Enhancing Agricultural Sustainability through Corporate Social Responsibility (CSR) Contributions

Enhancing Agricultural Sustainability through Corporate Social Responsibility (CSR) Contributions

Sub : Eco

Sec: National Income and Indian economy

Why in News

India was the first country to mandate Corporate Social Responsibility (CSR) legally under the Companies Act, 2013. With increasing CSR contributions, there is a growing interest in how effectively these funds are directed toward agriculture, which is vital for India’s economy and employs nearly half of the population.

What is Corporate Social Responsibility (CSR)?

Corporate Social Responsibility (CSR) refers to the ethical responsibility of companies to contribute positively to society and the environment. It goes beyond profit-making and includes efforts to improve social, environmental, and economic conditions.

Legal Framework for CSR in India

India became the first country to legally mandate CSR through the Companies Act, 2013, primarily outlined under Section 135.

Since the Act’s implementation, CSR disbursements have reached approximately ₹1.84 lakh crore between 2014 and 2023.

Eligibility for CSR under Section 135: Companies meeting any of the following criteria must comply with CSR obligations:

• Net worth of ₹500 crore or more
• Annual turnover of ₹1,000 crore or more
• Net profit of ₹5 crore or more

CSR Spending Requirement: Companies meeting the eligibility criteria must spend at least 2% of their average net profits from the last three financial years on CSR activities.

If companies fail to utilize the specified CSR funds, they must transfer the unspent amount to a government-approved fund (e.g., PM National Relief Fund) or a designated CSR fund within a stipulated period.

Companies subject to CSR requirements must form a CSR Committee consisting of at least three directors, including an independent director.

Companies that fail to meet CSR requirements may face financial penalties, including fines imposed on the company and its officers.

CSR’s Contribution to Agricultural Development:

Companies increasingly show interest in using CSR funds for climate action and sustainability in agriculture. According to a recent CSR platform report, 23% of surveyed companies prioritized “environment and sustainability” as key CSR focus areas.

Capital and Infrastructure Needs: Addressing core needs in agriculture, CSR contributions have focused on:

• Grain banks
• Farmer training schools
• Livelihood projects linked to agriculture and allied activities
• Water conservation initiatives
• Energy-efficient irrigation systems

Sustainability Focus: As agriculture shifts toward sustainable practices, CSR funding from the private sector could significantly support these initiatives, promoting long-term environmental and economic benefits.

Challenges in Tracking Agricultural CSR Contributions:

The existing CSR reporting mechanisms lack a framework to distinctly identify and track agriculture-specific contributions. This limits transparency and prevents accurate impact assessments.

CSR activities in agriculture can fall under 11 of the 29 sectors specified in Schedule VII of the Companies Act. Since many of these sectors encompass diverse activities unrelated to agriculture, accurately tracking agriculture-specific contributions is challenging.

Given agriculture’s crucial role in the Indian economy and sustainability goals, defining it as a distinct sector in CSR contributions is essential. This would:

• Enable precise tracking of CSR funds for agricultural sustainability
• Enhance transparency
• Improve the targeting of funds for maximum impact

Recommendations for a More Effective CSR Framework in Agriculture:

Shifting to a sector-based reporting system would streamline CSR allocations, enabling better identification of areas needing support and improving fund utilization.

Identifying specific sustainability issues within agroecosystems and channelling CSR funds accordingly could result in measurable improvements and promote resilient agricultural practices.

Clear tracking mechanisms can add value to CSR efforts by ensuring funds are utilized effectively, making a tangible impact in line with India’s broader development goals.