Presentation

Report
Overview of
Corporate Social Responsibility
Presentation by : S. Ravi, FCA
Corporate Social Responsibility (CSR): Definitions
‘The continuing commitment by business to behave ethically and contribute to
economic development while improving the quality of life of the workforce and
their families as well as of the local community and society at large’.
– World Business Council For Sustainable Development
‘A commitment to improve community well being through discretionary
business practices and contributions of corporate resources’.
– Philip Kotler and Nancy Lee (2005)
‘A way companies manage the business processes to produce an overall positive
impact on society.’
– Mallen Baker, Founding Director, Business Respect
‘A multi layered concept that can be differentiated into four interrelated aspects
– economic, legal, ethical and philanthropic responsibilities’.
– Archie Carroll (1991)
Overview of Corporate Social Responsibility
By: S. Ravi, FCA
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The Pyramid of CSR
Philanthropic
(Be a good
corporate citizen)
Contribute resources to the
community, improve quality
of life
Ethical
(Be ethical)
Obligation to do what is
right, just and fair
Legal
(Obey the law)
Law is society’s codification of
right and wrong
Economic
(Be profitable)
The foundation upon
which all others rest
Overview of Corporate Social Responsibility
By: S. Ravi, FCA
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Second Phase
(1914-1960)
First Phase
(1850-1914)
Driven by noble deeds
of philanthropists and charity
Largely influenced by Mahatma
Gandhi’s theory of trusteeship.
Industrialists pressurized to show
their dedication towards the
benefit of the society
Four Phases of
CSR
Development in
India
Third Phase
(1960 – 1980)
CSR influenced by the
emergence of Public sector
undertakings to ensure proper
distribution of wealth
Overview of Corporate Social Responsibility
By: S. Ravi, FCA
Fourth Phase
(1980 until the present)
Indian companies
integrated CSR into a sustainable
business strategy. What started as
charity is now understood and
accepted as responsibility.
4
Current state of CSR in India

Priority of business is getting widened from 1 P to 3 Ps by inclusion
of People and Planet with Profit.

Short-term, charity based welfare interventions are being replaced by
long-term, empowerment – based CSR.

Based on the realization that business cannot succeed in a society
that fails, CSR is being considered as an imperative for carrying on
business in the society rather than as a charity.

The new Companies bill passed by both Lok Sabha and Rajya Sabha
mandates the corporates to spend 2% of their average net profits of
the last three financial years towards CSR. This is applicable for
companies with a turnover of 1000 Cr/ PAT of 5 Cr/ or net worth of
500 cr. The new bill replaces the Companies act 1956 and emphasizes
carrying forward the agenda of Corporate Social Responsibility.
Overview of Corporate Social Responsibility
By: S. Ravi, FCA
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Current state of CSR in India

It is mandatory for Central Public Sector Enterprises to allocate 2-3%
of the PAT for the inclusive development of a backward district (CSR
& Sustainability guidelines by Department of Public Enterprises 2013),
in which one key project has to be in CSR and the other in
Sustainability for the development of the disadvantaged and
marginalized communities.
Overview of Corporate Social Responsibility
By: S. Ravi, FCA
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CSR Importance and its Relevance Today
CSR as a strategy is becoming increasingly important for
businesses today because of three identifiable trends
1.
Changing
social
expectations
• Consumers and society in general expect more from
the companies whose products they buy. This sense has
increased in the light of recent corporate scandals,
which reduced public trust of corporations, and
reduced public confidence in the ability of regulatory
bodies and organizations to control corporate excess.
2.
Increasing
affluence
• This is true within developed nations, but also in
comparison to developing nations. Affluent consumers
can afford to pick and choose the products they buy. A
society in need of work & inward investment is less
likely to enforce strict regulations and penalize
organizations that might take their business & money
elsewhere.
Overview of Corporate Social Responsibility
By: S. Ravi, FCA
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CSR Importance and its Relevance Today
CSR as a strategy is becoming increasingly important for
businesses today because of three identifiable trends
3.
Globalization
and free flow
of Information
• Growing influence of media sees any mistakes’ by
companies brought immediately to the attention of
the public. In addition, the Internet fuels
communication among like-minded groups and
consumers - empowering them to spread their
message, while giving them the means to co-ordinate
collective action.
Overview of Corporate Social Responsibility
By: S. Ravi, FCA
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Few Key Steps to Implement CSR Successfully

