Corporate Social Responsibility and Sustainable Business~ An Analytical Study
ABSTRACT
This research examines CSR as a universal idea throughout the world in an effort to provide a comprehensive grasp of the topic. The paper begins with an explanation of CSR and the reporting thereof, then moves on to an examination of the legal paradigm surrounding CSR reporting in India, touching on such topics as the applicable sections of the Companies Act of 2013 and the National Guidelines for Responsible Business Conduct. The research shows how is CSR important and its relation with the fundamental rights. This study includes many instances and an analysis of the Corporate Social Responsibility (CSR) Reporting framework in India. Last but not least, it analyses the role of CSR in the international and national developmental agenda and goals pursued by Indian corporations, as well as the systems and instruments of reporting that have been implemented for this very purpose, and presents a case study of the TATA group terminating the paper. This research was conducted with the intention of bridging the gap in knowledge on the importance of various CSR reporting mechanisms in the Indian setting.
- What is the scope of CSR in India?
- Why is CSR important?
Across the globe, businesses are adjusting to a new role: providing for the demands of today’s consumers without jeopardising the future prosperity of their descendants. It is becoming more expected of businesses to account for the effects of their actions on the communities and ecosystems in which they operate. Companies are also being encouraged to incorporate sustainable practises into how they operate. Voluntary steps taken by a company that show they are considering the needs of society and the environment as they do business and engage with their stakeholders are what we term “sustainable.”
As corporate social responsibility (CSR) concerns grow more ingrained in contemporary business operations, the term “responsible competitiveness” or “corporate sustainability” is increasingly being used to describe this phenomenon.
It’s important to keep in mind that CSR is just a relatively new idea that has yet to settle on a single, unified definition. To put it simply, corporate social responsibility (CSR) is how businesses openly and transparently address social, environmental, and economic issues in their value systems, culture, decision-making, strategy, and operations in order to foster better business practises, generate wealth, and better the world at large. CSR increasingly includes discussions of how the private sector responds to pressing concerns of sustainable development.
Commonly seen as a synonym for “Corporate Sustainability,” the phrase “Corporate Social Responsibility” (CSR) is used interchangeably across the world. However, CSR in India has a few unique characteristics that set it apart from its global counterpart. In India, CSR focuses on the areas of social development and environmental preservation as detailed in Schedule VII of the Companies Act, 2013.
Corporate Sustainability, on the other hand, has been accepted on a worldwide scale, and it refers to the practise of integrating sustainability into company value chains and supply networks so that all business activities adhere to a sustainable or responsible model. Integrating responsible behaviour into every aspect and action of a company’s operations is a fundamental tenet of responsible business practise. Any and all business dealings with natural resources, including sourcing, procurement, production, distribution, etc., should be conducted in an ethical manner. It also includes engaging in socially responsible actions.
Although CSR in India mostly still takes the form of monetary donations to charitable causes, the focus has shifted from infrastructure development to community improvement across a range of fields. In addition, as the world grows more interconnected and as local communities become more vocal and demanding, a clear trend has emerged: while corporate social responsibility (CSR) is still focused primarily on development initiatives, it is increasingly becoming linked with business rather than monetary donations to nonprofits, and many businesses are disclosing the work they are doing in this area in their annual reports.
The Companies Act of 2013 has brought the concept of CSR to the forefront, and it tell-or-explain mandate is contributing to a rise in transparency and openness. Community involvement is highlighted in Schedule VII of the Act, which details CSR initiatives.
WHY IS CORPORATE SOCIAL RESPONSIBILITY IMPORTANT?
In today’s world, it’s more important than ever that businesses prioritise doing good for society. ‘Social responsibility’ is shorthand for a company’s dedication to achieving long-term objectives that are good for both its workers and the greater community.
- Corporate Social Responsibility has the potential to increase customer loyalty: Organizations may find help in CSR in their efforts to enlist more customers in their causes. Many CSR initiatives call for interaction between companies and members of the public who aren’t necessarily customers or prospects. They may instantly ask customers what they think of their goods and services. Customers who are helped by a business’s efforts in the community are more likely to recommend that business to others. So, it’s a great promotional tool in the same vein.
- It’s possible that consumer perception of a brand might improve as a result of CSR efforts: It might be difficult for firms in today’s market to differentiate themselves from customers’ perspectives due to the intense competition. However, businesses that prioritise social responsibility are more likely to succeed in building brand awareness and attracting new consumers. By bringing attention to and sparking discussion about important topics, CSR may help businesses grow. Eventually, it may help build trust.
- Branding Depends Upon CSR: In order to construct a strong brand and keep consumers loyal, businesses must earn their trust. In my opinion, a company’s CSR efforts may help build trust and loyalty among its clientele. A company can only succeed with a committed customer base. Customers would rather show their support for a company that cares about more than just making a profit.
