Corporates free to choose CSR activities: Sachin Pilot

Press Trust of India

NEW DELHI: Corporate Affairs Minister Sachin Pilot today said the industry would be free to choose CSR programmes and strategies best suited to their company’s philosophy and businesses.

Speaking at the ‘National Summit on CSR’ organised by industry body CII here, Pilot said the government would adopt a “flexible approach” on CSR (Corporate Social Responsibility) which is now part of the new companies law.

“Industry would be free to choose programmes and strategies best aligned to their corporate philosophy and businesses,” he said.

Further he assured the industry that the government would “not apply any rules with retrospective effect”.

According to Pilot if CSR spending reaches the desired objective one would be able to see tangible results.

In monetary terms, it is estimated that the CSR provision would lead to anything from Rs 19,000-25,000 crore annual investment in the country’s social sector.

Talking about CSR, Ministry of Corporate Affairs Additional Secretary M J Joseph said that “when it came to embedding CSR into business strategy, the execution and mainstreaming of strategy was of paramount importance.”

CII National Council on Development Initiatives Chairman Rakesh Bharti Mittal said that government norm mandating three-year track record required for an NGO or foundation to receive funding be relaxed in the event that a foundation belongs to a reputed company.

The new Companies Act makes it mandatory for profit making companies reporting Rs 5 crore or more profits in the last three years to spend at least 2 per cent of their average profits towards CSR activities.

Religious Contributions by Corporates Not CSR Activity: Sachin Pilot

NEW DELHI: According to the new Companies Bill 2012, companies with a net worth of Rs.500 crore or more, a turnover of Rs.1,000 crore or more or a net profit of Rs.5 crore or more in a financial year are mandated to pay 2% of their profit towards CSR.

Corporate Affairs Minister Sachin Pilot on Friday said religions contributions by corporates should not be considered as corporate social responsibility (CSR) activity.

“Religious contributions by corporates should not be considered as CSR. For a corporate entity to do religious donations… I don’t think it constitute a part of CSR,” he told reporters on the sidelines of an interactive session with industry honchos organised by the Confederation of Indian Industry.

According to the new Companies Bill 2012, companies with a net worth of Rs.500 crore or more, a turnover of Rs.1,000 crore or more or a net profit of Rs.5 crore or more in a financial year are mandated to pay 2% of their profit towards CSR.

This provision has led to considerable discussion in the corporate sector regarding its pros and cons.

“Certainly, we will make some broad guidelines about what are the things which will be considered as CSR, but it is upto the companies to decide. The boards of the companies have to give approvals to these and it should be put up on the website of the companies for public view,” Pilot said.

While interacting with the industry members earlier, he said out of a total 800,000 companies in the country, around 15,000 companies in India will qualify for CSR activities.

“With CSR being made mandatory, we do not want corporates to spend money on it grudgingly. We want the companies to come forward to contribute in nation-building. It is not about the quantum of money, it is about being part of the social and economic development of the country,” he added.

Pilot said the CSR activities of the companies should be approved by their respective boards. “This will be as open-ended as possible.”

The industry leaders who attended the interactive session were Adi Godrej, chairman, Godrej Group; Kris Gopalakrishnan, executive vice-chairman, Infosys; Kiran Mazumdar Shaw, chairman and managing director, Biocon Limited; Rahul Bajaj of Bajaj Electricals; and Rajive Kaul, chairman, Nicco Corporation, among others.

Regarding the ongoing Tata-Unitech issue, where the Serious Fraud Investigation Office has questioned the purpose of the Rs.1,700 crore deal in 2007 between the Tata Group and Unitech, Pilot said the report will come out in the next few days.

(IANS)

Companies to Have Freedom to Choose CSR Activities, Says Sachin Pilot

NEW DELHI: Corporates would have discretion to decide on what can be considered as CSR activities under the new Companies Act, Union Minister Sachin Pilot said today.

Under the Companies Act, 2013, certain class of entities are required to shell out two per cent of their three-year average annual profit towards corporate social responsibility (CSR) activities.

Describing CSR as a new idea being included in the legislation, Pilot said the Ministry is giving only suggestive items regarding such activities.

The Schedule VII of the Companies Act provides a list of activities which may be considered as CSR. The schedule also mentions that “other matters as may be prescribed” could be CSR work.

Referring to this schedule, Pilot said that he was going to replace ‘as may be prescribed’ to “as the company deems fit”.

“I can’t be more liberal than that,” he told a gathering of businessmen here.

Pilot, who was instrumental in pushing the new Companies Act as Corporate Affairs Minister, said that CSR norms would be framed in a transparent manner and kept as “open ended as possible”.

His comments came at an event organised by industry body CII against the backdrop of some corporate leaders raising concerns about the idea of CSR in the new legislation.

Noted industrialist Rahul Bajaj expressed some concerns about certain aspects of the Companies Act including those related to CSR and rotation of auditors.

