Corporate Social

Responsibility
 What is CSR
• Corporate social responsibility (CSR) is a self regulating business model
that helps a company be socially accountable to itself, its stakeholders,
and the public.
• By practicing corporate social responsibility, also called corporate
citizenship companies are aware of how they impact aspects of society,
including economic, social, and environmental. Engaging in CSR means a
company operates in ways that enhances the society and
environment instead of contributing negatively to them.
 Understanding CSR
• Through corporate social responsibility programmes, philanthropy, and
volunteer efforts, businesses can benefit society while boosting their
brands. A socially responsible company is accountable to itself and its
shareholders. CSR is commonly a strategy employed by large
corporations. The more visible and successful a corporation is, the more
responsibility it has to set standards of ethical behavior for its peers,
competition, and industry.
 Types of CSR
• Environmental responsibility: Corporate social responsibility is rooted in preserving the environment. A company
can pursue environmental stewardship by reducing pollution and emissions in manufacturing, recycling materials,
replenishing natural resources like trees, or creating product lines consistent with CSR.
• Ethical responsibility: Corporate social responsibility includes acting fairly and ethically. Instances of ethical
responsibility include fair treatment of all customers regardless of age, race, culture, or sexual orientation, favorable
pay and benefits for employees, vendors use across demographics, full disclosures, and transparency for investors.
• Philanthropic responsibility: CSR requires a company to contribute to society, whether a company donates profit to
charities, enters into transactions only with suppliers or vendors that align with the company philanthropically,
supports employee philanthropic endeavors, or sponsors fundraising events.
• Financial responsibility: A company might make plans to be more environmentally, ethically, and philanthropically
focused, however, it must back these plans through financial investments in programs, donations, or product research
including research and development for products that encourage sustainability, creating a diverse workforce, or
implementing DEI, social awareness, or environmental initiatives.
 Benefits of CSR
• CRS initiatives strive to have a positive impact on the world through
direct benefits to society, nature and the community in which a business
operations. In addition, a company may experience internal benefits
through the initiatives. Knowing their company is promoting good causes,
employee satisfaction may increase and retention of staff may be
strengthened. In addition, members of society may be more likely to
choose to transact with companies that are attempting to make a more
conscious positive impact beyond the scope of its business.
 Examples
• In its 2022 Environmental and Social Impact Report, Starbucks highlights taking care of its
workforce and the planet among its CSR priorities through stock grants and additional medical,
family, and educational benefits. The company's goals include achieving 50% reductions in
greenhouse gas emissions, water consumption, and waste by 2030.
• Home Depot has invested more than 1 million hours per year in training to help front-line
employees advance in their careers, aims to produce or procure 100% renewable energy to operate
its facilities by 2030, and has plans to spend $5 billion per year with diverse suppliers by 2025.
• General Motors won the Sustainability Leadership Award from the Business Intelligence Group in
2022. The automaker provided $60 million in grants to more than 400 U.S. nonprofits focusing on
social issues, and it has agreements in place to use 100% renewable electricity at its U.S. sites by
2025.
 Why are companies adopting CSR
• Consumers are increasingly seeking products and services from socially responsible
companies. Meanwhile, many investors are prioritizing companies whose values are
clear and aligned with their own. To meet these demands, businesses are integrating
CSR into their operations. In addition, global expansion and the increasingly
interconnected nature of supply chains pushes companies to comply with a growing
web of regulatory environments and to better confront the impact of their business on
communities around the world.
• With increased awareness of environmental issues, labor practices and ethical concerns,
combined with better research and communication, CSR is now more central to
business strategies. Some companies even have dedicated CSR departments.
 Triple Bottom Line and CSR
• In economics, the triple bottom line (TBL) maintains that companies should
commit to focusing as much on social and environmental concerns as they do on
profits. TBL theory posits that instead of one bottom line, th. ere should be three:
profit, people, and the planet.
• Profit: This is the traditional measure of corporate profit—the Profit and Loss
(P&L) account.
• People: This measures how socially responsible an organization has been
throughout its history.
