was an increasing demand on ethical and social responsibilities from corporate
sector by the representatives of different communities, like, NGOs, corporate
sector, society, consumers, media, etc. With such demand, many companies have
recognized and focused on to improve their social, environmental and governmental
issues and developed ethical code of conduct.
concept of Corporate Social Responsibility (CSR) emerged in 1960's with the civil rights movement, consumerism,
and environmentalism. From here onwards, the scenario changed and huge transformation
occurred in the business world.
was contemplated in the UN Conference held in 1972 in Stockholm that there is a
need to find balance between both communities and business across the world to
protect the human environment.
Social Responsibility is a duty owed by every corporate body to protect the
interest of the society at large. It makes the companies accountable for their
financial as well as social and environmental aspects.
India prior to the enactment of the Companies Act, 2013 it was left to the
discretion of corporate sector to participate in the betterment of society
apart from rules and regulations framed by the Government on environment
protection. With the enforcement of the Companies Act, 2013 new provisions were
introduced which provide for CSR.
Section 135 and Schedule VII to the Act deals
with Corporate Social Responsibility. It requires every such company to spend
at least two percent of the average net profit for immediately three preceding
years on CSR activities, whose net worth is rupees five crore or more; turnover
is rupees one thousand crore or more; or net profit is rupees five crore or
Companies (Corporate Social Responsibility Policy) Rules, 2014 makes it
applicable not only to Indian Companies but also to foreign companies whose
branch or project offices are in India. The law gives preference to the local
areas or areas to which company operates.
Every such company is required to establish a committee of Board for CSR, which will have three or more number of directors. The Committee has to formulate a policy on CSR activities and amount of expenditure to be incurred and recommend it to the Board. The Board has the authority to approve the policy. After approval, the policy is to be disclosed in the report and on the Company's website. In case a company fails to spend less than the minimum amount required, it is answerable to the Board with sufficient reasons and if it fails to do so, penalties will be imposed.
activities, which can be conducted under Corporate Social Responsibility, are:
protection of national heritage,
eradication of poverty,
hunger and malnutrition,
promotion of education and sports,
benefit to armed forces,
women empowerment and gender equality, and
contribution to Prime Minister's National Relief Fund, etc.