“To me CSR is the least important…,” Bajaj said. Certain class of profitable companies are required to spend two per cent on CSR activities as per the new legislation. This would be applicable for corporates with turnover of Rs 1,000 crore and more, or net worth of Rs 500 crore and more, or a net profit of Rs 5 crore and more.

Among the activities for CSR under Schedule VII are reducing child mortality and improving maternal health and contribution by companies to the Prime Minister’s National Relief Fund or any other fund set up by the central or state government for socio-economic development.

“The success of this (CSR) would depend on how this is received by the Indian corporates. I am open to all suggestions,” the Minister said.

Pilot also stressed that religious donations does not look like CSR.

Going by estimates, the annual CSR spending by companies is expected to be around Rs 15,000-20,000 crore.

The Ministry is in the process of making rules for implementation of the new Act.

(PTI, 4 Oct 2013)

A CSR more capacious

By Usha Rai

The private sector also needs to adopt a corporate disability policy for inclusion of the differently abled in the workforce.

There are an estimated 3,000 NGOs or civil society organisations working with people with various disabilities in the country. There is, however, no clarity on the number of differently abled — estimates vary from 2.19 per cent of the population (Census 2001) to World Bank and WHO figures of 10 per cent of the population in developing countries. This is a huge human resource whose potential needs to be tapped. With a broad spectrum of disabilities, this is also a sector that needs a lot of monetary and moral support to make them equal partners in development.

However, the new Companies Act seems to have left out disabilities from the mandatory 2 per cent CSR spending of corporation whose net worth is over Rs 500 crore, or those making a profit of over Rs 5 crore a year. It could, however, merely be a listing omission, because marginalised groups have been included.

The National Trust for Disabilities is lobbying for the inclusion of disabilities as a separate category. Though the government has been steadily increasing its budget for disabilities, since it is a state subject, the responsibility of caring for this segment lies with the states. The brunt of caring, nurturing and promoting those with disabilities lies with civil society. Since disability is not a standalone issue but a multi-sectoral, cross-cutting one, hopefully it will be possible to access CSR even before its inclusion as a separate entity.

As Poonam Natrajan, who heads the National Trust, points out, people with disabilities need the same resources as non-disabled people, in terms of schooling, livelihood or residential facilities. They need reasonable accommodation and specific supports. They also need a barrier-free environment. Above all, they need a ramping up of attitudes. People need to include disabled people in all institutions. The accommodations and specific supports may cost a bit, but they are reasonable amounts. So, supporting people with disabilities is more about attitude than money.

One problem is that most NGOs work for specific disabilities. This leads to a kind of a specialisation, perhaps even a ghettoisation. Of late, organisations for disabled persons that work across disabilities have been coming up. However, even here, intellectual and development disabilities, as well as other neurological disabilities and mental illnesses, get left out.

The bigger problem is getting CSR support for the challenged in rural areas, where a sizeable population lives, often cutoff from schooling, health and other facilities available in urban centres. In these areas, they have little to no access to government programmes. Most of the funding comes from foreign donors, unless there is a company adjacent to a rural area. Most work in rural areas focuses on education, water and sanitation. It is important that such programmes be inclusive, responsive and sensitive to the needs of persons with disabilities.

Corporations involved with disabilities per se include ITC, Infosys, Mphasis, Ashok Leyland, Lemon Tree Hotels, Engineers India Limited, ONGC, SAIL, Ascendas and Wipro. CII and FICCI also have included disability in CSR. The Amar Jyoti Charitable Trust in Delhi, which has been running an integrated school for the able and challenged since 1981, gets sporadic support for various events.

Getting jobs for the differently abled has been a major challenge despite the 3 per cent reservation mandated by the 1995 Persons with Disabilities Act in identified government jobs. The reservation is never fulfilled. Recently, the Supreme Court ruled that the 3 per cent reservation has to be earmarked across Group A, B, C and D posts in entities established by or owned and controlled by Central, state governments and local authorities. In three months, vacancies have to be computed and posts for disabled identified.

As far as the private sector is concerned, the act suggested incentives to ensure that persons with disabilities comprised at least 5 per cent of the workforce. Subsequently, the Centre announced an incentive policy, but it is not clear how many corporations took up the government’s offer. However, recently, the minister for social justice and empowerment, Kumari Selja, wrote to the minister of corporate affairs, Sachin Pilot, to ask the private sector to adopt a corporate disability policy for the inclusion of the differently abled in their workforce. It’s heartening to hear of several differently abled people getting jobs due to their excellence and hard work. Employing such people cannot be claimed as CSR. Companies such as Infosys, Mphasis, Vinyas Innovative Technologies Pvt Ltd and IBM are equal opportunity employers and have employed many people with disabilities. The list is growing, but not fast enough.

(The writer, a veteran journalist formerly with ‘The Indian Express’, writes on development issues)

(Article First Published in INDIAN EXPRESS, 15 October 2013)

From CSR to shared value – the new competitive advantage for businesses

“Business is the only institution in the world that can provide value to the society and environment,” said acclaimed professor  Porter of Harvard University, during his keynote address at Institute for Competitiveness Porter Prize Strategy Awards. The Awards took place on October 11 in Gurgaon.

