CA. Kamal Garg CORPORATE SOCIAL RESPONSIBILITY

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Corporate Social Responsibility (CSR) – Complete Content

1. Introduction to CSR

Corporate Social Responsibility (CSR) refers to a company’s responsibility toward the social, environmental, and economic development of the communities it impacts. CSR represents a shift from profit-only motives to a holistic approach where businesses actively contribute to the well-being of society.

CSR is both a moral obligation and a statutory requirement in India for certain companies under the Companies Act, 2013.

2. Legal Framework of CSR in India

CSR is governed by Section 135 of the Companies Act, 2013, read with the Companies (CSR Policy) Rules, 2014, and amendments.

Applicability:

CSR provisions apply to companies that meet any one of the following criteria during the preceding financial year:

• Net worth of ?500 crore or more

• Turnover of ?1,000 crore or more

• Net profit of ?5 crore or more

3. Key Requirements under CSR Law

• CSR Expenditure:
  At least 2% of the average net profits (before tax) of the previous three financial years must be spent on CSR activities.

• CSR Committee:
  Eligible companies must form a CSR Committee of the Board consisting of at least three directors, including at least one independent director (if applicable).

• CSR Policy:
  The Committee should formulate and recommend a CSR policy and monitor its implementation.

• Annual Report Disclosure:
  CSR activities and spending must be disclosed in the Board’s Report and uploaded on the company’s website.

• Unspent CSR Amount:
  Unspent CSR funds must be transferred to a specific fund (e.g., PM CARES) or a separate CSR account within the prescribed timelines.

4. Permissible CSR Activities (Schedule VII)

CSR funds must be spent on activities listed in Schedule VII of the Companies Act. These include:

• Eradicating hunger, poverty, and malnutrition

• Promoting education and skill development

• Promoting gender equality and empowering women

• Ensuring environmental sustainability

• Protection of national heritage, art, and culture

• Measures for armed forces veterans and war widows

• Contributions to government relief funds (PMNRF, PM CARES)

• Rural development and slum area development

• Promoting sports and training to promote rural talent

• Disaster management, including COVID-19 relief

Note: Activities done in the normal course of business are not considered CSR (except for R&D related to COVID-19 in specified periods).

5. Modes of Implementing CSR

Companies can undertake CSR:

• Directly by themselves

• Through registered trusts, societies, or Section 8 companies

  • Must be registered with the Ministry of Corporate Affairs (MCA) with CSR-1 form

• In collaboration with other companies

6. CSR Reporting & Compliance

• File Form CSR-2 annually on the MCA portal

• Maintain proper documentation and impact assessments

• Conduct internal or third-party audits (especially for large-scale CSR)

7. Penalties for Non-Compliance

If the company fails to spend the required amount:

• The unspent amount must be transferred to a prescribed fund

• Penalty: Twice the unspent amount or ?1 crore (whichever is lower) on the company, and ?2 lakh on each defaulting officer

8. Importance of CSR

• Builds brand reputation and public trust

• Enhances employee engagement and retention

• Promotes sustainable development

• Attracts ethical investors

• Aligns business growth with community welfare

9. Recent Developments & Trends

• Mandatory impact assessment for companies with average CSR obligation of ?10 crore or more in the past three years

• Rise of ESG (Environmental, Social, and Governance) as a global reporting standard

• Integration of CSR with SDGs (Sustainable Development Goals)

10. Best Practices in CSR

• Align CSR with core business values

• Focus on long-term and measurable impact

• Engage stakeholders: community, employees, NGOs

• Use technology for transparency and tracking

• Communicate outcomes in CSR reports and sustainability reports

Conclusion

CSR is not just a legal compliance, but a strategic commitment to nation-building. Companies today are expected to play a meaningful role in addressing social and environmental challenges. A well-implemented CSR program reflects the company's values, builds goodwill, and ensures sustainable success for both the business and the society it serves.