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Corporate Social Responsibility: Reference Note
Corporate Social Responsibility: Reference Note
REFERENCE NOTE .
No. 11 /RN/Ref./2013
For the use of Members of Parliament
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publication. This Service is not to be quoted as the source of the information as it is based on the sources indicated at
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continuous debate on the concept and its implementation. Although the idea has been
around for more than half a century, there is still no clear consensus over its definition.
One of the most contemporary definitions is from the World Bank Group, stating,
Corporate social responsibility is the commitment of businesses to contribute to
sustainable economic development by working with employees, their families, the local
1
India, Ministry of Corporate Affairs, Corporate Social Responsibility Voluntary Guidelines 2009
-2community and society at large, to improve their lives in ways that are good for business
and for development.2
Fundamental Principle: Each business entity should formulate a CSR policy to guide its
strategic planning and provide a roadmap for its CSR initiatives, which should be an
integral part of overall business policy and aligned with its business goals. The policy
should be framed with the participation of various level executives and should be approved
by the Board.
Core Elements:
The CSR Policy should normally cover following core elements:
The Challenges of Social Corporate Social Responsibility: Facts for You, May 2013, pp. 38-39
India, Ministry of Corporate Affairs, Corporate Social Responsibility Voluntary Guidelines 2009
Ibid
-4education, skill building for livelihood of people, health, cultural and social welfare etc.,
particularly targeting at disadvantaged sections of society.
Implementation Guidance:
1.
The CSR policy of the business entity should provide for an implementation strategy
which should include identification of projects/activities, setting measurable physical
targets with timeframe, organizational mechanism and responsibilities, time schedules
and monitoring. Companies may partner with local authorities, business associations
and civil society/non-government organizations. They may influence the supply chain
for CSR initiative and motivate employees for voluntary effort for social development.
They may evolve a system of need assessment and impact assessment while
undertaking CSR activities in a particular area. Independent evaluation may also be
undertaken for selected projects/activities from time to time.
2.
Companies should allocate specific amount in their budgets for CSR activities. This
amount may be related to profits after tax, cost of planned CSR activities or any other
suitable parameter.
3.
To share experiences and network with other organizations the company should
engage with well established and recognized programmes/platforms which encourage
responsible business practices and CSR activities. This would help companies to
improve on their CSR strategies and effectively project the image of being socially
responsible.
4.
The companies should disseminate information on CSR policy, activities and progress
in a structured manner to all their stakeholders and the public at large through their
website, annual reports, and other communication media5.
Ibid
-5among the top 100 firms by revenue, there are many who dont report their CSR spends or
even declare the social causes they support, that is because they are not required to do so
by law and no provisions for CSR exists in the Companies Act, 1956 so currently the
Ministry does not maintain such details. But all that will change when the new Companies
Bill, 2012 (which has already been passed by the Lok Sabha) becomes a law6.
The Companies Bill, 2012 incorporates a provision of CSR under Clause 135 which
states that every company having net worth Rs. 500 crore or more, or a turnover of Rs.
1000 crore or more or a net profit of rupees five crore or more during any financial year,
shall constitute a CSR Committee of the Board consisting of three or more Directors,
including at least one Independent Director, to recommend activities for discharging
corporate social responsibilities in such a manner that the company would spend at least 2
per cent of its average net profits of the previous three years on specified CSR activities. It
is proposed to have detailed rules after passing of Companies Bill 2012 by Rajya Sabha to
give effect to this provision7.
According to Schedule-VII of Companies Bill, 2012 the following activities can be
included by companies in their CSR Policies:(i)
(ii)
promotion of education;
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
(ix)
contribution to the Prime Ministers National Relief Fund or any other fund set by the
Central Government or the State Governments for socio-economic development
6
7
CSR Report Card: Where Companies Stand - Forbes India Magazine dated 18.3.2013
Rajya Sabha Unstarred Question No. 2986 dated 22.4.2013
-6and relief and funds for the welfare of the Scheduled Caste, the Scheduled Tribes,
other backward classes, minorities and women; and
(x)
formulate and recommend to the Board, a CSR Policy which shall indicate the
activities to be undertaken by the company as specified in Schedule VII;
(b)
(c)
monitor the Corporate Social Responsibility Policy of the company from time to
time.
(d)
The format for disclosure of CSR policy and the activities therein as part of Boards
report will be prescribed in the rules once the Bill is enacted9.
The data pack compiled by CSR identity.com together with Forbes India is revealing
to some extent how much each company will have to fork out on CSR when they will
bound by law and their actual spending for the financial year 2012. The data is given in
Annexure I10.
