Corporate Social Responsibility

16th February, 2022 Polity

Figure 1: No Copyright Infringement Intended

Context:

Ministry of Corporate Affairs (MCA) has introduced an extensive format for reporting corporate social responsibility (CSR).
The government had mandated that Corporate India publish a comprehensive report on their specific CSR initiatives.
If any capital assets have been created or acquired through CSR spend, companies will have to provide details, including address, location, pincode of the property, along with amount spent and its registered owner.

All companies with a net worth of Rs 500 crore or more, a turnover of Rs 1,000 crore or more, or net profit of Rs 5 crore or more, are required to spend 2 per cent of their average profits of the previous three years on CSR activities every year.

The government is aware of the amount that is being spent on CSR, but it will now be able to track where this amount is being spent, utilised, and how.
This additional information can be used by the corporate affairs ministry in drafting effective policies for CSR.
it will enhance the transparency and disclosures around CSR activities and provide better oversight.
It will ensure that the CSR sum is spent in an appropriate and accountable manner and the money unspent is not ploughed back into the company or the coffers of the promoter.
It is also driven by the fact that many companies were funnelling CSR money back into their accounts or even abusing the CSR provision for money laundering.

Corporations will be burdened with compliance and costs.
Increasing burden on the corporates may lead to decrease in CSR spending.
It doesn’t alleviate companies concern of not being able to find a trusted implementing organisation to undertake CSR activity.

In 2017-18, only a little over half of those liable to spend on CSR have filed reports on their activity to the government.
The average CSR spend by private companies was just ₹95 lakh compared to ₹40 crore for public sector units.

Corporates have limited experience and expertise in addressing the complexities of social development as their main expertise lie in profit generation than social justice.
According to Ministry of Corporate affairs data, focus of corporates have been mainly on the three sectors: Education, Health and rural poverty.
According to Ministry of Corporate affairs data, almost 40 per cent of the money goes to just a few relatively well-developed states — Maharashtra, Gujarat, Karnataka, Tamil Nadu, Andhra Pradesh and Telangana.