Current Affairs 7 November 2024
General Studies Paper 2:Corporate Social Responsibility (CSR)
Syllabus: Governance
Source: TH
Context:
India, the first country to make Corporate Social Responsibility (CSR) mandatory, has seen over ₹1.84 lakh crore invested in CSR activities from 2014 to 2023. As agriculture remains a key sector—employing nearly half of the workforce and contributing 16.73% to the GDP—there is a growing interest in directing CSR funds toward agricultural sustainability.
About Corporate Social Responsibility (CSR):
- Definition: CSR refers to corporate efforts focused on contributing to societal, environmental, and economic development. It allows companies to have a positive impact on the communities where they operate.
- CSR Framework in India:
- Legal Basis: Governed by Section 135 of the Companies Act, 2013, and the CSR Policy Rules, 2014, which specify the eligibility, implementation, and reporting requirements for CSR activities.
- Criteria for CSR: Companies meeting any of the following thresholds are required to engage in CSR:
- Net worth of ₹500 crore or more
- Annual turnover of ₹1,000 crore or more
- Net profit of ₹5 crore or more
- CSR Allocation: These companies must allocate 2% of their average net profits over the previous three years toward CSR.
- Penal Provisions: Failure to meet CSR obligations can result in 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.
- 2019 Amendment:
- Before 2019, unspent CSR funds could be carried forward to the next fiscal year.
- Post-amendment, unspent CSR funds must be transferred to a specified Schedule VII fund by the end of the fiscal year and must be utilized within three years. If not, the funds must be deposited into a government-specified fund.
CSR Contribution to Agriculture:
- Employment Importance: Agriculture employs 47% of India’s workforce, significantly higher than the global average.
- Economic Role: Agriculture contributes 16.73% to India’s GDP, making it a crucial driver of the economy.
- Focus on Sustainability: Corporates are increasingly using CSR funds to support sustainable agricultural practices, including initiatives focused on climate action and resource conservation.
- CSR Initiatives in Agriculture: Many CSR initiatives focus on creating grain banks, providing farmer education, promoting sustainable irrigation, and supporting water conservation.
Challenges:
- Tracking Issues: Lack of specific classification for agriculture-related CSR activities complicates monitoring and evaluation.
- Sector Overlap: CSR efforts in agriculture often fall under multiple categories in Schedule VII, making it difficult to assess the precise impact on agriculture.
- Inadequate Reporting Focus: Current CSR reports often fail to emphasize agriculture, limiting the ability to evaluate their impact on agricultural sustainability.
- Ambiguity in Schedule VII: Broad categories in Schedule VII lead to overlapping activities, affecting transparency and making it harder to track agriculture-specific CSR contributions effectively.
Way Ahead:
- Designate Agriculture as a Separate CSR Sector: Clearly defining agriculture within CSR guidelines will help ensure targeted and transparent funding.
- Revise Reporting Framework: Transition to a sector-based reporting system to improve the accuracy of fund allocation and tracking of agricultural CSR projects.
- Identify Critical Issues: Recognize and address the most pressing sustainability challenges in agriculture to direct CSR funds toward high-impact areas.
- Encourage Sustainable Practices: Leverage CSR funds to promote sustainable agricultural practices, such as water management, agroforestry, and resource conservation, supporting India’s broader environmental goals.
Conclusion:
To improve the impact of CSR on agriculture, India should refine its CSR framework by recognizing agriculture as a distinct sector, enhancing transparency, and directing funds toward the most critical sustainability challenges. This will better align CSR with national priorities, support farmers, and promote sustainable agriculture.
