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The 21st Century Corporation
NEW IMPERATIVES FOR SOCIALLY INCLUSIVE BUSINESS
J.VIKRAM BAKSHI
3 Billion
THE NUMBER OF PEOPLE WHO WILL JOIN THE MIDDLE CLASS IN
NEXT 10 YEARS
Source: @washpost
6
Degrees
THE IMPACT OF
CLIMATE CHANGE IN
THE NEXT 10 YEARS
PRINCIPLE 1: BUSINESSES SHOULD CONDUCT AND GOVERN THEMSELVES WITH
ETHICS, TRANSPARENCY AND ACCOUNTABILITY
PRINCIPLE 2: BUS...
NVGs: the nine principles
1.
•Transparency, ethics and accountability
2.
•Providing goods and services that are sustainabl...
Drivers of changeRegulators: Current scenario
The NVGs & BRR
•In 2011, the Ministry of Corporate Affairs released the
Nati...
Four Pillars of Business
Responsibility (NVGs)
Leadership
(Boards)
Integration
(Business model)
Engagement
(Internal and
e...
Why should you care?
The NEW Companies Act, 2013
Section 135: Effective from April 1, 2014
Every company having a net worth of rupees five hund...
Requirement 1: Board CSR Committee ( 3 members, 1 independent)
net worth of INR 500 crore or
more (USD 100 million or
more...
Read with Schedule VII
Activities which may be included by companies in their Corporate Social Responsibility Policies:
(i...
Under Clause (o) of Sub-Section (3) of Section 134: There shall be attached to statements
laid before a company in a gene...
Section 450
If a company or any officer of a company or any other person contravenes any of the
provisions of this Act or...
The
Reporting
1. Provide a brief outline of the company’s CSR policy including the statement of
intent reflecting the etho...
6. Details of CSR activities/projects undertaken during the year in the following table : (cont’d)
* Give details of Imple...
Principle Revenue growth
and
Market Access
Cost savings
and
productivity
Access to
capital
Risk
management/
license to ope...
3 Quick Steps
Source: IBLF Report
But then…
Why is the Government legislating this change?
What are the systemic issues?
Should we just deal with the sympto...
Zero Sum Game
Ecosystems destruction
Environmental degradation
Increasing inequality, hunger
Natural resource decline
Clim...
The sustainability paradox
An Alternative Approach
•Everything is connected to everything else
•Our societies co-exist in a complex web of
relationsh...
Learning from the Living Planet
Designing for Abundance
•Capture and recycle essentials like carbon & phosphates
•Avoid adding anything toxic to materials...
Agenda for the 21st Century Corp
1. Purpose Maximisation vs. Profit Maximisation
2. Designing for Abundance vs. Capital as...
A Few Examples
Over to you!
@jvbakshi In/jvbakshi Jvbakshi.wordpress.com
The 21st Century Corporation
The 21st Century Corporation
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The 21st Century Corporation

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Why building sustainable businesses are important for the 21st Century Corporation. The rationale for India's 2% CSR law, and why it makes sense.
A journey from global imperatives to national law, and the road ahead for creating sustainable businesses which include all stakeholders in creating value across people, plant and profits.

