Author: S.AKSHAYAA, Tamil Nadu Dr Ambedkar law University 

Abstract

A company is a body of individuals that plays a significant role in the economic development of the country. The corporate sector utilizes the resources from the society greatly to enhance its economic growth and stability. These growing corporations should contribute a sum of profit incurred towards societal well-being. However, in India some of them may ignore their social responsibility and lead to eco-social destruction. To overcome this situation, the Indian Companies Act, 2013 imposed a statutory obligation for the companies to contribute towards the society. The main object of this legal research paper is to explore the working of mandatory corporate social responsibility (CSR) in preventing environmental degradation, resource exploitation and societal destruction. The author believes that a non-empirical legal research methodology is presentable to explore the voluntary contributions of companies for societal well-being and the importance of mandatory CSR in certain cases. Various legislations, judicial decisions and journals are referred to analyze the implementation of CSR in India. This paper examines the provisions of Companies Act, 2013 mandating the CSR for the companies in India and shows the significance of enhancing voluntary CSR for companies to avoid eco-social destruction. This paper finds possible remedies to promote voluntary CSR and to utilize the contributions of the companies effectively. This paper summarizes the outcome of a doctrinal legal research on the role of mandatory CSR in the corporate sector and the ways to accelerate voluntary CSR in India without hindering the economic stability of the company.

Introduction 

Businesses cannot be successful when the society around them fails.                                                                                         – Rockett Batt Spokesperson

The corporate companies are the major parts of the economic activities in a country which can be regulated by the company law of such country. Corporate social responsibility (CSR) is the essential concept of company law. It is the commitment of the corporate sector to meet specific goals related to environmental protection, sustainable development and other socio economic well-being. Corporate  social  responsibility  means  to  do  useful things for  the  society  and  to  contribute  to the balanced development of the society by giving enough services to the stakeholders, for example, employees, customers, shareholders, suppliers, etc.  The term Corporate Social Responsibility  may  be relatively  new  to  India,  but  the  concept  dates  back  to  Mauryan  history,  where philosophers like Chanakkya, emphasized on  ethical practices and principles while conducting business. At present the companies registered under the Indian Companies Act, 2013 are required to mandatorily contribute a minimum percentage of their net profits towards the welfare of society, while some companies voluntarily contribute more than such minimum percentage. 

CSR as a statutory obligation 

It is easy to dodge our responsibilities, but we cannot dodge the consequences of dodging our responsibilities.

                                                  – Sir Josiah Stamp

The Indian Companies Act, 2013 mandates the companies to contribute for CSR and to report the same. The Act states that the company registered under this Act should contribute 2 percent of its average net profits towards CSR activities which are enlisted in the 7th schedule of the Act. The Act provides that the company having net worth of rupees 500 crore or more, or turnover of rupees 1000 crore or more or a net profit of rupees 5 crore or more during any financial year shall constitute a Corporate Social Responsibility Committee of the Board consisting of three or more directors, out of which at least one director shall be an independent director. The Committee shall formulate a CSR Policy which shall indicate the activities to be undertaken by the company and recommend the amount of expenditure to be incurred on such activities. The Board of every company shall approve the CSR Policy for the company and disclose contents of such Policy in its report and also place it on the company`s website. The Board shall also ensure that the company spends, in every financial year, at least 2 percent of the average net profits of the company made during the three immediately preceding financial years, in pursuance of its CSR policy. The Act also mandates that the CSR policy shall give preference to the local areas surrounding the company. This shows the legal commitment of the company to ensure the well-being of these areas in return for the resources utilized.

CSR as a voluntary contribution to the society

Corporate social responsibility is a hard-edged business decision. Not because it is a nice thing to do or because people are forcing us to do it… because it is good for our business.

                                                                                                                          – Niall Fitzerald

In India, many companies contribute more than the minimum amount of 2 per cent of their average net profits towards CSR and the following are the voluntary contributions of such companies in the Financial Year (FY) 2023-2024, referenced from their office website.

1. Reliance is one of the economically sound corporate entities in India. It contributed $190.9 million towards reliance foundation to perform various CSR activities
2. TATA group is a well known corporation in India. One of the sister concerns of the TATA group is TATA motors. TATA motors spent an amount of 21.59 crore rupees on CSR activities in accordance with its CSR Policy.
3. Tata Consultancy Services (TCS) is also a sister concern of TATA group. TCS has spent $131.2 million for CSR activities in India.
4. ICICI Bank is one of the top most financial institutions in India. It allocated Rs. 5.19 billion for CSR activities.
5. The Oil and Natural Gas Corporation Limited (ONGC Ltd.) is a famous public sector corporation in India. ONGC Ltd contributed Rs.634.57 Cr towards CSR activities.

Apart from the aforementioned corporations, there are lots of corporate entities in India contributing towards CSR activities.

Conclusion and suggestions 

CSR is a form of business strategies which aims to enhance the eco-social well-being of the country. It is a self regulating corporate model that makes a company accountable to its countries social and environmental welfare. A voluntary contribution of a company towards CSR activities supports its effective administration. Undoubtedly, corporate social responsibility in India is a voluntary pleasure rather than mandatory pressure. Therefore, the effective utilization of these voluntary contributions helps in India’s progressive socio-economic development. The following are some practical suggestions to facilitate voluntary contributions of companies towards CSR activities for social, environmental and economic development. 

1. Willingness of government and private bodies to work together may contribute to the overall growth of national CSR standards among the corporate sector.

2. Financial assistance of banks and other financial institutions towards CSR related activities should be considered.

3. Active participation of general public, volunteers and non-government organizations may reduce the gap between CSR strategies and their implementation.

4. It is important to appoint experienced and skilled people as CSR committee members.

5. Submission of periodical reports on CSR activities may develop trust, engagement and transparency with the public.