CSR Reporting and Impact Assessment

- Prepared for ICAI Certificate Course on CSR

CA Harsh Batra
Ph: 9910244315
harshbatra76@gmail.com
 COPYRIGHT & DISCLAIMER

This presentation is only for academic purposes; this is not intended to be a professional advice or opinion.
Anyone relying on this does so at one’s own discretion. Please do consult your professional consultant for any
matter covered by this presentation.
The contents of the presentation are intended solely for the use of the client to whom the same is marked by us.
No circulation, publication, or unauthorised use of the presentation in any form is allowed, except with our prior
written permission.
No part of this presentation is intended to be solicitation of professional assignment.

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 AGENDA DISCUSSION

Value for Money (VFM)

Administration aspects under CSR

CSR Committee

CSR Policy

Monitoring of CSR

Impact Assessment
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 VALUE FOR MONEY

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 What does “value for money” mean?
Best value for money is defined as the most advantageous combination of cost, quality and sustainability to meet customer
requirements.

How do you assess value for money?

A value for money assessment happens when it has been determined that a problem may be solved through expenditure.
It comprises three key elements:
1. development of appropriate options;
2. measurement of proposal costs and impacts; and
3. consideration of risks and uncertainties to provide confidence in the assessment

What is the importance of value for money?

The time value of money (TVM) is an important concept to investors because
a dollar on hand today is worth more than a dollar promised in the future. (The dollar on hand today can be used to invest and
earn interest or capital gains)

What is the principle of value for money?

Value for money requires that;
1. organisational systems are proportional to the capacity and need to manage results and/or deliver better outcomes and be
calibrated to maximise efficiency.
2. An ongoing commitment to business process reforms to eliminate inefficiencies and duplication will help achieve this

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 WHAT ARE THE ELEMENTS OF VALUE FOR MONEY?
It has three components:
1. Economy Buying inputs of a given quality at the lowest cost. It includes following:
- Cost Consciousness
- Encouraging Competition

Ensuring that the maximum amount of output is achieved from an

2. Efficiency operation for the minimum amount of input. It includes following:
-Evidence Based Decision Making
-Proportionality

Eensuring that the outputs of an organisation are as closely aligned as

3. Effectiveness possible to its objectives. It includes following:
-Performance and Risk Management
-Result Focus
-Experimentation and Innovation

4. Ethics Ensuring the output is achieved in a manner which is socially acceptable, it

includes following:
-Accountability
-Transparency

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 VALUE FOR MONEY CHALLENGES IN PUBLIC SECTOR

Defining and measuring value for money is fraught with various challenges in the public sector
such as.
1. The public good problem - not always easy to value a public good, because money (cost) is
not the only measure.
2. Cost accounting - how do you do cost accounting in the public sector?
3. Multiple stakeholders with different and unclear expectations complicate the measurement
of value for money.

Value for money leaks!

Good intentions, ethical behaviour, adept planning does not always guarantee value for money.
Value for money leaks, and therefore it is important to identify the typical leak points, which include:

1. Poorly designed programs/projects

2. Poor budgeting
3. Sub-optimal implementation
4. Inadequate monitoring and evaluation processes
5. Weaknesses in procurement controls
6. Theft and corruption
7. Assets misappropriation
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 VALUE FOR MONEY
CSR – the business benefits (improve your business outcomes, short and long-term) through
1. Better business performance
2. A better customer experience
3. Employee benefits
4. Lower business costs
5. Brand differentiation and loyalty
6. Innovation
7. Community impact

How corporate social responsibility affects company value

CSR initiative can increase marketplace respect for a company, potentially resulting in:
1. Enhanced ability to attract qualified personnel
2. Greater employee engagement
3. Increased sales and profitability

Then Two Question should come to your mind

1. How do you devise a formula that will convert consumer respect into a quantifiable increase in
sales or profitability?
2. Will investors pay a premium to invest in a socially responsible company?” The answer is yes.

