Corporate Social Responsibility (CSR) is taken very seriously in India. In fact, it is the only country to have a mandatory CSR spending law in the world. It was introduced for the first time in India under the Companies Act 2013 under section 135. Its rules were notified in Feb 2014 and came into effect since April 2014.
What is CSR?
The basic principles of CSR: Although the ideals of CSR have a long history in India, its roots can be traced to Mahatma Gandhi’s dream of building a self-sustainable society. Gandhiji was of opinion that concentration of wealth with one group of people is of no good to the welfare of the society. Which is why he formulated the trusteeship model so that wealthy industrialists are obligated to invest in the welfare of society. This was, however, limited to very few activities. After Independence and the subsequent liberalization of Indian economy, globalization ensured global standards were met. Although many industrialists like TATA, Birla and even PSUs (Public sector Units) were doing activities in line with current CSR practice, the CSR laws were proposed in India.
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India still needs to improve in terms of development and CSR can catalyse such endeavors because Indian businesses spend around ₹15,000 crore a year on CSR as per pre-pandemic official estimates.
Corporate social responsibility law
This law is applicable to all companies incorporated in India and have either of these in their preceding financial year:
- Net worth of INR 500 Cr or more or
- Turnover of INR 1000 Cr or more or
- Net profit of INR 5 Cr or more
It has also been clearly mentioned that under this law, pure philanthropy or mere donations cannot be considered as CSR endeavors.
The list of activities and areas under the Sustainable Development Goals (SDGs) are defined clearly under CSR law. All organizations have to spend at least 2 % of their average net profit for three consecutive fiscal years as per CSR law. A lot of development has been happening in this space to make every work accountable. The Indian government keep making efforts for impactful results. Many changes have been happening for FDI (foreign direct Invesment) as there were some reports of fund misuse. As many companies which do CSR are not doing what they should do or NGOs which get funds but not making good use of the money. Recently many changes also happened in the CSR policy with amendments in terms and definitions as notified under the MCA ( Ministry of corporate affairs) notifications 2021. Here’s some of the key changes:
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- The definition of administrative overheads has been introduced and it excludes expenses directly incurred for designing, implementation, monitoring, and evaluation of a particular CSR project.
- Now there is compulsory registration electronically with Ministry of corporate affairs so that government knows exactly where and which agencies are doing implementations
- New terms have been included under the international organisation section so that instances like NGOs or any organisation working in this sector can take help from such international organisations in designing, monitoring and evaluation type activities.
- The Impact assessment has been added new in the policy so that any activity done by any the organisation can be verified. It can happen through proper CSR assessment and reporting methodology. To know more about it, view this course, linked below. Subscribe to our YouTube channel and hit the bell so such content get pushed to you!
We have only covered a few of the many updates in this topic. There are many rules and policies which keep changing acording to time and requirements.
Currently India stands at a low HDI(Human development ranking ) and much more is needed to remove poverty, hunger and many more issues like child malnutrition, education, the fight towards climate change. The CSR structure has the potential to bring together government, NGOs and international organization to work together for the benefit of the society.
The following videos are valuable knowledge sources for getting a deeper understanding of CSR in India:
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