This document discusses CSR legislation in India according to Section 135 of the Companies Act 2013. It mandates that companies meeting certain profit thresholds must spend 2% of their average net profits of the previous three years on CSR activities focused on areas like poverty alleviation, education, gender equality, healthcare, environment sustainability and others. Companies are required to form a CSR committee to devise and monitor CSR strategies. While there are no penalties for failing to spend on CSR, companies can be fined for failing to report on CSR activities or explain why spending was not done. The top CSR performing companies in India are also mentioned.

1. CSR LEGISLATION
SECTION 135. SCHEDULE VII. REGULATION.
Dr. Rajesh Timane
HEAD OF THE DEPARTMENT,
DR. PANJABRAO DESHMUKH INSTITUTE OF MANAGEMENT TECHNOLOGY & RESEARCH,
RTM NAGPUR UNIVERSITY, NAGPUR, INDIA
DISCLAIMER: All product names, logos, and brands are property of their respective owners. All company, product and service names used in this presentation are for identification
purposes only. Use of these names, logos, and brands does not imply endorsement.

3. CSR-Legislation In India & the world
Section 135 of Companies Act 2013
Scope for CSR Activities under Schedule VII
Appointment of Independent Directors on the Board
The Drivers of CSR in India
Changing expectations of social responsibility
four faces of social responsibility
the regulatory environment in India Counter trends
Performance in major business and programs
CONTENTS

4. CSR-Legislation in India
The CSR Clause requires a targeted company
 to make changes within its board of directors,
 to spend on government defined categories of CSR, and
 to formulate and publicly disclose an official policy on its CSR activities.
While there is no penalty for failing to spend on CSR, there are penalties for failing to
report on CSR activities conducted or explain why CSR spending was not carried out.
Source: Kordant Philanthropy Advisors
The Clause The Committee The CSR Rules Penalty

5. CSR-Legislation in India
CSR Committee: The CSR Clause requires companies to form a CSR committee
within the board of directors that will devise, recommend, and monitor CSR
activities, and the amounts spent on such activities, to the rest of the board.
The CSR Rules direct companies to spend 2 % of their average profit in the past
three years on social development.
The CSR Rules, which came into force on 1 April 2014 under the new Company’s
Act, direct all companies with a net worth of rupees 500 crore or revenue of
rupees 1000 crore or net profit of rupees 5 crore to spend 2 % of their average
profit in the past three years on social development.
Ghosh, C. S. (2018). The Path Ahead - Transformative Ideas For India. (A. Kant, Ed.) New Delhi: Rupa. & Kordant Philanthropy Advisors

6. net worth of rupees 500 crore
revenue of rupees 1000 crore
net profit of rupees 5 crore
to spend 2 % of
their average
profit in the past
three years*
*mandatory spending by the companies
CSR-Legislation in India

7. CSR-Legislation in India
Failure to Comply
While a company is not subject to liability for failing to spend on CSR, a company
and its officers are subject to liability for not explaining such a failure in the annual
report of the board of directors.
Failure to explain is punishable by a fine on the company of not less than 50,000
rupees and up to 25 lakh rupees.
Further, officers who default on the reporting provision could be subject to up to
three years in prison and/or fines of not less than 50,000 rupees and as high as 5
lakh rupees.
Source: Kordant Philanthropy Advisors

8. CSR-Legislation in the World
India is the first country in the world to make CSR mandatory, following an amendment to the
Companies Act, 2013 in April 2014.
On 16 December 2008, the Danish parliament adopted a bill making it mandatory for the 1100 largest
Danish companies, investors, and state-owned companies to include CSR information in their financial
reports. CSR is voluntary in Denmark, but if a company has no policy on this it must state its positioning
on CSR in financial reports.
In 1995, the Income Tax Act of Mauritius mandated that companies registered in Mauritius paid 2% of
their annual book profit to contribute to the social and environmental development of the country.
ISO 26000 is the recognized international standard for CSR. Public sector organizations (the United
Nations for example) adhere to the triple bottom line (TBL). It is widely accepted that CSR adheres to
similar principles, but with no formal act of legislation.
Source: Wikipedia etc

9. Section 135 of Companies Act 2013
Source: Compiled by the author

10. Scope for CSR Activities under Schedule VII
The term “CSR” itself is not defined in the Companies Bill. However, Schedule VII of
the Companies Bill, requires the CSR policy created by the CSR Committee to involve
at least one of the following focus areas:
Focus Areas SDG MDG
Eradicating extreme hunger and poverty SDG-2 & 1 MDG-1
Promotion of education SDG-4 MDG-2
Promoting gender-equality and empowering women SDG-5 MDG-3
Reducing child mortality and improving maternal health SDG-3 MDG-4 & 5
Combating HIV, AIDS, malaria and other diseases SDG-3 MDG-6
Ensuring environmental sustainability SDG-6, 7, 11-15 MDG-7
Employment-enhancing vocational skills SDG-4 & 9 MDG-2
Social business projects SDG-9, 11, 12 MDG-8
Contribution to the Prime Minister’s National Relief Fund SDG-16, 17 MDG-8
Compiled by the author from Kordant Philanthropy Advisors

