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The full form of CSR is Corporate Social Responsibility. CSR is an ethical commitment for companies towards the social, economic and environmental sectors of the country. India is the 1st country in the world to statutorily provide the provision for the CSR spending under section 135 of the Companies Act 2013. It is 2% of the company net profits made during the 3 immediately preceding financial years. The companies are needed to transfer the unspent money of CSR to statutory funds. However, the companies and the designated officers who do not follow the mandated rules are being financially penalized heavily by the government of India.
Definition and Evolution
- Definition: The Corporate Social Responsibility (CSR) is a norm or rule that encourages the companies to perform the social and environmental work for the benefit of society or the public.
- Evolution: The CSR started as a voluntary charity by big businessmen. Over the period of time, it transformed into a strategic model where companies make sure that a part of their company's profit utilizes environmental, ethical practices and societal development.
- People, Planet, and Profit: With time, Corporate Social Responsibility has shifted from just profit making for shareholders and performance across 3 dimensions of People, Planet, and Profit.
- Global Standard: CSR has been formalized globally through frameworks such as United Nations Development Goals (SDGs) and ISO 26000. It has converted voluntary goodwill into structured corporate governance.
Section 135 of the Companies Act 2013
- Apply to Companies: The section 135 of the Companies Act mandates for companies in India to perform CSR activities. It includes those companies who have a net worth of more than Rs. 500 crores and annual turnover of greater than Rs 1,000 crores, and Net profit of more than Rs. 5 crores.
- Compulsory Expenditure: The eligible companies must spend at least 2% of their average Net profits made during the 3 immediately preceding financial years.
- Structure of Governance: It requires to form a dedicated CSR board committee. It also mandates the company to form an annual CSR policy for companies and mentions the project selection and monitoring mechanisms.
- Compliance: It requires companies to transfer the unspent money to a particular government fund or penalize the non-compliant companies and authorized officers.
Key Types of Corporate Social Responsibility
| S.No. | Type of CSR | Brief Description |
|---|---|---|
| 1 | Environmental |
|
| 2 | Ethical |
|
| 3 | Philanthropic |
|
| 4 | Economic |
|
| 5 | Volunteering |
|
Indian Companies doing Good CSR
- Reliance Industries: It performs its CSR activities in the form of social
development projects:
- Healthcare sector: Sir H.N. Reliance Foundation Hospital and Research Centre at Mumbai in Maharashtra.
- Sport Sector: Reliance Foundation Youth Sports (RFYS) is a nationwide school and college sports competition platform.
- Ecological Conservation: The 'Vantara' is a flagship CSR of Reliance Foundation for the purpose of rescue, care and rehabilitation of wildlife species. It is located at Jamnagar in Gujarat.
- TATA Group: The company performs CSR activities in various sectors:
- Healthcare: Tata Memorial Centre at Mumbai in Maharashtra.
- Technical Education: R.D. Tata Technical Education Centre at Jamshedpur, J.N. Tata Technical Education Centre at Odisha, Tata Steel Industrial Training Centre at Tamar in Jharkhand.
- Initiatives of clean drinking water: The Tata Water Mission emphasizes on rural sanitation and hygiene. The Tata Swach and Tata Swach Tech Jal is a low-cost electricity free water purification process.
Benefits of Corporate Social Responsibility
- Increase in Company Reputation: It builds the public opinion positively towards the company, establishes brand loyalty and provides an edge to the companies in the market competition.
- Gain Investment: The companies may attract easy financial institutions for the investment and focus on the sustainable businesses.
- Increases Employee Retention: It enhances the motivation of the employees and attracts high talent and reduces the annual turnover of the companies.
- Risk Reduction: It helps in reducing the risk of environment, social and minimizes the regulatory fines and public retaliation.
- Increase in Community Goodwill: It forms a strong local bond or relation which allows the company to operate smoothly.
FAQs about CSR
What is the full form of CSR?
The full form of CSR is Corporate Social Responsibility.
What is CSR?
The CSR is a norm or rule for the companies to perform the social and environmental work for the benefit of society.
