New CSR rules

In news– The Ministry of corporate affairs has amended the rules of corporate social responsibility (CSR) activities recently.

Corporate Social Responsibility Policy(Amendment) Rules, 2022-

The ministry has amended the rules for calculating the cost of conducting social impact assessments of CSR activities and the procedure for dealing with unspent CSR funds of companies.
As per the amendment, businesses having any amount in its ‘unspent CSR account’ should set up a CSR committee to oversee the implementation of its CSR obligations.
Companies are allowed to keep unspent amounts earmarked for CSR in this designated account but have to utilise it within three financial years. The CSR committee will oversee its utilisation.
The ministry also modified the way companies can calculate the expenditure towards conducting an impact assessment.
The law requires large CSR spenders to carry out an independent impact assessment of their activities. This allows companies and investors to understand the impact of their social investments and target it better.
Such impact assessment is mandatory for businesses with RS 10 crore or more CSR budget and for all projects with an outlay of ₹1 crore or more.
The new rule says that the expenditure for social impact assessment, which can be included in the CSR spending, shall not exceed 2.5% of total CSR expenditure for the relevant financial year or ₹50 lakh whichever is higher.
The earlier rule had allowed up to 5% of the total CSR spending or ₹50 lakh whichever is less. The change allows higher spending on impact assessment in case of large CSR projects.
Apart from this, the government has released a new format for the annual report on CSR activities which is to be included in the board’s report for the financial year commencing on or after April, 2020.

Note:

CSR is a management concept whereby companies integrate social and environmental concerns in their business operations and interactions with their stakeholders.
It is a way through which a company achieves a balance of economic, environmental and social imperatives (“Triple-Bottom-Line Approach”), while at the same time addressing the expectations of shareholders and stakeholders.
Under the Companies Act, 2013, certain classes of profitable companies are required to spend at least 2 percent of their average net profit of the preceding three financial years on CSR activities in a particular financial year.
Companies having a net worth of at least Rs 500 crore or a minimum turnover of Rs 1,000 crore or net profit of Rs 5 crore or more during the immediately preceding financial year have to spend on CSR activities.