- Community service shows dedication to shareholders: Investors may be more attracted to companies that prioritise social responsibility. That’s because most shareholders want more out of the investment than they put in. Companies that are able to efficiently manage their finances and make charitable contributions to their communities also tend to be transparent in their dealings. Rather from seeing corporate social responsibility expenditure as frivolous, investors see it as a “sign of a business culture less prone to expensive blunders like financial fraud,” according to a 2016 Aflac analysis.Extra than half of customers, according to a 2015 Nielsen poll, are prepared to spend more for a product or service from a company that prioritises sustainability. This suggests that customers prefer and reward companies whose motivations extend beyond making a profit.
- Savings are realised as a direct result of CSR efforts: CSR may help a business in a number of ways, including recruitment and retention of staff and, as said, attracting a more loyal client base prepared to pay a higher price for items made by a socially accountable firm. Since employee turnover may cost businesses thousands of dollars, this is significant. In conclusion, companies that prioritise profit above all else endanger themselves, society, the economy, customers, and even their own workers. In order to attract and retain the greatest workers, businesses should think about ways they can contribute to the community. After all, happy customers and dedicated workers are the backbone of every thriving business.
CORPORATE RESPONSIBILITY AND THE COMPANIES ACT OF 2013
Corporate social responsibility (CSR) is not optional for businesses since it is required by law under the Companies Act of 2013. Section 135 of the Act requires all companies that satisfy certain requirements to establish a CSR Committee, create a CSR policy, and allocate at least 2% of their average net income from the three fiscal years before to the current fiscal year to CSR initiatives.
- Organization with a net value of at least Rs. 500 Cr;
- Organization with a turnover of at least Rs. 1000 Cr; or
- Organization with a net profit of at least Rs. 5 Cr in the most recent fiscal year.
If a company does not meet any of the criteria for CSR application (net worth, turnover, or net profit), then CSR does not apply to that company. In the case of Bilfinger Neo Structo Private Limited[1], it was determined the same thing.
- This was the case with Technicolor India (P.) Ltd. v. Registrar of Companies[2], where the company explained in its Director’s Report why it had spent less than the minimum required by Section 135 of the Companies Act on corporate social responsibility during the fiscal year in question (2017–18), despite meeting the net profit criteria, U/ s 135 (5). However, it was discovered that the Director’s report inaccurately recorded the total spending on CSR and related data, therefore the business filed an application with the National Company Law Tribunal (NCLT) in Bangalore. The company’s request to amend its report was granted by the tribunal, opening the door for it to seek compounding in accordance with Section 441 of the Act.
- This Compounding Application was filed with the Registrar of Companies in the Indian state of Chattisgarh (henceforth referred to as RoC) on behalf of Alok Pharmaceuticals and Industrial Company Private Limited[3], Rapid Estates Private Limited[4], and Avinash Developers Private Limited[5]; the RoC has since reported on the application and sent its findings to the National Company Law Tribunal in Mumbai. The Learned RoC informed the Company that this application was filed because the Company failed to provide an explanation for the non-spending of the CSR amount for the Financial Years 2011-12 to 2013-14 in the relevant Director’s Report, in violation of Section 134(3)(o) of the Companies Act, 2013 (hereinafter as Act) and Rule8 of the Companies (Corporate Social Responsibility Policy) Rules, 2014. It has been noted that submitting an application pursuant to 441 of the Act may result in the compounding of an offence for a breach of Section 134 (3)(o) for failing to provide information about the CSR policy in the Board’s Report.
The Sustainable Development Goals, Nationally Determined Contributions, and Schedule VII of the Companies Act, 2013 were all drafted simultaneously. India has a number of rules, guidelines, standards, and regulations pertaining to corporate social responsibility (CSR), but Indian corporations seem to be in a state of confusion as to which, if any, of these should be included into their CSR policy, strategy, and implementation.
In order to create a framework that enables companies to operate sustainably across multiple jurisdictions, it is necessary to align Corporate Social Responsibility, National Guidelines on Responsible Business Conduct (NGRBC), and some of the key International CSR Standards to Sustainable Development Goals.
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Written by- Mansi Malpani
[1] 2019 SCC OnLine NCLT 108
[2] Technicolor India (P.) Ltd. v. Registrar of Companies, 2020 (7) TMI 423
[3] 2018 SCC OnLine NCLT 28915, C.P. No. – 396/441/ND/2018
[4] 2018 SCC OnLine NCLT 545, C.P. No. 11/441/ND/2017
[5] 2018 SCC OnLine NCLT 29665, CP No. 2710/441/NCLT/MB/MAH/2018