India has emerged as one of the leading nations to make Corporate Social Responsibility (CSR) mandatory by the passage of the Companies Act, 2013 and the CSR (Policy) Rules (the Act) from 1 April 2014. The following article summarizes..
India has emerged as one of the leading nations to make Corporate Social Responsibility (CSR) mandatory by the passage of the Companies Act, 2013 and the CSR (Policy) Rules (the Act) from 1 April 2014. The following article summarizes the findings from KPMG’s annual research on CSR reporting in India across the areas of CSR policy, CSR committee, and CSR project management.
India has emerged as one of the leading nations to make CSR mandatory by the passage of the Companies Act, 2013 and the CSR (Policy) Rules (the Act) from 1 April 2014. This requirement can be seen as an explicit call to businesses from the government to partner in solving India’s complex development issues.
As per the Act, companies with either:
- a net worth of INR500 crore (cr.) or more,
- or a turnover of INR1000 cr. or more,
- or a net profit of INR5 cr. or more
in a given financial year must spend 2 per cent of their net profits on CSR programmes.
In addition the Act, mandates eligible companies to: formulate CSR policy, formulate a CSR committee of the board, and disclose CSR related details in the director’s report. Moreover, companies that are not able to spend the prescribed 2 per cent CSR spends are required to specify the reason(s) for the same.
KPMG in India has been conducting research on the CSR reporting of the top 100 listed companies as per market capital on the India’s National Stock Exchange (N100) since 2015 (the first year of mandatory CSR reporting). The report titled “India’s CSR Reporting Survey 2017” presents a comparative analysis of the N100 companies reporting in the last three years across the areas of CSR policy, CSR committee and disclosure of CSR in the director’s report, CSR project management and others(incl. reporting on the UN SDGs).
Based on KPMG’s past research findings:
- Before, and in 2015 companies were investing in systems and processes for effective reporting,
- In 2016 the availability of information and governance mechanism of CSR projects improved,
- In 2017, the number of compliant companies in aspects of CSR policy and CSR committee compared to the previous years are overall very encouraging, however there is still place for improvement in aspects related to CSR disclosure, particularly on the CSR project expenses and details of its administrative expenses.
In terms of mandatory requirements as of September 30, 2017, 98 companies have a CSR policy in the public domain as , two companies still don’t have CSR Policy in public domain for the third year in a row. And 92 companies have disclosed their mode of implementation in the CSR Policy. However only 69 companies are disclosing information on the treatment of financial surplus arising out of the CSR programs, as the act requires companies not to take this surplus as part of their business profit.