Corporate Social Responsibility: Issues & Development

[op-ed snap] Making CSR work: On Companies Act amendments

CONTEXT

Amendments to the Companies Act have made non-compliance with CSR norms a jailable offence for key officers of the company, apart from hefty fines up to ₹25 lakh on the company and ₹5 lakh on the officer in default.

Evolution of CSR

  1. It was first encouraged as a voluntary contribution by business
  2. 6 years ago it evolved into a co-option of the corporate sector to promote inclusiveness in society 
  3. Now it has become an imposition

Issues with amendments

  1. The committee headed by the Corporate Affairs Secretary has proposed that non-compliance be decriminalised and made a civil offence. CSR is a means to partner corporates for social development and such penal provisions are not in harmony with the spirit of CSR.
  2. CSR should not be treated as another tax on businesses.
  3. The government should not micromanage and tie-down businesses with rules and regulations that impose a heavy compliance burden.

Problems with CSR

  1. Filings with the Ministry of Corporate Affairs show that in 2017-18, only a little over half of those liable to spend on CSR have filed reports.
  2. The average CSR spend by private companies was just ₹95 lakh compared to ₹9.40 crore for public sector units.

Way ahead

  1. Compliance will improve as corporates imbibe CSR culture fully.
  2. The committee’s suggestion to offer a tax break for expenses on CSR may incentivise companies to spend.
  3. It has also recommended that unspent CSR funds be transferred to an escrow account within 30 days of the end of the financial year.

Conclusion

CSR is not the main business of a company they should rightly be focusing their energies on the business rather than on social spending.

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