Corporates spend for social development

According to the Companies Act 2013, any company that has minimum annual net profit of Rs. 5 crore, or turnover of Rs. 1,000 crore or net worth of Rs. 500 crore, should spend two per cent of the average net profit on corporate social responsibility (CSR) activities from 2014-2015.

The companies are encouraged to spend in their region in areas such as education, healthcare, environment and the Clean India campaign. The objective is to spend in sustainability initiatives and create assets in these areas.

While there are companies that have always earmarked part of the earnings for social development works, others have also started contributing for these causes now.

Coimbatore-based chartered accountant G. Karthikeyan says that companies form CSR committees, approve the spending planned in this area, and also tie-up with non-Governmental organisations and trusts and give the fund to these organisations as donations or CSR contribution.

In Coimbatore, many companies had contributed for construction of classrooms, improvement of education infrastructure in rural areas, etc. “It is a good move as it will create the required infrastructure in the long-term,” he says. Infrastructure work can be taken up in several remote schools and healthcare centres because of this. However, because of the economic slowdown, companies in some sectors here had incurred loss during the last financial year and hence, CSR spending was not mandatory for them. This is common in several other countries too.

Since companies are encouraged to spend towards improvement of social infrastructure in their area of operation, large corporate houses that have operations or branches in several cities, distribute the spending to all the cities.

The Hindu