CORPORATE SOCIAL RESPONSIBILITY

Corporate Social Responsibility is a management concept whereby companies integrate

social and environmental concerns in their business operations and interactions with their
stakeholders. The idea of corporate social responsibility operates on the principle of ‘quid
pro quo’ – something in exchange for something. Corporate social responsibility enables
businesses to participate in a variety of socially responsible initiatives.
CSR is a process by which an organization thinks about and evolves its relationships with
stakeholders for the common good and demonstrates its commitment in this regard by
adoption of appropriate business processes and strategies. Thus, CSR is no charity or mere
donations. CSR is a way of conducting business, by which corporate entities visibly
contribute to the social good. Socially responsible companies use CSR to integrate economic,
environmental and social objectives with the company’s operations and growth.
It goes beyond philanthropy and compliance and addresses how companies manage their
economic, social, and environmental impacts, as well as their relationships in all key spheres
of influence: the workplace, the marketplace, the supply chain, the community, and the public
policy realm. (Harvard University) CSR is generally understood as being the way through
which a company achieves a balance of economic, environmental and social imperatives
(“Triple-Bottom-Line Approach”), while at the same time addressing the expectations of
shareholders and stakeholders.
Evolution of the Definitions of CSR
The initial definition of CSR was given by Horward R Bowen during 1950s in his book
entitled Social Responsibilities of the Businessman in which he defines social responsibility
as: “Obligations of businessmen to pursue those policies, to make those decisions, or to
follow those lines of action which are desirable in terms of the objectives and values of our
society”.
In the 1960s, one of the most prominent definition of CSR was given by Keith Davis who
defines social responsibility as “businessmen’s decisions and actions taken for reasons at least
partially beyond the firm’s direct economic or technical interest”.
According to the United Nations Industrial Development Organisation, Corporate Social
Responsibility is a concept of management “whereby companies integrate social and
environmental concerns in their business operations and interactions with their stakeholders.”
CORPORATE SOCIAL RESPONSIBILITY AND COMPANIES ACT, 2013
Companies Act, 2013 [“Act”] is a legislation which officially embarked on one of the world’s
largest experiments of introducing the concept of CSR as a mandatory provision. With the
introduction of new Act, there is a statutory obligation for the corporates to take initiatives
towards Social, Environmental and Economic Responsibilities. The initiatives taken have to
be reported to the company and other stakeholders appropriately.
Section 135 of the Act and the Companies (Corporate Social Responsibility Policy) Rules,
2014 [“CSR Rules”] framed thereunder govern CSR in India.
Definition of CSR
The Act does not define the term CSR. As per rule 2(c) of the CSR Rules “Corporate Social
Responsibility means and includes but is not limited to:
i. projects or programs relating to activities specified in Schedule VII of the Act; or
ii. projects or programs relating to activities undertaken by the board of directors of a
company (Board) in pursuance of recommendations of the CSR Committee of the
Board as per declared CSR Policy of the company subject to the condition that
such policy will cover the subjects enumerated in Schedule VII of the Act.”
Additionally, Schedule VII of the Companies Act, 2013 lists a broad range of tasks that firms
in the country may carry out.
APPLICABILITY
Section 135 of the Act provides for the applicability of the CSR provisions on corporates.
Sub-section (1) of section lays down that every company having

