INTRODUCTION

In the contemporary business landscape, the role of corporations extends beyond profit generation,
encompassing a broader responsibility toward society and the environment. Recognizing this evolving
paradigm, the Companies Act of 2013 in India has incorporated provisions mandating Corporate Social
Responsibility (CSR). CSR represents a strategic approach by businesses to integrate social and
environmental concerns into their operations, fostering a sense of responsibility towards stakeholders
beyond shareholders. Under the Companies Act, 2013, CSR has emerged as a pivotal element in
corporate governance, emphasizing the need for businesses to contribute positively to society. The
legislation mandates qualifying companies to allocate a portion of their profits towards specified CSR
activities, thereby encouraging a sustainable and inclusive approach to business practices. This
legislative framework not only underscores the legal obligation for businesses but also promotes a shift
in corporate culture towards responsible and ethical conduct. The Companies Act, 2013, outlines the
criteria for companies that fall within the ambit of CSR, the nature of CSR activities, and the reporting
mechanisms to ensure transparency and accountability.

As we delve into the intricacies of CSR under the Companies Act, 2013, it becomes evident that this
statutory provision is not merely a compliance requirement but a catalyst for corporate entities to
become active contributors to societal well-being. This introduction sets the stage for a comprehensive
exploration of the dimensions, challenges, and impact of CSR within the regulatory framework,
shedding light on how businesses can align their operations with social responsibility for the greater
good.

Corporate Social Responsibility:- Meaning and its Scope

Corporate Social Responsibility (CSR) refers to the ethical and strategic commitment of businesses to
contribute positively to society by addressing social, economic, and environmental concerns. It goes
beyond the traditional focus on profit maximization and emphasizes the responsibility of corporations
to consider the impact of their activities on various stakeholders, including employees, customers,
communities, and the environment.
At its core, CSR embodies the idea that businesses have a broader role in society beyond merely
generating profits for shareholders. It involves integrating ethical practices, sustainability, and social
welfare into a company's operations and business model. CSR encompasses a range of activities and
initiatives aimed at fostering a positive impact on society and the environment.
The term CSR has been defined under the CSR Rules1 which includes but is not limited to:
1. Projects or programs relating to activities specified in the Schedule; or
2. Projects or programs relating to activities undertaken by the Board in pursuance of
recommendations of the CSR Committee as per the declared CSR policy subject to the
condition that such policy covers subjects enumerated in the Schedule.
This definition holds importance as it grants companies the flexibility to participate in projects or
programs related to activities specified in the Schedule. Companies are also given leeway to choose
CSR engagements according to their preferences, as long as they align with the CSR policy.

CSR Committee and Policy

Every eligible company is mandated to allocate a minimum of 2% of its average net profit from the
immediately preceding three financial years for CSR activities. Additionally, the qualifying company is
obligated to establish a committee, namely the CSR Committee, comprised of three or more directors
from the Board. This committee holds the responsibility of formulating and recommending a policy,
referred to as the CSR Policy, to the Board. The CSR Policy outlines the activities to be undertaken,
suggests the expenditure to be incurred on said activities, and monitors the company's CSR initiatives.
The Board, in turn, considers the recommendations put forth by the CSR Committee and grants approval
to the CSR Policy of the company.

According to the Companies Act, priority should be accorded to local areas and the regions where the
company conducts its operations in the implementation of CSR activities. Additionally, companies have
the option to collaborate with two or more entities to fulfill CSR obligations, with the stipulation that
individual reporting is feasible. The CSR Committee is tasked with crafting the CSR Policy,
encompassing the projects and programs to be undertaken. It is also responsible for compiling a list of
projects and programs slated for the implementation year. Furthermore, the committee is encouraged to
emphasize the integration of business models with social and environmental priorities and processes to
generate shared value.

The company has the option to include an annual report on CSR activities, detailing the average net
profit over the preceding three financial years and the prescribed CSR expenditure. However, in
instances where the company is unable to meet the minimum required expenditure, it must provide
reasons for non-compliance in the Board Report. This proactive disclosure in the Board Report is
essential to avoid the imposition of penal provisions.

1
General Circular No. 14 /2021, Ministry of Corporate affairs
Entities Covered by the CSR
Entities falling under the purview of CSR have relatively low threshold coverage levels. Companies are
obligated to adhere to CSR requirements for any financial year if they meet the following criteria:

 A net worth of at least Rs. 5 billion

 A turnover of at least Rs. 10 billion
 Net profits of at least Rs. 50 million

Companies meeting these specified thresholds are mandated to formulate a CSR policy, allocate a
minimum amount towards CSR activities, and provide a report on these activities. In cases where
compliance is not met, companies are required to furnish an explanation for their non-compliance.

Required Amount of CSR Spending

An entity or business meeting the specified thresholds is obligated to allocate a minimum of two percent
of its average net profit from the preceding three financial years towards CSR activities. The term "net
profit" refers to a company's profits in accordance with its profit and loss account, as per the provisions
of the New Act. It's important to note that profits from a company's operations outside India or dividends
received from an Indian company that has already fulfilled its CSR requirements are excluded from the
calculation of net profit for CSR spending purposes.

Corporate Social Responsibility

1. Any company with a net worth of rupees five hundred crore or more, a turnover of rupees one
thousand crore or more, or a net profit of rupees five crore or more during any financial year is required
to establish a Corporate Social Responsibility Committee of the Board. This committee must consist of
three or more directors, with at least one director being an independent director.

2. The composition of the Corporate Social Responsibility Committee is to be disclosed in the

Board's report under sub-section (3) of section 134.

