Answer: 

Introduction:

The Companies Act, 2013 regulates the companies incorporated under the Act replacing the earlier Act of 1956. It provides certain compliances which the company has to fulfil. Sustainable economic growth requires inclusive growth. Corporate social responsibility (CSR) seeks to achieve inclusive growth through addressing the challenges and catering to elements of Inclusive Growth like skill development.

The Act prescribes an expenditure of 2 per cent of the company’s profits on CSR (corporate social responsibility) activities in their respective areas of operation. These would have to be outcome and timeline-driven with details posted on websites.

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The challenges to CSR in India:

• Regional Disparity would rise: Most of the CSR spending is concentrated in States like Maharashtra, Tamil Nadu, Gujarat, Karnataka etc. A recent report by Ashoka University’s Centre for Social Impact and Philanthropy has observed the spending in these 4 States to be ~54%. Populous Uttar Pradesh and Madhya Pradesh with poor resources and poor population receive much less.
• Sectoral Disparity: An analysis of CSR spending (2014-18) reveals that while most CSR spending is in education (37%) and health and sanitation (29%), only 9% was spent on the environment even as extractive industries such as mining function in an environmentally detrimental manner in several States.
• Lack of Transparency and Information: The Standing Committee on Finance has observed that the information regarding CSR spending by companies is insufficient and difficult to access.
• Greenwashing: Many companies still view CSR as a statutory obligation only. They engage in superfluous activities not having a direct measurable impact on communities or the environment. This has been termed as ‘greenwashing’.
• Lack of Community Participation: Many companies are driving the CSR projects from top with little involvement of the locals who are the intended beneficiaries. Companies end up taking initiatives which they consider as important, rather than what is beneficial to the communities.

Salient features of the Companies Act 2013:

• The Companies Act 2013 increased the number of maximum shareholders in a private company from 50 to 200 and provides for approvals from shareholders on various significant transactions.
• The Companies Act 2013 stipulates appointment of at least one-woman Director on the Board (for certain class of companies).
• National Company Law Tribunal: The Companies Act 2013 introduced National Company Law Tribunal and the National Company Law Appellate Tribunal to replace the Company Law Board and Board for Industrial and Financial Reconstruction.
• Indian Resident as Director: Every company shall have at least one director who has stayed in India for a total period of not less than 182 days in the previous calendar year.
• Independent Directors: The Companies Act 2013 provides that all listed companies should have at least one-third of the Board as independent directors. No independent director shall hold office for more than two consecutive terms of five years.

Conclusion:

Due to a lack of strategic planning, proper experimentation, innovation, and engagement, companies aren’t able to make a meaningful impact on their CSR. They are not able to identify ideal investment projects and therefore cannot provide high impact results. Corporate houses must understand the challenges faced by its citizens and then invest properly.\