Corporate Social Responsibility and Why it is Important for Companies

April 11, 2019
PR Department
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Corporate Social Responsibility and Why it is Important for Companies

Corporate Social Responsibility, also referred to as CSR, denotes the steps taken by an organization to ensure positive social, economic and environmental influences, with relation to the manner in which it’s business functions. Formally speaking, CSR refers to a self-regulating business model that aids a firm in being socially responsible, to its own self, its stakeholders and the community on the whole.

Section 135 of Companies Act 2013 (inclusive of amendment) lays down that companies with a net worth of Rs. 500 crores or more, or a turnover of or over Rs. 1000 crores, or a net profit of Rs. 5 crores or more in any financial year, must spend at least 2% of average Net Profit of last three years on CSR.

How do companies benefit from CSR activities?

CSR activities present several advantages for organizations, prime among which are: –

Enhancement of public image – The public image of a brand is something that is assessed not only by its consumers but potential clients, stakeholders and business partners as well. Corporate social responsibility helps paint a good picture of companies that demonstrate commitment towards it, in comparison to those that do not.
Improve brand awareness and recognition – With a strong CSR program in place, companies receive more media coverage which leads to better brand awareness. The more people hear about a company’s ethical practices, the more they wish to engage with the brand.
Better employee engagement – A company that is in news because of positive reasons or has a good public image is the one people will want to work in. Dedicated employees result in better work output, thus adding to the value of the company.
Attract and retain investors – Investors like pouring money into companies that put their funds to good use. A company dedicated to not just its employees and customers, but also to causes and organizations which can transform the lives of others, will gain more attention from investors.
Sustainable Growth – CSR initiative contribute towards Sustainable Growth of Country by adopting CSR activities as defined in Schedule VII of Act which are in alignment with SDG.
Better Ratings – Companies can attain various Star Rating for their overall CSR performance.

BIS Standard on CSR

Bureau of Indian Standards has formulated a standard IS 26001 – Corporate Social Responsibility – Requirements corresponding to Companies Act 2013 in order to promote legislation on CSR. This Indian standard intends to promote a common understanding in the field of corporate social responsibility.

The standard has been put in place to help ensure that there is an effective mechanism to detect suitable and need-based CSR projects, alongside effective planning, implementation, monitoring, assessment and reporting of the outcomes of projects. This standard also specifies indicators and parameters to attain Star Rating for CSR performance.

The BIS standard is in conjunction with Companies Act 2013 (inclusive of amendment) and CSR rules 2014.

Holistically speaking, Corporate Social Responsibility is not a trend for a business to follow or ignore. Businesses that wish to stay relevant and appeal to changing mindsets while growing their revenues and effectiveness, should embrace CSR. Another thing that companies need to bear in mind is ensuring that they act upon the plans they promote as part of their CSR model; being ethical about your CSR commitments pays in the long run.

Written By: Shalu Varshney, Scientist ‘C’, MSD

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