Corporate Social Responsibility (CSR)
Context:
The Supreme Court recently ruled that Corporate Social Responsibility (CSR) inherently includes environmental responsibility.
The judgment was delivered in response to petitions highlighting the risks faced by the Great Indian Bustard (a near-extinct bird species) in the Thar desert.
Fundamental Duty to Protect Environment:
The Court held that companies, as legal persons, have a fundamental duty to protect the ecosystem.
Article 51-A(g):
The article imposes a duty on every citizen to protect and improve the natural environment and have compassion for living creatures.
The Court brought companies under this ambit.
Allocation of CSR funds for environmental protection is not a voluntary act of charity but the fulfillment of a constitutional obligation.
Polluter Pays Principle:
Where corporate activities (like mining or power generation) threaten endangered species, the company must bear the cost of species recovery.
Companies Act, 2013:
The Act formally introduced the mandate for CSR to the dashboard of the Boards of Indian companies.
It applies to companies with a Net Worth of ₹500 crore or more, OR Turnover of ₹1000 crore or more, OR Net Profit of ₹5 crore or more.
It mandates spending of at least 2% of the average net profits of the immediately preceding three financial years on CSR activities.
Companies must constitute a CSR Committee of the Board consisting of three or more directors, out of which at least one director shall be an independent director.
CSR Activities (Schedule VII):
Activities include eradicating hunger and poverty, promoting education, gender equality, and ensuring environmental sustainability that includes flora, fauna, animal welfare, agro-forestry, conservation of natural resources.
The company can implement its CSR activities through the following methods:
Directly on its own
Through its own non-profit foundation
Through independently registered non-profit organisations that have a record of at least three years in similar such related activities
Collaborating or pooling their resources with other companies