Govt looks to ease compliance burden with new CSR disclosure rules

The Ministry of Corporate Affairs’ (MCA’s) decision to omit key details of CSR projects in the annual report is to avoid duplication and reduce the compliance burden on companies, a senior government official told Business Standard. 

Companies have to provide details of their corporate social responsibility projects, such as activity, area, project duration, and mode of implementation, on the MCA21 portal in a form called CSR-2. The MCA in its September 20 notification on the Companies (Corporate Social Responsibility Policy) Amendment Rules did away with these details in Annexure II. The form provided a format in which companies had to report their CSR activities in the annual report. 

“We received several representations from industry that this was increasing the compliance burden; they were already providing this information on the MCA21 portal. The same information need not be given at two places,” the senior official said. 

There are, however, concerns that stakeholders may lose their ability to keep track of companies’ CSR activities. To this, the MCA said that it is planning to make details of CSR activities of companies available on the CSR portal from 2023 onwards. 

“We will filter the information provided to us on MCA21 and share it on the CSR portal. It will be open to the public and they would be able to see details of CSR projects company-wise,” the senior official said. 

Experts, on the other hand, feel that the ministry’s move has taken away the transparency on companies’ CSR spends. “The ministry has given into the industry pressure. How many people even know about the CSR portal? It has allowed companies to spend wherever they want with no one raising any questions about it. The more you disclose, the more accountability you have,” a company law expert said. 

Though the annual report does not require CSR activity details, except the amount spent, if a company has created a capital asset, the form specifies that information like address, location, and pin code has to be mentioned. 

The Companies (Accounts) Amendment Rules, 2022, have introduced the e-form CSR-2, which mandates the disclosure of company information, the composition of the CSR committee, ongoing projects, and the transfer of CSR funds that have not yet been used.

The new rules have also revised the amount to be spent on impact assessment of CSR projects to 2 per cent of total CSR obligation or Rs 5 million, whichever is higher. This expenditure on impact study will be part of the CSR obligation. 

According to the CSR data portal, in 2020-21, 17,007 companies undertook CSR activity with 36,865 projects across 14 development goals. Total CSR expenditure was Rs 24,865.46 crore.