11. Appointment of Independent Directors on the Board
Independent Director means a director who is not connected or associated with the Company in
any manner and works only to safeguard the interest of the members who individually cannot look
after their interest.
An independent director is a nonexecutive director of a company who helps the company in
improving corporate credibility and governance standards.
The provisions relating to appointment of Independent directors are contained in Section 149 of
the Companies Act, 2013 should be read along with Rule 4 and Rule 5 of the Companies
(Appointment and Qualification of Directors) Rules, 2014
Section 149 (6): An independent director in relation to a company, means a director other than a
managing director or a whole-time director or a nominee director:
(a) who, in the opinion of the Board, is a person of integrity and possesses relevant expertise and
experience
(b) (i) who is or was not a promoter of the company or its holding, subsidiary or associate
company (ii) who is not related to promoters or directors in the company, its holding,
subsidiary or associate company…

12. Appointment of Independent Directors on the Board
Appointment process of independent directors shall be independent of the company management;
while selecting independent directors the Board shall ensure that there is appropriate balance of skills,
experience and knowledge in the Board so as to enable the Board to discharge its functions and duties
effectively.
The appointment of independent director(s) of the company shall be approved at the meeting of the
shareholders.
The appointment of independent directors shall be formalized through a letter of appointment
The terms and conditions of appointment of independent directors shall be open for inspection at the
registered office of the company by any member during normal business hours.
The terms and conditions of appointment of independent directors shall also be posted on the
company’s website.
Source: https://www.icsi.edu/media/filer_public/78/8b/788b6cf7-7e67-4131-b883-fe4292b4c475/independent_director_under_companies_act_2013.pdf

13. The Drivers of CSR in India
The usual reasons which motivate corporates to pursue CSR in India are:
1. Globalization and market forces
2. Laws and regulation
3. License to operate
4. Brand / Image building
5. Social awareness
6. Stakeholder priorities
7. Ethical consumerism
8. Consumer satisfaction and customer demand
9. Employee satisfaction, recruitment and retention
10. Cost Management
11. Tax Relief
12. Risk management
13. Environmental protection
Source: Compiled by the author

14. Changing expectations of social responsibility
The future is expected to see the sustainability initiatives and core strategic
initiatives closely intertwining such that it becomes extremely difficult to
differentiate the two.
The new company’s bill stipulates a minimum spend towards CSR, hence
companies realize the need to focus on social and environmental aspects which
are important for its sustainability.
They are also becoming highly vocal in publishing their achievements on these
dimensions.
Their sustainability reporting is bound to become more sophisticated to capture
the changing face of CSR.
Source: https://www.thehindubusinessline.com/specials/new-manager/The-changing-face-of-corporate-social-responsibility/article20459403.ece

15. 4 faces of social responsibility

16. The regulatory environment in India Counter trends
There is a need for voluntary efforts by corporations on labor- and environment-related issues in
India as a result of the poor performance of the prevalent regulatory framework on these issues.
The domestic drivers supporting self-regulation by industries are rather weak.
Some hope may lie in the trusteeship theory of Gandhiji, or may emerge from within companies
where each corporate leader/manager makes a significant difference by adopting more socially
responsible corporate policies and practices.
Such a transformation, relates to:
• the inherent weakness of societal pressures that typically drive CSR
• the modern reality of corporate management and governance, and market-friendly regulation
Source: https://www.researchgate.net/publication/5219574_A_Review_of_Corporate_Social_Responsibility_in_India

17. Performance in major business and programs
CSR 2020
Tata Chemicals has dropped to the third position after being No. 1 for the past
three years. Infosys has climbed one spot. Mahindra & Mahindra has climbed two
spots to claim the second rank in the top 10 Indian companies for CSR in 2020.
ITC has also climbed up from No. 5 to the fourth position this year. The Vedanta
Group has outdone itself in the corporate citizenship realm, making it to the top 5,
from its previous 8th rank.
A new entry on the chart is Grasim Industries. The part of the Aditya Birla Group,
Grasim won numerous awards for its flagship programmes. Here are some of the
top companies from India in CSR performance 
Source: https://thecsrjournal.in/top-indian-companies-for-csr-in-2020/

18. Performance in major business and programs
TOP CSR Performers in India
1. Infosys Limited
2. Mahindra & Mahindra Ltd.
3. Tata Chemicals Ltd.
4. ITC Ltd.
5. Vedanta Ltd.
6. Wipro Ltd.
7. Hindustan Unilever Ltd.
8. Godrej Consumer Products Ltd.
9. Grasim Industries Ltd.
10. Bharat Petroleum Corporation Ltd.
Source: https://thecsrjournal.in/top-indian-companies-for-csr-in-2020/

19. Explore further
FAQ on CSR Ministry of Corporate Affirs -
https://www.mca.gov.in/MinistryV2/faq+on+csr+cell.html
Companies Act 2013 https://www.csr.gov.in/Companies%20ACT%202013.php
State-wise CSR Data https://www.csr.gov.in/statelist.php
Company specific CSR Data https://www.csr.gov.in/master_search.php
Development Sector-wise Data https://www.csr.gov.in/developmentlist.php
Top performing companies https://thecsrjournal.in/top-indian-companies-for-csr-in-2020/

20. Thank You !
Twitter : @timane | E-Mail: timane.rajesh@gmail.com | WhatsApp : +91 98609 31040