The Policy of Corporate Social Responsibility

In order to ensure ethical business practices and functioning by a company, several legal mandates have been created in India. These mandates are an effort for introducing a healthy culture of social responsibility among Indian corporates. It also requires a certain class of companies to formulate exclusive policies for incurring a certain minimum expenditure on social activities. The Indian Companies Act 2013 stipulates the companies to come up with their own policy for Corporate Social Responsibility under which they can contribute towards initiatives and activities for the benefit of the society. The companies which need to formulate the CSR policy are the ones that have an annual turnover of Rs.1000 crore or more. In addition to that, every company which has a net worth of Rs. 500 crore or more or a net profit of Rs. 5 crore or more during a particular financial year would be legally liable to establish an internal CSR Committee with a minimum of three directors on board. Also, out of the three directors, one should be independent. The aforementioned requirement of the Board of Directors would also be expected to generate a report based on which the composition of the CSR Committee would be disclosed. Though some companies may find it difficult to implement a policy for reflecting their Corporate Social Responsibility during the initial years, this measure has been taken to ensure the improvement of the under privileged sections of the society. Moreover, at another level, corporates can use this opportunity to enhance their image and reputation for contributing towards these causes.