 net worth of Rs. 500 Crore or more; or

 turnover of Rs. 1000 Crore or more; or
 net profit of Rs. 5 Crore during any financial year shall be required to constitute a
CSR Committee of the Board consisting of three (3) or more directors, out of which at
least one (1) director shall be an independent director.
Rule 3 of the CSR Rules specify that every company which ceases to be a company covered
under section 135 as per the limits specified thereunder for three consecutive financial years
shall not be required to constitute a CSR Committee and comply with the provision of section
135, till such time that it meets the criteria specified.
Ministry of Corporate Affairs (MCA) vide Circular No. 21/2014 dated 18.06.2014, has
clarified that the term ‘any financial year’ refered to in section 135 means any of the three
preceding financial years.
Effectively, section 135 and Schedule VII have come into effect from April 01, 2014,
accordingly, every company which meets the criteria specified under sub-section (1) of
section 135, in any of the three preceding financial years (i.e. 2011-12, 2012-13, 2013-14) is
required to comply with the same from April 01, 2014 onwards. The section is applicable to
both public and private companies as long as they fulfil the criteria.
Applicability to holding and subsidiary companies
Rule 3(1) provides that CSR is applicable to (a) every company including its holding or
subsidiary; and in case where the company fulfills the criteria specified in sub-section (1) of
section 135 of the Act. The net worth, turnover or net profit of a foreign company will be
prepared in accordance with the requirements under the Act.
Applicability to Foreign Company
A foreign company defined under clause (42) of section 2 of the Act having its branch office
or project office in India which fulfils the criteria specified in sub-section (l) of section 135 of
the Act shall comply with the provisions of section 135 of the Act and the rules. The net
worth, turnover or net profit of a foreign company under the Act shall be computed in
accordance with balance sheet and profit and loss account of such company prepared in
accordance with the provisions of clause (a) of sub-section (1) of section 381 and section 198
of the Act. In simple terms the net worth, turnover or net profit of a foreign company under
the section shall be computed in accordance with its Indian business operations.
CORPORATE SOCIAL RESPONSIBILITY COMMITTEE
As per section 135, every company which fulfils the criteria under subsection (1) of the
section 135 as mentioned above is required to constitute a Committee of the Board of
directors, the CSR Committee, consisting of at least three directors out of which one shall be
an independent director.
Certain companies have been exempted from the requirement of appointing an independent
director, an CSR Committee they are:

 a private company or unlisted public company covered under sub-section (1) of the
section 135 of the Act, which is not required to appoint independent director under
sub-section (4) of the section 149 of the Act; and
 where a private company has only two (2) directors on its Board, it shall constitute a
CSR Committee with those two (2)directors.
A foreign company covered under these rules shall constitute a CSR Committee with at least
two (2) persons of which one (1) shall be as specified under clause (d) of sub-section(1) of
section 380 of the Act and another person shall be nominated by the foreign company. A
person as specified under section 380(1)(d) means a person resident in India authorised to
accept on behalf of the company service of process and any notices or other documents
required to be served on the company.
As per Rule 5 of the Companies (Corporate Social Responsibility Policy) Rules, 2014,
In case of listed company
CSR committee shall comprise of three or more directors out of which at least one director is
to be an independent Director.
In case of unlisted company
CSR Committee shall consist of 3 or more directors without an independent director.
Foreign company
CSR Committee shall be constituted with 2 persons namely, Resident authorized person
appointed under Section 380 of the Companies Act, 2013. One person nominated by the
foreign company (can be a non-resident)
The functions of CSR Committee:

 To formulate and recommend to the Board, a CSR Policy which would indicate the
activities to be undertaken as specifiedin Schedule VII of the Act.
 To recommend the amount of the expenditure to be incurred on the activities
undertaken in pursuance of the CSR policy.
 To Institute a transparent monitor mechanism for implementation of the CSR projects
or programs or activities undertaken by the company.
 To monitor the CSR policy of the company time to time.
 To institute a transparent monitoring mechanism for implementation of the CSR
projects or programs or activities undertaken by the company [As per rule 5(2)].
As mentioned above, rule 3(2) provides that in case a company ceases to be covered under
section 135(1) for three consecutive financial years, it shall not be required to constitute a
CSR Committee and comply with provisions thereof.
CSR Reporting
Board’s Report shall disclose the constitution of CSR committee. CSR Committee shall

 Formulate CSR policy and recommend to board indicating the activities to be

undertaken as specified in schedule VII.
 Recommend the amount of expenditure to be incurred.
 Monitor CSR Policy of the company.

