The Ministry of Corporate Affairs (MCA) has released its 10th Report on Demands for Grants for the fiscal year 2025-26, highlighting significant challenges and proposing comprehensive reforms in three critical areas: Corporate Social Responsibility (CSR), the Insolvency and Bankruptcy Code (IBC), and Environmental, Social, and Governance (ESG) regulations.

Corporate Social Responsibility (CSR): Enhancing Accountability and Impact

The report identifies persistent issues in CSR compliance, including:

• Gaps in enforcement and monitoring mechanisms.

• Lack of detailed evaluation of the effectiveness and impact of CSR spending.

• Insufficient transparency in the Unspent CSR Account Mechanism, leading to inefficiencies in fund utilization.

Recommendations:

• Develop a 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.

These measures aim to ensure that CSR initiatives are not just statutory obligations but contribute meaningfully to societal development.

Insolvency and Bankruptcy Code (IBC): Streamlining Resolution Processes

The report highlights several challenges in the implementation of the IBC:

• Delays in resolution processes due to conflicts of interest and inconsistent interpretations of IBC provisions.

• Absence of a robust 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.

These reforms are expected to enhance the efficiency and fairness of the insolvency resolution process.

Environmental, Social, and Governance (ESG) Regulations: Building Sustainable Business Practices

The report points out the following issues in ESG compliance:

• Persistent risk of greenwashing, where companies misrepresent their environmental practices.

• Small businesses face difficulties in adopting ESG practices due to resource constraints.

Recommendations:

• Create a dedicated ESG oversight body within the ministry to ensure compliance and introduce penalties for greenwashing.

• Amend the Companies Act, 2013 to include ESG objectives as fiduciary duties of directors.

• Establish independent ESG committees, similar to audit committees, to oversee ESG initiatives.

These steps aim to integrate ESG considerations into the core governance structures of companies, promoting sustainable and responsible business practices.

Implications for Businesses

The proposed reforms signal a shift towards greater accountability and transparency in corporate governance. Companies are encouraged to:

• Reassess and strengthen their CSR strategies to align with measurable social outcomes.

• Ensure compliance with IBC provisions and actively participate in the resolution process.

• Integrate ESG considerations into their business models and governance frameworks.Ensure IAS

By proactively adopting these recommendations, businesses can enhance their reputation, attract investment, and contribute to sustainable economic growth.