The Companies Act, 2013- Section 135 of the Companies Act along with The Companies (CSR Policy) Rules 2014 and Schedule VII has introduced the concept of CSR in India to the forefront.
The CSR amendment has thrown a focus on the need for companies to define and measure the impact of their larger CSR programs. The Ministry of Corporate Affairs’ introduced the “Impact Assessment” in amendments dated 22nd January 2021 have significantly influenced the CSR landscape in India.
There is no definition given for “Impact Assessment” under the act and CSR Rules. So, in general terms, an impact assessment is a planning and decision-making tool used to assess the potential positive and negative effects of proposed projects.
- An assessment program is the first step in an ongoing monitoring process.
- The identification of the need for the project will ensure that it acts as a basic parameter while carrying out an impact assessment.
Benefits of Impact Assessment
- Help understand the Sustainability aspects of the projects being implemented.
- Help the funder in understanding the efficiency & effectiveness of the projects undertaken.
- Help understand the changes in the lives of the beneficiaries of the project.
- Help in planning future projects and discontinuing the project which is not doing well.
- Involvement of all stakeholders in the process of assessment and monitoring.
Rule 8 (3) brings in the requirement for impact assessment
(a)Every company having an average CSR obligation of 10 Cr rupees or more in the three immediately preceding financial years shall undertake an impact assessment, through an independent agency, of their CSR projects, having outlays of one crore rupees or more, and which have been completed not less than one year before undertaking the impact study.
The impact assessment shall be carried out project-wise only in cases where both the above conditions are fulfilled. In other cases, it can be taken up by the company on a voluntary basis. (MCA FAQ 9.2)
This Rule 8 (3) Applies to projects completed on/after 22nd January 2021
Appointment of Agency
CSR Committee shall appoint any implementing agency or trust for carrying out CSR activities including review and monitoring.
Companies or their CSR initiatives cannot conduct impact assessments (self-assessment) on their own. An independent agency must be engaged for the assessment.
The Board has the right to decide the eligibility criteria for the selection of an independent agency for impact assessment. (MCA FAQ 9.4)
Appointment of Agency
CSR Committee shall appoint any implementing agency or trust for carrying out CSR activities including review and monitoring.
Companies or their CSR initiatives cannot conduct impact assessments (self-assessment) on their own. An independent agency must be engaged for the assessment.
The Board has the right to decide the eligibility criteria for the selection of an independent agency for impact assessment. (MCA FAQ 9.4)
Impact Assessment Report
Rule 8 (3)
(b) Impact Assessment Report shall be placed before the Board and shall be annexed to the Annual Report on CSR.
It is clarified that the web link to access the complete impact assessment reports and provide an executive summary of the impact assessment reports in the annual report on CSR shall be considered as sufficient compliance of the said rule. (MCA FAQ 9.6)
Mention the necessary details like the amount spent on Impact Assessment in Annexure- II Format is given for the Annual Report on CSR Activities to be included in the Board’s Report.
Impact Assessment Expenditure
Rule 8 (3)
(c) A Company undertaking impact assessment may book the expenditure towards Corporate Social Responsibility for that financial year, which shall not exceed 2% of the total CSR expenditure for that financial year or fifty lakh rupees, whichever is higher.
The expenditure incurred on impact assessment is over and above the specified administrative overheads of 5%. (MCA FAQ 9.5)
Impact Assessment
Joint Projects:
•A company may also collaborate with other companies for undertaking projects or programmes or CSR activities in such a manner that the CSR committees of respective companies are in a position to report separately on such projects or programmes in accordance with these rules.
•A single company can bear the entire cost of Impact Assessment
•In the case of Related Parties, provisions of Section 177 (Audit Comm.) and Section 188 (Related Party) may also be looked up.
Companies can also get Impact Assessment done on a voluntary basis as part of good governance practice.