It is mandatory for the companies covered under section 135(1) of the Companies Act, 2013
to spend at least 2% of its average net profit during the three immediately preceding years on
CSR.
The company shall

 disclose the composition of CSR Committee, contents of CSR policy in the Board
Report.
 Place the same on the website of the company.
 If the company fails to spend funds on CSR activities, Board’s Report shall specify
the reasons for not spending the amount.
 A company may also collaborate with other companies for undertaking projects or
programs or CSR activities in such a manner that the CSR committees of respective
companies are in a position to report separately on such projects or programs in
accordance with these rules.
 Subject to provisions of Sub-Section (5) of Section 135 of the Act, the CSR projects
or programs or activities undertaken in India only shall amount to CSR expenditure.
The CSR projects or programs or activities that the benefit only the employees of the
Company and their families shall not be considered as CSR activities in accordance with
Section 135 of the act.
Contribution of any amount directly or indirectly to any political party under section 182
shall not be considered as CSR activity.

BOARD’S RESPONSIBILITY TOWARDS CSR

 To approve the CSR Policy after taking into account the recommendations made by
CSR committee for the company. • To ensure that the activities that are included in the
CSR Policy are undertaken by the company and are in accordance with Schedule VII
of the Act.
 To ensure that the company speeds at least 2% of the average net profits in pursuance
of its CSR Policy. • To disclose the composition of CSR Committee in the Board’s
Report.
 To disclose the details of the CSR Policy developed and implemented by the company
in CSR in Board’s Report (clause (o) of the sub-section (1) of the section 134).
 The content of the policy and CSR activities are to be placed on the company’s
website (Rule 9).

BENEFITS OF CSR

 Improved reputation
 Increased customer loyalty
 Increased Brand Recognition
 Enhanced employee well-being and retention
 Improved talent recruitment
 Better risk management
 Increased innovation
 Financial performance
 Long-term sustainability
 Competitive Advantage

Significance of corporate social responsibility

In today’s scenario, the significance of corporate social responsibility is making great
progress. It guarantees that, in the long term, social and economic operations in modern
capitalist communities are sustainable. The significance of corporate social responsibility is
illustrated below-
Increased brand value of the corporation
It is a well-known fact that a company that engages in good business conduct and numerous
corporate social responsibility programmes can gain popularity among the public and
increase customer loyalty. The company’s goods and services, as well as its corporate social
responsibility initiatives, gain the community’s respect and loyalty.
Revenue and consumer network growth
Organisations that indulge in meaningful initiatives in addition to their usual business
operations are seen optimistically by both current and prospective consumers. Additionally,
this results in a rise in revenues as consumers are more likely to buy from a company that
they believe has indulged in ethical business conduct.
An improvement in staff loyalty and involvement
A company’s corporate social responsibility actions aid in developing a positive public
image. The employees prefer working at these companies. Additionally, employees become
more empathetic and devoted to the organisation. An increased sense of fulfilment among the
employees further leads to better employee retention.
Removal of poverty
The business industry has the necessary skills and expertise to guarantee that the greatest
impact can be achieved at the lowest possible cost. Despite numerous government initiatives
to help the poor, the disparity between the rich and the poor continues to be immense.
Through their corporate social responsibility initiatives, businesses can support communities
at the ground level and contribute to the reduction of poverty.
Competitive edge over rival corporations who do not follow the guidelines
Companies that participate in corporate social responsibility are in a better position than their
rivals who do not. For instance, nowadays, consumers opt to purchase environmentally
friendly goods, which increases the sales and revenue of the business that makes such goods
by adhering to the guidelines of corporate social responsibility.

