By Priyasha Sen Gupta
India is one of the first countries in the world to promulgate a corporate social responsibility law. After the Companies Act, 2013 was revised in April 2014, the law became mandatory. Section 135 of the Companies Act, 2013 and the Companies (Corporate Social Responsibility) Rules, 2014 define corporate social responsibility as a company’s overall responsibility for the environment and society, in which the company is obliged to perform its business through environment-related activities such as environmental protection, social and educational activities, and more.
What is Corporate Social Responsibility?
Kotler and Lee are recognized experts in business and marketing. They define Corporate Social Responsibility as the obligation to enhance social well-being through business practice, diligence, and the contribution of company resources. The company fulfils its corporate social responsibility obligations in order to maintain social goals.
According to Section 2 (d) of the Companies (CSR Policy) Amendment Rules, 2021, "Corporate Social Responsibility (CSR)" refers to the activities carried out by the company in accordance with the legal obligations as per Section 135 of the Act, along with the provisions of the law, however, it does not include the following:
• The activities that are carried out in accordance with the company's normal course of business.
• All activities outside of India, with the exception of the training of Indian sports personnel who constitute or represent a state or union territory at a national level or from India at an international level.
• Direct or indirect donations of any amount to a political party under section 182 of the Act.
• Activities for the benefit of the company's employees as defined in Section 2 clause (k) of the Code on Wages, 2019.
• Activities that are to be supported by companies in the form of sponsorship in order to achieve marketing advantages for their products or services.
• Activities carried out to comply with other legal obligations under applicable law in India.
The History of CSR in India
In early and medieval India, kings, landlords, and businessmen accompanied the concept of social duty and additionally gave significance and value to social duty. Every person then believed withinside the term “The more you give, the more you receive”. The sustainability and boom of each person and the society as a whole can best be advanced and accomplished by the collective growth of the society.
Significance of CSR
• CSR helps companies to strengthen relationships with stakeholders.
• Provides important assistance in the recruitment and retention of human resources and ensures a good environment among the existing employees.
• Reduces risk management and helps to do the right things within an organization.
• Build brand reputation through innovation and other CSR initiatives.
• Increases while maintaining brand value as the media presence casts a positive light on the company.
• It also helps with the growth of the value of the corporate brand by cultivating and strengthening social relationships with customers.
• Helps companies to develop and legitimize a larger market share.
Amendments in CSR Rules, 2021
On January 22, 2021, The Ministry of Corporate Affairs (MCA) amended the Companies (Corporate Social Responsibility Policy) Rules, 2014, now known as Companies (Corporate Social Responsibility Policy) Amendment Rules 2021. According to the Companies (Corporate Social Responsibility Policy) Rules 2014, these rules have been modified to be more transparent and accountable.
After the amendment, “administrative overheads” will only refer to expenses incurred by the company for “general management and administrative management of the company's corporate social responsibility functions.” All other expenses directly incurred for the development, monitoring, implementation, and evaluations of specific CSR projects are not included in management expenses.
Simply put, this means that administrative expenses do not include all direct expenses of a given CSR project or program.
India’s Corporate Social Responsibility is adopted in the hope that it will become an effective tool to unite the efforts of the business and social sectors to achieve sustainable growth and the development of overall social goals.
It is also believed that the community will benefit because the government has not succeeded a great deal in its efforts to help local people. Although well-intentioned, the law did not initially cover most of the reasons.
Therefore, the Companies (CSR Policy) Amendment Rules 2021 were introduced to create a strong regulatory framework for holding CSR events in India and overhaul India’s CSR system. Concepts such as CSR meanings, CSR policies, and CSR implementation have changed and are presented in a more detailed and structured manner which is a positive development.