Demystifying CSR

Hi Folks!

We will try to understand the concept of Corporate Social responsibility with other related aspects.

1.Corporate social responsibility (CSR) also called corporate citizenship is a self-regulating business model that helps a company be socially accountable to itself, its stakeholders, and the public.?By practicing CSR, companies can be conscious of the kind of impact they are having on all aspects of society, including economic, social, and environmental.

2. As the Companies in India are regulated by Indian Companies Act, 2013, Section 135 of Companies Act lays down the responsibility on companies meeting the specified criteria to put aside 2% of average net profits of preceding three financial years on CSR activities defined as per schedule VII of the Act.

Tip 1: Net profits for the purpose of section 135 shall be calculated as per section 198 of the Act.

Tip 2: Company is required to earmark the amount that has been put aside between 2 categories - Ongoing projects and other than ongoing projects.

Now comes the tricky part of spending/depositing the set aside amount:

2a. Ongoing projects

If the Company fails to fully spend the amount set aside within that financial year, then Company is under obligation to transfer the unspent amount to special account within 30 days of end of financial year. Further, these deposited funds has to be mandatorily to be used for CSR activities within period of 3 financial years from the date of such transfer.

2b. Other than ongoing projects

If the Company fails to fully spend the amount set aside within that financial year, then Company is under obligation to transfer the unspent amount to such funds mentioned in schedule VII like Clean Ganga fund or Prime Minister National relief fund etc. within 6 months of end of financial year.

3. Other related aspects

In 2010, the?International Organization for Standardization?(ISO) released ISO 26000, a set of voluntary standards meant to help companies implement corporate social responsibility. Unlike other ISO standards, ISO 26000 provides guidance rather than requirements because the nature of CSR is more qualitative than quantitative, and its standards cannot be certified. ISO 26000 clarifies what social responsibility is and helps organizations translate CSR principles into practical actions. The standard is aimed at all types of organizations, regardless of their activity, size, or location. And because many key stakeholders from around the world contributed to developing ISO 26000, this standard represents an international consensus.

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