CORPORATE SOCIAL RESPONSIBILITY introduced in COMPANIES BILL, 2012

[Mr. M. GOVINDARAJAN]

 CORPORATE SOCIAL RESPONSIBILITY:

Corporate Social Responsibility is a form of self regulation integrated into a business model. It is also known as corporate conscience, corporate citizenship, social performance or sustainable business/responsible business. This term came into common use in late 1960s and early 1970s. CSR is about how company manages the business process to produce an over all impact on society. CSR is to achieve commercial success in ways that honor ethical values and respect people, communities and the natural environment..

Philip Kotler & Nancy Lee (2005) gave the concept for CSR as a commitment to improve community well-being through discretionary business practices and contributions of corporate resources. CSR is the sum of economic responsibilities, legal responsibilities, ethical responsibilities and philanthropic responsibilities.

The drivers of CSR are as follows:

•             The shrinking role of Government;

•             Demands for great disclosure;

•             Growing investor pressure; and

•             Competitive market.

The following are the benefits of CSR:

•             Strengthened brand positioning;

•             Enhanced corporate image;

•             Increased ability to attract, motivate and retain employees;

•             Increased sales and market share;

•             Increased appeals to investors and financial analysts.

EVOLUTION OF CSR IN INDIA:

The evolution of corporate social responsibility in India refers to changes over time in India of the cultural norms of corporations’ engagement of corporate social responsibility, with CSR referring to way that businesses are managed to bring about an overall positive impact on the communities, cultures, societies and environments in which they operate.[1] The fundamentals of CSR rest on the fact that not only public policy but even corporate should be responsible enough to address social issues. Thus companies should deal with the challenges and issues looked after to a certain extent by the states.

 Among other countries India has one of the most richest traditions of CSR Much has been done in recent years to make Indian entrepreneurs aware of social responsibility as an important segment of their business activity but CSR in India has yet to receive widespread recognition. If this goal has to be realized then the CSR approach of corporate has to be in line with their attitudes towards mainstream business- companies setting clear objectives, undertaking potential investments, measuring and reporting performance publicly.

CSR has gone through many phases in India. The ability to make a significant difference in the society and improve the overall quality of life has clearly been proven by the corporate. Not one but all corporate should try and bring about a change in the current social situation in India in order to have an effective and lasting solution to the social woes. Partnerships between companies, NGOs and the government should be facilitated so that a combination of their skills such as expertise, strategic thinking, manpower and money to initiate extensive social change will put the socio-economic development of India on a fast track. taxmanagementindia.com

CSR IS MADE MANDATORY:

Ministry of Corporate Affairs, Government of India brought ‘Corporate Social Responsibility Voluntary Guidelines, 2009. According these guidelines, each business entity should formulate a CSR policy to guide its strategic planning and provide a roadmap for its CSR initiatives, which should be an integral part of overall business policy and aligned with its business goals. The policy should be framed with the participation of various level executives and should be approved by the Board.The CSR policy should normally cover the following core elements:

•             Care for all stakeholders;

•             Ethical functioning;

•             Respect for workers’ right and welfare;

•             Respect for human rights;

•             Respect of environment;

•             Activities for social and inclusive development.

Now India has made implementation of CSR in the Companies Bill, 2012 which was passed in Lok Sabha on 18.12.2012. India may be the first country to make CSR  mandatory.

Section 135 deals with the Corporate Social Responsibility. The section requires that every company-

•             having net worth of Rs.500 crores or more; or

•             turnover of Rs.1000 crores or more; or

•             a net profit of Rs.5 crores or more

during any financial year shall constitute a Corporate Social Responsibility Committee of the Board. The said board shall consist of three or more directors, out which one director shall be an independent director. The composition of such Corporate Social Responsibility shall be disclosed in the Board’s Report as required under Section 134 (4).

FUNCTIONS OF THE COMMITTEE:

The Committee shall formulate and recommend to the Board, a Corporate Social Responsibility Policy which shall indicate the activities to be undertaken by the company as specified in Schedule VII of the Act.  Schedule VII describes the following activities to be undertaken by the company in CSR activities which are as detailed below:

(i) eradicating extreme hunger and poverty;

(ii) promotion of education;

(iii) promoting gender equality and empowering women;

(iv) reducing child mortality and improving maternal health;

(v) combating human immunodeficiency virus, acquired immune deficiency syndrome, malaria and other diseases;

(vi) ensuring environmental sustainability;

(vii) employment enhancing vocational skills;

(viii) social business projects;

(ix) contribution to the Prime Minister's National Relief Fund or any other fund set up by the Central Government or the State Governments for socio-economic development and relief and funds for the welfare of the Scheduled Castes, the Scheduled Tribes, other backward classes, minorities and women; and

(x) such other matters as may be prescribed.

The Committee shall recommend the amount of expenditure to be incurred on the activities referred to above. Further the Board is under obligation to monitor this policy from time to time.

ROLE OF BOARD:

     The Board of every company shall-

•    ensure that the company spends, in every financial year, at least two per cent. of the average net profits (to be calculated in accordance with the provisions of Sec. 198) of the company made during the three immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy:

•   give preference to the local area and areas around it where it operates, for spending the amount earmarked for Corporate Social Responsibility activities;

If the company fails to spend such amount the Board shall, in its report made under Section 134 (3) (o) specify the reasons for not spending the amount.

This time there is plenty of hope that the Company Bill will become an Act  and to improve the Corporate Social Responsibility concept in India.