Indian corporate social responsibility reflects the positive commitments of corporations toward helping communities and conserving the environment. Over time, this concept of social contribution has been transmogrified into mandatory legislation for companies with CSR clauses. This, in the nature of Section 135, Companies Act of 2013, was another feature of demanding India that corporations contribute back to welfare. This aims towards sustainability, literacy, and health. These are the causes related to social matters being taken very seriously.
CSR has become a mainstream activity in the recent past as companies have been a part of sustainable development and community welfare programs. It is pertinent to discuss that this article elaborates on meaning, legal provisions, benefits, and case laws that are connected with CSR that would provide deep insights into the impact of the same on Indian society as well as the corporate sector.
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Meaning of CSR Law in India
Corporate Social Responsibility or CSR, is a concept in which a company is pushed to extend beyond its objectives of doing business and strives to contribute to social, economic, and environmental development. CSR in India essentially talks about the responsibility a corporation should have towards ethics in conducting business, its charity contribution, community benefits, and sustainable practices as well. CSR funds of a company can be allotted to different sectors such as health care, education, rural development, environmental, and even COVID-19 relief measures.
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Statutory Provisions of CSR in India
Companies Act, 2013
Section 135 of the Companies Act, 2013 made CSR a statutory requirement for Indian companies. The above section, along with Schedule VII, is the legal framework in India for CSR. Legal Provisions in Detail As discussed above, CSR was a part of company law in India. Here are the relevant provisions which were in force at different times:
Applicability:
This Act is applicable to a company that fulfills prescribed financial criteria, which involve a net worth of more than ₹500 crores, a turnover of ₹1,000 crores or more, or more than ₹5 crores of net profit during any financial year.
CSR Committee:
Eligible companies shall have a CSR committee consisting of at least three directors, one of whom shall be an independent director. The committee will strategise, plan, and oversee CSR activities.
CSR Spend:
Companies should spend at least 2% of their average net profit of the last three financial years on CSR activities enumerated under Schedule VII.
Mandatory Disclosure:
Companies have to disclose CSR policies, activities, and expenditures in the board reports, making disclosure on CSR undertakings transparent.
The Companies (Amendment) Act, 2019 clarified penalties for non-compliance. Therefore, CSR reporting and spending became mandatory, not voluntary.
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Objectives of CSR Legislation in India
The CSR mandate brings in accountability among corporations through:
Ethical Responsibility: Instructing companies to meet social, economic, and environmental issues.
Community Welfare: Providing programs for the welfare of low-income communities.
Sustainable Development: It encourages responsible and sustainable consumption of resources to save the environment.
Transparency and Accountability: It makes it mandatory to disclose the CSR activities done in public so as not to waste.
Benefits of CSR Law in India
The CSR mandate gives the following advantages to society, corporations, and the country. The most important advantages are as follows:
Positive Corporate Image: CSR projects ensure a good brand image by increasing a company's goodwill.
Community Involvement: CSR activities ensure greater bonding between a firm and the local community to be trusted in the long term.
Employee Happiness: CSR initiatives usually improve employee happiness and involvement because of the social value added by such initiatives.
Economic Progress: CSR expenditures directly aid in national progress since such expenditures are utilized in educational, health, and infrastructural development projects.
Environmental Benefits: CSR activities undertaken for sustainability purposes result in carbon footprint reduction and support green initiatives.
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Case Laws on CSR in India
The importance of CSR has been well addressed and reaffirmed by case laws and landmark judgments in India. Below are some important case laws concerning CSR policies and implementation.
Tata Group's CSR Legacy:
Tata Group is one of the largest corporate contributors in India. It undertakes a lot of education, health, and rural development CSR activities that help set a benchmark for India.
Infosys Limited v. Union of India:
There it had discussed the ambit of CSR and also stated that how it syncs with corporate tax statute as the latter also reinstates the principle of law responsibility by the means of CSR.
Reliance Foundation’s Community Projects:
Such immense rural development and health projects have been done under the Reliance Foundation; therefore, such would be the contribution that can be done for CSR with the marginal part of society.
