CSR is the continuing commitment by business to

behave ethically and contribute to economic

development while improving the quality of life of the
workforce & their families, local communities and the
society at large families, local committees and other
society at large (World Business Council)
CSR is the commitment of the business to contribute to
sustainable economic development working with
employees their families, the local community and
society at large to improve quality of life in ways that
are both for business and good for international
development. (World Bank)
Corporate Social Responsibility is an extended model
of corporate governance. It is about how companies
manage the business processes to produce an overall
positive impact on the society. It is the responsibility of
corporations to go above and beyond what the law
required them to do. It is the responsibility of
corporations to contribute to a better society and cleaner
environment. Businesses operate in society. They
contribute their part to the development of society.
However, while undertaking some of the activities,
businesses may harm some or the other valuable aspect
of society. Businesses may pollute the environment;
they may employ workers under extortionate terms, or
they may undertake some activities that would
undermine the interests of shareholders and other
stakeholders. Corporate Social Responsibility is a
concept that outlines the larger responsibility of
businesses towards the society. It seeks to reduce
negative externalities associated with carrying out
activities in a business and enhance their positive
externalities instead. It is thus, about encouraging the
corporate to adopt responsible business practices.
Dimensions of CSR:
 Business ethics, values and principles.
 Accountability and transparency (legal compliance)
 Commitments to socio-economic developments
 Environmental concerns
 Human rights
 Workers rights and welfare
 Sustainability
 Corporate governance

Need For CSR

1. To establish a good corporate image
2. Certain donations are exempted by income tax
3. Companies undertaking social responsibility can
position their product better and increase the market
share.
4. The culture is strong that they take up social
responsibility as their moral responsibility
5. Social approach demand that they should be
responsive to the social problems of society.
6. Commitment to social responsibility enhance its
image , resulting in better business environment.
Corporate Social Responsibility – Development of
the Concept in India:
Corporate Social Responsibility as a concept has
existed in India since ages and plays an important role
in a developing country like ours. The organizations
have realized that besides profit making, a corporation
must involve in trust building by working upon its
societal relationships and environmental issues. Also,
companies which genuinely adopt the principles of
socially responsible behaviour are preferred and
favoured by the society at large, of which the company
forms an integral part. Hence, one can say that CSR is
basically an act of moral, social and business
responsibility with the aim to protect, preserve and
nurture human values and promote socio-economic
welfare.
CSR evolved over a period of time when in the
19th century, the industrial families like Tata, Birla,
Godrej, etc. had an inclination towards such activities.
These giant corporate involved themselves in a variety
of CSR activities without any legal requirements and
view it in the context of building goodwill, reputation
and brand building.
Later, during the time of Independence, Mahatma
Gandhi influenced various industrialists to adopt the
practices with respect to socio-economic development
due to which various companies had set up training
centres and educational institutions like schools and
colleges. Eventually, CSR got a push by way of
introduction of the labour and environment protection
laws in India and the Public Sector Undertakings were
asked to take up the CSR initiatives. This is how this
practice developed and has now evolved as a
sustainable business strategy.

According to the founder of Infosys Mr. Narayan

Murthy, “social responsibility is to create maximum
shareholders value working under the circumstances,
where it is fair to all its stakeholders, workers,
consumers, the community, government and the
environment.”
Hence one can say that social responsibility would
mean asking businesses to be more practical and
analyze the positive as well as negative effects of their
activities and decisions on the people and society at
large.
Benefits of CSR:
 Increased employee loyalty and retention
 Increased quality of products and services
 Increased in Customer loyalty
 Increased in reputation and brand image
 Greater productivity and quality
 Reduced regulatory
 Access to capital market
 Product safety and decreased liability
 Less volatile stock value
CSR TOWARDS DIFFERENT STAKEHOLDERS
Specific Social Responsibilities towards Stakeholders
 Society
 Government
 Share holders / Owners
 Employees
  Consumers
 Investors
 Creditors
Responsibility towards Society:
 Carrying of business with moral and ethical
standards
 Prevention of environmental pollution
 Minimizing ecological imbalance
 Contributing towards the development of social
health, education
 Making use of technology
 Overall developments of locality

Responsibility towards Government:

Business enterprises must carry on their business
activities within the framework of rules, regulations and
directions laid down by the central, state governments
and local governments.
 Obey rules and regulations
 Regular payment of taxes
 Cooperating with the government to promote
social values
  Not to take advance of loopholes in business
laws.
 Cooperating with the government for
economic growth and development
 Not to indulge in monopolies and restrictive
trade practices
 Not to encourage corruption.
Responsibility towards Shareholders/Owners:
In corporation, shareholders are the owners. The owners
expect a fair return on their investment as well as their
investment. Shareholders also require a business to
invest their funds only in productive and profitable
activities.
 To ensure a reasonable rate of return overtime
 To work for the survival and the growth of the
concern
 To build reputation and goodwill of the company.
 To remain transparent and accountable
Responsibility towards Employees:
The success of an organization depends on its
employees. There are many responsibilities of
corporation or business in relation to employees.
 To provide a healthy working environment
  To grant regular and fair wages
 To provide welfare services
 To provide training and promotion facilities
 To provide reasonable working standards and
norms
 To provide efficient mechanism to redress
grievance
 Proper recognition of efficiency and hard work.
Responsibility towards Consumers:
All the business activities revolve around the customer.
No enterprise can survive without caring the customer.
Responsibilities of corporation towards customers are
 Supplying socially harmless products
 Supplying quality, standards as promised
 Adopt fair pricing
 Provide after sales services
 Restricting block marketing and profit earning
 Maintaining consumer grievance cell
 Fair competition
Responsibility towards Investors:
Investors include persons and institutions that provide
medium term and short term finance by way of
investment in debentures, bonds, public deposits and
loans. Investors include the investing public, finance
companies, banks and financial institutions.
 Regular payment of interest
 Safety of investment.
 Repayment at maturity.
Responsibility towards suppliers and Creditors:
Suppliers mean those who provide or supply the
required raw material, intermediary products etc, for the
purpose of production. Suppliers making supplies on
credit basis are known as creditors.
 Regular orders
 Fair terms regarding supplies
 Reasonable credit period
 Timely payment to suppliers / Creditors.
Arguments for: (For CSR)
1. Corporate should have some moral and social
obligations to undertake for the welfare of the society.
2. Proper use of resources, capability and competence
3. Expenditure on CSR is a sort of investment
4. Companies can avoid many legal complications
5. It create a better impressions
6. Corporate should return a part of wealth

Arguments Against : (Against CSR)

1. Fundamental principles of business gets violates
2. Very expensive for business houses
3. CSR projects will not be successful
4. They are not the special areas of any business
5. CSR undue them to steal away the shareholder
money.

Relationship of CSR with Corporate Sustainability

The Modern definition of corporate social responsibility
(CSR) is a self-regulating business model that helps a
company be socially accountable to itself, its
stakeholders, and the public. By practicing corporate
social responsibility, also called corporate citizenship,
companies can be conscious of the kind of impact they
are having on all aspects of society, including
economic, social, and environmental. The term
corporate social responsibility (CSR) refers to practices
and policies undertaken by corporations that are
intended to have a positive influence on the world. The
key idea behind CSR is for corporations to pursue other
pro-social objectives, in addition to maximizing profits.
Sustainability may then be defined as maintaining well-
being over a long, perhaps even an indefinite period.
This covers largely the environmental dimension of the
triple bottom line, but environment and sustainability
are not synonymous. On the one hand, some forms of
environmental degradation are both relatively easily
reversed and highly noxious in the present many forms
of air and water pollution, for instance.
Corporate social responsibility (CSR) refers to both
managerial practices focused on welfare creation as per
Brown the definition of CSR is the obligations of
businessmen to pursue those policies, to make those
decisions, or to follow those lines of action which are
desirable in terms of the objectives and values of our
society.
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.
o 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.
o 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:
o Eradicating extreme hunger and poverty
 o Promotion of education, gender
equality and empowering women
o Combating HIV-AIDS and other diseases
o Ensuring environmental sustainability
o Contribution to the PM's National Relief
Fund or any other fund set up by the Central
Government for socio-economic development
and relief.
What is the Significance of CSR Compliance?
 CSR is increasingly being leveraged to build a
positive brand identity for corporations and help
their ESG compliance.
o 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.
o 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.
What are the 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.
o This is largely attributable to the fact that there
exists little or no knowledge about CSR within
the local communities as no serious efforts have
been made to spread awareness about CSR.
o The situation is further aggravated by a lack of
communication between the company and the
community at the grassroots.
 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.
 o This reported lack of transparency negatively
impacts the process of trust building between
companies and local communities, which is a key
to the success of any CSR initiative at the local
level.
 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.
How can the CSR be made more Effective?
 Role of Companies: Beyond just allocating funds,
the companies shall conduct regular reviews on
progress of CSR compliance and put in place some
measures for a more professional
approach towards the same. Also, they should set
clear objectives and align all the stakeholders with
them.
o It is equally important to let their NGO
partners know of their business needs.
 The latter should know that companies which
award money from their CSR budgets are
sincere about the causes they pick.
o The Companies must also refresh the roles of
Board, CSR Committee, CFO and set-up new
SOPs including a defined process for fund
utilisation, determine applicability of impact
 assessment, prepare a detailed checklist of
processes with the owners and timelines and
formulate an annual action plan.
 Role of Government: The government must ensure
that the activities included in the CSR Policy of a
company are implemented by it.
o It is also the responsibility of the government
to address the issues of non availability of the
NGOs and create awareness in the society
about the significance of the CSR and its
activities.
o The government plans to use technology tools
such as Artificial Intelligence and Machine
Learning to do data mining of the mandated
reports to bring changes to its policy on CSR.
 Leveraging technology to improve the
oversight of India Inc is welcome, but this
should be applied to the financial and
governance aspects of companies before
moving on to their social obligations.
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.
 o A policy environment that encourages CSR
investments in technology-led solutions has made
sustainable and scalable solutions a reality.
o 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.
o 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.
o 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.
o 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.

