Mandatory CSR Spending—Indian Experience

Abstract

Corporate Social Responsibility (CSR) has received increased attention in the recent past as a means for sustainable development. CSR has largely been viewed as a voluntary exercise. However, the Companies Act, 2013 has made it mandatory for a certain category of companies to spend 2 percent of their average net profit in the past 3 years on CSR activities. If a company fails to spend the mandated amount on CSR activities, it is required to explain the reasons for the same in the Board’s report. India thereby became the first and the only country in the world to have mandatory CSR spending. The Act also prescribes the activities that would be eligible for this purpose. The year 2014–2015 was the first year of operations for these provisions. The article aims to critically review the requirements of the Companies Act, 2013 in this regard and assess the implementation of CSR spending requirements in the maiden year of operations.