It is believed that a business is run only to make money, but the fact is that it has evolved and is able to contribute more to social and environmental issues than the Government or NGO.

Lack of funds to resolve societal challenges, along with traditional ways of dealing with these problems not working anymore, businesses are meeting the needs by creative thinking; they are working harder to show they care. Businesses are places where prosperity has to be created, and as they stand aware today, with sustainability as the prime issue.

The traditional way a business contributed to the society was through philanthropy or CSR (Corporate Social Responsibility). “CSR is a part of the business, which is run on the side of the main business and thus, does not make much impact. The most powerful way in which a business can make an impact is through an evolved business model, where business makes profit by meeting societal and environmental needs. And this gives birth to the ‘shared value’ proposition,” said Porter.

If businesses invent products according to social needs, with a business model in place, it can resolve problems. Many companies might believe that their CSR does the same, but there is a difference. The concept of shared value can be defined as policies and operating practices that enhance the competitiveness of a company while simultaneously advancing the economic and social conditions in the communities in which it operates. Shared value creation focuses on identifying and expanding the connections between societal and economic progress.

There are numerous ways in which addressing societal concerns can yield productivity benefits to the firm. For example, when a firm invests in a wellness programme, society benefits because employees and their families become healthier, and the firm minimises employee absences and lost productivity. Porter believes that businesses can make profound money by shared value.

Companies resisted efforts towards societal improvements as they thought that it might affect their profits, but with more studies about these issues, we learn that the solutions to such problems do not ask for a profit compromise. Businesses need to decide their focus in order to create shared value effectively, which is slowly becoming the new competitive advantage for businesses.

(Sourced from Exchange4Media.com)

Restricting spend methods to make complying with CSR difficult

NEW DELHI: Pitching for broadening the areas for social welfare spending, CII today said corporates would find it difficult to comply with new CSR norms if methods of expenditure are restricted.

As per the new Companies Act, activities that would fall under CSR net include reducing child mortality and improving maternal health, combating human immunodeficiency virus, acquired immune deficiency syndrome, malaria and other diseases, ensuring environmental sustainability, employment enhancing vocational skills and social business projects.

Certain class of companies are required to shell out at least two per cent of their three-year annual average profit towards social welfare activities.

Companies will face difficulty in spending 2 per cent of their profits towards CSR activities if areas and methods of this expenditure will be restricted, a CII survey today said.

As per the new Companies Bill, which was approved by Parliament after a long wait on August 8, requires companies to shell out two per cent of three-year average annual profit towards Corporate Social Responsibility (CSR) activities.

The survey said that strengthening or creation of new institutions, research, debate and on ground action should be qualified as CSR spends.

“…companies find it difficult to exhaust this (2 per cent) budget if areas and methods of spends are restricted,” it said.

On making it mandatory for the companies to spend on CSR activities, it said that it was too early to tell whether making sustainability a core aspect of businesses would happen through mandatory regulatory frameworks or voluntary efforts.

“Perhaps, a middle path is the most pragmatic and effective solution,” it suggested.

The Business Responsibility India Survey 2013′ found that about 75 per cent of the 200 companies surveyed have already incorporated business responsibility (BR) into purchasing policy or supplier code of conduct.

It said that about 25 per cent of the companies are spending at least 2 per cent of PAT on CSR activities.

“Women are under-represented at the workplace. Women employees account for less than 10 per cent for more than half of the top 200 companies,” it added.

(PTI)

CSR to make available 50,000 more jobs in the sector: Experts

Around 8,000 companies will fall under the Companies Act’s ambit and this in turn will open a host of new job opportunities

Compulsory corporate social responsibility is likely to increase the demand for professionals in this field by as much as 50% in the coming years and the industry is likely to see at least 50,000 more job opportunities in the CSR sector, experts say.

Around 8,000 companies would fall under the Companies Act’s ambit and this in turn would open a host of new job opportunities for individuals looking to work in the social development field.

At present, the CSR work of a company is mostly done by corporate communications team but with this law, many firms would have to build a strong team of around five-six people for the purpose.

According to leading executive search firm GlobalHunt MD Sunil Goel, “the demand for CSR professionals will surge 50-60% and we may have to train fresh hands to fulfil this need of the industry”.

Echoing similar sentiments, DLF Foundation CEO Rajender Singh said, “some of the demand for CSR professionals is likely to be filled with internal placement. However, the industry is likely to see at least 50,000 more job opportunities in the CSR sector”.

According to experts, the social sector is already a popular option and has low entry barriers and going forward, a lot of people could explore CSR as a career option.

“CSR should see a spurt in career opportunities. But the real growth would be in effective CSR management agencies which would require a combination of management and CSR experts,” Ashwajit Singh, Chairman and MD, IPE Global, a management consultancy company for development sector, said.

