Corporate Social Responsibility (CSR) Bill, 2024 – Overview
The Corporate Social Responsibility (CSR) Bill, 2024 has been tabled in the National Assembly and circulated by the Securities and Exchange Commission of Pakistan (SECP) for public feedback. This bill is a major legislative step aimed at mandating CSR spending by businesses, banks, and state-owned enterprises (SOEs) in Pakistan, aligning corporate contributions with Sustainable Development Goals (SDGs).
Objective of the CSR Bill
The primary objective of the CSR Bill is to:
- Legalize and enforce CSR contributions from profit-making entities.
- Encourage social, environmental, and economic well-being.
- Promote initiatives aligned with the UN SDGs.
Who Is Affected?
The CSR Bill applies to:
- All profit-making companies, banks, and state-owned enterprises (SOEs) operating in Pakistan.
It does not apply to:
- Section 42 companies (charitable and non-profit organizations).
CSR Spending Requirement
- Companies with an annual turnover exceeding PKR 1 billion must spend at least 1% of their net profit annually on CSR activities.
- Smaller companies will follow regulations to be notified by SECP.
CSR Policy & Governance
All covered entities are required to:
- Create a CSR Policy within 3 months of the Act’s enforcement.
- Form a CSR Committee (minimum 3 directors) to guide and monitor CSR activities.
- Publish the CSR Policy on their official website.
- File the policy with the CSR Commissioner.
- Include CSR disclosures in annual financial reports.
Implementation & Reporting
- Local communities around company operations must be prioritized in CSR initiatives.
The CSR Committee must:
- Recommend CSR projects and monitor implementation.
- Submit quarterly compliance reports to the CSR Commissioner.
- Publish an annual CSR activity report.
Non-Compliance Provisions
If CSR funds are not utilized:
- The company must submit a written explanation to the CSR Commissioner.
- Funds should be deposited into a special account and used within 2 years.
- If unused, funds will be transferred to registered non-profits.
- Penalties may be imposed, up to the value of unutilized CSR obligations.
CSR Commissioner
- Appointed from within the SECP.
- Must possess relevant CSR expertise.
- Responsible for:
- Receiving reports
- Ensuring compliance
- Imposing penalties for violations
Tax Incentives
- CSR expenses are tax deductible under Section 61 of the Income Tax Ordinance, 2001, offering fiscal benefits to compliant businesses.
Rulemaking Authority
- SECP will draft detailed rules within 60 days of the law’s enactment, with the Federal Government’s approval.
- The government also has the power to amend the schedule of allowable CSR activities.
Permissible CSR Activities
CSR funds may be used for:
- Community welfare & poverty alleviation
- Healthcare & sanitation programs
- Education & vocational training
- Environmental sustainability & agroforestry
- Women empowerment & financial inclusion
- Disaster relief & preparedness
- Sports, culture & heritage promotion
- IT and freelancing training centers
- Infrastructure development in rural/slum areas
Conclusion
The CSR Bill, 2024 represents a strategic move to ensure that corporate profits contribute directly to the nation’s sustainable development. It offers a structured framework for companies to give back to society while enjoying tax incentives and enhancing their brand reputation.
The SECP is currently seeking public feedback, and stakeholders are encouraged to participate and help shape this important legislation.