3. The Corporate Social Responsibility Committee is tasked with:

i) Formulating and recommending to the Board a Corporate Social Responsibility Policy,
indicating the activities to be undertaken by the company as specified in Schedule VII.
ii) Recommending the amount of expenditure to be incurred on the activities mentioned in
clause (a).
iii) Monitoring the Corporate Social Responsibility Policy of the company periodically.

4. The Board of every company falling under sub-section (1) must:

 a. After considering the recommendations of the Corporate Social Responsibility Committee,
approve the Corporate Social Responsibility Policy for the company. The contents of this
policy should be disclosed in the company's report and posted on its website, if applicable,
in the prescribed manner.
b. Ensure that the activities outlined in the Corporate Social Responsibility Policy are
undertaken by the company.
5. The Board of every company specified in sub-section (1) must ensure that the company
allocates, in every financial year, at least two percent of the average net profits made during the three
immediately preceding financial years in accordance with its Corporate Social Responsibility Policy.

Provided that the company is to give preference to the local area and areas around it where it operates
when spending the earmarked amount for Corporate Social Responsibility activities.
Provided further that if the company fails to spend this specified amount, the Board must specify the
reasons for non-compliance in its report under clause (o) of sub-section (3) of section 134.
EXPLANATION- For the purposes of this section, the term "average net profit" shall be computed in
accordance with the provisions stipulated in section 198.

Permitted CSR Activities

The permissible areas for CSR funding encompass a comprehensive list, ranging from addressing
hunger and poverty to promoting public health, supporting education, tackling gender inequality,
protecting the environment, and funding cultural initiatives and the arts. It is a prerequisite that all CSR
funds be utilized within India. The New Act encourages companies to direct their CSR funds to the
areas where they operate, but it explicitly prohibits spending on activities considered part of the normal
course of the company's business or on projects exclusively benefiting employees or their family
members.
Notably, contributions of any amount to a political party are not considered a permitted CSR activity.
However, there is an exception under the New Act that allows companies to utilize their CSR funds to
support development projects initiated by the prime minister or central government. It is crucial to
acknowledge that such projects in India have, in certain instances, raised concerns about political
patronage. Additionally, these initiatives may pose legal issues in other jurisdictions if they are
perceived as political payoffs.
CRITICISM

1. Too Complicated
The rules about CSR are kind of confusing. It might be hard for companies to understand and follow
them, leading to problems.

2. Forced Charity:
Making CSR mandatory might make companies do social activities just to follow the rules, not because
they really want to help. It could turn into a checkbox thing instead of meaningful help.

3. Same Rules for Everyone:

Not all companies are the same, but these rules treat them like they are. Some companies might need
different rules based on their size or type.

4. Just for Show:

Having a big list of things companies can spend on might make them choose easy things just to look
good, even if it doesn't really solve the main problems.

5. No Room for Change:

The rules are a bit strict, and companies might find it hard to change their plans based on new problems
or unexpected things. They need more freedom to make a real difference.

6. No Rewards for New Ideas:

The rules don't encourage companies to come up with new and better ways to help. They might just
stick to the usual stuff instead of trying cool and new ideas.

7. Might Look Good but Not Really Help:

Some companies might do things just to look good without really making a big impact. It's like
pretending to help without doing much.

8. Only Helping in India:

Companies are told to spend their money in India. But some companies work in other countries too, so
they might miss chances to help globally. In short, the rules are a bit confusing, might make companies
do things just for show, and could be better if they were more flexible and encouraged new and smarter
ways to help.
 CONCLUSION

In conclusion, the incorporation of Corporate Social Responsibility (CSR) into the regulatory
framework of the Companies Act, 2013 marks a significant stride toward a more conscientious and
sustainable business environment. The mandate for businesses to allocate resources for socially
responsible initiatives reflects a paradigm shift in corporate ethos, emphasizing a commitment to
societal welfare beyond profit-making objectives. The Companies Act, 2013, not only imposes a legal
obligation on qualifying companies to engage in CSR activities but also underscores the transformative
potential of businesses as catalysts for positive change. The scope of CSR outlined in the legislation
encourages companies to go beyond philanthropy and embrace a comprehensive approach that
integrates ethical, environmental, and social considerations into their core operations.
Moreover, the Act promotes transparency and accountability by mandating the disclosure of CSR
initiatives in annual reports, thereby enabling stakeholders to evaluate a company's commitment to
responsible business practices. The synergy between regulatory obligations and ethical imperatives
positions CSR as a cornerstone in the evolving landscape of corporate governance. In essence, CSR
under the Companies Act, 2013, serves as a powerful mechanism for businesses to contribute
meaningfully to the well-being of society while simultaneously ensuring their own longevity and
resilience. By recognizing the interconnectedness of business success and social welfare, the legislation
paves the way for a more harmonious and sustainable coexistence between corporate entities and the
communities they serve. In this era of heightened social consciousness, CSR emerges not just as a legal
requirement but as an integral aspect of corporate identity, reflecting a commitment to a better and more
equitable world.

REFERENCES & BIBLOGRAPHY

 Chahoud, Dr. Tatjana; Johannes Emmerling; Dorothea Kolb; Iris Kubina;
 Gordon Repinski; Catarina Schläger (2007). "Corporate Social and
 Environmental Responsibility in India - Assessing the UN Global Compact's Role
 Sathish, Ramya. "Corporate Social Responsibility in India - Putting Social-Economic
Development on a Fast Track".
 The Flag Off of CSR Rules: India Inc.’s To-Do List for Compliance to Section-135". Forbes.
 March 2014. Retrieved 7 March 2014.
 http://www.sebi.gov.in/cms/sebi_data/attachdocs/1344915990072.pdf
 Making Sense of Corporate Social Responsibility"
 7.http://www.mca.gov.in/SearchableActs/Section135.htm