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 BUSINESS LEADERS - VALUE FOR MONEY
HOW BUSINESS LEADERS CAN ENHANCE THE EFFECTIVENESS OF CSR ACTIVITIES

1. Diversify the CSR portfolio

2. Offset value trade-off of multiple activities
3. Prioritize product-related CSR activities over philanthropy and business practices
4. Be mindful of your customer type
5. Ensure coherence of CSR activities to build a “CSR brand”
6. Ensure consistent, long-term commitment to each CSR activity
7. Make adequate use of marketing to enhance the customer value proposition of CSR
8. Tie CSR activities to functional and utilitarian products
9. Seek optimal level of CSR investment
10. Be mindful of the impact of CSR on financial performance and shareholder value

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 SOCIAL RETURN ON INVESTMENT

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 SROI – MEANING, PRINCIPLES AND RELATION WITH CSR
Social Return on Investment
• Made of two terms
Social - denotes social mission
Return on investment - denotes application of the
commercial sector’s ROI analysis
• Method to assess social impact of an investment
• Expressed in monetary terms
• Attempts to capture the “blended value” of
investments in social or community ventures
Blended value
• Consists of economic, social and environmental
value
• CSR operates with a similar intent or objective
Benefits of SROI to overall CSR framework
• Communicates business benefits of CSR efforts
• Helps in standardising CSR reporting
• Illustrates gaps and opportunities for social
change
• Assess potential for generating social impact
relative to financial investments
• Track social performance

Principles forming basis of SROI

Understand what Value the things Only include what

Involve stakeholders changes that matter is material Do not over-claim

Be transparent Verify the result

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 STAGES OF SROI ANALYSIS

Evidencing
Establishing scope
Mapping outcomes and
and identifying key
outcomes giving them a
stakeholders
value

Reporting, using
and embedding Calculating the Establishing
results SROI impact

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 MODELS FOR CONDUCTING SROI

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 SROI VALUE MAP BY THE SROI NETWORK/ SOCIAL VALUE UK
(1/3)

Stage 1 Stage 2
Who and how many? At what cost? Outputs What changes?
Stakeholders Inputs Outcomes

Outcome description
Who do we How What will/did Financial Summar What is the change experienced by stakeholders?
have an many they invest value (for the y of
effect on? in and how much total activity
Who has an group (money, population for in
effect on us? ? time)? the numbers
accounting .
period)

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 SROI VALUE MAP BY THE SROI NETWORK/ SOCIAL VALUE UK
(2/3)
Stage 3

How much? How long? How valuable?

Indicator and source Quanti Amount Durati Outcom Express the relative importance (value) of the outcome
ty of o n of es start
(scale) change outco Weighting Valuation approach Monetary
per m es (monetary) valuation
stakehol
d er
(depth)
Describe how you will measure Number Describe How Does the How important is Describe the How
the described outcome of the long outcome this outcome to monetary important is
(including any sources used) people average (in start in stakeholders? valuation approach the outcome
experien amount years) Period of (e.g. on a scale of used to express to
c ing of does activity or 1-10) (N.B. To the relative stakeholders
describe change the in the make comparison importance (value) (expressed in
d experien outco Period between of each outcome. monetary
outcome c ed (or me after? outcomes (N.B. If your terms)?
. to be last possible, your analysis does not
experien for? analysis should be use monetary
c ed) consistent in the valuation of
per type of weighting outcomes, please
stakehol used). use the Value Map
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 SROI VALUE MAP BY THE SROI NETWORK/ SOCIAL VALUE UK
(3/3)

Stage 4
How much caused by the activity? Still
material?
Deadweight Displacemen Attribution Drop off Impact
t calculation Present value of each year
% % % Total Present Value (PV)
Net Present Value (PV minus the investment)
What will What Who Does the Number of
happen/w activity else outcome people Social Return (Value per amount invested)
hat would would/did contribu drop off in (quantity)
have you ted to future times value,
happened displace? the years? less
without change? deadweight,
the displacemen
activity? t and
attribution
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 REDF’S SROI FRAMEWORK

Relevant SROI metric (Value as well as Return) Manner of deriving

Enterprise value Project cash flows and discount using an appropriate rate

Social Purpose value Estimate future social purpose cash flows and discount

Blended Value (Enterprise Value + Social Purpose Value) - Long term debts

Enterprise Index of Return Enterprise value/ Present value of investment to date

Social Purpose Index of Return Social Purpose value/ Present value of investment to date

