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What is Corporate Social Responsibility

What is Corporate Social Responsibility

CSR stands for CORPORATE SOCIAL RESPONSIBILITY, Under Section 135 of the Companies Act 2013, the Ministry of Corporate Affairs (MCA) has released a Circular with regard to CSR. Under the Circular MCA suggests some measures for better monitoring of the implementation of CSR policies.

 

WHAT IS CORPORATE SOCIAL RESPONSIBILITY (CSR)?
Corporate Social Responsibility is a Business Model which is self-regulatory in nature. It helps the company to be socially accountable. Such acts as a check on the working on the company and its responsibility towards itself, its stakeholder and the public in large. It is the involvement of the company in its contribution towards society and its welfare, economy and the environment. It not only benefits society but also helps the company to exist in that environment, creating goodwill for the company.

 

WHAT IS THE IMPORTANCE OF CORPORATE SOCIAL RESPONSIBILITY-CSR?

  1. Corporate Social Responsibility (CSR) is a term, which is widely used to explain the efforts of a company, for improving society in any way.
  2. CSR improves the public social image by spreading or publishing the efforts of a Company towards a better society and increase its chance of becoming favorable in the eyes of the public.
  3. CSR also increases the coverage of media as the visibility throws a positive light on the picture of the Company.
  4. CSR also increases the company’s brand value by building a socially strong relationship with customers, at large.

 

WHAT ARE THE BENEFITS OF CSR?

The benefits of CSR are:-

  1. Contribution to society, the economic system, environmental development not only enhances the society but also creates better brand recognition.
  2. CSR results in developing a positive business reputation.
  3. As the company is contributing to society it will help with increased sales and customer loyalty as customers go for goods and services from those companies who are efficiently working towards the betterment of the environment and society as a whole and are responsible.
  4. There is a higher level of saving of operational costs.
  5. As CSR helps in creating accountability of the company’s working it also helps in the development of the financial performance of the company.
  6. As the presence of CSR in the working of the company helps to create stronger bonds between the employees and the higher authorities it ultimately results in organizational growth.
  7. It also helps in easier access to capital.

WHAT ARE THE TYPES OF CSR?

WHAT ARE THE TYPES OF CSR?

The four types of CSR are:

  1. CORPORATE ENVIRONMENTAL RESPONSIBILITY

Corporate Environmental Responsibility deals with the concern of the corporation towards the environment and accountability towards it. The increase in Green House Gases resulting in Global Warming carelessness towards working by a company will ultimately affect the survival of the company in the market.

Nowadays, with the increase in awareness, the corporation has been mindful towards the dumping of industrial wastes in the water bodies, packing of food in a way that is not hazardous towards the environment, etc. This also helps the company to gain recognition in the market as the consumer/customer/buyer of products lookout for goods that are environment-friendly as people in the society have also become aware of environmental protection.

  1. CORPORATE HUMAN RIGHTS RESPONSIBILITY

 Corporate Human Rights responsibility deals with the responsibility of the company towards the employees, laborers, and workers. Work accountability does not act one way. It is a give and takes policy. If the company is responsible for the employees the employees will be loyal to the company too. Many acts are enacted and practiced in the companies and industries in order to safeguard the working class from any malpractices.

For it to work the responsibility of the corporate is very important and while doing business certain things are to be taken very seriously. For example- child labor, and woman safety, maternity leave, hazardous work protection, etc.

 

  1. CORPORATE PHILANTHROPIC RESPONSIBILITY

Corporate Philanthropic Responsibility means an investment of the company towards the development of the country, working for a social cause, and bringing the development of the country.

In today’s world, the buyers/consumers are always eager to know about the company they are obtaining goods and services from. A good social image will ultimately develop the organization.

 

  1. CORPORATE ECONOMIC RESPONSIBILITY

The reality of the market world is that without money the business will not exist. However, unethical means will eventually disrupt the business. It may look in the short term that profits are been received, however, in the long run, it will create a financial crisis.

Thus, this brings into the saving and proper utilization of the capital. Less wastage of capital, it will safeguard the working of the company in long run.

