Companies need to improve disclosure on CSR activities: IiAS

Dec 05 2013, 03:22 IST
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SummaryThere is need for significant improvement in the quality of disclosure on CSR activities

There is need for significant improvement in the quality of disclosure on CSR activities, particularly with regard to quantum of spending, said a report released by proxy advisory firm IiAS on Wednesday.

The firm lauded the fact that many companies were already spending on CSR activities. Larger companies have already spent about R2,660 crore towards CSR programmes during FY13, with the companies spending on average 1% of average profits before tax of the preceding three years towards CSR activities, according to IiAS.

Of these, five companies — Ambuja Cements, Cairn India, Jindal Steel and Power, Tata Motors and Tata Steel — have already spent at least 2% of the immediately preceding three years’ profit before tax towards CSR activities.

The findings are part of the FY13 CSR initiatives and disclosures of 51 companies forming a part of the BSE S&P Sensex30 and CNX Nifty50 studied by IiAS.

The report, however, made a case for better quality of disclosure on CSR activities, particularly with regard to quantum of spending. For instance, Bajaj Auto did not disclose the amount spent on CSR activities for FY13. “We believe such disclosures will be useful for shareholders going forward. The format prescribed in the rules will help provide more transparency on this and also provide a better sense of alignment with goals and ability to execute,” the IiAS report said.

The advisory firm said most of the larger companies already had committees for oversight of CSR activities and to undertake independent audits of these. During FY13, 37 (or 73%) of the 51 firms had a committee to overlook the functions of CSR activities. However, of the 37 firms having the committees, only 18 consisted of at least one independent director, as per IiAS classification. “With the Companies Act placing greater board level responsibility for CSR and mandating induction of at least one independent director on the CSR committee, for some firms, the composition of the committee and the broader policy may need to undergo a revamp,” the report said. IiAS is of the opinion that state governments trying to commandeer CSR funds may defeat the purpose of mandating firms to carry out social projects. “Since the rules don’t provide guidance on many issues relating to implementation, in the initial period this gives flexibility to innovate, but it also increases risks of this spend getting frittered on non-serious initiatives,” said the report.

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