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CORPORATE SOCIAL RESPONSIBILITY (CSR)

Jun 13, 2022

CORPORATE SOCIAL RESPONSIBILITY (CSR)

The term "Corporate Social Responsibility" in general can be referred to as a corporate initiative to assess and take responsibility for the company's effects on the environment and impact on social welfare. With nearly two-thirds of India still living in poverty by today’s quality-of-life standards and the climate situation worsening day by day, the importance of CSR can’t be overestimated. Companies should take compliance to CSR more seriously and responsibly.

Does the CSR have a Legal-backing in India

  • In India, the concept of CSR is governed by clause 135 of the Companies Act, 2013.
  • India is the first country in the world to mandate CSR spending along with a framework to identify potential CSR activities.
  • The CSR provisions within the Act is applicable to companies with an annual turnover of 1,000 crore and more, or a net worth of Rs. 500 crore and more, or a net profit of Rs. 5 crore and more.
  • The Act requires companies to set up a CSR committee which shall recommend a Corporate Social Responsibility Policy to the Board of Directors and also monitor the same from time to time.
  • The Act encourages companies to spend 2% of their average net profit in the previous three years on CSR activities.

What Activities can be Undertaken by A Company under the CSR

  • Specified under Schedule VII of the Companies Act 2013, these activities include:
  • Eradicating extreme hunger and poverty
  • Promotion of education, gender equality and empowering women
  • Combating HIV-AIDS and other diseases
  • Ensuring environmental sustainability
  • Contribution to the PM's National Relief Fund or any other fund set up by the Central Government for socio-economic development and relief.

Significance of CSR Compliance

  • CSR is increasingly being leveraged to build a positive brand identity for corporations and help their ESG compliance.Brand image has gained importance as stakeholders have become more aware and involved in social issues.
  • Since the onset of the Covid-19 pandemic, the number of India’s philanthropic collaboratives has more than doubled, mobilising an array of funding from foreign and domestic philanthropy, high-net worth individuals, CSR funders, private capital, etc.
  • Through these varied streams, the amount of collaborative funding for improving people’s lives has increased significantly.
  • As funding levels have risen, so too have innovative financing approaches to drive social impact, including pay-for-outcomes models such as development impact bonds in education and health, and other blended financing mechanisms.

Issues Pertaining to CSR Compliance

  • Finding Right Partners: Despite growing awareness about the significance of CSR compliance, the challenges remain in identifying the right partners and projects, as well as in selecting projects that are long-term impactful, scalable, and are self-sustaining.
  • Lack of Community Participation in CSR Activities: There is a lack of interest of the local community in participating and contributing to CSR activities of companies.
  • Issues of Transparency: There is an expression by the companies that there exists lack of transparency on the part of the local implementing agencies as they do not make adequate efforts to disclose information on their programs, audit issues, impact assessment and utilisation of funds.
  • Non-availability of Well Organised NGOs: There is non-availability of well organised NGOs in remote and rural areas that can assess and identify real needs of the community and work along with companies to ensure successful implementation of CSR activities.

What are the Suitable Areas where CSR Investments can be Diverted to?

Technological Innovation: The key to a non-linear scale-up of any project lies in leveraging technology and solving societal problems is no exception.A policy environment that encourages CSR investments in technology-led solutions has made sustainable and scalable solutions a reality. Additionally, collaborations with local bodies and the establishment of governance and community engagement structures can ensure these projects become self-sustainable in the long run.

Higher Education: CSR can be used to meaningfully support the tertiary education sector in a number of ways. Funds can be channelled into the implementation of socially relevant projects conceptualised by faculty members, or for supporting scientific research that will unravel the answers to key scientific questions underlying social problems.

Incubators Management: Such grants can also be given towards government-recognised incubators, setting up new incubators, supporting existing incubators to hire more people through internships and fellowships, and providing seed funding for start-ups.The fact that the government’s CSR policy allows a company to choose to intervene at any point in the end-to-end tech value creation process is a great enabler.

Environment Friendly Projects: Creating sustainable construction materials that are affordable and recyclable, developing India-centric greening options such as novel heat and power management systems and addressing socio-technical issues (such as flood management systems) by carrying out in-depth risk analytics on relevant parameters.Projects such as these enabled through CSR funding and led by higher education institutions would accelerate the transition from laboratory to actualisation and serve communities in innovative ways.