As per the Companies Act 2013, any company that satisfies the following criteria during any financial year must allocate at least 2% of their average net profits in pursuance of its Corporate Social Responsibility (CSR) Policy:
- Having a net worth of rupees five hundred crore or more
- A turnover of rupees one thousand crore or more
- A net profit of rupees five crore or more
As per Companies (CSR Policy) amendment rules 2021, entities undertaking CSR activities for the Corporate donors must register themselves with the Ministry of Corporate Affairs using an electronic form called the CSR-1 form. This form can be filed all year round – as and when the implementing partner sign the contract with the corporate. Some of the details which need to be furnished in filling in the CSR-1 form is listed below
- Type of registering entity.
- Corporate Identification Number or registration number
- Date of incorporation of the entity, address and email ID, PAN
- Details of directors, board members, secretary, CEO or authorised representatives of the entity .
- DIN (Director Identification Number) and DSC (Digital Signature Certificate) of the signing director.
Impact Assessment of CSR Activities
Prior to the year 2021, companies having CSR obligations were only required to produce a report that detailed their CSR expenditures. However, impact assessments were optional.
As per the Companies (CSR Policy) Amendment Rules 2021, corporates that has a CSR obligation of more than 10 crore rupees in any financial year are required to submit an impact assessment of the CSR activities.
The impact assessment does not have to be performed for all CSR-related activity undertaken by the company. This obligation pertains solely to projects that have outlays of 1 crore rupees or more.
What is a CSR Impact Assessment?
Indian Corporates have spent more than 1trillion INR on CSR Projects since mandatory law in FY 2015. Such a large investment needs accountability & transparency and hence the requirement of impact assessment of CSR activities.
A CSR impact assessment is a process that aims to measure the delta change brought about due to the CSR activities and ascertain appropriate expenditure of a company’s CSR budget. It helps determine whether the company’s CSR activities align with their CSR policy objectives were met and whether the allocated funds were judiciously spent. Apart from enabling greater transparency in the expenditure of the CSR budget, these assessments help to improve the quality of CSR projects by involving the Board and Leadership teams. Impact assessment help the donors and other stakeholders gain insights into the positive and negative impact of their activities therefore contributing to Corporate social responsibility.
Who performs the CSR Impact Assessments?
The impact assessmentcan not be performed internally by the company that is obligated to undergo this assessment. It must be performed externally, through an independent agency.
Bluesky Sustainable Business is the only government-recognised entity in India that is certified to assess CSR activities. BlueSky has designed the impact assessment of CSR activities based on internationally recognisedguidance standards of ISO 26000: Guidance on Social Responsibility , NGRBC ( National Guidelines on Responsible Conduct) and other relevant Indian laws like The Companies Act 2013. IS ISO:26000 can be bought from the Bureau of Indian Standards website.
The company that is subject to the impact assessment may book the expenditure for the assessment towards Corporate Social Responsibility for that financial year. This expenditure shall however not exceed 5% of the total CSR expenditure for that financial year or fifty lakh rupees, whichever is less.
When Should the Impact Assessment be Done?
The CSR impact assessment must be performed no more than one year after the completion of the project that warrants such an assessment.
This remains the case for projects that span across multiple years as well. However, for multi-year projects, a follow up assessment will need to be performed on year after the first one.
What Happens if the Obligatory Impact Assessment is not Performed?
Companies that are non-compliant with regards to provisions of the Companies Act (such as the allocation of a CSR budget or conducting impact assessments) may incur fines of up to 25 lakh rupees. Additionally, defaulting officers of said companies may be subject to the possibility of imprisonment and personal fines amounting to 5 lakh rupees.
Conclusion CSR impact assessments can help maximise social impact while ensuring efficient expenditure of the CSR budget. It can therefore be a valuable tool not only in furthering philanthropic interests and social responsibility but can also help strengthen company-stakeholder relationships.