Corporate Governance
To influence the corporate path to sustainable
development, following approaches are advocated
namely:
• The Triple Bottom Line Approach (People, planet and
profits), 1995
• United Nations Global Compact (UNGC), 1999
• OECD (1999) – guidelines are addressed to MNCs
• ISO Standards
• Global Reporting Initiative, 1997 – guidelines are for
all organisations.
• Sustainable Development Goal, 2015
• World Bank GRI Index, 2020 – World Bank
sustainability disclosure index prepared with core
option of the GRI standards.
In addition to the Triple Bottom Line approach which
originated from Elkington’s the planet people- profit
(environmental, social and economic) framework.
Elkington argued business can be sustained by fulfilling
stakeholders’ interest, environmental protection policies
and public welfare. Global Reporting Initiative (GRI) is
an international organisation founded in 1997. GRI has
its roots in the US not for profit organisations, the
coalition for Environmentally Responsible Economies.
United Nations Environmental Programme (UNEP) was
involved in the establishment of GRI. GRI enjoys
strategic partnership with Organisation for Economic
Corporation and Development (OECD), the UN Global
Compact, United Nations Environmental Programme
(UNEP) and International Organisation for
Standardisation (ISO). GRI has designed the world’s
standard guidelines in sustainability reporting. GRI’s
mission is to make sustainability reporting a standard
practice and to enable all companies and organisations
to report their performance on the following criteria:
1) Economic,
2) Environmental,
3) Social and
4) Governance.
The G3 is “Third Generation” of the GRI’s
sustainability Reporting guidelines launched in 2006.
G3 reports only on impact study. G4 reports on broader
aspect of impact study which includes general standard
disclosure on organisation profile, stakeholder and
governance. Global Reporting Initiative includes
governance criteria in addition to the Triple Bottom
Line, economic, social and environmental criteria.
The Organisation for Economic Cooperation and
Development (OECD), in 1999, defined Corporate
Governance as “a set of relationships between a
company’s management, its board, its shareholders and
other stakeholders. It provides the structure through
which the objectives of the company are set, and the
means of attaining those objectives and monitoring
performance are determined. Good corporate
governance should provide proper incentives for the
board and management to pursue objectives that are in
the interests of the company and shareholders, and
should facilitate effective monitoring thereby
encouraging firms to use recourses more efficiently.”
The purview of Corporate Governance includes:
1. Rights of and equitable treatment of shareholders:
Organisations should respect the rights of shareholders
and help shareholders exercise those rights.
2. Interests of other stakeholders: Organisations should
recognise that they have legal and other obligations to
all legitimate stakeholders.
3. Role and responsibilities of the board: The board
needs a range of skills and understanding to be able to
deal with various business issues and to have the ability
to review and challenge management performance. It
needs to be sufficiently sized and have an appropriate
level of commitment to fulfill its responsibilities and
duties.
4. Integrity and ethical behaviour: Organisations should
develop a code of conduct for their directors and
executives that promote ethical and responsible
decision-making.
5. Disclosure and transparency: Organisations should
clarify the role of the board and the management and
the same should be conveyed to the public. They should
also implement procedures to independently verify and
safeguard the integrity of the company's financial
reporting. Disclosure of financial matters concerning
the organisation should be timely and balanced to
ensure that all investors have access to clear, factual
information. Transparency is the best principle of
corporate governance.
Role of Corporate Governance
You would have understood that the role of corporate
governance is largely significant to the society and
impacts various internal and external stakeholders.
Corporate Governance aims at the following aspects:
a) It fosters an efficient use of resources and curtails
wastages.
b) It aims at resource allocation to those verticals for
bringing in efficiencies in the production of goods and
services which further generates interest of the
shareholders.
c) It chooses best effective managers to manage scarce
resources to derive optimal results.
d) It enables the managers to remain attentive and
focused for enhanced performance continuously.
e) It brings in investor’s attractiveness and also
increases the shareholders' value.
f) It fosters increased consumer satisfaction which aids
in growing market share, besides the sales.
g) It results in higher employee satisfaction, low
turnover rate and lower HR costs. Further, satisfied
employees bring customer satisfaction.
h) It also attracts vendors and brings an efficient
inventory management system with reduced
purchase/production costs.
i) It brings down the marketing costs by developing
good rapport with the channel partners, distributors, etc.
CORPORATE SOCIAL RESPONSIBILITY (CSR)
The CSR has become one of the standard business
practices of our time. For companies, the overall aim of
CSR is to have a positive impact on society as a whole
while it engages in maximizing the creation of shared
value for the owners of the business, its employees,
shareholders and stakeholders. “Corporate Social
Responsibility is a management concept whereby
companies integrate social and environmental concerns
in their business operations and interactions with their
stakeholders. CSR is generally understood as being the
way through which a company achieves a balance of
economic, environmental and social imperatives
(‘Triple-Bottom Line-Approach’), while at the same
time addressing the expectations of shareholders and
stakeholders” (UNIDO).
 “The social responsibility of business encompasses the
economic, legal, ethical, and discretionary expectations
that society has of organisations at a given point in
time”.
Regulatory Mechanism for CSR
With the enactment of Section 135 of the Companies
Act 2013, India became the first country to make CSR
spending and disclosure mandatory for large companies
with specific turnovers.
The Companies Act 2013 and CSR
The inclusion of the CSR mandate under the Companies
Act, 2013 is an attempt to supplement the government’s
efforts of equitably delivering the benefits of growth
and to engage the Corporate World with the country’s
development agenda. The Companies in India are
governed by Clause 135 of the Companies Act 2013 for
performing their CSR activities.
Provision under Companies Act 2013:
The practice of CSR is not a new one in the Indian
industry. It was an activity that was not deliberated,
rather performed. Observers believe that in India, this
activity has evolved from institutional development to
community development by way of several projects and
 tends to focus on the utilization of profits made by a
company.
Also, undertaking such initiatives were a voluntary step
for all companies until it was mandated by the new
Companies Act which came to force in the year 2013.
Section 135 of this Act provides that every company in
India, either private or public having a net worth of Rs
500 crore, or a turnover of Rs 1,000 crore or net profit
of Rs 5 crore, needs to spend a minimum of 2% of its
average net profit for the immediately preceding three
financial years on corporate social responsibility
activities. A company refers to an entity incorporated
under the Companies Act or under the other previous
company law.
A clarification has been made with regard to
computation of net profits that if the profits have been
computed under the Companies Act 1956 then they
need not be recomputed under the 2013 Act. Also,
the CSR activities must be undertaken with respect to
certain areas which are listed under Schedule VII of the
2013 Act, some of which include:
 Activities to eradicate hunger, poverty and
malnutrition.
 Promotion of preventive healthcare, education and
gender equality.
 Setting up homes for women, orphans and the senior
citizens.
 Undertaking measures for reducing social and
economic inequalities.
 Ensure environmental sustainability, balance in the

ecology and welfare of animals.

 Protection of national heritage, art and culture.

 Taking measures for the benefit of armed forces

veterans, war widows and their dependents.

 Provide training to promote rural, nationally
recognized, Paralympic or Olympic sports.
 Contribute to Prime Minister’s National Relief Fund

or any other fund which has been set up by the Central

Government for socio-economic development, relief
and welfare of SC, ST, OBCs, minorities and women.
The provision also states that a company shall give
preference to the local areas and those areas around
which the company operates for undertaking the said
CSR activities. Another statutory requirement under
section 135 is the formation of a CSR Committee of the
Board for monitoring the CSR policies of any company
consisting of at least 3 directors (inclusive of an
independent director). The Committee is required to
recommend and suggest the amount of expenditure that
the company must incur on the activities so specified.
After considering the recommendations put forth by the
Committee, the Board shall approve the CSR policy for
the company.
It has been notified by the Ministry of Corporate Affairs
that Section 135 and Schedule VII under Companies
Act 2013, along with the provisions of the Rule shall
come into effect from 1st April 2014. The Statue
provides CSR activities to be undertaken through a
registered trust or society, or a company established by
its holding, subsidiary or associate company. For this
purpose, the company needs to specify the activities
that will be taken up and the modalities for utilizing the
funds. It is said that such an entity will have to establish
a track record of three years where similar activities
were performed by it. The report which shall be
submitted by the Directors along with the financial
statements of a company shall include an annual report
on the CSR Activities of a company in the prescribed
format under the Rules, setting out inter alia a brief
outline of the CSR policy, the composition of the CSR
Committee, the average net profit for the last three
financial years and the prescribed CSR expenditure. If
the company does not have adequate profits or has been
unable to spend the minimum required on its CSR
initiatives, the specific reasons for not doing so are to
be disclosed in the Board Report.
However, failure to report CSR spending or the specific
reasons for non-expenditure shall amount to
contravention of the provision under section 134 of the
Companies Act 2013 and the said company shall attract
penalty in the form of fine, which shall not be less than
fifty thousand rupees and may extend to INR 2.5
Million. Also, every officer who will be liable for such
a default will be punished with imprisonment for a term
extending to 3 years, along with fine of minimum fifty
thousand rupees but which may extend to INR five lakh
rupees or both.

However, Section 135 of the Companies Act, 2013

("Act") provides that certain companies must
mandatorily contribute a certain amount towards CSR
activities. As per the Act, 'Corporate Social
Responsibility' means and includes but is not limited
to:

 Projects or programs relating to activities specified

in Schedule VII to The Act.
 Projects or programs relating to those activities
which are undertaken by the Board of Directors of a
company in ensuring the recommendation of the
CSR Committee of the Board as per declared CSR
Policy along with the conditions that such policy
 will cover subjects specified in Schedule VII of the
Act.

CSR Applicability in India

The provisions of CSR applies to every

company fulfiing any of the following conditions in the
preceding financial year:

 Net worth of more than Rs.500 crore

 Turnover of more than Rs.1000 crore
 Net profit of more than Rs.5 crore

The Board of Directors of every company for which the

CSR provisions apply must ensure that the company
spends in every financial year at least 2% of its
average net profits made during the immediately
preceding three financial years as per its CSR policy.
If the company has not completed three financial years
since its incorporation, it must spend 2% of its average
net profits made during the immediately preceding
financial years as per its CSR policy.

Importance of Corporate Social Responsibility

CSR is an immense term that is used to explain the
efforts of a company in order to improve society in a
significant manner. Below reasons reflect why CSR is
important:

 CSR improves the public image by publicising the

efforts towards a better society and increasing their
chance of becoming favourable in the eyes of
consumers.
 CSR increases media coverage as media visibility
throws a positive light on the organisation.
 CSR enhances the company’s brand value by
building a socially strong relationship with
customers.
 CSR helps companies to stand out from the
competition when companies are involved in any
kind of community.

