The CSR Committee is to corporate social responsibility what a ministry is to government. It bestows transparency, structure and direction to welfare initiatives. In its absence, there would be no internal mechanism for scrutiny. Compliance would be a matter of debate.
There is a certain gravitas that the members lend. They ensure that the guidelines of the CSR policy are adhered to in every community development project undertaken. They act as advisors to a company’s CSR department, drawing from their own experiences in corporate management and social welfare.
Who is on the CSR Committee?
In India, a CSR Committee is a must for all companies doing corporate citizenship. The Ministry of Corporate Affairs has made this body mandatory for managing every company’s CSR programme. Section 135 of the Companies Act, 2013, states that companies that aren’t listed on a securities exchange should have a CSR Committee of two or more directors. Those which are listed on an exchange in India should have a Committee with three or more directors, including at least one independent director. As for MNCs and foreign companies, there are at least two members. One member should be an Indian resident who has the authority to make decisions on behalf of the company regarding notices and documentation.
What does a CSR Committee do?
It is the CSR Committee which drafts the definitive CSR policy, the holy grail for all the corporation’s activities on corporate responsibility, focus areas, principles and values. Recommendations for the CSR policy are put forward to the corporation’s Board of directors. The Board takes all the points into consideration before approving the policy document. The CSR policy is disclosed in the annual report which is published on the company’s website.
The CSR Committee is also entrusted with formulating a CSR activity plan, all the activities complying to Schedule VII. This “action plan” is more detailed than merely the kind of initiatives to be conducted. It includes all the expenses that will be incurred, who the stakeholders are and their roles in the activities, apart from the monitoring body. Not only does it talk about “what” and “how much”, but also the “how”. The action plan lays out how each project will be executed by the parties involved. The Committee has to give justification for underspending of CSR funds at the end of the financial year.
Duties of the CSR Committee
The Committee formulates the CSR policy in line with the company’s legacy, ethics and values and in keeping with guidelines of Schedule VII in Section 135. Checking whether the CSR department and the implementing agencies adhere to the policy is also the Committee’s responsibility.
The Committee recommends the amount of money that the corporation should spend on CSR activities in every financial year, based on the detailed plan and the projections.
An important function of the Committee is to ensure transparency across all levels of corporate social responsibility, from the monitoring mechanism, the CSR department within the company, implementing partners outside, and the various programmes for responsible citizenship.
Thanks to the mandatory directives, you can see the composition of every Indian firm’s CSR Committee in the annual report published on the company’s website. It lists out the names and designations of all the members.
Seeing how essential the role of the CSR Committee in corporate social responsibility is, this is one entity that is not to be taken lightly. The MCA has been getting stricter in the scrutiny of compliance of norms and composition of this essential component.