Corporate Social Responsibility (CSR) is essential because it recognizes that businesses are part of a larger ecosystem where communities, the environment and the economy are interconnected. Individuals depend on their environment for growth and survival, companies too depend on healthy, resilient societies and natural systems.

CSR achieves the greatest impact when it starts with systematic stakeholder identification and curating strategies for stakeholders. Mapping and engaging key groups—such as local communities, employees and governments helps companies understand diverse needs and expectations. This approach to stakeholder management ensures CSR is not just responsive, but also strategic creating long-term value for both business and society.

Impact assessment highlights how CSR projects create change across interconnected stakeholders. It captures what improved for individuals, families, communities and institutions, and guides businesses on what worked and what can be strengthened for sustainable outcomes.

MMJC encourages the adoption of theory-driven approach to address development issues and assess the impact of CSR programmes. By viewing communities, businesses and the environment as interconnected systems, CSR teams and implementation agencies are better equipped to:

• Design balanced and needs-driven programmes that consider the interdependence of people, society and environment, with clear pathways of change.
• Measure impact by identifying indicators that capture not only individual outcomes but also ripple effects across interconnected systems.
• Engage the right stakeholders across different levels of the ecosystem (micro, meso, exo, macro) who influence and facilitate change.

The CSR Impact Theory Series explores structured and theory-based approaches to assess, understand and enhance the real-world outcomes of CSR initiatives. The second article in this series examines CSR programs through Ecological theory, exploring how businesses can design, implement and assess initiatives by considering the interdependence, adaptation and balance of social and environmental systems.

Ecological Systems Theory

Ecological systems theory highlights how individuals are shaped by their interactions with multiple environments. Rooted in biological, psychological and social sciences, it explains how immediate surroundings such as family and community and broader societal structures, including cultural norms, laws and institutions, influence a person’s development and empowerment. In this article we are adopting and adapting Bronfenbrenner’s Ecological Systems Theory.

Bronfenbrenner’s ecological systems theory explains a person’s growth happens through ongoing interaction with different systems around them.  These include the microsystem, mesosystem, exosystem, macrosystem and chronosystem.

• Microsystem – Microsystem is the immediate environment a person interacts with every day. It includes direct relationships such as family, friends and the workplace.
• Mesosystem – Mesosystem involves the connections between different parts of a person’s microsystem reflecting how different environments work together to influence an individual.
• Exosystem – Includes settings that a person does not directly interact with but that still affect them indirectly. This could include local governance decisions or community-level programs.
• Macrosystem – Macrosystem refers to the larger cultural, societal and legal context in which a person lives. It includes beliefs, customs, values and policies that shape attitudes and opportunities.
• Chronosystem – The chronosystem involves changes and transitions over time, both in an individual’s life and in the society, they live in. These changes can be personal like marriage, childbirth or getting a job or societal like changes in government policies.

Ecological Theory as a Guide for CSR:

Stakeholder theory highlights that businesses have responsibilities to shareholders and to all stakeholders, including employees, communities, suppliers, customers and the environment. Ecological theory, which explains how all parts of an ecosystem are interconnected and need balance to thrive, offers a valuable approach for CSR by guiding businesses to engage and manage stakeholders in a way that supports both community well-being and long-term sustainability.

• Stakeholder Identification: Ecological thinking helps organizations recognize all interconnected groups affected by their actions, ensuring no stakeholder is overlooked.
• Stakeholder Engagement: It encourages meaningful interaction and collaboration, reflecting the interdependent nature of an ecosystem.
• Stakeholder Management: It guides businesses to implement strategies that maintain long-term balance, adapt to changing conditions and safeguard the health of both human and natural systems.

Applying this perspective to CSR helps organizations understand that their actions affect the environment and also multiple stakeholder groups, including employees, communities, suppliers, customers and regulatory bodies.

• Interdependence of Stakeholders: Just as changes in one part of an ecosystem affect other parts, corporate actions have ripple effects across stakeholders.
• Sustainability and Long-term Balance: CSR initiatives informed by ecological thinking aim for long-term sustainability rather than short-term gains. Companies are encouraged to adopt practices that conserve natural resources, reduce environmental footprints and promote social equity, thereby ensuring that business growth does not compromise societal or environmental health.
• Ethical and Strategic Alignment: Ecological theory aligns with the moral and strategic imperatives of CSR. Recognizing the interconnectedness of people and the planet fosters ethical responsibility, encouraging companies to go beyond compliance and profit motives. Strategically, it supports risk management, stakeholder trust and long-term competitiveness by building resilient communities and sustainable ecosystems around the business.

