CORPORATE SOCIAL RESPONSIBILITY

Submitted by:
Vishwa Badiani and Vidhi Mehta

LONG ANSWER:
1. What is the purpose of CSR? Should CSR be voluntary or mandatory?
Solution: 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.

 As important as CSR is for the community, it is equally valuable for a company.

CSR activities can help forge a stronger bond between employees and
corporations, boost morale and help both employees and employers feel more
connected with the world around them.
 The United Nations Industrial Development Organization notes that the
common functions of corporate social responsibility include:
- Responsible sourcing of materials and supplies
- Employee, vendor, customer and community engagement and relations
- Adherence to labour standards
- Environmental protection and management
- Anti-corruption measures
- Upholding social equity, gender equity and other human rights goals
- Conservation of resources, like water and energy, in production
 PURPOSE OF CSR:
- To engage with the internal and external stakeholders
- Treating the stakeholders ethically
- To create high standards of living
- To protect society and environment
- To take care of shareholders
 TYPES OF CSR:
Recognizing how important socially responsible efforts are to their customers,
employees and stakeholders, many companies focus on a few broad CSR categories,
including: 
(i) Environmental efforts: One primary focus of CSR is the environment. Businesses,
regardless of size, have large carbon footprints. Any steps a company can take to
reduce its footprint is considered good for both the company and society.
(ii) Philanthropy: Businesses can practice social responsibility by donating money,
products or services to social causes and non-profits. Larger companies tend to have
plentiful resources that can benefit charities and local community programs;
however, as a small business, your efforts can make a big difference
(iii) Ethical labour practices: By treating employees fairly and ethically, companies can
demonstrate CSR. This is especially true of businesses that operate in international
locations with labour laws that differ
(iv) Volunteering: Participating in local causes or volunteering your time (and your staff's
time) in community events says a lot about a company's sincerity. By doing good
deeds without expecting anything in return, companies can express their concern
(and support) for specific issues and social causes.

 BENEFITS OF CSR:
- Improves brand value
- Builds customer loyalty
- Helps attract and retain talent
- Increases employee engagement
 VOLUNTARY vs MANDATORY CSR:
o Voluntary CSR is connected to convictions and commitment. It's something that
comes from inside the company, with a desire to change things and create value.
It has a psychological explanation: Mandatory CSR is imposed from outside the
company and it may not be perceived as own.
o While Voluntary CSR would be more preferable, it should be mandatory for the
first three to five years. Thereafter, the momentum will be self-sustaining.
o It’s a doubt that mandatory CSR could be a global solution. After all, CSR is a way
to manage a company. It defines the company’s dialogue with the stakeholders.
Whether companies choose to be responsible or not, has to be left to their
discretion. Sooner or later they will be aware of the benefits of being responsible
(or the disadvantages of being irresponsible).
o Why voluntary CSR would be preferable?
(a) Promote, not impose
CSR is deeply connected with values, not with laws. Values cannot be forced,
they can be promoted, taught or awaken. Besides, who is going to define what
CSR is? Is it going to be the government?
(b) Where there is law, there is fraud
If someone is forced to do something, there will always be a temptation to skip
the rules. Sometimes fraud cannot be discovered so easily. However, if a
company decides not to be socially responsible, it’s more likely that its
stakeholders will end up unveiling it and punishing its behaviour.
(c) CSR as soft power tool
CSR approach (voluntary CSR plus public promotion) is far more effective than a
hard CSR approach (mandatory regulation). Soft power is in the very soul of
corporate sustainability.
(d) Convictions, not impositions
Voluntary CSR is connected to convictions and commitment. It’s something that
comes from inside the company, with a desire to change things and create value.
SHORT ANSWER:
1. CSR in India
Solution: India is the first country in the world to make corporate social responsibility (CSR)
mandatory, following an amendment to the Companies Act, 2013 in April 2014. Businesses
can invest their profits in areas such as education, poverty, gender equality, and hunger as
part of any CSR compliance.

Amid the COVID-19 (corona virus) outbreak, the Ministry of Corporate Affairs has notified
that companies’ expenditure to fight the pandemic will be considered valid under CSR
activities. Funds may be spent on various activities related to COVID-19 such as promotion
of healthcare including preventive healthcare and sanitation, and disaster management. 

The amendment notified in the Companies Act, 2013 requires companies with a net worth
of INR 5 billion (US$70 million) or more, or an annual turnover of INR 10 billion (US$140
million) or more, or net profit of INR 50 million (US$699,125) or more, to spend 2 percent of
their average net profits of three years on CSR.

Prior to that, the CSR clause was voluntary for companies, though it was mandatory to
disclose their CSR spending to shareholders. CSR includes but is not limited to the following:

 Projects related to activities specified in the Companies Act; or

 Projects related to activities taken by the company board as recommended by the
CSR Committee, provided those activities cover items listed in the Companies Act.

Businesses must note that the expenses towards CSR are not eligible for deduction in the
computation of taxable income. The government, however, is considering a re-evaluation of
this provision, as well as other CSR provisions recently introduced under the Companies
(Amendment) Act, 2019 (“the Act”).

CSR amendments under the Companies (Amendment) Act, 2019

Until now, if a company was unable to fully spend its CSR funds in a given year, it could carry
the amount forward and spend it in the next fiscal, in addition to the money allotted for that
year.

The new law prescribes for a monetary penalty as well as imprisonment in case of non-
compliance. The penalty ranges from INR 50,000 to INR 2.5 million whereas the defaulting
officer of the company may be liable to imprisonment for up to three years, or a fine up to
INR 500,000 or both.

The methodology of CSR

CSR is the procedure for assessing an organization’s impact on society and evaluating their
responsibilities. It begins with an assessment of the following aspects of each business:

 Customers;
  Suppliers;
 Environment;
 Communities; and,
 Employees.

The most effective CSR plans ensure that while organizations comply with legislation, their
investments also respect the growth and development of marginalized communities and the
environment. CSR should also be sustainable – involving activities that an organization can
uphold without negatively affecting their business goals.

Organizations in India have been quite sensible in taking up CSR initiatives and integrating
them into their business processes.

It has become progressively projected in the Indian corporate setting because organizations
have recognized that besides growing their businesses, it is also important to shape
responsible and supportable relationships with the community at large.

Companies now have specific departments and teams that develop specific policies,
strategies, and goals for their CSR programs and set separate budgets to support them.

Most of the time, these programs are based on well-defined social beliefs or are carefully
aligned with the companies’ business domain.