Lok Sabha Question No. 5116 (UNSTARRED), answered on 2022-04-04
Subject: CSR Disclosure Framework
Ministry: CORPORATE AFFAIRS
Asked by: Shrikant Eknath Shinde, Unmesh Bhaiyyasaheb Patil, Krishna Pal Singh Yadav, Heena Vijaykumar Gavit, Rajendra Dhedya  Gavit, Aparupa  Poddar, Sujay Radhakrishna Vikhepatil

## GOVERNMENT OF INDIA MINISTRY OF CORPORATE AFFAIRS

LOK SABHA UNSTARRED QUESTION NO. 5116 ANSWERED ON MONDAY, APRIL 4, 2022/ CHAITRA 14, 1944 (SAKA)

## CSR DISCLOSURE FRAMEWORK

## QUESTION

5116. DR. SHRIKANT EKNATH SHINDE: SHRI UNMESH BHAIYYASAHEB PATIL: DR. KRISHNA PAL SINGH YADAV: DR. HEENA GAVIT: SHRI RAJENDRA DHEDYA GAVIT: SHRIMATI APARUPA PODDAR:

DR. SUJAY RADHAKRISHNA VIKHE PATIL:

Will the Minister of CORPORATE AFFAIRS be pleased to state:

- (a)  the  reasons  and  rationale  for  introduction  of  Corporate  Social  Responsibility  (CSR) disclosure framework;
- (b) the details of the steps taken, if any, to tackle the burden of increased compliance put by  the  detailed  CSR  disclosure  framework,  if  so,  the  details  thereof,  if  not,  the  reasons therefor;
- (c)  the  details  of  the  steps  taken  to  increase  transparency  and  disclosures  around  CSR activities;
- (d)  whether  such  increased  compliance  will  have  any  financial  impact  on  recently incorporated  companies  coming  under  the  ambit  of  MSME  or  startups,  if  so,  the  details thereof;
- (e) whether there is an overlap on what the company is already required to disclose on its website and in the board and annual reports, if so, the details of the reasons for the overlap and the steps taken to assuage them to reduce the financial strain on companies; and (f) whether such overlap adversely affects the ease of doing business index and if so, the
- details thereof?

## ANSWER

MINISTER  OF  STATE  (INDEPENDENT  CHARGE)  OF  THE  MINISTRY  OF  STATISTICS  AND PROGRAMME IMPLEMENTATION; MINISTER OF STATE (INDEPENDENT CHARGE) OF THE MINISTRY  OF  PLANNING  AND  MINISTER  OF  STATE  IN  THE  MINISTRY  OF  CORPORATE AFFAIRS

## [RAO INDERJIT SINGH]

(a): The broad framework for Corporate Social Responsibility (CSR) has been provided under Section 135 of the Companies Act, 2013 ('Act'), Schedule VII of the Act and Companies (CSR Policy) Rules, 2014. Section 135 of the Act mandates every company including MSME and startups having net worth of Rs. 500 crore or more, or turnover of Rs. 1000 crore or more, or net profit of Rs. 5 crore or more during the immediately preceding financial year, to spend at  least  two  per  cent  of  the  average  net  profits  of  the  company  made  over immediately preceding three financial years towards CSR as per the CSR Policy of the Company.

Under the Act, CSR is a Board driven process and the Board of the company is empowered to  plan,  decide,  execute  and  monitor  the  CSR  activities  of  the  company  based  on  the recommendation of its CSR committee. The CSR framework is disclosure based and CSR mandated  companies  are  required  to  file  details  of  CSR  activities  annually  in  MCA21 registry. The CSR disclosures are essential as the Government monitors the compliance of CSR provisions through the disclosures made by the companies in the MCA 21 portal. The CSR disclosures are also essential for compliance of legal requirement of the Act driving accountability & transparency and developing a data base on CSR for the benefit of different stakeholders including general public.

(b) to (d):  It is imperative that reporting of CSR activities be holistic and granular capturing requisite details. At the same time, it is also essential that the disclosures are technology driven as technology based assessments such as machine readable disclosure format not only ease the burden of compliance on the companies but also facilitate monitoring of such compliances for the regulators. Recently, the reporting for CSR has been strengthened with enhanced  disclosures  with  respect  to  selection  of  projects,  locations,  implementing agencies  etc.  to  facilitate  better  monitoring,  greater  transparency  and  information dissemination.  The  Ministry  had  launched  a  National  CSR  Data  Portal  in  2018  to  bring transparency through wider dissemination of information on CSR to public at large. All data related to CSR as filed by companies in MCA21 registry is available in public domain and can be accessed at www.csr.gov.in.

Section 135 of the Act was amended vide the Companies (Amendment) Act, 2019 and the Companies (Amendment) Act, 2020. These amendments provided for the transfer of unspent CSR  amount  and  made  the  non-compliance  of  CSR  provisions  a  civil  wrong  w.  e.  f. 22nd January 2021. Further, Companies (CSR Policy) Rules, 2014 was also amended which have  strengthened  the  CSR  eco-system  by  bringing  more  objectivity,  transparency, entrusting  more  responsibility  on  the  board  and  enhancing  the  disclosures  by  the companies. In order to reduce the financial burden on companies, the amendments also allow the companies to spend 5% of their CSR expenditure on administrative overheads and another 5% if company undertakes any impact assessment of their CSR projects. Further, to ease the burden of CSR compliances on small companies, the companies having CSR obligation below Rs. 50 lakhs are exempted from constituting a CSR Committee.

(e)  &  (f):  Under  the  Act,  the  details  of  CSR  activities  are  required  to  be  reported  by  all companies in the 'Annual Report on CSR' which is part of the Company's Board Report. The Board's Report including Annual Report on CSR is an important tool of communication by the  Board  of  a  company  to  its  shareholders.  Further,  those  companies  who  have  their websites are required to make disclosures such as composition of CSR Committee, CSR Policy  and  CSR  projects  approved  by  Board  on  their  website  for  public  access  and transparency.

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