Monitoring CSR activities

Corporate social responsibility (CSR) is a form of corporate self-regulation integrated into a business model. CSR policy functions as a self-regulatory mechanism whereby a business monitors and ensures its active compliance with the spirit of the law, ethical standards and national or international norms.

The Companies Act, 2013 (Act) mandated certain category of companies to comply with the CSR requirement as specified in the Act. 

As per the provisions of the Act, certain class of profitable entities (as part of their CSR obligations) are obligated to shell out atleast two per cent of their three-year annual average net profit.

Such companies have to furnish the reasons to the concerned authorities in case they fail to comply with CSR requirement.

However, most of the companies are negligent in complying with CSR obligations and acquiring the status of non-compliant company as a consequence of the failure to comply with its CSR obligations.

In this backdrop the Corporate Affairs Ministry identified the requisite to monitor the compliance activities of the corporate entities.

Accordingly, the Ministry of the Corporate Affairs has taken a decision to establish a contrivance in place to closely monitor the act of compliance of the corporate firms with their CSR obligations.

The Ministry has directed 3 officials of the CSR cell to inspect the CSR filings of the companies to verify the Act of CSR compliance on zonal basis which will facilitate to carry the verification in a centralized way. As of now the Registrar of Companies is responsible to verify the companies’ compliance with CSR norms.

As per the official data, Rs 4,719 crore was spent by 6,286 companies towards various CSR activities in the financial year 2016-17. 11,597 is the total number of such projects taken up by the companies.

One can hope that closely monitoring the act of compliance with CSR norms by the companies by a dedicated team will aid in detecting the defaulting companies and enable the concerned authorities to take appropriate action against such default companies – ultimately the objective (to exterminate the instances of non-compliance with CSR norms by the companies) will be accomplished.

Research inputs by Paruchuri Baswanth Mohan