New CSR Regime – Will It Be a Game Changer?

When the Corporate Social Responsibility (‘CSR’) regulations were initially promulgated in 2014, it was being viewed, by some segments of the society, as an attempt to shift the government’s responsibilities to Indian corporates. Some even termed it as forced recovery – akin to taxes & levies. Admittedly, India was the first country to introduce such requirements in legislation, with no precedence available.

However, 7 years down the line, the entire approach towards CSR has undergone a transformational change. CSR is now being viewed by most corporates as a way of doing business effectively rather than a mundane compliance. With increased focus on sustainable way of doing businesses and the importance of local community support – companies are now alive to the importance of being ‘socially responsible’.  The amendments made to the rules earlier this year have also made corporates to relook at their overall CSR approach. Some of the key amendments made to CSR regulations are as under:

  • Annual Action Plan to be approved by the Board of Directors in advance – action plan should include execution modalities for CSR
  • Distinction between ‘Disbursement’ & ‘Utilization’ – Board made responsible to ensure the same
  • CFO to certify proper utilization of CSR funds
  • On-going projects restricted to 3+1year projects only
  • Capital asset generated from CSR funds not to be held by the company
  • Surplus arising from CSR activities to be ploughed back into the same project
  • Unspent CSR amount to be deposited in Government designated accounts
  • Penalty provisions included for failure to comply with regulations
  • Mandatory impact assessment of projects in specified cases
  • Registration of CSR implementing agencies with Ministry of Corporate Affairs

The introduction of revised regulations reaffirms the focus of Government on areas of national priority and its target of achieving Sustainable Development Goals, 2030. One will have to wait and watch whether these changes to CSR guidelines will make the CSR regime more effective, to achieve the intended results.

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