corporate social responsibility role of npo- new professional opportunities with regard to csr...
TRANSCRIPT
Corporate Social
ResponsibilityRole of NPO-
New Professional opportunities with
regard to CSR obligation under
Companies Act 2013.
CA CS Minal Agarwal1
Change “Life does not gets better by Chance
It gets better by Change”
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Long history of philanthropic activities by businesses – was performed but not much deliberated
Dharmadaya since ancient age
Was focussed on building institutions – schools, colleges, hospitals, etc.
Welfare role was largely played by Governments Socialist approach – Private Sector seen as
exploiter High tax rates
Evolution in recent times to include community development
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The TRADITIONAL Concept-CSR “The business of the business is to do business”
was the traditional approach It was initiated with the concept of “ Giving Back” . GIVE-N-TAKE relationship b/w corporate and society-
foundation of CSR started with.
CSR is extremely important for sustainable development of all stakeholders (all the people, on whom the business has an impact, including the society at large).
CSR can be better understood by “corporate conscience”, “corporate citizenship", "social performance”, or ”sustainable business”.
Corporate Social Responsbility
• CSR is the process by which an organization thinks and evolves its Relationship with stakeholders for the Common good
• CSR is not charity or mere donation
• CSR is a way of conducting business, by which corporate entities visibly contribute to the social good
Corporate Social Responsibility
“We only have what we give”
“Businesses cannot be successful when the society around them fails.”
“Basically, our goal is to make sure that when it comes to water and energy, we replenish the environment and leave it in a net zero state.”-Indra Nooyi
Corporate SustainbilityInvesting in FutureFor A
Sustainable Environment
WhereBusiness can GROW
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When The Wind Blows………
“There Are Those Who Build Walls” &
“There Are Those Who Build Wind Mills”
CSR Applicability- w.e.f 1-4-14
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Every Company
(Pub or Pvt)
Net Worth of Rs. 500 Cr or more
Turnover of Rs. 1000 Cr or more
Net Profit of Rs. 5 Cr
or more
During any Financial Year
Shall constitute a Corporate Social Responsibility Committee of the Board consisting of Minimum 3
directors, out of which at least one director shall be an independent director.
CSR Activities Amountified Minimum 2% of the average net profit of last 3
preceding financial years.
“Net Profit” shall mean:
Net profit before tax as per books of accounts.
Shall not include profits arising from branches outside India.
Dividend received from other companies in India which are complying with provisions of Section 135 of the CA, 2013
For the purpose of First CSR reporting the Net Profit shall mean average of the annual net profit of the preceding 3 financial years ending on or before 31 March 2014.
Applicability
• 1st Financial Year – From 1.4.2014 to 31.3.2015
• Applicability to be seen during 2014-15
• If criteria is met, Company must constitute CSR Committee
CSR Committee:Constitution Minimum of 3 directors
At least 1 out of 3 as Independent director.
Exemption to unlisted public companies and private companies which are not required to appoint an independent director from having an independent director in their CSR Committee
Private company and a foreign company: need to have a minimum of 2 members in their CSR Committee.
Board’s Report to disclose composition of CSR Committee.
Functions of CSR Committee:
Formulate and recommend to the Board, a Corporate Social Responsibility Policy which shall indicate the activities to be undertaken by the company as specified in Schedule VII of the Act.
Recommend the amount of expenditure to be incurred on the CSR activities.
Monitor the Corporate Social Responsibility Policy of the company from time to time.
Prepare a transparent monitoring mechanism for ensuring implementation of the projects / programmes / activities proposed to be undertaken by the company.
Contents of CSR Policy Projects and programmes that are to be undertaken
by the company. List of CSR projects planned to be implement in the
current year Implementation schedules for all the CSR
Activities planned. A declaration that surplus arising out of the CSR
activity will not be part of business profits of a company.
A statement that the corpus would include the following:
a. 2% of the average net profits of block of 3 yrs,
b. any income arising there fromc. surplus arising out of CSR activities.