-7(ii) In the revised guidelines, CSR and Sustainability agenda is perceived to be equally
applicable to external and internal stakeholders, including the employees of a
company, and a companys corporate social responsibility is expected to cover even
its routine business operations and activities. CPSEs are 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 externalities11.
(iii) In the revised guidelines CSR and Sustainable Development have been clubbed
together in one set of guidelines for CSR and Sustainability because of close
linkage between the two concepts.
(iv) Public Sector enterprises are required to have a CSR and Sustainability policy
approved by their respective Boards of Directors.
activities undertaken by them under such a policy should also have the
approval/ratification of their Boards. Within the ambit of these guidelines, it is the
discretion of the Board of Directors of CPSEs to decide on the CSR and
Sustainability activities to be undertaken.
(v) The financial component/budgetary spend on CSR and Sustainability will be based
on the profitability of the company and shall be determined by the Profit After Tax
(PAT) on the company in the previous year.
PAT of CPSES in the Previous year
(i)
2%-3%
1%-2%
All CPSEs shall strive to maximize their spending on CSR and Sustainability
activities and move towards the higher end of their slabs of budget allocation.
11
-8(vi) Loss making companies are not mandated to earmark specific funding for CSR and
Sustainability activities. However, they must pursue CSR and Sustainability policies
by integrating them with their business plans, strategies and processes, which do
not involve any financial expenditure. They may also collaborate with the profit
making CPSEs and assist them in ingenious ways without financial support in CSR
and Sustainability activities12.
(vii) Mandatory compliance with legal requirement/rules/regulations/laws in letter and in
spirit will be covered under CSR and Sustainability activity. However, expenditure
on such activities would not be covered by CSRs financial component and would
be considered as mainstream business spend.
(viii) The unutilized budget for CSR activities planned for a year will not lapse and will,
instead, be carried forward to the next year. However, the CPSEs will have to
disclose the reasons for not fully utilising the budget allocated for CSR and
Sustainability activities planned for each year. The unspent amount will have to be
spend within the next two financial years, failing which, it would be transferred to a
Sustainability Fund to be created separately for CSR and Sustainability activities.
(ix) From amongst these beneficiaries of CSR and Sustainability spend (financial
component) of a company, the stakeholders directly impacted by its operations and
activities can rightfully stake a claim for attention before others. Such stakeholders
are generally located in the periphery of commercial operations of a company. The
corporate social responsibility of a company towards these stakeholders extends
beyond its legal obligation to compensate for, and ameliorate the impact of its
commercial activities.
stakeholders and undertake CSR and Sustainability projects in the periphery of its
commercial operations on priority.
(x) CPSEs are expected to take initiative to promote welfare of employees and labour
by addressing their concerns of safety, security, professional enrichment and
12
Ibid
13
Ibid
-10produce goods and services that are safe and healthy for the consumers and the
environment, with reduced cost to the company in the long run.
(xv) 5 per cent of the annual budget for CSR and Sustainability activities has to be
earmarked for Emergency needs, which would include relief work undertaken during
natural calamities/disasters, and contributions towards Prime Ministers / Chief
Ministers Relief Funds.
(xvi) Ethical conduct of business lies at the core of responsible business. To promote
organizational integrity it is essential that premium is placed on individual probity of
employees; transparency in all activities, dealing and transactions is encouraged;
unethical, corrupt and anti-competition practices are discouraged temptation of
quick returns and marginal gains in business through questionable means is
resisted; and, position and situations that give rise to possible conflict of interest are
avoided.
(xvii) Sustainability reporting and disclosure of all CSR and Sustainability activities
undertaken by a CPSE is mandatory.
accountability, public sector companies can gain and reinforce the thrust of the
stakeholders. This, in turn, would provide a powerful stimulus to their CSR and
Sustainability policies and agenda, and motivate them to pursue them with greater
vigour14.
As per the above guidelines on CSR issued by the Department of Public
Enterprises (DPE) in April, 2010, all profit making Central Public Sector Enterprises
(CPSEs), including Maharatna CPSEs are required to select CSR activities which are
aligned with their Business strategy and to undertake them in a project mode. CPSEs are
mandated to spend their funds on CSR projects selected by them with the approval of their
respective Boards. All profit making CPSEs are required to allocate budget mandatorily
through a Board Resolution as percentage of net profit (previous year) in the following
manner:
14
Ibid
0.5%-2%
Loss making CPSEs are not mandated to earmark specific funding for CSR
activities. CSR Budget is fixed for each financial year and this fund does not lapse. It is
transferred to a CSR funds in which it accumulates. Implementation of CSR activities of
CPSEs is monitored by the administrative Ministries/Departments of concerned CPSEs.
