Importance of CSR

The term Corporate Social Responsibility (CSR) was introduced officially in the Companies Act 2013 as a compulsory regulation to make a social contribution by way of CSR for the welfare of society. The Ministry of Corporate Affairs (MCA) laid down the rules and regulations concerning social responsibilities.

Section 135 of the Companies Act 2013 incorporated a set of policies regarding Corporate Social Responsibility as a criterion under which the companies must abide when engaged in Corporate Social Responsibility. On April 1, 2014, CSR Rules came into force, providing procedures and guidelines concerning CSR by Indian companies.

Objectives of CSR policies

A company's CSR Policy should be developed, modified, and implemented by the CSR Rules of the Companies Act 2013. The policy should specify or require a minimum of 2% of the company's net income to be spent towards social responsibility. It should also consider allowing the company's employees to participate in social responsibility activities. Through CSR, companies can achieve the following benefits:

  • Improve government relations
  • Ensure customer and employee participation in social responsibilities
  • CSR can also help businesses to differentiate their brand positively and stand out in a competitive market

Now, the question is, what is the importance of CSR, and how does it contribute to a country's economic development? We need to understand multiple aspects related to the term and its significance to analyze its impact on a deeper level.

CSR's contribution to the Indian economy

According to the India philanthropy report of 2022, CSR contributions will grow around 19% annually and are expected to reach around 32% by FY 2026. CSR activities like education and skill development, rural development projects, livelihood enhancement, and healthcare contribute to the income index of the country.

CSR is mandated by India's laws that prompt eligible companies in the country to contribute funds  towards social welfare activities.

What is the connection between CSR and SDG?

SDG stands for Sustainable Development Goals, a set of 17 global goals adopted by United Nations member states in 2015 to end poverty, protect the planet, and ensure prosperity for all. India is one of the signatory countries that have pledged to achieve these goals by 2030.

The CSR rule establishes a broad framework and provides guidance for a more sustainable future, whereas the SDGs establish concrete, well-defined objectives for measuring the outcomes of operations. The National Institution for Transforming India (NITI Aayog), the government's top policy think tank led by the Prime Minister of India, has been charged with supervising SDG implementation.

Corporate Social Responsibility plays an important part in society providing multifaceted benefits in the form of better training, amenities, education, healthcare, and other services.

According to the Sustainability Development Report of 2022, SDGs are the roadmap to 2030, and CSR is a significant part of the global plan to finance them. Policy efforts and commitments made by different organizations can support the SDGs from the G20 countries, including other nations, to increase their contribution towards economic development.



Having read this, you should have sufficient guidance about the importance of CSR and its subsequent impact on the Indian economy. We at Vardaan assist companies in drafting efficient CSR reports and other significant documents that help highlight the above reports and statistics.