India: Corporate Social Responsibility-Boom For Social Upliftment

Introduction

Corporates have their core function or main target of earning profits. A company is considered an entity distinct from its members, therefore it is an artificial person in eyes of Law and Like a distinct person, a corporate or company is also expected to fulfill its social obligations. Corporate Social Responsibility (CSR) is a form of social obligation of a Company towards society at large. Corporates takes a lot from society in the form of resources for carrying out its functions and earning profits, hence it should also be able to return to society some of the benefits reaped.

The World Business Council for Sustainable Development explains CSR as continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large.

Companies in India have been proactive in taking up CSR initiatives and integrating them in their business processes. Numbers of Companies are actively engaging themselves in more and more CSR activities. Introduction of voluntary guidelines by Ministry of Corporate Affairs on CSR is also an indication of growing importance of CSR in business environment thesedays. Further, Companies Bill also contains provisions with respect to CSR. Therefore, CSR which is considered voluntary on part of Corporate will soon acquire statutory colours with coming into effect of Companies Bill, 2011.

CSR and Companies Bill , 2011

Some of the provisions under the Companies Bill, 2011 incorporating clauses relating to CSR are as follows:

Constitution of CSR committee

As per the Companies Bill, 2011, every company having net worth of rupees five hundred crore or more, or turnover of rupees one thousand crore or more or a net profit of rupees five crore or more during any financial year shall constitute a Corporate Social Responsibility Committee of the Board consisting of three or more directors, out of which at least one director shall be an independent director.

Function of CSR committee

a. Formulate and recommend to the Board, a Corporate Social Responsibility Policy which shall indicate the activities to be undertaken by the company as specified in Schedule VII.

b. Recommend the amount of expenditure to be incurred on the activities referred to in clause (a); and

c. Monitor the Corporate Social Responsibility Policy of the company from time to time.

Every company should spend, in every financial year, at least two per cent of the average net profits of the company made during the three immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy.

Present Environment

For a developing country like India, investment by corporates in CSR activities is a requisite. India is faced with problems like poverty, illiteracy, lack of healthcare etc. These challenges are still ubiquitous and the government has limited resources to tackle these challenges.

More and more companies are realizing their responsibility towards the community and doing their part for the society through donations and charity events. In fact CSR nowadays has gone beyond mere charity and donations, and is approached in a more organized fashion. It has become one of the strategic tools of the companies. Companies form CSR teams, especially dedicated to formulating policies, strategies and goals for their CSR programs and set aside budgets to support them.

Corporates are also executing many CSR initiatives in partnership with Non-Governmental organizations (NGOS), thereby taking advantage of the experience and expertise of such NGOs in tackling specific social problems.

Conclusion

Engaging in various CSR activities is a win-win situation for both corporate and society. Corporates can save a lot in front of taxation and also contribute in upliftment of society by indulging in such CSR activities.

CSR has come a long way in India, from responsive activities to sustainable initiatives, corporates have included CSR as part of their practice area.

Today, most of the corporate groups spend some part of their profit towards society in different ways like Organizing Medical/Health Camps, providing Educational Scholarship Schemes etc. This helps in development of community and enhancement of the reputation of the company. CSR also cultivates a sense of loyalty and trust amongst the employees in the organizational ethics. It improves operational efficiency of the company and is often accompanied by increase in quality and productivity.

Footnote

Ankit Sukhija is a Company Secretary Trainee.

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