According to Changeyourboss.Com CEO Bhupender Mehta: “Big or small, every company makes efforts towards corporate social responsibility with intention of giving something back to the society and with this law, the number of people exploring CSR as a career option will go up for sure.”

Select companies would have spend two% of their average profit over the last three years for CSR.

This would be applicable to firms having turnover of Rs 1,000 crore or more, or with net worth of Rs 500 crore and above, or entities having net profit of Rs 5 crore and more.

Experts, however, believe that NGO’s may not be the target to build the CSR team, and many institutes such as TISS and XISS have trained talent that can be hired through campus placements for the purpose.

They say people with experience in projects management in organisations like UNDP can also be invited to join the teams.

“For the companies who will be honestly getting into this for the first time will not poach employees from NGOs, but may look at some sort of tie-ups to avoid the hassles of making the numbers,” Prisma Global Executive Director and COO Amitabh Roy Chowdhury said.

(PTI)

India Inc pitches for widening scope of CSR

India Inc wants activities like public awareness ads, gainfully employing skilled professionals to be included under CSR.

NEW DELHI: Financial Express reported that India Inc wants activities including public awareness advertisements, gainfully employing skilled professionals, and contribution to local governing bodies for public causes to be included under corporate social responsibility (CSR), as defined under the Companies Act, 2013.

Apart from the expansion of the list of activities, corporates also want provision for carrying forward the unspent money set aside for CSR, a government official told The Indian Express.

The suggestions are a part of the comments received by the corporate affairs ministry on the rules for CSR under the recently-passed Companies Act, 2013. The Bill was passed by the Rajya Sabha and received President Pranab Mukherjee’s assent in August.

According to the Act, companies should ensure an expenditure of two per cent of the average profit of the preceding three years on CSR activities, failing which, they will have to disclose reasons in their annual report.

According to the proposed rules, activities relating to eradicating extreme hunger and poverty; promotion of education, gender equality and empowerment of women; reducing child mortality and improving maternal health; combating HIV-AIDS, malaria and other diseases; ensuring environmental sustainability, employment enhancing vocational skills; and contribution to the Prime Minister’s National Relief Fund or any other Central or state fund would be considered as CSR activity under the Act.

“Corporate bodies have suggested that the ministry should allow contribution to municipal corporation for public cause, like combating dengue, to be considered as CSR. Another suggestion is that in cases where corporates are funding non-governmental organisations and company employees also benefit from it, it should be called CSR activity,” the official said.

The ministry officials along with officials of Indian Institute of Corporate Affairs would meet in the second week of this month to finalise the rules. In total, the ministry has received around 27,000 comments for rules for all the Sections of the Act, with around 2,000 comments for CSR alone.

Companies have also sought clarity on whether the Section 25 companies or charitable organisations set up by them would be included towards CSR. The major area of concern, however, among all corporates, is taxation.

“Around 60-70 per cent suggestions, queries and comments received are on taxation. First, they want CSR to be considered as expenditure in profit and loss account. The other suggestion is a tax holiday on such activities,” the official said. While some of these recommendations like carrying forward unspent money are being considered by the ministry, those like providing suitable employment to underemployed skilled professionals like doctors, chartered accountants and engineers may not, the official added.

List of activities

* Inclusion of public awareness campaigns

* Gainfully employing skilled professionals

* Section 25 companies

* Contribution to local governing bodies for public causes

* Provision of carrying forward unspent amount

(Financial Express, 5 November 2013)

Career in CSR: The CSR Advantage

With corporate social responsibility being made mandatory, will students in the social service sector stand to gain?

Are businesses all about making profits or does contributing to social good fit into the picture?

Whatever the stance of corporates, the new Companies Act 2013 urges them to actively take up social causes, by making corporate social responsibility (CSR) statutory.

The new act stipulates that at least two per cent of average net profits in three immediately preceding financial years must be spent annually on CSR.

This is applicable to companies with net worth of Rs. 500 crore or turnover of Rs. 1,000 crore or net profit more than Rs. 5 crore in any financial year. They are also required by law to form a CSR committee to frame and implement policy.

If companies are to kickstart new or augment existing CSR activities seriously, career opportunities for those in the social sector are bound to open up, sooner than later.

According to recent media report, compulsory corporate social responsibility is likely to increase the demand for professionals in this field by as much as 50% in the coming years and the industry is likely to see at least 50,000 more job opportunities in the CSR sector.

Globally,Corporate Social Responsibility and Corporate Sustainability and Responsibility (CSR) has evolved from a buzzword to standard business practice and organization are integrating CSR in the core business strategic. It has said that CSR can become a key differentiator as hard core business practice for firms and can lead to improved profitability and sustainability.

While a centre affiliated to the Mysore University has recently launched an MBA in CSR, students of Human Resource Management, Master of Social Work (MSW) and even those with a background in rural or environment development may stand to gain.

The Indian Centre for CSR (ICCSR) has also collaborated with University of Applied Sciences, Vienna, Austria to offer India’s first MS Program in CSR & Ethical Management. The Global Master of Sciences in CSR & Ethical Management, which is designed to put executive careers on the fast track and to teach working professionals how to generate fresh ideas on building sustainable business.  First Batch of programme has started already. The study centre of the ICCSR MS Programme is located in Navi Mumbai.

