What is Corporate Social Responsibility? 

• Corporate social responsibility (CSR) is a self-regulating business model that helps a company be socially accountable—to itself, its stakeholders, and the public. 
• By practicing corporate social responsibility, also called corporate citizenship, companies can be conscious of the kind of impact they are having on all aspects of society, including economic, social, and environmental.
• In 2014, India became the first country to legally mandate corporate social responsibility by introducing Section 135 in the India’s Companies Act 2013. 
• All companies with a net worth of Rs 500 crore or more, a turnover of Rs 1,000 crore or more, or net profit of Rs 5 crore or more, are required to spend 2 percent of their average profits of the previous three years on CSR activities every year. 

Why in the news?

• The Ministry of Corporate Affairs amended rules of CSR. 4 Major amendments were done:

1. Corporates can now undertake multi-year projects under new CSR rules. Companies have been permitted to set off the excess amount spent under CSR up to three succeeding financial years.
2. Non-compliance with CSR provisions has also been decriminalised by shifting such offences to the penalty regime. Also, companies having CSR obligation below Rs 50 lakhs have been exempted from constituting a CSR Committee.
3. A large number of companies conduct CSR expenditure through implementing agencies, but the new amendment restricts companies from authorising either a Section 8 company or a registered public charitable trust to conduct CSR projects on their behalf. 

• International organisations have been permitted to carry out designing, monitoring and evaluation of the CSR projects or programmes. However, they cannot act as implementing agencies. 

1. There will be an impact assessment of CSR projects that will help companies to plan and allocate resources in a better manner. Companies can use upto 5% of the CSR fund for impact assessment.

What is the impact of amended rules?

• There was ambiguity whether the rule would apply for expenditure undertaken prior to the amendment.
• Experts note that the change would impact CSR programmes of a number of large Indian companies that conduct projects through private trusts. Private trusts would either have to be converted to registered public trusts, or stop acting as CSR implementing agencies.

References:

1. https://www.investopedia.com/terms/c/corp-social-responsibility.asp
2. https://indianexpress.com/article/explained/corporate-social-responsibility-csr-rules-indian-companies-7163098/
3. https://economictimes.indiatimes.com/news/economy/policy/govt-changes-rules-of-corporates-social-responsibility/to-improve-ease-of-doing-business/slideshow/80579802.cms