[Answered] The present CSR framework required to be strengthened to make it more suitable for the present Social, Environmental and other requirements of India. Discuss.

Companies Act, 2013 mandates that corporates who are beyond a certain level of profits and turnover, should pay at least 2% of their net profits before tax to the development space. This law gives corporates the necessary drive to collaborate with non-state actors like Non-Governmental Organisations (NGOs) and Civil Society Organisations (CSOs). This strengthening of citizenry-private partnerships is a major component of development activities.

Issues with present CSR framework:

• Since the requirement of 2% is only a minimum requirement, companies should be encouraged to spend more than this.
• Many private companies have registered their own foundations/trusts to which they transfer the statutory CSR budgets for utilisation.
• According to the Act, the company should give preference to local areas around it where it operates. So, there occurs geographical bias as 54% of CSR companies are concentrated in Maharashtra, Tamil Nadu, Karnataka, and Gujarat while Uttar Pradesh and Madhya Pradesh receive little.
• Most CSR spending is on education (37%), health and sanitation (29%), and only 9% was spent on the environment.
• The information regarding CSR spending by companies is insufficient and difficult to access.
• The auditor is not mandated to qualify the accounts for non-compliance or inadequate CSR performance in the audit report.

Measure to strengthen the CSR framework:

• There is a need to curate a national-level platform centralised by the MCA where all States could list their potential CSR-admissible projects and preferential treatment to areas where companies operate.
• Companies need to prioritise environment restoration in the area where they operate.
• All CSR projects should be selected and implemented with the active involvement of communities, district administration and public representatives.
• Bringing CSR within the purview of statutory financial audit with details of CSR expenditure and mandatory independent third-party impact assessment audits.
• CSR non-spend, underspend, and overspend should be qualified by the auditor in the audit report as a qualification to accounts.
• The MCA and the line departments need to exercise greater direct monitoring and supervision over CSR spend by companies.

With nearly two-thirds of India still living in poverty by today’s quality-of-life standards and the climate situation worsening day by day, the importance of Corporate Social Responsibility (CSR) can’t be overestimated.