A social commitment to the community where the company operates from, can help maintain smooth industrial relations says S. Baskaran, director, DEE-HR fusion lab, Puducherry.

“With companies choosing to outsource clerical HR work today, HR managers may get to focus more on relationship building, which includes CSR,” he says.

While human resources as a specialisation is offered in most social work postgraduate courses, students who take up community development, child welfare or clinical development may also be roped in by companies, depending on the activities businesses choose to undertake, according to Godwin Premsingh, associate professor, Bishop Heber College, Tiruchi.

“The practical exposure and continuous involvement of students in community development projects throughout the course gives them an edge over management students,” he adds.

Training in policy making

Hitherto, some corporates have had dedicated CSR wings to carry out initiatives, but it has not been uncommon for others to pass off employee benefits such as educational aid for children as CSR.

“If CSR activities are to be planned and executed professionally, there is a definite scope for employment opportunities for students of social work,” admits Nalini, head, department of social work, Pondicherry University.

But the scope of career growth in the arena would be determined by how a majority of companies would treat CSR — as a core function requiring dedicated staff or a periphery function with additional roles assigned to corporate communications or HR personnel or consultants, she admits.

“Institutions must now focus on training students in not merely implementing CSR activities, but in framing policies and initiating new activities,” emphasises Nalini.

Agreeing with her, Deepa Mala, head, development initiatives, Confederation of Indian Industries (CII), Southern Region, says that students and social work interns must be encouraged to come up with ideas and innovative policies in line with business strategies. “CSR is more or less industrial social work, where corporates are being motivated to be part of nation building activities. It is not just about conducting events or signing cheques,” she stresses.

“Innovations are the need of the hour as we are looking at how businesses can provide innovative solutions to issues being faced by cities, like solid waste management, as part of CSR.” Students who look for opportunities in this field should also be aware of best practices in European nations.

The CII has been arranging webinars and conferences to educate corporates on the new act.

If the act is implemented, an estimated Rs.18,000 crore may be pumped in through CSR in India.

“A mid-size corporate may be required to spend Rs. 50 lakh on CSR, which requires careful planning,” adds Deepa. While there is a possibility of NGOs being roped in to carry out projects at the grassroots, social work and HR personnel are integral to planning, monitoring, evaluating, assessing and sustaining the initiatives.

(The Hindu/IndiaCSR)

How the Indian Companies Bill could transform CSR in India by Stephanie Draper

The Indian Companies Bill 2012 (en route to becoming an Act) requires companies worth ₹500 Crore (or just over $9M) to spend at least 2% of their average net profits on Corporate Social Responsibility (CSR), or report on the reasons why not. This is creating quite a buzz amongst businesses in India, and a lot of questions too.

Pic courtesy of mckaysavage via Flickr (CC)

The main question is what exactly does the Indian Government mean by CSR? At the moment it is not tightly defined – although there are nine principles where areas like development, human rights and inclusive growth have been highlighted. The definition will be central to how companies approach this obligation. If CSR is too bounded to philanthropy it will limit Indian CSR to writing cheques for good causes with little effect on core business performance. If it is too wide it will be an open door for Greenwash and creative accounting.

Several years ago I sat on a UK Government Steering Committee on accelerating CSR that had similar challenges, so I feel the pain of people like Dr Bhaskar Chatterjee from the Indian Institute of Corporate Affairs who is in the process of setting the boundaries. Based on this experience, plus Forum for the Future’s work putting CSR and sustainability at the heart of strategy in numerous multi-national businesses, I offer a few suggestions:

• Ensure that the definition of CSR is as much (if not more) about how companies make their money rather than how they spend it.  CSR has to be strategic and linked to business benefit. The Bill’s requirement for a Corporate Social Responsibility Committee will be a key way for companies to set out a strong strategy that links to their core business. It would be brilliant if it incentivised more companies to produce ambitious plans like the Unilever Sustainable Living Plan or Kingfisher’s net positive strategy and to be able to put the time and money spent doing it down to their 2%. But at the very least it must not demand solely philanthropic activities totally unrelated to the business as that will relegate CSR to the fringes for good.
• Promote innovation of new business solutions as part of CSR. Companies are powerful beasts that are good at finding new opportunities and solutions. If they can focus their creativity and finance on finding products that can make profits and provide a social good then progress will accelerate. Our recent publication, India: Innovation Nation is full of examples of this from Mahindra’s Reva E20 to Hindustan Unilever’s Pureit. I am not suggesting that companies can account for their whole R&D spend as CSR but suggest that partnerships with NGOs and not for profits that focus on product, service and business model innovation are allowed (particularly at the Base of the Pyramid), as well as seed funding and incubation of breakthrough ideas and social enterprises. 
• Use a definition that is about companies contributing to a sustainable market economy – socially, environmentally and economically (see for example Forum’s Vision for a sustainable economy 2040). At the recent Delhi Sustainable Development Summit, Dr Chatterjee said that he saw CSR and sustainability working side by side. This is right, and because in India sustainability is seen as environmental and CSR as more social there is a need to do more to ensure that these are seen a one and the same - focused on solving challenges like access to healthcare, malnutrition, energy access or water security. These are all interrelated problems and this is an opportunity to recognise that.
• Make sure that 2% spend actually equates to impact. There is a risk that companies invest in a lot of small projects that, whilst good in themselves, endlessly reinvent the wheel with little learning or cross fertilisation. What we need are profound transitions that require shared efforts across a range of projects, approaches and organisations. If CSR is actually going to tackle major social challenges then it needs to allow bigger partnerships that provide sophisticated analyses of the problems and combine different projects to create scale. This might be the 2% reflecting involvement in things like the Roundtable on Sustainable Palm Oil – focused on sustainable sourcing, or recognising involvement in combined implementation of the mobility system in a city. Transparency for both civil society partners and business will be an important part of that - increasing the accountability for both to deliver good outcomes. And auditors and verifiers need to be looking for impact as well as spend in their assurance statements.

