An overview on Corporate Social Responsibility – CSR Corporate

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An overview on Corporate Social Responsibility – CSR Corporate

Corporate Social Responsibility is the organisation’s responsibility for the impacts of its decisions and activities on society and the environment, through transparent and ethical behaviour that:

  • Contributes to sustainable development of the society
  • Takes into account the expectations of stakeholders
  • Is in compliance with applicable law of land
  • Is integrated throughout the organization and practised in its relationships.”

Benefits of a Strong CSR policy

1. Satisfied employees.
Employees want to feel proud of the organization they work for. An employee with a positive attitude towards the company, is less likely to look for a job elsewhere. It is also likely that you will receive more job applications because people want to work for you.

2. Satisfied customers
 A strong CSR improves customers’ attitude towards the company. If a customer likes the company, he or she will buy more products or services and will be less willing to change to another brand.

3. Positive PR
CSR provides the opportunity to share positive stories online and through traditional media. Companies no longer have to waste money on expensive advertising campaigns. Instead they generate free publicity and benefit from worth of mouth marketing.

5. More business opportunities
A CSR program requires an open, outside oriented approach. The business must be in a constant dialogue with customers, suppliers and other parties that affect the organization. Because of continuous interaction with other parties, your business will be the first to know about new business opportunities.

Companies Act, 2013 on CSR policy

Every company, private limited or public limited, which either has a net worth of Rs 500 crore or a turnover of Rs 1,000 crore or net profit of Rs 5 crore, needs to spend at least 2% of its average net profit for the immediately preceding three financial years on corporate social responsibility activities. 

Contribution to any political party is not considered to be a CSR activity and only activities in India would be considered for computing CSR expenditure. 

The CSR Rules compliance obligations also include the holding and subsidiary companies as well as foreign companies whose branches or project offices in India fulfil the specified criteria.

The activities that can be undertaken by a company to fulfil its CSR obligations include eradicating hunger, poverty and malnutrition, promoting preventive healthcare, promoting education and promoting gender equality, setting up homes for women, orphans and the senior citizens, measures for reducing inequalities faced by socially and economically backward groups, ensuring environmental sustainability and ecological balance, animal welfare, protection of national heritage and art and culture, measures for the benefit of armed forces veterans, war widows and their dependents, training to promote rural, nationally recognized, Paralympic or Olympic sports, contribution to the prime minister’s national relief fund or any other fund set up by the Central Government  for socio economic development and relief and welfare of  SC, ST, OBCs, minorities and women, contributions or funds provided to technology incubators located within academic institutions approved by the Central Government and rural development projects.

Section 135 of the 2013 Act requires the CSR Committee to be constituted in the company consisting of at least three directors, including an independent director. However, CSR Rules exempts unlisted public companies and private companies that are not required to appoint an independent director from having an independent director as a part of their CSR Committee and stipulates that the Committee for a private company and a foreign company need have a minimum of only 2 members.

A company can undertake its CSR activities through a registered trust or society, a company established by its holding, subsidiary or associate company or otherwise, provided that the company has specified the activities to be undertaken, the modalities for utilization of funds as well as the reporting and monitoring mechanism.

The report of the Board of Directors attached to the financial statements of the Company would also need to include an annual report on the CSR activities of the company in the format prescribed in the CSR Rules setting out inter alia a brief outline of the CSR policy, the composition of the CSR Committee, the average net profit for the last three financial years and the prescribed CSR expenditure. If the company has been unable to spend the minimum required on its CSR initiatives, the reasons for not doing so are to be specified in the Board Report.

Where a company has a website, the CSR policy of the company would need to be disclosed on such website. 

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