CSR-1 Registration: Process, Importance, Benefits & Fees - Corporate social responsibility (CSR) is a management concept that describes how a company contributes to the well-being of communities and society through environmental and social measures. CSR plays a crucial role in how brands are perceived by customers and their target audience. It may also help attract employees and investors who prioritize the CSR goals a company has identified.

What is Corporate Social Responsibility (CSR)?

As per the Companies Act 2013, Corporate social responsibility (CSR) is a self-regulating business model that helps a company be socially accountable to itself, its stakeholders, and the public. 

By practicing corporate social responsibility, also called corporate citizenship, companies are aware of how they impact aspects of society, including economic, social, and environmental. Engaging in CSR means a company operates in ways that enhance society and the environment instead of contributing negatively to them.

Applicability of CSR

According to Section 135 of the Companies Act, 2013, Every Company having: -

  1. net worth of rupees five hundred crores or more,
  2. turnover of rupees one thousand crore or more,
  3. a net profit of rupees five crores or more,

During [the immediately preceding financial year] shall constitute a Corporate Social Responsibility Committee of the Board consisting of three or more Directors, out of which at least one director shall be independent.

The Board’s report under sub-section (3) of section 134 shall disclose the composition of the Corporate Social Responsibility Committee.

Activities included in CSR

As per section 135 read with Schedule VII of Activities which may be included by companies in their Corporate Social Responsibility Policies Activities relating to: —

  1. Eradicating hunger, poverty, and malnutrition, [“promoting health care including preventive health care”] and sanitation [including contribution to the Swachh Bharat Kosh set-up by the Central Government for the promotion of sanitation] and making available safe drinking water
  2. promoting education, including special education and employment enhancing vocation skills, especially among children, women, the elderly, and the differently abled, and livelihood enhancement projects.
  3. Promoting gender equality, empowering women, setting up homes and hostels for women and orphans; setting up old age homes, daycare centers, and other facilities for senior citizens, and measures for reducing inequalities faced by socially and economically backward groups.
  4. protection of national heritage, art, and culture including restoration of buildings and sites of historical importance and works of art; setting up public libraries; promotion and development of traditional art and handicrafts;
  5. measures for the benefit of armed forces veterans, war widows, and their dependents
  6. training to promote rural sports, nationally recognized sports, Paralympic sports, and Olympic sports
  7. contribution to the prime minister’s national relief fund
  8. Contributions to publicly funded Universities
  9. rural development projects

Benefits of CSR

Corporate Social Responsibility (CSR) offers several benefits to businesses, society, and stakeholders. Here are some key advantages:

For Businesses

  1. Enhanced Brand Reputation – CSR initiatives improve public perception making customers more likely to trust and support the company.
  2. Competitive Advantage – Ethical business practices attract conscious consumers and investors differentiating the company from competitors.
  3. Employee Satisfaction & Retention – Employees feel proud to work for socially responsible companies, increasing morale, productivity, and retention.
  4. Investor Attraction – Many investors prefer companies with strong CSR commitments as they indicate long-term sustainability.
  5. Cost Savings – Energy efficiency, waste reduction, and sustainable practices can reduce operational costs.
  6. Risk Management – CSR helps in compliance with regulations reducing legal and reputational risks.

For Society & Environment

  1. Community Development - CSR initiatives in education, healthcare, and poverty alleviation improve living standards.
  2. Environmental Protection - Sustainable business practices reduce pollution, conserve resources, and promote eco-friendly innovations.
  3. Social Equity - Companies that focus on diversity, inclusion, and fair wages contribute to a more equitable society.

Amount Spend in CSR

As per the Section 135(5) of Companies Act, 2013 specified that: -

The Board of every company shall ensure that the company spends, in every financial year, at least two percent. Of the average net profits of the company made during the three immediately preceding financial years [or where the company has not completed three financial years since its incorporation, during such immediately preceding financial years], in pursuance of its Corporate Social Responsibility Policy.

Non-compliance with CSR provisions

If a company fails to comply with the provisions of CSR, it shall be subject to a penalty equal to twice the amount it was required to transfer to the Fund specified in Schedule VII or the Unspent Corporate Social Responsibility Account, whichever is applicable, OR One Crore Rupees whichever is lower.

Additionally, every officer responsible for the default shall be liable to a penalty amounting to one-tenth of the required transfer amount or two lakh rupees, whichever is lower.

Conclusion

Corporate Social Responsibility (CSR) is a crucial aspect of modern business that goes beyond profit-making to contribute to societal and environmental well-being. By integrating ethical, social, and environmental considerations into their operations, companies enhance their reputation, build consumer trust, and foster long-term sustainability.

CSR benefits businesses, employees, customers, and communities, positively impacting society while driving economic growth.

Ultimately, CSR is not just a legal obligation but a strategic necessity that promotes responsible business practices and long-term value creation. Companies that actively engage in CSR demonstrate their commitment to ethical leadership and sustainable development, ensuring a better future for all stakeholders.