Corporate Social Responsibility

Corporate Social Responsibility (CSR) is a business philosophy that dictates that companies around the globe should deviate from the narrow path of chasing only financial gains and wealth buildup and embark on a journey of sustainable development.
It includes community welfare, ethical corporate conduct, climate action, defending the socio-economic rights of marginalised sections of society, among other aspects.

India harbours one of the earliest and richest traditions of CSR in the world in the form of philanthropy.
We can find Chanakya, also called Kautilya, the cardinal force behind Mauryan Imperialism, commenting and emphasising on the importance of observing ethical practices and principles while conducting commercial activities.
Our scriptures have also repeatedly echoed the importance of sharing business earnings with the deprived segments of the society.
In modern India, CSR was attributed with a whole new dimension with the “Trusteeship Theory” of Mahatma Gandhi, which considered the businessmen of India as trustees of trusts that looked after public welfare.

India is the first country in the world to make CSR mandatory, following an amendment to The Company Act, 2013 in 2014.
Any company that has a net worth of at least Rs 500 crore, a turnover of Rs 1,000 crore or a net profit of Rs 5 crore is obliged to spend 2% of its average profits over the last three years on CSR.
Businesses can invest their profits in areas such as education, poverty, gender equality, and hunger as part of their CSR compliance, as regulated by the law.

According to the new rules, non-compliance to the CSR rules and obligations will no longer be treated as a criminal offence. These will now be treated as civil wrongs.
A company may engage International Organisations for designing, monitoring and evaluation of the CSR projects and for capacity building of their own personnel for CSR.
Any surplus income being generated through a company’s CSR activities can not form part of the company’s profit. The surplus shall be reinvested into the same project or shall be transferred to the Unspent CSR Account.
Any CSR expenditure that exceeds the required amount can be carried forward to the next three years.

The Ministry of Corporate Affairs recently said that businesses need not restrict their Corporate Social Responsibility expenditure to local projects and must balance local area preferences specified in the law with ‘national priorities’.
The Ministry clarified that paying for the overseas training of Indian sports personnel representing any State or Union Territory at a national or international level, is the only instance where activities undertaken by firms outside India will be permitted as a CSR project.
The first provision to Section 135(5) of the Companies Act says a company shall give preference to local areas and areas around which it operates, in its mandatory CSR spending.

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