CSR Full Form

CSR is said to be the ethical responsibility of the Businesses towards the society in which it is working. It is driven by Section 135 of The Companies Act, 2013 as well as The Companies ( Corporate Social Responsibility Policy) Rules, 2014. If this concept is followed by the corporations properly with full planning and monitoring, it can lead to creating various competitive advantages along with benefiting the society as well as the community. In this article, we will be talking about CSR. We will cover the long form of CSR, meaning, provisions related to CSR, CSR activities full form, benefits and drawbacks, etc.

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Long Form of CSR

A business entity always works in a particular environment around the society and CSR helps in contributing towards the welfare of the society in which a company operates. If we talk about CSR full form, it refers to "Corporate Social Responsibility" which means corporate responsibility towards society. It also refers to Corporate Ethics Strategy by following which helps the corporates to enhance their business value and brand image. CSR has been made mandatory to fulfil under the Companies Act, 2013. All the management and people related to CSR are assigned the CSR designation or CSR post. Here, CSR designation full form related to the Corporate Social Responsibility Designation. 

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Section 135

The Companies Act, 2013 and its section135 deals with the provisions related to Corporate Social Responsibility. Let's understand the provisions which are given below:

Applicability 

Section 135(1): According to the Companies Act, every company which is defined in Section 2 clause 42, including holding or subsidiary & foreign company, which are having branch or project office in India, if they are fulfilling the criteria mentioned below during their immediately preceding year, shall have to comply with the provisions of CSR under section 135 of the Companies Act, 2013 and rules related to CSR.

• The net worth of rupees five hundred crores or more or

• Turnover of rupees one thousand crores or more or

• Net profit of rupees five crores or more

CSR Committee

Section 135 (1): The companies who are eligible for this, will have to constitute a CSR Committee which consists of three or more directors. Among these 3 directors, at least one should be an independent director.

Rule 5 of  The Companies ( Corporate Social Responsibility Policy ) Rules, 2014: It says that the company which does not require to appoint an independent director, shall have the committee without the independent director. If we talk about a private company which is having only 2 directors on its board, then that company can constitute a committee with 2 such directors whereas, in the case of a foreign company, the committee should consist of at least 2 persons out of which one shall be nominated by the company whereas the other will be as specified under Clause d of section 380 ( 1 ) of the Act.

Functions of CSR Committee: 

According to Section 135(3) of the Act, the functions of the CSR Committee are given below:

• The formulation as well as giving recommendations to the board related to the policy of Corporate Social Responsibility.

• Providing recommendations regarding the expenditure and the total amount to be incurred on the CSR activities.

• One of the other functions includes monitoring the policy of Corporate Social Responsibility of the company from time to time.

CSR Expenditure

Section 135(5): This section says that the board should ensure that at least 2% of the average net profits of three immediately preceding years of the company should be spent on the policy of Corporate Social Responsibility.

Important Points:

• Preference should be given to the local areas or the areas where the company operates for incurring the expenditure related to CSR activities.

• If the company fails to do so, then the board shall have to specify the reasons in the report for not spending the amount.

• (Rule 7) The CSR expenditure should include all the expenditure which also include the contribution to corpus or projects as well as programs which are approved by the board related to CSR activities on the recommendation of the committee but it does not include such expenditure which is not in line with the CSR activities mentioned in Schedule 7 of the act.

CSR Activities

Points need to remember according to the Rule 4 of The Companies (Corporate Social Responsibility Policy) Rules, 2014:

1. These activities should be undertaken as per the policy of the company whether they are new or ongoing projects.

2. Activities that are taken in pursuance of normal business, will not be included in the activities of CSR. 

3.  The board may decide the CSR activities which are approved by the CSR Committee. If the company is made under Section 8, as a company, trust or society, then it has to establish a three years record of undertaking similar activities or programs.

4. Any company may collaborate with other companies in order to undertake CSR activities. 

5. The expenditure incurred on CSR activities in India will only be considered as CSR expenditure. 

6. The projects or programs etc. If they are only benefiting the employees and their families, those activities will not be considered CSR activities.

7. Under Section 182 of the Act, any kind of contribution to the political parties will also not be considered as CSR expenditure.

CSR Policy

According to rule 6 of The Companies ( Corporate Social Responsibility Policy ) Rules, 2014, the CSR policy should include the following aspects:

• The whole list of all the projects and programs which the company is planning to undertake as CSR.

• It should also include the monitoring process of all the programs and projects as well.

The policy should also specify that any kind of surplus arising because of CSR activities shall not become part of the profits of the company.

Disclosures

The report of the board under section 134(3) shall disclose all the information related to the composition of the CSR Committee. Besides this, all the CSR activities shall also be displayed on the website of the company. 

