BUSINESS ETHICS AND CORPORATE SOCIAL RESPONSIBILITIES

UNIT- VI

CSR APPLICABILITY IN INDIA

The provisions of CSR applies to every company fulfiing any of the following
conditions in the preceding financial year:
 Net worth of more than Rs.500 crore
 Turnover of more than Rs.1000 crore
 Net profit of more than Rs.5 crore
The Board of Directors of every company for which the CSR provisions apply
must ensure that the company spends in every financial year at least 2% of its
average net profits made during the immediately preceding three financial years
as per its CSR policy. If the company has not completed three financial years
since its incorporation, it must spend 2% of its average net profits made during
the immediately preceding financial years as per its CSR policy.

SCHEDULE VII

Activities which may be included by companies in their Corporate Social

Responsibility Policies:
1) Eradicating hunger, poverty and malnutrition
2) Promoting health care including preventive health and sanitation
[Including contribution to the Swatch Bharat Kosh set-up by the Central
Government for the promotion of sanitation] and making available safe
drinking water;
3) Promoting education, including special education and employment
enhancing vocation skills especially among children, women, elderly, and
the differently abled and livelihood enhancement projects;
4) Promoting gender equality, empowering women, setting up homes and
hostels for women and orphans; setting up old age homes, day care centres
and such other facilities for senior citizens and measures for reducing
inequalities faced by socially and economically backward groups;
5) Ensuring environmental sustainability, ecological balance, protection of
flora and fauna, animal welfare, agroforestry, conservation of natural

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resources and maintaining quality of soil, air and water [including

contribution to the Clean Ganga Fund set-up by the Central Government
for rejuvenation of river Ganga];
6) Protection of national heritage, art and culture including restoration of
buildings and sites of historical importance and works of art; setting up
public libraries; promotion and development of traditional arts and
handicrafts;
7) Measures for the benefit of armed forces veterans, war widows and their
dependents, [Central Armed Police Forces (CAPE) and Central Para
Military Forces (CPMF) veterans, and their dependents including
windows];
8) Training to promote rural sports, nationally recognised sports, paralympic
sports and Olympic sports;
9) Contribution to the Prime Minister's National Relief Fund or Prime
Minister’s Citizen Assistance and Relief in Emergency Situations Fund
(PM CARES Fund) or any other fund set up by the Central Government
for socio-economic development and relief and welfare of the Scheduled
Castes, the Scheduled Tribes, other backward classes, minorities and
women;
10) Contribution to incubators or research and development projects in
the field of science, technology, engineering and medicine, funded by
Central Government or State Government or Public Sector Undertaking or
any agency of the Central Government or State Government; and
11) Contributions to public funded Universities; Indian Institute of
Technology (IITs); National Laboratories and autonomous bodies
established under Department of Atomic Energy (DAE); Department of
Biotechnology (DBT); Department of Science and Technology (DST);
Department of Pharmaceuticals; Ministry of Ayurveda, Yoga and
Naturopathy, Unani, Siddha and Homoeopathy (AYUSH); Ministry of
Electronics and Information Technology and other bodies, namely Defense
Research and Development Organisation (DRDO); Indian Council of
Agricultural Research (ICAR); Indian Council of Medical Research
(ICMR) and Council of Scientific and Industrial Research (CSIR), engaged
in conducting research in science, technology, engineering and medicine
aimed at promoting Sustainable Development Goals (SDGs)
12) Rural development projects.
13) Slum area development.
14) Disaster management, including relief, rehabilitation and
reconstruction activities.

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CSR COMMITTEE APPLICABILITY

 Every company to which CSR provision are applicable must constitute a

Corporate Social Responsibility (CSR) Committee.
 The CSR Committee should consist of three or more directors, out of which
at least one director must be an independent director.
 An unlisted public company or a private company shall have its CSR
Committee without any independent director if an independent director is
not required.
 A private company having only two directors on its Board shall constitute
its CSR Committee with two directors.
 In the case of a foreign company, the CSR Committee shall comprise of at
least two persons of which one person shall be a person resident in India
authorised to accept on behalf of the foreign company – the services of
notices and other documents. Also, the other person shall be nominated by
the foreign company.
 A company having any amount in its Unspent Corporate Social
Responsibility Account shall constitute a CSR Committee and comply with
the CSR provisions.

