For every IAS aspirant preparing the Governance topic, the knowledge of CSR UPSC topic is crucial. Therefore, every student must thoroughly comprehend the meaning and application of Corporate Social Responsibility (CSR) to prepare for the static portion of your UPSC Prelims and the UPSC Mains exams. Also, you must note that mostly the concepts of CSR remain related to current events. Therefore, apart from conventional books, you should depend on the CSR magazine for UPSC and newspapers.
Now that you understand the significance of CSR in UPSC exams, let us now understand what Corporate Social Responsibility is.
Introduction to Corporate Social Responsibility (CSR)
CSR, also known as Corporate Social Responsibility, refers to the concept that indicates that it is the accountability of every modern company working within society to add towards their social, economic, and environmental development. In addition, the Companies Act, 2013 is the primary legislation that created India the first nation to direct and quantify CSR expense.
The inclusion of Corporate Social Responsibility is an endeavour by the Indian Government to engage the companies with the national growth agenda. Section 135(1) of the Companies Act, 2013 defines thresholds to recognize businesses that are mandated to comprise a CSR Committee and organizations in the immediately preceding financial year of which:
- Business net worth was INR 500 crore or more.
- Annual company turnover is INR 1000 Crore or more.
- Companies Net profit is INR 5 Crore or more.
Furthermore, according to the Companies (Amendment) Act, 2019, Corporate Social Responsibility applies to organizations before completing three financial years. As per this legislation, companies falling in the CSR threshold must spend at least 2% of their average net profits every financial year.
In addition, for organizations that have not completed their three financial years, average net profits earned in the preceding financial years must get factored. The Corporate Social Responsibilities exercises in India should not be undertaken in the regular course of business and be regarding any of the 17 activities of Corporate Social Responsibilities in Schedule VII of the Companies Act, 2013.
The primary objective of Corporate Social Responsibility is to encourage sustainable and responsible business principles at a comprehensive level and motivate organizations to come up with creative ideas and robust management strategies.
Implementation of Corporate Social Responsibility
- Businesses that fall under the regulation must share a report on their CSR spending and activities.
- Those reports must comprise data about the company’s CSR policy, the arrangement of its CSR board, the amount of CSR costs, and details on the tasks where they spent the funds. Also, note that the CSR fund UPSC is the most crucial topic to read thoroughly.
- If the organization does not spend the needed amount, it must publicly announce its grounds. Failure to report the reasons is punishable under the act.
CSR Impact Evaluation
CSR (Corporate Social Responsibility) Rules, 2014 have no explicit representation or condition of impact assessment. In the initial year of the regulations, most businesses concentrated on compliance rather than following how their endeavours fared. Below are some problems that were observed in the field of impact evaluation:
- Assessing impact may be early at this phase, as the impact usually gets accomplished over the extended term. Many companies believe that impact can truly get assessed after a specific action has been in place for approximately 3-5 years.
- For most top listed businesses, Corporate Social Responsibilities initiatives have been part of sustainability statements for over five years. Still, for corporations undertaking CSR for the initial time, there is little or no impact to evaluate.
- Experienced players, in some instances, are doing third-party checks. Nevertheless, adoption is low, and the statements do not get shared.
- Most companies use their bases to carry out Corporate Social Responsibilities. Organizations choose this route as it allows better authority over the funds and hence, better monitoring of the endeavours.