India’s Mandate Will Require Firms to Spend 2 of Profits on CSR

Last year the Indian government passed the Indian Companies Act, a law which went into effect on April 2014 requiring Indian companies to contribute 2 percent of their annual profits to social and charitable causes.

India’s Ministry of Corporate Affairs recently released a circular that clarifies which companies fall under the law’s purview, as well as what qualifies as a corporate social responsibility (CSR) contribution.

Companies worth more than $80 million will be required to establish a CSR committee that formulates a CSR policy to contribute at least 2 percent of profits to causes such as the eradication of extreme poverty and hunger, the promotion of gender equality and education, environmental sustainability and government-run funds for socio-economic development such as the Prime Minister’s National Relief Fund. The Indian Companies Act also states that companies that refuse to comply must explain their reason for doing so in their annual financial statements.

India’s CSR mandate, often referred to as the “2 percent requirement,” makes India the first country in the world to require that qualifying companies make obligatory corporate social responsibility expenditures.

Key Aspects of India’s Corporate Social Responsibility Mandate Clarified (India Briefing)

Staff contact: Ariel Meyerstein

Staff Contact:   Gabriella Rigg Herzog

VP, Corporate Responsibility and Labor Affairs
Tel: 212.703.5056

Gabriella Rigg Herzog leads USCIB policy and programs on corporate responsibility, international labor standards and corporate governance. She manages USCIB engagement with its affiliated organizations, U.S. government agencies, and United Nations agencies on international corporate responsibility principles, codes of conduct and multi-stakeholder initiatives, as well as international and transnational regulatory activities on labor and employment policies, sustainable development and corporate governance.
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