Introduction
Corporate Social Responsibility (CSR) reporting is a process by which companies disclose their social, environmental, and community-related initiatives. In India, the Companies Act, 2013 made CSR reporting a legal requirement for certain companies. This makes India one of the first countries in the world to mandate CSR and reporting as per law. The objective is to ensure transparency, accountability, and strategic use of corporate resources for social development.
Explanation: CSR reporting allows the public, shareholders, and stakeholders to understand how a company is contributing to the well-being of society beyond profit-making.
CSR Provisions under the Companies Act, 2013
1. Applicability (Section 135)
The CSR provisions apply to companies that meet any one of the following criteria during a financial year:
- Net worth of ₹500 crore or more
- Turnover of ₹1000 crore or more
- Net profit of ₹5 crore or more
Explanation: These thresholds aim to include only financially capable companies to undertake CSR responsibilities.
2. CSR Committee
Eligible companies must form a CSR Committee of the Board with at least three directors (including one independent director).
Roles:
- Formulate and recommend a CSR Policy
- Recommend CSR expenditure
- Monitor implementation of CSR activities
Explanation: The committee ensures that CSR work is not just a side activity but an important part of board-level planning and governance.
3. Minimum Spending Requirement
Companies must spend at least 2% of their average net profits (of the past three years) on CSR activities.
Explanation: If they fail to spend this amount, they must explain the reasons in their board report, and in some cases, transfer the unspent amount to a specific government fund.
CSR Reporting Requirements
1. Board Report Disclosure
The Annual Report of the Board must contain a detailed section on CSR which includes:
- CSR policy contents and implementation details
- CSR committee composition
- Amount allocated and spent
- Project details (sector, location, duration)
- Reasons for unspent funds (if any)
Explanation: This makes the company accountable for its social obligations to the government and public.
2. Format of CSR Report (Annexure II of CSR Rules)
The Ministry of Corporate Affairs (MCA) has prescribed a standard reporting format. It must be signed by the CEO/Managing Director and the Chairperson of the CSR Committee.
Explanation: This helps maintain consistency in how CSR is reported and evaluated across companies.
3. Impact Assessment (for large projects)
Companies with average CSR obligation of ₹10 crore or more must conduct impact assessments for projects exceeding ₹1 crore in outlay.
Explanation: This helps verify whether the CSR activity has achieved the intended outcomes.
4. CSR Registration Number
From April 2021, companies must engage only with implementing agencies that are registered with the MCA and have a valid CSR Registration Number.
Explanation: This ensures only credible agencies are involved in CSR work.
Penalties for Non-Compliance
Failure to comply with CSR obligations can lead to penalties:
- Company: Up to ₹1 crore
- Every officer in default: Up to ₹2 lakh
Explanation: These penalties are meant to ensure CSR is treated seriously and not as a mere formality.
Conclusion
CSR reporting under the Companies Act, 2013 promotes responsible business practices and encourages transparency in the use of corporate resources for social good. With clear guidelines, minimum spending requirements, mandatory board-level oversight, and standardized formats, India’s CSR law has become a model for other nations. Proper reporting not only fulfills legal duties but also strengthens the company’s brand, stakeholder trust, and long-term social impact.