The government is going to make arrangements to prevent industrial enterprises from spending the amount of 'Corporate Social Responsibility (CSR)' themselves. The government is going to bring in a provision to centralize the amount allocated for CSR by industries, banks and financial institutions in a specific fund. The government itself is preparing to spend this amount on the basis of priority in the specified areas. 

'CSR' is mentioned in the '100 Agenda for Government Reforms' approved by the Council of Ministers led by Balendra Shah on Chaitra 13. Point No. 68 of the agenda states, 'Arrangements will be made to centralize the CSR amount of industrial enterprises and mobilize it in priority areas through the fund specified by the Government of Nepal, and the work of amending and creating the necessary laws for this will be completed within three months.' Two months have passed since the agenda was issued. 

The Ministry of Industry, Commerce and Supplies is making internal preparations for centralizing the amount of CSR. Private sector industries and enterprises, banks and financial institutions, and private sector umbrella organizations have opposed this initiative of the government. 

Anjan Shrestha, President of the Federation of Nepalese Chambers of Commerce and Industry, said that the private sector should be allowed to spend the CSR money itself by setting certain standards. Anjan Shrestha, President of the Federation of Nepalese Chambers of Commerce and Industry, said that the private sector should be allowed to spend the CSR money itself by setting certain standards. ‘Wherever there is an industrial establishment, the fund money should be used for the benefit of the local society,’ he told Kantipur. ‘We are ready to work in coordination with the local level. The state has many of its own funds, which have not been spent in the past. CSR money should not be kept as another fund.’

In the 1990s, international standards on corporate social responsibility began to be issued after there was a call for creating legal obligations by multinational companies, keeping in mind the impact they could have on the lives of citizens of underdeveloped countries. After the UN Human Rights Council unanimously adopted the ‘UN Guiding Principles on Business and Human Rights and the Three Pillars of Protect, Respect and Remedy’ document in 2011, legal compliance guidelines for corporate social responsibility have begun to emerge at the international level. 

In Nepal, Section 54 of the Industrial Business Act, 2076 BS, stipulates that medium and large industries or small and medium-sized industries with an annual turnover of more than Rs 150 million must allocate at least one percent of their annual net profit in each fiscal year for the purpose of fulfilling their corporate social responsibility. It is stated that this amount must be spent in the areas specified in the annual plan and program. This must be submitted to the relevant industry registration body within 6 months of the end of each fiscal year. Provision has been made for the amount allocated for corporate social responsibility to be deductible for income tax purposes. The Industrial Regulations have made provision for investment in skill-based and income-based programs for low-income, backward, rural women, people with disabilities, and minorities and marginalized communities. 

On 22 Baisakh 2082, the Ministry of Industry, Commerce and Supplies had issued the Professional Social Responsibility Implementation Procedure-2082, stating that ‘to strengthen the industrial environment by making the professional social responsibility to be fulfilled towards the community, consumers, workers, environment and other stakeholders systematic, transparent, predictable and productive’.

This procedure has made provision for specifying the areas to be spent and for spending at least 50 percent of the amount in the areas directly affected by the industry, as agreed upon by the local level. It has been made provision for preparing an action plan including the minimum amount allocated to be spent in such designated areas, the areas to be spent, the cost of the programs and activities, and the period for completion of the programs and activities and submitting it to the department. In addition, the details of the expenses under the professional social responsibility of the previous fiscal year must be submitted in the annual audit report of the industry. 

Private sector entrepreneurs are accused of misusing it by giving donations or 'charity' to people they know and those in influential groups in the name of corporate social responsibility. Private sector entrepreneurs are accused of misusing it by giving donations or 'charity' to people they know and those in influential groups in the name of corporate social responsibility. Birendra Raj Pandey, President of the Confederation of Nepalese Industries (CNI), said that effective monitoring and surveillance should be carried out to control misuse. 'We are spending one percent of the tax-paid profits to promote the local community. This is also an international practice. If someone misuses it, there is a method to investigate,' he said, 'We should set limits on which sectors to invest in.'

