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What is CSR ?

Every Company having

1. Net Worth of Rs 500 Crore or more

2. Turnover of Rs 1000Crore or more

3. Net profit of Rs 5Crore or more

during the immediately preceding financial year shall establish a Corporate Social Responsibility Committee of the
Board involving of three or more directors, out of which at least one director shall be an independent director

With the exception that a firm must have at least two directors on its Corporate Social Responsibility
Committee even if it is not necessary to designate an independent.

The CORPORATE SOCIAL RESPONSIBILITY (CSR) Committee purpose

(a) create a corporate social responsibility policy and suggest it to the board,
(b) suggest how much money should be spent on the activities, and
(c) periodically check the company's corporate social responsibility policy.

What Board will do?

Every company's board of directors must —

(a) accept the company's corporate social responsibility policy, publish its contents in its report, and
post it to the company's website,

(b) make sure that the company engages in the activities listed in its corporate social responsibility
policy,

(c) If the firm has not yet finished the period of three financial years since its formation, make sure
the company spends at least 2% of its average net profits from the three most recent financial
years during those most recent financial years in each fiscal year (Yet to be notified)

In order to spend the money, set aside for CSR initiatives, the company must give precedence to the
neighborhood in which it works and places nearby:

If a company violates the rules, they may be fined not less than 50,000 rupees but up to 25 lakh rupees,
and any officers of the company who are in default may be imprisoned for a term up to three years or
fined not less than 50,000 rupees but up to 5 lakh rupees, or both, depending on the severity of the
violation.

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Ministry of Corporate Affair on CSR

A thorough reporting system for corporate social responsibility has been established by the Ministry of
Corporate Affairs (MCA). The government required Corporate India to publish a comprehensive report
on its distinctive CSR initiatives. Under the new 11-page form made public by the MCA on February 11,
businesses will be required to report information about the amount spent on CSR in the three prior fiscal
years as well as any current activities. The corporate affairs ministry can use this fresh data to create CSR
strategies that work. The corporate affairs ministry can use this fresh data to create CSR strategies that
work. On or before March 31, 2022, businesses must submit the updated Form CSR-2 for the previous
fiscal year (2020–21). To report the company's financial accounts to the Registrar of Companies, there is
also the Form AOC-4. Additionally, the MCA-mandated yearly CSR report containing these disclosures.
Enterprises must provide information such as the address, location, and pin code of the property, as well
as the amount spent and the registered owner, if any capital assets were created or purchased as a result
of CSR spending.
The new procedure has been implemented to ensure that the CSR amount is used responsibly and
appropriately and that any extra cash is not returned to the company. By imposing legal responsibilities
on businesses to engage in CSR efforts targeted at social welfare, the Ministry of Corporate Affairs,
Government of India, conducted one of the largest trials in the world to embrace CSR as a mandated
provision.

CSR LAW IN INDIA

The regulation, which stipulates that Operations shall only be conducted in "project/program mode," sets
detailed guidelines on what kind of activities are permitted across a number of categories. This entails
dealing with challenges like hunger and poverty, encouraging rural and national sports, and advancing
ideas like gender and the empowerment of women. There are a variety of businesses subject to the rule,
but it is typically reported that there are between 16,000 and 70,000. Out of the more than 600,000
registered firms in India, this is one. Similar to this, the estimated annual budget ranges widely between
$1.5 billion and $3 billion USD, or 10,000 to 20,000 crore rupees. Since the guidelines became effective,
they have been slowly being put into practise. As a result, spending forecasts have been greatly
decreased. Most companies don't think they'll accomplish their objectives.

Businesses that have a combined wealth of 500 crore or more, revenue of 1,000 crore or more, or net
profit of 5 crore or more over the previous three years are required by the Companies Act of 2013 to
invest 2% of their average net profit in CSR initiatives. In FY 2020–21, India Inc. (1619 firms) spent
$8,828.11 crore on CSR, a significant fall from the combined total of $20,150.27 crore (25,099
companies) in FY19 and $24,688.66 crore (22,531 companies) in FY20. In FY 2020–21, India Inc. (1619
firms) spent $8,828.11 crore on CSR, a significant fall from the combined total of $20,150.27 crore
(25,099 companies) in FY19 and $24,688.66 crore (22,531 companies) in FY20.

