Jul 3, 2020

Corporate Social Responsibility is an evolving business practice that aims to incorporate sustainable development into a company’s business. Nowadays, employees and customers focus on working for and spending their money with businesses thatare becoming socially conscious about their working environment. The organizations need to prioritize their Corporate Social Responsibility (CSR) as it has a positive impact on social, economic and environmental dimensions. The success of numerous corporate firms in the western world is due to their contribution to such practice.

CSR majorly impacts an organization’s performance because it operates in the society, and the failure to give back to the society in which it operates makes a business unsustainable. CSR has no universal definition. According to United Nations Research Institute for Social Development (UNRSD), 2003 “ At the core of this ‘corporate social responsibility’ agenda are specific policies and practices involving codes of conduct, environmental management systems, stakeholder dialogues, community investment, and philanthropy, as well as reporting,auditing, and certification related to social and environmental aspects.”

Businesses face intensified challenges like rapid globalization and increasing environmental concerns, and therefore the need for adoption of CSR has become crucial. The relationship between organizational performance and CSR is inter-dependent on each other. Companies have certain responsibilities towards the environment and are accountable for the optimum utilization of resources of the society. For a long time in the past the sole business objective was profit maximization, but today this view holds less relevance. Companies have become aware and if they want to survive and maintain growth in the market to become market leaders, they have to sacrifice part of the profits in favor of such groups which include the greater community, the economy and the environment.

A socially responsible firm not only meets these needs of the society, but also enhances its goodwill and creates a long term and sustainable market for its goods and services.

CSR builds brand reputation and firms have been focusing more on integrating CSR as a strategic investment as it directly increases its economic value. Such companies are recognized for their positive policies of social responsibility and gain massive attention from their customers.

A brand which is majorly known for its social responsibility is Microsoft. This company has played active roles in working with educational institutions,non-profit organizations, government organizations etc., and has also partnered with many small-sized businesses. Google is another company that uses renewable energy as the focus of its CSR through its Google Green Program. This program aims on setting solar panels to improve the lives of people in an environmentally sustainable way. They want to optimally use earth’s resources in creating products in link with both people and the planet.

India is the first country that brought legislation in the implementation of corporate social responsibility activities. CSR was incorporated in the Companies Act, 2013 and the government plays a major role in ensuring the companies and organizations are restricted from harming the environment. The legislation includes rules and regulations which allows businesses to be more vigilant and responsible towards the society. These CSR activities have contributed to increasing the GDP of the country and the laws ensure that quantum of money is utilized for CSR purposes and are compulsorily included in the annual profit-loss report that is released by the company to ensure that the company is investing their profits in required areas such as poverty,education, hunger, gender equality.

The CSR rules came into effect on 1st April 2014, and it is applicable to all the corporate organizations that are involved in business activities in India. CSR has been comprehensively defined in Schedule VII of the Companies Act, 2013. It is an exhaustive definition and includes specific CSR activities listed in the schedule and other social programs not listed in schedule VII which are left at the company’s discretion to undertake. The amendment has brought about a major impact on the performance of these organizations. As notified in the Companies Act, 2013, its rules require companies with a net worth of INR 500 crore or more or net profit of INR 5 crore or more, to spend 2 % of their average net profits of three years on CSR.

As per the reports that are mandated to be submitted will help the government to keep a check on all the companies which include holdings and subsidiaries which are incorporated in India relating to their CSR contributions. The details from the reports will reveal corporations that are violating CSR. It not only creates a bad image, but also adversely affects organizational performance. If these companies do not adhere to the rules of CSR, it will hamper the lives of its customer,investors, stakeholders and employees etc. One such example is the Bhopal Gas Tragedy where there was a leak of deadly methyl gas and other chemicals from the Union Carbide India Limited (UCIL) plant that led to an explosion killing hundreds and thousands of lives. Another recent example of an industrial accident is the Vizag gas leak which occurred at the LG Polymers chemical plant on 7th May, 2020.

Themandatory provision for CSR has brought a change in the attitude ofcorporations. It has a substantial and positive overall impact on the business,its finance, employees’ satisfaction, reputation, and needs of the customer. It generous way to give back to the society which helped it to prosper in thefirst place. But for some companies which are trying to scale up their operations,it becomes difficult for them to spend 2% on CSR. But their success is not solelydependant on the profits that they earn but also on theadditional rewards, sustainability and good reputation in their place ofbusiness, which they can only gain by involving in CSR activities.