Corporate Social Responsibility (CSR)
Kartavya Desk Staff
Source: TOI
Subject: Bills and Act
Context: The Supreme Court of India has ruled that Corporate Social Responsibility (CSR) must inherently include environment and ecology, holding that CSR spending on environmental protection is not charity but a constitutional obligation under Article 51A(g).
About Corporate Social Responsibility (CSR):
What it is?
• Corporate Social Responsibility (CSR) refers to the responsibility of companies to contribute to social welfare and sustainable development, by integrating social, environmental, and ethical concerns into business operations and stakeholder interactions.
Launched in: CSR was made mandatory in India through the Companies Act, 2013, making India the first country in the world to legislate CSR spending.
Eligibility criteria (Section 135, Companies Act, 2013):
• CSR provisions apply to companies that meet any one of the following in the preceding financial year:
• Net worth: ₹500 crore or more Turnover: ₹1,000 crore or more Net profit: ₹5 crore or more
• Net worth: ₹500 crore or more
• Turnover: ₹1,000 crore or more
• Net profit: ₹5 crore or more
• Such companies must spend at least 2% of the average net profits of the last three years on CSR activities.
Key features of CSR in India:
• Mandatory spending: Minimum 2% of average net profits.
• CSR Committee: Board-level committee to plan and monitor CSR policy.
• Schedule VII activities: CSR spending must align with approved areas such as education, health, environment, rural development, etc.
• Disclosure norms: Details of CSR policy, spending, and unspent amounts must be disclosed in the Board’s Report.
• Environmental inclusion (as per SC): Protection of ecology, biodiversity, and wildlife is an intrinsic CSR duty, not optional.
Significance of CSR:
• Promotes sustainable development: Aligns corporate growth with environmental protection and social justice.
• Corporate accountability: Reinforces the idea that profits are partly owed to society that enables their generation.
• Constitutional alignment: Operationalises Fundamental Duties, especially environmental protection.