CSR spending in chemical industry to rise due to Companies Act, 2013

The new Companies Act, 2013, which mandates profitable companies to spend every year at least 2% of their average net profit over the preceding three years on CSR works, is expected to increase spending by the chemical industry. “The new Companies Act will certainly help in adding value and increasing companies’ participation in CSR initiatives. Companies will be obliged to spend a portion of the profit which will directly support the under privileged sections. This will not only lead to benefit in specific areas but also the overall sections wherever support is required,” opined Dr Joerg Strassburger, Managing Director and Country Representative, LANXESS India.
 
This mandatory CSR-spend rule will apply from fiscal 2014-15 onwards. Those companies that have a turnover of Rs 1,000 crore or more or net worth of Rs 500 crore or more or net profit of Rs 5 crore or more will have to comply. “Since it is has been mandated in the Companies Act, it will definitely lead to increase in spends in companies who have not already invested in CSR initiatives. The ones who have invested and met the criteria will perhaps continue at the current levels,” said Ruby Thapar, Director Public and Government Affairs, Dow Chemical International Pvt Ltd.
 
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She added, “Overall, the CSR spend by corporate India post implementation of the new Bill is touted at Rs 15,000-18,000 crore, but one is not clear if this will arise only out of new investments in CSR or if it will be an overall increase (including the current spends).”
 
Experts believe that as a result of new Companies Act more chemical companies are expected to increase their sustainability efforts. Companies are looking beyond the short-term gains.
In fact, companies, which have already earned Responsible Care code, are likely to be in better position to comply the Companies Act 2013.
 
Sanjay Choudhary, Chief Sustainability and Technology Officer, Tata Chemicals Ltd, said, “The new Companies Act on CSR spending will create the benchmark for minimum spending, however, the philosophy at the Tata Group has been on maximising impacts. The life cycle assessment of value creation from such spends will only help understand the true benefits. This is an opportunity for the corporate to shift the business strategy in favour of the long term and integrating sustainability and CSR into their brand promise and make meaningful impact with the large corpus of funds that they would be generating.”