Corporate Social responsibility

Corporate Social Responsibility
Corporate Social Responsibility is a management concept whereby companies integrate social and environmental concerns in their business operations and interactions with their stakeholders. CSR is generally understood as being the way through which a company achieves a balance of economic, environmental and social imperatives, while at the same time addressing the expectations of shareholders and stakeholders. In this sense it is important to draw a distinction between CSR, which can be a strategic business management concept, and charity, sponsorships or philanthropy. Even though the latter can also make a valuable contribution to poverty reduction, will directly enhance the reputation of a company and strengthen its brand, the concept of CSR clearly goes beyond that.

The rudimentary principle behind CSR involves the evaluation of a firm's profits, as well as their utilization. The latest definition of CSR encompasses seven principles: organizational governance, community involvement and development, human rights, labor practices, the environment, fair operating practices and consumer issues. As organizations have evolved since the advent of the Industrial Revolution, the role of corporations has become much more important and the influence of societies on their activities has increased. The company's responsibility is not solely to shareholders anymore and they need to make contributions that benefit society. 
Promoting the uptake of CSR amongst SMEs requires approaches that fit the respective needs and capacities of these businesses, and do not adversely affect their economic viability. UNIDO based its CSR programme on the Triple Bottom Line (TBL) Approach, which has proven to be a successful tool for SMEs in the developing countries to assist them in meeting social and environmental standards without compromising their competitiveness. The TBL approach is used as a framework for measuring and reporting corporate performance against economic, social and environmental performance. It is an attempt to align private enterprises to the goal of sustainable global development by providing them with a more comprehensive set of working objectives than just profit alone. The perspective taken is that for an organization to be sustainable, it must be financially secure, minimize (or ideally eliminate) its negative environmental impacts and act in conformity with societal expectations.

CSR within an Organization is not only relevant because of a changing policy environment but also because of its ability to meet business objectives. Undertaking CSR initiatives and being socially responsible can have a host of benefits for companies such as the following:
Strengthening relationships with stakeholders
Enabling continuous improvement and encouraging innovation
Attracting the best industry talent as a socially responsible company
Additional motivation to employees
Risk mitigation because of an effective corporate governance framework
Enhanced ability to manage stakeholder expectations
These benefits are important and most companies that are engaged in CSR are revisiting their strategies and expanding their operations to reap enhanced benefits and contribute to inclusivity in growth.

CSR IN India-

APPLICABILITY AND CONSTITUTION OF A CSR COMMITTEE
Section 135 of the 2013 Act states that every company having,
Net worth of Rs 500 crore or more, or
Turnover of Rs 1000 crore or more, or
Net profit of Rs 5 crore or more during any financial year,
shall constitute a Corporate Social Responsibility Committee of the Board
The committee would comprise of three or more directors, out of which at least one director shall be an independent director. The mandate of the said CSR committee shall be:
to formulate and recommend to the Board, a Corporate Social Responsibility Policy, which shall indicate the activities to be undertaken by the company as specified in Schedule VII;
to recommend the amount of expenditure to be incurred on the activities referred to above;
to monitor the Corporate Social Responsibility Policy of the company from time to time

RESPONSIBILITY OF THE BOARD
The Board of every company referred to above shall after taking into account the recommendations made by CSR Committee:
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, and
ensure that the activities as are included in CSR Policy of the company are undertaken by the company, and
ensure that the company spends, in every financial year, at least two per cent of the average net profits
If the Company fails to spend such amount, the Board shall, in its report specify the reasons for not spending the amount. "Average net profit" shall be calculated in accordance with the provisions of section 198 of the 2013 Act.

CSR RULES
The Central Government has prescribed some rules, which are to be read along with the sections, which may get applicable from financial year 2014-15:

Net profit shall mean net profit before tax as per books of accounts and shall not include profit arising from branches outside India.
Reporting to be done from F.Y. 2014-15.
Tax treatment of CSR spent is yet to be notified by the IT Act.
In case a company invests in a Social business project in order to fulfill its CSR requirements the CSR policy of the company should provide that the surplus arising out of the CSR activity will not be part of business profits of a company.
All the incomes and surplus arising out of CSR policy shall form part of the corpus along with 2% of the average net profits.
The company may implement its CSR programmes through its own trusts or any other registered trusts or section 8 company which shall have established track record of atleast three years in carrying on activities in related areas.
Only such CSR activities will be taken into consideration as are undertaken within India.
The CSR activities undertaken shall not be exclusively for the purpose of the benefit of the employees or their families.
Key CSR issues: environmental management, eco-efficiency, responsible sourcing, stakeholder engagement, labour standards and working conditions, employee and community relations, social equity, gender balance, human rights, good governance, and anti-corruption measures.
A properly implemented CSR concept can bring along a variety of competitive advantages, such as enhanced access to capital and markets, increased sales and profits, operational cost savings, improved productivity and quality, efficient human resource base, improved brand image and reputation, enhanced customer loyalty, better decision making and risk management processes.

CONCLUSION
By providing more clarity on standardizing the meaning of CSR in the Indian context and providing a favorable policy environment, the initiatives can be strengthened. By creating a pool of resources, whether financial or technical, a win-win situation is within reach of all the stakeholders involved. The mandatory reporting standards being introduced in the Companies Bill will aid in creating uniformity and accountability of actions and also become a measure of the impact these activities will have — and the ability measure the impact will be a step in a positive direction. Even the tools that have been developed for measuring social return on investment can be employed more effectively.

SMEs- Small and Medium size Enterprises
UNIDO- United Nations Industrial Development Organization



http://www.unido.org/en/what-we-do/trade/csr/what-is-csr.html
Implications of Companies Act, 2013 Corporate Social Responsibility, Grant Thorton
Implications of Companies Act, 2013 Corporate Social Responsibility, Grant Thorton
Proposed Draft Corporate Social Responsibility Rules under Section 135 of the Companies Act, 2013