Virtual CSR: A Refresher

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Mr R S Krishnaswamy, Founder & Chief Patron, CSR SPARK provided a brief update on the current CSR scenario. With the world and India hit hard by the pandemic, he likened it to a Black Swan crisis—which is characterised by three elements:

• Rarity
• Extreme impact, and
• Retrospective predictability

The challenges due to this are stalled activities and difficulties to stay afloat. There is an urgent need to collaborate, mitigate, prepare, innovate, learn and move forward.

He analysed the CSR spend over the first six years of implementation of the CSR law. “Looking at the CSR spend for 2019-20 from the national CSR portal (www.csr.gov.in), there has been a dip from the previous year. The amount spent by 1075 companies is 7823 crores as against 18000 crores in the previous year. This is no reason for gloom, as the portal has not been updated. Other sources have presented a much better picture,” he said and added that the national CSR portal is highly informative and useful.

This portal is maintained by the Ministry of Corporate Affairs and enlists the CSR spend over the first six years in total and also has details on state-wise, district-wise and corporate-wise spending. A perusal of these details will help Implementing Agencies (IAs) approach the appropriate corporate for partnership.

Amendments to CSR Rules

The Government on its part notified amendments to the CSR Rules, effective from 22.01.2021. Several important changes have been notified, including a registration for all Implementing Agencies (IAs). Mr Nikhil Pant, Chief Executive Officer, REACHA, Former Chief Programme Executive, National Foundation for CSR, IICA, Ministry of Corporate Affairs, highlighted all aspects of changes, its intent, and also provided guidance in the registration of the IAs.

He dwelt into the evolution of CSR over the first seven-year period and explained the basic legislation under Section 135 of the Companies Act. The prelude to the current amendments were the recommendations of the Second High Level Committee, whose key points were:

• Thrust on budgeted spending
• CSR expert in the Board
• Monetary penalty for non-compliance
• Utilization as spend
• Mandatory impact assessment
• Reporting / Disclosure
• Implementing Agencies as partners, not vendors/ service providers
• Annual CSR survey
• SDG alignment

The following are the entities approved to participate as IAs:

• The Company itself directly
• A new Foundation (Society, Trust or a Section 8 Company) of the Company with 12A and 80G registration, possessing UID on submission of Form CSR-1
• An external NGO (Society, Trust or a Section 8 Company) with a minimum of three years’ experience and with 12A and 80G registration, possessing UID on submission of Form CSR-1
• A Central or State Government vehicle with Form-CSR1 (may even be new)
• A Parliament or State established entity with Form-CSR1 (may even be new)
• Notified funds such as PM Cares, PM National Relief Fund, etc

The broad highlights of the CSR Amendments are:

1) Natural progression on compliance from 2014 onwards.

2) Relevant recommendations of High-Level Committee (HLC) on CSR of 2018/2019 have been suitably incorporated. These recommendations were based on extensive feedback from stakeholders and data analysis of reporting as received by the Ministry of Corporate Affairs (MCA). Thus, Rules 2021 are much more inclusive as they have incorporated inputs from all concerned.

3) Compliance with impact is the way forward!

4) By defining Ongoing Projects, MCA has subtly provided encouragement for medium-to-long term projects. Corporates would be best advised to start incorporating sustainability elements as projects rollout so that once they phase out, community ownership kicks in.

5) Further re-enforcement of non-profit and charitable nature of CSR by clearly mentioning Sections 12A and 80G.

6) There is clearly increased requirement on governance, accountability, disclosure, and transparency at the Board level, with accountability of CSR Committee members by name and attendance being asked for in annual reporting.

7) Introduction of Annual Action Plan (AAP) at the Board level under CSR Policy will likely bring in more structure and alignment of Grant Cycle to the FY Cycle. This should assist planned CSR spending and lead to lesser unspent funds at the end of the FY if the intent is right. Also, where intent is right, there is leeway provided to the Board to make mid-course corrections in AAP as also to designate projects as Ongoing Projects based on reasonable justifications.

8) Government is clear that unspent CSR funds need to be deployed for development work and not held back.

9) Clarity presented on some unclear areas like Admin Overheads, Surplus, Set-off etc.

10) Role of CFO now becomes particularly important. Key collaboration must now be between CFO, CSR Head, CA and CS.

11) Business / for-profit activities must be clearly kept away from CSR activities.

12) International-based Sports Training finds its due. This should be a huge relief to the sports fraternity and will likely assist India strengthen its sporting outcomes.

13) Registration on CSR-1 Form will help bring donor and donee within the same umbrella of Ministry of Corporate Affairs. Later, this may also lead to NGO reporting on CSR utilizations against their allocated CSR Registration. This could then be tallied against CSR spends as reported by Companies through MCA21.

The link for IAs to register under Form CSR-1 is available in the Ministry of Corporate Affairs portal.