States/UT/PSU-wise information of CSR work undertaken by the CPSEs, including
Maharatna CPSEs and the number of persons benefited therefrom, is not maintained
centrally in the Department of Public Enterprises. Information furnished by Maharatna and
Navratna CPSEs on total funds allocated for CSR and the funds utilized for the year 201011 and 2011-12 is given in the Annexure-II. CPSEs are free to take up CSR Projects for
upliftment of weaker sections and backward districts15.
Conclusion
The exact provisions of the Companies Bill, 2012 are still being debated. Once the
Bill is passed in Rajya Sabha, detailed rules would give effect to the provisions of voluntary
guidelines issued in 2009 to Corporate Sector (Private Companies), then Companies
would be bound by legal provisions to implement Corporate Social Responsibilities 16. In
case of public sectors, revised guidelines on CSR and sustainability are being
implemented from 1 April 2013,
15
-12Annexure-I
Indias top companies are ranked 1-100 based on
Net Sales for the Financial Year 2012 and their spending on CSR
-13-
-14-
-16Infosys
The Infosys Science Foundation, set up in 2009, gives away the annual Infosys Prize to
honour outstanding achievements in the fields of science and engineering. The company
supports causes in health care, culture and rural development. In an interesting initiative
undertaken by it, 100 school teachers in Karnataka, who were suffering from arthritis,
underwent free surgery as a part of a week-long programme.
Mahindra & Mahindra
Nanhi Kali, a programme run by the KC Mahindra Education Trust, supports education of
over 75,000 underprivileged girls. The trust has awarded grants and scholarships to
83,245 students so far. In vocational training, the Mahindra Pride School provides
livelihood training to youth from socially and economically disadvantaged communities.
M&M also works for causes related to environment, health care, sports and culture.
Oil & Natural Gas Corporation
It offers community-based health care services in rural areas through 30 Mobile Medicare
Units (MMUs). The ONGC-Eastern Swamp Deer Conservation Project works to protect the
rare species of Easter Swamp Deer at the Kaziranga National Park in Assam. ONGC also
supports education and women empowerment.
Tata Consultancy Services
Its Computer Based Functional Literacy (CBFL) initiative for providing adult literacy has
already benefitted 1.2 lakh people. The programme is available in nine Indian languages.
Besides adult education, TCS also works in the areas of skill development, health care and
agriculture.
Tata Steel
It comes out with the Human Development Index (HDI), a composite index of health,
education and income levels, to assess the impact of its work in rural areas. Health care is
one of its main concerns. The Tata Steel Rural Development Society aims to improve
agricultural productivity and raise farmers standard of living.
-17Annexure-II
TOP PSUs Spending on CSR
Maharatna CPSEs
S. No.
1.
2.
3.
4.
5.
Year
2010-11
2011-12
553.33
77.33
2010-11
131.11
128.41
2011-12
95360
82.73
2010-11
72.37
72.21
2011-12
45.52
49.43
2010-11
335.352
219.03
2011-12
378.48
121.08
2010-11
94.00
68.95
2011-12
64.00
61.25
Navratna CPSEs
S. No.
1.
2.
3.
4.
5.
Year
2010-11
2011-12
2.25
2.36
2010-11
21.55
4.30
2011-12
30.05
4.87
2010-11
22.00
18.23
2011-12
7.73
7.76
2010-11
69.54
(including carry
forward amount of
financial year
2009-10)
63.91
2011-12
82.77
54.43
2010-11
No specific
allocation of
money for CSR,
as CSR Policy
was notified
formally during
November 2010
1.79
2011-12
5.00
5.81
-186.
7.
2010-11
15.00
20.10
2011-12
30.78
26.54
2010-11
2010-11
Since MTNL is in
losses, no specific
allotment is made
under CSR Head
26.77
26.77
2011-12
34.22
34.22
2010-11
81.56
62.23
2011-12
80.13
86.72
2010-11
12.47
13.23
2011-12
13.00
16.14
2010-11
25.00
29.40
2011-12
50.00
50.19
2010-11
11.89
8.91
2011-12
13.24
13.27
2010-11
20.41
15.58
2011-12
13.48
24.93
2010-11
15.40
11.73
2011-12
12.00
10.62
2010-11
5.10
1.38
2011-12
12.85
12.99
2010-11
3.77
5.84 including
the balance
carry forwarded
from the
previous year
2011-12
5.67
5.84
2011-12
8.
9.
10.
11.
12.
13.
14.
15.
16.
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