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Govt may tighten disclosure norms for CSR spending


India Inc may soon have to make higher disclosures on their corporate social responsibility (CSR) spending, a government official has said.

A high-level panel on CSR is likely to propose increased disclosures to bring transparency in spending on these activities.

All companies with a net worth of Rs 500 crore or more, turnover of Rs 1,000 crore or more, or net profit of Rs 5 crore or more are required to spend 2% of their average profit of the previous three years on CSR activities every year.

“There is a view that disclosures need to be enhanced,” the official told ET, adding that this was needed to facilitate a “social audit”, or an examination of CSR spending.

These could include disclosures on amounts spent on foundations or trusts related to companies and spending in the local area of the company relative to that in other areas. The move comes in the backdrop of reports of companies spending CSR funds on trusts related to the group.

“The government has permitted companies to spend money in certain areas but the disclosure that is required is whether the expenditure is being done in foundations or organisations of your own company or related to your company,” said Pavan Vijay, founder of legal and corporate advisory firm Corporate Professionals.

There has been a lot of criticism about companies spending large parts of their CSR budget far from their local areas, Vijay said. Companies are required to give preference to local areas and areas around their facilities for spending amounts earmarked for CSR under the Companies Act.

At present, companies are required to disclose only their CSR policy and the composition of the CSR committee. The report will also make recommendations to deal with implementation issues related to CSR expenditure.

The committee is expected to moot creation of an online exchange portal from where companies can pick projects pitched by district-level government officers and connect with implementation agencies that have been registered with the government, another government official said. The panel is expected to submit its report next month, said the official, who is privy to the talks.

The government may also begin publishing an annual report on CSR spending by companies.

Source: Economic Times