CHANGES IN CSR

Changes in CSR Laws: India

On January 22, 2021, the Government of India brought into effect the Companies (Corporate
Social Responsibility Policy) Amendment Rules, 2021 (“Rules”). The Rules amended the
exiting Companies (Corporate Social Responsibility Policy) Rules, 2014 (“Existing Rules”).
These CSR law amendments bring several significant changes to the national CSR policy
including an increased focus on impact assessment, decriminalisation of non-compliance,
greater inclusion of international organizations, and provisions altering the guidelines for
management of excess funds and surplus expenditures.

Under the new rules, companies eligible for CSR i.e. net worth of Rs 500 crore or more,
turnover of Rs 1,000 crore or more, net profit of Rs 5 crore or more, are now mandated to
spend at least 2% of the average net profit of the Company made during the three
immediately preceding Financial Years. Earlier, this was a voluntary task, the change in
status to mandatory means that non-compliance will invite penalties.

Certain definitions have also been amended, including the definition of CSR itself. While
activities undertaken in the ordinary course of business are beyond the scope of CSR, any
company engaged in developing medical devices and drugs, may undertake the task of
developing medical devices, drugs and vaccines for COVID-19, as a part of its CSR 1. In this
vein, while activities undertaken outside India are not CSR, the exception allows for training
of Indian Sport-persons, that represent India or any state, to be treated as CSR 2. Next, any
donation to a political party is not under the ambit of CSR 3. Finally, activities undertaken for
benefit of employees or for deriving market benefits for own products and services are also
not considered CSR4.

The rules pertaining to implementation have been altered as well. The amended Rule 4 states
that a Company can undertake CSR activities by itself or through any (a) company
incorporated under Section 8 of the Act; (b) registered pubic trust; (c) registered society
under Sections 12A and 80G of the Income Tax Act, 1961; (d) any entity established under
1
Rule 2 (d) (i) of the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021.
2
Rule 2 (d) (ii) of the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021.
3
Rule 2 (d) (iii) of the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021.
4
Rule 2 (d) (v) of the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021.
an Act of Parliament or a State legislature; or (e) any company incorporated under Section 8
of the Act, registered pubic trust, registered society under Sections 12A and 80G of the
Income Tax Act, 1961 which has an established track record of at least three years in
undertaking similar activities5. The board is obligated to check and monitor the usage of
funds for the appropriate CSR projects, and is empowered to make alterations at their
discretion, for ensuring adherence to timelines 6. The rule also obligates the CFO to ensure
that funds allocated for CSR are used in the manner approved by the board, and certify the
same7.

The rules have a provision for a mandatory CSR committee. The amended rule requires that
this committee formulate an annual action plan as per the CSR policy of the company. The
same has to be shared with the board any time in the financial year. The action plan must
include (a) approved list of CSR projects; (b) manner of execution of the listed projects; (c)
implementation schedule/timeline and method of fund utilization; (d) mechanism of
monitoring and reporting ongoings of the project; and (e) details of need for project and
impact assessment, if any8.

With regards to limits on expenditure on CSR, the amount allocated by a company in a

financial year to the administrative aspects of CSR cannot exceed five percent of total CSR
expenditure9. And for the first time an International Organization may be appointed for such
administrative tasks relating to designing, monitoring and evaluation of the CSR projects or
programmes as per its CSR policy.
In the event of excess of CSR funds, the company cannot channel those towards anything that
is not prescribed in the rules (such as business profits). That amount has to either be
reinvested in the project, or saved in a separate CSR account (as provided in the annual action
plan), or transferred to a fund as specified under Schedule VII of the Act 10. Additionally,
companies are now allowed to set off CSR expenditure in excess of the 2% mandatory
requirement against the required expenditure for up to three financial year, if a company
spends an amount in excess to their CSR requirements. The same is subject to a resolution by

5
Rule 4 (1) of the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021.
6
Rule 4 (6) of the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021.
7
Rule 4 (5) of the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021.
8
Rule 5 (2) of the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021.
9
Rule 7 (1) of the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021.
10
Rule 7 (2) of the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021.
the board11. Lastly, the new rules also allow usage of CSR funds towards asset acquisition, in
the name of beneficiaries of the CSR project, or a charitable trust12.