Ecological theory makes CSR stronger by focusing on how everything is connected, the need for balance and the ability to adapt. It helps companies plan CSR programs that are sustainable, fair and effective. By seeing stakeholders and the environment as parts of a connected system, businesses can make sure their CSR activities benefit both people and the planet.

This article is published on

Ms Suhani Thepadiya –Consultant – Sustainability, MMJC

The post Ecological Theory for Strategic Stakeholder Management in CSR first appeared on MMJC.

“The highest education is that which does not merely give us information but makes our life in Harmony with all existence.”- Rabindranath Tagore

In today’s world, education is more important than ever, especially in rural areas where it is difficult for children to access quality education. Many children in rural areas lack access to quality education due to various challenges such as poverty, lack of infrastructure, and inadequate resources. As per a recent survey, India ranked 32 in the world on the education index. This is where Corporate Social Responsibility (CSR) programs can play a vital role in supporting primary education and helping build a better future for these children. CSR is a driving force behind positive change, and when it intersects with primary education, the results can be truly transformative. This article focuses on the transformation that CSR can bring to the field of education.

By investing in education infrastructure, providing resources, and training to teachers, and supporting schools, corporates can help improve the quality of education in rural areas. These initiatives have left an indelible mark on the lives of children, teachers, and communities, fueling a wave of progress and productivity. Additionally, CSR activities can help create awareness about the importance of education and encourage more people to support educational initiatives.

India has utilised the highest share of its mandated Corporate Social Responsibility (CSR) fund in the education sector, between FY16-17 and FY20-21, During these five financial years, the education sector received ₹29,918 crore in CSR fund, including CSR Spent on vocational training.

Rural Education: Inequalities, Inadequate resources and lack of skills:

The main challenges facing primary education in rural areas include a lack of funding and resources, inadequate infrastructure, and a shortage of trained teachers. These challenges can be especially difficult for girls residing in rural areas whose education is often neglected due to cultural and economic factors, which can make it difficult for them to complete their education or pursue higher education.  Recognizing the pivotal role of education in shaping the future of individuals and societies, CSR interventions have become a catalyst for change and productivity enhancement.

Companies are working to improve education in rural areas. With the involvement of technology in their CSR practices, companies are promoting the use of technology in education to help address the challenges and improve access to education in rural areas. By harnessing the power of technology, companies bridge the gap between urban and rural areas and ensure that every child has access to the education they need to succeed.

Primary education is crucial for people residing in rural parts of the Country because it possesses the potential to lift people from poverty and improve their quality of life. By providing children with a solid foundation in the initial years of their education help them develop the skills they require to succeed in life and pursue desired careers. CSR interventions can help improve primary education by providing the required funding, resources, and support to schools and teachers.

Investing in Minds: Business care for primary education

• From ABC to PhDs: Primary education enhances educational opportunities:
  • CSR interventions in primary education increase access to educational opportunities for disadvantaged children. By partnering with local schools and non-profit organizations, businesses have been able to improve infrastructure, provide learning materials, and offer scholarships. These initiatives have opened doors for children who had limited access to education, empowering them to become productive contributors to society.
  • In remote areas where formal schooling might not be feasible, innovative CSR initiatives have implemented mobile classrooms or remote learning programs using technology. From mobile apps that help students learn on the go to virtual reality tools that bring lessons to life, technology is transforming the way we think about education in rural areas. This approach has not only widened access to quality education but also ensured a continuous flow of knowledge to areas lacking educational infrastructure.