Better communication between top management and
organisation

Appoint for CSR position

Good relationship with customer, supplier, stakeholder

Annual CSR audit

Feedback process
Overview of Corporate Social Responsibility
By: S. Ravi, FCA
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Companies Bill and CSR
Allow corporates to harness
and channelize their core
competencies as well as
develop effective business
models
Promote and facilitate far
better connect between
businesses and communities
Purpose of
Inclusion of CSR
in the
Companies Bill
Facilitate deeper thought and
longer term strategies for
addressing some of our most
persistent social, economic and
environmental problems
Overview of Corporate Social Responsibility
By: S. Ravi, FCA
Assist in synergizing
partnerships between
Corporates, Governments, Civil
Society Organizations,
Academic Institutions and
Social Entrepreneurs
10
Companies Bill and CSR – Clause 135
Every Company
With
Net Worth of
Rs. 500
Crores or
more
Turnover of
Rs. 1000
Crores or
more
Net Profit of
Rs. 5 Crores
or more
During any Financial Year
Shall constitute a Corporate Social Responsibility Committee of
the Board consisting of three or more directors, out of which at
least one director shall be an independent director.
Overview of Corporate Social Responsibility
By: S. Ravi, FCA
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Companies Bill and CSR
Activities Required for Qualifying Companies
Duty of the Board
Duty of the Corporate Social
Responsibility Committee
 Disclose the composition of the CSR
 Formulate and recommend a CSR
Committee in its report
Policy to the Board indicating the
 Approve the Company’s CSR policy after
activities to be undertaken by the
considering the recommendations of the
Company
committee
 Recommend the amount of
 Disclose the CSR policy in its report and on
expenditure to be incurred on
Company Website
CSR related activities
 Ensure the implementation of the policy
 Monitor the Company’s CSR
 To spend at least 2% of the Company’s average
policy from time to time.
profit for the last 3 financial years for this
purpose
 Give preference to spending in local areas
where it operates
 Specify reasons in report in case of failure
Overview of Corporate Social Responsibility
By: S. Ravi, FCA
12
Companies Bill – Permissible CSR Activities
Schedule VII of the Companies Bill requires the CSR policy created by
the CSR committee involve at least one of the following focus areas:

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
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

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Eradicating extreme hunger and poverty;
Promotion of education;
Promoting gender equality and empowering women;
Reducing child mortality and improving maternal health;
Combating [HIV], [AIDS], malaria and other diseases;
Ensuring environmental sustainability;
Employment-enhancing vocational skills;
Social business projects;
Contribution to the Prime Minister’s National Relief Fund or any other
fund set up by the Central Government or the state governments for
socioeconomic development, and relief and funds for the welfare of the
Scheduled Castes, the Scheduled Tribes, other backward classes, minorities
and women; and
Such other matters as may be prescribed.
Overview of Corporate Social Responsibility
By: S. Ravi, FCA
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Points of Concern

The Companies Bill does not define CSR only contains a list of activities
that may be included by a company in its CSR policy. The bill does not
prescribe the proportion of funds to be contributed towards any activity.

2% spending on CSR is not mandatory for Companies, the rules are in
line with the ‘Comply or Explain’ principle with penalties applicable only if
an explanation is not offered. This could really be an escape clause for
companies not meeting the necessary CSR requirements.

Tax treatment to CSR spending by companies whether it is to be treated
as non-deductible income since it is an allocation of profit, or, whether it
is to be treated as an allowable expenditure under the Income Tax Act.

