What is Corporate Social Responsibility?
Corporate Social Responsibility (CSR) as the name suggests, is the ‘Social Responsibility’ of the Corporate. What this means is that for an organisation, there are several stakeholders, including the society in which it conducts its business. Thus, it is responsible for the upkeep and advancement of the same. Changes in the global environment increasingly challenge business around the world to look beyond financial performance, and to integrate social and environmental concerns into their strategic management.
On 1st April, 2014, India became the first country to legally mandate CSR. As per Section 135 of Companies (CSR) Rules 2014 and Schedule VII of Companies Act 2013, every company having a net worth of Rs 500 crores or more, or turnover of Rs 1,000 crore or more, or net profit of Rs 5 crore or more during the immediately preceding financial year, must have a CSR committee and spend at least 2% of the average net profits earned during three immediate preceding financial years to CSR activities.
The activities included are hunger and poverty, education, health, gender equality and women empowerment, skills training, environment, social enterprise projects and promotion of rural and national sports. Thus, the term CSR became the new normal for Indian organisations. Companies now consider CSR as an approach towards sustainable development and focus on the triple bottom line of Economic, Environmental and Social performance. The CSR initiatives of companies thrust on creating value in the lives of the communities around its areas of business and manufacturing operations.
Indian corporates spent Rs. 8,691 crore on CSR as per an analysis conducted by KPMG, titled ‘India CSR reporting survey 2019’ (3). The survey shows that even though CSR spending has increased by 70% from Rs. 5,115 in the year 2014-15, it is too small for the size of corporate India. Also, as per the report, the number of companies having CSR Foundations’ has gone up from 6 in 2014-15 to 18 in 2018-19. However, against 21% companies that implemented their CSR projects directly or exclusive through their own foundations in 2014-15, only 7% have reported having chosen this mode of implementation during 2018-19, indicating an increased partnership with implementing agencies. The top 3 activities as per the CSR spends are Education (Rs. 2,775 cr), Health (Rs. 2,145 cr) and Rural Development (Rs. 1,144 cr)(3).
CSR and Covid-19
Amid the COVID-19 (coronavirus) outbreak, the Ministry of Corporate Affairs has notified that companies’ expenditure to fight the pandemic will be considered valid under CSR activities. Funds may be spent on various activities related to COVID-19 such as the promotion of healthcare including preventive healthcare and sanitation, and disaster management. At least Rs. 9,678 crore (7) has been collected in the Prime Minister’s Citizen Assistance and Relief in Emergency Situations (PM CARES) fund for COVID-19 relief, according to an analysis by IndiaSpend. These donations have been made in the 52 days since this new fund was announced on March 28, 2020. At least an additional Rs 2,098.2 crore has been pledged to the fund and Rs 7,855 crore has also been earmarked from other government sources.
The Way Forward
While I believe we have started on the right front by encouraging firms of a specific size to spend at least 2% of their profits on CSR, we still have a long way to go. The cut off for the Net Profit is Rs. 5 crores and a 2% of it would come out to be Rs. 10 Lakhs. Sometimes, the goals targeted by the company cannot be achieved in this amount and thus companies struggle to implement strategies that can create an impact.
In addition, there are several companies that are not mandated by the Act to spend on CSR, but that want to help society. Such firms also face a challenge to create an impact individually due to the limited resources being spent by them. We live in a connected world, and our goal to help society and create an impact should also be connected. Thus, partnering with various NGO’s and organisations can help all such firms collectively achieve their goals in a more efficient manner.
1.https://indiacsr.in/corporate-social-responsibility-csr-in-india/
2.https://bthechange.com/csr-in-india-is-now-a-law-2502aa6d0daa
3.https://assets.kpmg/content/dam/kpmg/in/pdf/2020/02/india-s-csr-reporting-survey-2019.pdf
5.https://csrcfe.org/about-csr-in-india-public-policy/
6.https://www.india-briefing.com/news/corporate-social-responsibility-india-5511.html/
About the Author
Manik loves to spend time with his family, listening inquisitively to the stories his grandparents share. He has always been passionate about helping society and thus gave up his Investment Banking career to pursue his passion. Having majored in finance, he wishes to increase financial literacy and awareness in the country.