Suggested Areas of Activities for companies to implement their CSR in PROJECT MODE are:  (as
per Schedule VII) 

Activities which may be included by companies in their Corporate Social Responsibility

Policies Activities relating to:

1. Putting an end to hunger, poverty, and malnutrition; encouraging health care, especially
preventive health care; and contributing to the Swachh Bharat Kosh initiative, which the Central
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 Government established to promote cleanliness and make safe drinking water accessible.

2. supporting livelihood improvement programmes, special education, and employment-enhancing

vocation skills, particularly among children, women, elderly people, and people with disabilities.

3. promoting gender equality, empowering women, establishing homes and hostels for women and
orphans, establishing old age homes, day care centres, and other facilities for senior citizens, as
well as taking steps to lessen the disparities that socially and economically disadvantaged groups
must contend with.

4. ensuring environmental sustainability, ecological balance, animal welfare, agroforestry, resource

conservation, and maintaining the quality of soil, air, and water, including making a contribution
to the Clean Ganga Fund established by the Central Government for the rejuvenation of the river
Ganga.

5. safeguarding the nation's artistic, cultural, and historical heritage, which includes restoring
historic structures, places, and artwork; establishing public libraries; and encouraging the growth
of traditional crafts and art forms;

6. actions in favor of military veterans, war widows, and their families;

7. promoting rural sports, recognized national sports, paralympic sports, and Olympic sports
through training

8. Contributions to incubators funded by the federal government, state governments, or any agency
or publicly traded company of the federal or state governments, as well as contributions to
publicly funded universities, Indian Institutes of Technology (IITs), national laboratories, and
autonomous bodies (established under the auspices of the Indian Council of Agricultural
Research (ICAR), Indian Council of Medical Research (ICMR), Council of Scientific and
Industrial Research (CSIR), D (SDGs).

9. projects for rural development

10. slum area construction, Explanation. - The term "slum area" as used in this item refers to any
place that has been designated as such by the Central Government, any State Government, or any
other competent body in accordance with any law now in effect.

11. Disaster management, which includes relief, recovery, and reconstruction efforts

FOLLOWING ACTIVITIES SHALL NOT BE CONSIDERED AS CSR ACTIVTIES:

1. Any financial contribution, whether made directly or indirectly, to a political party is not a CSR
activity.
2. According to section 135 of the Act, CSR initiatives, programmes, or activities that primarily
benefit the company's employees and their families are not to be regarded as CSR activities.

India Inc. and the government have to work together to restore the country's fundamental systems after
the outbreak. In order to prevent enterprises from using unused CSR funding for commercial purposes or
offsetting previous CSR expenses against future responsibilities, the government modified the CSR
Policy in 2021. To guarantee that programmes were beneficiary-focused, the amendment set limits on
administrative costs and the participation of international organisations. Additionally, it required
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executing agencies to register and assessed the effectiveness of CSR programmes. The CSR Policy was
modified in 2021 with requirements that were more organised and comprehensive than the original. The
modification simplified complex ideas in the Policy while also clarifying fundamental concepts like the
definition of CSR, CSR policy, and CSR implementation. It also reduced uncertainties that could be
exploited by corporations, brought uniformity by laying out the correct procedures, and brought clarity to
complex ideas in the Policy. Businesses that were partially or completely non-compliant were obviously
forced to comply. The COVID-19 pandemic had a substantial effect on India Inc. in the fiscal years
2020–2021. As a result, changes implemented in 2021 did not immediately affect efficiency or CSR
standards compliance. However, the Government is now focusing on enhancing the effectiveness of CSR
programmes or impact, as is usually addressed in the development sector, having filled up the key holes
in the Policy governing CSR compliance and effective use of CSR money.

A notice from the Ministry of Corporate Affairs states that as of February 11, 2022, India Inc. shall
submit an 11-page form with a comprehensive report on its CSR initiatives. This process was developed
to help the government of India assess how much money is spent on corporate social responsibility, how
programmes are carried out, and the results of CSR initiatives by eligible businesses. The rule went into
force immediately, and by the end of March 2022, information for the fiscal years 2020–21 had to be
given. This notification prompted mixed comments from businesses all around India, just like it did when
the CSR Policy was first launched in 2014. Many CSR leaders saw the new reporting requirements as an
additional burden because some of the data the government required was already included in their
company's annual reports. On the other hand, some industry leaders think that collecting CSR
information using a standardised approach will make it possible for the government to analyse the
information and apply the results to further its growth plan.

