Corporate Social Responsibility (CSR) has undergone remarkable changes over the years from merely dispensing cash through charity to organisations or NGOs engaged in social work to integrating CSR as a strategic business management concept.
We have seen the business sector generating wealth and value for the shareholders in the last 70 years, but simultaneously we also have the problems of poverty, unemployment, illiteracy, malnutrition etc. facing the nation. The corporate growth is sometimes seen as widening the gap between ‘India’ and ‘Bharat’ through its income-skewing capability. This gap needs to be bridged. While the Government undertakes extensive developmental initiatives through a series of sectoral programmes, the business sector also needs to take the responsibility of exhibiting socially responsible business practices that ensure the distribution of wealth and well-being of the communities in which the business operates.
Definition of CSR
United Nations Industrial Development Organization (UNIDO) has defined CSR as a management concept whereby companies integrate social and environmental concerns in their business operations and interactions with their stakeholders. CSR is generally understood as the way through which a company achieves a balance of economic, environmental and social imperatives (“Triple-Bottom-Line-Approach”), while at the same time addressing the expectations of shareholders and stakeholders.
Corporate social responsibility is a topic that is increasingly capturing the interest and imagination of people in the business world. Today it has grown beyond the earlier concepts of charity, philanthropy and relief measures. Today, it is recognised that it can play a vital role in nation-building through public-private partnerships. It can usher in regional progress and renewal of lives in towns and villages by generating employment and contributing to the education and health sectors.
CSR is the continuing commitment by businesses to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families, as well as that of the local community and society at large. In simple terms, CSR may be described as the responsibility of a corporation towards society in consideration of the support given and the sacrifices made by society.
Is CSR Mandatory in India?
Indian businesses have traditionally been socially responsible, with a long tradition of working within the values that have defined our nation’s character for millennia. Numerous examples can be given, viz., Tatas, Birlas, Mahindras etc., from the Corporate side. However, having recognized the importance of inclusive growth as an essential part of India’s quest for development, CSR was conceived as instrumental for integrating social, environmental and human development concerns in the entire value chain of corporate business
India had voluntary guidelines on Corporate Social Responsibility back in 2009. But on April 1, 2014, India became the first country to legally mandate corporate social responsibility.
CSR has to be adhered to by all listed companies. A company will come under the ambit of the new CSR policy
- if its net worth is Rs 500 Crore or more, or
- if its turnover is 1000 crore or more, or
- if its net profit is Rs 5 crore or more during any financial year.
Under any of these conditions, a company should spend at least 2% of the average net profit made during the three immediate preceding financial years, in pursuance of the Companies Act laid down towards Corporate Social Responsibility.
CSR in Today’s world
The 21st century is characterized by unprecedented challenges and opportunities, arising from increasing globalization, the desire for inclusive development, imperatives of climate change. The recent upheaval caused by the COVID-19 pandemic served as a stark reminder to prioritize ecological harmony over blindly chasing capitalism.
It is recognized worldwide that integrating social, environmental and ethical responsibilities into the governance of businesses ensures their long-term success, competitiveness and sustainability. This approach also reaffirms the view that businesses are an integral part of society, and have a critical and active role to play in the sustenance and improvement of healthy ecosystems, in fostering social inclusiveness and equity, and in upholding the essentials of ethical practices and good governance. It’s a strategic imperative for businesses as well since companies with effective CSR curate the image of socially responsible entities, achieve sustainable growth in their operations in the long run and their products and services are preferred by the customers.
