Corporate Social Responsibility | The Extent, Advancements, And Challenges In India
Introduction
The main factor driving the country’s rapid adoption of corporate social responsibility is the fact that India has one of the fastest-growing economies, and socioeconomic issues like poverty, illiteracy, a lack of access to healthcare, etc. are still widespread and the government has little resources to address these issues. This has made it possible for many companies to support in the development of society.
Known as “the ethical behaviour of a company towards society,” corporate social responsibility takes the form of noteworthy initiatives started by for-profit businesses. Because businesses have understood that developing enduring relationships with the community at large is just as important as expanding their business, corporate social responsibility (CSR) has gained significant traction in the Indian corporate scene. This is one of the main forces behind CSR initiatives. In case of Indian companies, corporate social responsibility (CSR), is not something new.
What’s novel is how Indian corporations have embraced it and how directly it has involved employees involved in carrying out these projects. Most organisations divisions delve into far more than just money or one-time projects.
The extent of corporate social responsibility in India
Since 2013, corporate social responsibility (CSR) has been both an obligatory and voluntary activity in accordance with the Companies Act of 2013.
Certain companies are required by Section 135 of the Companies Act 2013 (Act) to devote a minimum of 2% of their average net profit from the three previous financial years to corporate social responsibility (CSR) initiatives. Companies that had a net value of at least Rs. 500 crores, a turnover of at least Rs. 1000 crores, or a net profit of at least Rs. 5 crores in the previous fiscal year are covered by this provision. These businesses shall form a CSR Committee of the Board, composed of three or more directors, at least one of whom must be an independent director
The CSR Committee is tasked with creating and recommending to the board a CSR policy that outlines the actions the firm will take in the areas or subjects listed in Schedule VII of the Act. It also has to keep an eye on how the policy is being implemented. The committee is in charge of creating an annual report on the business’s CSR initiatives, which has to be included in the board’s shareholder report. Details on the business’s annual CSR projects and activities, the funding allotted to them, and the effects these efforts had on society should all be included in the report.
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According to Schedule VII of the Act, corporate social responsibility (CSR) activities must be carried out in areas like gender equality, education, poverty, hunger, and environmental protection. In addition to the Companies Act, CSR is encouraged by a number of other Indian laws and rules. For example, businesses listed on the stock exchange are required by the Securities and Exchange Board of India (SEBI) to submit a Business Responsibility and Sustainability Report (BRSR), which details their CSR initiatives. The Ministry of Corporate Affairs (MCA) has also released a number of circulars and rules regarding CSR.
CSR Awards: The annual National Corporate Social Responsibility (CSR) Awards were established by the Ministry of Corporate Affairs, Government of India, to honor businesses for their creative and long-lasting CSR efforts that have improved society. These honors represent the highest level of national acknowledgment granted by the Indian government
According to the report from 2023 by The CSR Journal on Top Companies for CSR and Sustainability, these businesses are leading a group effort to create a more sustainable and socially conscious global environment; they are not just players in the market.The top 5 companies are Reliance Industries Limited,SBI Limited,ITC Limited,Hero Motocorp, and JSW Steel.
Advancements in India’s CSR in past few years
- Impact assessment: The CSR Rules used to allow impact assessments up to 5% of CSR expenditures, or Rs. 50 lakhs. The Companies (Corporate Social Responsibility Policy) Amendment Rules 2022 [1] set a cap of Rs. 50 lakhs, or 2% of all CSR spending, on the cost of social impact evaluations, which are categorized as CSR spending. The modification permits significant CSR projects to spend more on impact assessments. The necessity for businesses to evaluate the results of their corporate social responsibility initiatives has received more attention in the last few years.
- Accountability and Transparency: A new format for the annual report on CSR activities has been adopted under the Amendment Rules of 2022. The CSR policy, the contact details of the CSR committee members, an executive summary, and impact evaluations of the CSR projects are all required to be included in the annual report. Companies must also disclose the sums allotted to ongoing and new projects, surplus amounts for set-off, and amounts of CSR that were not spent during the preceding three fiscal years. A breakdown of capital assets created or acquired by CSR spending should also be included in the annual report, as should an explanation if the business does not allocate 2% of its average net income from the three previous fiscal years toward CSR activities. These modifications are in line with India’s rising emphasis on transparency and accountability in CSR reporting.
- The Ministry of Corporate Affairs published a circular in 2020 that allowed companies to include COVID-19 relief measures under corporate social responsibility (CSR). These measures included hospital establishment, healthcare facility provision, and contributions to the Prime Minister’s Citizen Assistance and Relief in Emergency Situations (PM CARES) Fund.
- The top states in CSR expenditure in the financial year 2021-2022, according to the National CSR Portal, are Maharashtra,Karnataka,Pan India (other centralized funds), Gujarat, Tamil Nadu, Uttar Pradesh, Delhi, Rajasthan, Telangana, and Haryana.
Challenges
Lack of public knowledge about CSR initiatives
The public is not interested in supporting or taking part in corporate social responsibility (CSR) initiatives. This is a result of a lack of awareness or ignorance regarding CSR. The situation is made worse by the dearth of communication that exists at the grassroots level between the public and corporations engaged in corporate social responsibility.
The requirement to develop local capabilities
Building the capacity of local nongovernmental organizations is necessary since there is a severe lack of qualified and effective organizations that can successfully support the ongoing corporate social responsibility initiatives. This restricts the breadth of CSR projects and jeopardizes their ability to be scaled up.
Transparency concerns
One of the main concerns facing corporations is a lack of transparency, which is exacerbated by small businesses’ inadequate efforts to reveal information about their programs, audit issues, impact assessments, and fund utilization. This has a detrimental effect on the companies’ process of developing trust, which is essential to any CSR initiative’s success.
Lack of effectively run non-governmental groups
In remote and rural locations, it is difficult to find well-run nongovernmental organizations that can evaluate and identify the true needs of the community and collaborate with businesses to successfully execute corporate social responsibility initiatives.
Limited understanding of CSR projects
Governmental and non-governmental organizations typically have a limited perspective on corporate social responsibility (CSR) efforts, frequently characterizing them as donor-driven.
Corporations therefore struggle to determine if, in the medium and long term, they should engage in such activities at all
The absence of precise CSR guidelines
There aren’t any precise legislative requirements or policy directions that could provide a clear direction for business CSR initiatives. The scope and nature of a company’s operations should determine how big its CSR programs are. Put differently, a company’s CSR program grows with size.
Conclusion
While businesses are making significant efforts to ensure long-term growth, certain critics continue to cast doubt on the notion of corporate social responsibility. While some believe that corporate social responsibility is a hoax, others assert that it is the basis for some hidden agendas. In actuality, CSR doesn’t serve as a strategy for establishing a company’s brand, but it does help employees develop an internal identity. Engaging in endeavors that contribute to society in any manner enhances a company’s goodwill. CSR cannot be an add-on; rather, it must be ingrained in a company’s ethics and how it treats its clients and staff. As a result, the sector of CSR is expanding quickly and becoming more competitive.
Author: Tanishqa Shukla, in case of any queries please contact/write back to us at support@ipandlegalfilings.com or IP & Legal Filing.
References
- https://www.investopedia.com/terms/c/corp-social-responsibility.asp
- https://www.csr.gov.in/content/csr/global/master/home/home.html
- https://thecsrjournal.in/top-companies-india-csr-sustainability-2022/
- https://thecsrjournal.in/top-companies-india-csr-sustainability-2022/
- Universal’s Bare Act: :Section 135 of The Companies Act