Despite these opposing points of view, the Ministry of Corporate Affairs at the time remained dedicated
to encouraging corporate social responsibility to the extent that evasion or delay was not an option and
the focus was on making an impact. Organizations who were only partially or entirely non-compliant
were quickly roused from their complacency and pushed in the direction of compliance because the CSR
notification was released near the end of FY 2021-22 and went into effect straight away for FY 2020-21.
Without a doubt, recent changes to the CSR Policy have increased reporting requirements and pressure
on CSR executives. An ecosystem like this will have a significant, long-lasting impact on audiences that
have long been in the dark, paving the way for them and future generations to both contribute to and
benefit from India's growth story. However, if stricter rules and more regulations force compliant
organisations to prioritise impact and non-compliant businesses to fully embrace their social
responsibility, I think it will be worthwhile.

The provision mandating "2 percent" has received the greatest attention because it made India the first
country to implement CSR standards. The entire information is contained in the 294-page statute; the five
key points that every corporation with business interests in India should be aware of are given below.

What does the 2% requirement mean?

Businesses are required by legislation to establish a CSR board committee that consists of a minimum of
three directors, one of whom must be independent. According to the committee tasked with ensuring this,
the firm must spend "at least 2 percent of the average net earnings of the Company earned during the
three immediately preceding financial years" on "CSR" projects. The board must justify why the
company did not spend this money for CSR in its annual report.

Who is obligated to abide by this rule?

The criteria will apply to any Indian-incorporated company that has (1) a net value of at least Rs. 5
billion (US$83 million), (2) a turnover of at least Rs. 10 billion (US$160 million), or (3) a net profit of at
least Rs. 50 million (US$830,000) over any three-year period. Accordingly, up to 8,000 businesses
would invest a combined amount of Rs. 150 billion (US$2 billion) in CSR initiatives every year.
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How will the requirement be carried out?

The board committee is responsible for reviewing, approving, and confirming the company's investments
in CSR. Prior to each annual meeting, the board is expected to submit a report summarising the CSR
initiatives completed during the previous fiscal year. The board's independent director helps to maintain
the propriety of this process. However, the regulation gives no suggestions as to what constitutes
legitimate reasoning for a firm to omit paying 2 percent on CSR.

How is "CSR" defined by the act?

The statute defines CSR as programmes that promote gender equality, environmental sustainability,
education, health, and the growth of vocational skills. Businesses have the option of investing in specific
regions or contributing to federal or state money intended for socioeconomic development. Despite being
ambiguous and accessible to several interpretations, this CSR idea emphasises corporate philanthropy
over strategic CSR. Businesses "shall give primacy to the local region and areas around where it
operates," the statute states.

How will this affect CSR in India—positively or negatively?

A nation like India, where 400 million people still live on less than $2 per day, one-third of the
population is still illiterate, and lacks access to proper sanitation, should be applauded for passing the
Companies Act as a significant step in ensuring that business contributes to equitable and sustainable
economic development. However, there are a lot of reasons to think that it might not have a substantial
impact on CSR. Instead of understanding CSR as a thorough examination of the impacts that business
activities have on society and the environment, Indian corporations continue to incorrectly equate it with
corporate charity. By promoting this stance, the regulation may dissuade business executives who are
ready to embrace strategic CSR.

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Bibliography

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idea-to-mandate-corporate-social-responsibility/articleshow/16101647.cms?
from=mdr.
2. https://www.forbes.com/sites/devinthorpe/2013/05/18/why-csr-the-benefits-of-
corporate-social-responsibility-will-move-you-to-act/#763a037965a3
3. https://www.investopedia.com/terms/p/progressivetax.asp
4. https://www.score.org/blog/corporate-social-responsibility-is-it-right-your-small-
business
5. mailto:https://csrcfe.org/about-csr-in-india-public-policy/