Role of Board of Directors

The role of the Board of Directors in implementing

CSR is as follows:

 After considering the recommendations made by the

CSR Committee, approve the CSR policy for the
Company.
 The Board must ensure only those activities must be
undertaken which are mentioned in the policy.
 The Board of Directors shall make sure that the
company spends in every financial year, a minimum
of 2% of the average net profits made during the
three immediately preceding financial years as per
CSR policy.
 In case a company has not completed three financial
years since its incorporation, the average net profits
shall be calculated for the financial years since its
incorporation.
 The Board’s Report shall disclose:
 CSR Committee’s composition
 The contents of CSR Policy
 In case CSR spending does not meet 2% as per
CSR Policy, the reasons for the unspent amount,
and details of the transfer of unspent amount
relating to an ongoing project to a specified fund
(transfer within a period of six months from the
expiry of the financial year).

Net Profit for CSR Applicability

Every company which needs to comply with the CSR
provisions have to spend 2% of the average net profits
made during the preceding three years as per the CSR
policy. The computation of net profit for CSR is as per
Section 198 of the Companies Act, 2013.

Section 198 provides that while computing the net

profits of a company a credit should be given for the
subsidies and bounties received from any government,
or public authority constituted or authorised on this
behalf.

For computing net profits, credit cannot be given for

the following sums:

 Profits, by way of premium on shares, unless the

company is an investment company.
 Profits on sales of forfeited shares.
 Profits of a capital nature, including profits from the
sale of the undertaking or any part thereof.
 Profits from the sale of any fixed assets or
immovable property of a capital nature comprised in
the undertaking, unless the company business
consists of buying and selling any assets or
property.
 Any change in the carrying amount of an asset or of
a liability recognised in equity reserves, including
surplus in profit and loss accounts for the
measurement of the asset or the liability at fair
value.
 Any amount representing notional gains, unrealised
gains or revaluation of assets

In making the computation of net profits, the following

sums should be deducted:

 Every usual working charge.

 Directors’ remuneration.
 Bonus or commission payable or paid to any
member of the company’s staff, technician, engineer
or person engaged or employed by the company,
whether on a part-time or whole-time basis.
 Any tax notified by the Central Government as a tax
on abnormal or excess profits.
 Any tax on business profits imposed for special
reasons or special circumstances and notified by the
Central Government.
 Interest on debenture issued by the company.
 Interest on mortgages executed by the company and
on advances and loans secured by a charge on its
floating or fixed assets.
 Interest on unsecured advances and loans.
 Expenses on repairs, whether to movable or
immovable property, provided the repairs are not of
a capital nature.
 Outgoings inclusive of contributions made under
section 181.
 Depreciation to the extent specified in section 123.
 Excess of expenditure over income.
 Damages or compensation to be paid for any legal
liability and any sum paid by way of insurance
against the risk of meeting the such liability.
 Debts considered bad and adjusted or written off
during the year of account.

In making the computation of net profits, the following

sums cannot be deducted:

 Income-tax and super-tax payable by the company

under the Income-tax Act, 1961.
 Any damages, compensation or payments made
voluntarily.
 Loss of capital nature including loss on sale of the
undertaking or of any part thereof not including any
excess of the written-down value of any asset which
is discarded, sold, discarded, destroyed or
demolished over its sale proceeds or its scrap value.
 Any change in carrying amount of an asset or of a
liability recognised in equity reserves, including
surplus in profit and loss accounts for the
measurement of the asset or the liability at fair
value.

Transfer and Use of Unspent Amount

A company can transfer unspent CSR amount to the

following specified funds:

 A contribution made to the Prime Minister’s

National Relief Fund.
 Any other fund is initiated by the central
government concerning socio-economic
development, relief and welfare of the scheduled
caste, minorities, tribes, women and other backward
classes.
 A contribution made to an incubator is funded either
by the central government, the state government,
 public sector undertaking of the state or central
government, or any other agency.
 Contributions made to:
 Public-funded universities
 Indian Institute of Technology (IITs)
 National Laboratories and Autonomous Bodies
established under:
 Indian Council of Agricultural Research
(ICAR)
 Council of Scientific and Industrial Research
(CSIR)
 Department of Atomic Energy (DAE)
 Department of Biotechnology (DBT)
 Department of Pharmaceuticals
 Ministry of Ayurveda, Yoga and
Naturopathy, Unani, Siddha and
Homoeopathy (AYUSH)
 Ministry of Electronics and Information
Technology
 Indian Council of Medical Research (ICMR)
 Defence Research and Development
Organisation (DRDO)
  Department of Science and Technology
(DST) engaged in conducting research in
technology, science, medicine, and
engineering aimed at encouraging
Sustainable Development Goals (SDGs).

In case of the unspent amount relating to an ongoing

project under the company’s CSR policy, the company
will transfer the unspent amount to an exclusive account
to be opened by a company, known as ‘Unspent
Corporate Social Responsibility Account’, in any
scheduled bank within 30 days from the end of the
financial year.

The company must use the funds in the ‘Unspent

Corporate Social Responsibility Account’ towards its
obligations under the CSR policy within a period of
three financial years from the date of the transfer.

In a case where the company fails to utilise the

funds at the end of the three financial years, the funds
should be transferred to the specified fund mentioned
above within a period of 30 days upon completion of
the third financial year.

CSR Committee Applicability

 Every company to which CSR provision are
applicable must constitute a Corporate Social
Responsibility (CSR) Committee.
 The CSR Committee should consist of three or more
directors, out of which at least one director must be
an independent director.
 An unlisted public company or a private company
shall have its CSR Committee without any
independent director if an independent director is
not required.
 A private company having only two directors on its
Board shall constitute its CSR Committee with two
directors.
 In the case of a foreign company, the CSR
Committee shall comprise of at least two persons of
which one person shall be a person resident in India
authorised to accept on behalf of the foreign
company – the services of notices and other
documents. Also, the other person shall be
nominated by the foreign company.
 A company having any amount in its Unspent
Corporate Social Responsibility Account shall
constitute a CSR Committee and comply with the
CSR provisions.
Duties of the CSR Committee

 The CSR Committee will formulate and recommend

a CSR policy to the Board. CSR policy shall point
out the activities to be undertaken by the company
as enumerated in Schedule VII of the Act.
 CSR Committee will recommend the amount of
expenditure to be incurred on the CSR activities to
be undertaken by the company.
 CSR Committee will monitor the CSR policy of the
Company from time to time.
 The CSR Committee will establish a transparent
controlling mechanism for the implementation of
the CSR projects or programs or activities
undertaken by the company.

CSR Reporting

With respect to CSR Reporting, the provisions are as

follows :

 The Board’s Report referring to any financial year

initiating on or after the 1st day of April 2014 shall
include an annual report on CSR.
 In the case of a foreign company, the balance sheet
filed shall contain an Annexure regarding a report
on CSR.

CSR Policy

CSR Policy elaborates the activities to be undertaken

by the Company as named in Schedule VII to the
Act. The activities should not be the same which are
done by the company in its normal course of business.
Additionally, the Act provides the follwoing in relation
to CSR Policy:

 Contents of CSR Policy should be placed on the

company’s website by the Board.
 The activities mentioned in the policy must be
undertaken by the company.
 The company can join hands with other companies
for undertaking projects or programs or CSR
activities and report separately on such programs or
projects.
 The CSR policy shall monitor the projects or
programs.
 List of Permitted CSR Activities Under Schedule
VII

The Board of Directors shall ensure that the activities

included by a company in its CSR Policy fall within
the purview of the activities included is schedule
VII of the Act. The activities specified in Schedule VII
which may be included by companies in their Corporate
Social Responsibility Policies are as follows:

Sr.No CSR Activities

Eradicating poverty, hunger and malnutrition,

promoting health care which includes sanitation and
preventinve health care, contribution to the Swach
1
Bharat Kosh set-up by the Central Government for the
promotion of sanitation and making available safe
drinking water.

Improvement in education which includes special

education and employment strengthening vocation
2
skills among children, women, elderly and the
differently-abled and livelihood enhancement projects.
 Improving gender equality, setting up homes and
hostels for women and orphans, empowering women,
setting up old age homes, day care centres and such
3
other facilities for senior citizens and measures for
reducing inequalities faced by socially and
economically backward groups.

Safeguarding environmental sustainability, ecological

balance, protection of flora and fauna, animal welfare,
agroforestry, conservation of natural resources and
4
maintaining a quality of soil, air and water which also
includes a contribution for rejuvenation of river
Ganga.

Protection of national heritage, art and culture

including restoration of buildings and sites of
5 historical importance and works of art; setting up
public libraries; promotion and development of
traditional arts and handicrafts.

6 Measures for the benefit of armed forces veterans, war

widows and their dependents, Central Armed Police
Forces (CAPF) and Central Para Military Forces
(CPMF) veterans, and their dependents including
 widows.

Training to stimulate rural sports, nationally

7 recognized sports, Paralympic sports and Olympic
sports.

Contribution to the Prime Minister’s National Relief

Fund, Prime Minister's Central Assistance and Relief
in Emergency Situations Fund (PM CARES Fund) or
any other fund set up by the Central Government for
8
socio-economic development providing relief and
welfare of the Scheduled Castes, the Scheduled and
backward classes, other backward classes, minorities
and women.

Contribution to incubators or research and

development projects in the field of science,
technology, engineering and medicine, funded by the
9
Central Government, State Government, Public Sector
Undertaking or any agency of the Central Government
or State Government.

10 Contributions to public funded Universities, IITs,

National Laboratories and autonomous bodies
established under DAE, DBT, DST, Department of
 Pharmaceuticals, Ministry of AYUSH, Ministry of
Electronics and Information Technology and other
bodies, namely DRDO, ICAR, ICMR and CSIR,
engaged in conducting research in science,
technology, engineering and medicine aimed at
promoting Sustainable Development Goals (SDGs).

11 Rural development projects.

Slum area development. Slum area means any area

declared as such by the Central Government or any
12
State Government or any other competent authority
under any law for the time being in force.

Disaster management, including relief, rehabilitation

13
and reconstruction activities.

Fines and Penalties for Non-Compliance

In case a company fails to comply with the provisions

relating to CSR spending, transferring and utilising the
unspent amount, the company will be punishable with a
penalty of Rs.1 crore or twice the amount required to be
transferred by the company to the CSR fund specified
in Schedule VII of the Act or the Unspent Corporate
Social Responsibility Account, whichever is less.