 

WHEN CSR IS APPLICABLE?

Section 135 of the Companies Act, 2013 is applicable to every company, which fulfills any of the following criteria:

  • the net worth of Rs 500 crore or more, or
  • a turnover of over Rs 1,000 crore or
  • a net profit exceeding Rs 5 crore in any financial year.

It further explains that ‘any financial year’ implies any of the three preceding financial years.

 

WHAT IS THE ROLE OF GOVERNMENT IN CSR?

The government has no role in monitoring CSR activities; it lays the burden on the Management Board of the company to ensure the best quality and efficacy of a CSR project is been implemented.

Further, the government has no role in appointing any prescribed appropriate authority for approving and implementing CSR programs for the Company or helps in pleasing outside experts in monitoring the efficacy of CSR expenditure of the Companies such as for impact assessments.

 

WHAT IS FORMCSR-1?

Every entity, who proposes to undertake any CSR activity, shall get register itself with the Government by filing the E-form CSR-1, online, on the MCA portal with the Registrar, with effect from the 1st April 2021:

Provided this provision shall not affect the CSR projects or programs approved prior to the 1st April 2021.

  • E- Form CSR-1 shall be signed by the entity and shall be certified by a Chartered Accountant in practice (PCA) or a Company Secretary in practice (PCS) or a Cost Accountant in practice.
  • A unique CSR Registration Number shall be generated by the system automatically, while the submission of the E-Form CSR-1 on the portal,
WHAT ARE THE ACTIVITIES THAT ARE TO BE INCLUDED IN CSR?

LIST OF PERMITTED ACTIVITIES TO BE INCLUDED IN ACCORDANCE WITH SCHEDULE VII OF THE COMPANIES ACT, 2013

The Board shall ensure that the activities included by a company in its CSR Policy fall within the purview of the activities included in Schedule VII. Some activities are specified in Schedule VII as the activities which may be included by companies in their Corporate Social Responsibility Policies. These activities are related to:

 

Sr.No CSR Activities
1 abolishing poverty, malnourishment and hunger, improvising health care which includes preventive health care and sanitation and making available safe drinking water
2 improvement in education which includes special education and employment strengthening vocation skills among children, women, elderly, and the differently-abled and livelihood enhancement projects
3 improving gender equality, setting up homes and hostels for women and orphans
4 introducing the measures for reducing inequalities faced by socially and economically backward groups
5 Safeguarding environmental sustainability, ecological balance, protection of flora and fauna, animal welfare, agroforestry, conservation of natural resources, and maintaining a quality of soil, air, and water which also includes a contribution  for rejuvenation of river Ganga
6 protection of national heritage, art, and culture including restoration of buildings and sites of historical importance and works of art; setting up public libraries; promotion and development of traditional arts and handicrafts
7 areas for the advantage of skilled armed forces, war widows, and their dependents
8 training to stimulate rural sports, nationally recognized sports, Paralympic sports, and Olympic sports
9 contribution to the Prime Minister’s National Relief Fund or any other fund set up by the Central Government for socio-economic development providing relief and welfare of the Scheduled Castes, the Scheduled and backward classes, minorities, and women
10 contributions or funds provided to technology incubators which are approved by the Central Government
11 rural development projects
12 disaster management, including relief, rehabilitation, and reconstruction activities
13 slum area development where ‘slum area’ shall mean any area declared as such by the Central Government or any State Government or any other competent authority under any law for the time being in force

 

WHAT ARE THE FINES AND PENALTIES FOR NON-COMPLIANCE OF CSR POLICY?

In case a company fails to comply with the provisions relating to CSR spending, transferring, and utilizing:

PENALTY on Company: A minimum fine of Rs 50,000 may increase to Rs 25 lakh.

PENALTY on Board of the Company: Every officer who is in defaults in the compliance shall be liable for a punishment which is imprisonment for a term which may extend to three years or with a minimum fine of Rs 50,000 which may increase to Rs 5 lakh, or with both.

 

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