Corporate Social Responsibility Provisions under Companies Bill 2012

requirement towards course HS699 September 2013.

Deepa KM (deepa.prakruti@gmail.com)
Doctoral Student, SJM SOM, IIT Bombay Areas of Interest: Energy, Env., Sustainability

Index: CSR Under Companies Bill 2012

1. Meaning of Corporate Social Responsibility (CSR) 2. Efforts in this direction so far? 3. Specific Provisions under CSR Clause, CB 2012 4. CSR requirements to be complied with 5. CSR Fund - Who are the beneficiaries? 6. Economy, other stimulus, spill over effects? 7. Industry View - any Pain Points? 8. Suggestions & Recommendations our side 9. References

Deepa More, Doctoral Student, SJMSOM-IITB, 2013

Meaning of Corporate Social Responsibility (CSR)

All the thoughts, processes and actions that... Company might engage in keeping in mind... ...Its responsibilities towards society & natural environment Also covers Ethical Conduct of Business to avoid monopolies Such that Consumer Choices are Not Compromised

Deepa More, Doctoral Student, SJMSOM-IITB, 2013

Meaning of Corporate Social Responsibility (CSR)

Thus, CSR is.... How companies run their business to produce an overall Positive Impact on Society on a Continual Basis to contribute to Economic Development & Betterment of Quality of Life of All Stakeholders

It is also observed that in doing so, the companies are also shaping their own sustenance, creating lasting value, in the marketplace also known as Sustainability.

Deepa More, Doctoral Student, SJMSOM-IITB, 2013

Efforts in this direction so far?

CSR Voluntary Guidelines 2009 (9 Principles) (NVG, Ref.1) Businesses should... 1. Conduct and govern themselves with Ethics, Transparency and Accountability 2. Provide goods and services that are Safe and contribute to sustainability throughout their life cycle 3. Promote the Wellbeing of all employees 4. Respect the interests of, and be responsive towards all stakeholders, especially those who are disadvantaged, vulnerable and marginalised

Deepa More, Doctoral Student, SJMSOM-IITB, 2013

Efforts in this direction so far?

CSR Voluntary Guidelines 2009 (9 Principles) (NVG, Ref.1) Businesses should... 5. Respect and promote Human Rights 6. Respect, protect, and make efforts to Restore the Environment 7. When engaged in influencing public and regulatory policy, should do so in a responsible manner 8. Support inclusive growth and equitable development 9. Engage with and provide value to their customers and consumers in a responsible manner

Deepa More, Doctoral Student, SJMSOM-IITB, 2013

Specific Provisions under CSR Clause, CB 2012

The provisions require companies of a certain size... Any Company meeting one the following criteria (Ref.2) - Net worth of Rs.500 Cr or more, or - Turnover of Rs.1000 Cr or more or - Net profit of Rs.5 Cr or more during any financial year To make specific allotments of a certain amount... 2% of average profits of last three years, (given under Clause no.135 of the Bill) ~ expected corpus = 15000 Cr (Ref.3) Allotments are Mandatory!

Deepa More, Doctoral Student, SJMSOM-IITB, 2013

CSR requirements to be complied with

Companies required to constitute a CSR committee with 3 or more directors (at least one to be independent director) The functions of the Committee are as follows:Formulate a CSR Policy & recommend same to Company Board Indicate CSR activities to be undertaken (refer next slide) It shall recommend to the Board amount of expenditure to be spent for identified CSR activities and Monitor the CSR policy and review it from time to time

Deepa More, Doctoral Student, SJMSOM-IITB, 2013

CSR requirements to be complied with

Examples of CSR activities may include Eradication of hunger and poverty Promotion of education Gender equality Reducing child mortality and improving maternal health Environment Sustainability Social business projects or Any other matters as may be specified

Deepa More, Doctoral Student, SJMSOM-IITB, 2013

CSR requirements to be complied with

Responsibility of the Board: Approval of CSR policy recommended by CSR committee & disclose same in Directors Report Ensure CSR policy is displayed on the companys web site Ensure Company spends at least 2% of avg. net profits (last 3yrs) Spending preference to be given to local areas (regional focus) Failure to speed amount requires explanation in Directors Report

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Deepa More, Doctoral Student, SJMSOM-IITB, 2013

CSR Fund - Who are the beneficiaries?