Further, every officer of such company who defaults in

compliance will be liable to pay Rs.2 lakh or one-tenth
of the amount required to be transferred by the
company to CSR fund specified in Schedule VII or the
Unspent Corporate Social Responsibility Account,
whichever is less.

Reason for Introduction of CSR for Companies

We live a dynamic life in a world that is growing more

and more complex. Global-scale environment, social,
cultural and economic issues have now become part of
our everyday life. Boosting profits is no longer the sole
business performance indicator for the corporate and
they have to play the role of responsible corporate
citizens as they owe a duty towards society.

The concept of Corporate Social Responsibility (CSR),

introduced through Companies Act, 2013 puts a greater
responsibility on companies in India to set out a clear
CSR framework.

Many corporate houses like TATA and Birla have been

engaged in doing CSR voluntarily. The Act introduces
the culture of corporate social responsibility (CSR) in
Indian corporate requiring companies to formulate a
CSR policy and spend on social upliftment activities.

CSR is all about corporate giving back to society. The

Company Secretaries are expected to be known about
the legal and technical requirements with respect to
CSR in order to guide the management and Board.

LEGAL PROVISIONS AND SPECIFICATIONS

ON CSR
The term ‘Corporate Social Responsibility’ (CSR)
means the responsibility of Corporate Entities towards
society. The 75 origination of CSR happened long back
in ancient India which lasted till 1850 and Charity and
Philanthropy were the main drivers of that time.
APPLICABILITY: Section 135(1) of the Companies
Act, 2013 is a trigger point for the applicability of CSR
Provisions and constitution of CSR Committee.
The constitution of the CSR committee is mandatory in
company having:
Net Worth of Rs. 500 Crore Turnover of Rs. 1000 Crore
Net Profit of Rs. 5 Crore during any financial year.
NET WORTH: As per Section 2(57), ‘NW’ = (Paid Up
Share Capital + All Reserves Created Out of Profits +
Securities Premium Account) – (Accumulated Losses +
Deferred Expenditure and Miscellaneous Expenditure
not Written Off)
TURNOVER: As per Section 2(91), ‘Turnover’ means
the aggregate value of the realization of the amount
made from the sale, supply, or distribution of goods or
on account of services rendered, or both, by the
company during a financial year
NET PROFIT: As per Rule 2(f) of the Companies (CSR
Policy) Rules, 2014,‘Net Profit’ means the net profit of
a company as per its financial statement prepared by the
applicable provisions of the Act, but shall not include
the following namely: i) any profit arising from any
overseas branch or branches of the company, whether
operated as a separate company or otherwise; and ii)
any dividend received from other companies in India,
which are covered under and complying; with the
provisions of section 135 of the Act; Provided that net
profit in respect of a financial year for which the
relevant financial statements were prepared under the
provisions of the Companies Act, 1956, (1 of 1956)
shall not be required to be re-calculated under the
provisions of the Act. Provided further that in case of a
foreign company covered under these rules, net profit
means the net profit of such company as per profit and
loss account prepared in terms of clause (a) of sub-
section (1) of section 381 read with section 198 of the
Act.
COMPOSITION OF CSR COMMITTEE: As per
Section 135(1), three or more Directors including at
least one Independent Director shall form the CSR
Committee. However, the companies which are not
required to have Independent Director shall constitute
CSR Committee without Independent Director, and the
private companies having only two Directors shall
constitute CSR Committee only with two such
Directors as provided in Rule 5(1) of the Companies
(CSR Policy) Rules, 2014.

DISCLOSURE IN BOARD REPORT: As per Section

135(2) read with Rule 8, the Board’s Report prepared
under Section 134 shall contain the disclosures of the
Composition of CSR Committee as per prescribed
Annexure under Companies (CSR Policy) Rules, 2014.

ROLE OF CSR COMMITTEE: As per Section

135(3), the following are the roles and responsibilities
of CSR Committee: Formulate a CSR Policy indicating
the activities as per Schedule VII to the Act;
Recommend the policy to Board of the Company;
Recommend the amount of expenditure on the
activities, and Monitor CSR Policy by way of
instituting a transparent monitoring mechanism for
implementation of CSR projects or programmes or
activities undertaken by the company as provided in
Rule 5(2).
ROLE OF BOARD OF DIRECTORS: As per Section
135(4), the following is the role of the Board of
Directors Approve the CSR Policy; Disclose the
contents of policy on the company’s website, if any;
Ensure that activities, as included in CSR Policy, have
been undertaken.
CSR EXPENDITURE: As per Section 135(5), at least
2% of the average net profits of the company during
three immediately preceding financial years must be
spent against CSR as provided in CSR Policy.”
FAILURE TO SPEND CSR FUND: If a company fails
to pay the amount allocated for CSR, then such
company shall make such disclosure in the Board’s
Report. Such a company shall also specify the reason
for the failure to spend the CSR Fund. CSR Policy: As
per Rule4, the following points must be considered
while drafting the CSR Policy:
1) CSR policy shall specifically provide activities
which are to be undertaken by the Company during the
financial year;
2) CSR Policy shall not include the activities which are
in the normal course of the business of the Company;
3) CSR policy shall provide for the activities to be
executed in India only to be covered under Section 135;
4) CSR policy may provide for the activities which are
for the benefit of the employees of the company.
However, such expenditure on such activity will not
consider as CSR expenditure; 5) The companies can
build the capacities of their personnel as well as those
of their implementing agencies through Institutions with
established track records of the last three financial
years. However, administrative overhead, in any case,
shall not exceed 5% of total CSR expenditure in one
financial year.
As per Rule 6, the following shall be included in the
CSR Policy:
1) The list of programmes or projects which finds their
place in the purview of Schedule VII;
2) The modalities for exaction of CSR projects;
3) The schedules for implementation of CSR projects;
4) Monitoring process of such projects; 5) Specific
declaration to the effect that surplus arising out of the
CSR projects shall not form part of the business profit
of a company.

CSR ACTIVITIES:
As per Rule 4, the following points must be considered
while taking decisions on the activities to be undertaken
by the Companies:
1) CSR activities shall be undertaken as per its
formalised CSR Policy;
2) Any activity which is undertaken in the normal
course of business cannot be termed as CSR activities
of the Company;
3) Two or more companies can also come together and
collaborate to undertake projects or programmes under
their CSR Policy in such a manner that the CSR
Committees of respective companies are in a position to
report separately;
4) To term any activity as ‘CSR activity’, the same shall
be undertaken in India only;
5) The companies can have CSR activities that will
benefit the employees of such companies. However,
such activities will not be considered as CSR Activities
according to Section 135 of the Act;
6) Political contribution shall not be considered as CSR
activities.
CSR THROUGH TRUST, SOCIETY, AND
SECTION 8 COMPANY:
As per Rule 4(2), Companies can spend their CSR
expenditure through registered trust, society, or section
8 companies.
1. The law has granted companies to come together to
form a trust, society, or section 8 company for this
purpose. Such companies coming together not
necessarily required having some relations with each
other such as associates, holdingsubsidiary relation,
etc., and hence, even unrelated companies can come
together for this purpose.
2. The Companies can also undertake CSR activities
through a company established under section 8 of the
Act or a registered trust or a registered society
established by the Central Government or State
Government or any entity established under an Act of
Parliament or a State Legislature. However, if a
company does not opt for any of the aforesaid options
for undertaking CSR activities and decide to undertake
CSR activities through a company established under
section 8 of the Act or a registered trust or a registered
society other than those specified above then:
1. Such a company or trust or society shall have an
established track record of three years in undertaking
similar programs or projects;
2. The Companies have specified the projects or
programs which shall be undertaken with their funds;
3. Modalities of the utilization of funds; and 4.
Monitoring and reporting mechanism. Schedule VII of
the companies Act 2013 Activities which may be
included by companies in their Corporate Social
Responsibility Policies Activities relating to:—
i) eradicating extreme hunger and poverty;
ii) promotion of education;
iii) promoting gender equality and empowering women;
iv) reducing child mortality and improving maternal
health;
v) combating human immunodeficiency virus, acquired
immune deficiency syndrome, malaria, and other
diseases;
vi) ensuring environmental sustainability;
vii) employment enhancing vocational skills;
viii)social business projects;
ix) contribution to the Prime Minister's National Relief
Fund or any other fund set up by the Central
Government or the State Governments for socio-
economic development and relief and 79 funds for the
welfare of the Scheduled Castes, the Scheduled Tribes,
other backward classes, minorities and women; and
x) such other matters as may be prescribed.

References:
http://www.iimchyderabad.com/econtent/
BBAIVthSem-E&CG-UnitV-CSR.pdf
https://gfgc.kar.nic.in/punjalakatte/
GenericDocHandler/199-8443e0be-b8f0-4b3f-8be1-
34fa35858716.pdf
https://theintactone.com/2022/12/24/relationship-of-csr-
with-corporate-sustainability/
https://www.drishtiias.com/daily-news-editorials/
corporate-social-responsibility-a-strategic-endeavour
https://mu.ac.in/wp-content/uploads/2021/11/Business-
Ethics-and-Corporate-Social-Responsibility-English-
Version.pdf
https://cleartax.in/s/corporate-social-responsibility

