CORPORATE SOCIAL RESPONSIBILITY (CSR) CURRENT SCENARIO IN INDIA D.Varsha, LLM(Business Law), Dr. Ambedkar Govt Law College, Chennai, Tamilnadu. ABSTRACT Government of India introduced CSR in the Companies Act, 2013 where a mandate was made that a company has to spend at least 2% of the last 3 years average net profits on CSR activities as specified under Schedule VII.
It is an attempt to make the private entities contribute towards the social development and to yield for greater good for the community. This paper focuses on the current scenario of CSR in India.INTRODUCTION A need was felt that companies should be made more responsible and accountable for their social and environmental consequences, where a way is to be made in which the profits made by companies should be channeled to improve the society, so in 2013 CSR was introduced in Companies Act, 2013 where it was mandated that 2% of profits of a corporate entity has to be spent on CSR activities. CSR creates an obligation on corporate sector for societal development with professional management capabilities of the private sector. As per Section 135 of the Act, companies with an annual turnover of at least Rs 1,000 crore, or a net worth of minimum Rs. 500 crore, or a net profit of Rs 5 crore and above shall constitute a CSR panel of the Board.
Reporting will be done on an annual basis, commencing from FY15. Such companies (including foreign companies in India) are required to mandatorily spend 2% of their average net profit towards specified CSR activities during the year. Schedule VII of the Companies Act prescribes activities towards which CSR expenditure should be incurred, including eradicating extreme hunger and poverty, promoting education, ensuring environmental sustainability, social business projects, reducing child mortality and improving maternal health, etc.
WHAT IS CSR? There is no precise definition of CSR, however on 25.10.2011, the European Commission came up with a definition of CSR as “the responsibility of enterprises for their impacts on society” OECD refers CSR to RBC(Responsible business conduct) which means ” complying with laws, such as those on respecting human rights, environmental protection, labour relations and financial accountability, even where these are poorly enforced and private voluntary initiatives addressing the latter aspects of RBC”CSR TRENDS IN INDIA In the Financial Year 2016-2017 there was a rise about 28.21% in comparison to previous year. Many listed companies spend Rs 84.
35 billion in various programs. Educational and health sector gained maximum funding followed by rural developmental sector.The major areas on which CSR allocations are made are :AreaPercentage spentEducation27.1Health14.86Rural development13.82Water and sanitation10.2Environment and wildlife6.
98Community development4.74Women and Children0.90Top 10 companies which spent on CSR in 2017CompaniesRankTata Chemicals Ltd.1Tata Steel Ltd.2Tata Power Company Ltd.
3Shree Cements Ltd.4Tata Motors Ltd.5UltraTech Cement Ltd.6Mahindra & Mahindra Ltd.
7ACC Ltd.8Ambuja Cements Ltd.9ITC Ltd.
10Area wise allocation:StatePercentage of CSRAndra Pradesh4%Delhi3%Gujarat6%Karnataka4%Maharastra14%Odhisa5%Rajasthan3%Tamil Nadu4%Telengana4.4%Uttar Pradesh3.3% CSR AS A TOOL FOR BRANDING Nowadays Corporate entities take advantage of CSR for building their brand reputation. Consumers are most likely to purchase goods from a company which is socially responsible. Contention is that a company must create persistent and committed efforts towards the society which may be challenging at first but it will in turn help in building reputation and can play a huge role in influencing people. By making right use of the funds, CSR can create a huge impact upon the society as well as the environment which will lead to increased goodwill and reputation. Even though CSR is used for brand promotion the intent behind such is for the betterment of the society.
A pertinent question to be asked here is whether CSR can be aligned with the company’s business? The rules of CSR prohibits CSR expenses from being claimed as business expenditure, these expenses are not incurred in normal course of business an obligation is placed upon the corporate entity that they are to be paid back to the society rule 4(5) of the CSR Rules, 2014 states that such CSR project or activities that benefit only the company or that of their employees shall not be considered as CSR expenditure. CONCLUSION The mandate of 2% CSR is a right step towards societal development; it should not be used as a mask for corporate irresponsibility in its core operations. Recent data reveal that CSR funds and project are used for promoting the brand value rather than for development of society which defeats the main purpose for which these rules have been implemented. Companies need to extend their preference for spending CSR rather than confining it to their own spheres for benefitting company’s operations, companies should extend their spheres for CSR projects or donate it to Government programs.