Corporate Social Responsibility (CSR) in India

What is Corporate Social Responsibility (CSR)?

Corporate social responsibility means managing of business processes by fulfilling its social responsibilities to provide positive impact on the society as a whole. There are various responsibilities performed by a business owner – Among them one is corporate social responsibility. A business owner must cover attributes like sustainability, social ethics in order to fulfil their social responsibilities towards society as a whole.

Businesses that perform social responsibilities not only take their businesses into limelight but also benefit them in the long run. CSR plays an important role in sustainable development as well as focus on economic, environment and social performance of a particular business. There are various CSR initiatives performed by businesses in the various fields such as health, education, rural development, livelihood and social entrepreneurship. Most of the businesses report their corporate social responsibility not only in annual report but also in annual CSR & sustainable development report. After filing these reports annually, it gets verified as per global reporting initiative guidelines and business responsibility report.

Businesses that perform social responsibilities not only take their businesses into limelight but also benefit them in the long run. CSR plays an important role in sustainable development as well as focus on economic, environment and social performance of a particular business. There are various CSR initiatives performed by businesses in the various fields such as health, education, rural development, livelihood and social entrepreneurship. As per section 135 of the companies act, the main aim of launching corporate social responsibility policy is to achieve improvement & growth of the society. A corporate social responsibility policy has been launched by the government so that businesses come forward to meet people needs, to enhance their lives through health care & education, to demonstrate positive attitude to improve the quality of life and to create employment opportunities so that more & more person should earn their livelihood.

Benefits of Corporate Social Responsibility

Businesses are strongly benefitted with corporate social responsibility policy in the following ways –

• It enhances the goodwillof the company and benefits it in the long run.
• Companies contributing towards corporate social responsibility are considered as responsible corporate entities.
• CSR commitments attract, retain and motivate the employees of the company and spread a sense of belongingness throughout the company.
• It improves the decision making process of the company.
• Access to more capital & markets.
• It helps in increasing the sales & profits of the company.
• It helps in improving the quality & productivity of the company.
• It increases the loyalty of the customer towards you.
• It helps in better managing of risk processes.
• It influences you to donate for AIDS or Ebola victims, Earthquake victims etc.
• It increases your long term benefits in case of online & offline businesses and makes you more efficient.

Methods of Implementing CSR Activities

A company can implement CSR activities by the following methods –

• On its own
• By setting up Not for profit organizations
• By an independent Not for profit organization having a record of at least 3 years in performing similar activities.
• Collaborative or resource pooling with other companies.

CSR Methodology

Corporate social responsibility is a method to evaluate the organization performance on the basis of their social responsibilities and their impact. Businesses are evaluated on the basis of the following aspects –

• Customers
• Employees
• Suppliers
• Communities
• Environment

Every business organization must comply with the legislation in relation to the corporate social responsibility.

CSR Committee

As per section 135 of the Companies act 2013, CSR committee has been formed to carry out the following activities –

• Planning and providing support to the board.
• Recommending the amount of expenditure to be incurred on the activities mentioned in clause (a).
• Monitoring company’s corporate social responsibility (CSR) from time to time.

Budget

As far as budget is concerned, it is the responsibility of company board of directors to plan and spend at least 2% of the average net profit earned during the previous 3 financial years.

Net profit as given in the financial statements in compliance with the applicable provisions not includes the following –

• Any profit earned from any branch/branches situated in overseas (whether operating as a separate company or otherwise)
• Any dividend earned from other Indian companies covered under & comply with section 135 requirements as per the act.

Funds Allocation

Every company allocate some of its funds to fulfill their objective of corporate social responsibility. It is mandatory for a business to allocate at least 2% of the average net profitsearned during the previous 3 financial yearsto CSR activity. Business profits of the company do not include the surplus standing out of the CSR activity. Company itself build the CSR capacities of its personnel and its implementing agencies through institutions having the track record of at least 3 previous financial years but the expenditure incurred should not be more than 5% of the total CSR expenditure in a single financial year. If CSR allocation fund is not utilized in a particular year, it will be carried forward to the next financial year.