Corporate Social Responsibility (CSR) is as a Company’s sense of responsibility towards the community and environment (both ecological and social) in which it operates. Companies can fulfill this responsibility through waste and pollution reduction processes, by contributing educational and social programs, by being environmentally friendly and by undertaking activities of similar nature. CSR is not charity or mere donations. CSR is a way of conducting business, by which corporate entities visibly contribute to the social good. Socially responsible companies do not limit themselves to using resources to engage in activities that increase only their profits. They use CSR to integrate economic, environmental and social objectives with the company’s operations and growth. CSR is said to increase the reputation of a company’s brand among its customers and society.
Ministry of Corporate Affairs has notified Section 135 and Schedule VII of the Companies Act as well as the provisions of the Companies (Corporate Social Responsibility Policy) Rules, 2014 (CRS Rules) which has come into effect from 1 April 2014.
Applicability of Corporate Social Responsibility to Companies
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 higher, or
- Companies with a turnover of Rs. 1000 crores or higher, or
- 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 apply 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.
Functions of a CSR Committee
The CSR Committee shall—
- Formulate and recommend to the Board, a CSR Policy which shall indicate the activities to be undertaken by the Company
- Recommend the amount of expenditure to be incurred on the activities referred to in clause (i)
- Monitor the CSR Policy of the company from time to time
- Institute a transparent monitoring mechanism for implementation of the CSR projects or programs or activities undertaken by the company
CSR Activities to be performed
Activities which may be included by companies in their Corporate Social Responsibility Policies relating to:
- Eradicating hunger, poverty, and malnutrition, promoting health care including preventive health care and sanitation including contribution to the Swach Bharat Kosh set-up by the Central Government for the promotion of hygiene and making available safe drinking water.
- Promoting education, including special education and employment, enhancing vocation skills, especially among children, women, elderly, and the differently abled and livelihood enhancement projects.
- Promoting gender equality, empowering women, setting up homes and hostels for women and orphans; setting up old age homes, day care centers and such other facilities for senior citizens and measures for reducing inequalities faced by socially and economically backward groups.
- Ensuring environmental sustainability, ecological balance, protection of flora and fauna, animal welfare, agroforestry, conservation of natural resources and maintaining quality of soil, air, and water including contribution to the Clean Ganga Fund set-up by the Central Government for rejuvenation of river Ganga.
- Protection of national heritage, art, and culture including restoration of buildings and sites of historical importance and works of art; setting up public libraries; promotion and development of traditional art and handicrafts;
- Measures for the benefit of armed forces veterans, war widows and their dependents;
- Training to promote rural sports, nationally recognized sports, Paralympic sports, and Olympic sports
- Contribution to the Prime Minister’s national relief fund or any other fund set up by the central govt. For socio-economic development and relief and welfare of the scheduled caste, tribes, other backward classes, minorities, and women;
- Contributions or funds provided to technology incubators located within academic institutions which are approved by the central govt.
- Rural development projects
- Slum area development.
Under the Companies Act, preference should be given to local areas and the areas where the company operates. Company may also choose to associate with 2 or more companies for fulfilling the CSR activities provided that they can report individually. The CSR Committee shall also prepare the CSR Policy in which it includes the projects and programs which is to be undertaken, develop a list of projects and programs which a company plans to conduct during the implementation year and also focus on integrating business models with social and environmental priorities and process in order to create shared value.
CSR Initiatives: India
The top 5 sectors in terms of CSR expenditure from 2014-15 to 2016-18 were
- Education/ Differently Abled/ Livelihood
- Health/ Eradicating Hunger/ Poverty and malnutrition/ Safe drinking water / Sanitation
- Rural development
- Other Sectors (Technology Incubator and Benefits to Armed Forces, Admin Overheads and others)
- Environment, Animal Welfare, Conservation of Resources.
India Inc. is being more generous and focused on its CSR spends. Spending on Corporate Social Responsibility (CSR), or welfare schemes like health and education, India’s largest firms stood at Rs7,536.30 crore (around $1 billion) in the financial year that ended in March 2018, according to a survey by KPMG India. The survey analyzed the CSR spending of India’s top 100 listed companies.
The CSR spending by top Indian companies in 2018 was 47% higher than what it was back in 2014 when India first made it mandatory for large private and public sector firms to spend at least 2% of their net profits on special development projects. The mandatory funding applies to companies with a turnover of Rs1,000 crore or those reporting a profit of over Rs5 crore in a year.
CSR Activities for various Industrial Sectors
Banks — Personal, commercial, corporate and investment banking
Banks are scrutinized for their lending and investment activities—never more so than in the years after the 2008 financial meltdown in India. But banks can use their market power to promote sustainability and discourage involvement in environmentally and socially sensitive commercial activities by applying secure lending and investment standards.
Energy and Utilities — Oil & gas exploration and production, power generators
This group is a significant emitter of greenhouse gases and other air pollutants that contribute to climate change, acid rain, and smog. Additionally, there are significant social issues like worker health and safety, bribery and corruption, and community and aboriginal relations.
