Profitable companies that do not spend 2% or more of their profits on corporate social responsibility (CSR) activities would be required to explain the reasons for not being able to do so, even though the government has not decided to make it mandatory for them to spend on philanthropic programmes.
“We have not mandated companies to spend 2% or any particular amount on CSR but we expect all companies are expected to spend a reasonable amount on such activities and if they fail to do so, they would have to give valid reasons,” M Veerappa Moily, corporate affairs minister, told Hindustan Times.
The government was earlier toying with the idea of mandating companies to spend 2% of their net profit on CSR. Several companies such as Bharti Airtel, Hindustan Unilever Ltd, ITC Group and the State Bank of India have taken up CSR programmes are part of their business models.
Corporate India may also have to present elaborate and separate audit reports for their CSR programmes and environment-linked activities to ensure greater transparency and disclosure. The Institute of Chartered Accountants of India (ICAI) is chalking out a framework for reporting norms on CSR.
At present, companies are only required to make a mention of their CSR activities and the quantum of money that is being directed towards it. There is no separate audit for CSR.
The move comes in the wake of widespread corruption and surging black money.