Enhancing CSR, IBC, and ESG Regulations

The 10th report on ‘Demands for Grants (2025-26)’ by the Ministry of Corporate Affairs (MCA) highlights key challenges in Corporate Social Responsibility (CSR), the Insolvency and Bankruptcy Code (IBC), and Environmental, Social, and Governance (ESG) regulations.
 

The report provides crucial recommendations to improve the effectiveness of these frameworks.
 

Key Areas, Challenges, and Recommendations
 

1. Corporate Social Responsibility (CSR)

Issues:

• Gaps in enforcement and monitoring of CSR compliance.
• Lack of detailed evaluation of the effectiveness and impact of CSR spending.
• Unspent CSR Account Mechanism lacks transparency, leading to inefficiencies in fund utilization.

Recommendations:

• Develop a more structured reporting and monitoring system to ensure CSR activities generate measurable impact.
• Introduce regular publication of reports assessing the effectiveness and social outcomes of CSR projects.
• Enforce penalties in a timely manner for non-compliance to strengthen accountability.

 

2. Insolvency and Bankruptcy Code (IBC)

Issues:

• Delays in resolution processes due to conflicts of interest and inconsistent interpretations of IBC provisions.
• Absence of a strong framework for handling complaints against Resolution Professionals (RPs).

Recommendations:

• Implement a centralized online portal for the direct submission of resolution plans, reducing bureaucratic delays.
• Strengthen certification requirements for RPs and conduct independent performance reviews to improve efficiency.
• Revamp the structure of the Committee of Creditors (CoC) to ensure better representation of operational creditors in decision-making.

 

3. Environmental, Social, and Governance (ESG) Regulations

Issues:

• Growing concerns over greenwashing, where companies misrepresent their sustainability efforts.
• Small businesses struggle to integrate ESG practices due to financial and technical constraints.

Recommendations:

• Set up a dedicated ESG oversight body within the ministry to monitor compliance and introduce penalties for greenwashing.
• Amend the Companies Act, 2013, to make ESG objectives part of the fiduciary duties of company directors.
• Create independent ESG committees similar to audit committees, ensuring corporate accountability and transparency.