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What Is CSR Or Corporate Social Responsibility & Are Indian Companies Doing Enough?

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CSR Corporate Social Responsibility

Giving away Rs. 20,316 crores in the last 2 financial years, the media now addresses Mr Azim Premji as philanthropist instead of Wipro Chairman and IT Tycoon. As the years roll by, many firms are debuting the Social landscape apart from the traditional social veterans like Tata, Birla, Godrej and Singhania for whom it was a practiced ancestral custom.

As they say, happiness shared is happiness doubled and now that the government believes in it too, being the first of it’s kind legislation in the world, has mandated prescribed companies to spare at least 2% of it’s profit for CSR activities through Companies Act, 2013.

Why indulge in CSR activities?

Ask the numero-uno idiot, Aamir Khan to describe his most satisfying film and he answers, “I think most satisfying thing for me has been Satyamev Jayate, this experience of these five years researching topics, understanding how India is, meeting people from different parts from different corners, small villages has been a very enriching journey, so I think that has been very satisfying for me.”

The management books are filled with sophisticated CSR definitions, but in a lay man’s words, it’s about making bread and then breaking it with those who can’t afford it. The bottom line is giving as much as you take. The take aways from the text book definition are

  • Promoting sustainable environment and practicing ethical and responsible business.
  • Corporate Citizenship

The best CSR driven companies in the world

Company Foundation Name Cause
Microsoft Bill & Melinda Gates Foundation (BMGF) Famous for their belief in giving away half of their fortunes, the richest thriving couple on the planet, since it’s inception in 2000, has given away as much as $15billion ie 93,885 crores in today’s rupees for healthcare alone . Gates visited India last year and supported many NGO’s to eradicate poverty and shipped in tonnes of polio vaccines.
Berkshire Hathway Buffett Foundation and BMGF Social entrepreneur and philanthropist buddy to Bill Gates, he contributes to BMGF.
Google Google Foundation Google this year topped the CSR list that Microsoft won by handing out scholarships to students in China, Earthquake relief funds and Google grants for Non profit organizations. Google also has another environmental power saving version of Google Search Engine called Blackle. (use it today!)
The Walt Disney Company Disney Foundation From offering free tickets to volunteers who’d like to serve a non profit organization to planting billions of trees in Brazil and Bahamas and conserving the environment in Africa, the company has been a top contender in CSR activities
Apple Apple Foundation Supporting the environmental cause, Apple till date has been constantly working to help Mother Earth by making sure that their products consume less power. The average Apple product’s power consumption has come down by 57%. Apple has also eliminated the use of harmful toxins such as mercury, arsenic, BFR’s. 73% of it’s facilities are powered by renewable source of energy. The new Apple products are the recycled old disposed ones. Their carbon credit is still intact with a high score that they can sell it and still survive.
BMW BMW Foundation Their creation, BMWi can run on electricity and can also act as a plug in hybrid vehicle to reduce CO2 emissions by atleast 50%. Per vehicle’s solvent consumption reduced by 45%, implemented efficient supply chain to cut on logistics being the highlights.

Well, we are no less say the Indian socially active companies. A recent study has found, the CSR activities in India may be 4 times USD 2.5 billion (ie over 15,000 crores), if all companies spend as per the new law as described under section 135.

Devoting a whole new section 135 r/w The Companies (CSR Policy) Rules, 2014 provides 3 separate criteria for the setting up of a CSR Committee, ie

Net worth Rs.500 crore+ during the last audited financial statements OR
Turnover Rs.1000 crore+ during the last audited financial statements OR
Net profit Rs. 5 crore during any of the 3 preceding financial years

With the net profit criteria of just Rs. 5 crore, the government wants to ensure even the medium sized firms are ushered into CSR. A company can be exempted from it if in3 consecutive years, it fails to meet any of the above mentioned criteria.

Meaning of CSR Activity:

Though recently the government included Swachch Bharat Andolan, and Cleanse Ganga Projects into CSR, the Companies Act, 2013 has mentioned activities that can be called CSR in Schedule VII which mainly includes

  • Eradication of poverty and lifestyle upliftment
  • Promoting education and healthcare
  • Setting up of old age homes
  • Environmental sustainability and rural agriculture
  • Preservation of national art, heritage

CSR Amount limit:

The CSR Committee has to ensure that the company spends at least 2% of the average net profits made during the immediately preceding financial year.

Also the act adds, that the company cannot spend more than 5% of the CSR Amount on administrative overheads (like office expenses, personnel expenses etc)

Demographic limit:

To qualify as a CSR activity, the company needs to spend in India, preferably the area of it’s establishment. One can spend on CSR activities abroad, but that won’t be qualified as CSR activity under the law

The company should also bring out an annual CSR report along with it’s Financials and Annual Reports.

The Best CSR Driven Companies in India

In the pre-legislation phase, only 10 corporates have been recorded to have been spending more than 2% of their PAT. ET Dossier in co-ordination with Futurescape and IIM Udaipur has come out with the list of top CSR spenders for 2014. Let’s take a peek at the top 5 Indian companies

Company Name Foundation name Cause
Tata Steel TSRDS, TSFIF, TSTCS, TSSDS Provided healthcare services in collaboration with HP and brought down infant mortality rate by 26.5% in Seraikela District, rural development around Jharkhand and Odisha, nearly 2300 solar street lights were installed in Jharkhand and Odisha. Overall spending came to Rs.212 crores which is 3.31% of PAT
Tata Chemicals TCSRD Have been an active participant in raising the rural community living in Okhamandal, Wildlife conservation
Mahindra Group Mahindra Foundation A member of Dow Jones Sustainability Indices, M&M planted around 60,000 saplings as a part of Project Hariyali
Maruti Suzuki Maruti Suzuki Foundation The company spent Rs. 232.8 crores on road safety and awareness. The company has also partnered with 29 Industrial Training Institutes
Tata motors TGAA, TAAP and TBEM Healthcare and education provided to more than 37,000 children, eradicating social inequalities, contributed Rs.4.5 crores for Uttarakhand Flood relief and rehabilitation.

In this list we have been talking about the top donors, but let’s not forget that every penny gone towards a social cause matters and is in no way insignificant. We have to laud every organization that does it’s bit to the society’s betterment.

Conclusion

CSR is a noble thought that shows the goodness of being selfless. As a very proficient guru said, a tricky fact about money is – Money in the hands of good people grows and generates more money. It makes rather no sense for one to talk about donating money when he/she can’t earn enough of it. As a moral citizen, it’s our responsibility to revamp our standard of living and make enough money. One should not confuse this with greed. If you look at it symbolically, money is like the beach sand, the more you clench it in your palms, the more slips out, so instead keep your palms open so that you can give more.

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