What Is Corporate Social Responsibility [CSR]?

INTRODUCTION

In the corporate world before some amendments took place, one might think that corporations reflect the light only on economic factor but it is not true the performance of corporations reflect the light not only on economic factor but also on social, cultural, legal, environmental factors, etc. So by the inclusion of these factors in the corporate world the Corporate Social Responsibility (CSR) arises. Here we will learn about the definition of corporate social responsibility (CSR) and in order to do so we have to learn about the evolution of corporate social responsibility (CSR), its meaning, activities constituting it, etc.

DEFINITION OF CORPORATE SOCIAL RESPONSIBILITY

The concept of corporate social responsibility (CSR) has been defined in many ways the reason behind this is that, the activities constituting corporate social responsibility (CSR) differs from companies to companies because of the different natures of business. So, the definition of corporate social responsibility (CSR) depends upon the nature of business of the companies.

Before deriving the definition of corporate social responsibility (CSR) we will understand some other definitions given by different authorities:-

1. One said that the corporate social responsibility (CSR) in the process of operation of company’s business must be defined as the manner in which the company’s business must operate should always meet the ethical, legal, commercial and public opinion.[1]
2. Some said that in corporate social responsibility companies voluntarily decides and contributes towards making the society better place to live and also believed that the same can be achieved by interacting with the stakeholders voluntarily.[2]

While considering the above definitions one can easily figure it out that these definitions put emphasis on the impact of corporate social responsibility’s activities which the companies perform while managing their business. Some other definitions not only covered the impacts of corporate social responsibility’s activities but also covered the limits of the companies in performing corporate social responsibility activities.[3]

The detailed definition of corporate social responsibility (CSR) would be:-

“A corporate social responsibility is a responsibility which the companies imposes on itself, for the betterment of the society which will include various aspects of the society such as environment, competition-ethics, legal, moral, economic and well-being of employees and the responsibilities so imposed by the companies on itself are in accordance with their financial capacity and other resources useful for carrying out activities of corporate social responsibility”.

Whereas, the short and precise definition of corporate social responsibility would be:-

“A company’s corporate social responsibility (CSR) should be concerned to the management of the business operations to produce a positive impact on society”

MEANING AND CONCEPT OF CSR

Corporate social responsibility (CSR) is considered as a self-regulating approach which generally helps the companies to be socially responsible to itself, to its stakeholders and to the public. By implementing the concept of corporate social responsibility (CSR) in India companies can become more circumspect of the consequences of the functions performed by the companies on various aspects of society. If a company while performing its functions give importance to enhance the society and environment then it is said that the company is engaged in corporate social responsibility (CSR).

Broadly speaking, corporate social responsibility (CSR) is the concept which can take various forms depending on the nature of business. It is also believed that corporate social responsibility (CSR) is not only for the benefit of society but also helps the brands and companies to grow. Each and every companies irrespective of small, medium or large, is asked to promote corporate social responsibility (CSR) in accordance with their financial capacity and other resources. In the conduct of company’s business corporate social responsibility (CSR) encourages the companies to be ethical and the companies can be ethical by indulging in social, economic and environmental acts.[4]

EVOLUTION OF CORPORATE SOCIAL RESPONSIBILITY

As concerned to the evolution of corporate social responsibility (CSR) one can trace it back from the Mauryan period, however, the term corporate social responsibility (CSR) was not same back then but the concept was quite related to the concept of corporate social responsibility (CSR). In ancient times it was practiced in the form of charity to the poor. This concept can also be traced in our Indian culture of sharing and caring. It will be more convenient to trace the evolution of corporate social responsibility (CSR) by different phases.

