CORPORATE SOCIAL RESPONSIBILITY POLICY
Corporate Social Responsibility can be defined as a Company’s sense of responsibility towards the community and environment (both ecological and social) in which it operates. Companies can fulfil this responsibility through waste and pollution reduction processes, by contributing educational and social programs, by being environmentally friendly and by undertaking activities of similar nature. CSR is not charity or mere donations. CSR is a way of conducting business, by which corporate entities visibly contribute to the social good. Socially responsible companies do not limit themselves to using resources to engage in activities that increase only their profits. They use CSR to integrate economic, environmental and social objectives with the company’s operations and growth. CSR is said to increase reputation of a company’s brand among its customers and society.
The Companies Act, 2013 has formulated Section 135, Companies (Corporate Social Responsibility) Rules, 2014 and Schedule VII which prescribes mandatory provisions for Companies to fulfil their CSR. This article aims to analyze these provisions (including all the amendments therein).
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Applicability of CSR Provisions:
On every Company including its holding or subsidiary 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 the immediately preceding financial year
A foreign company having its branch office or project office in India, which fulfills the criteria specified above However, if a company ceases to meet the above criteria for 3 consecutive financial years then it is not required to comply with CSR Provisions till such time it meets the specified criteria.
CSR Committee:
Every Company on which CSR is applicable is required to constitute a CSR Committee of the Board:
- Consisting of 3 or more directors, out of which at least one director shall be an independent director. However, if a company is not required to appoint an independent director, then it shall have in 2 or more directors in the Committee.
- Consisting of 2 directors in case of a private company having only two directors on its Board
- Consisting of at least 2 persons in case of a foreign Company of which one person shall be its authorized person resident in India and another nominated by the foreign company.
CSR Policy
The CSR Policy of the company shall, inter-alia, include the following namely :-
A list of CSR projects or programs which a company plans to undertake specifying modalities of execution of such project or programs and implementation schedules for the same.
Monitoring process of such projects or programs.
A clause specifying that the surplus arising out of the CSR projects or programs or activities shall not form part of the business profit of the company.
PURPOSE OF CSR POLICY
The main intention of a CSR or sustainability report is to improve the transparency of businesses’ activities.
CSR Policy aim to enable companies to measure the impact of their activities on the environment, on society and on the economy (the famous triple-bottom-line). In this way, companies can get accurate and insightful data which will help them to improve their processes and have a more positive impact.
A CSR Policy also allows companies to externally communicate with their stakeholders what are their goals regarding CSR. This allows stakeholders to get to know better what are the short, medium and long-term goals of companies and make more informed decisions.