List of CSR activities

The activities related to CSR are called CSR activities and CSR activities full form is Corporate Social Responsibility Activities. The activities can be related to the following:

• Activities related to health such as eradication of hunger and malnutrition, eradication of poverty, promoting health care along with preventive health care as well as maintaining cleanliness and sanitation as well as safe drinking water.

• Activities related to education promotion and employment enhancing skills especially for women and children or elderly etc., empowerment of women, promoting gender equality, providing opportunities to LGBTQ, establishing old age homes and orphanages, health care centres or schools, etc.

• Activities related to the environment such as promoting environmental sustainability, protection of plants and animals, ecological balance promotion, agroforestry, conservation activities related to the natural resources such as soil, air, water, forest, etc. Protecting the rivers as well as important wetlands etc. 

• Promoting national heritage and art & culture of the country, restoration of the buildings, promoting traditional art and economic activities as well as promotion of the same to enhance employment opportunities, providing a platform for handicrafts etc.

• Taking measures for benefitting the armed forces veterans, widows and dependents, promoting sports and games such as rural and national sports, and other sports, doing welfare activities for SC, ST, and backward classes, contributing to the Prime Minister National Relief Fund or any other fund established by the country or state, steps taken for promoting Science & technology as well as research, measures related to slum areas, etc.

Benefits of CSR to the Organisation

We have gone through the full form of a CSR and its meaning. Let's go through the benefits of CSR:

• It really matters how a company treats its community because it shows the way it will treat its employees. Employees feel much satisfaction in such organizations who provide values to their community as well as employees. They become more productive and also volunteer in the CSR activities which helps in their development and provide them motivation & pride.

• The CSR activities led by the company can create a positive impact on the community. When they fulfil all their Social Responsibility, it benefits society as a whole which can help the organization to think of new business opportunities. 

• If any company fulfills their social responsibility, it will also increase its business image and brand value. People these days value such companies who are responsible towards their society and customers always goods and services of those companies more because they also feel they are contributing in such a way to give back to the society. This is why it is necessary to promote and publicize the CSR activities taken by the company.

• CSR activities can help the company to be an employer of choice as well as the company of choice by customers. It shows the capability of the company to be a good employer by supporting their employees, providing work-life balance, good working conditions, etc. These things lead to increased employee productivity whereas the customer base will also be increased.

• Besides these major benefits, it helps in the following aspects:

• Increasing sales 

• Enhancing customer loyalty

• Improving business image

• Creating brand value

• Enhancing the finance performance

• Access to capital easily

• Attracts investors

• Attracts excellent employees

Benefits of CSR to the Society

We have read the long form of CSR or its benefits to the Organisation. Let's go through the benefits of CSR to Society:

• It helps in creating a better surrounding by solving the local problems.

• It helps in solving social problems and provides a lot of opportunities for youth as well as the society to grow through a wide range of activities.

• The people or sectors helped by the CSR are considered as much happier and stable. Growth and development can be seen in those areas.

• It helps in providing additional welfare to the social sector besides the Government welfare programs.

• Providing good products and services also helps the Society to consume better and channel their money in the right way.

• It helps in promoting health and education and creating employment opportunities as well.

• It touches the social problems at the ground level where the government programs might not be able to reach sometimes.

• It also encourages the society as well to do such activities especially the youth power can be channelized by including them in such activities. Besides these, it also helps in reducing corruption in society.

Drawbacks of CSR

We know that CSR full form is Corporate Social Responsibility and it provides a lot of benefits but also has some drawbacks which are given below:

• The major drawback is related to the costs of CSR. It becomes difficult sometimes for small businesses to afford and implement such activities. Large businesses only can afford a separate budget for CSR.

• Spending on CSR activities can create a major shift in the business profits and can shift the objective of the company from profit-making to welfare aspects.

• When a company has to spend on CSR activities, it has to cut its profits, which ultimately can unhappy the shareholders of the company.

• In case the company fails to fulfil its CSR activities, it will leave a bad impact on the customers base. It can lead to a decrease in the sales of the company as well.

• In the beginning, when the company initiates the CSR, the company will be appreciated but when results are not realized from such activities in the specified time, people can get annoyed and can lose faith in the company which leads to affecting the image of the company.

•  CSR expenditure can lead to an increase in the cost of production of the company as well because it costs the company when they shift their profit in the CSR. In such cases when companies increase the prices of products and services in order to make up the CSR expenditure, the burden will be on the customers and thus there is a high risk of losing the customers base.

Conclusion

To sum up we can conclude that CSR is a source of fulfilling the social responsibilities of the corporations towards society. Corporates take everything from the society and its environment from raw material to employees and even sell their goods and services in the same society and earn profits. It will be an unequal balance if they are only taking and not contributing to society. Thus, CSR plays an important role in this case. If this is followed properly, it will not only benefit the society but also the organisation as well. We covered the CSR post full form, the meaning of CSR & provisions, CSR activities full form, etc. in this article. If the company follows all the provisions, it will be helpful for the company in the long run for sure.