“Creating a strong business and building a better world are not conflicting goals–they are both essential ingredients for long-term success” – Bill Ford
Modern enterprises have a huge social responsibility. Apart from creating employment opportunities and profits for their investors, it is equally important for them to align efforts in uplifting the underprivileged sections of society. By making corporate social responsibility (CSR) an integral part of their business operations, enterprises can forge ahead to find a solution to global developmental issues.
Corporate Social Responsibility in a Nutshell
CSR, a management concept, is geared towards enabling organizations to integrate social and environmental concerns in business operations and interactions with their stakeholders. CSR is an ideal way through which organizations can strengthen the socio-economic sector of society.
CSR in India
Formulated under the Companies Act, 2013, India became the first country to legally mandate CSR in the year 2014. The act required organizations, with a net worth of ₹500 crore or more, or with a turnover of ₹1,000 crores or more, or a net profit of ₹5 crores or more during the immediate preceding financial year, to spend 2 percent of their average net profits on CSR activities. This model strengthened governance within an organization, while driving social, economic, and environmental good in the society.
Given here is a snapshot of what does CSR include:
Projects and programs enacted and relating to activities specified in Schedule VII of the Companies Act 2013 and the amendments made thereunder
Projects or programs, relating to those activities, which are undertaken by the board of directors of a company in ensuring the recommendation of the CSR Committee of the board, declared CSR Policy of the Company along with the conditions that such policy will cover subjects specified in Schedule VII of the Act
CSR Funding
Earlier, for many business leaders CSR was synonymous to caring for the environment and donating to relief funds. The concept, however, has evolved with time to include equitable and quality healthcare, education, skill development, and digital literacy.
Today, for many organisations, CSR has become the cornerstone of their corporate strategies and values. And as a result, CSR funds have seen a significant rise over the last couple of years. Furthermore, with COVID-19 creating a huge impact on the socio-economic condition, certain changes have also been enforced in the CSR rules. With the execution of new rules, CSR funds can be utilized for setting up makeshift hospitals and temporary COVID-care facilities.
The Role of Corporates and NGOs in CSR
The leadership teams, board of directors, CSR committees, and CSR team take charge of investing the funds judiciously. The board and chief financial officer monitor, evaluate, and report CSR activities. CSR committee is held responsible to take steps, including:
Formulating the list of CSR projects
Executing plan(s)
Assessing needs and impact made thereafter
Monitoring projects and the CSR policies alike
Corporates may either choose to collaborate with NGOs for implementing activities related to projects/programs or they can execute the same set of activities through CSR teams. If funds are given to an NGO, it becomes imperative for corporations to keep monitoring activities and the financials of the project. This helps corporations avoid being penalized in any way and stay compliant.
Prohibited Activities in CSR
It goes without saying that not every welfare activity can be pushed under CSR. There’s a predefined and clearly laid out CSR rules, which prohibit the enlisted:
Performing activities in the normal course of business or activities, benefiting employees only.
Spending toward sponsorships, with an intent of generating marketing benefits.
Sponsoring sports personnel outside India except for training sports personnel representing any State or Union territory at the national level or India at international level.
Political donations.
Summing Up
Well-defined and thoughtful CSR initiatives can create a multi-fold impact and go a long way in building a better tomorrow for society. It is imperative for modern enterprises to proactively approach CSR and be committed to creating a positive social, economic, and environmental impact on the communities in which we operate.
(Views are personal)
