Corporate Social Responsibility (CSR) is a branch of business management whereby companies integrate social and environmental concerns in their business operations and interactions with stakeholders. Through CSR, companies achieve a balance of economic, environmental and social imperatives (or what is called the ‘Triple-Bottom-Line approach’ of people, planet and profits), through the business model itself, or through charity, sponsorships or philanthropy.
CSR in India
In a landmark initiative aimed at strengthening corporate India’s contribution to the social sector, the recently amended Companies Act, 2013, states that any Indian company with a net worth of Rs 500 crore, or a turnover of Rs 1,000 crore, or net profit of Rs 5 crore, needs to spend at least 2 percent of its average net profit (from the preceding three financial years) on CSR activities.
India is the only country in the world to have implemented legislation that, in effect, makes it mandatory for a large swathe of mid-level to large companies to dedicate a percentage of their profits to social good. Companies now follow the ‘comply or explain’ model, which means they must implement and declare how they have complied with the CSR legislation or else explain their reasons for not doing so to shareholders, in their report to the Board of Directors.
The Companies Act had earlier prescribed companies can do CSR work on their own or through a holding, subsidiary or associate company. Recently, the government has allowed companies to enter into collaboration with each other to engage in CSR.
Approved CSR activities are defined by the Act include not-for-profit spending on social, cultural, environmental, health, education, sports, and gender issues, among others.