Corporate Social Responsibility (hereinafter referred to as “CSR”) is one of the methods whereby the companies pay back to the society by making their contribution for the welfare of mankind. As per the European Union, it “is a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis”. Corporate Social Responsibility ascertain the socio-economic and environmental welfare of the society while balancing the interests of the corporates.
CSR- A responsibility
Introduced under the provisions of Section 135 of the Companies Act, 2013 (hereinafter referred to as the “Act”), the Government makes it mandatory for certain class of profitable enterprises to spend a share of their profits on social activities by the way of a dedicated procedure of CSR. The welfare causes may include acts as eradication of hunger/ malnutrition or poverty, promoting healthcare and sanitation, supporting education and employment enhancing vocational skills, encouraging gender equality, ensuring sustainability, protecting heritage, working for the benefit of armed forces, fostering training for sports, contribution for relief projects, etc.
Following companies are required to constitute a CSR Committee for the enforcement of the policy in the said regard:
- having net worth of Rupees Five Hundred crore or more, or
- having turnover of Rupees One Thousand Crore or more or;
- having a net profit of Rupees Five Crore or more
Amendment to CSR provisions
The Ministry of Corporate Affairs vide its notification dated September 19, 2018, allowed the enforcement Section 37 of the Companies (Amendment) Act, 2017 (hereinafter referred to as the “Amendment Act”) whereby amendment to covered under Section 135 of the Act stating that:
- Where a company is not required to appoint an independent director as per the Act, it shall have in its CSR Committee two or more directors [Proviso to Section 135(1)];
- For the purpose of computation of net profits in furtherance of the CSR credit shall be given to bounties and subsidies received from any Government or any public authority in accordance with the provisions of Section 198 of the Act. [Explanation to Section 135(5)].
CSR is a means which permits the corporates to function in an ethical and sustainable way and deals with its environmental and social impacts. It helps determine a careful consideration of human rights, the community, environment, and society in which it operates. By the way of incorporation of changes in the present regulatory framework governing CSR, the Government aims to make sure effective and mandatory compliance of the companies towards their social obligations towards the society making them responsible corporates.