If done well, the CSR obligation in the Companies Act will accelerate a new form of business in India – combining strong financial returns with social good. It is an opportunity for existing leaders like Infosys and Tata to raise the bar on what can be achieved through CSR and sustainability. And it is a chance for the majority to reflect CSR much more actively in how they do business. If the risks of confusion, mediocrity, manipulation and a side-lining of CSR are addressed then it could put India at the forefront of business leadership. I look forward to seeing that come to fruition.

- See more at: http://www.forumforthefuture.org/blog/how-indian-companies-bill-could-transform-csr-india#sthash.Q6d22hlB.dpuf

CSR Spending Estimates of BSE Top 100 and BRRs Analysis

After the Lok Sabha gave its approval in December last year, there arose some noise surrounding the New Companies Bill 2013. Media, companies, and that part of the general public that seems interested in the legislative affairs of the country dissected the Bill end to end, discussed and debated the likely impacts. A few days later, the noise ceased. Nobody seemed to know what ultimately would become of the bill.

Every Parliament session post December – 2012 saw increased anticipation among interested stakeholders as to when Rajya Sabha will formally take up the bill for consideration. After more than seven months, on August 8th, the bill was moved for consideration in the upper house. “This is a momentous day, as this will usher in a new era for the company law,” said Sachin Pilot, Minister of State for corporate affairs after the bill was passed, aptly encapsulating the end of a long and anxious wait.

The President gave his approval to the bill to be enacted into a law end of August 2013. The spanking new Act is simpler, with fewer clauses and pages and looks at contemporary issues such as corporate governance, investor protection, corporate social responsibility (CSR) and measures to check frauds. Further, a third of corporate boards have to necessarily comprise independent members, some boards would have to include more women, auditors will be compulsorily changed every ten years, minority shareholders and depositors can launch action suits against managements, among other sea changes.

What interests us, Partners in Change (PiC), as an organization that has been pioneering the understanding and practice of corporate responsibility issues in India, is Clause 135 that makes it mandatory for companies of a certain size and profitability to spend 2% of their average net profits of previous 3 years on CSR. The proposed draft CSR rules under Section 135 of the Act has been posted on the Ministry of Corporate Affairs (MCA) website for public comments till October 7, 2013.

The clause on CSR is being celebrated and criticized in, may we say, equal measure.  The development sector, as the world of NGOs and professionals working in the area of social and economic development has come to be known as, is rejoicing. It sees this clause as a late but welcome measure to make companies understand its responsibilities towards the society and act conscientiously. The other side of their joy is the opening up of much-needed funding options. Some in the sector, however, feel that the clause dilutes the meaning of a company’s commitment to ethical and responsible business and instead focuses on the end (under Schedule VII) as opposed to means of doing business.

 The reactions seem appear mixed on the other side as well. Some in the corporate sector are worried that making CSR spending mandatory would lead to what is informally referred to as “cheque-book CSR”. Others, while sounding positive about a law that encourages companies to act responsibly, find the list and scope of activities too small to comprehensively correspond to what entails a company’s responsibilities towards the society.

 Through this document, PiC has tried to analyze the likely impact of the new Act on the CSR landscape of the country. Although we do have an opinion on the subject, we have tried to keep this document unbiased and objective. PiC believes that the use or misuse of the CSR clause will be determined by the intent of the companies. As Plato said “Good people do not need laws to tell them to act responsibly, while bad people will find a way around the laws.”

 This document highlights the CSR funding part of the CSR Clause (135) and presents how companies are reporting on their Business Responsibility Reports.

