Corporate Social Responsibility: A realistic agenda of development
“Social responsibility is an organization obligation to benefit society in ways that transcend the primary business objective of maximizing profit.”
Social responsibility is important for every business. Economic criteria alone cannot justify the existence of business organizations. A socially responsible firm not only meets the needs of the society but also creates long-term and sustainable market for its products.
Corporate social responsibility (CSR) is a self-regulating business model that helps a company be socially accountable—to itself, its stakeholders, and the public. By practicing corporate social responsibility, also called corporate citizenship, companies can be conscious of the kind of impact they are having on all aspects of society, including economic, social, and environmental.
The goal of CSR is to embrace responsibility for the company’s action and encourage a positive impact through its activities on employees, consumers etc. It focuses to promote the public interest. In recent years CSR has become a fundamental business practice and has gained much attention from chief executives, Chairman, boards of directors and executive management teams of larger international Companies.
To engage in CSR means that, in the ordinary course of business, a company is operating in ways that enhances society and the environment, instead of contributing negatively to them.
Corporate social responsibility (CSR) is a type of international private business self-regulation that aims to contribute to societal goals of a philanthropic, activist, or charitable nature or by engage in or support volunteering or ethically-oriented practices.
The term Corporate Social Responsibility or CSR has been defined as under, but is not limited to:
- Projects or programs with reference to activities that are specified in schedule ; or
- Projects or programs related to activities undertaken by the Board in pursuance of recommendations of the CSR Committee according to the declared CSR policy subject to the condition that such policy covers.
Applicability of Corporate Social Responsibility
- Corporate Social Responsibility is required for all companies viz. private limited company, limited company. The following companies are necessary to constitute a CSR committee:
- Companies with a net worth of Rs. 500 crores or greater
- Companies with a turnover of Rs. 1000 crores or greater
- Companies with a net profit of Rs. 5 crores or greater.
If any of the above financial strength criteria are met, the Corporate Social Responsibility (CSR) provisions and related rules will be applicable to the company. These companies are required to form a CSR committee consisting of its directors. This committee oversees the entire CSR activities of the Company.
Corporate Social Responsibility is a requirement for companies meeting the above criteria apart from the fact of non profit section.
Corporate Social Responsibility in India
Corporate Social Responsibility in India sets a realistic agenda of development through alliances and partnership with sustainable development approaches.
Companies like Tata, Birla and Reliance have been imbibing the case for social good in their operations long before CSR became popular. After this also CSR in India is in a very emerging stage. It is followed by few public and private companies. Nearly all leading companies in India are involved in Corporate Social Responsibility activities. Central Government even working for the quantifying the CSR initiatives to promote them further. Moreover, in 2009, the government made it mandatory for all public sector oil companies to spend 2 per cent of their net profits on corporate social responsibility.
CSR in Foreign
There are companies and organizations like BMW, Levi Strauss and Survey Monkey etc. who actively participate in CSR activities. BMW holds its pride in being one of the most socially responsible companies in its industry. BMW has set the bar high with a goal of helping over one million people by 2020. They plan to do this by creating programs such as “The Schools Environmental Education Development Project” to help raise awareness of social and environmental issues. BMW’s key to CSR success has always been alignment. They’re a great example of corporate social responsibility because of their balance between a good business model and helping social causes.
CSR Committee and Role of Director in CSR
All qualifying company required to have a CSR committee are required to spend at least 2% of its average net profit for the directly preceding 3 financial years on CSR activities. Additionally, the qualifying company shall be necessitated to comprise a committee (CSR Committee) of the Board of Directors (Board) comprising of 3 or more directors.
The role of Board of Directors is as follows:
- Approval of the CSR policy.
- Ensuring its implementation.
- Disclosure of the contents of CSR policies related to its report.
- Placing the same on Company’s website.
Advantages of Corporate Social Responsibility
- Improved public image
This is crucial, as consumers look up to your public image when deciding whether to buy from you. Something simple, like staff members volunteering an hour a week at a charity, shows that you’re a brand committed to helping others. As a result, you’ll appear much more favorable to consumers.
- Increased brand awareness and recognition
If you’re committed to ethical and charity practices, this news will spread. More people will therefore hear about your brand, which creates an increased brand awareness.
Many simple changes in favor of sustainability, such as using less packaging, will help to decrease your production costs.
An advantage over competitors.
By embracing CSR, you stand out from competitors in your industry. You establish yourself as a company committed to going one step further by considering social and environmental factors.
Increased customer engagement.
If you’re using sustainable systems, you should shout it from the rooftops. Post it on your social media channels and create a story out of your efforts. Furthermore, you should show your efforts to local media outlets in the hope they’ll give it some coverage. Customers will follow this and engage with your brand and operations.
Greater employee engagement.
Similar to customer engagement, you also need to ensure that your employees know your CSR strategies. It’s proven that employees enjoy working more for a company that has a good public image than one that doesn’t. Furthermore, by showing that you’re committed to things like human rights, you’re much more likely to attract and retain the top candidates.
During the recent times in India the focus of most of the companies was on charity, which is not really CSR. Sustainable CSR programmes means a unified mix of economic, legal, ethical and philanthropic doctrines. In today’s changed business scenario, there is an increased focus on giving back to society and creating a model which is sustainable and it is essential that the best practices for inclusive growth are shared with the stakeholders. Getting multinationals to comply with local laws is not an easy task. . Furthermore, labor laws can indeed be difficult to interpret. In any case, providers, organizations, and nations can’t highlight these challenges to evade lawful responsibility. Lawful consistence will be difficult to achieve, regardless of whether inside the CSR rubric or not, however separating lawful compliance from CSR has the advantage of bringing to light a range of workplace and wage issues that the organizations and companies are legally necessary to take care of. Therefore, It is required that companies’ attitude towards CSR is more on transformation rather than giving information in web sites.
Authored by Saurav Sharma, A Fresher Associate at Vidhiśāstras-Advocates & Solicitors.