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Corporate Social Responsibility in Sports

April 21, 2022
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By Rupin Chopra and Apalka Bareja

Companies and the corporates running the said companies have a certain responsibilities and obligations towards the society. Therefore, these activities that are undertaken by the corporates in the advancements of a part of our society or particular sector separate from their ordinary course of business falls under Corporate Social Responsibility. In this article we will be discussing the responsibility that such corporates have towards the Sport community in India and are there any provisions mentioned in the Companies Act for the same.

Corporate Social Responsibility

Corporate Social Responsibility, or CSR as it is generally referred to as, refers to the activities that a company undertakes in accordance with the statutory obligations laid down in Sector 135 of the Companies Act, 2013.[1] CSR activities are undertaken in accordance with the provisions laid down in the Companies (CSR Policy) Rules, 2014. CSR can be thought of as a business practice that helps a company be socially accountable and fulfil its social responsibilities and work towards the betterment and enhancement of the society, environment, etc. CSR activities find their mention in Schedule VII of the Companies Act, 2013.

Corporate Social Receptibilities towards Sports

Section 135(5)[2] of the Companies Act, 2013, states that the management of every company must ensure at least 2% of their average income over the preceding three financial years to Corporate Social Responsibility (CSR) in the current financial year. This 2% is inclusive of all the CSR activities inclusive of sports. The activities mention that the contribution should be made towards the “training to promote rural sports, nationally recognized sports, paralympic sports and Olympic sports”[3]. The scope of the CSR activities was widened in 2016 in which the obligations under CSR for sports was expanded to include “construction, renovation, maintenance of stadiums, gymnasiums and sports science support including rehabilitation centres” as permissible CSR activities.

It is mandatory for a company having net worth of rupees five hundred crore or more, or turnover of rupees one thousand crore or more or a net profit of rupees five crore or more during any financial year, under the Company’s Act, 2013, to formulate a CSR policy[4].

In recent years contribution towards building a nation of the future, through health and wellness as well as sports and fitness has been a new imperative of the Government of India and hence the focus shift on funding of sports and inclusion in CSR activities. But for corporates, sports in the past has not been an area of priority as reports have indicated that sports have been in the lowest pedestal in the top eight sectors making up the expenditure of the corporate sector on CSR activities in 2015-2016[5].

According to a report published by KPMG in February 2020[6], the 100 largest listed Indian origin companies by market capitalisation (referred in the survey as N100) spent INR 123 crore on sports under CSR in 2018-19 out of a total of 8,691 crores spent on CSR expenditure. Whereas it is an increase as compared to 2017-18 in which the number was just a meagre 120 crores out of a total of 7536 crores.

Between FY 2014 and FY 2019, corporate India only spent INR 795 Crores out of INR 49,600 Crores towards Sports amounting to a meagre 1.6% of the total CSR spent[7].

Amendments to the CSR rules

According to the notification issued by the Ministry of Corporate Affairs, certain amendments have been made in the CSR Rules known as the Companies (Corporate Social Responsibility) Amendment Rules, 2021[8] to modify the present legislative framework and provide a better mechanism for the governance of CSR activities.

Every company under the CSR criteria should constitute a Corporate Social Responsibility Committee with a minimum of 3 or more directors[9]. The new amendments have added new responsibilities upon the members of the committee and the Board of directors such as proper monitoring, evaluating, and reporting on CSR activities and ensure that the funds allocated for CSR are being used in a permitted way.

An annual action plan[10] is to be prepared by the CSR committee in accordance with the CSR policy. The surplus arising out of the CSR projects or programmes or activities of the previous financial years will not be added to the business profit but be carried forward and added to the unutilised CSR fund categories. Through this the companies can actually make a proper annual action plan and incorporate sectors which in the past have been overlooked in their CSR activities and utilise the funds along with the surplus if any in an equally distributive way.

This is one of the ways the Government is trying to ensure that no corners are cut and all the CSR activities are being fulfilled by the various Corporate Companies. One of the main problems in India in the Sports sector has been that of funding and investments from the corporate sector will surely go a long way in providing the athletes or budding athletes with the proper infrastructure, training, equipment as well as other facilities necessary for their proper grooming.

Some companies spend a decent amount of their CSR funds and even more on Indian Sports. For example, Tata Steel which has been consistently involved in creating and nurturing professional Sportspersons through its academies and grassroots feeder centres or reliance foundation’s Young Champs Programme, or Hindustan Zinc’s football programme, etc[11].

Conclusion

Sports in India have a rich history but the awareness nowadays is decreasing and is comparatively low as compared to the past. Therefore, it is important to increase awareness and support the up-and-coming people from rural areas full of talent and aspiration with the imperative that the corporate sector should provide a more sizeable contribution towards sports in India and provide all necessary financial and logistical support to the Indian athletes so that the country can take major strides towards becoming a sporting superpower.

[1] The Companies Act, §135, Act of Parliament, 2013

[2] The Companies Act, §135(5), Act of Parliament, 2013

[3] The Companies Act, Schedule VII (vii), Act of Parliament, 2013

[4] The Companies Act, §135(5), Act of Parliament, 2013

[5] https://indiacsr.in/csr-spending-sports-corporate-india/#:~:text=Promotion%20of%20sports%20in%20the,Paralympic%20sports%20and%20Olympic%20sports.

[6] https://assets.kpmg/content/dam/kpmg/in/pdf/2020/02/india-s-csr-reporting-survey-2019.pdf

[7] https://thecsrjournal.in/top-csr-projects-for-sports-in-india/

[8] https://files.caclub.in/wp-content/uploads/mca-notification-dt-22-01-2021-companies-csr-policy-amendment-rules-2021.pdf

[9] The Companies Act, §135(1), Act of Parliament, 2013

[10] the Companies (Corporate Social Responsibility) Amendment Rules, Rule 5-Sub rule (2), 2021

[11] https://thecsrjournal.in/top-csr-projects-for-sports-in-india/ supra

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