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 2
 The Pyramid of CSR

Philanthropic Contribute resources

(Be a good to the community,
corporate citizen) improve quality of life

Ethical Obligation to do
(Be ethical) what is right, just
and fair
Legal Law is society’s
(Obey the law) codification of right and
wrong
Economic The foundation
(Be profitable) upon which all
others rest

Overview of Corporate Social Responsibility

By: S. Ravi, FCA 3
 Second Phase
charity (1914-1960)
of philanthropists and
Largely influenced by
Driven by noble deeds Mahatma Gandhi’s theory
(1850-1914) of trusteeship.
First Phase Industrialists pressurized
to show their dedication
towards
Four Phases of the benefit of the
society
CSR responsibility.
Development and accepted as
Third Phase in India charity is now understood
(1960 – 1980) strategy. What started as
CSR  influenced by the sustainable business
emergence of Public integrated CSR into a
sector undertakings to Indian companies
ensure proper distribution (1980 until the present)
of wealth Fourth Phase

Overview of Corporate Social Responsibility

By: S. Ravi, FCA 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 5
 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 6
7 By: S. Ravi, FCA
Overview of Corporate Social Responsibility
• This is true within developed nations, but also
in comparison to developing nations. Affluent
consumers can afford to pick and choose the affluence
products they buy. A society in need of work & Increasing
inward investment is less likely to enforce 2.
strict regulations and penalize organizations
that might take their business & money
elsewhere.
• Consumers and society in general expect more
from the companies whose products they buy.
ns
expectatio
This sense has increased in the light of recent social
corporate scandals, which reduced public trust Changing
of corporations, and reduced public confidence 1.
in the ability of regulatory bodies and
organizations to control corporate excess.
identifiable trends
important for businesses today because of three
CSR as a strategy is becoming increasingly
CSR Importance and its Relevance Today
8 By: S. Ravi, FCA
Overview of Corporate Social Responsibility
• Growing influence of media sees any
mistakes’ by companies brought immediately Information
to the attention of the public. In addition, the flow of
Internet fuels communication among like- n and free
minded groups and consumers - empowering
Globalizatio
them to spread their message, while giving 3.
them the means to co-ordinate collective
action.
identifiable trends
important for businesses today because of three
CSR as a strategy is becoming increasingly
CSR Importance and its Relevance Today
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 9
 Companies Bill and CSR

models
Promote and facilitate far
develop effective business
better connect between
competencies as well as
businesses and communities
and channelize their core
Allow corporates to harness
Purpose of
Inclusion of CSR
in the
Companies Bill
Social Entrepreneurs
Facilitate deeper thought and Academic Institutions and
longer term strategies for Society Organizations,
addressing some of our most Corporates, Governments, Civil
persistent social, economic partnerships between
and environmental problems Assist in synergizing

Overview of Corporate Social Responsibility

By: S. Ravi, FCA 10
 Companies Bill and CSR – Clause 135

Every
Company
With

Net Worth Turnover of Net Profit

of Rs. 500 Rs. 1000 of Rs. 5
Crores or Crores or Crores or
more more 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 11
 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
Committee in its report a CSR Policy to the Board
 Approve the Company’s CSR policy indicating the activities to
after considering the be undertaken by the
recommendations of the committee Company
 Disclose the CSR policy in its report  Recommend the amount of
and on Company Website expenditure to be incurred
 Ensure the implementation of the on CSR related activities
policy  Monitor the Company’s CSR
 To spend at least 2% of the policy from time to time.
Company’s average profit for the last
3 financial years for this purpose
 Give preference to spending in local
areas where it operates
 Specify
Overviewreasons in report
of Corporate Social in case of
Responsibility
12
failure
By: S. Ravi, FCA
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:
 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 13
 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 14
 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.
Overview of Corporate Social Responsibility
By: S.NRIs
 Ravi, FCA are also entitled to claim tax benefits against 15
 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 16
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
Overview of Responsibility
of Corporate Social
By: S. Ravi, FCA
all stakeholders. 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 Budgetary allocation
in the previous year (as % of PAT in previous
year)
Less than Rs. 100 Crore 3% - 5%
Rs. 100 Crore to Rs. 500 2% - 3%
Crore
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
Overview of Corporate Social Responsibility
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number of beneficiaries.
By: S. Ravi, FCA
 SEBI - Making CSR Reporting Compulsory
 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
Overview of Corporate Social Responsibility
Ministry
By: S. Ravi, FCA of Corporate Affairs in July 2011. 22
 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 23
 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
Overview of Corporate Social Responsibility
24
policies evolved by Govts world over.
By: S. Ravi, FCA
 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
Baseline Survey
Dispersing
Monitoring and Impact Analysis
Overview of Corporate Social Responsibility
By: S. Ravi, FCA 25
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 Environmental Benefits
Community and
General Public
• Charitable • Greater material
contributions recyclability
• Employee volunteer • Better product durability
programs and functionality
• Corporate involvement • Greater use of renewable
in community resources
education, • Integration of
employment and environmental
homelessness management tools into
programs business plans, including
• Product safety and life-cycle assessment and
Overviewquality
of Corporate Social Responsibility
By: S. Ravi, FCA
costing, environmental 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, bar-bending, 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
Overview skilled
of Corporate Social workmen
Responsibility in various trades, with about sixty
29
percent of them being deployed to L&T’s jobsites spread across
By: S. Ravi, FCA
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
Overview of Corporate Social Responsibility
32
against the competitors and enhance brand equity, but
By: S. Ravi, FCA
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.

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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
By: of sustainable corporate social responsibility.
Overview of Corporate Social Responsibility
S. Ravi, FCA 35
 Thank You

Overview of Corporate Social Responsibility

By: S. Ravi, FCA 36