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Strengthening the Business Ecosystem Through CSR CSR is part of corporate governance, which helps a company stay ethical and accountable to the government, its shareholders, and its stakeholders

By HP Singh

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Corporate social responsibility, also known as CSR, is a self-regulating format wherein businesses stay accountable by contributing to the communities and society. CSR is integrated into a company's business operations where they address environmental and social issues and build solutions for them. It is a voluntary action to interact with problems within the community and take steps towards bettering the lives of their stakeholders and society. This practice allows a company to understand its impact on the economic, social, and environmental development of society. They are also a great way to boost morale among stakeholders.

CSR is part of corporate governance, which helps a company stay ethical and accountable to the government, its shareholders, and its stakeholders. It helps companies build strong relationships with their customers. This helps in cementing the trust of people in a company while aiding the development of our nation. It is a strong attempt to enhance a company's brand value and improve its brand image. This building of a positive image in society results in an increased preference amongst the public. The CSR activities of a company also strengthen its customer base. With the current amount of competition in the world, it is hard for a company to stay on top of the list of customers. However, CSR activities help a corporate build a strong rostrum to market their activities and inevitably gain the attention of their target audience. Staying a positive force in society is essential for a company to stay relevant in the market. Additionally, CSR activities allow the company to stand on a moral ground within the society and retain employees and investors. When an investor is able to see the accountability of a company, they are more likely to trust the company and stand through the highs and the lows.

The business ecosystem is a huge network of suppliers, distributors, companies, competitors, customers, employees and government agencies. If any one of these parts fails, the system can collapse. In order for a company to create value for its customers and increase its profits, it is essential to ensure that the entire ecosystem is working effectively and efficiently. Moreover, it is important to ensure that the company is creating value for the various aspects of its network. This is where CSR plays a vital role. Not only does it help the company to help better the community but it also allows them to build an added incentive to strengthen its business ecosystem. People are more likely to work for corporations that have a positive image of staying accountable than corporations that have an image of being notorious for their working practices. Essentially, CSR can help a company not only do good for the society but also build strong and long-lasting relationships within its ecosystem.

Section 135 of the Companies Act, passed by the government of India in 2013, was a bold attempt by the government to improve corporate governance and keep businesses accountable while also improving the process of doing business in India. It stated that a company has to constitute a CSR board committee. It also must spend two percent of its average net profits of the last three financial years on CSR activities if the company has a net worth of INR 500 crore or more, or its turnover is INR 1,000 crore or more or its net profit is INR 5 crore or more. This section of the Companies Act, 2013 highly impacted businesses and positively changed the entrepreneurial ecosystem in India.

The government of India recently revised the Companies Act, 2013. The ministry of corporate affairs has amended the procedure for dealing with unspent CSR funds and the cost calculation of conducting social impact assessments of CSR activities. The amendment in the Companies Amendment Rules, 2022 (CSR policy section) states that businesses with any amount within their unspent corporate social responsibility account must set up a CSR committee. This committee will oversee the implementation of the CSR activities rules and the utilization of the funds in this account. While the businesses will be allowed to keep the unspent amount earmarked for CSR, they have to utilize it within three financial years. The law will also require companies with INR 10 crore or more on their CSR budget and companies with projects costing INR 1 crore or more to carry out an independent impact assessment of their activities. This was implemented so that the companies can recognize the impact of their activities on the social causes chosen by them and come up with better solutions. Additionally, the government has introduced a new format for companies to make their annual CSR reports.

The new revisions to the Companies Act, 2013 have been created to help businesses stay accountable for their CSR activities. With the implementation of these laws, the business ecosystem will be further improved and strengthened. It will not only help companies stay on top of their responsibility towards society, but also ensure the social, economic, and environmental development of the nation.

HP Singh

Chairman & MD, Satin Creditcare Network Limited

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