject to the condition that such policy will cover subjects enumerated in Schedule VII of the Act[1]

• According to the United Nations Industrial Development Organisation, Corporate Social Responsibility is a concept of management “whereby companies integrate social and environmental concerns in their business operations and interactions with their stakeholders.” As per the organization, corporate social responsibility is the process by which a business maintains an equilibrium between its financial, ecological, and ethical obligations. They termed this process a ‘triple bottom line’ approach. 
• As per Kotler and Lee, Corporate Social Responsibility is “an obligation to improve community well-being through business practices, discretionary and contribution of corporate resources. To support social causes and to fulfill commitments towards CSR, corporations undertake various corporate social initiatives such as eradicating hunger, malnutrition, promoting education, etc.”
• As per the World Business Council for Sustainable Development – “Corporate social responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large”.
• According to the European Union, Corporate Social Responsibility refers to – ‘‘a concept whereby companies decide voluntarily to contribute to a better society and a cleaner environment, this is done by integrating social and environmental concerns in their business operations and their interaction with their stakeholders on a voluntary basis.”[2]

TYPES OF CSR

There are four major categories into which CSR is divided. It is divided on the basis of the efforts made by the companies or organizations.

Environmental Corporate Social Responsibility

The main objective behind this is to minimize the negative effects of the operations of a business on the environment. Also to achieve a sustainable production method. Various initiatives are taken by companies in order to reduce pollution and offset carbon footprints. Moreover, Companies should decrease the emissions of greenhouse gases and should rely more on recyclable resources. Also, Companies should reduce the use of single-use plastics and regulate water consumption and energy consumption. Companies should also plant trees and donate to various environmental causes as an alternative.

Ethical Corporate Social Responsibility

Ethical responsibility is also known as Human Resource Corporate Social Responsibility. It basically deals with the moral values of an organization. Moreover, This type of responsibility can be shown by businesses by fairly treating their members, stakeholders, investors, employees, and customers. In the general case, The Companies work according to the provision of labor laws. However, if they are working with international companies then they should follow ethical trade practices and work in compliance with international trade laws.

Philanthropic Corporate Social Responsibility

The major objective behind this CSR is to raise the living standards of people and to make the world a better place to live. This can be achieved by providing monetary assistance to people and organizations in need. Firms also donate to charities, non-profit organizations, and relevant causes. These donations should be related to their company.

Economic Corporate Social Responsibility

Economic responsibility projects entail enhancing a company’s operational efficiency while engaging in sustainable business methods. This type of responsibility specifies that a company should not just be concerned about the profits of the company but should pay all taxes on time. Moreover, The company should make that its operations have a positive impact on society and its people.

CSR & COMPANY LAW

India legalized and mandated CSR on 1^st April 2014 and it is the first country to do so. Section 135 of the Companies Act,2013 contains legal provisions of CSR in regard to businesses and companies operating in India. As per Section 135(1) of the Companies Act,2013, ‘Every company having a net worth of rupees five hundred crores or more, or turnover of rupees one thousand crores or more or a net profit of rupees five crores or more during any financial year shall constitute a Corporate Social Responsibility Committee of the Board consisting of three or more directors, out of which at least one director shall be an independent director.’[3]

Section 8 companies should also establish a Corporate Social Responsibility Committee. Also, it should comply with CSR provisions when it meets the conditions specified in Section 135 (1) of the Companies Act,2013.

CSR COMMITTEE (COMPOSITION & DUTIES)

1. As per Companies (CSR Policy) Rules, 2014 The companies mentioned in rule 3 (every company including its holding or subsidiary, and a foreign company) shall constitute CSR Committee as under-
2. An unlisted public company or a private company covered under sub-section (1) of section 135 which is not required to appoint an independent director pursuant to sub-section (4) of section 149 of the Act[4], shall have its CSR Committee without such director;
3. A private company having only two directors on its Board shall constitute its CSR Committee with two such directors:
4. With respect to a foreign company covered under these rules, the CSR Committee shall comprise at least two persons of which one person shall be as specified under clause (d) of sub-section (1) of section 380 of the Act and another person shall be nominated by the foreign company. [5]
5. The CSR Committee shall institute a transparent monitoring mechanism for the implementation of the CSR projects or programs or activities undertaken by the company.

Section 135(3) of the Companies Act,2013 [6]lists the various roles and responsibilities of the Corporate Social Responsibility Committee of a business organization or a company. The Corporate Social Responsibility Committee shall —

• Formulate and recommend to the Board, a Corporate Social Responsibility Policy which shall indicate the activities to be undertaken by the company as specified in Schedule VII;
• Recommend the amount of expenditure to be incurred on the activities referred to in clause (a); and
• Monitor The Corporate Social Responsibility Policy of the company from time to time.

CSR POLICY

1. The CSR Policy of the company shall, inter-alia, include the following, namely –
2. A list of CSR projects or programs which a company plans to undertake to fall within the purview of the Schedule VII of the Act. It specifies modalities of execution of such projects or programs and implementation schedules for the same; and
3. The monitoring process of such projects or Programs:
4. Provided that the CSR activities do not include the activities undertaken in pursuance of the normal course of business of a company.
5. Provided further that the Board of Directors shall 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.
6. The CSR Policy of the company shall also specify that the surplus arising out of the CSR projects or programs or activities shall not form part of the business profit of a company.

