Over 6,000 companies are required to spend on corporate social responsibility. But two-thirds have defaulted and there is no penalty
Fcorporate world, it is a unique OR INDIA'S season. Chief executives have been nervous about their annual reports, but for a completely new reason. As a senior vice president of an insurance firm says,companies are not just monitoring the net profit,but another key aspect: the spending under corporate social responsibility (csr). For the first time companies are filing their annual reports that will show their legally mandated expenditure on csr.
On April 1, 2014, India became the world’s first country to legally mandate csr.The Companies Act, 2013, made it mandatory for companies with a net profit before tax of at least crore, or a net worth of at least crore, or a turnover of at least crore to spend two per cent of its average net profit before tax of the preceding three years on csr. Some 6,000 companies are required to invest in csr under this provision. But according to the preliminary data with the Ministry of Corporate Affairs (mca), two-thirds of the companies have failed to meet the two per cent spending mandate.
All eligible companies are required to constitute committees to set csr objectives and monitor their activities. They are also required to mention csr details in their annual reports.The investment can be made in areas like education, health, sanitation and environment. The csr activities can be channelised through a foundation formed by the company.