CORPORATE SOCIAL RESPONSIBILTY

"Welcome to our latest edition of the THE TRUTH OF INDIA newsletter!

Today, we are going to deliver the detailed analysis of Corporate Social Responsibility(CSR) . So, sit back and enjoy the read !

CSR: What is Corporate Social Responsibility?

Medical camps, healthcare campaigns, installation of solar panels, promotion of sports & culture and many more are several examples of CSR commonly seen in daily life. Corporate social responsibility or CSR in India refers to the initiatives, including philanthropic activities undertaken by companies to contribute to our country's social, economic, and environmental development. 

India is the only country in the world with a legislature on mandatory CSR. The biggest corporations in the country are mandated to spend 2% of their net profits under CSR as per Company’s Act 2013.

Which companies should have CSR in India?

The Companies Act of 2013 made it mandatory for companies with a certain level of turnover or profits to spend 2% of their average net profit over the preceding three years on CSR activities. This Act also mandates companies to set up a CSR committee of at least three directors, including one independent director & to report on their CSR initiatives in their annual reports.

• Under the 2013 Act, the following companies in India are needed to undertake CSR activities which include foreign companies having a branch office, project office or liaison office in India:

1. Companies with a net worth of Rs. 500 crores or more
2. Companies with a turnover of Rs. 1,000 crores or more
3. Companies with a net profit of Rs. 5 crores or more.

• CSR activities in India comprise a wide range of activities like education, skill development programs, healthcare and sanitation initiatives, community development projects, and environment & disaster relief efforts. 
• Many companies also engage in other philanthropic activities, such as donating to charities and social causes.
• India and other countries have introduced regulations requiring companies to spend a certain percentage of their profits on CSR activities. Compliance with these regulations can help companies avoid penalties and legal consequences.

4. CSR activities also help build brand value & reputation alongside economic development, creating employment opportunities etc.

Companies doing CSR activities in India

CSR has a positive impact on the environment & society and helps the company build reputation & brand value. The concept of CSR has been gaining momentum in India & many companies have started taking it very seriously. Many big companies in India are actively involved in CSR activities. Few examples are:

1. Tata Group: Tata Group is one of India's largest conglomerates and is renowned for its philanthropic activities. Tata Group’s charitable arm, the Tata Trusts have undertaken a wide range of initiatives in areas like education, healthcare, rural development & disaster relief.

2. Reliance Industries: Reliance Industries is one of India's largest private sector companies having strong grip on CSR. The company has undertaken initiatives in many areas like education, healthcare, rural development, and environmental sustainability.

3.Infosys: Infosys is India’s one of leading IT companies with a strong hold over education and skill development. The company has set up the Infosys Foundation, which undertakes initiatives in areas like education, healthcare, and rural development.

4.Wipro: Wipro is another leading IT company in India, with a strong grip on environmental sustainability. The company has undertaken initiatives to reduce its carbon footprint, conserve water & promote renewable energy.

5.HDFC Bank: HDFC Bank is one of India's leading private sector banks, undertaking initiatives in several areas like education, healthcare, and environmental sustainability. The bank has set up the HDFC Bank Parivartan program, that primarily focuses on skill development & livelihood generation in rural areas.

Which company has the highest CSR in India?

It's difficult to identify a single company with the highest CSR in India, as CSR is a broad and diverse field, and many companies have implemented successful CSR initiatives. However, a few of the top 10 companies leading in CSR activities for FY 2021-22 are:

1. Reliance Industries Limited – 737 Crore Rupees
2. HDFC Bank Limited – 733.86 Crore Rupees
3. Tata Consultancy Services Limited – 716 Crore Rupees
4. Oil And Natural Gas Corporation Limited – 436.02 Crore Rupees
5. Infosys Limited – 396.7 Crore Rupees
6. ITC Limited – 354.27 Crore Rupees
7. Indian Oil Corporation Limited – 323.14 Crore Rupees
8. NTPC Limited – 281.8 Crore Rupees
9. Tata Steel limited – 266.57 Crore Rupees
10. ICICI Bank Limited – 261.73 Crore Rupees

CSR violations by Companies in India

There have been several CSR violations by Indian companies in recent years. Here are few examples:

1. Vedanta Resources violation: In 2010, the Indian govt. launched an investigation into Vedanta Resources, a UK-based mining company, for violating environmental & human rights regulations. It was accused of polluting rivers and destroying forests in the state of Orissa, displacing thousands of indigenous people from their land.
2. Tata Motors violation: In 2006, Tata Motors faced protests and legal challenges over its plan to build a car factory in Singur, West Bengal. Farmers and local activists stated that the state government had forcibly acquired the land without adequate compensation, and that the project would harm the environment and displace thousands of people leading to the abandonment of this project.
3. Coca-Cola violation: In 2004, the company was forced to shut down a bottling plant in Plachimada, Kerala, following protests by local communities over the depletion of groundwater & contamination of soil and water sources. Hence, the Coca-Cola Company faced allegations of depleting groundwater and polluting the environment in many parts of India. 
4. Nestle violation: In 2015, Nestle faced a major controversy over its Maggi noodles, which were found to contain high levels of lead and MSG (monosodium glutamate), a flavour enhancer. The incident led to a nationwide call for a ban on its sale in several states. The Indian government also fined Nestle for violating food safety regulations.
5. Union Carbide violation: The most popular and devastating disaster of India, the 1984 Bhopal gas tragedy, in which thousands of people died, and environment was damaged due to a gas leak from a pesticide plant owned by Union Carbide Corporation (now part of Dow Chemicals), is one of the most infamous cases of CSR violations in India as the incident lacked a lot of adequate safety measures.

Punishments for CSR violation

In India, the Companies Act of 2013 requires companies to spend a certain percentage of their profits on CSR activities in compliance with the CSR Rules of 2022. But, the failure to comply with these regulations can result in penalties and other consequences, which are:

1. Monetary Action: Companies which fail to spend the required amount on CSR activities can be fined up to 2% of their average net profits for the preceding three years.
2. Legal Action: The government can take legal action against companies that fail to comply with CSR regulations, including filing criminal charges or revoking the company's registration.
3. Damage to company’s reputation: Non-compliance with CSR regulations can harm a company's reputation, leading to loss of business, difficulty in attracting investors and employees & damage to brand value.
4. Blacklisting: Non- compliance with CSR regulations may result in the blacklisting of the companies by government agencies or barring them from participating in public procurement processes.

Thanks for reading !

This newsletter was written by BIKRAM GORAI. If you liked this advice from this newsletter, subscribe to it.