Corporate Social Responsibility is one of the most important organizational concepts in the contemporary corporate scene, particularly in India where the Government has made it a mandate for businesses. Through CSR, businesses consider the larger interests apart from making profits as they take responsibility and look for ways in which they can positively impact society. In order to execute this, companies comprehensively conduct an impact assessment of CSR projects in India to understand how their activities impact employees, suppliers, customers, stakeholders, communities and the environment.
However, ever since its inception in India, the government has made noteworthy amendments to the CSR under the Companies Act, 2013. As all of the amendments are now in effect since January 22, 2021, here is a write-up that will help you in understanding how these amendments have remodeled the CSR framework in India and how it impacts the corporates:
Eligibility of CSR Expenditure
The recent amendments in CSR align the various clarifications on the FAQs issued by the Ministry of Corporate Affairs since the Companies Act in 2014 when the CSR mandates were introduced. It encompasses the excluded activities undertaken by the company which is deemed “ineligible” as CSR spends. Besides, the companies must oblige to the COVID-19 related activities and must spend on drug-related research and development. Also, the creation or acquisition of a capital asset must be monitored by a CSR implementing agency or by public personnel or the beneficiaries of the initiative and not by the company itself. For more information regarding the eligibility of CSR spending, you can reach out to professional social impact consultants.
Responsibility of the CSR Committee
According to the recent amendments to the CSR Rules, the CSR Committee has to form an annual course of action for CSR spending detailing the implementation of CSR projects, tracking timelines and reports on impact assessment if applicable. Furthermore, the CSR Committee can also recommend any updates in the annual plan to the board of directions during the financial year with clarification for the changes if required.
Redefining CSR Policy
As per the Amendments, the CSR policy of a corporate organization must include the details of the CSR philosophy of the firm, in addition to the guiding principles for the resolution, implementation and impact assessment of CSR projects along with the creation of the annual action plan. Earlier, the board of directors had to adopt the policy in accordance with the recommendations of the CSR Committee.
Actuating Excess CSR Spends
In case an organization has spent funds more than the obligated 2% CSR spending, the organization can actuate such excess amounts against the CSR expenditure in the coming three financial years, granted the board of directors passes a resolution on the matter. Moreover, these excess amounts should not comprise the surplus coming out of CSR activities.
Concluding Thoughts
The latest CSR amendments clearly focus on the “responsibility” of the corporates regarding their CSR initiatives and are designed to consolidate their roles in the CSR projects and boost the accountability of the major stakeholders in the CSR program. If you are looking for more transparency on these amendments, you can reach out to the assistance of reputed social impact consultants.
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