CSR & Its Mandatory Regime in India

Last Updated at: May 28, 2020
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Mandatory
CSR and its Mandatory regime in India
As per the changes proposed in the Companies (Amendment) Bill, 2020, companies with an obligation to spend up to Rs 50 lakhs on CSR are not required to have a CSR committee any longer. Also, companies spending more than the mandatory 2% on CSR in a year can carry forward the ‘excess baggage’ as a credit for the next few years.

 

India is one of the few countries that has made CSR activity for big companies a mandatory regime. It has done so that businesses don’t take undue advantage of the environment, improve customer satisfaction, and help better investor’s morale. The focus of this article will be on the types of CSR activity a corporation can undertake.

CSR abbreviated as corporate social responsibility comes under the aspect of checks and balances. It is the act of giving back for what was taken or to be taken. Corporate companies usually tend to use the environment of a place in its entirety for the economic development of the company as well as the country. This economic development on the other side uses various facilities of a particular region. So the company inherently will have a moral liability excluding the legal responsibility. India has a mandatory regime for CSR activity, unlike most other countries. This mandatory statute came in place just to stop the corporates from gaining free benefits from the government and tried to pull the corporate into the social fabric. The Indian regime makes it compulsory for a CSR activity to be 2% of the profits of three consecutive years.

Get Legal Guidance

If you’re looking for specific legal services related to tax registration or startup business,,
you might want to browse the services below to see how our team of experts that assures you to
run the business smoothly.

PROS OF CSR

Let us now look at a few positive notions that are set because of the CSR activity

  • CSR activity helps to improve the loyalty of the clients
  • It helps improve customer satisfaction
  • It helps improve the investor’s morale
  • The connectivity between the company and the localities would improve to a greater extent.

All these pros would be in place in situations where the actual intent of the company is to do good for the society and not just to embody a checkbox mindset.

The CSR regime is very useful in India for the society in general. So, let’s look into some of the different kinds of CSR activities that can be pursued by corporate companies.

EDUCATIONAL RESPONSIBILITY:

In this CSR activity, it is the responsibility of the company to take care of and cater to the educational requirements of the area around the factory or their place of business. This includes maintenance of schools and funding the aspiring students in their path to success. In most of the cases, these types of CSR activity would be focused on media coverage. For example, most of the Indian Banking Sectors would be focusing on Educational activities where these banks would be implementing their employees in these events just to gain some mileage in the business through publicity.

HEALTHCARE:

This is another area where it has been stated that most corporates invest. The activity involves conducting health camps in and around the area of the company as well as in some cases where the company insures the people in a selected area and provide complete health care in and around the area. The CSR activity in this area is being done by many corporates and even though it’s a mere amount of people getting benefited out of it, something is better than nothing.

ENVIRONMENTAL CLEANING

The next major area where the corporates show their interest is the environment clean-up drives that many major corporates undertake in an important hub near their vicinity. This includes cleaning up sea shores, maintaining the marshlands, picking plastic wastes from the ecologically important sites etc. This was mostly done by IT companies and corporate offices in cities. There are many other such activities like women empowerment, Disaster response, Sustainable Environment as well. These are in a mere number compared to the above-stated types of CSR.

India is facing some huge problems in resources for various issues which the western world have no idea. The idea of hoping for the government to respond and support the intricate problems would be like waiting for the sun to rise at midnight. Thus, the demand has to be satisfied somewhere in the run. The CSR actually does that and at least forces to make a philanthropic act. Many critics state that the mandatory regime will make a checkbox mentality from the company side. That to a certain extent is true as some company do these activities for namesake.

It is to be said that even though India has a mandatory regime to have a compulsory CSR activity, poor implementation of the laws and a clear lack of enforcement authorities make the regime an easily vulnerable one. This implementation promotes the implementation on paper level or in a namesake setup. Thus, it is time for India to rework on the laws regarding CSR.

The act of giving back what was taken by a company or will be taken is called CSR. In short, there are several ways a corporation can fulfil its social responsibility. But the three most popular ones are education, health care, and environmental cleaning.

