An Empirical Study on Green Initiatives by S&P BSE SENSEX Companies in India at the Outlet of Companies Act, 2013

Introduction

Corporate social responsibility under the new Companies Act 2013 has brought a bundle of changes in Indian corporate business. CSR introduction in Section 135 is referred as a give and take policy, as the companies are taking resources from the society it needs to reduce the gap by providing something back the society. The concept goes way back in 1994 when John Elkington coined the need or Triple Bottom Line which was based on 3 pillars namely people, planet and profit. Ministry of corporate affairs notified Section 135 and schedule VII and the provisions regarding Companies (Corporate Social Responsibility Policy) Rules, 2014 or generally known as CSR rules which came into effect from 1st April 2014. Companies now need to share a part of their profit on CSR activities as a contribution to the society, and these expenses cannot be claimed as business expenses. The guidelines issued by MCA on social, environmental and economic responsibilities of business mandated adaptation of CSR by the companies having the following yardsticks during any financial year.

• 1.

  Companies with a net worth of Rs. 500 crore or more, or

• 2.

  Companies having turnover of Rs.1000 crore or more, or

• 3.

  Companies achieving a profit of Rs. 5 crore or more

And these companies shall constitute a CSR committee on the board. Composition of corporate social responsibility committee is subjected to disclosure under sub section (3) of section 134. These companies must constitute of minimum 3 directors containing an independent director. SEBI also mandated a top hundred listed companies at BSE and NSE on the basis of market capitalization for proper inclusion and disclosure of business responsibility report in their annual report. The CSR committee formulates and recommends about the CSR policy to the board and the amount of expenditure to be incurred in these activities. Monitoring these activities and policies are also another important function of CSR committee.

With great powers come great responsibility that is why CSR committee is bound to some responsibilities which are:

• •

  Recommendations of the CSR committee are approved by the board which eventually becomes the CSR policy and disclosure of the contents of such policy in company report and website is required. Rule 9 of the CSR rules clarifies that a company qualifying under section 135 shall include a CSR report along with board report.

• •

  The company must spend at least 2% of the average net profits of three years immediately preceding financial year. Computation of net profit is as per section 198 of the companies act, MCA clarifies that profit means profit before tax.

Companies may engage in various activities notified are: (l) In Schedule VII, for items (i) to (x), the following items and entries shall be substituted, namely:

• 1.

  Eradicating hunger, poverty and malnutrition, promoting preventive health care and sanitation and making available safe drinking water:

• 2.

  Promoting education, including special education and employment enhancing vocation skills especially among children, women, 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, day care centers and such other facilities for senior citizens and measures for reducing inequalities faced by socially and economically backward groups;

• 4.

  Ensuring environmental sustainability, ecological balance, protection of flora and fauna, animal welfare, agroforestry, conservation of natural resources and maintaining quality of soil, air and water;

• 5.

  Protection of national heritage, alt and culture including restoration of buildings and sites of historical importance and works of art; setting up public libraries; promotion and development of traditional and handicrafts:

• 6.

  Measures for the benefit of armed forces veterans, war widows and their dependents;

• 7.

  Training to promote rural sports, nationally recognized sports, Paralympic sports and Olympic sports;

• 8.

  Contribution to the Prime Minister's National Relief Fund or any other fund set up by the Central Government for socio-economic development and relief and welfare of the Scheduled Caste, the Scheduled Tribes, other backward classes, minorities and women;

• 9.

  Contributions or funds provided to technology incubators located within academic institutions which are approved by the Central Government

• 10.

  Rural development projects.