Corporate Social Responsibility (CSR) is a concept in which companies voluntarily contribute to a better society and a cleaner environment. The companies integrate social and other valuable concerns in their business operations to better their stakeholders and community in general voluntarily. It was introduced under Section 135 of the Companies Act 2013 of the Indian Constitution.
Basically, “Corporate Social Responsibility” means and includes but is not limited to:
- Projects or programs relating to activities specified in Schedule VII to The Act.
- Projects or programs relating to those activities carried out by the Board of directors of a company as per the CSR Policy of the Company, along with the conditions that such policy will cover subjects specified in Schedule VII of the Act.
Where is it applicable?
The provisions of CSR applies to:
- Every company
- Its holding company
- Its subsidiary company
- Foreign company
Having in the preceding financial year:
- Net worth > 500 crore
- Turnover > 1000 crore
- Net profit > 5 crore
What are the 4 types of CSR?
A business’s measure of success goes beyond mere profits. In today’s world, it is critical to how a company gives back to society, does well for the environment, and acts for the greater good – not just a bigger profit. This is where CSR becomes crucial.
Here are the four types of corporate social responsibilities and how they look in action.
Businesses need to engage in environmentally friendly practices for companies committed to CSR. Corporations can cause pollution, generate waste, and deplete natural resources – but a business can take ownership over its environmental effects through CSR.
Depending on a business’s size and sector, environmental responsibility is varied. For some companies, it means using alternative and sustainable energy sources. For others, it means organizing a recycling program or giving to local pro-environment NGOs.
Being ethically responsible means a business only engage in fair business practices across the Board – including treating all employees, stakeholders, and customers ethically and respectfully.
This type of CSR has many examples. Common examples of ethical responsibility are setting a higher minimum wage, guaranteeing ethically sourced materials, and ensuring enough compensation to employees.
In today’s world, it’s expected for businesses to give back to the community. When businesses do this, they’re fulfilling their philanthropic responsibility.
This philanthropic responsibility can be as small as sponsoring a local NGO’s events or as big as donating some of a business’s annual earnings to an urgent cause.
When a business takes economic responsibility seriously, it makes financial decisions for doing good, not just earning profits. This type of CSR is linked with the other types of CSR mentioned above.
For example, an economically responsible business signs a contract for sustainable materials—even if it is expensive. Another example of economic responsibility is when a company starts a fair salary system that matches the employee’s talents and commitments.
Why is CSR beneficial to employees?
How a company chooses to treat its employees plays a significant role in its overall success. For example, suppose employees feel unappreciated and believe they are simply a means to an end for their employers to make money. In that case, it will significantly affect the standard of their work.
On the other hand, employees who feel that the work they do matters and are a valuable asset to their employers will naturally feel more motivated to do their best to help the brand succeed. In addition, offering employees opportunities to volunteer in the community during regular office hours is an excellent opportunity for personal growth and development.
Remember that when employees are active in the community, they act as brand ambassadors for the business. How employees feel about their company will be evident in their interactions with the general community. This is why brands that hope to have a positive reputation must strive to have enthusiastic and satisfied employees.
Why is CSR important to society?
According to a research paper by Ross School of Business, it depends on the ownership type, specifically, whether a company is publicly or privately owned. Publicly listed companies have a responsibility to shareholders, leading to discontinuing CSR activities if the activities are at odds with shareholder expectations.
That being said, it’s difficult to ignore so much of the positive work many multinational firms do for societies around the world.
These are just a few examples of these large corporations’ positive impact on society. Whether by donating to needy causes, supporting environmental changes, or developing programs to help people from developing countries.
But CSR isn’t just something practiced by large corporates and isn’t always publicized. Many firms work on their CSR by employee engagement through healthy initiatives or organizing fundraising events to benefit local charities. Though smaller in scale, these CSR programs are no less impactful and can hugely positively affect staff and local communities.
A genuinely effective CSR strategy cannot be just a tick-in-the-box activity. It’s a case of action over words. Senior management engagement is essential, and that enthusiasm will filter down and have a broader impact on the other employees.
An easy way to ensure that CSR activities are promoted and adopted by as many employees as possible is to include program details via the company newsletter. In addition, keep employees up to date on outcomes from any CSR activities with videos or short articles and make sure to send these updates out regularly.
How does CSR improve employee engagement?
Employee engagement refers to the measure of an employee’s commitment and connection to an organization. However, one great way to increase employee engagement may be through corporate social responsibility (CSR) initiatives. Research shows that CSR initiatives contribute to higher levels of employee engagement by providing them purpose through work.
Businesses with high levels of employee engagement enjoy many benefits, including:
Hike in Productivity
Engaged employees show more care and conscientiousness in their duties, which increases productivity.
Engaged employees are less likely to leave. They are loyal to the company and feel as though they are valuable team members.
Engaged employees are hardly absent from work. This is because they are invested in the company and care about its success. Therefore, they want to contribute and help advance the organization’s mission.
Engaged organizations experience earnings-per-share growth, four times higher than their competitors. At the same time, those in the top quartile of engagement realize 21 percent higher profitability.
Is CSR Mandated?
The Board of Directors of the CSR Committee shall make sure that the company spends at least 2% of the average net profits earned during the 3 immediately preceding financial years as per CSR policy.
If CSR spending does not meet 2% as per CSR Policy, the reason for it and the details of transferring the amount to an ongoing project t have to be mentioned in the CSR report. Also, the amount must be transferred within six months from the expiry of the financial year).
Can CSR be ignored?
Ignoring your company’s social responsibility could be disastrous for you.
Consumers criticize companies that ignore social responsibility and develop an unethical image. Such companies are more likely to get into legal troubles, resulting in their failure.
Additionally, companies use social responsibility as a recruiting tool. Prospective employees consider a company’s respected place in society the second most important driver of employee engagement.
CSR Program – Kalpaka
Kalpaka Charitable Trust has a range of lucrative CSR options for interested corporates. Check out our ‘Events’ Page to know more.