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TEACH INDIA (Times of India)

2% CORPORATE SOCIAL
RESPONSIBILITY
(By: GAURAV RAINA)

INTRODUCTION
Corporate Social Responsibility is a term that is used to define the socially responsible activities and
investments that is integrated into the business model of high-end companies. This means that a company
is required to spend an amount out of its profits and should invest it into projects and initiatives meant for
the society as a whole.
Corporate Social Responsibility (CSR) has always been a debatable topic for companies, governments
and critics. The main issue raised was, that the prime motive of any business is to maximize shareholders
wealth and cutting out an amount from profits towards the betterment of society will simply reduce the
profit. But soon, this main issue was evidently contradicted by the fact that, Yes! The main aim of any
company (regular) is to earn profits, but if a company is doing something for the betterment of society,
then the benefits received will be much higher and the company will run for a longer period of time.
Initially, this concept was just introduced to companies on a volunteer basis. But now, this concept is
further improvised and has been made MANDATORY for companies falling under a given category.

Report on CSR

This improvised compulsory version of CSR is known as 2% Corporate Social Responsibility. This
law has been now passed in the parliament, that any company having net worth of Rs. 500 Crores or more
OR turnover of Rs. 1000 Crores or more OR net profit of Rs. 5 Crores or more during any financial year,
will have to spend 2% of its three year average annual profits on CSR activities
An article was printed in Harvard Business Review telling that, investment in CSR has lead increased
sales for Hindustan Unilever and also provided benefits to 65,000 households. This article thus described
the importance of CSR in companies, its effect on society and the company itself.

I would also like to tell, that the law has not been roughly defined. It also mentions that, if any spending
on social cause that will benefit shareholders or is directly related to core business activities is made, then
it will not fall under CSR. Investment in social activities like sanitation, health-care, setting up of
orphanages and education centers will count as CSR activities.
Next we talk about the consequences if a company is not able to contribute towards CSR. If a company is
not able to spend the prescribed minimum amount towards CSR, then it is required to tell the reason of
this deficiency to its shareholders.
2% CSR was being discussed by Ministry of Corporate Affairs, around 4 years ago. But, it was kept as a
volunteer practice due to protests from companies. But this proposal was converted into a law when MCA
got its support from parliament and thus 2% Corporate Social Responsibility was born from April 114.
This new law was hugely publicized in newspapers and other forms of media.
Now let me support my report with some newspaper clippings.

Report on CSR

So, as we can see, that 2% CSR is a law that is now being followed by many high-end companies. This
law has faced many protests from various sources but now, it has been finally made functional since April
1 2014. Now companies falling under given category are supposed to spend 2% of its three year average
annual profits on CSR activities.
This law combines business motive with profit making and such practice is very healthy for business and
society both. In coming years, we will see the betterment of society done by companies on a regular basis.
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