CSR Fund Pool (expected): Rs.15000 Cr (Ref.2) Opportunities for social entrepreneurship Job opportunities for Many Stakeholders include all sections of society, especially Working at the grassroots such as farmers Labourers, non-profits active in these areas Education & Healthcare at the primary level are also to benefit largely

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Deepa More, Doctoral Student, SJMSOM-IITB, 2013

Economy, other stimulus, spill over effects?

CSR Provisions directly linked to Market Parameters such as Revenue Growth & Market Access Cost Savings & Productivity Access to Capital & Risk Management Licence to Operate & Human Capital Brand Value & Reputation Providing key stimulus to Growth & Choices for All Heavy on Ethics & Concern for Society & Environment Expected to attract investment into the country as well Contributing to business sustenance and longevity
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Deepa More, Doctoral Student, SJMSOM-IITB, 2013

Industry View - any Pain Points?

Industry has welcomed the Companies Bill 2012 (Ref.2,3) Sees it as a step towards achieving Global Standards in Reporting and more Accountability of Corporates in general Bill expected to Boost Investor Confidence & that is a definite yes for companies looking towards the long term horizon Judiciary feels that Bill aligns Indian Corporate Laws with global standards, enhancing the Standards of Corporate Governance, Disclosure & Regulatory Oversight

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Deepa More, Doctoral Student, SJMSOM-IITB, 2013

Industry View - any Pain Points?

Inputs / Suggestions from Industry (Ref.2,3) Emphasis on CSR activities to be carried out within the vicinity of their location might pose a challenge for services sectors like Financial Institutions and IT Amounts spent on CSR may be allowed as business expenditure under Income Tax Act, 1961 attracting more Cos to come forward Detailing needs to be done in case of simple state why no CSR Some guidelines for clarity on unusual situations such as absence of adequate profits or bad economic scenario to make the mandatory spend provision meaningful

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Deepa More, Doctoral Student, SJMSOM-IITB, 2013

Suggestions & Recommendations our side

Gov. Of India has shown firm commitment towards social & environment aspects of business, set a tone...for How exactly it expects companies to interface with these aspects Being only legislation of its kind anywhere in the world... Congratulations are due to Gov. efforts in bring out well detailed Bill Adequate capacity needs to be built amongst Non-profits and NGOs Regarding their own performance wrt. utilization of the funds Bill is a definite plus on all fronts, how things pan would have to be seen, when a few Corporates commit themselves and see the learnings thereafter.

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Deepa More, Doctoral Student, SJMSOM-IITB, 2013

References
1. National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business, Ministry of Corporate Affairs, Government of India. weblink: http://www.mca.gov.in/Ministry/latestnews/National_Voluntary_Guidelines _2011_12jul2011.pdf 9/7/13 CAclubindia News : New Companies Bill, 2012 and Provisions relating to Corporate Social Responsibility, www.caclubindia.com/articles/print_this_page.asp?article_id=18242 4/5 COMPANIES BILL 2013 GIVES BIRTH TO RS.15,000 CRORE CSR PIE!, Online PR News 04-September-2013, www.onlineprnews.com, extracted dt. 7Sep2013.

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Deepa More, Doctoral Student, SJMSOM-IITB, 2013

Stewardship Management Concept

Stewardship is an ethic that embodies responsible planning and management of resources. The concept of stewardship has been applied in diverse realms, including with respect to environment, economics, health, property, information, and religion, and is linked to the concept of sustainability.

THANK YOU!
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Deepa More, Doctoral Student, SJMSOM-IITB, 2013