• Digital Transformation in Education:
  • Where infrastructure for basic education is lacking, digital literacy is a challenge. Corporates, Governments, and NGOs have been working to bring technology to rural areas of the Country. With the rapid advancement of technology, digital transformation has become a significant aspect of CSR interventions in primary education. Initiatives like the Integration of technology in classrooms, providing access to computers, tablets, and improved internet connectivity in some parts have improved the quality of education remarkably. This digital revolution has enriched the learning experience for students and enhanced their digital literacy skills, which are essential for a productive workforce in the modern era. This has also helped in developing interest in learning and improving attendance rates.
  • In a world where technology has become the heartbeat of progress, CSR interventions are not far behind. Classrooms are evolving into spaces of boundless creativity and innovation. Additionally, Digital education has emerged as a powerful catalyst for effecting change, faster communication, and networking.  CSR programs that provide holistic educational support, including digital literacy encourage students to pursue higher education, even in areas where affordability is a challenge.

• Infrastructure development in Primary schools
  • Infrastructure is essential for the delivery of quality primary education. The infrastructure condition of the schools in rural areas is an important issue that needs to be addressed. Many schools in rural areas lack basic facilities like clean drinking water, toilets, and electricity. This makes it difficult for students to get a quality education and for teachers to provide one.
  • Well-maintained schools with good infrastructure provide a more comfortable and conducive learning environment for students, which can lead to improved academic performance. Companies can invest in building and improving school infrastructure, such as constructing classrooms, providing clean drinking water, and installing toilets. Additionally, companies can provide resources like textbooks, teaching materials, and technology to help enhance the learning experience for students and teachers.
  • Investing in school infrastructure in rural areas can be a crucial CSR intervention for companies that can help in addressing social and environmental challenges, promote sustainable development, and create positive social impact. These interventions can help reduce poverty, promote economic growth, and create a more equitable society.

• Quality Education: Influence multiple SDGs resulting in holistic development:
  • An innovative aspect of CSR interventions in primary education is the focus on holistic development. Achievement of Sustainable Development Goal (SDG) 4 relating to quality education can help take important steps towards other SDGs like no poverty, gender equality, reducing inequalities, Good Health and well-being.
  • Apart from academic excellence, support is being provided to extracurricular activities, sports, arts, and cultural activities to promote well-rounded development. Such initiatives enhance students’ creativity, problem-solving abilities, and overall personality, making them more productive and confident individuals in the long run. Gone are the days when education was just about textbooks and exams. The new era supports and promotes skills that are shaping tomorrow’s workforce. Education goes beyond textbooks and grades, and CSR initiatives know it all too well.

Conclusion:

CSR intervention in primary education has proven to be a transformative force in driving productivity and sustainable development. By investing in primary education, companies help create a brighter tomorrow for all. Through innovations in teaching methodologies, technology integration, teacher training, and holistic development, CSR initiatives empower young minds and create a competent and productive workforce for the future.

It’s a smart investment that pays dividends for years to come. Not only does it help create a more educated and skilled workforce, but it also helps companies build strong relationships with communities, which can help them create a positive brand image and enhance their reputation. As businesses continue to embrace CSR in primary education, they move closer to building a brighter and more equitable future for generations to come. Despite the challenges faced by corporations in assessing the needs of society and the actual benefits reaped by beneficiaries from the aforementioned – programs, they continue to work tirelessly to make a meaningful change in society. They are driven by their vision and mission to change the way education is delivered in the modern era.

This article is published in Taxmann. The link to the same is: –

https://www.taxmann.com/research/company-and-sebi/top-story/105010000000023193/from-corporate-responsibility-to-classroom-readiness-how-csr-helps-build-a-better-future-experts-opinion

The article is written by:

1. Charu Roopchandani – Deputy Manager – CSR Impact Assessment & BRSR Team – charuroopchandani@mmjc.in
2. Ashok Pathak – Deputy Manager – Secretarial Team – ashokpathak@mmjc.in
3. Pradnesh Kamat – Partner – pradneshkamat@mmjc.in

The post From Corporate Responsibility to classroom readiness: How CSR helps build a better future first appeared on MMJC.

‘Corporate’ is a concept of the modern world that has separate legal entity. Corporates are allowed to undertake business activities, earn profits, and are required to pay taxes also like any other citizen. As responsible citizens, corporates are also expected to meet their obligations towards society and the environment. Corporate Social Responsibility (‘CSR’) is a mode through which corporates are expected to meet this obligation by spending at least 2% of their profits every year on any one or more areas prescribed for CSR. As the name suggests, CSR is a responsibility and hence, it is expected to be discharged like a duty.

