Business · Law

Corporate Social Responsibilty (CSR) : A Necessary Contribution

Shivam Singhal describes the basic characteristics as to CSR as a concept functioal in India, along with commenting upon its evolution and the legal framework constituting it.

CORPORATE SOCIAL RESPONSIBILITY (CSR) : INTRODUCTION AND DEFINITION

Corporate Social Responsibility (CSR), a term which is in vogue for its role of maintaining balance between economics and ecology ,from the otherwise ubiquitous “crony capitalism”, promotes the idea of social welfare, wherein corporate entities take cognizance of their activities and takes responsibility for the organization’s effect on the environment, and thus, contribute for its betterment. Without the tinge of surprise, the inevitable question pops up – How it is done? Is it a charity or a donation from the big corporate giants, who have mind blogging surplus to share?

As it put by the Chairman of CSR committee in the guidelines principle, while incorporating CSR under Section 125 of the Companies Act, 2013 –  “CSR is a relationship between organizations and stakeholder for the common good, it is a system where the corporate entities have devised a way to do social good, thus in no way it is a donation or a charity.”

Defining CSR isn’t an easy task, with its widened horizon of  social welfare and corporate morals, and companies taking up the baton of promoting social developments, various definitions and terms have immerged then. Some describe it as “Corporate Citizen” or “Business Ethics” or even,  “Corporate Sustainability” etc. – it is getting bigger with every passing dusk and dawn. Probably, the most applicable definition was given by European Commission who defined it as – “the concept that an enterprise is accountable for its impact on all relevant stakeholders. It is the continuing commitment by business to behave fairly and responsibly, and contribute to economic development while improving the quality of life of the work force and their families as well as of the local community and society at large “  

 

THE HISTORY OF CSR : ITS ROOTS

Before taking up its root in India, the concept of CSR was prevalent in different countries.

In 1976, Organization for Economic Co-operation and Development OECD), was the first to established a set of guidelines for multinational enterprises, where in around 30 nations were put under its ambit. Following this was the Malaysian Government, which in 2007 incorporated this system. Adding to the list was the Denmark’s 2009 declaration for opting CSR in state owned to incorporate social initiatives in their annual reports. Thus, before India, there were handful of countries who brought in the concept of CSR.

CSR’s evolution in India is itself an enrapturing tale. Our nation traditionally a land where business does not only means money minting. It brings itself a lot of ethical and social welfare notions and it can be traced in the Kautilya’s famous work Arthashastra, wherein, he mentioned about the ethical concept behind doing business. Even in 19th Century, the company owners had the tradition of uplifting societies through providing public with schools, hospitals, temples, ashrams etc.

CSR in India is the outcome of impact Companies had on people’s lives and they have managed to affect their social, cultural and economic lifestyle. This rapid change with the notion of building a better socially welfare nation evolved CSR in India.

 

PROVISIONS OF CSR AS APPLICABLE IN INDIA

Moving further from the evolution to the applicability of CSR, companies who comes under Section 135 (1) of the Companies Act, 2013, will be applicable for the CSR. This section provides for the criteria for CSR, which is that the net profit of the company should be of minimum INR 5 Crore or net worth should be of minimum INR 500 crore or turnover should be of INR 1000 Crore minimum in a financial year, and if a corporate entity fulfill these criteria then, the company will have to form a CSR committee of the Board who will formulate policies regarding CSR of that entity. It is to be noted that, minimum of 2 % at of the average net profits of the entity made during the three successive financial years, shall be provided in pursuance of its Corporate Social Responsibility Policy. Through this fund, the corporate provides for social initiatives which can be of various types – it can in the form of health facilities, educational set –ups, social empowerment programs , awareness programs , sports facilities etc

 

CONCLUSION

There is no second thought regarding the foundation of Corporate Social Responsibility laid by the companies through their various programs of social welfare, ecological development, sustainable development etc. All these programs were restricted to that company only without any policy framework and coordination. Thus, due to the need of the hour to properly utilize the corporate social development funds, a legislation was brought in the form of Companies Act, which provided with the proper policy framework and a regulatory system for its breach and infringements, and thus making CSR, a widespread practice and ensuring success in reducing inequalities without risking business growth through a legislation.

 

REFERENCES

(1) “A renewed EU strategy 2011-14 for Corporate Social Responsibility,” European Commission press release, Access at : http://ec.europa.eu/enterprise/ newsroom/cf/_getdocument.cfm?doc_id=7010, 25 October 2011.

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