What? Is considered as a CSR Activity:
Activities relating to:—
(i) Eradicating extreme Hunger and Poverty (ii) Promotion of Education (iii) Promoting Gender Equality and Empowering Women (iv) Reducing Child Mortality and improving Maternal Health (v)Combating Human Immuno-deficiency Virus, acquired
immune deficiency syndrome, malaria and other diseases (vi) Ensuring Environmental Sustainability (vii) Employment enhancing Vocational Skills (viii) Social Business projects (ix) Contribution to the Prime Minister's National Relief
Fund or any other fund set up by The Central Government Or The State Governments for socio-economic development and relief and funds for the welfare of the Scheduled Castes, the Scheduled Tribes, other backward classes, minorities and women
(x) such other matters as may be prescribed.
Activities: Not considered CSR Activities not mentioned in Schedule VII CSR Activities outside India. Activities exclusively for the benefit of
employees of the company or their family members.
Activities undertaken in the normal course of business.
Contribution to any political party. One off events such as
marathons/awards/contribution/sponsorship Expenses incurred for fulfillment of any
Act/Law(Labour Laws)
How to do CSR Activities? OWN SETUP-A Company may set up an
organization which is registered as a Trust or Section 8 Company, or Society or Foundation or any other form of entity operating within India to facilitate implementation of its CSR activities in accordance with its stated CSR Policy.
OUTSOURCCED SETUP-A company may also conduct/implement its CSR programmes through Trusts, Societies, or Section 8 companies operating in India, which are not set up by the company itself.
COLLABORATIVE SETUP- Companies may collaborate or pool resources with other companies to undertake CSR activities and any expenditure incurred on such collaborative efforts would qualify for computing the CSR spending.
How to do CSR Activities? OUTSOURCED SETUP-3Yrs Track record: If the
entity through which the CSR activities are being undertaken is not established by the company or its holding, subsidiary or associate company, such entity would need to have an established track record of three years undertaking similar activities.
OUTSOURCED SETUP-5% Of total CSR Expense-A company can build CSR capabilities of its personnel or implementation agencies through institutions with established track records of at least three years, provided that the expenditure for such activities does not exceed 5% of the total CSR expenditure of the company in a single financial year.
Contribution to Corpus of a Trust/ society/ section 8 companies etc. will qualify as CSR expenditure as long as (a) the Trust/ society/ section 8 companies etc. is created exclusively for undertaking CSR activities or (b) where the corpus is created exclusively for a purpose directly relatable to a subject covered in Schedule VII of the Act.
Responsibility of Board of Directors Disclose the composition of the CSR Committee in its
report Approve the Company’s CSR policy after considering the
recommendations of the committee Disclose the CSR policy in its report and on Company
Website Ensure the actual implementation of the policy To spend at least 2% of the Company’s average profit for the
last 3 financial years for this purpose
Manner in which the amount spent project wise clearly mentioning the details pertaining to sector, location of project, budget, expenditure and whether spent direct or through any implementing agency
Give preference to spending in local areas where it operates Specify reasons in report in case of failure
Wrapping up: “comply or explain” Companies Act, 2013 has introduced the concept
of CSR in the Act itself and even though the Act advocates it strongly but it has still prescribed a “comply or explain” approach only.
This means as per the new norms, the 2% spending on CSR is not mandatory but reporting about it is mandatory.
In case, a company is unable to spend the required amount, then it has to give an explanation for the same only, No penalties/fines.
Non-compliance
• For failure to spend prescribed amount on CSR activities:
• Disclosure to be made in the Directors’ report under Section 134(3)(o) of the Act, specifying reasons for not spending the amount.
Non-compliance
Fine/Penalty of Rs.50,000 to Rs.25 Lakhs u/s 134 of Companies Act 2013 if the company fails to specify the reasons for not spending the 2% profit amount for CSR in its Board of Directors Report.
CSR being made mandatory justifies the quote.“It is the duty of the government to make it
difficult for the people to do wrong and easy to do right”.