Case of Vedanta CSR Scandal:
The case showcases how Vedanta should incorporate CSR, more especially into the tribal welfare sector, and makes it amply clear that CSR cannot function by unethical considerations but will have to operate according to community-oriented policies.
ITC’s CSR in Rural Development:
In fact, the most notable and gigantic efforts through its CSR works made in respect to the farming communities have come from ITC. So many are the modes that CSR may engage in towards the social as well as economic uplift of rural India.
CSR Activities Allowed under Schedule VII
According to Schedule VII of the Companies Act, 2013, companies can engage in different CSR activities that directly impact society. The CSR activities permitted under this schedule are:
Eradicating Hunger, Poverty, and Malnutrition: Funding food programs for the underprivileged communities.
Promotion of Education: Supporting schools, scholarships, and educational facilities.
Environmental Sustainability: initiating projects for clean energy, water conservation, and waste management.
Protection of National Heritage and Culture: Contributing to heritage site preservation and supporting art and culture.
Supporting Rural Development: Engaging in projects enhancing rural infrastructure and quality of life.’
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Issues and Criticisms in CSR Law of India
Even with all the said positive effects, CSR law in India has many problems:
Compliance Issues: Companies face many problems with respect to compliance because of the lack of adequate understanding or resources.
Lack of Impact Assessment: There is little transparency and accountability concerning the effectiveness of CSR projects.
Box-Ticking Approach: Most organizations consider CSR to be a duty thrust upon them by the law and do not consider it as a real commitment to welfare.
Regional Imbalances: CSR money mostly pools up in cities and is in short supply in rural regions.
Limited Focus Areas: Areas of concentration for CSR are mostly only a few areas that they think are important, like education. Others, such as climate change in remote places, are ignored.
Future of CSR Law in India
Indian CSR law is evolving through trends that indicate an upward trend towards:
Sustainability and Climate Action: Corporations are now focusing much more on eco-friendly projects to address climate concerns.
Impact Measurement: Future CSR strategies might include standardized measurements of the actual impacts created in the communities.
Expanding the Scope of CSR: The government would look to extend the scope of CSR towards more vital sectors, including digital literacy and climate resilience.
Enhanced Compliance: The government would probably enforce strict compliance norms that would ensure CSR expenditure is appropriately utilized in bringing about the desired social impact.
Conclusion
CSR law in India, therefore, is a blend of corporate responsibility and legal obligation. It forms a socially conscious business culture that contributes to the development goals of the nation. CSR provides companies with the opportunity to contribute to the welfare of society by making long-term social changes in areas that require urgent attention. CSR is an area that contributes towards poverty alleviation, enhancement of education, and promotion of sustainable development, bridging corporate profits and societal progress.
This trend will continue as CSR law matures in shaping the ideal sustainable, inclusive, and equitable society that drives India closer to its socio-economic goals. CSR does more than enhance a company's image; it also forms one of the important contributors to holistic national development.
CSR Law in India FAQs
1. Which companies are required to comply with CSR in India?
CSR applies to all companies having either a net worth of ₹500 crores or more, a turnover of ₹1000 crores or more, or a net profit of ₹5 crores or more during a financial year.
2. What minimum CSR spend is mandated through law?
Eligible companies are mandated to incur at least 2 percent of their average net profits for the previous three financial years on CSR activities.
3. Can CSR funds be spent on COVID-19 relief work?
Yes, and for the duration of the pandemic of COVID-19, the government of India allowed the firms could utilize funds for relief activities like any healthcare facility, donations toward COVID research, and aid provided to such affected communities as well.
4. In what way does India report CSR activity impact?
Impact assessment is not compulsory for all, but companies are also encouraged to assess the effectiveness of their CSR activities. Impact assessments have recently been recommended for larger companies for selected high-budget projects.
5. Is a CSR committee indispensable for all companies?
Only the financially qualified companies to implement CSR are required to form a CSR committee with a minimum number of three directors in it, out of whom at least one is independent.