Social Responsibility towards different Interest Groups

Business social responsibility is a voluntary effort of businesses to take a few steps and
measures in order to satisfy the expectations of different interest groups. An interest group
represents an association of individuals or organizations that on the basis of one or more
shared concerns, attempts to influence public policy in their favor. Business is concerned with
interest groups because every decision and action a company takes will directly or indirectly
affect the interests of these groups. The following are the responsibilities of businesses
towards different interest groups.
1. Social Responsibility of Businesses Towards the Owners
Business owners are the person who owns the businesses. They are liable for all profits and
losses. Owners take all the risks of running the business, capital allocation, etc. The following
are the responsibilities of businesses towards their owners:
 To run the business efficiently.
 To allocate and utilize capital and resources.
 To ensure appreciation and growth of capital.
  To provide a fair and regular return on capital invested.
2. Social Responsibility of Businesses Towards Investors
Investors are those who provide funds to businesses through various investment instruments
(Equity, Bonds, Debentures, etc.). Financial institutions, HNIs, and retail investors fall under
this category. The following are the responsibilities of businesses towards their investors:
 To provide required and essential information regarding the schemes of future
growth.
 To ensure the safety of investors’ investments.
 To provide regular payment of interest.
 To give timely repayment of the principal amount to the investors.
3. Social Responsibility of Businesses Towards Suppliers
Suppliers are businessmen or merchants who supply raw materials and other items that are
required by manufacturers or traders. A supplier also includes a distributor who supplies the
final finished product to the consumers or customers. The following are the responsibilities of
businesses towards their supplier:
 To give regular orders for the purchase of goods.
 To make a deal with fair terms and conditions.
 To avail reasonable credit period.
 To pay the dues on time.
4. Social Responsibility of Businesses Towards Customers
Businesses produce and sell goods or services to customers. It can not survive without the
support of the customers and have to fulfill their wants and needs in order to attain success.
The following are the responsibilities of businesses towards their consumers:
 To provide customers with goods and services that fulfill their needs and
requirements.
 To provide them with qualitative goods and services.
 To maintain a regular supply of goods and services in the market.
 To provide customers with goods and services at reasonable and affordable prices.
 To provide them with proper after-sales services for the purchased goods and
services.
 To provide customers with every essential information including warnings regarding
the goods and services.
 To provide them with a manual for the use of goods and services.
  To follow proper and fair trade practices and take corrective measures against
malpractices.
 To ensure that the grievances of the customers are listened to and resolved quickly.
5. Social Responsibility of Businesses Towards Employees
All businesses need employees and workers to work for their business. These employees put
in their best effort for the benefit of the businesses. If employees are satisfied with their needs
and requirements, they will work efficiently, which will help in the success of the business.
The following are the responsibilities of businesses towards their employees:
 To provide the employees and workers with timely and regular salaries and wages,
respectively.
 To provide them with a good workplace and safe environment.
 To provide the employees with better career opportunities and prospects.
 To provide the employees with job security and social security through Provident
Fund, Health Insurance, Retirement Benefits, etc.
 To provide them with proper training for their development and growth.
 To respect their democratic rights in the formation of unions.
6. Social Responsibility of Businesses Towards Society or Community
Society consists of various entities, including individuals, groups, organizations, families, etc.
All these entities are related to each other; they interact with each other and also depend on
each other, directly or indirectly. It is the responsibility of every entity to perform a job or a
business that will benefit society at large. The following are the responsibilities of businesses
towards the society:
 To maintain a balance between the economy and the ecosystem.
 To generate employment opportunities.
 To protect the environment by conserving natural resources and wildlife.
 To promote sports and culture.
 To help the weaker sections of society.
 To preserve the social and cultural values of the society and promote these values.
 To provide proper assistance in education, development, etc., of society.
7. Social Responsibility of Businesses Towards Government
Businesses are governed by certain rules and regulations which are set by the government.
These rules and regulations also help businesses to perform their responsibilities towards
society. The following are the responsibilities of businesses towards the government:
  To pay fees, duties, and taxes honestly and regularly.
 To set up new business units as per the guidelines provided by the Government.