Strategic planning and Corporate Social

Responsibility
Strategic planning and corporate social responsibility is
a form of management in which companies take the
ethical aspects of their business operations into
consideration. They incorporate these social concerns
into their business strategies and are more conscious of
their roles in society and their communities outside of
business. More than just obeying the law, corporate
social responsibility involves a business taking
proactive steps to improve the quality of life for its
employees and community. Different companies will
select a different social responsibility strategy from
each other, but they all focus on four ethical aspects of
business: economic, ethical, legal and philanthropic.
Ethical Social Responsibility
Values and ethics in strategic management are
important. Being ethical means companies must be
aware of society's values and standards and operate in a
manner that is conducive to those. Inside the workplace,
this could include paying a living wage, ensuring safe
working conditions, abiding by all labour laws and
being willing only to do business with companies with
similar ethical principles not purchasing products from
a factory that uses child labour, for example.
Being an ethical business also means taking into
consideration a company's environmental impact and
doing its job to limit forms of waste. As environmental
issues grow on a global scale, it is increasingly essential
that companies are aware of how they contribute to
these issues. Companies should analyze the processes
they use and proactively do what they can to reduce
their environmental impact. This is especially important
for companies that dispose of waste, leaving a carbon
footprint.
Economic Social Responsibility
An economic social responsibility strategy begins with
making sure a company is sustainable, which in turn
means it is profitable. Not only does a company need to
make a profit to satisfy its shareholders, it also must
make enough money to pay its employees a respectable
wage.
It should also be the company's responsibility to make
sure it addresses issues such as gender wage
discrimination. Outside of its employees, economic
social responsibility involves paying appropriate
business taxes and meeting other financial
commitments.
Likewise, corporate economic responsibility includes
businesses finding inefficiencies in their operations that
waste capital, and implementing processes that improve
efficiencies and reduce this waste.
Legal Social Responsibility
The legal segment of corporate social responsibility
revolves around making sure that companies are aware
of and abide by all local, state and federal laws.
Companies must comply with safety and labor laws put
in place by regulators. It is the duty of the company to
make sure they remain knowledgeable of any changes
to the laws.
Being mindful of legal obligations can protect a
company's reputation and limit the amount of time and
money it has to spend in potential legal fees. Part of
these legal responsibilities is always making sure the
company meets its tax obligations.
Philanthropic Social Responsibility
Corporate philanthropic responsibility involves using a
company's time and resources to make investments in
the communities where they operate. These investments
could be in the form of scholarships and other
educational assistance, or other notable local causes.
Many businesses choose to solely donate money to
particular causes that are aiming to bring about social
change, while others will attach their name and brand to
causes they strongly believe in as a company. It is
common for large corporations to have in-house
departments that manage and coordinate the company's
philanthropic efforts.
Corporate philanthropy
Philanthropy involves charitable giving to worthy
causes on a large scale, but it is much more than just a
charitable donation. Philanthropy is an effort an
individual or organization undertakes based on an
altruistic desire to improve human welfare, and wealthy
individuals sometimes establish private foundations to
facilitate their philanthropic efforts. Nonprofits are
organizations set up to support a variety of social
causes, such as educational, health, scientific, public
safety, and human rights.
Philanthropy refers to charitable acts or other good
works like volunteering your time or efforts that help
others or contribute to the well being of society overall.
For some people, philanthropy means donations of
money, often large sums, to support or create university
buildings, research centers, or fund four-year college
scholarships. For others, acts of philanthropy mean an
annual donation to a local theatre, food pantry, or public
school.
Corporate philanthropy refers to the activities that
companies voluntarily initiate to manage their impact
on society. Typically, corporate philanthropic activities
include monetary investments, donations of products or
services, in kind donations, employee volunteer
programs and other business arrangements which aim to
support a social cause. While some companies
spearhead and operate corporate philanthropy programs
themselves, others may focus on advancing the work of
local community organizations, non profit organizations
or other social initiatives geared toward improving
society.
Corporate philanthropy has become increasingly
popular in recent years, as consumers now expect a
certain level of accountability and transparency from
corporate entities. With higher levels of open dialogue
between consumers and businesses via social media,
companies have taken on more responsibility for their
particular social effects, wielding their financial and
societal influence to empower communities. It's
important to note that corporate philanthropy differs
from corporate social responsibility (CSR) in that CSR
is typically incorporated into a company's actual
practices and functions as a business.

There are many ways to make charitable contributions

on a local to a global scale, including corporate
philanthropy. There are also individual philanthropists,
Philanthropy may be done for tax breaks or altruism, or
a combination of the two things. Anyone can be a
philanthropist if they give of their talent, time, money,
or skills.
The majority of corporate contribution programs are
diffuse and unfocused. Most consist of numerous small
cash donations given to aid local civic causes or provide
general operating support to universities and national
charities in the hope of generating goodwill among
employees, customers, and the local community. Rather
than being tied to well-thought-out social or business
objectives, the contributions often reflect the personal
beliefs and values of executives or employees.
Indeed, one of the most popular approaches employee
matching grants explicitly leaves the choice of charity
to the individual worker. Although aimed at enhancing
morale, the same effect might be gained from an equal
increase in wages that employees could then choose to
donate to charity on a tax-deductible basis. It does
indeed seem that many of the giving decisions
companies make today would be better made by
individuals donating their own money.
Types of Corporate philanthropy:
 Volunteer grants- In volunteer grant programs,
companies usually donate money to nonprofits and
community organizations matching stakeholders'
volunteer hour contributions. These programs
typically use a particular hour-to- donation formula
to calculate contributions after stakeholders
complete their volunteer hours. These projects not
only allow companies to donate but can also
encourage donations from other parties.
 Gift matching- Matching gifts are a popular type
of corporate philanthropy effort. In matching gift
programs, companies donate the same amount of
money to a non profit or community organization
that other stakeholders do. These stakeholders
could be employees, consumers or the general
public. Typically, these programs increase the
amount of philanthropic benefit to other
organizations by a certain match ratio.
 Employee grants- Companies may allow their
employees to designate which non profit or
community organizations to receive philanthropic
donations. In employee grant programs, companies
usually award monetary grants to organizations
selected by employees. Though these programs
may contribute less than match programs, they
rarely rely on any monetary investment from
employees or external stakeholders.
 Community grants- Community grant programs
typically allow non profit or community
organizations to apply for funding from a company.
Companies choose to fund particular organizations
depending on their goals for social impact. This
allows businesses to support organizations that
match their values and passions.
 Community works-Community works programs
refer to those initiatives in which companies donate
specific products, services or infrastructure to local
communities. For example, a company may choose
to build the infrastructure for a new park or donate
laptop computers to a local school needing
technology resources. These programs allow
companies to positively impact areas where they're
located and build ties with their neighbors.
  Scholarships- Scholarship and fellowship
programs are some of the most common corporate
philanthropy initiatives. They're typically
straightforward endeavors that seek to support
promising community leaders, students and other
individuals financially. Companies usually require
candidates to apply for funding in these programs
and host a competitive selection process.

Corporate Governance
To influence the corporate path to sustainable
development, following approaches are advocated
namely:
• The Triple Bottom Line Approach (People, planet and
profits), 1995
• United Nations Global Compact (UNGC), 1999
• OECD (1999) – guidelines are addressed to MNCs
• ISO Standards
• Global Reporting Initiative, 1997 – guidelines are for
all organisations.
• Sustainable Development Goal, 2015
• World Bank GRI Index, 2020 – World Bank
sustainability disclosure index prepared with core
option of the GRI standards.
In addition to the Triple Bottom Line approach which
originated from Elkington’s the planetpeople- profit
(environmental, social and economic) framework.
Elkington argued business can be sustained by fulfilling
stakeholders’ interest, environmental protection policies
and public welfare. Global Reporting Initiative (GRI) is
an international organisation founded in 1997. GRI has
its roots in the US not for profit organisations, the
coalition for Environmentally Responsible Economies.
United Nations Environmental Programme (UNEP) was
involved in the establishment of GRI. GRI enjoys
strategic partnership with Organisation for Economic
Corporation and Development (OECD), the UN Global
Compact, United Nations Environmental Programme
(UNEP) and International Organisation for
Standardisation (ISO). GRI has designed the world’s
standard guidelines in sustainability reporting. GRI’s
mission is to make sustainability reporting a standard
practice and to enable all companies and organisations
to report their performance on the following criteria:
1) Economic,
2) Environmental,
3) Social and
4) Governance.
The G3 is “Third Generation” of the GRI’s
sustainability Reporting guidelines launched in 2006.
G3 reports only on impact study. G4 reports on broader
aspect of impact study which includes general standard
disclosure on organisation profile, stakeholder and
governance. Global Reporting Initiative includes
governance criteria in addition to the Triple Bottom
Line, economic, social and environmental criteria.
The Organisation for Economic Cooperation and
Development (OECD), in 1999, defined Corporate
Governance as “a set of relationships between a
company’s management, its board, its shareholders and
other stakeholders. It provides the structure through
which the objectives of the company are set, and the
means of attaining those objectives and monitoring
performance are determined. Good corporate
governance should provide proper incentives for the
board and management to pursue objectives that are in
the interests of the company and shareholders, and
should facilitate effective monitoring thereby
encouraging firms to use recourses more efficiently.”
The purview of Corporate Governance includes:
1. Rights of and equitable treatment of shareholders:
Organisations should respect the rights of shareholders
and help shareholders exercise those rights.
2. Interests of other stakeholders: Organisations should
recognise that they have legal and other obligations to
all legitimate stakeholders.
3. Role and responsibilities of the board: The board
needs a range of skills and understanding to be able to
deal with various business issues and to have the ability
to review and challenge management performance. It
needs to be sufficiently sized and have an appropriate
level of commitment to fulfill its responsibilities and
duties.
4. Integrity and ethical behaviour: Organisations should
develop a code of conduct for their directors and
executives that promote ethical and responsible
decision-making.
5. Disclosure and transparency: Organisations should
clarify the role of the board and the management and
the same should be conveyed to the public. They should
also implement procedures to independently verify and
safeguard the integrity of the company's financial
reporting. Disclosure of financial matters concerning
the organisation should be timely and balanced to
ensure that all investors have access to clear, factual
information. Transparency is the best principle of
corporate governance.
Role of Corporate Governance
You would have understood that the role of corporate
governance is largely significant to the society and
impacts various internal and external stakeholders.
Corporate Governance aims at the following aspects:
a) It fosters an efficient use of resources and curtails
wastages.
b) It aims at resource allocation to those verticals for
bringing in efficiencies in the production of goods and
services which further generates interest of the
shareholders.
c) It chooses best effective managers to manage scarce
resources to derive optimal results.
d) It enables the managers to remain attentive and
focused for enhanced performance continuously.
e) It brings in investor’s attractiveness and also
increases the shareholders' value.
f) It fosters increased consumer satisfaction which aids
in growing market share, besides the sales.
g) It results in higher employee satisfaction, low
turnover rate and lower HR costs. Further, satisfied
employees bring customer satisfaction.
h) It also attracts vendors and brings an efficient
inventory management system with reduced
purchase/production costs.
i) It brings down the marketing costs by developing
good rapport with the channel partners, distributors, etc.
CORPORATE SOCIAL RESPONSIBILITY (CSR)
The CSR has become one of the standard business
practices of our time. For companies, the overall aim of
CSR is to have a positive impact on society as a whole
while it engages in maximizing the creation of shared
value for the owners of the business, its employees,
shareholders and stakeholders. “Corporate Social
Responsibility is a management concept whereby
companies integrate social and environmental concerns
in their business operations and interactions with their
stakeholders. CSR is generally understood as being the
way through which a company achieves a balance of
economic, environmental and social imperatives
(‘Triple-Bottom Line-Approach’), while at the same
time addressing the expectations of shareholders and
stakeholders” (UNIDO).
 “The social responsibility of business encompasses the
economic, legal, ethical, and discretionary expectations
that society has of organisations at a given point in
time”.
Regulatory Mechanism for CSR
With the enactment of Section 135 of the Companies
Act 2013, India became the first country to make CSR
spending and disclosure mandatory for large companies
with specific turnovers.
The Companies Act 2013 and CSR
The inclusion of the CSR mandate under the Companies
Act, 2013 is an attempt to supplement the government’s
efforts of equitably delivering the benefits of growth
and to engage the Corporate World with the country’s
development agenda. The Companies in India are
governed by Clause 135 of the Companies Act 2013 for
performing their CSR activities.
Provision under Companies Act 2013:
The practice of CSR is not a new one in the Indian
industry. It was an activity that was not deliberated,
rather performed. Observers believe that in India, this
activity has evolved from institutional development to
community development by way of several projects and
 tends to focus on the utilization of profits made by a
company.
Also, undertaking such initiatives were a voluntary step
for all companies until it was mandated by the new
Companies Act which came to force in the year 2013.
Section 135 of this Act provides that every company in
India, either private or public having a net worth of Rs
500 crore, or a turnover of Rs 1,000 crore or net profit
of Rs 5 crore, needs to spend a minimum of 2% of its
average net profit for the immediately preceding three
financial years on corporate social responsibility
activities. A company refers to an entity incorporated
under the Companies Act or under the other previous
company law.
A clarification has been made with regard to
computation of net profits that if the profits have been
computed under the Companies Act 1956 then they
need not be recomputed under the 2013 Act. Also,
the CSR activities must be undertaken with respect to
certain areas which are listed under Schedule VII of the
2013 Act, some of which include:
 Activities to eradicate hunger, poverty and
malnutrition.
 Promotion of preventive healthcare, education and
gender equality.
 Setting up homes for women, orphans and the senior
citizens.
 Undertaking measures for reducing social and
economic inequalities.
 Ensure environmental sustainability, balance in the

