CORPORATE SOCIAL RESPONISBILITY

SUBMITTED
TO

Dr. Y. Papa Rao

(FACULTY OF CORPORATE LAWS)

SUBMITTED
BY
HIMANSHU KUNJAM

Roll no. 60
SEMESTER – IX
SECTION – C

DATE OF SUBMISSION – 25-10-2018

HIDAYATULLAH NATIONAL LAW UNIVERSITY

Corporate Social Responsibility Corporate Law - I

DECLARATION

I hereby declare that the Project entitled "Corporate Social

Responsibility" Submitted to Faculty, Dr. Y. Papa Rao Principles of
taxation laws, HNLU, is my original work and the project has not formed
the basis for the of any degree, fellowship or any similar titles.

Himanshu kunjam

Batch-XIV
Section- C
Roll no.-60

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ACKNOWLEDGEMENTS

First & foremost, I take this opportunity to thank Dr. Y. Papa Rao Faculty, Tax, HNLU,
for allotting me this challenging topic to work on. She has been very kind in providing
inputs for this work, by way of suggestions.

I would also like to thank my dear classmates and friends in the University, who have
helped me with ideas about this work. Last, but not the least I thank the University
Administration for equipping the University with such good library and I.T. facilities,
without which, no doubt this work would not have taken this shape in correct time.

Himanshu kunjam
Semester- IX,
Batch-XIV
Roll No. - 60

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Corporate Social Responsibility Corporate Law - I

Table of Contents

DECLARATION ...............................................................................................................ii
ACKNOWLEDGEMENTS ............................................................................................. iii
INTRODUCTION ............................................................................................................. v
OBJECTIVES OF STUDY............................................................................................... vi
METHODOLOGY ..........................................................................................................vii

CORPORATE SOCIAL RESPONSIBILITY ................................................................... 1

The Global Context........................................................................................................1
CSR in India...................................................................................................................2
CSR and Sustainability...................................................................................................2

BENFITS OF CORPORATE SOCIAL RESPONSIBILITY ............................................ 3

CSR UNDER COMAPNIS ACT, 2013............................................................................. 4

Clause 135, Companies Act, 2013..................................................................................4

GOVERNANCE UNDER COMPANIES ACT ................................................................ 6

REPORTING UNDER COMPANIES ACT ..................................................................... 7

Business responsibility reporting(BRR).........................................................................7

CSR ACTIVITIES AS PER SCHEDULE VII .................................................................. 7

CONCLUSION .................................................................................................................. 9
REFERENCES ................................................................................................................ 10

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INTRODUCTION

A robust and thriving development sector is central to India’s quest for equitable,
inclusive and sustainable growth. India’s development sector has evolved substantially
over the last few decades and is now witnessing unprecedented interest and
investments across the value chain. With the passage of the Companies Act, 2013 the
mandate for corporate social responsibility (CSR) has been formally introduced to the
dashboard of the Boards of Indian companies. The industry has responded positively to
the reform measure undertaken by the government with a wide interest across the
public and private sector, Indian and multinational companies. The practice of CSR is
not new to companies in India. However, what this Act does is bring more companies
into the fold. Also, it is likely that the total CSR spends will increase.
India`s new Companies Act 2013 (Companies Act) has introduced several new
provisions which change the face of Indian corporate business" Companies Act 2013
(Companies Act) has introduced several new provisions which change the face of
Indian corporate business. One of such new provisions is Corporate Social
Responsibility (CSR). The concept of CSR rests on the ideology of give and take.
Companies take resources in the form of raw materials, human resources etc from the
society. By performing the task of CSR activities, the companies are giving something
back to the society. Ministry of Corporate Affairs had notified Section 135 and
Schedule VII of the Companies Act as well as the provisions of the Companies
(Corporate Social Responsibility Policy) Rules, 2014 (CRS Rules) which has come
into effect from 1 April 2014. The definition of CSR given under the act assumes
significance as it allows companies to engage in projects or programs relating to
activities enlisted under the Schedule. Flexibility is also permitted to the companies by
allowing them to choose their preferred CSR engagements that are in conformity with
the CSR policy.

