CSR Compliance – What you should know about CSR Rules & Non-Compliance?admin
What is CSR (Corporate Social Responsibility)?
Any industry or business changes environments, societies, or communities. They provide livelihoods, raise living standards, and contribute to the GDP of a nation. Corporate Social Responsibility (CSR) is an initiative or a model where organizations become socially accountable. These are initiatives focused on improving the state of society.
CSR benefits businesses by building their brand. It also projects the message that they engage in worthy causes and make a difference in society. Most of these initiatives fall under the following four categories:
- Environmental Initiatives: Companies using their resources to better environmental conditions like limiting greenhouse emissions
- Direct Philanthropy: Donating resources or funds to charities or concerns that elevate underprivileged sections of society.
- Ethical Practices: Taking up practices that are responsible and have a positive impact on society, such as minimum wage, equal pay for all genders, safer workplaces, etc.
- Economic/ Financial Responsibility: Resorting to economically responsible practices. For instance, using fair trade or recycled products in the manufacturing process.
The idea of CSR at many times transcends the idea of regular compliance. This is because companies look to do social good and forgo the idea of profits.
CSR in India:
Corporate Social Responsibility in India permits companies to start projects, programs, or activities related to social betterment. This was defined under the terms of Companies Act, 2013. India was the first company in the world to make CSR mandatory
Applicability to Companies
CSR is required of all companies. Below are criteria necessary to form a CSR committee:
- Companies with a net worth of 500+ crores.
- Companies with a turnover of 1000+ crores.
- Companies with a net profit of 5+ crores.
If the above criteria are met, CSR provisions and related rules will apply to the company. The CSR committee should consist of directors that monitor the entire CSR activities of the company.
The CSR Committee
The CSR committee is directly responsible for the approval of the CSR policy and to ensure its implementation. They must disclose the contents of CSR policies related to its report. They must also upload details online, ensuring that the statutory specified amount is spent by the company for CSR activities.
All companies are required to spend at least 2% of their average net profit for three financial years on CSR activities such as eradicating poverty, promoting education, gender equality, donating to government funds and so on.
Most companies, when starting a CSR initiative, have a CSR compliance checklist of the various compliances involved. They include:
- The Companies Act, 2013: This delineates what criteria are necessary for the formation of a company and its responsibilities.
- Schedule III: This schedule gives instructions for the preparation of balance sheets of a company, including those of profit and loss.
- Schedule VII (amended): This clarifies what activities fall under CSR initiatives that are acceptable by the government.
- Section 134: This is the board’s preparation of financial statements of the state of the company.
- Section 135: This section clearly describes which companies must have CSR initiatives based on their profits and turnovers, as mentioned above.
- Failure to comply with the above CSR rules can result in an organization or company incurring penalties.
Corporate Governance and CSR:
Corporate governance ensures that an organization engages in fair and ethical business practices and standards. While CSR is an organization’s way of giving back to the community. It can be said that CSR comes under the umbrella term of corporate governance. This ensures conscientious business practices translate into social good and eventually contribute to the development of the nation.
To know how TalentPro can help you with CSR initiatives, contact us to know more.