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Advantages and Disadvantages of CSR

We all know that businesses exploit natural resources to produce goods, generate pollution, and increase their profits, but those who live in society must bear the costs of this awful pollution since these businesses must use filthy air and water to produce their goods. However, these impacted individuals do not receive any sort of compensation from the businesses. Because of this, it is now required that businesses everywhere, including India, set aside a portion of their earnings for the wellbeing of individuals who have inconvenienced them.

Advantages and Disadvantages of CSR

Corporate Social Responsibility (CSR) is simply the practice of informing businesses about their societal responsibilities. As of April 1, 2014, India will be subjected to Corporate Social Responsibility (CSR) regulations. According to this, businesses with a net worth of 500 crores, income of 1000 crores, or profits of 5 crores annually must invest in CSR. At least 2% of the average profit over the previous three years should be spent on this.

Why CSR is necessary in India

In our nation, there are several social and economic problems. In order to tackle these issues, we must work together. Everyone will need to work together, whether they are from the general population, the government, social groups, or industrial organizations. CSR law has been introduced in India as a result of this sentiment. According to this regulation, businesses must invest a specific percentage of their profits in community service and welfare projects. CSR law is exclusively for the benefit of Indian nationals.

Prior to the CSR Act, how much money was spent on CSR

Prior to the implementation of the CSR law in the Companies Act on 1 April 2014, businesses in India already engaged in charitable efforts. Companies formerly performed this social service on a voluntary basis, but now it is required by law. According to Section 135 of the Companies Act, the corporation prefers to spend the required amount on CSR activities in the neighborhood where it works.

CSR falls into which ministry

In our nation, the Central Government is in charge of corporate social responsibility. The Ministry of Corporate Affairs, Government of India, keeps an eye on CSR issues. Therefore, it is this ministry's duty to execute the CSR law, make it effective, and make any necessary modifications or amendments.

Why CSR only includes businesses

CSR law is focused on businesses. Every company gains something from society. A clause like that has been passed to compel businesses to split financial gains. The Indian Parliament supports this bill, and it has been approved by the Parliament.

Which businesses are covered by CSR

In India, in order to conduct business, a corporation must register. All businesses, regardless of size, must register in accordance with the requirements and processes of the Companies Act of 2013. Not every business in India is covered by CSR. Small businesses with few resources or employment are not compelled to invest in CSR. Corporate Social Responsibility (CSR) has been mandated under Section 135 of the 2013 Companies Act.

Every business, whether private limited or public, with a net worth of Rs. 500 crore, a revenue of Rs. 1,000 crore, or a net profit of Rs. 5 crore for the previous three fiscal years, will promptly publish its average of these three figures. The minimum amount of net profit that must be used for CSR initiatives is 2%.

Who can be the beneficiaries of CSR

The business entities and corporations in our nation invest millions of dollars on CSR. The society and the neighborhood immediately profit from this money. The general population and those in need can both benefit from CSR. A single person cannot ethically receive a direct benefit from a company's CSR efforts. CSR is a concept that was created to improve communities.

Can companies spend their CSR funds on a single person

Although morally speaking, businesses shouldn't use CSR funds to support a single individual, they are permitted to do so if they so choose for the welfare and advancement of a particular deserving person. Every person is a member of a community, which means that CSR initiatives may undoubtedly benefit a single person.

Use the following example to better understand what we're saying: If your community is experiencing a water scarcity, the corporation can arrange CSR initiatives to provide drinking water. You are undoubtedly a resident of the village and a beneficiary of drinking water if the CSR project solves the village's drinking water problem.

Does a government company also do CSR like a private company?

Corporate Social Responsibility is now required for all businesses, whether they are public or private, according to the rules of Section 135 of the 2013 Companies Act. Additionally, whether it is a private or public corporation, those covered by this law must invest in CSR. Everyone in the private sector, whether it be Infosys, Wipro, or Reliance, engages in CSR, but only PSUs (Public Sector Undertakings) like Bharat Petroleum, Indian Oil, and NTPC engage in CSR on a huge scale.

Can CSR funds be used in government schemes

This is feasible. Although there is undoubtedly a lack of funding for the several government programmes that the Government of India administers around the nation, corporations on a huge scale collaborate with the Government of India to advance these programmes. Does Whether it is the Swachh Bharat Mission or Beti Bachao Beti Padhao, these initiatives have the power of CSR, which is why they are succeeding so well.

Where to do CSR projects

Companies must adhere to CSR guidelines. Companies must follow specific rules while engaging in activities connected to corporate social responsibility. Every corporation is required by law to have a CSR committee. Which activity, when, and where the business must operate are chosen by this committee and the board of the corporation. Where the businesses operate is where the majority of their CSR operations are completed. In this manner, just the designated action is covered by CSR.

Can the company get any work done under CSR

No, the business is unable to complete any CSR-related tasks because of certain restrictions. The CSR law also specifies the social work that the corporation must perform. Other CSR actions cannot be done in addition to these. The CSR activities that fall under its purview are listed in the Act. The seventh schedule of the regulations contains a copy of this list. These are the CSR initiatives from which businesses must select:

  • Protection of the nation's artistic, cultural, and historically significant structures and locations.
  • The development and promotion of traditional arts and crafts.
  • The creation of public libraries.
  • The establishment of orphanages and hostels, the development of those facilities, as well as their upkeep and management.
  • Construction of buildings for old age homes, their establishment, upkeep, and operation.
  • Establishing daycare facilities, building them, maintaining them, and running them.
  • Creation of women's residences and hostels.
  • To offer instruction in order to promote rural sports, nationally recognised sports, Olympic sports, and Paralympic sports.
  • To offer funding for technological incubators housed in colleges and universities that have received central government recognition.
  • Attempting to supply clean drinking water.
  • To preserve the soil, air, and water quality.
  • Preservation of the environment.
  • To maintain ecological equilibrium.
  • Agroforestry, animal welfare, and plant and animal species conservation.
  • Projects for rural development.
  • Livelihood improvement initiatives.
  • Promotion of cleanliness and health.
  • To support economically and socially marginalised populations that suffer the most from inequality.

Can CSR donations be made to political parties?

No. It is forbidden to do it. CSR funds are for the benefit of society, not for the advancement of any one political party. Contributions of any kind, whether direct or indirect, to political parties are not regarded as CSR activities.

Whether expenditure on disaster relief is eligible for CSR or not?

The Indian government frequently modifies the laws and regulations governing corporate social responsibility. During a pandemic like Corona, the government of India greatly aided businesses and the general public by altering the regulations. Businesses can now provide their CSR contributions directly to the PM Cares Fund. The money provided to the State Government shall not fall under the ambit of CSR, according to a clear statement from the Central Government.

Advantages of Corporate Social Responsibility

  • Enhances a company's reputation
  • assists in luring and keeping future personnel
  • wins favor with regulatory bodies
  • draws in new investors
  • helps retain current staff.
  • A fresh approach to brand promotion

Disadvantages of Corporate Social Responsibility

  • Customers may become impatient
  • Company's reputation may suffer
  • Changes to the goal of creating a profit
  • Manufacturing costs may suddenly increase among other things.

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