 

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Don’t restrict social spends to only CSR: India Inc

NEW DELHI: Financial Express reported that India Inc wants the government to not restrict or tie social welfare spending to the mandatory provision of Corporate Social Responsibility (CSR) as mentioned in the new Companies Act, 2013. Sharing the results of a survey conducted among 200 firms, the Confederation of Indian Industries (CII) on Tuesday said companies will face difficulty in spending 2% of their profits towards CSR activities if areas and methods of this expenditure is restricted. In fact, CII survey bats for inclusion of more events and areas that should also qualify as CSR spend under the new law. These include strengthening or creation of new institutions, research, debate and on ground action among others as some of the additional measures that should be added in the existing list of items that qualify as CSR spends for India Inc under the new law. As per the new law, activities that would fall under CSR net includes reducing child mortality and improving maternal health, combating human immunodeficiency virus, acquired immune deficiency syndrome, malaria and other diseases, ensuring environmental sustainability, employment enhancing vocational skills and social business projects. The Business Responsibility India Survey 2013 of the CII found that about 75% of the 200 companies surveyed have already incorporated business responsibility (BR) into purchasing policy or supplier code of conduct. It said that about 25% of the companies are spending at least 2% of PAT on CSR activities. As per the new law, certain class of companies are required to shell out at least 2% of their three-year annual average profit towards social welfare activities from among an exhaustive list of activities. However, the corporate affairs ministry has invited suggestions and comments to the draft rule various provisions of the new law including those related to CSR where companies are free to recommend additional areas that should qualify for CSR spends. On making it mandatory for the companies to spend on CSR activities, it said that it was too early to tell whether making sustainability a core aspect of businesses would happen through mandatory regulatory frameworks or voluntary efforts. Perhaps, a middle path is the most pragmatic and effective solution, it suggested. (Financial Express)

No Relaxation: Companies Have to Spend On CSR Initiatives, Rotate Auditors

No Relaxation: Companies Have to Spend On CSR Initiatives, Rotate Auditors Posted: 25 Nov 2013 10:43 PM PST NEW DELHI: It has reported that the corporate affairs ministry has rejected the industry’s demand for a relaxation in the norms on mandatory CSR spending and rotation of auditors outlined in the new Companies Act. A senior official told ET that the ministry has decided to stick to the original draft of rules despite intense lobbying by industry bodies. The new Companies Act, which replaces the Companies Act of 1956, requires firms above a certain threshold to spend 2% of their average net profit on so-called corporate social responsibility (CSR) initiatives. The Act also requires companies to rotate the auditors they use periodically. The corporate affairs ministry is of the view that rules under the new Companies Act have been carefully drafted and, therefore, do not require any significant change. “There is no need for major changes. We have already sent some of the drafts to the law ministry for vetting,” the official quoted earlier said. Industry bodies have been vocal in their criticism of the proposed rules. In their interactions with corporate affairs minister Sachin Pilot, industry associations had pressed for scrapping of the rule on mandatory rotation of auditors for unlisted companies. Auditor rotation rules have been prescribed but they do not seem to consider the size of companies based on turnover or any measure of profit and loss account, but on the basis of balance sheet items. The other major concern seems to be the threshold of 2% CSR spend by companies in a year. According to the Companies Bill, 2013, companies with a net worth of 500 crore or more, a turnover of 1,000 crore or more, or a net profit of 5 crore or more in a financial year are mandated to spend 2% of their profit towards corporate social responsibility. Industry had also sought relaxation and clarity on corporate governance; restriction on layers of subsidiaries; constitution of National Financial Reporting Authority, its oversight; appointment of auditors including mandatory firm rotation, limits on the number of audits; clauses on independent directors and the manner of their selection; power to compromise or make arrangements with creditors and members; merger and amalgamation of companies. “For big companies, audit firms need a specific infrastructure for rotation of auditors. We as an audit firm will also face problems if we shift from a small to a big account at a specific location,” said Atul Dhawan, partner at Deloitte Haskins & Sells. The retrospective implementation of the clause pertaining to rotation of auditors has particularly irked the industry. The new law mandates companies to rotate their auditor after five years in case of an individual auditor and after two terms of five years each in case of an audit company. (Economic Times, 25 November 2013)

Companies spending 2 pc on CSR will have a multiplier effect : Finance Minister

Companies spending 2 pc on CSR will have a multiplier effect: Finance Minister Posted: 25 Nov 2013 10:57 PM PST NEW DELHI: Finance Minister P Chidambaram today said if corporates spend 2 per cent of their profit on CSR activities, then it will have a multiplier effect in bringing out much greater inclusiveness. “Corporate Social Responsibility (CSR) is now mandatory. The mandate is that corporates must spend 2 per cent of their profit on CSR, I think if 2 per cent of India’s corporates profit is spent on CSR activities then it will have great multiplier effect in bringing out much greater inclusiveness,” Chidambaram said at an event here. “Corporate Social Responsibility (CSR) is now mandatory. The mandate is that corporates must spend 2 per cent of their profit on CSR, I think if 2 per cent of India’s corporates profit is spent on CSR activities then it will have great multiplier effect in bringing out much greater inclusiveness,” Chidambaram said at an event here. Under the new Companies Act, 2013, all profitable companies with a sizable business will have to spend every year at least 2 per cent of three-year average profit on CSR works. This would apply to companies with a turnover of Rs 1,000 crore and more, or networth of Rs 500 crore and more, or a net profit of Rs 5 crore and more. The new rules would be applicable from fiscal 2014-15. The new rules also requires the companies to set up a CSR committee, including at least one independent director. Recently, Corporate Affairs Minister Sachin Pilot has said: “Our assessment is that if every company that is qualified for doing the CSR does so, then Rs 15,000-20,000 crore would be spent in a year in various projects such as environment, skill development, water, sanitation, etc.” The companies have been asked to give preference to their local area of operations for such CSR activities, while those not being able to spend the required amount would need to specify the reasons for for the same in their annual CSR report. (PTI, 11 November 2013)

