Corporate Social Responsibility
Kartavya Desk Staff
Syllabus: Governance
Source: TH
Context: India, the first country to mandate Corporate Social Responsibility (CSR), has seen over ₹1.84 lakh crore invested through CSR from 2014 to 2023. With agriculture employing nearly half of the workforce and contributing 16.73% to GDP, interest in directing CSR funds toward agricultural sustainability is rising.
About Corporate Social Responsibility (CSR):
· Definition: CSR involves corporate initiatives focused on societal, environmental, and economic development, enabling companies to positively impact communities.
· CSR Framework in India:
o Legal Basis: Governed by Section 135 and Schedule VII of the Companies Act, 2013, and Companies (CSR Policy) Rules, 2014, which outline eligibility criteria, implementation, and reporting requirements for CSR activities.
o Criteria for CSR: Mandatory for companies meeting any of the following:
§ Net worth of ₹500 crore or more,
§ Annual turnover of ₹1,000 crore or more,
§ Net profit of ₹5 crore or more.
§ Such companies are required to allocate 2% of their average net profits from the past three years toward CSR.
o Penal Provisions: If a company fails to meet CSR obligations, it faces fines ranging from ₹50,000 to ₹25 lakh. Responsible officers may face imprisonment (up to three years), fines between ₹50,000-₹5 lakh, or both.
o 2019 Amendment:
§ Prior to 2019, unspent CSR funds could be carried forward to the next fiscal.
§ Post-amendment, unspent funds must be transferred to a specified Schedule VII fund by the end of the fiscal year and utilized within three years, failing which, they must be deposited in a government-specified fund
CSR Contribution to Agriculture:
• Employment significance: Agriculture employs 47% of India’s workforce, far above the global average.
• Economic role: Contributing 16.73% to GDP, agriculture is central to India’s economic growth and sustainability.
• Focus on Sustainability: Corporates are increasingly supporting sustainable agricultural practices, including climate action and resource conservation, through their CSR funds.
• CSR initiatives: Corporates increasingly support agriculture through CSR, focusing on projects like grain banks, farmer education, sustainable irrigation, and water conservation.
Challenges:
• Tracking issues: Lack of specific classification for agriculture-related CSR efforts complicates tracking and monitoring.
• Sector overlap: CSR activities in agriculture often fall under multiple categories in Schedule VII, diluting agriculture-specific reporting.
• Inadequate reporting focus: Current CSR reports lack dedicated attention to agriculture, limiting accurate assessment of impact on agricultural sustainability.
• Ambiguity in Schedule VII: Broad categories under Schedule VII result in a mix of activities, affecting transparency and the potential to track agriculture-specific CSR contributions effectively.
Way Ahead:
• Designate Agriculture as a Separate CSR Sector: Define agriculture clearly within CSR guidelines to ensure more targeted and transparent funding.
• Revise Reporting Framework: Shift to a sector-based reporting structure to enhance accuracy in fund allocation and impact tracking for agricultural projects.
• Identify Critical Issues: Recognize key sustainability challenges in agriculture to direct CSR funds toward the most pressing areas for improvement.
• Encourage Sustainable Practices: Leverage CSR to drive sustainable agricultural practices, such as conservation, water management, and agroforestry, to support India’s environmental goals.
Conclusion:
To enhance CSR’s impact on agriculture, India should refine its reporting framework by designating agriculture as a distinct sector, promoting transparency, and focusing funds on specific sustainability challenges. This approach aligns CSR with national priorities, better supports farmers, and advances sustainable agriculture.
Insta Links:
• Impact-of-CSR-funds
• Corporate social responsibility makes companies more profitable and sustainable. Analyse. (UPSC-2017)