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Unit 4

CSR – Nature of Activities, Evaluation of CSR Projects

Business Society Interface

Philip Kotler had said “we sell goods and services in the society in the market”. This implies that
unless society demands, there cannot be any production, sale or services. Business, therefore, is
essential to any social development. No business can sustain in the long run ignoring social values.

Corporate Social Responsibility is the responsibility which the corporate enterprises accept for the
social, economic and environmental impact their activities have on the stakeholders. The
stakeholders include employees, consumers, investors, shareholders, civil society groups,
Government, non-government organisations, communities and the society at large.

CSR in India- background

There are many companies used to run school, medical units, roads, sanitation etc. They used to do
these voluntarily, since there was no law for mandatory CSR.

The Ministry of Corporate Affairs (MCA), Government of India, released a set of guidelines in 2011
called the National Voluntary Guidelines on the Social, Environmental and Economic
Responsibilities of Business (NVGs).

After, revision and updation, the new principles are called the National Guidelines on Responsible
Business Conduct (NGRBC). As with the NVGs, the NGRBC has been designed to assist businesses to
perform above and beyond the requirements of regulatory compliance.

Sustainability reporting
Sustainability reports enable companies to transparently communicate their ESG performance to
stakeholders, fostering trust and accountability.

Companies that excel in sustainability reporting often enjoy a competitive advantage by attracting
responsible investors and customers.

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Compliance with SEBI regulations and global reporting standards is essential for listed companies in
India.

Gathering accurate and relevant data for sustainability reporting can be challenging, especially for
smaller companies.

Many Indian businesses lack awareness of sustainability reporting and the skills needed to prepare
comprehensive reports. Training and capacity building are required.

Sustainability reporting in India is influenced by regulatory requirements, and companies often

align their reports with the SEBI Business Responsibility Report (BRR) framework and global
standards.

The National Guidelines on Responsible Business Conduct

The National Guidelines on Responsible Business Conduct comprises nine thematic pillars of
business responsibility that are known Principles. These principles are interdependent, interrelated
and non-divisible.
Principle 1: Businesses should conduct and govern themselves with integrity, and in a manner that is
ethical, transparent, and accountable.
Principle 2: Businesses should provide goods and services in a manner that is sustainable and safe.
Principle 3: Businesses should respect and promote the well-being of all employees, including those
in their value chains.
Principle 4: Businesses should respect the interests of and be responsive to all its stakeholders.
Principle 5: Businesses should respect and promote human rights.
Principle 6: Businesses should respect and make efforts to protect and restore the environment.
Principle 7: Businesses, when engaging in influencing public and regulatory policy, should do so in
a manner that is responsible and transparent.
Principle 8: Businesses should promote inclusive growth and equitable development.
Principle 9: Businesses should engage with and provide value to their consumers in a responsible
manner.

CSR ACTIVITIES
Some activities are specified in Schedule VII as the activities which may be included by companies
in their Corporate Social Responsibility Policies.

1. Eradicating hunger, poverty and malnutrition, promoting health care including preventive health
care and sanitation including contribution to the Swach Bharat Kosh set-up by the Central
Government for the promotion of sanitation and making available safe drinking water;

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2. Promoting education, including special education and employment enhancing vocation skills
especially among children, women, elderly and the differently abled and livelihood enhancement
projects;

3. Training to promote rural sports, nationally recognized sports, paralympic sports and Olympic
sports;

4. Rural development projects;

5. Disaster management, including relief, rehabilitation and reconstruction activities.

6. Contribution to the Prime Minister’s National Relief Fund or Prime Minister’s Citizen Assistance
and Relief in Emergency Situations Fund (PM Cares Fund) or any other fund set up by the Central
Government for socio- economic development and relief and welfare of the Scheduled Castes, the
Scheduled Tribes, other backward classes, minorities and women;

7. Protection of national heritage, art and culture including restoration of buildings and sites of
historical importance and works of art; setting up public libraries; promotion and development of
traditional arts and handicrafts;

8. Contribution to incubators or research and development projects in the field of science,

technology, engineering and medicine, funded by the Central Government or State Government or
Public Sector Undertaking or any agency of the Central Government or State Government;

How has the CSR spending pertaining to COVID-19 been inculcated in the Companies Act, 2013?
The PM-CARES Fund has been set up to provide relief to those affected by any kind of emergency
or distress situation such as that posed by COVID 19 pandemic. Accordingly, it is clarified that any
contribution made to the PM CARES Fund shall qualify as CSR expenditure under the Companies
Act.

