Why in the news?

• The Supreme Court has placed Corporate Environmental Responsibility within the legal scope of Corporate Social Responsibility (CSR).

Corporate Social Responsibility (CSR) in India

• Governed By: Companies Act, 2013
• What is it?: Corporate Social Responsibility (CSR) in India mandates companies to allocate 2% of their average net profits from the preceding three years toward social, environmental, and economic development activities.
• Applicability: Applies to companies meeting any of these thresholds in the prior financial year:
  • Net worth of ₹500 crore or more.
  • Turnover of ₹1,000 crore or more or
  • Net profit of ₹5 crore or more.
  • Qualifying firms must form a CSR Committee (with at least three directors, including one independent), formulate a CSR policy, and spend the mandated amount on Schedule VII activities.
• Key Provisions:
  • Companies spend at least 2% of average net profits annually.
  • Unspent amounts go to specified funds or accounts, with reporting mandatory in annual reports.
  • The 2019 Amendment introduced penalties for non-compliance (up to twice the unspent amount), and allowed contributions to central schemes like PM CARES.
• Eligible Activities: Schedule VII lists 12 priority areas.
• Relevance: India is the first country to legally enforce quantified CSR spending, integrating corporate contributions into national development goals.

Source: The Hindu