The Rules have been amended in regards of the reporting mechanism. It is now mandatory
for the board to prepare a CSR report 13. A foreign company is required to submit its balance
sheet in its annual report14. Moreover, companies with CSR obligation of Rupees Ten Crore
or more are required to undertake an impact assessment for their CSR projects of Rupees One
Crore or more, that are completed less than a year of the impact study via an independent
agency, within three immediately preceding financial years15

Changes in CSR Policy: India

CSR is not a new concept in India, it has existed since the beginning of Indian industry, with
industrialist families undertaking social welfare activities, under the garbs of religious beliefs
or other social considerations. Over the course of decades, a formal and robust mechanism for
CSR has been derived, and that is what we see in practise today 16. While most CSR programs
ranges from community development to development in education, environment and
healthcare etc, the Pandemic has required new methods to be used to achieve these goals. All
efforts are channelled towards ensuring better management of the situation and provision of
resources.
Production of oxygen and other facilities:
It can be in the form of undertaking big projects, such as production of medical oxygen
(given the shortages in our country). The Bhillai Steel Plant abandoned their industrial
production and started producing medical grade oxygen and sending it to several states
including Madhya Pradesh, Maharashtra, Andhra Pradesh, Telengana, Uttar Pradesh.
Reliance Industries rallied its resources to produce medical grade oxygen for treatment of
patients, at its refinery-cum-petrochemical complex in Jamnagar and other facilities, RIL now
produces over 1000 MT of medical grade liquid oxygen per day. It is also setting up 1,000
bedded Covid Care facilities with oxygen supply, these services will be provided free of cost
to the citizens and the entire cost of setting up and running the facilities will be borne by

11
Rule 7 (3) of the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021.
12
Rule 7 of the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021.
13
Rule 8 (1) of the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021.
14
Rule 8 (2) of the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021.
15
Rule 8 (3) (a) of the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021.
16
https://www.ijltemas.in/DigitalLibrary/Vol.3Issue7/164-167.pdf
Reliance as part of its CSR obligations17. They also announced a donation of Rs. 500 crores
to PM CARES Fund. To augment the quarantine system instituted by the government, HUL
has tied up with Apollo Hospitals, State Bank of India, Oyo, Lemon Tree and others to create
isolation facilities that are equipped with medical supervision. This will help reduce the
burden on hospitals while providing acute care for the patients in need.
Donations:
Donating money towards relied funds (set up by states and centre) is one of the most common
methods used. Recenlty, Mankind Pharma, also donated Rs 51 crore to CM Relief fund to
manage this disaster. They also donated ventilators, Personal protective equipment (PPE) and
Medicines to the states reporting maximum number of positive cases18. Hyundai Motors
donated a package of Rs. 10 Crores towards Pandemic Relief in the State of Tamil Nadu19.
Partnering with NGOs:
We can see that the scale of the company doesn’t matter, all are doing their own bit in their
own way. Similarly, Petonic Infotech, one of the fast-growing mid-sized Indian management
consultancy firm, has mobilized INR 2 Crore for COVID relief through its multinational
partners, clients and associates. Petonic Infotech has partnered with NGOs like Open
Innovation Lotus Foundation, Project India Foundation and many more for outreach to
widespread rural India during the second wave of COVID crisis that India is going through
currently20.
Sanitation Drives:
In endeavour to combat this COVID 19 Pandemic Vedanta Sesa Goa Iron Ore in association
with Hansa Pest Control Services carried out sanitation and fumigation drives at public places
such as bus stops, temples, mantaps and shops etc. at Amona and Navelim villages21.
Under the CSR healthcare initiative, some organizations have also deployed medical mobile
vans to provide healthcare facilities to the underprivileged, thus, bridging the gap in the
existing system. These mobile vans can be equipped well and can be used for testing of
COVID-19 and can also be used as Mini ICUs.
Pharmaceutical Companies:

17
https://indiacsr.in/csr-reliance-foundation-to-set-up-1000-bedded-covid-care-facilities-in-jamnagar/
18
https://indiacsr.in/mankind-pharma-pledge-rs-51-crore-for-covid-19-relief-fund/
19
https://indiacsr.in/corporate-social-responsibility-csr-hyundai-motor-india-foundation-pledges-support-to-
tamil-nadu-govt/
20
https://indiacsr.in/corporate-social-responsibility-csr-petonic-infotech-mobilizes-rs-2cr-for-covid-relief/
21
https://indiacsr.in/csr-vedanta-sesa-goa-iron-ore-carried-out-sanitation-and-fumigation-drives-in-goa-to-fight-
covid-19-pandemic/
Companies that work towards research and development of medical supplies, drugs and
vaccines have been working towards creating medical supplies, drugs and vaccines for the
COVID-19 Pandemic. For example, since the pandemic began, GlaxoSmithKline has been
working with several partners to develop potential COVID-19 vaccines and treatments as
quickly and safely as possible.