DUTIES OF THE CSR COMMITTEE

The CSR Committee will formulate and recommend a CSR policy to the Board.
CSR policy shall point out the activities to be undertaken by the company as
enumerated in SCHEDULE VII of the Act.
 CSR Committee will recommend the amount of expenditure to be incurred
on the CSR activities to be undertaken by the company.
 CSR Committee will monitor the CSR policy of the Company from time
to time.
 The CSR Committee will establish a transparent controlling mechanism
for the implementation of the CSR projects or programs or activities
undertaken by the company.

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CSR REPORTING

The Board’s Report of a company covered under CSR Rules shall include an
annual report on CSR containing particulars specified in Annexure I or Annexure
II of the CSR Rules.
The format as per Annexure I is applicable for the financial year commenced prior
to 1st April 2020, and the format as per Annexure II is applicable for the financial
year commencing on or after 1st April 2020. In case of a foreign company, the
balance sheet filed under the Act, shall contain an annual report on CSR
containing particulars specified in Annexure I or Annexure II, as applicable.
CSR reports generally include information such as:
 Introduction and Overview: Providing context for the CSR report,
including the organization's mission, values, and approach to CSR.
 Governance Structure: Describing the company's CSR governance
structure, including roles and responsibilities of individuals or committees
involved in CSR decision-making.
 Stakeholder Engagement: Detailing how the company engages with
various stakeholders, such as employees, customers, communities, and
investors.
 Material Issues: Identifying and discussing the most significant CSR
issues relevant to the company and its stakeholders.
 CSR Programs and Initiatives: Providing information on specific CSR
programs, projects, and initiatives undertaken by the company, including
their impact.
 Performance Indicators: Presenting key performance indicators (KPIs)
used to measure the success and impact of CSR activities.
 Environmental, Social, and Governance (ESG) Metrics: Reporting on
the company's performance in areas related to environmental sustainability,
social responsibility, and governance.
 Partnerships and Collaborations: Highlighting any partnerships or
collaborations with external organizations or NGOs to address CSR issues.
 Future Plans and Commitments: Outlining the company's future CSR
goals, initiatives, and commitments.

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DISPLAY OF CSR ACTIVITIES ON WEBSITE

The Board of Directors of the company shall mandatorily disclose the

composition of the CSR Committee, the CSR Policy and projects approved by
the Board on website of the company, if any, for public access.
Previously only the contents of CSR Policy were to be displayed on the website
of the company, as per the particulars specified in the Annexure to be attached to
the Board’s Report. However, post the amendment dated 22nd January 2021, the
composition of the CSR Committee as well as the projects approved by the Board
should also be disclosed on website of the company.

CORPORATE SUSTAINABILITY

Corporate sustainability refers to the integration of environmental, social, and

governance (ESG) considerations into a company's business strategy and
operations.
It involves the pursuit of long-term value creation for both the company and its
stakeholders while taking into account the impact on the environment, society,
and corporate governance.
Sustainability in the corporate context goes beyond just financial performance
and incorporates a broader perspective that considers the well-being of the planet,
people, and the organization itself.

Key components of corporate sustainability include:

1) Environmental Sustainability:
 Reducing carbon footprint and energy consumption.
 Efficient use of natural resources.
 Waste reduction and recycling initiatives.
 Sustainable supply chain management.
2) Social Sustainability:
 Promoting diversity and inclusion within the workforce.
 Ensuring fair labor practices and safe working conditions.
 Contributing to community development and philanthropy.
 Addressing social issues and supporting social justice initiatives.
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3) Governance:
 Transparent and ethical business practices.
 Effective corporate governance structures.
 Responsible leadership and decision-making.
 Compliance with laws and regulations.

FACTORS AFFECTING CORPORATE SUSTAINABILITY

Following key drivers need to be garnered to ensure sustainability:

1) Internal Capacity Building strength – In order to convert various risks
into competitive advantage.
2) Social impact assessment– In order to become sensitive to various social
factors, like changes in culture, living habits etc.
3) Repositioning capability through development and innovation.
4) Corporate sustainability is a business approach creating shareholder
value in long run.

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