CORPORATE SOCIAL RESPONSIBILITY (Syllabus: GS Paper 3 – Economy)

Context: Recently, the Securities and Exchange Board of India (SEBI) has sent a proposal to the government to amend Corporate Social Responsibility (CSR) rules in the Companies Act (2013) to include donations made by companies through Social Stock Exchanges (SSEs).

Corporate Social Responsibility (CSR)

• Meaning: It is a law in India, that mandatorily obliged corporates in the country have to do social work.

oIt suggests: The responsibility of the corporations operating within society to contribute towards economic, social and environmental development that creates positive impact on society at large.

• Statutory Backing: Under the Companies Act, 2013, introduced in April 2014.
• Four types of CSR are prevalent: Ethical responsibility, environmental responsibility, economic responsibility and philanthropic responsibility.
• CSR Applicability in India: Under Section 135 of the Act, certain companies are required to comply with CSR provisions. 

oObjective: It aims to promote responsible business practices and contribute towards the welfare of society. The criteria for CSR applicability are based on the company’s net worth, turnover, and profit.

oCSR applicability criteria, if a company: 

üNet worth: More than Rs 500 crore or,

üTurnover: More than Rs 1,000 crore or,

üNet profit: More than Rs 5 crore.

• CSR Committee: Every company to which CSR criteria are applicable shall constitute a Corporate Social Responsibility (CSR) Committee.

oThe CSR Committee should consist of 3 or more directors, out of which at least 1 director must be an independent director.

Importance of Corporate Social Responsibility

• CSR helps companies be socially responsible and give back to society.
• It improves the company’s reputation.
• CSR activities attract and retain employees.
• It helps build long-term stakeholder relationships.
• CSR can have a positive impact on the environment.
• It can also benefit the communities in which the company operates.