Even central public sector enterprises, subject to CSR norms under
separate guidelines, will, on enactment of the bill, come within the
purview of these new provisions.
Overview of Corporate Social Responsibility
By: S. Ravi, FCA
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Tax Exemption

Section 80G of Income Tax Act – Donations
This section does not restrict the deduction to individuals, companies or any
specific category of taxpayer.Allowable to all kind of Assessee.
 Donations made to foreign trusts do not quality for deduction under
this section.
 Deduction cannot be claimed for donations made to political
parties for any reason, including paying for brochures, souvenirs or pamphlets
brought out by such parties.
 Only donation made to prescribed funds and institutions qualify
for deduction.
 Maximum allowable deduction:- If aggregate of the sums donated exceed
10% of the adjusted gross total income, the amount in excess of 10% ceases
to be entitled for tax benefit.
 Only donations in cash/ cheque are eligible for the tax deduction.
 NRIs are also entitled to claim tax benefits against donations, subject
to the donations being made to eligible institutions and funds.

Overview of Corporate Social Responsibility
By: S. Ravi, FCA
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Tax Exemption

Section 35 AC of Income Tax Act – Expenditure on eligible
projects/ schemes
 To promote reinvestment of business profits in areas where massive capital
input is required for socio-economic development, a tax incentive has been
provided under Section 35AC of the Income Tax Act, 1961.
 The section provides that where an assessee incurs any expenditure by
way of payments of any sum to:
i) a public sector company or;
ii) a local authority or;
iii) to an association/ institution approved by the National Committee
for carrying out any eligible project or scheme for promoting the social and
economic welfare or upliftment of the public as the Central Government may
specify, then the amount so paid shall be allowed as deduction from the
business income of the assessee/ contributor of such amount.
Overview of Corporate Social Responsibility
By: S. Ravi, FCA
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Public Sector Undertakings – Key Contributors To
Socio-Economic Development of India & CSR

The government of India formed public sector undertakings (PSUs)
with the purpose of building industrial capacity, creating employment
opportunities and improving the socio-economic condition.

Both, central public sector enterprises (CPSEs) and state level PSUs
have played a vital role in supporting the socio-economic development
of the country. They are actively involved in various areas of CSR such
as
education, healthcare, improving
infrastructure, social
empowerment, vocational training and environmental protection
among others.

With a high degree of support from the government, CSPEs acts as a
catalyst of social enterprise by providing such diverse services for
grass root development.
Overview of Corporate Social Responsibility
By: S. Ravi, FCA
17
Public Sector Undertakings – Key Contributors
To Socio-Economic Development of India & CSR

Over the past two decades, India has emerged as one of the world’s
strongest emerging markets and PSUs have played a vital role in
achieving this growth and development.

In order to sustain this growth, CSR initiatives have become
important as they form a crucial part of the companies’ strategic
decision-making process. In order to integrate this into their business
models and achieve the nation’s aim of inclusive growth, the revised
CSR and sustainability guidelines issued by the Department of Public
Enterprises (DPE) in December 2012 (effective April 2013) are
expected to play a crucial role. The revised guidelines has urged
the CPSEs to embrace a robust CSR practice that is in the
interest of all stakeholders.
Overview of Corporate Social Responsibility
By: S. Ravi, FCA
18
Key Highlights of the Revised CSR and
Sustainability Guidelines for CPSEs

CPSEs expected to formulate their policies with a balanced
emphasis on all aspects of CSR and Sustainability – equally with
regard to their internal operations, activities and processes, as well
as in their response to externalities. Earlier guidelines focused
mainly on CSR activities for external stakeholders.