 To follow the pollution control norms set up by the Government.
 To run the business fairly and not indulge in any corruptive and unfair activities.
Activities covered under CSR Activities
Schedule VII of the Companies Act, 2013, provides a wide range of CSR activities that may
be undertaken by corporates in India. The activities to achieve its CSR obligations include:
1. Eradicating hunger, poverty, and malnutrition, promoting health care including
preventive health care and sanitation including contributing to the Swach Bharat Kosh
set up by the Central Government for the promotion of sanitation and making
available safe drinking water.
2. Promoting education, including special education and employment enhancing
vocational skills, especially among children, women, the elderly, and the differently
abled, and livelihood enhancement projects.
3. Promoting gender equality, empowering women, setting up homes and hostels for
women and orphans; setting up old age homes, daycare centers, and such other
facilities for senior citizens, and measures for reducing inequalities faced by socially
and economically backward groups.
4. Ensuring environmental sustainability, ecological balance, protection of flora and
fauna, animal welfare, agroforestry, conservation of natural resources, and
maintaining the quality of soil, air, and water including contribution to the Clean
Ganga Fund set up by the Central Government for rejuvenation of river Ganga.
5. 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 art and handicrafts.
6. Measures for the benefit of armed forces veterans, war widows and their dependents,
Central Armed Police Forces (CAPF) and Central Para Military Forces (CPMF)
veterans, and their dependents including widows.
7. Training to promote rural sports, nationally recognized sports, paralympic sports, and
Olympic sports.
8. 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 govt. for socio-economic development and relief and
welfare of the scheduled caste, tribes, other backward classes, minorities, and women.
9. Contribution to incubators or research and development projects in the field of
science, technology, engineering and medicine, funded by the Central Government or
 State Government or Public Sector Undertaking or any agency of the Central
Government or State Government and
10. 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 Defence 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).
11. Rural development projects.
12. Slum area development.
13. Disaster management, including relief, rehabilitation, and reconstruction activities.
Further, as per General Circular No. 21/2014 dated 18th June 2014, activities mentioned
above should be interpreted liberally so as to capture the essence. The items listed above are
broad-based and are intended to cover a wide range of activities as illustratively mentioned in
the Annexure.
Further, as per Section 135(5) of the Companies Act, shall give preference to the local area
and areas around it where it operates, for spending the amount earmarked for Corporate
Social Responsibility activities.
Activities not covered under CSR activities
As per General Circular No. 21/2014 dated 18th June 2022, the following activities cannot be
included as part of a company’s eligible CSR spend:
1. Projects or programs or activities that benefit only the employees of the company and
their families
2. One-off events such as marathons/ awards/ charitable contributions/ advertisements/
sponsorships of TV programs etc.
3. Expenses incurred for the fulfillment of any Act/ Statute of regulations (such as
Labour Laws, Land Acquisition Act, etc.)
4. Contribution of any amount directly or indirectly to any political party shall not be
considered as a CSR activity.
5. Activities incurred in pursuance of its normal course of business.
However, Salaries paid by the companies to regular CSR staff as well as to volunteers of the
companies can be factored into CSR project cost as part of the CSR expenditure.
Consequences of Non-Compliance
As per Section 135(7) of the Companies Act, If a company defaults in complying with the
provisions of CSR, the company shall be liable to a penalty of the lower following amount:
1. Twice the amount required to be transferred by the company to the Fund specified in
Schedule VII or the Unspent Corporate Social Responsibility Account, as the case
may be, or
2. INR 1 Crores
Further, every officer of the company who is in default shall be liable to a penalty of lower
following amounts:
1. of 1/10th of the amount required to be transferred by the company to such Fund
specified in Schedule VII, or the Unspent Corporate Social Responsibility Account, as
the case may be,
2. or two lakh rupees, whichever is less.]

TATA
Furthering their Sustainable Development Goals (SDGs), Tata Motor’s Corporate social
responsibility initiatives in FY 2020-21 touched 7.5 lakh lives in India.
They have been catering to domains, starting with sustainability initiatives through
community engagement, to social upliftment and environmental transformation, addressing
healthcare and sanitation issues, strengthening household income, making women self-reliant
and more.
Aarogya
Addressing malnutrition, spreading awareness and delivering preventative healthcare –
Impacted 3,82,888 lakh lives
Kaushalya
Improving employability through skill development, vocational training, assistance for
supplementing income, women empowerment – Skilled 17,661 people
Amrutdhara
Offering water relief measures – Impacted 8,153 lives
Seva
Tata Motors’ family volunteered – 10,232 employees clocked 29,011 hours for social
upliftment