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There is a long and varied history associated with the evolution of the concept of Corporate Social Responsibility (CSR). it is generally understood to be a mechanism whereby companies take responsibility for the impacts of their decisions and practices by holding themselves to a set of ethical, social and ecological standards - with the aim of contributing towards the health, welfare and sustainable development of society. The term was coined in the 1950s, although the real impetus came later after several industrial disasters.
Over the past few decades, expectations on corporate behavior have continued to rise alongside greater public awareness around human rights, environmental protection, and other issues. The institutionalization of CSR is stronger than ever, as many companies have sought to adapt to this more socially conscious customer base. There is strong evidence to suggest that highlighting responsible business practices endows a company with clear competitive advantages.
India is the first country in the world to make corporate social responsibility (CSR) mandatory, following an amendment to the Companies Act, 2013 in April 2014. Businesses can invest their profits in areas such as education, poverty, gender equality, and hunger as part of any CSR compliance.
The amendment notified in the Companies Act, 2013 requires companies with a net worth of INR 5 billion (US$70 million) or more, or an annual turnover of INR 10 billion (US$140 million) or more, or net profit of INR 50 million (US$699,125) or more, to spend 2 percent of their average net profits of three years on CSR.
The CSR amendments introduced under the Act now require companies to deposit the unspent CSR funds into a fund prescribed under Schedule VII of the Act within the end of the fiscal year. This amount must be utilized within three years from the date of transfer, failing which the fund must be deposited in to one of the specified funds.
The new law prescribes for a monetary penalty as well as imprisonment in case of non-compliance. The penalty ranges from INR 50,000 (US$700) to INR 2.5 million (US$35,000) whereas the defaulting officer of the company may be liable to imprisonment for up to three years, or a fine up to INR 500,000 (US $7,023), or both.
Know more about corporate social responsibility in India on the National CSR Portal of the Government of India.
Since the applicability of mandatory CSR provision in 2014, CSR spending by corporate India has increased significantly. In 2018, companies spent 47 percent higher as compared to the amount in 2014-15, contributing US$1 billion to CSR initiatives, according to a survey.
Listed companies in India spent INR 100 billion (US$1.4 billion) in various programs ranging from educational programs, skill development, social welfare, healthcare, and environment conservation, while the Prime Minister’s Relief Fund saw an increase of 139 percent in CSR contribution over last one year.
The education sector received the maximum funding (38 percent of the total) followed by hunger, poverty, and healthcare (25 percent), environmental sustainability (12 percent), rural development (11 percent). Programs such as technology incubators, sports, armed forces, reducing inequalities saw negligible spends.
Amid the COVID-19 (coronavirus) outbreak, the Ministry of Corporate Affairs has notified that companies’ expenditure to fight the pandemic will be considered valid under CSR activities. Funds may be spent on various activities related to COVID19 such as promotion of healthcare including preventive healthcare and sanitation, and disaster management Follow the latest India COVID-19 updates.
The Tata Group conglomerate in India carries out various CSR projects, most of which are community improvement and poverty alleviation programs. Through self-help groups, it has engaged in women empowerment activities, income generation, rural community development, and other social welfare programs. In the field of education, the Tata Group provides scholarships and endowments for numerous institutions.
The group also engages in healthcare projects, such as the facilitation of child education, immunization, and creation of awareness of AIDS. Other areas include economic empowerment through agriculture programs, environment protection, providing sports scholarships, and infrastructure development, such as hospitals, research centers, educational institutions, sports academy, and cultural centers.
Ultratech Cement, India’s biggest cement company is involved in social work across 407 villages in the country aiming to create sustainability and self-reliance. Its CSR activities focus on healthcare and family welfare programs, education, infrastructure, environment, social welfare, and sustainable livelihood.
The company has organized medical camps, immunization programs, sanitization programs, school enrollment, plantation drives, water conservation programs, industrial training, and organic farming programs.
Indian automobile manufacturer Mahindra & Mahindra (M&M) established the K. C. Mahindra Education Trust in 1954, followed by Mahindra Foundation in 1969 with the purpose of promoting education. The company primarily focuses on education programs to assist economically and socially disadvantaged communities.
Its CSR programs invest in scholarships and grants, livelihood training, healthcare for remote areas, water conservation, and disaster relief programs. M&M runs programs such as Nanhi Kali focusing on education for girls, Mahindra Pride Schools for industrial training, and Lifeline Express for healthcare services in remote areas.
ITC Group, a conglomerate with business interests across hotels, FMCG, agriculture, IT, and packaging sectors has been focusing on creating sustainable livelihood and environment protection programs. The company has been able to generate sustainable livelihood opportunities for six million people through its CSR activities.
Their e-Choupal program, which aims to connect rural farmers through the internet for procuring agriculture products, covers 40,000 villages and over four million farmers. It’s social and farm forestry program assists farmers in converting wasteland to pulpwood plantations. Social empowerment programs through microenterprises or loans have created sustainable livelihoods for over 40,000 rural women.
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