Corporate Social Responsibility (CSR) – Meaning and Concept
Corporate Social Responsibility (CSR) refers to the statutory and ethical obligation of companies to contribute towards social, environmental, and economic development of society. Under Indian law, CSR is governed by Section 135 of the Companies Act, 2013, which makes CSR mandatory for certain classes of companies. The idea behind CSR is that companies do not operate in isolation but function within society and must give back a portion of their profits for social welfare. CSR moves beyond charity and focuses on sustainable development, inclusive growth, and long-term societal benefits. It encourages companies to align business objectives with national priorities such as education, healthcare, environmental protection, and poverty eradication. Thus, CSR bridges the gap between corporate growth and social responsibility, ensuring that economic development does not occur at the cost of social well-being.
Applicability and Legal Framework under Companies Act, 2013
As per Section 135 of the Companies Act, 2013, CSR provisions apply to companies having a net worth of ₹500 crore or more, or turnover of ₹1000 crore or more, or a net profit of ₹5 crore or more during any financial year. Such companies are required to constitute a CSR Committee of the Board, consisting of at least three directors, including one independent director. The Board must ensure that at least 2% of the average net profits of the last three financial years is spent on CSR activities. Schedule VII of the Act specifies permissible CSR activities such as promotion of education, healthcare, environmental sustainability, rural development, and disaster relief. Non-compliance with CSR obligations can attract penalties, making CSR a legally enforceable corporate duty rather than a voluntary initiative.
Significance and Impact of CSR
CSR plays a vital role in promoting ethical corporate behavior and sustainable development. By mandating CSR, the law ensures that companies actively participate in addressing social challenges while maintaining profitability. CSR initiatives help build corporate goodwill, improve brand reputation, and foster trust among stakeholders such as consumers, employees, and investors. From a legal perspective, CSR reflects a shift from shareholder-centric governance to stakeholder-oriented governance. It also aligns corporate functioning with constitutional values such as social justice and equality. Effective CSR implementation can contribute significantly to national development goals while also ensuring long-term business sustainability. Therefore, CSR is not merely a statutory obligation but a strategic tool for responsible corporate governance.
Real-Time Example of CSR
A practical example of CSR can be seen in large Indian corporations like a manufacturing company that meets the thresholds under Section 135. Such a company may allocate 2% of its average net profits to establish skill development centers in rural areas. These centers provide vocational training to unemployed youth, improving employability and income generation. During the COVID-19 pandemic, many companies fulfilled their CSR obligations by contributing to healthcare infrastructure, oxygen supply, and vaccination drives. These initiatives not only complied with legal requirements but also created a positive social impact. This real-time application highlights how CSR directly benefits society while enhancing the company’s social image.
Mnemonic to Remember CSR
A simple mnemonic to remember CSR provisions is “CARE–2–S”.
C – Covered companies under Section 135
A – Average net profit of last three years
R – Responsibility of Board and CSR Committee
E – Eligible activities under Schedule VII
2 – Minimum 2% spending requirement
S – Social welfare focus
This mnemonic helps students recall the core elements of CSR quickly during exams. It connects legal provisions with their practical purpose, making answers more structured and precise.
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