Published in: Leadership & Management

The 21st Century Corporation

  1. 1. The 21st Century Corporation NEW IMPERATIVES FOR SOCIALLY INCLUSIVE BUSINESS J.VIKRAM BAKSHI
  2. 2. 3 Billion THE NUMBER OF PEOPLE WHO WILL JOIN THE MIDDLE CLASS IN NEXT 10 YEARS Source: @washpost
  3. 3. 6 Degrees THE IMPACT OF CLIMATE CHANGE IN THE NEXT 10 YEARS
  4. 4. PRINCIPLE 1: BUSINESSES SHOULD CONDUCT AND GOVERN THEMSELVES WITH ETHICS, TRANSPARENCY AND ACCOUNTABILITY PRINCIPLE 2: BUSINESSES SHOULD PROVIDE GOODS AND SERVICES THAT ARE SAFE AND CONTRIBUTE TO SUSTAINABILITY THROUGHOUT THEIR LIFE CYCLE PRINCIPLE 3: BUSINESSES SHOULD PROMOTE THE WELLBEING OF ALL EMPLOYEES PRINCIPLE 4: BUSINESSES SHOULD RESPECT THE INTERESTS OF, AND BE RESPONSIVE TOWARDS ALL STAKEHOLDERS, ESPECIALLY THOSE WHO ARE DISADVANTAGED PRINCIPLE 5: BUSINESSES SHOULD RESPECT AND PROMOTE HUMAN RIGHTS PRINCIPLE 6: BUSINESS SHOULD RESPECT, PROTECT, AND MAKE EFFORTS TO RESTORE THE ENVIRONMENT PRINCIPLE 7: BUSINESSES, WHEN ENGAGED IN INFLUENCING PUBLIC AND REGULATORY POLICY, SHOULD DO SO IN A RESPONSIBLE MANNER PRINCIPLE 8: BUSINESSES SHOULD SUPPORT INCLUSIVE GROWTH AND EQUITABLE DEVELOPMENT PRINCIPLE 9: BUSINESSES SHOULD ENGAGE WITH AND PROVIDE VALUE TO THEIR CUSTOMERS AND SOCIETY AT LARGE, IN A RESPONSIBLE MANNER 9 Principles
  5. 5. NVGs: the nine principles 1. •Transparency, ethics and accountability 2. •Providing goods and services that are sustainable over entire life cycle 3. •Well-being of employees, including contract labor and home based workers 4. •Being responsive towards stakeholders, especially the disadvantaged 5. •Respecting and promoting human rights 6. •Protecting and restoring the environment 7. •Responsible policy advocacy that enhances public good 8. •Supporting inclusive growth and development – impactful community development - CSR 9. •Providing value to consumers responsibly NATIONAL VOLUNTARY GUIDELINES – THE RELEVANCE TO YOUR SECTOR 6 P R I N C I P L E S Indivisibility of principles key to linking competitiveness, responsibility and development impact. Source: IICA-GIZ Project
  6. 6. Drivers of changeRegulators: Current scenario The NVGs & BRR •In 2011, the Ministry of Corporate Affairs released the National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business (NVGs) •In August 2012, SEBI mandated the top 100 listed companies to file a Business Responsibility Report (BRR) describing their performance on the NVGs. The CSR 2% mandate: •In 2013, the Companies’ Bill was made an Act. •Section 135 of the Companies’ Act mandates all companies making a profit of INR 5 crore and above to spend 2% of their profits on Corporate Social Responsibility (CSR). Source: IICA-GIZ Project
  7. 7. Four Pillars of Business Responsibility (NVGs) Leadership (Boards) Integration (Business model) Engagement (Internal and external stakeholders) Reporting Communication) 8Source: IICA-GIZ Project
  8. 8. Why should you care?
  9. 9. The NEW Companies Act, 2013 Section 135: Effective from April 1, 2014 Every company having a net worth of rupees five hundred crore or more (USD 100 million or more),or a turnover of rupees one thousand crore or more (USD 200 million or more) , or a net profit of rupees five crore or more (USD 1 million or 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; The Board's report shall disclose the composition of the Corporate Social Responsibility Committee. Source: MCA website
  10. 10. Requirement 1: Board CSR Committee ( 3 members, 1 independent) net worth of INR 500 crore or more (USD 100 million or more), or a turnover of INR 1000 crore or more (USD 200 million or more) , or a net profit of rupees five crore or more (USD 1 million or more) during any financial year To Do: Board report should disclose CSR committee composition Requirement 2: CSR Committee Report formulate and recommend to the Board, a Corporate Social Responsibility Policy which shall indicate the activities to be undertaken by the company as specified in Schedule VII; recommend the amount of expenditure to be incurred on the activities referred to in clause (a); and monitor the Corporate Social Responsibility Policy of the company from time to time. Requirement 3: Board to disclose CSR Policy on Company Website ensure that the activities as are included in Corporate Social Responsibility Policy of the company are undertaken by the company. The Board of every company referred to in sub-section (1), shall ensure that the company spends, in every financial year, at least two per cent of the average net profits of the company made during the three immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy. Proviso 1: Get Local Provided that the company shall give preference to the local area and areas around it where it operates, for spending the amount earmarked for Corporate Social Responsibility activities; Proviso 2: Failure to spend Provided that if the company fails to spend such amount, the Board shall, in its report made under clause (o) of sub-section (3) of section 134, specify the reasons for not spending the amount.
  11. 11. Read with Schedule VII Activities which may be included by companies in their Corporate Social Responsibility Policies: (i) eradicating extreme hunger and poverty; (ii) promotion of education; (iii) promoting gender equality and empowering women; (iv) reducing child mortality and improving maternal health; (v) combating human immunodeficiency virus, acquired immune deficiency syndrome, malaria and other diseases; (vi) ensuring environmental sustainability; (vii) employment enhancing vocational skills; (viii) social business projects; (ix) 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 (x) such other matters as may be prescribed Source: MCA website
