Companies can omit important information under new CSR disclosure rules

New rules let companies omit details like title, location, and duration of the business's CSR project, budget allotted for it, the amount spent on it during the current fiscal year among others

The Ministry of Corporate Affairs (MCA) has limited details that companies must give about their corporate social responsibility (CSR) projects in their annual reports, according to a notification from the ministry. The Economic Times reported that the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2022, which was published on September 20, has revised Annexure II, among other things, which outlines the manner in which CSR activities are reported in annual reports.

Details pertaining to the companies' contributions to ongoing and additional CSR programmes are not included in the amended Annexure II.

The details omitted include the title, location, and duration of the company's CSR project, as well as the budget allotted for it, the amount spent on it during the current fiscal year, the mode of implementation, the name of the implementing agency and their CSR registration number, and the amount transferred to the unspent CSR account.

This omission is a significant alteration made to Annexure II.

While disclosing these details in the annual report has been eliminated, the corporations must still include this information in the CSR-2 form that is submitted through the MCA portal.

In total, more than 17,000 enterprises have together spent around Rs 24,865 crore on almost 37,000 projects across 14 development sectors for the fiscal year 2020-21, according to CSR expenditure data made public on the national CSR portal. The shareholders, employees, peers, customers, and the public of the companies will not readily be able to see how and where the CSR budgets of specific companies will be spent according to the amended disclosure guidelines.

Chartered accountant Daniel Selvaraj, partner at Manohar Chowdhry & Associates and a specialist in the non-profit sector said to ET, “This is important information that has been skipped out from the annual reports. Emphasising impact assessment without informing the company’s stakeholders about where and how the CSR amount is getting spent will not add the expected value.”