CSR in India is a legal requirement for businesses. Since 2013, all businesses in India have been required to integrate social and environmental concerns into their business operations. This blog post will talk about what CSR – or corporate social responsibility – is, why it is important, and what businesses need to do to comply with Indian CSR regulations.
CSR, or Corporate Social Responsibility, is a hot topic worldwide. But what is CSR? And why is it important for companies to engage in these activities? CSR can be broadly defined as the commitment of a company to act ethically and responsibly towards society. This includes areas such as environmental protection, human rights, consumer protection, and anti-corruption. CSR is about how companies manage and execute their business processes to produce an overall positive impact on society. CSR activities are voluntary, meaning that these are not required by law but rather carried out at the discretion of the company or organisation. CSR can also be referred to as corporate citizenship, sustainable responsible business (SRB), or sustainable business.
CSR in India is slightly different from CSR in other countries. In India, CSR is regulated by the government. The Companies Act of 2013 requires companies with a net worth of Rs 500 crore or more or those that have generated revenues of Rs 1000 crore or more, to spend at least two per cent of their average net profit over the previous three years on CSR activities. This CSR spending is required to be performed in compliance with CSR guidelines that have been established by India’s Ministry of Corporate Affairs. If a company fails to comply, it must explain why it did not comply and what steps it will take to comply in the future.
What is CSR?
CSR – or corporate social responsibility, since that’s what the acronym stands for – is the continuing commitment by businesses to integrate care for the environment and social concerns into their everyday business operations. CSR has been around for a long time, but it became a legal requirement in India in 2013.
Why is CSR important?
CSR is important because it helps businesses to be responsible members of society. By integrating social and environmental concerns into their business operations, businesses can make a positive impact on their employees, the community, and the environment.
What do businesses need to do to comply with CSR regulations in India?
To comply with CSR regulations in India, businesses must develop and implement a CSR policy. This policy should outline how the business will integrate social and environmental concerns into its business operations. CSR policies must be approved by the CSR committee of a company’s board, and CSR activities must be included in a company’s annual report.
Many very successful companies in India have trailblazing CSR policies. Some of them include:
- Mahindra Group has a CSR policy for all its businesses, seeking to invest in projects to create social impact by investing in education and entrepreneurship programmes as well as environmental initiatives.
- Hindustan Unilever has a CSR policy that focuses on creating sustainable livelihoods, promoting hygiene and environmental sustainability.
- The Tata Group is one of the most active CSR promoters in India with an overarching philosophy of ‘Sarve Bhavantu Sukhinah’. This translates to ‘May all be happy and prosperous’.
- Apollo Tyres has a CSR policy that focuses on creating social and environmental value by contributing to the sustainable development of communities where it operates.
What sort of CSR projects can companies in India take on?
Examples of CSR issues that companies may tackle include:
- Reducing carbon footprint
- Engaging in charity work
- Purchasing fair trade products
- Investing in environmentally conscious businesses
- Getting involved in volunteer work
- Improving labour policies
- Reducing gender discrimination in the workplace
- Improving inclusion and company environment for neurodivergent people
- Improving inclusion and company environment for non-heteronormative people
CSR in India is important because:
- It helps companies to be more accountable to their employees, customers, suppliers and shareholders.
- CSR initiatives help companies to boost their reputations, reduce risk and increase productivity. CSR also helps develop a more loyal workforce that is committed to the company’s goals.
- CSR can have the potential of creating social impact by contributing to education and entrepreneurship programmes as well as environmental initiatives.
- CSR is mandated in India by the government. All companies with a net worth of Rs 500 crore or more, or revenue of Rs 1000 crore or more, are required to spend at least two per cent of their average profit over the last three years on CSR activities. Companies that fail to do so can be penalised.
There are many regulations for CSR in India. The Companies Act, CSR Rules and CSR Policy are some of the most important CSR regulations in India.
The CSR Rules were released in 2014 and state the following:
- Companies should focus on sustainable development
- There is a need for companies to disclose their CSR spending
- Projects that are undertaken should have a positive social impact
- CSR should not be used for religious or political activities
The CSR Policy was released in 2016 and it states the following:
- The government will provide financial assistance to companies that want to start CSR projects
- There is a need for companies to disclose their CSR policies and projects on a public portal
- CSR projects should have a positive social and environmental impact
In addition, companies are required to keep up participation in their CSR schemes for as long as they remain operational, and to reinvest a percentage of their yearly profits in the development of their corporate and social responsibilities – at the time of writing this figure is 2% of past yearly profits over an average of 3 years.
CSR is an integral part of modern-day businesses for many reasons. CSR helps companies to be socially responsible members of society and it also makes good business sense. By integrating social and environmental concerns into their business operations, businesses can make a positive impact on their employees, the community, and the environment. If you are looking to start a business in India, or move your existing business to India, you must familiarize yourself with CSR regulations and develop a CSR policy for your company.
This might seem like a lot of work or a daunting amount of knowledge to take on, but you’re not alone – you can download a sample CSR plan here and our team are always available to liaise with you about developing a robust and effective CSR strategy for your business. This isn’t just a formality – it’s a legal requirement, so make sure that your business is ready and able to take on the challenge!