Less than 1% of total companies are covered under CSR
Total No of Companies Registered in India 13.30 lakhs
Estimated no of companies coming under section 135
8000
Positive Outcomes of CSR• Improved financial performance
• Lower operating costs
• Enhanced brand image and reputation
• Increased sales and customer loyalty
• Greater productivity and quality
• More ability to attract and retain employees
• Reduced regulatory oversight
• Access to capital
• Workforce diversity
• Product safety and decreased liability
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CSR Initiatives - Examples
Tata Consultancy Services
The Adult Literacy Program (ALP) was conceived and set up by Dr. F C Kohli along with Prof. P N Murthy & Prof. Kesav Nori of TCS in May 2000 to address the problem of illiteracy. ALP believes illiteracy is a major social concern affecting a third of the Indian population comprising old and young adults. To accelerate the rate of learning, it uses a TCS-designed Computer–Based Functional Literacy Method (CBFL), an innovative teaching strategy that uses multimedia software to teach adults to read within about 40 learning hours.
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CSR Initiatives - Examples ITC Limited
ITC partnered the Indian farmer for close to a century. ITC is now engaged in elevating this partnership to a new paradigm by leveraging information technology through its trailblazing
'e-Choupal' initiative. ITC is significantly widening its farmer partnerships to embrace a host of value-adding activities: Creating livelihoods by helping poor tribals make their
wastelands productive; Investing in rainwater harvesting to bring much-needed
irrigation to parched dry lands; Empowering rural women by helping them evolve into
entrepreneurs; and Providing infrastructural support to make schools exciting
for village children.
Through these rural partnerships, ITC touches the lives of nearly
3 million villagers across India.
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CSR Initiatives - Examples
CISCO System Inc.
The company pursues a strong “triple bottom line” which is described as profits, people and presence. It promotes a culture of charitable giving and connects employees to nonprofit organizations serving the communities where they live. It invests its best-in-class networking equipment to those nonprofit organizations that best put it to work for their communities, eventuating in positive global impact. It takes its responsibility seriously as a global citizen. Education is a top corporate priority for Cisco, as it is the key to prosperity and opportunity.
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CSR Initiatives -ExamplesSuccessful companies allocate resources to ensure well being of stakeholders which also enables the company to acquire a key differentiator vis-à-vis its competition, thereby making the business sustainable. Tata Chemicals and HUL pioneered iodization of salt to combat iodine deficiency. Their market campaign to change the mindset of BPL customers to pay a little extra for the pack of iodized salt was clearly laudable. These efforts not only increased their market share and profitability but at the same time addressed an important nutritional issue of national importance.Hindustan Unilever (HUL), for example, invests in research working with nutrition and health specialists to further improve its “ready to eat” food business, enhance hygiene through its “regular hand wash” campaign, etc. These initiatives not only position its products distinctively against the competitors and enhance brand equity, but also ensure well being of customers.
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CSR Initiatives - Examples
Socially responsible initiatives has potential to improve employability in the society and at the same time provide companies access to skilled labor, a key driver of profitability across many industry sectors.Maruti has recently adopted forty Industrial Training Institutes (ITI) which not only enhances skill level of youth making them employable, but also guarantees supply of skilled personnel to Maruti. Similar investments in skills development training are made by companies like Microsoft, Infosys, Tata Steel and L&T.
Rather than paying donations, using core strengths to address social issues is the best form of sustainable corporate social responsibility.
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CSR LAWS IN INDIA National Voluntary Guidelines for Social,
Environmental and Economic Responsibilities of Business (NVG) 12th July 2011Given by Ministry of Corporate Affairs – India
Business Responsibility Reports (BRR) – SEBI - mandated the top 100 listed companies of BSE & NSE to report under the BRR Aug 13, 2012 added clause 55 to listing agreement
Section 135 w.e.f 1st April 2014 Companies Act, 2013 (India)
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Clause 55 of listing agreement
Business Responsibility Report – Suggested Framework
ESG-Environmental-Social- Governance perspective
Section A: General Information about the Company
Section B: Financial Details of the Company Section C: Other Details Section D: BR Information
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Clause 55 of listing agreement Section E: Principle-wise performance
Principle 1: Businesses should conduct and govern themselves with Ethics, Transparency and Accountability
Principle 2: Businesses should provide goods and services that are safe and contribute to sustainability throughout their life cycle
Principle 3: Businesses should promote the wellbeing of all employees
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Clause 55 of listing agreement Section E: Principle-wise performance
Principle 4: Businesses should respect the interests of, and be responsive towards all stakeholders, especially those who are disadvantaged, vulnerable and marginalized.