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OBJECTIVES OF STUDY

 The major objective of this project is to study the concept of Corporate Social
Responsibility.
 To study and highlight the Salient features of Corporate Social Responsibility in
India under Companies Act 2013.
 To study the other aspects of Corporate Social Responsibility.

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Corporate Social Responsibility Corporate Law - I

METHODOLOGY

It is largely based on secondary & electronic sources of data. Books, eBooks case laws,
journals & other reference as guided by faculty of Legal Methods are primarily helpful
for the completion of this project.

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CORPORATE SOCIAL RESPONSIBILITY

The major objective behind corporate social responsibility is that a company uses the
natural resources like Raw material, Human resources for production and even dumps the
waste in environment causing harm to environment. While there may be no single
universally accepted definition of CSR, each definition that currently exists underpins the
impact that businesses have on society at large and the societal expectations of them.
Although the roots of CSR lie in philanthropic activities (such as donations, charity, relief
work, etc.) of corporations.

The Global Context

Globally, the concept of CSR has evolved and now encompasses all related concepts such
as triple bottom line, corporate citizenship, philanthropy, strategic philanthropy, shared
value, corporate sustainability and business responsibility. This is evident in some of the
definitions presented below:

 The EC defines CSR as “the responsibility of enterprises for their impacts on

society”. To completely meet their social responsibility, enterprises “should have
in place a process to integrate social, environmental, ethical human rights and
consumer concerns into their business operations and core strategy in close
collaboration with their stakeholders”1
 The WBCSD defines CSR as “the continuing commitment by business to
contribute to economic development while improving the quality of life of the
workforce and their families as well as of the community and society at large.”2
 According to the UNIDO , “Corporate social responsibility is a management
concept whereby companies integrate social and environmental concerns in their

1
http://ec.europa.eu/enterprise/policies/sustainablebusiness/corporate-social-responsibility/index_
en.html
2
http://www.wbcsd.org/work-program/businessrole/previous-work/corporate-social-responsibility.
aspx
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business operations and interactions with their stakeholders. CSR is generally

understood as being the way through which a company achieves a balance of
economic, environmental and social imperatives"3 (Triple-Bottom-Line
Approach).

Hence, the concept of Corporate social responsibility is very well recognized

internationally. Almost similarly by every state i.e. if you take something from society
you need to give it back.

CSR in India
CSR in India has traditionally been seen as a philanthropic activity. And in keeping with
the Indian tradition, it was an activity that was performed but not deliberated. As a result,
there is limited documentation on specific activities related to this concept. As some
observers have pointed out, the practice of CSR in India still remains within the
philanthropic space, but has moved from institutional building (educational, research and
cultural) to community development through various projects. Also, with global
influences and with communities becoming more active and demanding, there appears to
be a noticeable trend. The Companies Act, 2013 has introduced the idea of CSR to the
forefront and through its disclose-or-explain mandate, is promoting greater transparency
and disclosure. Schedule VII of the Act, which lists out the CSR activities, suggests
communities to be the focal point.

CSR and Sustainability

Sustainability (corporate sustainability) is derived from the concept of sustainable
development which is defined by the Brundtland Commission as “development that
meets the needs of the present without compromising the ability of future generations to
meet their own needs”4 . Corporate sustainability essentially refers to the role that

3
http://www.unido.org/what-we-do/trade/csr/whatis-csr.html
4
Brundtland Commission’s Report, 1987
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companies can play in meeting the agenda of sustainable development and entails a
balanced approach to economic progress, social progress and environmental stewardship.

BENFITS OF CORPORATE SOCIAL RESPONSIBILITY

As the business environment gets increasingly complex and stakeholders become vocal
about their expectations, good CSR practices can only bring in greater benefits, some of
which are as follows:

• Communities provide the license to operate: Apart from internal drivers such as
values and ethos, some of the key stakeholders that influence corporate behavior include
governments (through laws and regulations), investors and customers. In India, a fourth
and increasingly important stakeholder is the community, and many companies have
started realising that the ‘licence to operate’ is no longer given by governments alone, but
communities that are impacted by a company’s business operations. Thus, a robust CSR
programme that meets the aspirations of these communities not only provides them with
the licence to operate, but also to maintain the licence, thereby precluding the ‘trust
deficit’.

