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Mandated CSR in India: Opportunities, Constraints, and the Road Ahead

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Rethinking Business Responsibility in a Global Context

Part of the book series: CSR, Sustainability, Ethics & Governance ((CSEG))

Abstract

Corporate social responsibility (CSR) endeavors have been made mandatory for certain firms in India through the Companies Act, 2013. In this chapter, we focus on the nuances of this Act as it relates to CSR and discuss possible strategic implications for the Indian firms. To this end, we analyze strategic opportunities associated with mandatory CSR and identify potential challenges. Our in-depth analysis also explores avenues for future scholarly research in this area.

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Notes

  1. 1.

    INR 10,000,000 = 1 crore.

  2. 2.

    The conversion rate for the whole chapter is based on data from April 15, 2019. The values in US Dollars are rounded accordingly.

  3. 3.

    The Indian Institute of Corporate Affairs (IICA) is the institution, which is at the forefront of the CSR initiative of the Government of India, being the think tank as well as the arm of dissemination of the Ministry of Corporate Affairs, and has a role of considerable significance to play.

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Author information

Authors and Affiliations

  1. Sustainable Advancements (OPC) Private Ltd., Kolkata, India

    Nayan Mitra

  2. College of Business Administration, The University of Akron, Akron, OH, USA

    Debmalya Mukherjee

  3. Department of Management and Global Business, Rutgers Business School, Rutgers University, Newark, NJ, USA

    Ajai S. Gaur

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  1. Nayan Mitra
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  2. Debmalya Mukherjee
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Correspondence to Debmalya Mukherjee .

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Editors and Affiliations

  1. Vienna University of Economics and Business, Vienna, Austria

    Bodo B. Schlegelmilch

  2. University of Vienna, Vienna, Austria

    Ilona Szőcs

Appendix 1: Section 135 of the Companies Act 2013

Appendix 1: Section 135 of the Companies Act 2013

  1. 1.

    Every company having a net worth of INR 5 billion or more, or a turnover of INR 10 billion or more, or a net profit of INR 50 million or more during any financial year shall constitute a Corporate Social Responsibility Committee of the Board consisting of three or more directors, out of which at least one director shall be an independent director.

  2. 2.

    The Board’s report shall disclose the composition of the CSR Committee.

  3. 3.

    The Corporate Social Responsibility Committee shall:

    • Formulate and recommend to the Board a CSR policy, which shall indicate the activities to be undertaken by the company as specified in Schedule VII.

    • Recommend the amount of expenditure to be incurred on these CSR activities.

    • Monitor the CSR policy of the company from time to time.

  4. 4.

    The Board of these companies that shall:

    • After taking in account the recommendations made by the CSR Committee, approve the CSR policy for the company and disclose the contents of such policy in its report and also place it on the company’s website, if any, in such manner as may be prescribed.

    • Ensure that the activities are included in their CSR policy and are actually undertaken by the company.

  5. 5.

    The Board of these companies, shall ensure that the company spends, in every financial year, at least 2% of the average net profits of the company made during the three immediately preceding financial years in pursuance of its CSR policy.

Moreover, the Section 135 also provides a direction to these companies to give preference to the local area and areas around it where it operates, for spending the amount earmarked for CSR activities. However, the law also states that if the company fails to spend such amount, the Board shall, in its report, specify the reasons for not spending the amount.

Source: http://www.mca.gov.in/SearchableActs/Section135.htm

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Mitra, N., Mukherjee, D., Gaur, A.S. (2020). Mandated CSR in India: Opportunities, Constraints, and the Road Ahead. In: Schlegelmilch, B.B., Szőcs, I. (eds) Rethinking Business Responsibility in a Global Context. CSR, Sustainability, Ethics & Governance. Springer, Cham. https://doi.org/10.1007/978-3-030-34261-6_12

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