Corporate Social Responsibility (CSR) is a concept that holds companies accountable for contributing to the economic, social, and environmental development of the society in which they operate. CSR, or corporate social responsibility, is a type of self-regulation representing a company’s accountability and commitment to contribute to the well-being of communities and society. CSR is critical to a company’s brand reputation, consumer, employee, investor attractiveness, talent retention, and overall business performance. The notion of Corporate Social Responsibility (CSR), as established by the Companies Act of 2013, places a higher duty on Indian corporations to have a defined CSR structure.

 Benefits of Corporate Social Responsibility

CSR has become very essential because consumers evaluate a company’s public image while determining whether or not to use the products. There are other numerous easy improvements such as utilizing less packaging which will reduce the production expenses of a company. The company shall aim to increase consumer involvement and also must ensure that their employees are aware of their CSR efforts. Employees prefer to work for a company that has a positive public image than one that does not. CSR increases the value of a company’s brand by forging socially strong relationships with customers. When businesses are active in any community, it helps them stand out from the competitors. 

Legal obligations of a company 

After modifying the Companies Act in 2013, India became the first country in the world to make CSR mandatory in 2014. Companies with a net worth of INR 500 crores or more, annual revenue of INR 1,000 crores or more, and a net profit of INR 5 crores or more are required to meet Corporate Social Responsibility standards. Some defined fund transfers in the name of CSR are the donations given to the prime minister’s national relief fund, any other fund started by the central government concerned with socioeconomic development, or any public-funded organization for research, development, and welfare. Another rule involves the company having a Corporate Social Responsibility (CSR) Committee to whom the regulations apply. The CSR Committee shall develop and recommend to the Board a CSR policy and the amount of spending to be done on the company’s CSR operations.

 Penalties for Non-Compliance

The government monitors CSR provisions compliance through company filings on the Ministry of Corporate Affairs portal. Following a thorough inspection of records, the government may take action against non-compliant corporations for any infringement of CSR laws. If a company fails to comply with the laws about CSR spending, transferring, and using unspent funds, the company will face a minimum penalty of Rs 50,000, which can be up to Rs 25 lakhs. Furthermore, any official of such a corporation who fails to comply shall face imprisonment for a term extending to three years, a minimum fine of Rs 50,000 that may be increased to Rs 5 lakh, or both. 

Corporate social responsibility is all about corporations giving back to the society. Company Secretaries usually assist the management and the Board with CSR as they have the legal expertise and are aware of the technical requirements of the same.