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News: Government has brought out a new disclosure framework for companies that requires a detailed level of reporting from FY21 within a prescribed format of its Corporate social responsibilities (CSR) activities.
Companies need to submit these details to the Registrar of Companies.
What does the government directive say?
The disclosure requires some granular details.
– Companies will need to show how much they are spending on ongoing and new projects, how much fund has been left unspent, and whether capital assets have been created, in addition to impact assessment reports.
– They will also need to submit information on the constitution of the company’s CSR committee, the details of the committee, and approved CSR projects on the company’s website.
Although this will help government in analytical purposes as well as to inform stakeholders better on CSR obligations, but there are some apprehensions as well.
What are the concerns that may arise due to this detailed reporting?
Duplication of work: Companies have pointed out that much of this information is already available on corporate websites and in the directors’ report, which accompanies all annual reports. Submitting all of this information into a government-prescribed form will lead to duplication of work.
Ease of doing business: Currently India urgently needs investment and the new disclosure requirements may hurt India’s reputation as an easy place to do business.
There is also an apprehension that the political parties may use this to determine whether corporations are donating to causes that align with their political agendas. This may also affect their independence in terms of donating to causes of their choice.
Although it is logical and morally right to encourage companies to spend their surpluses on social projects such as education and health instead of merely enhancing shareholder value, but it is not a panacea that can completely transform society.
Source: This post is based on the article “Onerous disclosures” published in Business Standard on 23rd Feb 2022.