The 'Guidelines on Corporate Social Responsibility of Banks and Financial Institutions 2082 (First Amendment)' issued by the Rastra Bank states that the expenditure made by banks and financial institutions under CSR should be transparent, effective and purposeful. ‘While mobilizing the CSR fund, priority should be given to the welfare and upliftment of communities living in extreme poverty, including those below the poverty line,’ the procedure states. ‘As soon as the financial statements of each fiscal year are approved, institutions should make arrangements to spend at least 60 percent of the amount accumulated in the fund from profits within the same fiscal year.’ 

As per the directives of the Nepal Rastra Bank, banks and financial institutions should spend at least one percent of their net profit on CSR. Last year, only 20 commercial banks made a profit of 71.51 billion. Accordingly, this year, these institutions should spend 715.1 million on CSR. In addition, if the profits earned by development banks, finance companies, and microfinance financial institutions are added, the amount to be spent on CSR is even higher. The overall profit of the industry sector has not been confirmed. 

Spokesperson of the Nepal Rastra Bank, Guru Prasad Poudel, said that guidelines have been prepared to allow the spending of CSR funds as per the order of the Supreme Court. ‘The government should look positively at the issue of enacting laws. It can be more effective to integrate and create a single fund. A large amount of money can be created,' he said, 'We have already sent a circular to implement the demand statement as per the order of the Supreme Court.' 

On 17 Mangsir 2081, a joint bench of Supreme Court judges Hari Prasad Phuyal and Nripadhwaj Niraula had issued a directive order in the name of the government not to spend the money accumulated in the CSR fund on large development projects. The Supreme Court has ordered that the amount that should be allocated in the fund for the upliftment of the poor, disadvantaged and targeted groups should be spent only on them. The latest Nepal Living Standards Survey has shown that 20.27 percent of the population in Nepal is in poverty. Among them, the Supreme Court has ordered that such money should be spent on housing, education, health, children, women's upliftment and other areas necessary for a minimum human life.

There is an international practice that has been taken forward as a legal compliance by companies by keeping the concept of corporate social responsibility under institutional good governance. The UK Companies Act, 2006, specifies areas for the benefit of the environment and the community as part of the responsibilities of company directors. 

There is an international practice where the concept of corporate social responsibility is taken forward as a legal compliance by the company under corporate governance.  India's Companies Act, 2013 states that at least two percent of the average net profit of the last three years should be spent on various headings of social responsibility. For this, 12 priority areas including poverty, hunger, malnutrition, gender equality, rural development, education and health, environmental protection, national heritage conservation, and rural sports promotion have been identified. China's Companies Act, 2006 emphasizes the need to fulfill social responsibility by adhering to social ethics and business ethics. 

According to advocate Semant Dahal, it is not appropriate to separate the CSR amount from the company. 'Only in South Asia is there a practice of allocating a certain amount of CSR. This is the amount allocated after paying taxes on the income earned by the company concerned. The government cannot be the owner of this amount,' he said, 'instead, the government should determine the area where CSR investment is recognized. And, it should be paid attention to in effective auditing.'

During the hearing of a writ petition filed to regulate the amount of corporate social responsibility, the Supreme Court had formed a study team including the petitioner and the respondent Nepal Rastra Bank. The team had submitted a report to the Supreme Court stating the need for an umbrella act to address corporate social responsibility. "An umbrella act is necessary to instill consumer confidence in industrial enterprises, to include even companies that earn a certain profit under the concept of corporate social responsibility, to ensure national interest, product safety, protection of consumer rights, control of industrial pollution, sustainable strengthening, stable and healthy economic growth, to manage the amount spent under corporate responsibility for hunger reduction, and to achieve the goals set in the long-term development goals 2019-2030, including poverty alleviation," the report states.