• Attracting and retaining employees: Several human resource studies have linked a
company’s ability to attract, retain and motivate employees with their CSR commitments.
Interventions that encourage and enable employees to participate are shown to increase
employee morale and a sense of belonging to the company.

• Communities as suppliers: There are certain innovative CSR initiatives emerging,

wherein companies have invested in enhancing community livelihood by incorporating
them into their supply chain. This has benefitted communities and increased their income
levels, while providing these companies with an additional and secure supply chain.

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• Enhancing corporate reputation: The traditional benefit of generating goodwill,

creating a positive image and branding benefits continue to exist for companies that
operate effective CSR programmes. This allows companies to position themselves as
responsible corporate citizens. 5

CSR UNDER COMAPNIS ACT, 2013

Clause 135, Companies Act, 2013:

In India, the concept of CSR is governed by clause 135 of the Companies

Act, 2013, which was passed by both Houses of the Parliament, and had
received the assent of the President of India on 29 August 2013. The
Section 135 of Companies Act, 2013 states:

135. Corporate Social Responsibility

(1) Every company having net worth of rupees five hundred crore or more,
or turnover of rupees one thousand crore or more or a 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.

(2) The Board's report under sub-section (3) of section 134 shall disclose
the composition of the Corporate Social Responsibility Committee.

(3) 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;

5
https://www.pwc.in/assets/pdfs/publications/2013/handbook-on-corporate-social-responsibility-in-
india.pdf (Handbook on Corporate Social Responsibility in India) Last Seen at 19/09/16, 3:05pm.
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(b) recommend the amount of expenditure to be incurred on the activities

referred to in clause (a); and

(c) monitor the Corporate Social Responsibility Policy of the company

from time to time.

(4) The Board of every company referred to in sub-section (1) shall,—

(a) 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; and

(b) ensure that the activities as are included in Corporate Social

Responsibility Policy of the company are undertaken by the company.

(5) The Board of every company referred to in sub-section (1), shall

ensure that the company spends, in every financial year, at least two per
cent. of the average net profits of the company made during the three
immediately preceding financial years, in pursuance of its Corporate
Social Responsibility Policy:

Provided that the company shall give preference to the local area and
areas around it where it operates, for spending the amount earmarked for
Corporate Social Responsibility activities:

Provided further that if the company fails to spend such amount, the Board
shall, in its report made under clause (o) of sub-section (3) of section 134,
specify the reasons for not spending the amount.

Explanation.—For the purposes of this section “average net profit” shall

be calculated in accordance with the provisions of section 198.6

6
Section 135 of Companies Act 2013.
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The CSR provisions within the Act is applicable to companies with an annual
turnover of 1,000 crore INR and more, or a net worth of 500 crore INR and
more, or a net profit of five crore INR and more. The new rules, were applicable
from the fiscal year 2014-15, also require companies to set-up a CSR committee
consisting of their board members, including at least one independent director.
The Act encourages companies to spend at least 2% of their average net profit in
the previous three years on CSR activities.7 The ministry’s draft rules, that have
been put up for public comment, define net profit as the profit before tax as per
the books of accounts, excluding profits arising from branches outside India.

The Act lists out a set of activities eligible under CSR. Companies may
implement these activities taking into account the local conditions after seeking
board approval. The indicative activities which can be undertaken by a company
under CSR have been specified under Schedule VII of the Act.

GOVERNANCE UNDER COMPANIES ACT

Clause 135 of the Act lays down the guidelines to be followed by companies while
developing their CSR programme. The CSR committee will be responsible for preparing
a detailed plan on CSR activities, including the expenditure, the type of activities, roles
and responsibilities of various stakeholders and a monitoring mechanism for such
activities.8 The CSR committee can also ensure that all the kinds of income accrued to the
company by way of CSR activities should be credited back to the community or CSR
corpus.

7
Pandab & S.K., Companies Act, 201, Indian Journal of Research, Vol - 1, Issue- 9 (2013, Law Point
Publications).
8
Ekta Selarka & Saumitra N. Bhaduri,Corporate, Governance and Corporate Social Responsibility of
Indian Companies,( 2016, Springer Singapore publications) Page 86.
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REPORTING UNDER COMPANIES ACT

The new Act requires that the board of the company shall, after taking into account the
recommendations made by the CSR committee, approve the CSR policy for the company
and disclose its contents in their report and also publish the details on the company’s
official website, if any, in such manner as may be prescribed. If the company fails to
spend the prescribed amount, the board, in its report, shall specify the reasons.

