Corporate Social Responsibility

This is a hot topic in the business world. Some of the corporates are busy in discussing the pros and cons of CSR. Some of the corporates are suggesting changes in the CSR guidelines. Some of NGOs are finding this as a ‘great opportunity’ to mobilize funds. Needless to say, a bunch of people are born as CSR consultants. There are paid seminars and workshops on CSR being held across India.

What is CSR?

A couple of years back, I had been to ShankaraNethralaya, Chennai.There I saw a board in front of a lab that said ‘Donated by Infosys’; If you visit Krishna Rao Park, Basavanagudi, you will find a mechanical gym for senior citizens and on the display board it is mentioned as ‘Sponsored by RMZ Corp’. If you pass a circle near Madhavan Park, Jayanagar, you will find a nicely done small garden around the centre of the circle with a nameplate ‘Maintained by ‘Cloud Nine Hospital’ This is CSR. There is nothing new about spending money by the corporates on social activities. This is an age old phenomenon. It’s just that CSR is included in the new Company Law, 2013 (Section 135 of Companies Act, 2013)

Applicability

The companies who have

• Net worth of Rs.500 Crore or more; OR
• Turnover of Rs.1000 Crore or more; OR
• Net Profit of Rs.5 Crore or more;

Spend atleast 2% of average net profit of last 3 years on CSR activities 

CSR Committee to be formed consisting of 3 directors out of which atleast 1 director should be independent director.

Social Activities: Some of them are –

• Eradicating extreme hunger and poverty
• Promotion of education
• Promoting gender equality and empowering women
• Reducing child mortality and improving maternal health
• Ensuring environmental sustainability
• Employment enhancing vocational skills
• Social business projects
• Contribution to Prime Minister’s National Relief Fund.

 Some other important points to be noted –

• A company can spend CSR amount through the Trust or society or Section 8 company (earlier Section 25 Company) set up by it. So, the amount needn’t be spent through other external trusts.
• The companies can also pay the amount to any existing trust/societies that have 3 years prior existence.
• The amount to be spent in India
• The CSR project can be jointly taken up by various corporates
• If the benefit of CSR is exclusively for company employees or their family members, then such expenses won’t be considered as CSR spending.
• There is no penal provisions (as on date) for violation of CSR rules
• Any expenses met such as salary of employees, honorarium to volunteers to execute CSR activity can be considered as part of CSR project.
• Money given towards the corpus of the trust or society is also considered as CSR spending, as long as the objective of the trust/society is to carryout specified social activities.

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