ecology and welfare of animals.

 Protection of national heritage, art and culture.

 Taking measures for the benefit of armed forces

veterans, war widows and their dependents.

 Provide training to promote rural, nationally
recognized, Paralympic or Olympic sports.
 Contribute to Prime Minister’s National Relief Fund

or any other fund which has been set up by the Central

Government for socio-economic development, relief
and welfare of SC, ST, OBCs, minorities and women.
The provision also states that a company shall give
preference to the local areas and those areas around
which the company operates for undertaking the said
CSR activities. Another statutory requirement under
section 135 is the formation of a CSR Committee of the
Board for monitoring the CSR policies of any company
consisting of at least 3 directors (inclusive of an
independent director). The Committee is required to
recommend and suggest the amount of expenditure that
the company must incur on the activities so specified.
After considering the recommendations put forth by the
Committee, the Board shall approve the CSR policy for
the company.
It has been notified by the Ministry of Corporate Affairs
that Section 135 and Schedule VII under Companies
Act 2013, along with the provisions of the Rule shall
come into effect from 1st April 2014. The Statue
provides CSR activities to be undertaken through a
registered trust or society, or a company established by
its holding, subsidiary or associate company. For this
purpose, the company needs to specify the activities
that will be taken up and the modalities for utilizing the
funds. It is said that such an entity will have to establish
a track record of three years where similar activities
were performed by it. The report which shall be
submitted by the Directors along with the financial
statements of a company shall include an annual report
on the CSR Activities of a company in the prescribed
format under the Rules, setting out inter alia a brief
outline of the CSR policy, the composition of the CSR
Committee, the average net profit for the last three
financial years and the prescribed CSR expenditure. If
the company does not have adequate profits or has been
unable to spend the minimum required on its CSR
initiatives, the specific reasons for not doing so are to
be disclosed in the Board Report.
However, failure to report CSR spending or the specific
reasons for non-expenditure shall amount to
contravention of the provision under section 134 of the
Companies Act 2013 and the said company shall attract
penalty in the form of fine, which shall not be less than
fifty thousand rupees and may extend to INR 2.5
Million. Also, every officer who will be liable for such
a default will be punished with imprisonment for a term
extending to 3 years, along with fine of minimum fifty
thousand rupees but which may extend to INR five lakh
rupees or both.

However, Section 135 of the Companies Act, 2013

("Act") provides that certain companies must
mandatorily contribute a certain amount towards CSR
activities. As per the Act, 'Corporate Social
Responsibility' means and includes but is not limited
to:

 Projects or programs relating to activities specified

in Schedule VII to The Act.
 Projects or programs relating to those activities
which are undertaken by the Board of Directors of a
company in ensuring the recommendation of the
CSR Committee of the Board as per declared CSR
Policy along with the conditions that such policy
 will cover subjects specified in Schedule VII of the
Act.

CSR Applicability in India

The provisions of CSR applies to every

company fulfiing any of the following conditions in the
preceding financial year:

 Net worth of more than Rs.500 crore

 Turnover of more than Rs.1000 crore
 Net profit of more than Rs.5 crore

The Board of Directors of every company for which the

CSR provisions apply must ensure that the company
spends in every financial year at least 2% of its
average net profits made during the immediately
preceding three financial years as per its CSR policy.
If the company has not completed three financial years
since its incorporation, it must spend 2% of its average
net profits made during the immediately preceding
financial years as per its CSR policy.

Importance of Corporate Social Responsibility

CSR is an immense term that is used to explain the
efforts of a company in order to improve society in a
significant manner. Below reasons reflect why CSR is
important:

 CSR improves the public image by publicising the

efforts towards a better society and increasing their
chance of becoming favourable in the eyes of
consumers.
 CSR increases media coverage as media visibility
throws a positive light on the organisation.
 CSR enhances the company’s brand value by
building a socially strong relationship with
customers.
 CSR helps companies to stand out from the
competition when companies are involved in any
kind of community.

Role of Board of Directors

The role of the Board of Directors in implementing

CSR is as follows:

 After considering the recommendations made by the

CSR Committee, approve the CSR policy for the
Company.
 The Board must ensure only those activities must be
undertaken which are mentioned in the policy.
 The Board of Directors shall make sure that the
company spends in every financial year, a minimum
of 2% of the average net profits made during the
three immediately preceding financial years as per
CSR policy.
 In case a company has not completed three financial
years since its incorporation, the average net profits
shall be calculated for the financial years since its
incorporation.
 The Board’s Report shall disclose:
 CSR Committee’s composition
 The contents of CSR Policy
 In case CSR spending does not meet 2% as per
CSR Policy, the reasons for the unspent amount,
and details of the transfer of unspent amount
relating to an ongoing project to a specified fund
(transfer within a period of six months from the
expiry of the financial year).

Net Profit for CSR Applicability

Every company which needs to comply with the CSR
provisions have to spend 2% of the average net profits
made during the preceding three years as per the CSR
policy. The computation of net profit for CSR is as per
Section 198 of the Companies Act, 2013.

Section 198 provides that while computing the net

profits of a company a credit should be given for the
subsidies and bounties received from any government,
or public authority constituted or authorised on this
behalf.

For computing net profits, credit cannot be given for

the following sums:

 Profits, by way of premium on shares, unless the

company is an investment company.
 Profits on sales of forfeited shares.
 Profits of a capital nature, including profits from the
sale of the undertaking or any part thereof.
 Profits from the sale of any fixed assets or
immovable property of a capital nature comprised in
the undertaking, unless the company business
consists of buying and selling any assets or
property.
 Any change in the carrying amount of an asset or of
a liability recognised in equity reserves, including
surplus in profit and loss accounts for the
measurement of the asset or the liability at fair
value.
 Any amount representing notional gains, unrealised
gains or revaluation of assets

In making the computation of net profits, the following

sums should be deducted:

 Every usual working charge.

 Directors’ remuneration.
 Bonus or commission payable or paid to any
member of the company’s staff, technician, engineer
or person engaged or employed by the company,
whether on a part-time or whole-time basis.
 Any tax notified by the Central Government as a tax
on abnormal or excess profits.
 Any tax on business profits imposed for special
reasons or special circumstances and notified by the
Central Government.
 Interest on debenture issued by the company.
 Interest on mortgages executed by the company and
on advances and loans secured by a charge on its
floating or fixed assets.
 Interest on unsecured advances and loans.
 Expenses on repairs, whether to movable or
immovable property, provided the repairs are not of
a capital nature.
 Outgoings inclusive of contributions made under
section 181.
 Depreciation to the extent specified in section 123.
 Excess of expenditure over income.
 Damages or compensation to be paid for any legal
liability and any sum paid by way of insurance
against the risk of meeting the such liability.
 Debts considered bad and adjusted or written off
during the year of account.

In making the computation of net profits, the following

sums cannot be deducted:

 Income-tax and super-tax payable by the company

under the Income-tax Act, 1961.
 Any damages, compensation or payments made
voluntarily.
 Loss of capital nature including loss on sale of the
undertaking or of any part thereof not including any
excess of the written-down value of any asset which
is discarded, sold, discarded, destroyed or
demolished over its sale proceeds or its scrap value.
 Any change in carrying amount of an asset or of a
liability recognised in equity reserves, including
surplus in profit and loss accounts for the
measurement of the asset or the liability at fair
value.

Transfer and Use of Unspent Amount

A company can transfer unspent CSR amount to the

following specified funds:

 A contribution made to the Prime Minister’s

National Relief Fund.
 Any other fund is initiated by the central
government concerning socio-economic
development, relief and welfare of the scheduled
caste, minorities, tribes, women and other backward
classes.
 A contribution made to an incubator is funded either
by the central government, the state government,
 public sector undertaking of the state or central
government, or any other agency.
 Contributions made to:
 Public-funded universities
 Indian Institute of Technology (IITs)
 National Laboratories and Autonomous Bodies
established under:
 Indian Council of Agricultural Research
(ICAR)
 Council of Scientific and Industrial Research
(CSIR)
 Department of Atomic Energy (DAE)
 Department of Biotechnology (DBT)
 Department of Pharmaceuticals
 Ministry of Ayurveda, Yoga and
Naturopathy, Unani, Siddha and
Homoeopathy (AYUSH)
 Ministry of Electronics and Information
Technology
 Indian Council of Medical Research (ICMR)
 Defence Research and Development
Organisation (DRDO)
  Department of Science and Technology
(DST) engaged in conducting research in
technology, science, medicine, and
engineering aimed at encouraging
Sustainable Development Goals (SDGs).

