Corporate Social Responsibility Challenges and Solutions Report

This report provides an overview of Corporate Social Responsibility (CSR) and its implications, particularly in the context of the Companies Act 2013. It begins with an introduction to CSR and the legal framework, including the requirement for companies to spend 2% of their net profits on CSR acti...Read More

Corporate Social Responsibility

INTRODUCTION...........................................................................................................................1
Q3. Introduction of the company’s act 2013 and spending 2% net profitability on CSR...........1
3.1 Five challenges which is required to be addressed................................................................2
3.2 Viable and Practical Solutions of the Challenges..................................................................3
CONCLUSION................................................................................................................................3
REFERENCES................................................................................................................................5

INTRODUCTION
A Company is a group of individuals associated with a common purpose in order to carry
out a business by spending some contribution (Jain, Is Companies Act 2013). A company is an
incorporated association and an artificial legal person with having a separate legal entity and
holds a perpetual existence with a limited liability and a common seal. In this present report,
discussions has been made on, Introduction of the Companies Act, 2013 along with provision
that have been laid down in section 135.In addition with this, challenges of CSR and solutions
for these challenges are also covered in this present report.
Q3. Introduction of the company’s act 2013 and spending 2% net profitability on CSR
Lok Sabha and Rajya sabha passed a bill The Companies Bill 2012, simultaneously on
the date 18th Dec, 2012 and 8th August, 2013. After receiving consent from the president of India
the Companies Act, 2013 then came into the consideration with a purpose of:
 Developing economy by significantly encouraging entrepreneurship.
 Creation of simple and flexible working structure in the upholding and formation of
companies Bring transparency and facilitating new concept as to encourage high standards and
interest of all stakeholders.
Structure of the companies Act, 2013
A company is a combination of individuals willingly associated with a purpose of,
charity, business, research etc. The Companies Act 2013 include 470 section in which there are
29 chapters along with 7 schedules aligned 658 section, covered in it. A company is an
incorporated association and an artificial person framed by law and holds a spate legal identity
with a common seal. In the companies act 2013, there is a section named Section 135 Corporate
Social Responsibility according to which, every company holds whether listed or not is required
to constitute a committee named Corporate Social Responsibility in which it is required to have
three or more than number of director and in this one director must have to be a independent
director (Ferran, 2014).
Net Profit Require Spending on CSR Activity
It is important for a private company who is covered under CSR provision with having at
least 2% average net profit on the 3 immediate previous financial years to frame composition of
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CSR committee and formatively spend on it every year. While it is important for companies to
consider that those CSR expenditure will taken into account who are undertaken in itself India
only.
3.1 Five challenges which is required to be addressed
Main challenges in CSR are mentioned below:
Lack of transparency:
Exact details are not published i.e. how CSR can be calculated. Moreover, methodologies
which are reported also do not shows rating weight for each criteria. It does not provide precise
information to stakeholders (Ferran, 2014). Transparency can aid organization to gain
competitive edge.
Proposed general criteria:
There are two trends related with assessment criteria of CSR. In this first criteria to
provide with general criteria and second deals with both specific and general criteria. First
criteria can be applied to every organization but it does not consider their operations In second
criteria both elements are taken into consideration. But it is not easy to include criteria in CSR
framework where they are appropriate to every sector.
Not accepted weight rate of criteria:
After evaluation of methodologies it is analyzed that there is no weight rate for criteria.
Assessment agencies have opted for high weight criteria as it is crucial for society. Weight of
rate is changing from years but sometimes both criteria have same weight.
Lack of consensus criteria and invalid criteria:
This exists in terms of criteria which have to be measured. Each methodology can be
measured as per what agencies thinks is suitable. Assessment agencies also have their own
methodology which sometimes is invalid or feasible for determining performance of CSR.
Lack of community participation in CSR activities:
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It is accumulation of both society and corporate responsibilities. But it has been observed
that local communities are least interested in making their contribution in CSR activities. Fact is
that they are not aware of exactly what CSR is and what it deals with.
3.2 Viable and Practical Solutions of the Challenges
Lack of Transparency:
It is one of the major issues, according to which some companies did not disclose their
information related to their audit issues, programs, utilization of fund and impact assessment.
This impact, lack of trust in between local communities and companies which acts a major
success factor for CSR activities (Kim, 2014). In relation to this, by making open communication
with partners plays a key essential role in building trust and transparency. Company by
facilitating partner meeting can effectively improve coordination in between different partners.
In addition with this, accountability based dialog will also aid company strengthen their CSR
programme ability while maintaining a shared investment in effective way.
Lack of community participation in CSR Activities:
CSR activity is a wholesome combination in which different types of a company partners
conjointly come together to perform Corporate social responsibility together. However, due to
lack of community participation hinder performance of a company in their CSR programmes for
this, it is important for a company to spread awareness in local communities about CSR
knowledge and encourage their confidence to take CSR initiatives.
CONCLUSION
As per the above mentioned report, it has been concluded that, a company is group of
persons associated with a purpose and holds a separate legal identity. In this report, it has been
evaluated that it is important for a company whether listed or not to spend 2% net profit on CSR
activities according to the section 135. There are different types of challenges of CSR activity
which is required to be addressed by a company in order to effectively conduct their CSR
programmes.
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REFERENCES
Books & Journals
Cheng, B., Ioannou, I. and Serafeim, G., 2014. Corporate social responsibility and access to
finance. Strategic management journal, 35(1), pp.1-23.
Kim, Y., Li, H. and Li, S., 2014. Corporate social responsibility and stock price crash
risk. Journal of Banking & Finance, 43, pp.1-13.
Jain, M.K., 2015. Is Companies Act 2013 forcing corporate to do Charity?: A critical Analysis of
CSR regime of new Corporate Legislature of India. International Journal of Multidisciplinary
Approach & Studies, 2(2).
Ferran, E. and Ho, L.C., 2014. Principles of corporate finance law. Oxford University Press.
Kim, Y., Li, H. and Li, S., 2014. Corporate social responsibility and stock price crash
risk. Journal of Banking & Finance, 43, pp.1-13.
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