Corporate Social Responsibility (CSR)
Context:
- There were 2,926 companies in 2020-21 with zero spend on CSR while companies spending less than the prescribed limit of 2% rose from 3,078 in 2015-16 to 3,290 in 2020-21.
- There was also a decline in the number of companies participating in CSR — 25,103 in FY2019 to 17,007 in FY2021.
Background:
- The amount spent on corporate social responsibility (CSR) in India has increased from 10,065 crore in 2014–15 to 24,865 crore in 2020–21 since the CSR framework was established under Section 135 of the Companies Act 2013 in that country.
- If a business spends more than the required minimum of 2%, the extra money may be deducted from spending over the course of the next three fiscal years.
The Geographical Bias:
- The first exception to Section 135(5) of the Act is that the business must give local and surrounding communities where it operates priority.
- However, according to a report by Ashoka University’s Centre for Social Impact and Philanthropy, the states with the highest CSR expenditures Maharashtra, Tamil Nadu, Karnataka, and Gujarat receive 54% of all CSR spending, compared to Uttar Pradesh and Madhya Pradesh, which have lower CSR expenditures despite being more populous.
- In 2018, a high-level group noted that the Act’s emphasis on “local area” is just directive and that it is important to maintain a sense of balance.
Improper Division of Funds:
- Schedule VII of the Act deals with broader environmental issues to create a countervailing effect.
- However, an analysis of CSR spending (2014-18) reveals that while most CSR spending is in education (37%) and health and sanitation (29%), only 9% was spent on the environment even as extractive industries such as mining function in an environmentally detrimental manner in several States.
