The Companies Act mandates that firms with a net worth of at least Rs 500 crore or revenue of Rs 1,000 crore or net profit of Rs 5 crore should spend at least 2% of their net profit on CSR.
The government has set up an 11-member high-level panel to review the existing framework, guide and formulate the roadmap for a coherent policy on corporate social responsibility (CSR) activities under the companies law.
The panel will be chaired by corporate affairs secretary Injeti Srinivas. Additional solicitor-general PS Narasimha, Tata Sons Chairman N Chandrasekaran, former badminton player Prakash Padukone, chairman or representative of markets regulator Securities Exchange Board of India (Sebi), Bain Capital Private Equity MD Amit Chandra, Helpage India CEO Mathew Cherian, IIM-A professor Anil K Gupta, director-general of the Indian Institute of Corporate Affairs (IICA), consultant S Santhanakrishnan and a joint secretary from the ministry will be a part of the panel.
The Companies Act mandates that firms with a net worth of at least Rs 500 crore or revenue of Rs 1,000 crore or net profit of Rs 5 crore should spend at least 2% of their net profit on CSR. It also mandates that any failure in this regard should be explained in the annual financial statement. The disclosure requirement was meant to ensure firms do their best in CSR initiatives and hence no penalty for default of this requirement is prescribed in the law.
“The committee is expected to review the existing CSR framework as per act, rules and circulars issued from time to time and recommend guidelines for better enforcement of CSR provisions. It will analyze outcomes of CSR activities/programmes/projects and suggest measures for effective monitoring and evaluation of CSR by companies. Suggestions are also expected on innovative solutions, use of technology, platform to connect stakeholders, and social audit,” the release said.
According to the ministry of corporate affairs, the four years of implementation of CSR have enabled compilation of data on the number of companies complying with CSR provisions, funds allocated and spent across various sectors, and geographical spread of CSR spending, among others.
“Experience has also been gained on the quantum, outreach and impact of CSR (which is estimated to be around Rs 38,000 crore up to FY 2016-17) and immense feedback has been received on how CSR provisions can be leveraged to have larger and more impactful outcomes,” the release said.
The committee would submit its report within three months from the date of holding its first meeting, it added.