Blended Index of Return Blended Value/ Present value of investment to date

Source - https://redfworkshop.org/wp-content/uploads/2017/06/SROI-Methodology-2001.pdf

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 SYNOPSIS OF PROCESS OF CSR SPENDING
CSR committee shall review
expenditure of previous unspent as at the end of
year and note if there is
any unspent amount to be
reported
Committee shall discuss
and determine the focus
area for CSR spending for
the current FY as per the
CSR policy
Committee shall determine
whether CSR projects shall
be undertaken by the co.
or any trust or other
implementing agency
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The amount remaining
The CSR committee
shall obtain utilisation
the year shall be certificates from
transferred within the
implementing agency
specified timelines
Company shall undertake
The CSR team shall impact assessment and
initiate monitoring of activities
the activities undertaken
Board shall take note of
minutes of CSR committee
and discuss if any unspent
amount is lying which shall
be disclosed in the Board’s
Report
 ADMINISTRATION ASPECTS UNDER CSR
MONITORING AND REPORTING OF CSR IMPLEMENTATION

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 CSR COMMITTEE
CONSTITUTION AND ROLE

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 CONSTITUTION OF COMMITTEE

It should be a committee of Board

With minimum 3 directors
Atleast one should be ID out of the 3 directors (in cases where co. is req to appoint an ID)

Listed cos Unlisted Public cos Private debt listed cos Unlisted Pvt cos Deemed Public cos

3 or more Structure
3 or more 3 or more directors if co. remains
directors with directors with 3 or more unchanged of a
directors has 3 directors.
min 1 ID min 1 ID (if req) deemed public
Can be limited to
2 members also co. Same as pvt
cos’

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 ROLE OF CSR COMMITTEE
Formulate and recommend CSR policy to Board

Identify activities mentioned in Schedule VII as priority projects to be undertaken by the Company as CSR
i.e. CSR philosophy

Recommend the amount of expenditure to be incurred on CSR every year

Review the status of expenditure incurred on CSR activities last year

Monitor implementation of CSR activities including modalities of utilisation of CSR funds

Appoint any implementing agency or trust for carrying out CSR activities includes review and monitoring

Approve and recommend CSR report to be annexed to Annual Report

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 CSR POLICY
REQUIREMENT & CONTENTS
OF POLICY

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 REQUIREMENT & CONTENTS OF CSR POLICY

CSR Policy BoD Approves √

CSR Committee
Formulates and recommend CSR Policy to BoD

List of activities to be undertaken by the company which are related to activities mentioned in Schedule VII of the Act.

CONTENTS OF CSR POLICY

Company’s philosophy on CSR spending

Targeted approach- List of priority projects as per Schedule VII

Process of implementation

Modalities of execution

Guiding principles for formulation of annual action plan

Process of monitoring and reviewing of projects or programs

Surplus arising out of CSR projects shall not form part of business profits

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 FORMULATION OF ANNUAL ACTION PLAN

List of CSR
projects

Need of
Manner of
impact
execution
assessment
ANNUAL
ACTION
PLAN

Monitoring
Modalities of
and reporting
utilisation
mechanism

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 ROLE OF BOARD OF DIRECTORS

Constitute a CSR committee

Approve CSR policy and priority

projects

Approve annual report on CSR

Monitor minimum spending for the

purpose of CSR

Satisfy itself regarding utilisation

of funds disbursed

Approve disclosure of reasons of

unspent CSR expenditure, if any

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 MONITORING OF CSR

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 MONITORING OF CSR IMPLEMENTATION

Company undertakes CSR activities on its Company undertakes CSR activities

own. For ex: construction of a school through implementing agencies

Company may monitor the Company should obtain

expenditure by way of utilisation certificates from such
obtaining regular updates agencies and track disposal of
from the internal CSR funds on quarterly/ half-yearly
execution team (if any). basis

Further, the CFO or any other person responsible for the financial management shall certify the utilisation of CSR funds
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 MONITORING IN CASE OF DIRECT EXPENDITURE BY THE
COMPANY
Manner of monitoring
Hiring an internal specialized CSR team
Engage the services of any other entity,
including an international organization

