CSR in India- a brief overview

CSR in India- a brief overview

Abstract-

Corporate Social Responsibility (CSR) in India has gained significant importance, with companies actively engaging in social and environmental initiatives. In this blog we will understand the concept of Corporate Social Responsibility (CSR), its position in India, the CSR committee. We will also get to know about the evolution of CSR in India and at last we will get to know some benefits of CSR.

Introduction-

Corporate Social Responsibility (CSR) refers to the voluntary decision made by businesses to contribute to a better society and a cleaner environment, promote sustainable development by benefiting all stakeholders in terms of the economy, and society. Integrating social and environmental concerns into business operations and relationships with stakeholders, such as clients, staff, vendors, local communities, and the environment, is known as corporate social responsibility, or CSR.[1] It is about generating shared value and establishing enduring bonds of respect and trust with stakeholders. To put it succinctly, corporate social responsibility (CSR) is the practise of conducting business in a way that is beneficial to the firm and the community at large.

CSR in India-

CSR is not a new concept in India. Companies in India have dedicated CSR teams that develop policies, strategies, and goals for their CSR programmes, as well as budgets to fund them. These programmes are frequently determined by social philosophy, which has clear objectives, is well defined, and is aligned with the core business.[2]

Section 135 of the Companies Act, 2013 ("Act") provides that certain companies must mandatorily contribute a certain amount towards CSR activities. The provisions of CSR apply to any company that met any of the following conditions in the previous fiscal year:

• More than Rs.500 crore in net worth
• More than Rs.1000 crore in revenue
• More than Rs.5 crore in net profit

The Board of Directors of each company to which the CSR provisions apply must ensure that the company spends at least 2% of its average net profits from the previous three fiscal years in each fiscal year, in accordance with its CSR policy.

The Companies act provides a list of activities that qualify as CSR expenditure, including promoting education, eradicating hunger and poverty, promoting gender equality and empowering women, healthcare, environmental sustainability, and more. The government monitors CSR provisions compliance through company disclosures on the MCA portal. Following a thorough examination of records, the government may take action against non-compliant companies for any violation of CSR provisions.

The CSR committee-

Companies in India that meet the specified criteria are required to form a Corporate Social Responsibility (CSR) Committee under the Companies Act, 2013.[3] The following are the key characteristics of India's CSR committee:

• Composition- The CSR Committee must be composed of at least three directors, including at least one independent director. This committee is in charge of developing and recommending to the board a Corporate Social Responsibility Policy (CSR Policy) outlining the company's activities.
• Responsibilities: The primary responsibilities of the CSR Committee are creating and recommending the board's CSR policy, recommending CSR activities that the company can do in accordance with its CSR policy, recommending the amount of money to be spent on CSR activities, monitoring the company's CSR policy implementation on a regular basis.
• Meetings: The CSR Committee must meet at least once per fiscal year. The meeting requires a quorum of two members, with at least one independent director present.
• CSR Policy: The CSR Committee develops and recommends the CSR Policy to the board of directors. The policy specifies the areas or projects where the company intends to invest its CSR funds.
• Reporting: The details of the CSR Committee's composition, CSR Policy, and CSR activities undertaken by the company must be disclosed in the Board's report and on the company's website.

Evolution of CSR in India-[4]

The evolution of corporate social responsibility in India refers to changes in the cultural norms of corporations' engagement in corporate social responsibility (CSR) over time in India, with CSR referring to how businesses are managed to have an overall positive impact on the communities, cultures, societies, and environments in which they operate. CSR has gone through many phases in India-

1. Pre-Independence Era: Prior to India's independence in 1947, some business leaders were involved in philanthropic activities, frequently supporting educational and healthcare initiatives. These efforts, however, were mostly voluntary and not governed by any specific regulations.
2. Post-Independence Era: Following independence, businesses shifted their focus to economic growth and development. During this time, CSR activities were often sporadic and limited to charitable donations.
3. The Bhopal Gas Tragedy (1984): The Bhopal disaster emphasised the importance of stricter regulations and corporate accountability. This incident increased public awareness of corporate negligence and environmental concerns, resulting in a growing demand for CSR regulations in India.
4. The Companies Act of 2013: The passage of the Companies Act in 2013 was a watershed moment in the evolution of CSR in India. Section 135 of the Act required certain qualifying corporations to spend a certain percentage of their profits on CSR activities. This legal provision defined the criteria for eligible companies and the activities that qualify as CSR expenditure in India, bringing a structured approach to CSR.
5. Revised CSR Rules (2019): In 2019, India's Ministry of Corporate Affairs revised the CSR rules to clarify eligible CSR activities, reporting requirements, and the role of CSR committees. These revisions aimed to improve the effectiveness and impact of corporate CSR initiatives.
6. Emphasis on Impact and Sustainability: There has been a shift in recent years towards emphasising the impact and sustainability of CSR activities. Companies are increasingly aligning their CSR initiatives with the UN Sustainable Development Goals (SDGs) in order to address global challenges such as poverty, education, healthcare, gender equality, and climate change.
7. Public-Private Partnerships: In the implementation of CSR projects, collaboration between the government, private sector, and civil society organisations has become more common. Partnerships between the public and private sectors help to leverage resources and expertise, resulting in more impactful CSR initiatives.

Benefits of CSR-

The following are the advantages of CSR:[5]

1. Improvement in terms of brand positioning.
2. Enhancement of the corporate image and reputation.
3. The moral satisfaction that comes from contributing to society.
4. Contribution to societal improvement.
5. Makes it easier to attract, retain, and motivate employees.
6. Growth in terms of sales and market share.

Conclusion-

CSR initiatives in India have become more strategic over the years, aligning with societal needs and global sustainability goals. The evolution of CSR in India reflects a broader shift in corporate mindset - away from profit-driven approaches and towards a more holistic approach that includes social and environmental responsibilities. It benefits not only communities and the environment, but it also boosts a company's reputation, encourages employee engagement, and strengthens stakeholder relationships. As India grows, the role of CSR is expected to become even more important, with businesses expected to play a critical role in addressing complex societal challenges. With ongoing advancements and a growing awareness of business and society's interconnectedness, the future of CSR in India holds the promise of creating a more sustainable, inclusive, and equitable future for all stakeholders involved.

[1] Mandatory CSR in the Companies Bill, 2011: Are We There, Yet?, (2013) 8 NSLR 37

[2] https://www.ijltemas.in/DigitalLibrary/Vol.3Issue7/164-167.pdf

[3] Corporate Social Responsibility in India, 2.1 JCLJ (2021) 1322

[4] Corporate Social Responsibility, 2.2 JCLJ (2022) 774

[5] The Reshaping of Corporate Social Responsibility (CSR) in Covid-19 Times, 5.1 GLS LJ (2023) 30