CSR, BRSR, Social Impact Funds, and Social Stock Exchange (2021-2023)
CSR Policy (2021)
What is CSR (Corporate Social Responsibility)?
CSR refers to companies taking responsibility for their impact on society and the environment. The idea is that businesses should give back to society, not just make profits.
Rule 8(3) Amendment (2021):
In 2021, the government made changes to CSR rules. Now, companies with the following characteristics must conduct an "impact assessment":
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Companies with CSR obligations of Rs. 10 crore or more in the last 3 financial years.
- Example: If a company has spent Rs. 10 crore or more on CSR in the past 3 years, it needs to check if its efforts were successful (impact assessment).
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Companies with CSR projects worth Rs. 1 crore or more that were completed at least 1 year ago.
- Example: If a company finished a CSR project (like building schools or donating to hospitals) worth Rs. 1 crore, it has to evaluate the results.
BRSR Reporting (2021)
BRSR (Business Responsibility and Sustainability Reporting) is a new rule introduced by SEBI (Securities and Exchange Board of India) in 2021.
For Whom? It’s mandatory for the top 1,000 listed companies in India.
Purpose: To ensure companies report how they are doing in areas like:
- Governance (how the company is managed)
- Ethics (how ethically the company operates)
- Social Responsibility (how the company impacts society)
- Environmental Performance (how the company impacts the environment)
- Economic Performance (how the company is performing financially)
Why is it important?
BRSR helps companies align with global sustainability standards, ensuring transparency and trust with investors and customers.
Social Impact Fund (2022)
Social Impact Fund refers to a special type of fund that invests in businesses or projects that aim to create a positive social impact.
What does it do? It invests primarily in:
- Social Ventures or Social Enterprises (businesses focused on solving social problems like education, healthcare, poverty, etc.).
- These ventures must meet specific social performance standards to qualify for investment.
Example:
If a company makes affordable solar panels for rural areas, it could attract funding from a social impact fund because it's solving an important social problem.
Social Stock Exchange (2023)
Social Stock Exchange is a new concept being introduced where investors can buy and sell shares of social enterprises—companies that aim to solve social and environmental problems. This is similar to a regular stock exchange, but the focus is on businesses with a social mission.
Business & Sustainability:
There’s a debate on whether businesses should focus solely on profit or contribute to society. Milton Friedman, a famous economist, once said that businesses only need to focus on increasing profits.
Stakeholder vs. Shareholder:
- Stakeholder Model: Businesses should consider the interests of all parties (employees, customers, suppliers, the environment, etc.) rather than just shareholders (investors).
- Shareholder Model: The traditional view where the primary responsibility of business is to maximize profits for shareholders.
Example:
A company that creates eco-friendly products is thinking about its stakeholders (customers, environment), not just the shareholders (investors looking for profit).
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