In this article, we shall deliberate on how a corporate is expected to spend its CSR funds and what care it should take w.r.t utilisation of CSR funds?

• Mandatory spending

CSR provisions were introduced under the Companies Act, 2013, and have undergone multiple amendments over these years. Since 2013, the language of Section 135 which deals with CSR provisions indicated that corporates are expected to either spend a minimum 2% of profits OR explain the reason for not spending in the Director’s Report, although Regulator had been taking contradictory view and had been sending show cause notices to various companies which had not spent towards CSR. In order to strengthen the enforcement framework in relation to CSR spending and various other matters, MCA has again amended the CSR provisions vide the Companies (Amendment) Act, 2019 and the Companies (Amendment) Act, 2020. On 22nd January 2021, these amended provisions became effective and corresponding amendments were also made in the Companies (CSR) Rules.

Post this amendment, corporates are either required to spend complete 2% of their profits for a particular cause as prescribed under Schedule VII of the Act and as permitted by CSR Policy OR if they are not able to spend 2% of their profits, then there are two options available to them:-

• If the Company has already commenced any CSR project, then the Board of Directors can approve it as a multi-year on-going project and earmark the unspent funds and transfer it to a separate bank A/c to be opened with the name as “Unspent CSR Account for FY ____” and spend the unspent amount in three succeeding years [As per section 135(6)] OR
• In case there is no on-going project, then to transfer to the unspent CSR funds to any Fund as prescribed in Schedule VII of the Companies Act, 2013. [second proviso to section 135(5)]

In case any company does not spend the entire 2% of profits towards CSR in any particular year and if does not comply with either of the above options, then penal provisions are prescribed for this non-compliance of spending on the company and the officer in default shall also be made personally liable for the default.

• Certificate of utilisation of CSR spending

Even before the above-mentioned amendment dated 22^nd January 2021, the CSR Committee and the Board of Directors were required to monitor the utilisation of CSR spending done by the Company. Pursuant to this amendment, the Chief Financial Officer (CFO) needs to certify to the Board of Directors that “the funds disbursed have been utilised for the purposes and in the manner as approved by the Board.” [Rule 4(5) of CSR Rules]

If we refer dictionary meaning of “utilisation” in Cambridge Dictionary, it states as “the act of using something in an effective way”

In the backdrop that non-spending of CSR towards the prescribed avenues shall attract penal provisions and the responsibility to be taken by the CFO w.r.t utilisation of amounts disbursed for CSR, it becomes all the more important to understand when shall an amount disbursed will be considered as utilised and when it may not be considered as utilised?

• Contribution v/s utilisation

Section 135(3)(a) requires that “the CSR Policy shall indicate the activities to be undertaken by Company in areas or subject specified in Schedule VII.” Rule 4 of CSR Rules prescribe that “the Board shall ensure that the CSR activities are undertaken by the Company itself or through…” (certain prescribed entities, commonly referred to as ‘Implementing agencies’).

Before the above-mentioned amendment dated 22^nd January 2021, the erstwhile Rule 7 said that “CSR expenditure shall include all expenditure including contribution to corpus, or on projects or programs relating to CSR activities approved by the Board….” However, post this amendment, this provision no longer continues in CSR Rules. Instead of the concept of ‘on-going project’ has been introduced, as mentioned in the above paras, which permit the company to extend the CSR spending to 3 additional financial years (as on-going project explained in Para 2 above) instead of contribution in the same financial year towards corpus (of NGOs).

Hence a question arises that in cases where activities are undertaken through these prescribed entities (for eg: a section 8 company or Trust formed by the company itself for carrying on CSR activities), then whether disbursement of CSR funds to these entities for carrying out CSR activities shall be considered as CSR spending and utilisation of CSR funds OR whether CFO needs to monitor even at that entity level, that whether the amount disbursed to these entities for carrying out CSR activities has been utilised for these activities or not?

• Permitted contributions

It can be seen that these provisions imply that the Company needs to spend CSR amount towards activities prescribed in Schedule VII. This Schedule VII prescribes activities relating to points (i) to (xii) which may be undertaken for CSR. Among these 12 activities, the following are 2 items are in the nature of contributions:-

• Item 8 – Contribution to PM National Relief Fund or PM Cares Fund or any other Fund set up by the Central Govt ….
• Item 9 (a) – Contribution to incubators or research and development projects… and
  9(b) contribution to public funded universities … engaged in conducting research in science, technology, engineering and medicine aimed at promoting Sustainable Development Goals (SDGs).

