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A Guide On Corporate Social Responsibility (CSR) | Company Vakil

Introduction:Corporate Social Responsibility (CSR)

Corporate social responsibility (CSR) is a self-governing business model that helps a company be socially responsible — to itself, its stakeholders, and the public. To engage in CSR means that, in the standard course of business, a company is functioning in ways those enhance the society as well as the environment, as a replacement for contributing negatively to it.

By practicing corporate social responsibility (CSR), also known as corporate citizenship, companies become aware of the kind of impact they are having on all the aspects of the society including economic, social, and environmental.

CSR is also regarded as ‘corporate conscience’, ‘corporate citizenship’ and ‘responsible businesses’.

Corporate Social Initiatives

CSR includes in itself six types of corporate social initiatives:

  1. Corporate philanthropy: Companies donations to charities, including cash, goods, and services, and sometimes via a corporate foundation
  2. Community volunteering: Company-organized helper activities, sometimes as an employee receives pay for pro-bono work on behalf of a non-profit organization (NPO)
  3. Socially-responsible business practices: Ethically created products which appeal to a customer segment
  4. Cause promotions: Company-funded sponsorship campaigns
  5. Cause-related marketing: Donations to charities on the basis of product sales
  6. Corporate social marketing: Company-funded behaviour-change programmes.

Common CSR Actions

Environment Sustainability

  • Waste management.
  • Renewable energy.

Community Involvement

  • Raising money for charity purpose.
  • Employing local workers.
  • Engaging fair trade practices.

Ethical Marketing

  • Companies who are carrying on their business ethically are placing a higher value on their customers, they do not influence their consumers.

Ministry of Corporate Affairs has also realized the significance the Corporate Social Responsibility (CSR) and has notified some provisions in the Companies Act, 2013. According to the Act, following companies must contribute at least 2% of the average net profit for the immediately previous 3 financial years, companies who have to follow this criterion are:

  1. The net worth of the company is Rs. 500 Crore or above
  2. Turnover of the company is Rs. 1000 Crore or above
  3. Net profit of the company is Rs. 5 Crore or above

Need for CSR Compliance

Each and every stakeholder of a business including investors, managers, employees, and consumers have begun to recognize how economic growth of a business or an industry is correlated with the environmental and social well-being of the community. Even though it is just a voluntary activity by business organizations, it has almost become an essential part of business activities as undertaking social activities can in some way benefit the organization for the long run. When a business operates in an environmentally, socially and economically responsible and translucent manner, it helps the organization be successful in particular through social acceptance & shared value.

Pros and Cons of Corporate Social Responsibility

Pros: Improved Company Reputation

Making the policy of corporate social responsibility (CSR) and implementing the same with a authentic action, can help in building or improving the status of a business.  If a company’s behavior creates a negative impact on the community and because of this there is a loss or reduction in the productivity of the company. Corporate social responsibility (CSR) has become one of the means to improve the status of the business and increase its profitability.

Better customer relation

Corporate social responsibility (CSR) is to get involved in the society or community where the business is functioning. Getting involved with the society where the business is functioning helps in building a trust relationship among the business and the customer. This trust relationship helps in creating a long-term relationship and helps the business the benefit of the doubt that if at any time something goes wrong customers rather thinking or assuming any malevolent intent will trust the company. Customers tend to stick with those companies those who get caught up in the society in which it is functioning.

Shareholder Resistance

Investors usually acquire stocks in those companies which are socially responsible but the eventual aim is to earn maximum return. There are some companies like Toyota which have earned due to corporate social responsibility (CSR).

Cons:Cost

The cost or expenditure incurred while adopting Corporate Social Responsibility policy is one of the drawbacks. Organization of programs for the lessening in the environmental impact requires the huge expense in availing equipment besides the ongoing cost. Subsequent to incurring heavy expenses also there is no guarantee or clear proof that implementing such policy would amplify the profitability of the business.

SUMMARY

Corporate social responsibility is a theory that can take many forms depending on the company and industry. Through CSR programs, philanthropy, and volunteer efforts, businesses can do good to society while boosting their own brands.

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