CSR issues continue to remain unresolved by Asish K Bhattacharyya

CSR issues continue to remain unresolved by Asish K Bhattacharyya Posted: 21 Nov 2013 03:51 AM PST In the absence of clarity, unscrupulous companies will take advantage of loopholes and honest companies will get harassed By Asish K Bhattacharyya We have discussed a lot on ‘why CSR’. It’s time to discuss ‘how’, rather than ‘why’. Draft Rules are before us. The provision (section 135) of the Companies Act 2013 shall be applicable from the financial year 2014-15 and companies hardly have five months to formulate the CSR policy. Certain issues are bothering those who are responsible for formulating the CSR policy and implementing the same. The Draft Rules state, “CSR projects/programmes of a company may also focus on integrating business models with social and environmental priorities and processes in order to create shared value.” Michel Porter, the Harvard Professor, who introduced the term ‘shared value’ in a HBR (January-February 2011) article defines shared value as, “policies and operating practices that enhance the competitiveness of a company while simultaneously advancing the economic and social conditions in the communities in which it operates.” An example of shared value initiative is the ‘Project Shakti’ of Hindustan Unilever Limited (HUL).It enhances the direct rural reach of the company while empowering women. Can we classify ‘Project Shakti’ as a CSR project? Whether training expenses on Shakti entrepreneurs should be classified as CSR expenditure? The concept of ‘shared value’ blurs the boundary between pure business activities and CSR activities. ‘Shared value’ strategies definitely serve the CSR objectives, but they are closely intertwined with the business strategy. Clarification on this issue is essential, as companies and regulators should have a common understanding on which items should be included in calculating CSR spend. The Act (schedule VII) stipulates that ‘social business projects’ may be included in the CSR policy. By definition, surplus from those projects are ploughed back to improve the product or service or to provide subsidy. For example, the ‘agarbatti’ (incense sticks) business of ITC started to provide livelihood support to retired employees and then it was extended to other members of the community located around ITC’s manufacturing facilities. If ITC designates it as a ‘social business project’, it shall not include surplus from this business in the net profit of the company. A clarification is required on whether a part of general overheads and the cost of service provided by employees, who are employed primarily to work for the core business of the company, but spend some time on those projects, should be considered as CSR spend. The Draft Rules state, “Only activities, which are not exclusively for the benefit of employees of the company or their family members shall be considered as CSR activity.” Companies build and operate facilities (e.g. educational institutions and health care facilities) primarily for employees and their families. Members of the local community also use those facilities. A clarification is required on whether only proportionate expenditure that can be assigned to the use of those facilities by local community members should be considered as CSR spend. Allocation of expenditure will be an issue that should be addressed by cost accountants. Activities related to ‘environmental sustainability’ are also classified as CSR activities. Companies undertake research projects to improve existing products or processes to make them environment friendly. A clarification is required on whether such research expenses will be considered as CSR spend.The Draft Rules state, “CSR Policy would specify that the corpus would include the following: 2% of the average net profits; any income arising therefrom; and surplus arising out of CSR activities.” This implies that every year, companies should transfer two percent of average net profit before tax (calculated as per section 198) of the previous three years to the CSR corpus and then spend money for CSR activities from that corpus. A clarification is required on whether companies should transfer the amount to the corpus at the beginning of the financial year and invest the corpus fund outside the business to earn an income that will form a part of the corpus. The Act mandates that every company having a net worth of Rs 500 crore or more, or turnover of Rs 1,000 crore or more or a net profit of Rs 500 crore or more during any financial year shall constitute a CSR Committee of the Board consisting of three or more directors, out of which at least one director will be an independent director. A clarification is required on whether a company that is not otherwise required to appoint independent directors is required to appoint an independent director only to comply with the requirement under section 135 of the Act. The government should come out with detailed clarifications as early as possible to enable companies to formulate the CSR policy. In the absence of clarity, unscrupulous companies will take advantage of loopholes and honest companies will get harassed. Affiliation: Professor and Head, School of Corporate Governance and Public Policy, Indian Institute of Corporate Affairs; Advisor (Advanced Studies), Institute of Cost Accountants of India; Chairman, Riverside Management Academy Private Limited (Article first Published in Business Standard, 17 November 2013)