What is Corporate Social Responsibility (CSR)

What Is Corporate social responsibility

(What is Corporate Social Responsibility (CSR)) Corporate Social Responsibility is the way companies manage their businesses to produce an overall positive impact on society through economic, environmental and social actions. Corporate social responsibility (CSR), also called corporate conscience, corporate citizenship, social performance, or sustainable responsible business/businesses. Business depends for its survival on long term prosperity of the society.

CSR has been defined by different people giving it a varied dimension.

According to Michel Hopkins “Corporate Social Responsibility is concerned with treating the stakeholders of a company or institution ethically or in a responsible manner.
‘Ethically or in a responsible manner’ refers
to treating key stakeholders in a manner deemed acceptable according to international norms.”

Corporate social responsibility is basically a new business strategy to reduce investment risks and maximise profits by taking all the key stakeholders into confidence.

It is a tool to increase the reputation of the company in the eyes of society.

CORPORATE SOCIAL RESPONSIBILITY
Applicability:-

As per section 135 of the Companies Act 2013, the CSR provision is applicable to companies which fulfills any of the following criteria during the immediately preceding financial year:-

• Companies having net worth of rupees five hundred crore or more, or
( 500 crore or more )

• Companies having turnover of rupees one thousand crore or more or
( 1000 crore or more )

• Companies having a net profit of rupees five crore or more
( 5 crore or more )

NOTE:- The CSR Rules have widen the ambit for compliance obligations to include the holding and subsidiary companies as well as foreign companies whose branches or project offices in India which fulfills the criteria specified above.

According to the CSR Rules,
the CSR provision will also be applicable to every company including its
holding
or subsidiary,
and a foreign company
having its branch office or
project office in India.

having net worth of rupees five hundred crore (500 Crore)or more,

or turnover of rupees one thousand crore (1000 crore) or
more or

a net profit of rupees five crore (5 Crore) or more during any financial year.

Cessation________

Thus, the CSR Rules specify that,
a company which does not satisfy the specified criteria,

for a consecutive period of three financial years is not required to comply with the CSR obligations,

implying that a company not satisfying any of the specified criteria in a subsequent financial year,
would still need to undertake CSR activities.

unless it ceases to satisfy the specified criteria for a continuous period of three years.

CSR Committee_______

Companies that trigger any of the aforesaid conditions must constitute a Corporate Social Responsibility Committee
(CSR COMMITTEE ) of the Board to formulate and monitor the CSR policy of a company.

Section 135 of the 2013 Act requires the CSR Committee to consist of at least…..

three directors,
including atleast one independent director.

Where a company is not required to appoint an independent director under sub-section (4) of section 149,
it shall have in its Corporate Social Responsibility Committee two or more directors.

Further, the CSR Rules have relaxed the requirement regarding the presence of three or more directors on the CSR Committee of the Board.
in case where a private company has only two directors on the Board.

the CSR Committee can be constituted with these two directors.

The CSR Committee of a foreign company shall comprise of at least two persons wherein one or more persons should be resident in India, and the other person nominated by the foreign company.

The Board’s report shall disclose the composition of the Corporate Social Responsibility Committee.

Rule 3 of the Companies (Corporate Social Responsibility Policy) Rules, 2014 specify that every company, which ceases to be a company covered under section 135 as per the limits specified thereunder for three
consecutive financial years.

shall not be required to constitute a CSR Committee and comply with the provision of section 135, till such time that it meets the criteria specified.

The functions of CSR Committee_________

• To formulate and recommend to the Board, a CSR Policy which would indicate the activities to be

• undertaken ïn areas or subject, specified in Schedule VII of the Act.

• To recommend the amount of the expenditure to be incurred on the activities undertaken in pursuance of the CSR policy.

• To institute a transparent monitoring mechanism for implementation of the CSR projects or

• programs or activities undertaken by the company.

• To monitor the CSR policy of the company time to time.

CSR Activities……..

• The CSR activities shall be undertaken by the company, as per its stated CSR Policy, as projects or

• programs or activities (either new or ongoing), excluding activities undertaken in pursuance of its normal course of business.

• The CSR Committee of the company may decide to undertake its CSR activities
approved by the Board, through

(a) a company established under section 8
of the Act or
a registered trust or
a registered society, established by the
company, either singly or alongwith any
other company, or

(b) a company established under section 8
of the Act or a registered trust or
a registered society, established by the
Central Government or
State Government or
any entity established under an
Act of Parliament or
a State legislature.

• Further, if the Board of a company decides to undertake its CSR activities through a company,
established under section 8 of the Act or
a registered trust or
a registered society, other than those
specified above,
such company or trust or society shall have an established track record of three years
in undertaking similar programs or projects;

and the company has specified the projects or programs to
be undertaken, the modalities of utilisation of funds of such projects and programs and the monitoring
and reporting mechanism.

A company may also collaborate with other companies for undertaking projects or
programs or CSR activities in such a manner, that the CSR Committees of respective companies are in a positions to report separately on such projects or
programs in accordance with these rules.

• The CSR projects or programs or activities undertaken in India only shall amount to CSR Expenditure.

• The CSR projects or programs or activities that benefit only the employees of the company and their families shall not be considered as CSR activities in accordance with section 135 of the Act.

• Companies may build CSR capacities of their own personnel as well as those of their implementing agencies through institutions with established track records of atleast three financial years but such
expenditure, including expenditure on administrative overheads, shall not exceed five percent of total
CSR expenditure of the company in one financial year.

• Contribution of any amount directly or indirectly to any political party under section 182 of the Act, shall not be considered as CSR activity.

List of CSR Activities___________

Some activities are specified in Schedule VII as the activities which may be included by companies in their Corporate Social Responsibility Policies.

The entries in the said Schedule VII must be interpreted liberally so as to capture the essence of the subjects enumerated in the said Schedule.
The items enlisted in the amended Schedule VII of the Act, are broad-based and are intended to cover a wide range of activities as illustratively.

See Also : What Is Indian Trusts Act, 1882 What is Corporate Social Responsibility (CSR)

These are activities related to:

(i) eradicating

hunger,
poverty and
malnutrition,
promoting health care, including preventive health care and
sanitation including contribution to the Swach Bharat Kosh set-up by the Central Government,
for the promotion of sanitation and making available safe drinking water.

(ii)
promoting education,
including special education and employment enhancing vocation skills
especially among children,
women,
elderly and the differently abled and livelihood enhancement projects.

(iii)
promoting gender equality,
empowering women,
setting up homes and hostels for women and orphans; setting up old age homes,
day care centres and
such other facilities for senior citizens and
measures for reducing inequalities faced by socially and economically backward groups;

(iv)
ensuring environmental sustainability, ecological balance,
protection of flora and fauna,
animal
welfare,
agro forestry,
conservation of natural resources and maintaining quality of soil, air and water including contribution to the Clean Ganga Fund set-up by the Central Government for
rejuvenation of river Ganga;

(v) protection of national heritage,
art and culture including restoration of buildings and sites of historical importance and works of art;
setting up public libraries;
promotion and development of traditional arts and handicrafts;

(vi) measures for the benefit of armed forces veteran, war widows and their dependents;

(vii) training to promote rural sports, nationally recognized sports,
para olympic sports and
Olympic
sports;

(viii) 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 the Scheduled Castes, the
Scheduled Tribes, other backward classes, minorities and women;

(ix) contributions or funds provided to technology incubators located within academic institutions which are

What is Corporate Social Responsibility (CSR)

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