RESPONSIBILITY OF THE BOARD IN REFERENCE TO CSR

The Boards of Every Company have a certain set of responsibilities to fulfill with reference to Corporate Social Responsibility. The same are as follows-

• The Board of every company is bound to approve a Corporate Social Responsibility policy which is made upon the recommendations of the Corporate Social Responsibility Committee.
• It is also an obligation of the Board to publish the contents of such policy in its report and on the company’s website.
• The Board should also ensure that the company spends at least two percent(2%) of the average net profits of the company made during the three immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy in every financial year. The preference for disbursing the money assigned for CSR shall be given to areas in which the company operates.
• Also, in case of failure of the company to spend the assigned or fixed amount. The Board must justify and state all reasons for the same, in its report.

CSR ACTIVITIES

Schedule VII of the Companies Act, 2013 [7]lists various activities which may be included by companies in their Corporate Social Responsibility Policies Activities. The activities can be in relation to: –

• Eradicating extreme hunger and poverty;
• Promotion of education;
• Promoting gender equality and empowering women;
• Reducing child mortality and improving maternal health;
• Combating human immunodeficiency virus, acquired immune deficiency syndrome, malaria, and other diseases;
• Ensuring environmental sustainability;
• Employment enhancing vocational skills;
• Social business projects;
• Contribution to the Prime Minister’s National Relief Fund or any other fund set up by the Central Government or the State Governments for socio-economic development and relief. Also to fund the welfare of the Scheduled Castes, the Scheduled Tribes, other backward classes, minorities, and women; and
• Such other matters as may be prescribed.

Moreover, Swachh Bharat Kosh, Clean Ganga Fund, Prime Minister’s Citizen Assistance, and Relief in Emergency Situations Fund (PM CARES Fund) are the various funds that can be included in the category of funds set up by the Central or State Government.

According to the Companies (CSR Policy) Rules, 2014-

• 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 in accordance with these rules.
• Section 182 of the Companies Act prohibits any direct or indirect contribution of any amount to any political party. It states that such contribution shall not be considered as CSR activity.
• The CSR projects or programs or activities that benefit only the employees of the company and their families shall not be considered CSR activities in accordance with section 135 of the Companies Act.

INSTANCES OF CSR IN INDIA

TATA Steel

The goal of “Mission 2020 for Agricultural Development,” sought to improve the lives of underprivileged farmers. It helps them by boosting employment possibilities and tackling the problems of poverty and food security. It was incorporated by TATA Steel and the State of Odisha. Moreover, By providing them with appropriate training and development in the field of horticulture and contemporary irrigation practices, it hoped to increase the income of 7000 home farmers.

Furthermore, The project’s implementation, promotion of employment prospects for women, and goal to convert three acres of agriculture through irrigational infrastructure all required the formation of a self-help group.

The construction of ponds and irrigation systems assisted 344 farmers. The National Horticultural Mission transformed a 60-acre wasteland for the growth of cashew, mango, and lemon plantations.

Coca Cola

Coca-Cola, a well-known beverage corporation, took on the “Alag Karo Har Teen Din Bin” project. It aimed for simple disposal management and wet and dry rubbish segregation. The Coca-Cola Foundation began this project in Gurugram in January 2017 in collaboration with the non-profit Sahass, TetraPak, and GIZ.

The Municipal Corporation of Gurugram provided rules on the correct disposal of garbage in three categories i.e. wet, dry, and reuse waste. However, Gurugram produces 600 tonnes of waste that were not disposed of in an efficient manner.

The following goals were sought by this initiative:

1. Raising awareness and understanding among 150000 people.

2. In 60 designated regions, 9000 families were required to separate waste at the source.

3. Knowledge of the waste management system and recycling was to be provided among 50 schools and 50 commercial outlets.

4. Prevention of waste dumped in landfills.

Mahindra & Mahindra

The Mahindra & Mahindra, an Indian car manufacturer, established the K. C. Mahindra Education Trust in 1954 and the Mahindra Foundation in 1969 with the goal of advancing education. The company’s main area of interest is educational programs that assist communities in need on both social and economic levels.

Money is donated to programs that train people in livelihoods, offer healthcare in rural areas, save water, and respond to natural disasters through the company’s corporate social responsibility efforts. Furthermore, The group’s initiatives include Lifeline Express, which offers healthcare in remote areas, Mahindra Pride Schools, which offer industry attachment, and Nanhi Kali, which focuses on education for girls.

CONCLUSION

In the modern world, CSR plays a significant role in business ethics and governance. Every firm has a social obligation to fulfill. It should be viewed as an investment rather than a cost in order to achieve better long-term benefits.

The commercial activity could be re-started by CSR efforts. Often, people are unable to spend during times of crisis. Furthermore, Customers are in a position to spend money when companies that practice corporate social responsibility collaborate and donate a portion of their income. The economy quickly operates at peak efficiency as one activity drives the next.

CSR is the finest practice adopted by both large and small organizations since it benefits all parties involved. The country has benefited from the Corporate Social Responsibility (CSR) philosophy as evidenced by the growing recognition of it and also by the development of policies for economic stability and sustainable development. Additionally, because of population growth and technological pressures, the environment is slowly deteriorating. This is why corporate responsibility comes into play and puts a limit on this.

Also Read: Lifting up of the Corporate Veil. Click Here!

[1] Companies (CSR Policy) Rules, 2014

[2] https://blog.ipleaders.in/corporate-social-responsibility-4/#Definitions_of_corporate_social_responsibility

[3]The Companies Act,2013§ 135(1)

[4] Companies Act,2013§ 149(4)

[5] Companies (CSR Policy) Rules, 2014

[6]The Companies Act,2013§ 135(3)

[7] Companies Act,2013