This blog is written by Mayank Upadhyay, a Third-year law student of Delhi Metropolitan Educationy

INTRODUCTION

Corporate Social Responsibility (abb. CSR) is an activity that is done as a charity by a business organization towards society. It is a significantly evolving legal practice in the business or corporate world. It determines the devotion and dedication of companies towards the betterment of society by fulfilling the needs of three main components i.e. Social, Economic, and Environmental. In this blog, we will deal with the concept of CSR and its legal implications as mentioned in the Companies Act 2013.

WHAT DO WE MEAN BY CSR?

To understand the general definition of CSR or Corporate Social Responsibility; let’s break down the three letters of CSR and understand them:

• C – CORPORATE – Also known as Business Organisation or a company
  
  

• S – SOCIETY – Society, here, indicates the three main components i.e. Social, Economical & Environmental
  
  

• R – RESPONSIBILITY – Here, it means a business Responsibility, and above business means Corporate so, Responsibility here means Corporate Responsibility.
  
  

THUS, By combining all three letters; we can conclude with the definition of CSR as [It is the responsibility of a Business organization towards the betterment of society by fulfilling and satisfying the needs of three main components i.e. Social, Economic, and Environmental.]

WHAT DOES ‘CSR’ AIM FOR?

CSR aims to balance the Social, Economic, and Environmental aspects of the Society. It also aims to positively contribute to society as it is a voluntary legal service by a company.

# WHAT ARE KEY AREAS OF CONCERN FOR ‘CSR’?

Some of the Key areas of concern for CSR are as follows:

• Environmental Protection
  
  

• Ethical Labour Practices
  
  

• Community Engagement
  
  

• Meeting the requirements of Stakeholders; and so on
  
  

WHAT ARE THE THREE BASIC PRINCIPLES OF CSR?

• ACCOUNTABILITY: It means that a business should be Accountable for all its actions towards society and day–to–day operations conducted in an organization.
  

• TRANSPARENCY: It means that the activities and operations conducted by the business organization must be transparent to all its stakeholders consisting of Shareholders, Customers, Workers, etc.
  

• SUSTAINABILITY: It means that a business should focus on its future growth and survival by complying with legal standards and supporting the three main aspects of CSR.
  

WHAT ARE THE IMPORTANCE OF ‘CSR’

CSR is important for business in various ways as it is a voluntary activity done by businesses for the betterment of society. A few importance of CSR are listed down below:

1. Companies engaging in CSR with great enthusiasm and a positive attitude will create a brand image and reputation for their product as well as increase the goodwill for the company in the market.

2. Companies fulfilling the CSR needs of society positively have the upper hand over their competitors in the market or simply, they gain a competitive advantage over competitors.

3. Companies effectively utilizing CSR initiatives can save costs and time by minimizing the carbon footprints and reducing waste leading to Operational Efficiency with reducing carbon footprints and implementing waste management techniques leads to Environmental Conservation.

4. An effective CSR activity will also create a better working environment for its workers, ensuring the well-being of employees leads to an increase in Employee Morale and Retention and an increase in this reduces Employee Turnover.

5. By effective CSR strategies, companies can minimize risks and ensure long–term sustainability.

6. It also helps in engaging with society and thus, helps in Community Development finally if the company is using effective CSR strategies then, it means the company is complying with legal standards.

IMPLICATION OF ‘CSR’ IN INDIAN COMPANIES ACT 2013

The legal framework of CSR varies from country to country. While some countries make CSR a mandatory activity, on the other hand, some country says that CSR is voluntary. In this blog, let’s understand the legal framework of CSR in India:

1. Legal Provision: Section 135 of Indian Companies Act, 2013

2. Applicability: Companies having a net worth of around INR 500 Crore or more, INR 1000 Crore or more, or a net profit of INR 5 Crore or more during any fiscal or financial year.

3. CSR Committee & its composition: Companies shall constitute a CSR committee Board relating to the formulation and implementation of CSR strategy and policy. This committee must include 3 or more directors, of which 1 should be at least an Independent director.

4. CSR spending requirement: It is required for the companies eligible for CSR should spend at least 2% of the average net profit of the company made immediately during the three preceding years.

5. Scope of CSR activities: The CSR activities encompass various areas such as:

a. Eradicate Poverty, hunger, and malnutrition

b. Gender Equality and Women Empowerment

c. Social Business Impacts

d. Promote Education for children including Children with special needs

6. Reporting and Audit: The company must disclose its CSR policy, the composition of the CSR committee, the amount spent on implementing CSR activities, etc through the annual report prepared during the end of the fiscal year.

7. Monitoring and Compliance: It is the responsibility of CSR committees to monitor the implementation and working of CSR activities and to ensure that the business organization complies with the provisions of the Indian Companies Act 2013.

CONCLUSION

CSR and Law both help the business to grow and operate its workings ethically. Law frames the rules and regulations for implementing CSR so that businesses can contribute positively to society. Similarly, effective CSR strategies help the business comply with legal standards. Thus, CSR and Law are interconnected with each other.

REFERENCES

1. Tim Stobierski, ‘What is Corporate Social Responsibility? 4 Types’ (2021) https://online.hbs.edu/blog/post/types-of-corporate-social-responsibility accessed 9th September 2024

2. Naincy Mishra, ‘CSR under Companies Act 2013’ (2024) https://blog.ipleaders.in/csr-laws-india/ accessed 9th September 2024

3. Shraileen Kaur, ‘Corporate Social Responsibility’ (2022) https://blog.ipleaders.in/corporate-social-responsibility-4/ accessed 9th September 2024

4. Section 135 of Indian Companies Act 2013 https://indiankanoon.org/doc/120906957/#:~:text=(1)Every%20company%20having%20net,directors%2C%20out%20of%20which%20at

5. P.A. Anand, ‘The relationship between CSR and effective management: A comparative study’ (2021)

https://ilkogretim-online.org/index.php/pub/article/view/4006accessed 9th September 2