CSR Guide

Corporate Social Responsibility:

Until the 2000s, it was believed that the priority of every business was to maximize shareholder value. Besides realizing profits and providing employment, businesses were not expected to contribute much. Over time, it was observed that there were benefits of engaging in socially responsible activities as they positively affected the local communities. The development and well-being of local communities meant development for companies as well. This encouraged companies to adopt more of these activities and eventually led to the creation of a new corporate division called “Corporate Social Responsibility”. CSR activities are evolving by becoming less reactive to a crisis and more proactive to issues.

Though there is no single agreed-upon definition of corporate social responsibility, we can broadly state that CSR encompasses all the activities voluntarily taken up by corporates to promote positive social or environmental change without expecting a financial return.

CSR in India

In India, ever since the government enacted Section 135 of the Indian Companies Act, Corporate willingness to engage in socially responsible and sustainable activities has undoubtedly increased.

Under the Companies Act, 2013, certain classes of profitable companies are required to spend at least 2 percent of their average net profit of the preceding three financial years on CSR activities.

Thus, Corporate Social Responsibility has become increasingly relevant and important to a business’s image, so much so that “CSR Initiatives” have almost become synonymous with good business practices. It helps build goodwill and trust among the public by promising to continuously deliver high-quality products and services sustainably.

Advantages of CSR Practices

  • More welcoming communities as CSR initiatives help build trust. Communities believe in companies whose values, ethics, and activities have a positive impact on the social well-being and sustainability of surrounding locals.
  • Employees usually want to be a part of an organization that has a good reputation among the public. Employee satisfaction is high for companies with active CSR policies, which reduces the cost of employee turnover and recruitment.
  • Increasing social and environmental awareness among customers has encouraged them to make more conscious decisions. Customers are looking for a brand's social purpose, which is an important factor in influencing a purchase decision. Nowadays, a loyal customer is willing to forego convenience, price, and quality to support the brand that they value.
  • There is a misconception that implementing a comprehensive CSR policy is expensive. Though there is an outflow of funds initially, to set up the programs, the long-run financial benefits are many.
  • Successful CSR effort results in an overall decrease in money spent on hiring new staff and developing programs to retain existing employees. It also decreases advertising costs as the company builds its brand and reputation through goodwill. It piques the interest of the general public and garners media attention. Moreover, the heightened awareness, translates into an increase in revenue as loyal customers purchase new products from the company while converted customers, bolster existing sales.