Corporate Social Responsibility Fundamentals

Corporate social responsibility (CSR) is also known as corporate responsibility and corporate citizenship. Since society is fundamentally based upon performance and profit, so it is necessary to impart a sense of corporate social responsibility with regard to modern commerce. The ethical approaches of purpose, principle and consequence are integral components of business social performance; itemising these contributions involves incorporating the
interests of ethics and morality within the corporate structure.

Corporate social responsibility is a management concept whereby companies integrate social and environmental concerns in their business operations and interactions with their stakeholders. Thus, CSR is generally understood as being the way through which a company achieves a balance of economic, environmental and social imperatives (“Triple-Bottom-Line-Approach”).

Key corporate social responsibility issues are:
Integration of environmental management tools into business plans, environmental management standards and eco-labelling
Benefits to the community and the general public
Improved financial performance
Increased sales and customer loyalty
Better product durability and functionality
Greater use of renewable resources, etc.
 

Abusive, unfair, corrupt or anti-competitive business practices are not included in the core principles of the Corporate Social Responsibility Voluntary Guidelines 2009.

Under Section 135 of the Companies Act, 2013, the provisions relating to corporate social responsibility are given.

Section 135 of the Companies Act, 2013 states that every company having net worth of rupees five hundred crore or more, or turnover of rupees one thousand crore or more or net profit of rupees five crore or more during any financial year shall constitute a corporate social responsibility committee of the board consisting of three or more directors, out of which at least one director shall be an independent director.

Section 135 of the Companies Act, 2013 states that the corporate social responsibility committee shall
(a) formulate and recommend to the board, a corporate social responsibility policy, which shall indicate the activities to be undertaken by the company as specified in Schedule VII
(b) recommend the amount of expenditure to be incurred on the activities referred to in clause (a)
(c) monitor the corporate social responsibility policy of the company from time to time

The board may decide to undertake the CSR activities as recommended by the CSR committee through a registered trust or a registered society or a company established by the company or its holding or subsidiary or associate company under Section 8 of the act or otherwise.

Triple bottom line works on the assumption that the corporation is a member of the moral community and this gives it social responsibilities. This theory focuses on sustainability and requires that any company weigh its actions on three independent scales: economic sustainability, social sustainability and environmental sustainability.

The CSR activities shall be undertaken by the company as per its stated CSR Policy, as projects or programs or activities. A company may also collaborate with other companies for undertaking projects or programs or CSR activities in such a manner that the CSR committees of respective companies are in a position to report separately on such projects or programs in accordance with these rules. The CSR projects or programs or activities undertaken in India only shall amount to CSR expenditure.

Section 135 of the Companies Act, 2013 states that the board of every company referred to in subsection (1) shall

1. after taking into account the recommendations made by the corporate social responsibility committee, approve the corporate social responsibility policy for the company and disclose contents of such policy in its report and also place it on the company’s website, if any, in such manner as may be prescribed
2. ensure that the activities that are included in the corporate social responsibility policy of the company are undertaken by the company
3. ensure that the company spends, in every financial year, at least two percent of the average net profits of the company made during the three immediately preceding financial years, in pursuance of its corporate social responsibility policy

The competitive advantage(s) of a properly implemented CSR is/are:
Integration of environmental management tools into business plans, environmental management standards and eco-labelling
Benefits to the community and the general public
Improved financial performance
Increased sales and customer loyalty
Better product durability and functionality
Greater use of renewable resources, etc.

Corporate social responsibility is a management concept whereby companies integrate social and environmental concerns in their business operations and interact with their stakeholders.

The triple bottom line approach focuses on sustainability and requires that any company weighs its actions on three independent scales: economic sustainability, social sustainability and environmental sustainability.