Principle 5: Businesses should respect and promote human rights
Principle 6: Business should respect, protect, and make efforts to restore the environment
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Clause 55 of listing agreement Section E: Principle-wise performance
Principle 7: Businesses, when engaged in influencing public and regulatory policy, should do so in a responsible manner
Principle 8: Businesses should support inclusive growth and equitable development
Principle 9: Businesses should engage with and provide value to their customers and consumers in a responsible manner
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Great role of International business and trade agencies to ensure compliance by multinational corporations working in different geographies
EC: European Commission ILO: International Labour Organisation ISO: International Organisation for Standardisation OECD: Organisation for Economic Co-operation and
Development UNGC: United Nations Global Compact UNIDO: United Nations Industrial Development Organisation WBCSD: World Business Council for Sustainable
Development
Convergence of concept of CSR with concept of Sustainability
Forms the guiding principle to developing world
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UN Guiding Principles on Business and Human Rights Focus on human rights and fundamental freedom
ILO’s tripartite declaration of principles on multinational enterprises and social policy
Labour welfare, industrial relations, no discrimination
Institute of Social and Ethical Accountability: AccountAbility’s AA1000 series of standards
Inclusivity, materiality and responsiveness
Social Accountability International (SAI) SA8000 Standard
Human rights of workers 695 facilities in India have adopted this Standard including Bhilai
Steel Plant, Dr. Reddy’s
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OECD Guidelines: Multinational enterprises and CSR Policy Tool
employment, human rights, environment, information disclosure, combating bribery, etc.
ISO 26000: Social responsibility Holistic approach: human rights, labour practices, environment,
fair operating practices, consumer issues, community involvement and development
UN Global Compact Self-Assessment Tool In line with the UN Guiding Principles on Business and Human
Rights
Social Return on Investment Network framework based on social generally accepted accounting
principles (SGAAP)
London Benchmarking Group model Assessment of impact of community investment to both business
and society
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OpportunitiesPlethora of new opportunities for CA with CSR
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Professional OpportunitiesAnother great opportunity for the
professionAdvisory on CSR activities to be taken upselection of agencies through which the
activities could be undertakenMonitoring and audit of CSR spends…Formation of NPO for CSR outsourcingAudits of these NPO Sector.Fund raising Project Reports by NPOFaculty/Consultant/Freelancer CSR expert
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CSR-Managers CSR MANAGERS- A global- in house
department & designation…Industry opportunity.
how to strategically include CSR within their business goals
leading and educating their enterprise regarding the importance of CSR
goals of becoming a socially and environmentally responsible firm – one which reduces it’s negative and enhances its positive impacts on society and the environment.
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CSR - PROFESSIONAL OPPORTUNITIES
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DEVELOPING WORK IN CSR Writing articles in CSR related magazines and other publications
Participating as speaker in conferences Communicating with people related to CSR
activities Building a CSR information website Writing books on topics covered under CSR Projecting oneself as a CSR Expert Reaching out to the prospective service receivers Using social media to reach more number of
people related to CSR Increase expertise in the field of CSR by
undertaking capacity building initiatives
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Companies around the globe beginning to assess their social performance and report the results of those assessments as a means of demonstrating their commitment to social responsibility
Social auditing is the process of assessing and reporting a business’s performance on fulfilling the economic, legal, ethical and philanthropic social responsibilities expected of it by its stakeholders
Helps companies to assess performance of their social initiatives and take corrective action to maximize the social impact
Focus on Human Rights, Labour Practices, Environment, Ethics, Consumer issues, community involvement and development
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<IR> pioneered by International Integrated Reporting Council, London is a process founded on integrated thinking that results in a periodic integrated report by an organization about value creation over time and related communications regarding value creation
Companies like Unilever, HSBC, Deutsche Bank, Hyundai, Microsoft, PepsiCo, National Australia Bank and Tata Steel are among over 100 businesses in the IIRC Pilot Programme
Recognition of “Social and Relationship Capital” and “Natural Capital”
Covers People, Planet, Profit, Governance and Strategic Management
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"There's enough in the world to meet the needs of everyone but there's not enough to meet the greed of everyone".
……Mahatma Gandhi
Thank You-Be in TouchCA CS Minal Agarwal
+91-9818039002www.camkagarwal.comwww.professionaltimes.org
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