What is Corporate social responsibility (CSR)

Corporate social responsibility (CSR) is a way of doing business that aims to have a positive impact on society and the environment. CSR is not just about donating money or volunteering for good causes, but also about how a company operates in its everyday activities. CSR can benefit both the company and its stakeholders, such as customers, employees, investors, suppliers, communities, and regulators.

There are different types of CSR that a company can practice, depending on its goals and values. Some common types are:

·         Environmental responsibility: This involves reducing the company’s environmental footprint, such as greenhouse gas emissions, waste, water use, and energy consumption. It also means using renewable or recycled materials, promoting biodiversity, and supporting environmental initiatives.

·         Human rights responsibility: This involves respecting and protecting the rights and dignity of all people involved in the company’s operations, such as workers, customers, suppliers, and local communities. It also means avoiding any form of discrimination, harassment, exploitation, or abuse, and ensuring fair labor and trade practices.

·         Philanthropic responsibility: This involves giving back to society through charitable donations, sponsorships, grants, or in-kind contributions. It also means supporting causes that align with the company’s mission and values, such as education, health, arts, culture, or social justice.

·         Economic responsibility: This involves creating value for the company and its stakeholders through profitable and sustainable business practices. It also means investing in innovation, quality, efficiency, and growth, while complying with laws and regulations.

Some examples of companies that practice CSR are:

·         Starbucks: The coffee giant has a comprehensive CSR strategy that covers environmental stewardship, ethical sourcing, community engagement, diversity and inclusion, and social impact. Some of its initiatives include reducing its carbon footprint by 50% by 2030, supporting fair trade and organic coffee farmers, donating millions of meals to food banks, providing health care and education benefits to its employees, and funding social enterprises that create jobs for marginalized groups.

·         Ben & Jerry’s: The ice cream company is known for its social activism and advocacy on issues such as climate change, racial justice, LGBTQ+ rights, democracy, and peace. Some of its initiatives include sourcing ingredients from fair trade and family farms, reducing its greenhouse gas emissions by 40% by 2025, donating 7.5% of its pre-tax profits to social causes, supporting grassroots movements and campaigns, and creating flavors that raise awareness and funds for various issues.

CSR can help a company build a stronger brand image, increase customer loyalty and sales, save operational costs, retain talented employees, access funding more easily, and reduce regulatory burden. However, CSR also comes with some challenges, such as measuring its impact, balancing stakeholder expectations, ensuring transparency and accountability, and avoiding greenwashing or social washing.

CSR is not a one-size-fits-all approach but a dynamic and evolving concept that requires constant adaptation and improvement. A company that wants to practice CSR should align its actions with its vision and values, engage with its stakeholders, assess its opportunities and risks, set clear goals and indicators, monitor and report its progress, and learn from its successes and failures.

FAQ on What is Corporate social responsibility (CSR)

• What are the benefits of CSR for businesses?

  • CSR can have various benefits for businesses, such as:

    • Improving their public image and trust by demonstrating their commitment to social causes and values.
    • Attracting and retaining customers who prefer to buy from socially responsible companies.
    • Enhancing their employee satisfaction, motivation and productivity by creating a positive work culture and providing opportunities for volunteering and skill development.
    • Reducing their operational costs and risks by adopting eco-friendly practices and complying with legal and ethical standards.
    • Increasing their innovation and competitiveness by exploring new markets, products and services that address social needs and expectations.
    • Balancing their social objectives with their financial goals and shareholder interests.
    • Measuring and reporting their social impact and performance in a credible and transparent manner.
    • Aligning their CSR strategy with their core business strategy and values.
    • Engaging with their diverse stakeholders and managing their expectations and feedback.
    • Facing criticism or scrutiny from activists, media or regulators for their CSR activities or lack thereof.
    • The National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business (NVGs), issued by the Ministry of Corporate Affairs in 2011, which provide nine principles and core elements for responsible business conduct.
    • The Securities and Exchange Board of India (SEBI) Listing Obligations and Disclosure Requirements Regulations, 2015, which require the top 500 listed companies to include a business responsibility report in their annual reports, based on the NVGs.
    • The Indian Accounting Standard (Ind AS) 37 on Provisions, Contingent Liabilities and Contingent Assets, which requires companies to recognize provisions for environmental restoration costs, decommissioning costs, etc., as part of their financial statements.
    • The Environmental Protection Act, 1986; the Water (Prevention and Control of Pollution) Act,

• What are the challenges of CSR for businesses?

  • CSR can also pose some challenges for businesses, such as:

• What are the legal frameworks for CSR in India?

  • India is one of the few countries that has a mandatory provision for CSR in its corporate law. According to Section 135 of the Companies Act, 2013, every company having a net worth of Rs. 500 crore or more, or a turnover of Rs. 1000 crore or more, or a net profit of Rs. 5 crore or more during any financial year, has to constitute a CSR committee of its board of directors. The committee has to formulate a CSR policy that specifies the activities to be undertaken by the company in accordance with Schedule VII of the Act. The company has to spend at least 2% of its average net profits of the preceding three years on CSR activities every year. The company also has to disclose its CSR policy, activities and expenditure in its annual report and on its website.

  • Apart from the Companies Act, there are other laws and regulations that govern various aspects of CSR in India, such as:

 

Hope this was helpful !