Why Must Indian Businesses Prioritize CSR?
It is our pride to proclaim that India stands first in terms of making corporate social responsibility (CSR) mandatory across the globe, and setting an example for the other countries. Before the Companies Act 2013, it was purely the company's choice whether to involve in CSR activities or not. But after passing the amendment to the Companies Act 2013 in April 2014, it has become mandatory for the companies with the net worth of $70 million and above, or an annual turnover of $140 million and above or net profit of $699,125 and above, to contribute two percent their average profit of three years towards CSR. The company's CSR activities could revolve in areas such as education, gender discrimination, poverty, health, and more.
Previously, the companies had the privilege to carry forward the remaining amount allocated for CSR to the next fiscal year, in addition to the amount allocated for that year. But, the introduction of the amendment changed the scenario, now, the companies should spend the prescribed percent of the amount on CSR within three years, else the remaining amount has to be deposited in one of the specified funds. The companies failing to conduct CSR activity would attract monetary penalties ranging from 50, 000 to 25 lakh as well as imprisonment. This serious measure of the government has forced the companies to indulge in CSR activities. The survey conducted on CSR by KPMG reports that the companies have spent about 7 536 crore from 2014 to 2018 (after implementing the Act), this has shown a significant rise of 47 percent as compared to 2013.
Benefits CSR Brings to Businesses
Apart from contributing to society, companies also have several advantages that would benefit their business. Firstly, the company would gain enhanced public image, also when a business shows interest in social problems, it gains people's goodwill and these activities would keep the company's name in constant news, this would grab the customer's attention, and eventually lead to improved business profit. The social activity would result in a better environment in which the business could attain long term profit.
The company's involvement in social responsibility gradually improves its productivity. These activities would increase employee's participation, provides better working conditions for their employees, minimize environmental impact, consequently improvising their quality of work and productivity. Additionally, these activities also improve the company's financial performance. The improved financial results of the business lead to stable socio-political legal conditions, better competitive benefits through the company's reputation, and brand value. The enhanced environment in the company also results in improved recruitment and retention of employees and also provides a protected workplace.
Furthermore, the company's constant social responsibility not only enhances its reputation with the public but also elevates it in the business community; this would, in turn, draw more business partners and sequentially would lead to successful business expansion. Besides, through CSR, the organizations would also gain wider access to capital, which is not possible without high CSR performance.
Successful CSR Initiatives
Citing all the benefits, the large, as well as small companies, have involved themselves in various CSR activities. Here are the details of a few such activities carried out by certain companies. Mahindra & Mahindra engage in education, health, and quality of life, and its CSR initiatives are 'Rise for good,' support youth, girls, and farmers. While, Bharat Petroleum Ltd has contributed to the country's growth through its active involvement in the energy sector. Tata Motors Ltd's initiatives are mainly focused on health, education, and women empowerment. And ITC has put in notable efforts in the agriculture sector.
With the Indian business involving in various social responsibility activities, we could see that the country is progressing in multiple dimensions. These activities powered by CSR initiatives would pave a way for the country's societal and business advancement.