  12. 12. Under Clause (o) of Sub-Section (3) of Section 134: There shall be attached to statements laid before a company in a general meeting, a report by its Board of Directors, which shall include: (o) The details about the policy developed and implemented by the company on corporate social responsibility initiatives taken during the year. Sub Section (8) of Section 134 If a company contravenes the provisions of this section, the company shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend to twenty- five lakh rupees and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to three years or with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees, or with both. Source: MCA website
  13. 13. Section 450 If a company or any officer of a company or any other person contravenes any of the provisions of this Act or the rules made thereunder, or any condition, limitation or restrictions subject to which any approval, sanction, consent, confirmation, recognition, direction or exemption in relation to any matter has been accorded, given or granted, and for which no penalty or punishment is provided elsewhere in this Act, the company and every officer of the company who is in default or such other person shall be punishable with fine which may extend to ten thousand rupees, and where the contravention is continuing one, with a further fine which may extend to one thousand rupees for every day after the first during which the contravention continues. Source: MCA website
  14. 14. The Reporting 1. Provide a brief outline of the company’s CSR policy including the statement of intent reflecting the ethos of the company, broad areas of CSR interest and an overview of activities proposed to be undertaken; 2. Indicate the web-link to the CSR Policy. The policy should include the full list of projects/activities/programmes proposed to be undertaken by the company. must be provided. 3. The composition of CSR Committee 4. Average Net Profit of the company for last 3 financial years 5. Threshold limit (2% of this amount as in 4 above) 6. Details of CSR activities/projects undertaken during the year in the following table: a. total amount to be spent for the year; b. amount carried forward from earlier years; c. Amount spent during the year as below; d. Amount carried forward for the year. 7. In case the company has failed to spend the 2% of Average Net Profit (INR) of last 3 financial years, please provide the reasons for not spending the amount; 8. A responsibility statement of the CSR Committee, that the CSR Policy implementation and monitoring thereof is, in letter and spirit, in compliance with CSR Objectives. 9. Signed …………………………………………..(CEO/Managing Director/Director) ……………………………………(Chairman CSR Committee) Source: MCA website
  15. 15. 6. Details of CSR activities/projects undertaken during the year in the following table : (cont’d) * Give details of Implementing Agency 16 1. Sr N o. 2. CSR project/activity identified 3. Sector in which the project is covered 4. Projects/Programm es 1. Local areas/others 2. Specify the state/district 5. Amount outlay (budget) project/ programme wise 6. Amount spent on the programme /project Subheads 1. Direct expenditur e on projects 2. Over heads 7. Cumulative spend upto the reporting period 8. Amount spent Direct through implementi ng agency Total Source: MCA website
  16. 16. Principle Revenue growth and Market Access Cost savings and productivity Access to capital Risk management/ license to operate Human capital Brand value/ reputation 1 Ethics, Transparency, Accountability New customers Attractive to investors and banks Positively seen by communities and NGOs Attract and retain employees Positively seen by Customers and Regulators 2 Safe and sustainable goods and Services Customer loyalty Cost savings 3 Well-being of Employees Increased productivity Attract and retain employees 4 Responsiveness to all stakeholders Attractive to investors and banks Positively seenby communities and NGOs Positively seen by Customers and Regulators 5 Promoting Human rights Attractive to investors and banks Positively seen by communities and NGOs- Lower risk of non- compliance Positively seen by regulators 6 Protecting the Environment Improved access to green Customers Lower operating costs Attractive to investors and banks Positively seen by communities and NGOs Lower risk of non-compliance Positively seen by regulators 7 Responsible policy Advocacy Positively seen by civil society Positively seen by regulators 8 Supporting inclusive Development Potential source of trained employees Positively seen by governments 9 Providing value to customer New customers Customer Loyalty Lower risk of consumer action NVGs: Impact on Business Source: GIZ consulting paper
  17. 17. 3 Quick Steps Source: IBLF Report
  18. 18. But then… Why is the Government legislating this change? What are the systemic issues? Should we just deal with the symptoms or tackle the problem at its very core?
  19. 19. Zero Sum Game Ecosystems destruction Environmental degradation Increasing inequality, hunger Natural resource decline Climate change Biodiversity loss Increasing population
  20. 20. The sustainability paradox
  21. 21. An Alternative Approach •Everything is connected to everything else •Our societies co-exist in a complex web of relationships •You can never do just one thing •Every solution will create further problems
  22. 22. Learning from the Living Planet
  23. 23. Designing for Abundance •Capture and recycle essentials like carbon & phosphates •Avoid adding anything toxic to materials from the beginning of the process rather than remove them at the end •Ensure you do not replace one problematic material with another •Design in concert with nature •Build vertical greenhouses. •Recycle Bio and Tech Waste • View the Earth as a battery, and keep it charged
  24. 24. Agenda for the 21st Century Corp 1. Purpose Maximisation vs. Profit Maximisation 2. Designing for Abundance vs. Capital as “Barrier to Entry” 3. Leadership by Design vs. Leadership by scale 4. People+ Planet+ Profie 5. New Ideas, Social Enterprises, Inclusive Businesses
  25. 25. A Few Examples
  26. 26. Over to you! @jvbakshi In/jvbakshi Jvbakshi.wordpress.com

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