Corporate
Social
Responsibility
Role of NPONew Professional
opportunities with regard
to CSR obligation under
Companies Act 2013.
1
CA CS Minal Agarwal
2
Change
“Life does not gets better by Chance
It gets better by Change”
3
It all began much earlier

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
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 societyfoundation 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
• CSR is the process by which an
Responsbility
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
Investing in Future
Corporate Sustainbility
For A
Sustainable Environment
Where
Business can GROW
8
3P Approach
People
When The Wind Blows………
“There Are Those Who Build Walls”
&
“There Are Those Who Build Wind Mills”
10
CSR Applicability- w.e.f 1-4-14
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 from
c. 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
8000
135
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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.
27
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.
28
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 -Examples
Successful 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 2011
Given 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)
32
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
33
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
34
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
35
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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Role of international agencies

Great role of International business and trade
agencies to ensure compliance by multinational
corporations working in different geographies


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





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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Global standards & guidelines

UN Guiding Principles on Business and Human Rights


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


Focus on human rights and fundamental freedom
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
38
Global standards & guidelines

OECD Guidelines: Multinational enterprises and CSR
Policy Tool


ISO 26000: Social responsibility


In line with the UN Guiding Principles on Business and Human Rights
Social Return on Investment Network


Holistic approach: human rights, labour practices, environment, fair
operating practices, consumer issues, community involvement and
development
UN Global Compact Self-Assessment Tool


employment, human rights, environment, information disclosure,
combating bribery, etc.
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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Legal framework internationally
Mandatory
reporting for
listed companies
in Annual reports
France
Natural resource
based
companies to
allocate CSR
budgets
Indonesia
Mandatory
reporting by
State-owned
companies
Sweden
Voluntary
reporting in
Sustainability
reports
USA
Malaysia
Denmark
UK
China
Germany
Australia
40
Opportunities
Plethora of new opportunities
for CA with CSR
41
Professional Opportunities
 Another
great opportunity for the
profession
 Advisory on CSR activities to be taken up
 selection of agencies through which the
activities could be undertaken
 Monitoring and audit of CSR spends…
 Formation of NPO for CSR outsourcing
 Audits of these NPO Sector.
 Fund raising Project Reports by NPO
 Faculty/Consultant/Freelancer CSR expert
42
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.
43
CSR - PROFESSIONAL
OPPORTUNITIES
1.
2.
3.
4.
5.
6.
7.
8.
9.
Consultancy in CSR
Business responsibility
reports SEBI
Accounting for CSR
Taxation for CSR
Application of FCRA
Application &
compliance with FEMA
Advising on NPO
Governance
Grading/ Rating NPOs
Social Audit
Selection of NPOs –
a. Trust
b. Society
c. Company
d. Non Trading
Corporations
11. Consultants in funding –
India & outside India
12. Complying with Standards
13. Integrated Reporting
14. Internal audit of CSR
10.
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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
45
Social Audit

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
46
Integrated Reporting <IR>

<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

"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
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Thank You-Be in Touch
CA CS Minal Agarwal
Agarwal_minal@yahoo.com
+91-9818039002
www.camkagarwal.com
www.professionaltimes.org