Changes in Law: Global

The European Commission recently released their recommendations on CSR in light of the
sustainable development goals. With regards to promotion of CSR it has been acknowledged
that sustainable industry sectors have to promoted properly. The need of the hour is to to
engage European businesses and industry sectors on Sustainability as an integral part of the
European Industry Strategy 2030. The aim is to help businesses and industry sectors to
accelerate towards more sustainable business practices and in devising solutions to societal
sustainability challenges, which would be done through practical supportive measures on
learning, sharing, capacity building and sector collaborative platforms and by raising
awareness. It was suggested to suggested to implement programmes to promote and support
awareness and implementation of due diligence by companies against human rights and other
risks.
In context of future of youth and refugees, governance structures that encourage engagement
between enterprises and education and training establishments, particularly at secondary and
tertiary levels should be created. A culture of partnership between youth and enterprises
should be actively promoted. Initiatives such as digitization, automation, globalisation and
reorganisation that promote employability, skill development and easy tranisitions should be
promoted. Research should also be undertaken for market opportunities in online learning
and digital school services.
In context of protection of human rights, the focus on due diligence was highlighted. Training
with the purpose of strengthening the capacity of enterprises to deal with challenges
regarding human rights in their supply chains, as well as how to provide information to
businesses and other stakeholders on the legal framework.
In order to achieve sustainable innovation, it is crucial that the current and future European
Research programmes invest in social, ecological, business-model, institutional and
technological innovations.
Changes in Policy: Global
The COVID-19 outbreak has thrown us into a time that can be described as unprecedented
for many reasons. For one, businesses across the globe are making quick shifts for the good
of workers, customers and society. Many businesses are standing up in order to help fight
COVID-19. This has seemingly forced industries to press pause on the pursuit and
prioritization of profit in order to strive for a balance between revenue and impact. For some
of these businesses, this change has come by force, through a steady stream of government
mandates and calls for participation. A common pattern of provision of necessary materials
and products is seen all across the board.
Provision of essentials:
The world’s biggest brewery company best known for lagers like Budweiser Anheuser-Busch
is making hand sanitizer to help during the coronavirus crisis. They are collaborating with the
red cross to determine where their sanitizers were needed the most. Given the shortages of
protective equipment and masks, many clothing brands have stepped up and are producing
masks. Hanes Brands, renowned for its cotton basics is converting factories to produce cotton
face masks in the United States. Many other popular brands such as Gap, Nordstrom and Zara
are also involved in making masks, gowns and scrubs for medical workers and first
responders.
Production of medical equipment:
Those with factory plants, i.e. firms involved in production of heavy consumables, are using
their facilities to produce medical equipment. Ford has started large scale production of
ventilators, masks, respirators, and other essential medical equipment and supplies for public
health care professionals, first responders, and patients fighting the COVID-1922. Similarly,
General Motors has been collaborating with “Ventec Life Systems” to scale up critically vital
respiratory products rapidly. With a severe PPE shortage in the health care system, the global
purchasing supply chain team began work to find excess PPE. To help health workers in
essential services across the country, General Motor produces up to 50,000 level 1 face masks
daily or 1.5 million a month23.
Donations:
On the other hand we also find several companies making direct monetary contributions.
Netflix has created a $100 million relief fund to help members of the creative community
who have been left unemployed and without a way to earn an income during the coronavirus

22
https://journals.sagepub.com/doi/full/10.1177/2158244020988710
23
https://journals.sagepub.com/doi/full/10.1177/2158244020988710
crisis. The streaming giant said the bulk of the funds will go toward supporting laid-off crew
members. Additionally, $15 million of the Netflix fund will go to third parties and non-profits
that offer emergency relief to out-of-work crew and cast in countries where there’s a large
production base. Of that, Netflix said it will donate $1 million each to the SAG-AFTRA
COVID-19 Disaster Fund, the Motion Picture & Television Fund, and the Actors Fund
Emergency Assistance in the U.S., as well as $1 million between the AFC and Fondation des
Artistes. Sarandos said the company is also working with industry organizations to bolster
relief efforts in Europe, Latin America and Asia, where many of its movies and shows are
shot.
Pharmaceutical companies:
Johnson & Johnson started mobilisation of its resources of its Janssen Pharmaceutical
Companies in response to the outbreak to develop a possible preventive vaccine candidate
against the COVID-19 and succeeded, their vaccine is now being administered widely in the
US24.
Free Services:
A newly emerged ‘essential’ service provider, Zoom has grown to be one of the leading tools
to keep businesses up and running and students learning. Given the worsening situation, they
removed the time-limit in free meetings in badly hit nations and even gave free accounts to
K-12 schools in affected nations.

24
https://journals.sagepub.com/doi/full/10.1177/2158244020988710