Earlier, CSR and sustainable development treated as two separate
subject areas and were dealt with differently for the purpose of
memorandum of understanding (MoU) evaluation. However, now
they are combined into a single set of guidelines for greater
transparency.
Overview of Corporate Social Responsibility
By: S. Ravi, FCA
19
Key Highlights of the Revised CSR and
Sustainability Guidelines for CPSEs

The revised CSR and sustainability budgetary allocation for CPSEs is as
under:
PAT of CPSE
in the previous year
Budgetary allocation
(as % of PAT in previous year)
Less than Rs. 100 Crore
3% - 5%
Rs. 100 Crore to Rs. 500 Crore
2% - 3%
Rs. 500 Crore and above
1% - 2%

CPSEs to take up at least one major project mandatorily for
development of a backward district.

CPSEs expected to act in a socially responsible manner at all times. Even
in their normal business activities, CPSEs should try to conduct business
in a manner that is beneficial to both, business and society.
Overview of Corporate Social Responsibility
By: S. Ravi, FCA
20
Key Highlights of the Revised CSR and
Sustainability Guidelines for CPSEs
CPSEs have to disclose the reasons for not fully utilizing the budget
allocated for CSR and Sustainability activities for a year. Further, if the
CPSEs are unable to spend the earmarked amount for CSR in a
particular year, it would have to spend the amount in the next two
financial years, failing which, it would be transferred to ‘Sustainability
Fund’.
 Emphasis is placed on the scalability of CSR and Sustainability projects, in
terms of their size and impact, rather than on their numbers.
 Employees to avail the infrastructure facilities created by the company
from its CSR and Sustainability budget, provided the facilities are
originally created essentially for the external stakeholders, and the use of
these facilities by the CPSE’s employees (internal stakeholders) is only
incidental and confined to less than 25 percent of the total number of
beneficiaries.

Overview of Corporate Social Responsibility
By: S. Ravi, FCA
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SEBI - Making CSR Reporting Compulsory
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SEBI vide its circular CIR/CFD/DIL/8/2012 dated August13, 2012 has made it
mandatory for top 100 listed companies (by market capitalization) to
report certain critical information as part of their business responsibility.
This includes how much the company is spending on CSR as a percentage of
its net profit, the number of stakeholders' complaints received and resolved,
details of any pending case filed by stakeholder against any unfair trade
practice, irresponsible advertising or anti-competitive behaviour adopted by
the company.
The provisions of this circular shall be applicable with effect from financial year
ending on or after December 31, 2012.
This will enable the shareholders to have a better understanding of the
manner in which their companies' function and adopt responsible business
practices.
The circular exhorts the companies to follow the national voluntary
guidelines on social, environmental and economic responsibility that
have been formulated by Ministry of Corporate Affairs in July 2011.
Overview of Corporate Social Responsibility
By: S. Ravi, FCA
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World Bank - CSR Initiatives
According to the World Bank, “Corporate social responsibility is the
commitment of business to contribute to sustainable economic development
by working with employees, their families, the local community and society at
large to improve their lives in ways that are good for business and for
development”.

The World Bank in India is working with the Department
of Public Enterprises (DPE), GoI, to evolve CSR policies
and guidelines through its knowledge missions and
advocacy initiatives. They together are working to create an
institution that will undertake capacity building for CSR in Public
Sector Enterprises and to develop a strong communications
strategy for the CSR work of Public Sector Enterprises.
Overview of Corporate Social Responsibility
By: S. Ravi, FCA
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World Bank - CSR Initiatives

The Ministry of Corporate Affairs has also set up through the
Indian Institute of Corporate Affairs, the National
Foundation for CSR in partnership with the World Bank. The
mission of the foundation includes building an enabling environment
for the corporate sector to work in partnership with the government,
non- governmental & civil society organizations and local communities
towards goal of inclusive growth, reduction of poverty, and
achievement of Millennium Development Goals.

The World Bank is supporting the GoI to develop and
coordinate CSR activities across the country through
workshops, knowledge missions, international seminars and training
programs to bring about learning from international best practices and
experiences as well as evolving CSR concepts worldwide and CSR
policies evolved by Govts world over.
Overview of Corporate Social Responsibility
By: S. Ravi, FCA
24
What the Companies should do?

