What is Corporate Social Responsibility (CSR)

Corporate social responsibility (CSR) is a self-regulating

business model that helps a company be socially accountable
— to itself, its stakeholders, and the public. By practicing
corporate social responsibility, also called corporate citizenship,
companies can be conscious of the kind of impact they are
having on all aspects of society including economic, social, and
environmental. To engage in CSR means that, in the normal
course of business, a company is operating in ways that
enhance society and the environment, instead of contributing
negatively to them.

1- Social responsibility is an ethical theory in which individual

are accountable for fulfilling there civic duty
2- Corporate social responsibility – it is one of the most
important business ethics quality for an organization to
become successful
3- Csr- it refers to business practices involving initiative that
benefits society.

Different name of CSR

1)Social responsible business

2)corporate citizenship

3)corporate accountability

The drivers of csr

There are five major trends that influence CSR and that have been the driving force
behind the CSR phenomenon. These forces are:
1. Transparency: Companies can no longer hide things. With the creation of the internet
and government legislation. What companies do for either the good or the bad will be
known almost instantaneous, where in the past companies have been able to hide
things from the citizens.

2. Knowledge: With all the information we can find today this has caused the economy
to be stricly information based, we know have more information than ever before at our
disposal. This is great for consumers and investors, consumers will be able to access
these companies files and when purchasing between products that are similar in
nature, will be able to choose the one that has the best CSR

3. Sustainability: There has been a huge topic lately around the world, that with our
population so high we have crossed the sustainable yield threshold of many of our
natural environmental systems that we heavily rely on. This is a major problem for us
and some of these companies that heavily rely on these environmental systems for
there business and are under a great deal of pressure to cut back and show they are
doing there best to be environmentally friendly, for the good of our future.

4. Globalization: Which is the cooperations of people, companies and governments of

different nations to come together and create a plan for our future so we will be able to
sustain life here on our planet for as long as possible.

5. Failure of the Public Sector: Many people in our societies world wide have lost their
faith in the government, and arguabbly expect less from them because of previous
promises that they have failed to keep. With this failure of the public secotr the pressure
has greatly increased to those who own businesses and corporations, to take action for
their own social actions and do whats right for the people.

TYPES OF CSR
Ethical CSR

This is the legal and ethical requirements that a business must fulfil. This is the ‘cover your back’
aspect of CSR and failure to address these requirements can result in a loss of reputation, or even
worse, legal prosecution. Large companies are well advised to have a specialist CSR department to
keep on top of legal requirements, lack of knowledge is never a defence in a court of law! There are
strict laws regarding working conditions for employees, and environmental laws regarding sourcing
materials, emissions and so forth.

Altruistic CSR

Altruistic CSR goes beyond the basic requirements that any business must adhere to. An act of
altruistic CSR may not directly benefit the company, at least, the benefits to the business will not be
the main focus of the project, however, most acts of CSR do have a positive knock-on effect for
businesses. Let us take a look at an example…
A company decides to have a fund raising event for a local charity. The employees get involved with
various events, a non-uniform day, a raffle and a cake stall. An amount of cash is raised and a
representative from the charity visits the company to accept a cheque. This event may have cost the
business money, they may have lost man hours from staff involved in the event, and it doesn’t have a
direct impact on the business, but the indirect impact can be far-reaching:

The staff will have fun, improving morale.

The staff will feel like they have done something worthwhile.

The staff will appreciate the fact that their employer cares enough about a charity to put on such an
event.

The event may make the local paper, TV news or at least be talked about in the local community,
putting the business in a positive light locally.

Strategic CSR

Strategic CSR is a carefully planned act of CSR that has a direct and expected impact on the
business. This type of CSR is implemented primarily for the affect it will have on the business. The
types of act involved could be quite varied, depending on the outcome desired, and may be initiated
as a direct result of an external issue. Let us look at examples to show causes and response
strategies…

A newspaper gives a bad write up on the environmental ideals of a business.

In response the company implements energy saving measures throughout the business and releases
a press release detailing these actions. In addition they have a high-profile opening day for a small
community recycling centre on their land. They invite a celebrity to open it. They receive some good
publicity as planned.

Staff turnover is high, morale is low. The business isn’t keeping their employees long enough, work
isn’t getting done, but the business can’t afford to increase wages across the board.

In response, the business holds a consultation with all staff members, everyone is included, from the
work experience girl, to the cleaner, to the CEO. This helps the staff to feel that at least their needs
are being listened to. As a result some changes are implemented. A gym is installed for staff to use
during their lunchtimes and flexible working times are planned for future implementation, allowing staff
to more easily deal with family commitments.

The business is worried that they are not getting enough highly skilled applicants for job vacancies.

Looking at the long term future of the business, the company sponsors scholarships at a local college
for a student to study relevant skills, with the offer of a work placement at the company. An
investment in education now, could pay off well in the future.