Hence, it appears that contributions made to the entities/funds mentioned in these two items shall, in itself, be considered as activities. Hence, if the contribution to these funds is approved by the Board of Directors as CSR activity, then as soon as CSR amount is transferred to these funds, it can be considered that the amount disbursed is utilized for the purpose and manner approved by the Board. The CFO need not investigate the actual utilisation of these funds.

• Agent-Principal Relationship

If the Board has approved any activity other than contribution to the above-mentioned funds, then the amount will be treated as the amount that is spent or utilised only when it reaches to the concerned beneficiary of the activity which is approved by the Board for undertaking CSR. Say for example if a company engages implementing agency to undertake CSR activity identified by the Company and Company disburses the amount to such implementing agency, it cannot be treated as utilisation of funds, unless said funds are utilised by implementing agency towards that project /activity approved by the Board.

This is because Rule 4 of CSR Rules says “the Board shall ensure that the CSR activities are undertaken by the Company itself or through…” This shows the ultimate obligation of undertaking the activity is of the Company and not of the agency which is hired by the Company for undertaking the activity. The position of implementing agency is of an Agent and the position of the Company is of Principal. Therefore, unless the amount disbursed to the Implementing agency is not utilised towards the cause, i.e., the activity approved by the Board, it will not be considered as CSR amount utilised, and hence it appears that CFO will have to check till this level and then only certify about the utilisation of CSR funds to the Board of Directors.

Recently, on 25^th August 2021, MCA came up with a circular wherein Frequently asked questions on CSR were issued, in said FAQs also, MCA clears this view that “mere disbursal of funds for implementation of project does not amount to spending unless the implementing agency utilises the whole amount.” (FAQ No. 7.4)

So notable point here is that it will not be correct compliance if the company merely disburses money to implementing agency and claims that it has fulfilled CSR obligation, but disbursal of the same along with monitoring the utilisation of funds disbersed vis-à-vis the Action Plan for the identified cause and whether ultimate beneficiary gets benefitted out of it is the litmus test to be applied to consider whether we can term it as utilisation or not.

• Some good practices which can be implemented

Some practices which corporates can adopt while undertaking CSR activities that shall lead to effective utilisation of CSR funds can be if the CSR implementation satisfies the following points:

• When it is done as duty and not as favour
• Undertaking need and impact analysis before undertaking any project/activity
• Following proper process like identifying project and laying down action plan and monitoring the same as per laid plan
• Undertaking activities with motive of public good and not blended with motive to derive benefits out of it
• When Company undertakes activities only through eligible implementing agency and monitor the same and ensure that the said implementing agency further utilises it for ultimate beneficiary
• In case any related party is involved directly or indirectly, proper processes to be followed and necessary compliance should be made

• Conclusion:

Post amendment and post-publication of CSR FAQs, the stance of MCA is quite clear that mere Post amendment and post-publication of CSR FAQs, the stance of MCA is quite clear that mere contribution or mere disbursement of funds does not amount to CSR. The objective of CSR provisions is to involve the corporates as partners in the social development process. CSR should not be interpreted as a source of financing the resource gaps in Govt. schemes but to use of corporate innovations and management skills in the delivery of “public Good.”

The post CSR – What is the meaning of Utilisation first appeared on MMJC.

Satvik Dana means charities for the right cause, right person, and right time with proper process and without any expectation in return. Bhagavad Gita elaborates on Satvik, Rajas, and Tamas charities and destiny arising out of such charities. Recent changes in Section 135 and corresponding rules are actually pushing corporates to do a very well thought, well processed CSR without even any remote economic or other benefits in return. There would be corporates that will implement these provisions in a true sense and there would be some which will try to somehow meet the letter without adhering to its true intent. If implemented in letter and spirit it will not only help to fulfill the Sustainable Development Goals set by UN but at the individual and corporate level also it will forward such person/ entity. This validation we get when we reconcile the modern concept of CSR and the teachings of Lord Shree Krishna in Bhagavad Gita!!

The link to the article is Click here

The link to the Chartered Secretary: Click here

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