The definition of CSR, in short, is if a particular company applies rules and regulations for the welfare of its investors and society as their duty. In the fast growing and globally competitive world companies must present them to be socially responsible and this is one of their best strategies to gain an advantage in reaching their goals. From many past decades, there was a lot of pressure on corporate companies to get involved in CSR for which most of the firms were not ready as many firms thought it as a waste of time and money. But some companies used their strategies to gain support from the public to strengthen their existence in national and global markets.
CSR involves various activities like charity, fund donations, educating children, women empowerment and doing some social contributions. CSR and financial performance are related to each other if a firm is interested in CSR and doing activities related to it form the profits gained, if the results are positive from those activities then the companies will be more interested to do activities and get profit maximization. If the social activities done by them effect negatively then they will not show any interest in CSR and adopt stable approach related to these activities.
CSR is not only related to social activities but it also focuses on stakeholders and their lifestyle improvement. As already known an act was passed by law in 2013 in which the companies with turnover more than 1000 crore should participate in CSR without fail, if they fail to do so then they will be charged according to law. Companies can implement the CSR activities according to the local conditions after seeking the approval from the CSR board of the company. Every corporate company should have CSR committee. And the role of the board in building CSR is:
- Form CSR committee
- Study and approve the policies of CSR
- The board should make sure that members of CSR are implementing the rules listed
- Make sure that 2% of net profits is pent for the purpose of social activities and wellness of stakeholders
- If the members of CSR fail to spend so, then the committee should make an inquiry about it.
- The committee of CSR consists of more than three directors of which one should be an independent director
- They should recommend the activities and expenditure related to CSR
- They should be up to date with changes done in policy from time to time.