So you can see, there is so much more to CSR than simply acts of philanthropy. CSR is an
increasingly important aspect of running any business, and it goes far beyond simple legal and ethical
obligations. You will also now realise that the positive effects of well planned CSR can have a far
reaching impact on a business. CSR is definitely not all about generous acts, out of the goodness of a
company’s heart.

Forward thinking businesses would do well to invest time and money on their CSR strategies. It may
well become even more important as we move into the future. It’s a win-win ideal for businesses,
communities and the environment. Businesses large and small tend to receive a lot of bad press
when it comes to social and environmental responsibility, so the importance to turn this around should
be at the forefront of any businesses plans for the future.
BENEFITS OF CSR
1- Increase in employee loyality redention
2- A good image in the society
3- Increase customer loyality
4- Increase reputation and brand image
5- Improvement in the quality of product and services.

Corporate Social Responsibility

under Companies Act
Corporate Social Responsibility (CSR) assumes significance as it permits companies to engage
in projects or programs related to activities related to social welfare and improvement enlisted
under the terms of Companies Act, 2013. There is an element of flexibility in company activities
by allowing them to select their preferred CSR engagements that are in agreement with the
overall CSR policy of the company. In this article, we review the applicability of CSR, policy of
CSR, role of Board of Directors and activities of CSR.

Definition of Corporate Social

Responsibility (CSR)
The term Corporate Social Responsibility or CSR has been defined as under, but is not limited
to:

 Projects or programs with reference to activities that are specified in the Schedule; or
 Projects or programs related to activities undertaken by the Board in pursuance of
recommendations of the CSR Committee according to the declared CSR policy subject to
the condition that such policy covers subjects explained in the Schedule.

Applicability of Corporate Social

Responsibility to Companies
Corporate Social Responsibility is required for all companies viz. private limited company, limited
company. The following companies are necessary to constitute a CSR committee:

 Companies with a net worth of Rs. 500 crores or greater, or

 Companies with a turnover of Rs. 1000 crores or greater, or
 Companies with a net profit of Rs. 5 crores or greater.

If any of the above financial strength criteria are met, the Corporate Social Responsibility (CSR)
provisions and related rules will be applicable to the company. These companies are required to
form a CSR committee consisting of its directors. This committee oversees the entire CSR
activities of the Company.

Note: Corporate Social Responsibility is a requirement for companies meeting the above criteria.
On the other hand, Section 8 Companies are incorporated solely for not-for-profit
purposes.

Role of Board of Directors in CSR

The board of directors of a company plays a significant role in CSR activities of the company.
The role of Board is as follows:

 Approval of the CSR policy.

 Ensuring its implementation.
 Disclosure of the contents of CSR policies related to its report.
 Placing the same on Company’s website.
 Ensuring that statutory specified amount is spend by the company with reference to CSR
activities.
 It’s significant to note that there is no penalty if the particular amount is not spent on CSR
activities. In such case, the board’s report must identify the reason for such short
spending.

CSR Committee and Policy

All qualifying company required to have a CSR committee are required to spend at least 2% of its
average net profit for the directly preceding 3 financial years on CSR activities. Additionally, the
qualifying company shall be necessitated to comprise a committee (CSR Committee) of the
Board of Directors (Board) comprising of 3 or more directors. The CSR Committee will prepare
and recommend to the Board, a policy which will specify the activities to be undertaken (CSR
Policy); advocate the amount of expenditure to be incurred on the activities referred and monitor
the CSR Policy related to the company. The Board will take into account the recommendations
made by the CSR Committee and support the CSR Policy of the company.

Activities permitted under Corporate

Social Responsibility (CSR)
The following activities can be performed by a company to accomplish its CSR obligations:

 Eradicating extreme hunger and poverty

 Promotion of education
 Promoting gender equality and empowering women
 Reducing child mortality
 Improving maternal health
 Combating human immunodeficiency virus, acquired, immune deficiency syndrome,
malaria and other diseases
 Ensuring environmental sustainability,
 Employment enhancing vocational skills, social business projects
 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 such other matters as may be prescribed.

Importance to Local Areas

and Neighborhoods
Under the terms of Companies Act, preference must be given by companies in its CSR activities
to local areas and the areas where the company operates. Company may possibly also choose
to link with 2 or more companies for fulfilling the CSR activities provided that they are competent
to report individually. The CSR Committee will also prepare the CSR Policy in which it includes
the projects and programmes which is to be undertaken, organize a list of projects and
programmes which a company plans to embark on during the execution year and also focus on
integrating business models with social and environmental priorities and process for the reason
of creating share value. The company can in addition make the annual report of CSR activities in
which they declare the average net profit for the 3 financial years and also approved CSR
expenditure but if the company is not capable to spend the minimum required expenditure the
company has to provide the reasons in the Board Report for non-compliance so that there are no
related penal provisions.