Corporate Social Responsibility: A Company's Ethical Obligation To Contribute To Sustainable Development
Rohit A Pal, Thakur Ramnarayan College of Law
Introduction
Corporate social responsibility (CSR) refers to the voluntary efforts undertaken by companies to address the social, environmental, and economic impacts of their operations. These efforts can take many forms, such as philanthropy, sustainability initiatives, and community engagement. The goal of CSR is to balance a company's financial goals with the needs and expectations of various stakeholders, including shareholders, employees, customers, and the broader community. While CSR is not legally required in most countries, many companies choose to implement CSR initiatives as a way to demonstrate their commitment to being good corporate citizens and to enhance their reputation with stakeholders.
In India, the Companies Act, 2013 requires certain companies to adopt CSR initiatives as part of their corporate governance practices. Specifically, section 135 of the Act requires companies that meet certain criteria to spend at least 2% of their average net profits from the previous three financial years on CSR activities. The criteria for being covered by section 135 are as follows:
• Companies with a net worth of INR 500 crore (approximately USD 68 million) or more
• Companies with a turnover of INR 1,000 crore (approximately USD 136 million) or more
• Companies with a net profit of INR 5 crore (approximately USD 680,000) or more
Once a company meets these criteria and is covered under section 135, it must remain covered for a minimum period of three financial years. The company is required to adopt a CSR policy and disclose information about its CSR activities in its annual report. The CSR policy must include details about the company's CSR activities, the amount to be spent on CSR, and the implementation and monitoring of the CSR projects.