It is further clarified that spending of CSR funds for carrying out awareness campaigns/programmes
on COVID-19 Vaccination programme is an eligible CSR activity.

The MCA has clarified that spending of CSR funds for ‘setting up makeshift hospitals and temporary
COVID Care facilities ‘ is an eligible CSR activity.

Steps in CSR Implementation Process

(a) Determining thrust area
(b) Identification of project:
(c) Evaluation of CSR projects

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(d) Implementation of the CSR projects:
(e) Monitoring
(f) Impact Assessment

Collaborative Projects
When companies decide to do something for the society under CSR, it may not be possible to do
with stand alone infrastructure unless the company is very big. Therefore, they need to
collaborate, partner or supplement with external agencies which can be a GOVT. agency, academic
institution or NGO.
(a) With other companies: sometimes, one company may not be able to implement the project on
its own mad may decide to go with other similar companies.
(b) With Govt. under PPP model: Govt. may not be able to reach out to every corner due to lack of
resources. NGOs and voluntary organizations may be roped in to do the job with Govt. Support.
(c) With specialized agencies: companies sometime implement project through specialized
agencies funded by them.

Specialized Implementing Agencies

1. Self-help Groups
2. Elected local bodies such as Panchayats;
3. Voluntary Agencies (NGOs);
4. Institutes/Academic Organisations;
5. Trusts, Missions, etc. (NGOs)
6. Mahila Mandals/Samitis
7. Government, Semi-Government and autonomous Organisations;

Evaluation of the CSR Projects before making the expenditure

This is also called due diligence of CSR projects. Normally companies make a shortlisting on the
basis of the projects proposals available to the company. The purpose of due diligence is to decide
whether the company is ultimately taking up the project or making the expenditure. The following
factors shall be measure while evaluating the CSR Projects before making the expenditure -
1. Nature of project
2. Cost of the project
3. Independent or linked to some other project
4. Collaborative project
5. Beneficiaries
6. Technical feasibility

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7. Financial feasibility
8 Implementation time
9. Whether impact can be measurable
10. Monitoring mechanism

Implementation of CSR projects

There are some large companies and their budget for CSR is also very high. These companies have
adequate manpower and execute the CSR project. They have separate well organized CSR
department in the company.
Advantages of direct implementation by the company
(a) Flexible
(b) Better supervision
(c) Quick decision making
(d) Less coordination and no coordination with third parties, i.e. implementing agency
(e) Less cost

Disadvantages of direct implementation by the company

(a) Manpower involvement
(b) Lack of domain knowledge
(c) No 80 G benefit
(d) Lack of local area knowledge and language
(e) Lack of adequate monitoring due to other issues

Third party implementation:

Third party implementation means implementation by specialised agencies.
When the project is being implemented by implementing agencies, the organisation needs to
evaluated, which can be done with following checks.
(a) Documentation
(b) Inspection of project site
(c) Track record of the organisation
(d) Beneficiary feedback
(e) Sponsors’ feedback
(f) Interview of the persons responsible for implementation.

Advantages of third party implementation:

(a) expertise
(b) Better supervision at site
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(c) unbiased
(d) Single point coordination
(e) Negotiate cost

Disadvantages third party implementation:

(a) May be more supervision
(b) No proper accounting
(c) No 80 G benefit
(d) Lack of adequate monitoring by the company
(e) Dominance in local area

Problems in implementation
Internal
(a) deciding preferences of projects:
(b) Financial Mismatch
(c) Lack of seriousness by management.
(d) Right people to work.
(e) Difference in opinion of the team/ committee

External
(a) Political pressure.
(b) Social pressure.
(c) Inefficient implementing agency.
(d) Diverting money
(e) Fraud

Impact assessment
Any CSR project/activity should have some impact, big or small. Impact refers to success of the activity
with relation to the target. In order to know the impact, an impact analysis study is supposed to be
made, which would compare the achieved results with the desired result. In order to get real picture,
following issues needs consideration –
(a) Should preferably done by an independent agency
(b) Focused on the impact only
(c) Done immediately after the benefit given
(d) Should be data based