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CORPORATE SOCIAL RESPONSIBILITY (CSR) AND ITS IMPORTANCE
There is not any single universally accepted definition of Corporate Social Responsibility, but every definition revolves around the centre idea of responsibilities of corporate entities towards the society & environment. India has become the first country in the world to make Corporate Social Responsibility statutory as well as mandatory, through the new Companies Act 2013. Prior to it, CSR clause was voluntary at the end of companies, though it was mandatory to disclose their CSR spending to shareholders.
The new concept of Corporate Social Responsibility has been introduced under section 135 with Schedule VII of the Companies Act, 2013 and Companies (Corporate Social Responsibility) rules, 2014. The amendment notified in the Companies Act, 2013 requires companies with a net worth of INR 5 billion or more, or an annual turnover of INR 10 billion or more, or net profit of INR 50 million or more, to spend 2% of their average net profits of three years on CSR. The CSR initiatives of companies thrust on creating value in the lives of the communities around its areas of business.
Amid the coronavirus outbreak, the Ministry of Corporate Affairs has notified the companies contributing to expenditure to fight against the pandemic will be considered as CSR activities. The fund so raised shall be used in activities such as promotion of health case, sanitation and disaster management.
The importance and relevance of CSR is highly significant in today’s economy, to ensure the sustainability of life, environment and business for future generations. In India, the term Corporate Social Responsibility (CSR) is widely being used even to related concepts and terms, such as sustainable development, philanthropy, sustainability, corporate citizenship, business responsibility responsible business and corporate responsibility. CSR has been supplementary to implementation of the Sustainable Development Goals (SDGs), which are a universal call to action to end poverty, protect the planet and ensure that all people enjoy peace and prosperity. It is a self-regulatory form of corporate conscience included into corporate and business models guaranteeing that the business is accommodating ethical standards of national and international laws and contributing to societal development surrounding it. In common parlance, it is understood as companies providing funding for valuable social causes prevailing.
Importance of CSR –
The overall aim of Corporate Social Responsibility is to impact the society positively while getting the most out of the creation of shared value for the shareholders, stakeholders and even employees. For understanding CSR’s importance in today’s era following threads must be looked into-
- It works as a tool for advancing public image of companies within society. It may be psychological but somehow people find companies with social responsibilities as more approachable and philanthropist compared to other self-regarding companies. According to a study, 88% of the people surveyed would buy products from a responsible company.
- It enhances customer and employees’ engagement as the social causes lures them to participate more and they get interested eventually to be a part of such cause.
- CSR builds up and boosts government relations. It is an effective tool to get in the good books of government officials, politicians and regulators as a socially responsible company. It also helps to avoid various investigations and probes or even public campaigns.
- A well-managed CSR program can help increase brand value, awareness and resonate with strong values. The exceptional goodwill of Tata group in India has made it the most valuable brand. People appreciate the company not only for its high-quality products but also for the activities that they do for the greater good of the people.
- CSR tends to increase sales of company by presenting a positive public perception of its serious approach towards responsibilities.
- CSR also positively works in sphere of poverty alleviation and risk management.