Such companies can focus on developing emerging or early-stage technologies that focus on water and energy efficiencies, reducing emissions, environmental remediation, and mitigating land disturbances.
Food and Beverages — Soft drinks, packaged foods, restaurants
Demand for ethical food options is an essential trend in this sector. Product quality, safety, and careful management of supply chains are critical issues for companies as they respond to pressure to offer healthier and more sustainable foods. Such companies can develop a calculation system with SAP, an enterprise application software developer, that enables the comparison of environmental impacts throughout the lifecycle of 35,000 products, even if products vary by only a few different ingredients and audit suppliers for compliance with its social standards.
Industrials — Industrial conglomerates, machinery, aerospace, and defense
In this manufacturing-intensive industry, labor relations and employee health and safety are paramount, as is dealing with the environmental impacts associated with manufacturing. Leading companies strive to make their products more energy and fuel efficient. Such companies can aim to improve product energy efficiency.
Materials — Gold, precious and diversified metals, mining, packaging
Mining inevitably has significant environmental impacts. Key issues are how companies in this industry minimize these effects and also address the protection of their workers and affected communities. Gold mining companies face heightened scrutiny over the safe handling and disposal of cyanide, which is widely used in the industry to separate gold from ore.
For example, Cascades Inc. As part of Cascades commitment to sustainability, the company offers a wide array of green products and services. In addition to its flagship environmental towel and tissue line, the company designs and manufactures garden furniture and public site furnishings (benches, bike racks, trash cans, and picnic tables) made of 100% recycled plastic. The Cascades also partnered with NextLife, a manufacturer of sustainable plastic resins, to make meat packaging trays out of recycled polystyrene.
Retailers — Food, specialty, general merchandise, home improvement
For most retailers, there is nothing more important than the front-line relationship with consumers. A good reputation is invaluable, and how retailers deal with social and environmental issues—like greenhouse gas emissions and waste management—can all have a direct impact on the bottom line.
For example, Gap Inc. The process of washing and finishing denim requires a significant amount of chemicals, dyes, and water. If the wastewater isn’t adequately treated, it pollutes rivers and streams and can harm local communities. Through Gap Inc.’s Water Quality Program, the company has developed clear guidelines for the management of toxic chemicals, such as copper and mercury, in wastewater at mills and laundries. Additionally, the company requires that 100% of the denim laundries that manufacture Gap Inc.-branded denim treat the water before it leaves the facility.
Technology — Hardware, software, semiconductors, communications equipment
Recent high-profile controversies surrounding working conditions in China have put labor concerns in this sector in the spotlight. There are also human rights concerns related to so-called conflict minerals sourced by suppliers, and the environmental impacts of electronics throughout their product life cycle. Companies that manage these issues will find themselves with a significant advantage. Because semiconductor manufacturing can be water intensive, Intel has a dedicated water policy and invests in conservation technologies. Using water footprint analysis, the company assesses its impact on water resources. Intel established that its most significant impact on water resources is via direct operations and factories, and it’s second, through its use of energy, known as the “energy-water nexus.”
Telecoms/Electronics — Telephony services, electronic equipment, consumer electronics
Much like the technology sector, social impacts loom large for this group, most importantly, the working conditions of employees of contractors and suppliers, and the responsible sourcing of conflict minerals. Major environmental issues include the development of environmentally friendly electronic products and the management of electronic waste. Energy efficient products are also in high demand among consumers. To strengthen its environmental performance, such companies can formulate a strategy that focuses on reducing the environmental impact of operations and supporting consumers in leading green lifestyles.
Textiles, Footwear, and Apparel — Footwear, sportswear, and accessories
Due to heightened public scrutiny, companies have made progress in addressing child labor and human rights violations within supply chains. However, concerns are still ongoing. Increasingly, so are the environmental impacts of companies with high levels of water use and wastewater discharge in their operations. The industry has taken a collaborative approach to address ecological and social risks in supply chains. Textile mills use approximately 3 billion gallons of water each year to process cotton and polyester for Nike brand apparel. Companies can assist their material vendors in addressing water management through H20 Insight tools. This online data-collection system allows vendors to supply detailed data regarding the processes employed, the materials produced, and how much water vendors use and discharge. The data helps companies assess whether vendors are meeting discharge permits and local environmental standards, as well as it’s water quality guidelines.
Transportation and Logistics — Shipping, automobiles, railroads
Automakers, the most visible segment of this group, have refocused in recent years on more fuel-efficient vehicles. In an era of rising energy costs, consumers have shied away from gas guzzlers. The transportation industry—responsible for a significant portion of global emissions—is also subject to more and more stringent emissions requirements. Union relations are also typically front and center. Rising fuel prices have increased consumer demand for fuel-efficient vehicles, while concerns regarding cost and power have prevented much of that demand from transferring into sales. Eco boost engines are quite an option for this industry. The additional cost for the EcoBoost option is around USD 1,000, a much more cost-effective option than alternative environmentally friendly vehicles. In 2011, 40% of all Ford F-150 sales included Eco-Boost technology.
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