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CSR & Its Mandatory Regime in India

2689
As per the changes proposed in the Companies (Amendment) Bill, 2020, companies with an obligation to spend up to Rs 50 lakhs on CSR are not required to have a CSR committee any longer. Also, companies spending more than the mandatory 2% on CSR in a year can carry forward the ‘excess baggage’ as a credit for the next few years.

 

India is one of the few countries that has made CSR activity for big companies a mandatory regime. It has done so that businesses don’t take undue advantage of the environment, improve customer satisfaction, and help better investor’s morale. The focus of this article will be on the types of CSR activity a corporation can undertake.

CSR abbreviated as corporate social responsibility comes under the aspect of checks and balances. It is the act of giving back for what was taken or to be taken. Corporate companies usually tend to use the environment of a place in its entirety for the economic development of the company as well as the country. This economic development on the other side uses various facilities of a particular region. So the company inherently will have a moral liability excluding the legal responsibility. India has a mandatory regime for CSR activity, unlike most other countries. This mandatory statute came in place just to stop the corporates from gaining free benefits from the government and tried to pull the corporate into the social fabric. The Indian regime makes it compulsory for a CSR activity to be 2% of the profits of three consecutive years.

Get Legal Guidance

If you’re looking for specific legal services related to tax registration or startup business,,
you might want to browse the services below to see how our team of experts that assures you to
run the business smoothly.

PROS OF CSR

Let us now look at a few positive notions that are set because of the CSR activity

  • CSR activity helps to improve the loyalty of the clients
  • It helps improve customer satisfaction
  • It helps improve the investor’s morale
  • The connectivity between the company and the localities would improve to a greater extent.

All these pros would be in place in situations where the actual intent of the company is to do good for the society and not just to embody a checkbox mindset.

The CSR regime is very useful in India for the society in general. So, let’s look into some of the different kinds of CSR activities that can be pursued by corporate companies.

EDUCATIONAL RESPONSIBILITY:

In this CSR activity, it is the responsibility of the company to take care of and cater to the educational requirements of the area around the factory or their place of business. This includes maintenance of schools and funding the aspiring students in their path to success. In most of the cases, these types of CSR activity would be focused on media coverage. For example, most of the Indian Banking Sectors would be focusing on Educational activities where these banks would be implementing their employees in these events just to gain some mileage in the business through publicity.

HEALTHCARE:

This is another area where it has been stated that most corporates invest. The activity involves conducting health camps in and around the area of the company as well as in some cases where the company insures the people in a selected area and provide complete health care in and around the area. The CSR activity in this area is being done by many corporates and even though it’s a mere amount of people getting benefited out of it, something is better than nothing.

ENVIRONMENTAL CLEANING

The next major area where the corporates show their interest is the environment clean-up drives that many major corporates undertake in an important hub near their vicinity. This includes cleaning up sea shores, maintaining the marshlands, picking plastic wastes from the ecologically important sites etc. This was mostly done by IT companies and corporate offices in cities. There are many other such activities like women empowerment, Disaster response, Sustainable Environment as well. These are in a mere number compared to the above-stated types of CSR.

India is facing some huge problems in resources for various issues which the western world have no idea. The idea of hoping for the government to respond and support the intricate problems would be like waiting for the sun to rise at midnight. Thus, the demand has to be satisfied somewhere in the run. The CSR actually does that and at least forces to make a philanthropic act. Many critics state that the mandatory regime will make a checkbox mentality from the company side. That to a certain extent is true as some company do these activities for namesake.

It is to be said that even though India has a mandatory regime to have a compulsory CSR activity, poor implementation of the laws and a clear lack of enforcement authorities make the regime an easily vulnerable one. This implementation promotes the implementation on paper level or in a namesake setup. Thus, it is time for India to rework on the laws regarding CSR.

The act of giving back what was taken by a company or will be taken is called CSR. In short, there are several ways a corporation can fulfil its social responsibility. But the three most popular ones are education, health care, and environmental cleaning.

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