The term Corporate Social Responsibility (CSR) was coined by the Companies Act, 2013. As per Section 2(c) of the Act, CSR means and includes but is not limited to projects or programmes relating to activities in Schedule VII of the Companies Act, 2013, which include eradicating extreme hunger and poverty, promotion of education, promoting gender equality and empowering women, reducing child mortality and improving maternal health, combating various diseases, ensuring environmental sustainability, providing employment enhancing vocational skills, promoting social business projects and contribution to the Prime Minister Relief Fund or any other fund set up for the welfare of socially marginalised sections and such other matters as may be prescribed by the Indian government like construction of toilets under the Swachh Bharat Mission. The Board of Directors has been made responsible under section 134(o) of the act to ensure the implementation of the company’s CSR mandate. The eligible companies have to create a corpus exclusively for this purpose.
Autonomy for CSR activities
In spite of seemingly rigid provisions of law, a lot of autonomy is provided to companies to undertake CSR activities. Schedule VII is so widely worded that even the efforts by companies to control pandemics due to the coronavirus is covered. It is also stated in section 135 of the act that companies shall give preference to the local area and areas around its operations for spending the amount earmarked for CSR activities. This way, the companies will get support of the local people. This has been amply demonstrated by many industrial groups in India like implementation of welfare activities by Tata Steel in and around the town of Jamshedpur in Jharkhand. However, companies are equally responsible for development of the country and they are handling that onerous duty by providing employment and by way of contribution to the national exchequer which is used for the welfare of the people. The CSR activities therefore, should not be linked directly with governmental projects and programmes which are the exclusive domain of the government. Sometimes, unusual initiatives by the private sector prompt policy changes and fill up the gap left by governmental work.
In the past, the private sector in India did its share of philanthropy. In fact, many temples, schools, educational institutions, hospitals, dharmashalas were made and maintained by them as part of their charitable activities. However, it is understandable to do away with these social and charitable activities based on the whims and fancies of the promoters. But at the same time, the management of companies should not be held criminally liable for CSR lapses. Recent changes in the act have removed the criminal persecution clause for CSR lapses in case of defaults which lack the element of fraud or do not involve larger public interest. It is hoped that after the amendment in place, the private sector will come to discharge their responsibility with more vigour.