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 MONITORING IN CASE OF INDIRECT CSR AND ONGOING
PROJECTS
In case of Indirect CSR In case of ongoing projects

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 MONITORING OVERALL CSR COMPLIANCES | RELEVANCE OF
CSR AUDIT
CSR Audit
Formal evaluation of the procedures and practices to ensure applicable provisions of
CSR
Identification of gaps
Making recommendations
Includes review of

Composition of Verification of Functioning off Implementation

CSR Policy CSR Budget
CSR Committee CSR Budget CSR Committee as per AAP

Activities Disbursements Amounts booked

Implementation
against which against Utilisation of as Adequacy of
of the ongoing
expenditures budgeted funds by the IA administrative disclosures
project
incurred amount overheads

Transfer of
unspent Impact
amounts within Assessment
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 IMPACT ASSESSMENT

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 MEANING OF IMPACT ASSESSMENT
The purpose of impact assessment is to
assess social impact, and hence, it is
called “social impact assessment”
Impact assessment may also include
“social return on investment”
Social impact assessment and “social
audit” are closed related
International Association for Impact
Assessment has several publications on
the topic, mostly in context of
environmental projects:
https://www.iaia.org/reference-
and-guidance- documents.php
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Several PSUs have carried out impact assessment of
their various CSR projects
Examples
https://www.nmdc.co.in/CSR/NMDC_Kirandul.
pdf
https://www.unitedbreweries.com/Pdf/CSR/Im
pact%20Ass essment%20Report%202022.pdf
https://www.bharatpetroleum.in/
CSR/CSR- Reporting/Impact-
Assessment-Reports.aspx
https://recindia.nic.in/uploads/files/RECF-
Impact-
Assessment-fy-21-22.pdf
http://www.nhpcindia.com/writereaddata/Ima
ges/pdf/IA_ of_Leh_CMA_202206_1.pdf
 PROVISIONS W.R.T. IMPACT ASSESSMENT

Rule 8 (3) brings in the requirement of impact assessment To whom is the impact assessment report
addressed?
If the CSR target of the company, in each of the 3 preceding
financial years, is Rs 10 crores or more This has to be placed before the Board [Rule
8(3)(b)]
The activity or the project has an outlay of Rs 1 crore or more
This has to form part of CSR Annual Report
Since the requirement applies immediately, the CSR target for FY
2017-18, 18-19 and 19-20 will be relevant, to see the impact Impact assessment costs shall not exceed
assessment requirement for FY 20-21
2% of the total CSR expenditure for that
Applies to projects completed on/after 22nd January, 2021 financial year or
Who can conduct impact assessment? Rs. 50 lacs, whichever is higher
to be carried by an independent agency Prior to amendment, limits were higher of 5%
of total CSR expenditure or Rs. 50 lacs
Mostly academic or research entities with capabilities of field
surveys, understanding the objectives of the CSR interventions,
social auditors etc
Eligibility criteria left upon Board’s discretion (MCA FAQ 9.4)
Can a company itself conduct impact assessment?
May be done on a voluntary basis
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 BROAD STEPS AND METHODOLOGY OF IMPACT ASSESSMENT

Concept of 5 Ps

1. Plan
Setting out the
Detailed plan to Setting timelines for 2. Process
survey methodology 3. Prepare
collect information obtaining findings
and instruments 4. Perform
5. Publish

Means of data collection

Discussion with • Questionnaires
Disclosure and gap Preparation and various stakeholders
assessment for submission of the • On field verification
and getting • Oral interview
future actions detailed report feedback • Focussed group discussions

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 IMPACT ASSESSMENT TOOLS AND METHODOLOGY (1/2)

OECD DAC Evaluation criteria

IRECS Framework

Inclusiveness – Ability of different stakeholders to access

benefits of activities

Relevance – Ability to meet community priorities

Effectiveness – Ability to effectively address

community expectations

Convergence – Degree of convergence with

government/ other partnerships etc

Sustainability – Ability to manage and sustain activities after

completion of the project

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 IMPACT ASSESSMENT TOOLS AND METHODOLOGY (2/2)
Bluesky Impact Assessment Methodology

Source -
https://blueskycsr.com/methodology/
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 THANK YOU !!
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