Understanding CSR Rules: A Guide to Corporate Social Responsibility in India Corporate Social Responsibility (CSR) has become a vital part of the modern business landscape, especially in India. With growing awareness around environmental sustainability, ethical business practices, and social welfare, CSR is now seen not just as a regulatory requirement but also as a strategic tool to build trust and long-term value. In this blog, we will dive deep into CSR rules, explore what is CSR fund, discuss the role of CSR, and review some inspiring CSR initiatives taken by Indian companies.
What is CSR? Corporate Social Responsibility (CSR) refers to a company’s commitment to manage the social, environmental, and economic effects of its operations responsibly. It is a way businesses contribute to the betterment of society while enhancing their own brand and sustainability in the long term. In India, CSR was made mandatory under the Companies Act, 2013, making it one of the few countries in the world to legislate corporate responsibility.
CSR Rules in India The CSR rules in India are governed by Section 135 of the Companies Act, 2013 and the Companies (Corporate Social Responsibility Policy) Rules, 2014. These rules apply to companies that meet any of the following criteria in the preceding financial year: ● Net worth of ₹500 crore or more ● Turnover of ₹1,000 crore or more ● Net profit of ₹5 crore or more
If a company falls under any of these categories, it is required to: 1. Form a CSR Committee: Consisting of at least three directors, including one independent director. 2. Allocate CSR Funds: Spend at least 2% of the average net profits made during the three immediately preceding financial years on CSR activities. 3. Publish a CSR Policy: The policy should outline the areas of focus, budget, and implementation plan for CSR activities. 4. Disclose CSR Spending: Companies must include CSR spending and outcomes in their annual board reports.
What is CSR Fund? Now that we've covered the rules, you might be wondering — what is CSR fund? A CSR fund refers to the budget that a qualifying company must allocate and spend towards CSR activities. As per Indian law, this is a financial commitment—specifically, 2% of the average net profits of the past three years. The fund must be used for specific activities laid out in Schedule VII of the Companies Act, which includes: ● Eradicating hunger and poverty ● Promoting education and gender equality ● Ensuring environmental sustainability
● Protecting national heritage ● Promoting sports and rural development
CSR funds must be utilized in a transparent and accountable manner. Unspent funds related to ongoing projects must be transferred to a designated CSR account and used within three financial years, or else transferred to a government-specified fund.
Role of CSR in Society and Business The role of CSR goes far beyond just legal compliance. CSR is a powerful instrument that enables businesses to positively impact the communities in which they operate. Let’s look at its key roles:
1. Social Development CSR directly contributes to the betterment of society by addressing issues like poverty, education, healthcare, and women’s empowerment.
2. Environmental Sustainability With climate change and environmental degradation becoming pressing concerns, CSR helps companies reduce their ecological footprint through green practices and sustainable technologies.
3. Brand Building and Trust Consumers and investors increasingly prefer companies that are socially responsible. CSR activities enhance brand reputation and foster customer loyalty.
4. Employee Engagement Employees are more likely to feel connected and motivated when working for a company that gives back to society. CSR also improves workplace culture and morale.
5. Regulatory Compliance and Risk Management Adhering to CSR rules not only ensures legal compliance but also helps in identifying and mitigating social and environmental risks early.
Noteworthy CSR Initiatives in India
Over the years, many Indian companies have set benchmarks through innovative and impactful CSR initiatives. Here are a few examples:
1. Tata Group Tata has long been a pioneer in CSR. Through Tata Trusts, the company has invested in education, healthcare, rural livelihoods, and water conservation across India.
2. Infosys Foundation Infosys Foundation focuses on healthcare, education, and rural development. One of its notable projects includes building toilets in government schools to promote hygiene and encourage girl child education.
3. Reliance Industries Reliance Foundation supports multiple sectors including rural transformation, health, education, sports for development, disaster response, and urban renewal.
4. ITC Limited ITC's "e-Choupal" initiative connects rural farmers with digital technology to improve their productivity and income. The company also focuses on afforestation and solid waste management. These examples highlight how companies can align their core competencies with social needs to create a lasting impact.
Final Thought CSR is not just about spending a portion of profits; it is about being accountable to the people and the planet. The CSR rules in India provide a structured framework for companies to contribute meaningfully to social development. Understanding what is CSR fund, the role of CSR, and looking at successful CSR initiatives helps us appreciate how businesses can be a force for good. As the world moves toward inclusive growth and sustainable development, CSR will continue to play a critical role in shaping the future of business and society. If you’re a company looking to develop or improve your CSR strategy, now is the perfect time to dive in—not just to meet legal requirements but to make a genuine difference. Let’s build a better world, one responsible step at a time.
