All about Corporate Social Responsibility (CSR) in India

Corporate Social Responsibility (CSR) is a business approach that seeks to contribute to sustainable development by delivering economic, social, and environmental benefits for all stakeholders. CSR involves integrating social and environmental concerns into business operations and interactions with stakeholders, including customers, employees, suppliers, communities, and the environment. It is about creating shared value and building long-term relationships with stakeholders based on trust and mutual respect. In short, CSR is about doing business in a responsible and sustainable way that benefits both the company and society as a whole.

The Companies Act, 2013, mandates companies to undertake CSR activities and spend at least 2% of their average net profits of the preceding three years on CSR activities. The CSR provisions under the Companies Act, 2013, require companies to:

1. Formulate a CSR policy: Companies are required to formulate a CSR policy that outlines the company’s approach to CSR and the activities that will be undertaken.

2. CSR Committee: Companies are required to constitute a CSR Committee comprising of at least three directors, one of whom should be an independent director.

3. Disclosure: Companies are required to disclose their CSR activities in their annual report and on their website.

4. Eligibility: Only companies with a net worth of INR 500 crore or more, or a turnover of INR 1,000 crore or more, or a net profit of INR 5 crore or more during any financial year are required to undertake CSR activities.

5. Activities: Companies can undertake CSR activities in areas such as education, healthcare, poverty alleviation, environmental sustainability, and rural development, Schedule 7 of the Indian Companies Act, 2013 outlines the activities that qualify as Corporate Social Responsibility (CSR) activities. Companies that meet certain financial thresholds are required to spend at least 2% of their average net profits of the preceding three years on CSR activities. The following activities are included in Schedule 7:

1. Eradicating extreme hunger and poverty

2. Promotion of education

3. Promoting gender equality and empowering women

4. Reducing child mortality and improving maternal health

5. Combating human immunodeficiency virus, acquired immune deficiency syndrome, malaria and other diseases

6. Ensuring environmental sustainability

7. Employment enhancing vocational skills

8. Social business projects

9. Contribution to the Prime Minister’s National Relief Fund or any other fund set up by the Central Government or the State Governments for socio-economic development and relief and welfare of the Scheduled Castes, the Scheduled Tribes, other backward classes, minorities and women

10. Contributions or funds provided to technology incubators located within academic institutions which are approved by the Central Government

11. Rural development projects.

The Schedule 7 activities provide a framework for companies to contribute to sustainable development and social welfare in India. Companies are encouraged to select activities that align with their business objectives and core competencies, and to work in partnership with stakeholders to maximize the impact of their CSR activities.

6. Monitoring: Companies are required to monitor their CSR activities and report on the impact of their activities.

CSR is an essential aspect of business in India, as mandated by the Companies Act, 2013. By embracing CSR, companies contribute to sustainable development, address social and environmental concerns, and foster positive relationships with stakeholders. The Act encourages companies to align their CSR activities with their core competencies and business objectives, thereby maximizing the impact of their initiatives. Through CSR, businesses play a crucial role in creating a more responsible and sustainable future for the nation.