Determining the Corpus earmarked for CSR

Identifying the areas/activities for CSR
– Education, Healthcare, Social business project,
Donation, Environmental Sustainability, Employment
etc.

Identifying the Agencies
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Baseline Survey

Dispersing
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Monitoring and Impact Analysis
Overview of Corporate Social Responsibility
By: S. Ravi, FCA
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Some of the Positive Outcomes That can Arise
When Businesses Adopt a Policy of Social
Responsibility and Sustainability
Company Benefits
•
•
•
•
•
•
•
•
•
•
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
Overview of Corporate Social Responsibility
By: S. Ravi, FCA
26
Some of the Positive Outcomes That can Arise
When Businesses Adopt a Policy of Social
Responsibility and Sustainability
Benefits to Community
and General Public
Environmental Benefits
• Charitable contributions
• Employee volunteer
programs
• Corporate involvement in
community education,
employment and
homelessness programs
• Product safety and quality
• Greater material recyclability
• Better product durability and
functionality
• Greater use of renewable
resources
• Integration of environmental
management tools into business
plans, including life-cycle
assessment and costing,
environmental management
standards, and eco-labeling
Overview of Corporate Social Responsibility
By: S. Ravi, FCA
27
CSR and Sustainability 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.
Overview of Corporate Social Responsibility
By: S. Ravi, FCA
28
CSR and Sustainability Initiatives - Examples

Larsen & Toubro (L & T) Limited
Considering that construction industry is the second largest employer in India
after agriculture, employing about 32 million-strong workforce, L&T set out to
regulate and promote Construction Vocational Training (CVT) in India by
establishing a Construction Skills Training Institute (CSTI) on a 5.5 acre land,
close to its Construction Division Headquarters at Manapakkam, Chennai. CSTI
imparts, totally free of cost, basic training in formwork, carpentry, masonry, barbending, plumbing and sanitary, scaffolder & electrical wireman trades to wide
spectrum of the rural poor.
CSTI has also set up a branch at Panvel, Mumbai, initially offering training in
formwork, carpentry and masonry trades. The Manapakkam and Panvel facilities
together provide training to about 300 candidates annually who are inducted
after a process of selection, the minimum qualification being tenth standard.
Since inception, these two units have produced about 2,000 skilled workmen in
various trades, with about sixty percent of them being deployed to L&T’s
jobsites spread across the country.
Overview of Corporate Social Responsibility
By: S. Ravi, FCA
29
CSR and Sustainability 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.
Overview of Corporate Social Responsibility
By: S. Ravi, FCA
30
CSR and Sustainability 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.
Overview of Corporate Social Responsibility
By: S. Ravi, FCA
31
CSR and Sustainability 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 and the environment.
Overview of Corporate Social Responsibility
By: S. Ravi, FCA
32
CSR and Sustainability Initiatives - Examples
Linking sustainability to business strategy can also improve access
to supply chains.

In order to combat the global shortage of pulp-wood for paper
board production, ITC and Ballarpur Industries are helping small
farmers with degraded land pieces by providing them saplings,
financial and technical support and an assured buy back of timber.
This ensures sustainable raw material supply for the company, and
also improves farmer’s livelihood.
Overview of Corporate Social Responsibility
By: S. Ravi, FCA
33
CSR and Sustainability Initiatives - Examples
Social initiatives can also help enhance ethical values in society
and at the same time can offer a distinctive edge to companies.

Fluor Corporation, one of the largest construction companies in
the world, worked for three decades with Transparency
International to fight corruption; today its “anti-corruption”
movement has 150 large companies across industries having signed
a “zero-tolerance” policy on bribery. In industries marred by
corruption, Flour is today perceived as an ethical player, thereby
positioning itself with a significant competitive advantage.
Overview of Corporate Social Responsibility
By: S. Ravi, FCA
34
CSR and Sustainability 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.
Overview of Corporate Social Responsibility
By: S. Ravi, FCA
35
Thank You
Overview of Corporate Social Responsibility
By: S. Ravi, FCA
36

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