• Planet: This measures how environmentally responsible a firm has been
 Pros and Cons of Triple Bottom Line
• PROs
• Aims to have positive impact on the world
• May boost employee retention as workers may appreciate favorable working conditions
• May result in greater external funds from investors seeking ESG investments
• May result in greater sales from customers seeking to support ESG companies
• May result in long-term efficiencies that reduce costs in the long-run
• CONs
• May be more difficult to assess non-financial inputs or outputs
• Lack of comparability across impact groups (i.e. companies may need to choose one bottom line over the other)
• May result in competing strategies, making it difficult to easily pivot from one plan to another
• Will likely increase the cost of operations due to needing to find alternative products or processes
 Pros and Cons of Triple Bottom Line
Pros Cons
• May be more difficult to assess non-
• Aims to have positive impact on the world financial inputs or outputs
• May boost employee retention as workers • Lack of comparability across impact groups
may appreciate favorable working
(i.e. companies may need to choose one
conditions
bottom line over the other)
• May result in greater external funds from • May result in competing strategies, making
investors seeking ESG investments it difficult to easily pivot from one plan to
• May result in greater sales from customers another
seeking to support ESG companies • Will likely increase the cost of operations
• May result in long-term efficiencies that due to needing to find alternative products
reduce costs in the long-run or processes
 AMENDMENTS 2022
• Mandatory constitution of CSR Committee in case of unspent CSR amount: If a company fulfilled
any of the three criteria set forth in section 135(1) of the Companies Act, the first obligation cast on
it was to formulate a CSR Committee. Given certain practical difficulties and the quantum of CSR
budgets of individual companies, certain companies were exempted from constituting a separate
board CSR committee (for instance, a company having a CSR obligation of not more than INR 50
lakh in a financial year). Needless to say, the CSR obligations were to be discharged and monitored
by the board of directors itself. Since 21 January 2021, a company which could not spend its CSR
fund within the financial year had an option to select an ‘ongoing multi-year CSR project’ and
earmark its CSR budget to that project. Such company was required to transfer the unspent CSR
amount to a separate bank account with a scheduled bank and continue spending on the ongoing
CSR projects. With effect from 20 September 2022, a company which was hitherto exempted from
constituting a CSR Committee has any amount to be utilized on ongoing projects, will be required
to constitute a board level CSR Committee. The amendment is a step to strengthen governance
around implementation of CSR by utilizing services of a dedicated subcommittee to take ownership
and responsibility of the ongoing project which may go on up to 3 (three) years.
• Additional institutions now eligible to be appointed as implementation agency: Under the
extant CSR Rules, a company required to fulfill the CSR obligations may do so by itself or
through an eligible implementation agency (IA). With effect from 20 September 2022, a
section 8 company, public charitable trust or a society (registered under the Societies
Registration Act) and which is exempted under sub-clauses (iv), (v), (vi) and (via) of section
10(23C) of the Income Tax Act (phle 12 A and 80G hi tha), 1961 (IT Act) is also eligible to
become an implementation agency for CSR, albeit subject to obtaining registration with the
MCA by filing Form CSR-1. The amendment thus opens up more avenues for companies to
deploy the CSR funds for charitable purposes; public religious purposes or for public
religious and charitable purposes; activities of any eligible university or other educational
institution existing solely for educational purposes; or hospitals or other institution for the
reception and treatment of persons suffering from illness or mental defectiveness or for the
reception and treatment of persons during convalescence or of persons requiring medical
attention or rehabilitation, existing solely for philanthropic purposes.
• Threshold for permitted expenditure towards mandatory impact assessment changed:
The 2021 Amendment Rules provided for mandatory impact assessment of certain
projects based on twin test of average CSR obligation in the 3 (three) immediately
preceding financial years of INR 10 crores or more and the CSR expenditure on a
project being of INR 1 crore or more(itna experience ho implementation agency ko
bade project ka)). The 2021 Amendment Rules further provided that the expenditure
towards such mandatory impact assessment may be booked as valid CSR expenditure
to the extent of INR 50 lakhs or 5% of the total CSR expenditure, whichever is lower.
Under the 2022 Amendment Rules, the threshold has been reduced to INR 50 lakhs or
2% of the total CSR expenditure, whichever is higher. This is likely to create an
artificial barrier for companies to spend appropriate amounts on impact assessment of
the CSR projects. For larger CSR projects, it could also limit the ability of companies
to engage the services of international impact assessment organisations.