In case of the unspent amount relating to an ongoing

project under the company’s CSR policy, the company
will transfer the unspent amount to an exclusive account
to be opened by a company, known as ‘Unspent
Corporate Social Responsibility Account’, in any
scheduled bank within 30 days from the end of the
financial year.

The company must use the funds in the ‘Unspent

Corporate Social Responsibility Account’ towards its
obligations under the CSR policy within a period of
three financial years from the date of the transfer.

In a case where the company fails to utilise the

funds at the end of the three financial years, the funds
should be transferred to the specified fund mentioned
above within a period of 30 days upon completion of
the third financial year.

CSR Committee Applicability

 Every company to which CSR provision are
applicable must constitute a Corporate Social
Responsibility (CSR) Committee.
 The CSR Committee should consist of three or more
directors, out of which at least one director must be
an independent director.
 An unlisted public company or a private company
shall have its CSR Committee without any
independent director if an independent director is
not required.
 A private company having only two directors on its
Board shall constitute its CSR Committee with two
directors.
 In the case of a foreign company, the CSR
Committee shall comprise of at least two persons of
which one person shall be a person resident in India
authorised to accept on behalf of the foreign
company – the services of notices and other
documents. Also, the other person shall be
nominated by the foreign company.
 A company having any amount in its Unspent
Corporate Social Responsibility Account shall
constitute a CSR Committee and comply with the
CSR provisions.
Duties of the CSR Committee

 The CSR Committee will formulate and recommend

a CSR policy to the Board. CSR policy shall point
out the activities to be undertaken by the company
as enumerated in Schedule VII of the Act.
 CSR Committee will recommend the amount of
expenditure to be incurred on the CSR activities to
be undertaken by the company.
 CSR Committee will monitor the CSR policy of the
Company from time to time.
 The CSR Committee will establish a transparent
controlling mechanism for the implementation of
the CSR projects or programs or activities
undertaken by the company.

CSR Reporting

With respect to CSR Reporting, the provisions are as

follows :

 The Board’s Report referring to any financial year

initiating on or after the 1st day of April 2014 shall
include an annual report on CSR.
 In the case of a foreign company, the balance sheet
filed shall contain an Annexure regarding a report
on CSR.

CSR Policy

CSR Policy elaborates the activities to be undertaken

by the Company as named in Schedule VII to the
Act. The activities should not be the same which are
done by the company in its normal course of business.
Additionally, the Act provides the follwoing in relation
to CSR Policy:

 Contents of CSR Policy should be placed on the

company’s website by the Board.
 The activities mentioned in the policy must be
undertaken by the company.
 The company can join hands with other companies
for undertaking projects or programs or CSR
activities and report separately on such programs or
projects.
 The CSR policy shall monitor the projects or
programs.
List of Permitted CSR Activities Under Schedule
VII

The Board of Directors shall ensure that the activities

included by a company in its CSR Policy fall within
the purview of the activities included is schedule
VII of the Act. The activities specified in Schedule VII
which may be included by companies in their Corporate
Social Responsibility Policies are as follows:

Sr.No CSR Activities

Eradicating poverty, hunger and malnutrition,

promoting health care which includes sanitation and
preventinve health care, contribution to the Swach
1
Bharat Kosh set-up by the Central Government for
the promotion of sanitation and making available safe
drinking water.

Improvement in education which includes special

education and employment strengthening vocation
2 skills among children, women, elderly and the
differently-abled and livelihood enhancement
projects.
 Improving gender equality, setting up homes and
hostels for women and orphans, empowring women,
setting up old age homes, day care centres and such
3
other facilities for senior citizens and measures for
reducing inequalities faced by socially and
economically backward groups.

Safeguarding environmental sustainability, ecological

balance, protection of flora and fauna, animal
welfare, agroforestry, conservation of natural
4
resources and maintaining a quality of soil, air and
water which also includes a contribution for
rejuvenation of river Ganga.

Protection of national heritage, art and culture

including restoration of buildings and sites of
5 historical importance and works of art; setting up
public libraries; promotion and development of
traditional arts and handicrafts.

6 Measures for the benefit of armed forces veterans,

war widows and their dependents, Central Armed
Police Forces (CAPF) and Central Para Military
Forces (CPMF) veterans, and their dependents
 including widows.

Training to stimulate rural sports, nationally

7 recognized sports, Paralympic sports and Olympic
sports.

Contribution to the Prime Minister’s National Relief

Fund, Prime Minister's Central Assistance and Relief
in Emergency Situations Fund (PM CARES Fund) or
any other fund set up by the Central Government for
8
socio-economic development providing relief and
welfare of the Scheduled Castes, the Scheduled and
backward classes, other backward classes, minorities
and women.

Contribution to incubators or research and

development projects in the field of science,
technology, engineering and medicine, funded by the
9
Central Government, State Government, Public
Sector Undertaking or any agency of the Central
Government or State Government.

10 Contributions to public funded Universities, IITs,

National Laboratories and autonomous bodies
established under DAE, DBT, DST, Department of
 Pharmaceuticals, Ministry of AYUSH, Ministry of
Electronics and Information Technology and other
bodies, namely DRDO, ICAR, ICMR and CSIR,
engaged in conducting research in science,
technology, engineering and medicine aimed at
promoting Sustainable Development Goals (SDGs).

11 Rural development projects.

Slum area development. Slum area means any area

declared as such by the Central Government or any
12
State Government or any other competent authority
under any law for the time being in force.

Disaster management, including relief, rehabilitation

13
and reconstruction activities.

Fines and Penalties for Non-Compliance

In case a company fails to comply with the provisions

relating to CSR spending, transferring and utilising the
unspent amount, the company will be punishable with a
penalty of Rs.1 crore or twice the amount required to be
transferred by the company to the CSR fund specified
in Schedule VII of the Act or the Unspent Corporate
Social Responsibility Account, whichever is less.

Further, every officer of such company who defaults in

compliance will be liable to pay Rs.2 lakh or one-tenth
of the amount required to be transferred by the
company to CSR fund specified in Schedule VII or the
Unspent Corporate Social Responsibility Account,
whichever is less.

Reason for Introduction of CSR for Companies

We live a dynamic life in a world that is growing more

and more complex. Global-scale environment, social,
cultural and economic issues have now become part of
our everyday life. Boosting profits is no longer the sole
business performance indicator for the corporate and
they have to play the role of responsible corporate
citizens as they owe a duty towards society.

The concept of Corporate Social Responsibility (CSR),

introduced through Companies Act, 2013 puts a greater
responsibility on companies in India to set out a clear
CSR framework.

Many corporate houses like TATA and Birla have been

engaged in doing CSR voluntarily. The Act introduces
the culture of corporate social responsibility (CSR) in
Indian corporate requiring companies to formulate a
CSR policy and spend on social upliftment activities.

CSR is all about corporate giving back to society. The

Company Secretaries are expected to be known about
the legal and technical requirements with respect to
CSR in order to guide the management and Board.