The first phase is of philanthropists and charity which drove the basics of corporate social responsibility (CSR) in this phase. It was till 1850s that the corporate social responsibility was influenced by cultural and hereditary values along with industrialisation.[5]

Then came the second phase of pre-independence period, of setting up of industries and the industrialist were at that time supposed to show their dedication towards the benefit of the society.[6]

Then in the third phase the time of globalisation came it was the time of 1990s when great businessmen like Tata, Birla, Godrej, Bajaj, etc. encouraged the concept of charities via establishing educational and healthcare institutions, trusts for development of various communities.[7]

The last phase or say the current scenario is that India not only developed this concept but also gave this concept a specific term i.e. Corporate Social Responsibility (CSR) by incorporating it in Companies Act, 2013. India is the first country in whole wide world to give the concept of corporate social responsibility a statutory significance.[8]

ACTIVITIES CONSTITUTING CORPORATE SOCIAL RESPONSIBILITY[9]

The various activities which a company is allowed to do in the view of implementing corporate social responsibility (CSR) are as follows:-

1. The companies can set up trusts or charitable foundations.
2. They promote education by setting up educational institutions.
3. By creating or connecting with different NGO’s they promote gender equality and women empowerment.
4. They can establish healthcare institutions for enhancing the health standards in the society.
5. They can also contribute in government raised funds such as Prime Minister’s Relief Fund.
6. They are also allowed to establish old age homes, orphanage etc.
7. They ensure environmental sustainability by enhancing the quality of environment or by performing their functions within the permissible limits prescribed by various environmental legislations.
8. For the welfare of the minority or backward classes raise funds and various other activities constituting corporate social responsibility (CSR) as prescribed by the company can be performed.

LEGAL ASPECT OF CSR

As we must know, India’s new Companies Act, 2013 has introduced many new provisions one of them is corporate social responsibility (CSR), these provisions collectively changed the face of India’s corporate world. While talking about The Companies Act, 2013 one should cover the concept of corporate social responsibility which is introduced in section 135 under The Companies Act, 2013 and was officially notified by the Ministry of Corporate Affairs and not only they introduce the concept of corporate social responsibility in India but also provided some rules regarding the same under the title of Companies (Corporate Social Responsibility Policy) Rules, 2014 and they came into force on 1st April, 2014.

In section 135 it is provided that only those companies are eligible to perform activities of corporate social responsibility (CSR) which[10]:-

1. Have the net worth of RS. 500crore or more,
2. Have the turnover of RS. 1000crore or more,
3. Have the net profit of RS. 5 crore or more, and
4. Comply with the rules prescribed under Companies (Corporate Social Responsibility Policy) Rules, 2014.

Every company who is eligible according to above mentioned conditions to perform corporate social responsibility’s activities is required to spend at least 2% of its average net profit, immediately preceding three financial years. Eligible companies will also constitute a corporate social responsibility committee, consisting of three or more directors of the company, which shall allow certain corporate social responsibility’s activities to be performed by companies and while allowing those corporate social responsibility’s activities the committee will take into consideration the rules prescribed under Companies (Corporate Social Responsibility Policy) Rules, 2014.[11]

[1] https://mallenbaker.net/article/clear-reflection/definitions-of-corporate-social-responsibility-in-India-what-is-csr

[2] https://youmatter.world/en/definition/csr-definition/

[3] https://mallenbaker.net/article/clear-reflection/definitions-of-corporate-social-responsibility-what-is-csr

[4] https://www.investopedia.com/terms/c/corp-social-responsibility.asp

[5] https://www.soulace.in/blog/evolution-of-csr-in-india/

[6] https://www.soulace.in/blog/evolution-of-csr-in-india/

[7] https://www.vskills.in/certification/blog/evolution-for-csr-in-india/

[8] https://blog.ipleaders.in/corporate-social-responsibility-2/amp/

[9]https://www.indiafilings.com/learn/corporate-social-responsibility-companies-act/

[10] The Companies Act, 2013

[11]https://www.mondaq.com/india/corporategovernance/366528/corporate-social-responsibility-indian-companies-act-2013

This Article is authored by by SANSKAR RASTOGI, 3rd Year B.A.LL.B Student of IIMT College of Law, Greater Noida.