Business responsibility reporting

The other reporting requirement mandated by the government of India, including CSR is
by the SEBI which issued a circular on 13 August 2012 mandating the top 100 listed
companies to report their ESG initiatives. These are to be reported in the form of a BRR
as a part of the annual report. SEBI has provided a template for filing the BRR. Business
responsibility reporting is in line with the NVG published by the Ministry of Corporate
Affairs in July 2011. Provisions have also been made in the listing agreement to
incorporate the submission of BRR by the relevant companies. The listing agreement also
provides the format of the BRR. The BRR requires companies to report their performance
on the nine NVG principles. Other listed companies have also been encouraged by SEBI
to voluntarily disclose information on their ESG performance in the BRR format.

CSR ACTIVITIES AS PER SCHEDULE VII

CSR activities are mentioned under the Schedule VII of the Companies Act 2013. The
activities included are roughly categorized below.

 Eradicating extreme hunger and poverty.

 Promotion of education.

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 Promoting gender equality and empowering women.

 Reducing child mortality and improving maternal health.
 Combating human immunodeficiency virus, acquired immune deficiency
syndrome, malaria and other diseases.
 Ensuring environmental sustainability.
 Employment enhancing vocational skills.
 Social business projects contribution to the Prime Minister's National Relief Fund
or any other fund set up by the Central Government or the State Governments for
socio-economic development and relief and funds for the welfare of the
Scheduled Castes, the Scheduled Tribes, other backward classes, minorities and
women; and
 such other matters as may be prescribe.9

9
Chanhiok V., Implication of Companies Act, 2013 Corporate Social Responsibility. (2013, Thronton
Grant Publications)
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CONCLUSION

Corporate social responsibility (CSR) refers to the responsibility of businesses for their
impact on society. Today, CSR is receiving increasing attention and expectations of
business responsibility are constantly rising both among consumers and the society as a
whole. Many of the articles highlight the variety of benefits gained with CSR, for
instance related to the environment, human resources, customer relations, innovation,
reputation and financial performance of companies. They also emphasize the importance
of CSR for the competitive success of enterprises. A socially responsible company can
obtain various benefits and thus improve its performance. For instance, guaranteeing
decent working conditions, proper wages, and possibilities for training and skills
development for employees contributes to their motivation, commitment to the company
and productivity. CSR also strengthens the reputation of the company as an alluring place
to work, thus attracting skilled and motivated people, which again contributes to the
competitiveness of the company. Furthermore, integrating CSR into company values can
create a positive public image and a distinctive brand for the company, which is
important in today’s society with abundance of brands and tough competition for
customers. In fact, socially responsible and environmentally sustainable business
practices are increasingly important for consumers nowadays and often even determine
their choices. Moreover, when the natural resources are scarce, environmental
sustainability can also be the lifeline for a company.

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REFERENCES

Websites Referred:

 http://www.nber.org/chapters/c7207.pdf
 https://www.pwc.in/assets/pdfs/publications/2013/handbook-on-corporate-social-
responsibility-in-india.pdf (Handbook on Corporate Social Responsibility in
India).
 http://www.wbcsd.org/work-program/businessrole/previous-work/corporate-
social-responsibility.
 aspx
 http://www.journalofaccountancy.com/issues/2013/oct/20137721.html
 http://ec.europa.eu/enterprise/policies/sustainablebusiness/corporate-social-
responsibility/index_en.html
 http://www.unido.org/what-we-do/trade/csr/whatis-csr.html

Books Referred:
 Chanhiok V., Implication of Companies Act, 2013 Corporate Social
Responsibility. (2013, Thronton Grant Publications).

 Ekta Selarka & Saumitra N. Bhaduri,Corporate, Governance and Corporate Social

Responsibility of Indian Companies,( 2016, Springer Singapore publications).

 Pandab & S.K., Companies Act, 201, Indian Journal of Research, Vol - 1, Issue- 9
(2013, Law Point Publications).

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