“Corporate Social Responsibility Under The Indian Companies Act 2013”

Introduction

• It takes 20 years to build a reputation and only 5 minutes to ruin it. (Warren Buffet). Business should not only be responsible morally to the stakeholders but also to the society, environment and towards a sustainable planet at large.
• Many other names are used to refer to CSR such as socially responsible business, responsible business conduct, responsible entrepreneurship, corporate citizenship, corporate accountability or corporate sustainability. CSR is the continuing commitment by businesses to behave ethically & contribute to economic development while improving the quality of life of the workforce & their families ,local communities and the society at large. (World Business Council). 
• CSR requires companies to acknowledge that they should be publicly accountable not only for their financial performance but also for their social and environmental record. 
•  CSR encompasses the extent to which companies should promote human rights,democracy,community improvement and sustainable development objectives throughout the world. (Confederation of British Industry,2001). 
•  CSR is the commitment of businesses to contribute to sustainable economic development working with employees, their families, the local community and society at large to improve their quality of life in ways that are both for business and good for international development. (World Bank,24 March 2004). 
• CSR is an extended model of corporate governance based on the fiduciary duties owed to all the firm’s shareholders. CSR is about how companies manage the business processes to produce an overall positive impact on the society. CSR is the responsibility of corporations to go above and beyond what the law requires them to do. CSR is the responsibility of corporations to contribute to a better society and cleaner environment. 
• Eradicate extreme poverty and hunger. Achieve universal Primary education. Promote gender equality and empower women. Reduce child mortality. Improve maternal health. Combat HIV/ AIDS, Malaria & other fatal diseases. Ensure environmental sustainability. Develop a global partnership. Source:( United Nations Millennium Project).

SECTION 135

• Applicability: Section 135 and Schedule VII of the Companies  Act 2013, is made applicable from 1st April, 2014. 
• Companies covered: The Company having net worth of Rs. 500 crore or more, or turnover of Rs. 1,000 crore or more or net profit of Rs. 5 crore or more during any financial year. 
• Composition of CSR Committee: 3 or more directors, out of which at least one director shall be an independent Director. Unlisted Public Company or a Private Company can go without the Independent Director.
• Role of the CSR Committee: To institute a transparent monitoring mechanism for implementation of the CSR projects or programmes or activities undertaken by the Company.

Role of the Board:

• To Ensure that Company spend in every financial year  atleast 2% of average net profit made during last 3 financial years;
• To approve CSR policy after taking account suggestions made by CSR Committee;
• To disclose contents of CSR Policies in CSR Report and in Company’s website;
• Ensure that activities framed under CSR policy are actually undertaken by the Company;
• If the Company fails to spend the amount earmarked for CSR activities, the Board Report to disclose reasons for not spending the amount.

Activities to be included in the CSR Policy:

1. Eradicating hunger, poverty and malnutrition, promoting preventive health care and sanitation and making available safe drinking water;
2. Promotion of education including special education and employment enhancing vocation skills especially among children, women, elderly and differently abled and livelihood enhancement projects;
3. Promotion of gender equality and empowering women, setting up homes and hospitals for women and orphans, setting up old age homes, day care 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 quality of soil, air and water;
5. Protection of national heritage, art and culture including restoration of building and sites of historical importance and works of art; setting up public libraries, promotion and development of traditional arts and handicrafts;
6. Measures for the benefit of armed forces veterans, war windows, and their dependants;
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 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;
9. Contribution or funds provided to technology incubators located within academic institutions which are approved by the Central Government;
10. Rural development projects.

FORMAT OF REPORTING

• Format for the annual report on CSR initiatives to be included in the board report by qualifying companies;
• Provide a brief outline on Company’s CSR Policy including an overview of activities proposed to be undertaken and indicate the web link to the CSR Policy; 
• The composition of the CSR committee  Average Net profit of the company for last three financial years; 
• Prescribed CSR expenditure; 
• In case the company has failed to spend the 2% of the Average Net Profit (INR) of the last 3 financial years, please provide the reasons for not spending the amount.
• FORMAT OF REPORTING 
• Details of CSR activities/ projects undertaken during the year: 

                   a.) Total amount to be spent for the year; 

                   b.) amount carried forward from earlier years;

                   c.) amount spent during the year; 

                   d.) amount carried forward for the year. 

To be signed by CEO/ MD/ Director or Chairman CSR Committee. (Corporate Social Responsibility) Companies act, 2013

Conclusion

• The government has proclaimed corporate social responsibility a legislative duty for enterprises. This law gives the corporation a premium for its commitment to sustainability, human values and social responsibility. It is a right and hence has legal authority, even though it defies Salmond’s idea of rights and obligations.
• It is a form of legislation that respects social justice and takes a liberal viewpoint at the same time. This is, therefore, a sound law that takes into account various prospects. The argument is that they do so for sustainability’s sake, but they would not be interested in continuing them even at this level without regulation. Alternatively, because the company pays taxes and wages, etc., such laws do not have to be implemented.
• The law is based on the utilitarian concept of anything that serves the majority as legislation; likewise, it is a just law that is good for many because it benefits the majority. As a result, it becomes easier to access the statute’s legitimacy by evaluating the legal personhood of the company and its rights and obligations.
• However, the Constitution provides that a bill passed by parliament may reduce some rights. Therefore, the law on social responsibility acts as a control over the power of the private sector. There is a risk that the desire for capitalism will destroy the social good to benefit its citizens. Thus, even outside legal theory and jurisprudence, control becomes essential to operate.