LEGAL PROVISIONS AND SPECIFICATIONS ON

CSR
The term ‘Corporate Social Responsibility’ (CSR)
means the responsibility of Corporate Entities towards
society. The 75 origination of CSR happened long back
in ancient India which lasted till 1850 and Charity and
Philanthropy were the main drivers of that time.
APPLICABILITY: Section 135(1) of the Companies
Act, 2013 is a trigger point for the applicability of CSR
Provisions and constitution of CSR Committee.
The constitution of the CSR committee is mandatory in
company having:
Net Worth of Rs. 500 Crore Turnover of Rs. 1000 Crore
Net Profit of Rs. 5 Crore during any financial year.
NET WORTH: As per Section 2(57), ‘NW’ = (Paid Up
Share Capital + All Reserves Created Out of Profits +
Securities Premium Account) – (Accumulated Losses +
Deferred Expenditure and Miscellaneous Expenditure
not Written Off)
TURNOVER: As per Section 2(91), ‘Turnover’ means
the aggregate value of the realization of the amount
made from the sale, supply, or distribution of goods or
on account of services rendered, or both, by the
company during a financial year
NET PROFIT: As per Rule 2(f) of the Companies (CSR
Policy) Rules, 2014,‘Net Profit’ means the net profit of
a company as per its financial statement prepared by the
applicable provisions of the Act, but shall not include
the following namely: i) any profit arising from any
overseas branch or branches of the company, whether
operated as a separate company or otherwise; and ii)
any dividend received from other companies in India,
which are covered under and complying; with the
provisions of section 135 of the Act; Provided that net
profit in respect of a financial year for which the
relevant financial statements were prepared under the
provisions of the Companies Act, 1956, (1 of 1956)
shall not be required to be re-calculated under the
provisions of the Act. Provided further that in case of a
foreign company covered under these rules, net profit
means the net profit of such company as per profit and
loss account prepared in terms of clause (a) of sub-
section (1) of section 381 read with section 198 of the
Act.
COMPOSITION OF CSR COMMITTEE: As per
Section 135(1), three or more Directors including at
least one Independent Director shall form the CSR
Committee. However, the companies which are not
required to have Independent Director shall constitute
CSR Committee without Independent Director, and the
private companies having only two Directors shall
constitute CSR Committee only with two such
Directors as provided in Rule 5(1) of the Companies
(CSR Policy) Rules, 2014.
DISCLOSURE IN BOARD REPORT: As per Section
135(2) read with Rule 8, the Board’s Report prepared
under Section 134 shall contain the disclosures of the
Composition of CSR Committee as per prescribed
Annexure under Companies (CSR Policy) Rules, 2014.
ROLE OF CSR COMMITTEE: As per Section 135(3),
the following are the roles and responsibilities of CSR
Committee: Formulate a CSR Policy indicating the
activities as per Schedule VII to the Act; Recommend
the policy to Board of the Company; Recommend the
amount of expenditure on the activities, and Monitor
CSR Policy by way of instituting a transparent
monitoring mechanism for implementation of CSR
projects or programmes or activities undertaken by the
company as provided in Rule 5(2).
ROLE OF BOARD OF DIRECTORS: As per Section
135(4), the following is the role of the Board of
Directors Approve the CSR Policy; Disclose the
contents of policy on the company’s website, if any;
Ensure that activities, as included in CSR Policy, have
been undertaken.
CSR EXPENDITURE: As per Section 135(5), at least
2% of the average net profits of the company during
three immediately preceding financial years must be
spent against CSR as provided in CSR Policy.”
FAILURE TO SPEND CSR FUND: If a company fails
to pay the amount allocated for CSR, then such
company shall make such disclosure in the Board’s
Report. Such a company shall also specify the reason
for the failure to spend the CSR Fund. CSR Policy: As
per Rule4, the following points must be considered
while drafting the CSR Policy:
1) CSR policy shall specifically provide activities
which are to be undertaken by the Company during the
financial year;
2) CSR Policy shall not include the activities which are
in the normal course of the business of the Company;
3) CSR policy shall provide for the activities to be
executed in India only to be covered under Section 135;
4) CSR policy may provide for the activities which are
for the benefit of the employees of the company.
However, such expenditure on such activity will not
consider as CSR expenditure; 5) The companies can
build the capacities of their personnel as well as those
of their implementing agencies through Institutions with
established track records of the last three financial
years. However, administrative overhead, in any case,
shall not exceed 5% of total CSR expenditure in one
financial year.
As per Rule 6, the following shall be included in the
CSR Policy:
1) The list of programmes or projects which finds their
place in the purview of Schedule VII;
2) The modalities for exaction of CSR projects;
3) The schedules for implementation of CSR projects;
4) Monitoring process of such projects; 5) Specific
declaration to the effect that surplus arising out of the
CSR projects shall not form part of the business profit
of a company.
CSR ACTIVITIES:
As per Rule 4, the following points must be considered
while taking decisions on the activities to be undertaken
by the Companies:
1) CSR activities shall be undertaken as per its
formalised CSR Policy;
2) Any activity which is undertaken in the normal
course of business cannot be termed as CSR activities
of the Company;
3) Two or more companies can also come together and
collaborate to undertake projects or programmes under
their CSR Policy in such a manner that the CSR
Committees of respective companies are in a position to
report separately;
4) To term any activity as ‘CSR activity’, the same shall
be undertaken in India only;
5) The companies can have CSR activities that will
benefit the employees of such companies. However,
such activities will not be considered as CSR Activities
according to Section 135 of the Act;
6) Political contribution shall not be considered as CSR
activities.
CSR THROUGH TRUST, SOCIETY, AND
SECTION 8 COMPANY:
As per Rule 4(2), Companies can spend their CSR
expenditure through registered trust, society, or section
8 companies.
1. The law has granted companies to come together to
form a trust, society, or section 8 company for this
purpose. Such companies coming together not
necessarily required having some relations with each
other such as associates, holdingsubsidiary relation,
etc., and hence, even unrelated companies can come
together for this purpose.
2. The Companies can also undertake CSR activities
through a company established under section 8 of the
Act or a registered trust or a registered society
established by the Central Government or State
Government or any entity established under an Act of
Parliament or a State Legislature. However, if a
company does not opt for any of the aforesaid options
for undertaking CSR activities and decide to undertake
CSR activities through a company established under
section 8 of the Act or a registered trust or a registered
society other than those specified above then:
1. Such a company or trust or society shall have an
established track record of three years in undertaking
similar programs or projects;
2. The Companies have specified the projects or
programs which shall be undertaken with their funds;
3. Modalities of the utilization of funds; and 4.
Monitoring and reporting mechanism. Schedule VII of
the companies Act 2013 Activities which may be
included by companies in their Corporate Social
Responsibility Policies Activities relating to:—
i) eradicating extreme hunger and poverty;
ii) promotion of education;
iii) promoting gender equality and empowering women;
iv) reducing child mortality and improving maternal
health;
v) combating human immunodeficiency virus, acquired
immune deficiency syndrome, malaria, and other
diseases;
vi) ensuring environmental sustainability;
vii) employment enhancing vocational skills;
viii)social business projects;
ix) contribution to the Prime Minister's National Relief
Fund or any other fund set up by the Central
Government or the State Governments for socio-
economic development and relief and 79 funds for the
welfare of the Scheduled Castes, the Scheduled Tribes,
other backward classes, minorities and women; and
x) such other matters as may be prescribed.

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MODELS FOR IMPLEMENTATION OF CSR

Over the years, scholars have defined, interpreted, and
understood CSR in many different ways. Some have
perceived it as a hierarchical model while others have
illustrated it in the form of inclusive concentric circles.
Just when one presumes that closure to this has been
achieved, new jargon like ‘corporate sustainability’,
‘corporate social responsiveness’, and ‘corporate social
performance’ spring up and complicate the already
existing dilemma. Bowen often regarded as the father of
CSR, who provided the first sets of literature on the
subject, defined CSR as ‘obligations of businessmen to
pursue those policies, to make those decisions, or to
follow those lines of action which are desirable in terms
of the objectives and values of our society. The concept
has evolved since then to form two very different
streams: the stockholder theory (as postulated by
Friedman) and the social contract theory. Following
these two non-identical streams of theory, many models
have come up and have also been implemented
worldwide.
 Friedman model
 Ackerman Model
 Carroll Model
 Stockholders & Stakeholders Model
Friedman model - In his article which appeared in the
New York Times in 1970, American economist Milton
Friedman discussed the social responsibility of business
organizations. He straightforwardly argued: the social
responsibility of a business is to increase its profits. He
first presented this argument in his book “Capitalism
and Freedom” published in 1962. He described business
owners who talked about “social conscience” as
“unwitting puppets of the intellectual forces that have
been undermining the basis of a free society these past
decades.” while addressing social issues; he argued that
this is the responsibility of governments and other
nonprofit organizations and not of business
organizations. However, although businesses have a
sole responsibility toward their shareholders, they must
remind compliant with legal standards. The profitability
of a business promotes an environment conducive to
investment that, in turn, fosters capitalism and the
creation of free-market enterprises. Besides, a thriving
business would result in the introduction of competitive
products and the creation of jobs, as well as in the
payment of taxes to the government. Hence, Friedman
explained that the profitability and success of a business
would eventually benefit society.
ACKERMAN MODEL (1976) - the model has
emphasized the internal policy goals & their relation to
CSR. There are four stages involved in CSR. Managers
of the company get to know the most common social
problem & then express a willingness to take a
particular project which will solve some social
problems. These are the four stages model; according to
Ackerman companies tend to pass through these stages
to solving any social issue. Awareness, at this stage
management, recognizes the social issue or problems
existing in society and acknowledges the corporate
obligation to deal with it. Polices are structured and
communicated by the company to increase 66
awareness. Planning, at this stage analysis, is done to
observe the issue and formulate a strategy to deal with
the problem. Management appoints specialists/experts
for this purpose. Implementation, at this stage
implementation of policies, strategically takes place.
Evaluation, this the last stage where continuous
evaluation is required to keep the situation under
control.
Carroll’s model - (1983) according to him “corporate
social responsibility involves the conduct of a business
so that it is economically profitable, law-abiding,
ethical and socially supportive. To be socially
responsible then means that profitability and obedience
to the law are foremost conditions when discussing the
firm’s ethics and the extent to which it supports the
society in which it exists with contributions of money,
time, and talent. Philanthropic This represents the
ultimate objective of business to work for the
betterment of society Ethical This represents the
responsibility of the business to be morally right and
practice fair business Legal The business should abide
by laws and regulatory norms to any legal
complications in work Economic The basic
responsibility of any business to be profitable for longer
survival in a competitive market.
Stockholders & Stakeholders Model - According to
this theory, which was first introduced by Milton
Friedman in the 1960s, a corporation is primarily
responsible to its stockholders due to the cyclical nature
of business hierarchy. Stockholder theory, also known
as shareholder theory, says that a corporation’s
managers have to maximize shareholder returns.
Stakeholder theory says that business managers have an
ethical duty to the corporation’s stockholders, as well as
those individuals or groups that contribute to the
company’s profits and activities and those who could
benefit from or be harmed by the company.
Ethical model - The origin of the first ethical model of
corporate responsibility lies in the pioneering efforts of
19th Century corporate philanthropists such as the
Cadbury brothers in England and the Tata family in
India. The pressure on Indian industrialists to
demonstrate their commitment to social development
increased during the independence movement when
Mahatma Gandhiji developed the notion of trusteeship,
whereby the owners of the property would voluntarily
manage their wealth on behalf of the people. Gandhiji’s
influence prompted various Indian companies to play
active roles in nation-building and promoting socio-
economic development during the 20th century. The
history of Indian corporate philanthropy has
encompassed cash or kind donations, community
investment in trusts, and provision of essential services
such as schools, libraries, hospitals, etc. Many firms,
particularly family-run businesses, continue to support
such philanthropic initiatives.
Statist model - A second model of CSR emerged in
India after independence in 1947, when India adopted
the socialist and mixed economy framework, with a
large public sector and state owned companies. The
boundaries between the state and society were clearly
defined for the state enterprises. Elements of corporate
responsibility, especially those relating to community
and worker relationships, were enshrined in labour laws
and management principles. This state-sponsored
corporate philosophy still operates in the numerous
public sector companies that have survived the wave of
privatization of the early 1990s
Liberal Model -Indeed, the worldwide trend towards
privatization and deregulation can be said to be
underpinned by a third model of corporate
responsibility that companies are solely responsible to
their owners. This approach was given by the American
economist Milton Fried-man, who in 1958 challenged
the very notion of corporate responsibility for anything
other than the economic bottom line. Many in the
corporate world and elsewhere would agree with this
concept, arguing that it is sufficient for the business to
obey the law and generate wealth, which through
taxation and private charitable choices can be directed
to social ends.
Philanthropic model – in this model business firms
focus on philanthropic activities, Such as corporate
donations to the health program, education program,
eradication of poverty, training to rural unskilled and
semi-skill youth, etc. by doing this kind of activities
business firms fulfilled their responsibility towards
society. As per the Indian company act, 2% of the
company's net profit is required to set aside for CSR.

Reference:
https://theintactone.com/2022/12/24/strategic-planning-
and-corporate-social-responsibility/
https://theintactone.com/2022/12/24/corporate-
philanthropy/