by Corporate Social Responsibility (CSR) Committee is a specialized committee formed within a company’s board of directors to oversee and implement its CSR activities. The committee ensures that the company fulfills its social, environmental, and ethical obligations in accordance with the law and promotes sustainable development. It plays a vital role in strategizing, monitoring, and evaluating CSR initiatives to align them with the organization’s vision and regulatory requirements.
Meaning and Legal Mandate
CSR Committee is mandated under Section 135 of the Companies Act, 2013 in India for companies that meet specific criteria related to net worth, turnover, or net profit. It is responsible for formulating and monitoring CSR policies and ensuring compliance with statutory obligations. The formation of a CSR Committee underscores the growing importance of corporate accountability towards societal and environmental welfare.
Composition of CSR Committee
- Members:
CSR Committee should consist of at least three directors, with at least one being an independent director. For private companies, the committee may include only two directors, and for unlisted public companies without independent directors, it is not mandatory to have an independent director on the committee.
- Chairperson:
The committee often elects a chairperson from among its members to lead its activities.
The composition ensures diversity in perspectives and expertise, enabling the committee to design and execute effective CSR strategies.
Role and Responsibilities of CSR Committee
The CSR Committee is tasked with several critical responsibilities, including:
a. Formulating CSR Policy
- Developing a detailed CSR policy that outlines the company’s CSR vision, objectives, and areas of focus, such as education, healthcare, environmental sustainability, and community welfare.
- Aligning the policy with the company’s long-term goals and the provisions of Schedule VII of the Companies Act, 2013.
b. Recommending CSR Activities
- Identifying specific CSR projects or programs to be undertaken.
- Ensuring that these activities align with the objectives mentioned in the CSR policy.
c. Budget Allocation
- Recommending the amount of expenditure to be incurred on CSR activities.
- Ensuring that the prescribed percentage of profits (2% of the average net profit of the preceding three years) is allocated for CSR activities.
d. Monitoring and Implementation
- Monitoring the implementation of CSR projects to ensure compliance with the CSR policy and timelines.
- Evaluating the impact of CSR initiatives and ensuring that they contribute positively to the targeted beneficiaries.
e. Reporting
- Preparing an annual report on CSR activities, including details of projects undertaken, expenditure incurred, and outcomes achieved.
- Ensuring that the report is included in the company’s board report and submitted to regulatory authorities.
Importance of CSR Committee
CSR Committee plays a pivotal role in bridging the gap between corporate objectives and societal needs. Its importance can be summarized as follows:
- Strategic Oversight: Provides a structured approach to CSR by integrating it into the company’s strategic framework.
- Compliance: Ensures adherence to legal mandates and regulatory requirements related to CSR.
- Sustainability: Promotes sustainable development through impactful initiatives addressing social and environmental concerns.
- Accountability: Enhances transparency and accountability by monitoring and reporting CSR activities.
- Corporate Reputation: Strengthens the company’s image as a socially responsible organization, fostering goodwill among stakeholders.
Key Activities of the CSR Committee
Some of the typical activities undertaken by the CSR Committee:
- Identifying key areas of intervention such as education, healthcare, sanitation, rural development, and environmental sustainability.
- Partnering with non-governmental organizations (NGOs), government bodies, or other organizations for effective project implementation.
- Reviewing and approving CSR proposals and budgets.
- Assessing the long-term impact of CSR projects and making necessary adjustments to the CSR policy or projects as needed.
Challenges Faced by CSR Committees
- Limited Resources: Balancing financial constraints with the need for impactful CSR initiatives.
- Measuring Impact: Accurately assessing the outcomes of CSR projects can be challenging.
- Stakeholder Engagement: Ensuring alignment with the expectations of all stakeholders, including communities, employees, and shareholders.
- Regulatory Compliance: Keeping up with changes in CSR regulations and ensuring adherence.
CSR Committee in India
In India, the Companies Act, 2013 makes CSR mandatory for companies meeting certain financial thresholds:
- Net worth: ₹500 crore or more.
- Turnover: ₹1,000 crore or more.
- Net profit: ₹5 crore or more.
Such companies must spend at least 2% of their average net profit from the preceding three financial years on CSR activities. The CSR Committee ensures that these requirements are met effectively.
