NILF - Roundtable February 14, 2013Hidden Opportunities in the 2% Mandate
Agenda 1. Catalyzing Change - IT/BPM Industry & Corporate Social Responsibility 2. The law & prescribed activities (Schedule VII) 3. Key questions specifically for IT-BPM industry 4. What role the NASSCOM Foundation can play? a) Drafting rules and regulations b) Implementation 5. Way Ahead…
Catalyzing Change IT/BPM Industry & CSR• IT-BPM industry’s contribution to the growth of India’s economy - • provided direct employment to nearly 3 million people, and indirectly to 9 million in 2012. • revenues of the sector have grown from 1.2 per cent of the GDP in FY1998 to an estimated 7.5 per cent in FY2012.• History of investing in philanthropy, long-term development projects, humanitarian causes, disaster relief etc.• Initiatives to promote education, health and general development in rural and urban areas, especially for excluded groups like at-risk children, women and persons with disability• Community engagements involving employees• ‘ Catalysing Change – 2012 – Shaping the future’ on the state-of-play of business responsibility (BR) in the IT-BPM industry in India
Clause 135 of Companies Bill 2012What Does The Law Say?• Every registered company under companies law or any previous laws (Section 1, clause 135): • Net worth of rupees > 500 crore • Turnover of rupees > 1000 crore • Net profit of rupees > 5 crore during any financial year must spend at least 2% of its average net profit every year.• If the company fails to spend such amount, the board shall explain the reason for not spending in its financial statement• A CSR committee of the Board, comprised of three or more directors and at least one independent director must be formed• CSR committee will be responsible for designing the policy, deciding the projects as per schedule VII, decide the CSR spend and monitor that it is being utilized as planned.
Clause 135 of Companies Bill 2012Schedule VII – Prescribed CSR Activities1. Eradicating extreme hunger and 8. Social business projects; poverty; 9. Contribution to the Prime Ministers2. Promotion of education; National Relief Fund or any other fund3. Promoting gender equality and set up by the Central Government or empowering women; the State Governments for socio-4. Reducing child mortality and improving economic development and relief and maternal health; funds for the welfare of the Scheduled Castes, the Scheduled Tribes, other5. Combating human immunodeficiency backward classes, minorities and virus, acquired immune deficiency women; syndrome, malaria and other diseases; 10. Such other matters as may be6. Ensuring environmental sustainability; prescribed.7. Employment enhancing vocational skills • # 1-7: UN Millennium Development Goals • # 8: Shared Value • # 9: Public-Private Partnership (PPP) • # 10: Flexibility
Role NASSCOM Foundation Can Play Indian Law Mandated CSR SEBI’s Sustainability Reporting to Top 100 Companies Bill companiesRule Writing Implementation Strategic & Consolidate & Regulatory Advise & Train Implementation Inputs Communicate Services CSR Advisory Help define CSR Role of Aggregator – Industry Inputs Services Policy e.g. NDLM Help companies identify the CSR Thought Leadership Foundation Awareness Campaigns Programs activities Represent Industry Metrics to measure the On National Handbook for policy impact creation, monitoring & Foundation for CSR reporting Support Reporting PR Convey SEBI reporting divergence & convergence
Where to spend?• Should the CSR activities • be driven from the ‘core business rather environmental & social impact‘? • involve other stakeholders of the organization – such as suppliers, customers, investors? If so, how does this impact the supply chain? • Be driven through ‘Public–Private Partnership’ (PPP), or can it be expanded to multi-stakeholder projects• Can CSR training be considered a part of CSR spend?• Some suggested additions to the Schedule VII • PwD & Inclusion • Monitoring & evaluation • Software donation • NDLM
How To Spend? • Internal programs e.g. Accessibility tools development • Consider volunteering by the staff of companies as a CSR activity (attaching the money value to volunteering)? • What should be the maximum percentage of CSR funds earmarked for Government? • What happens to the unspent funds – rollover of unspent funds, anything else? • Corporate Foundations – should all the activities of Foundations be considered as CSR for Parent Corporate.
Potential Collaborative Projects • Traditional CSR: • National Digital Literacy Mission (NDLM) • My Kartavya • Big Bridge • NASSCOM Knowledge Network (NKN) • Urban NKN Centers • Responsible Business • Impact Sourcing • Skills For Employment
How to Report? • Within financial report? • Supplemented with narrative format? • Reporting must include social impact as well as spending • Integration is the most recent trend on sustainability reporting; financials to be integrated with Annual Financial Returns • National Voluntary Guidelines (NVGs) • Convergence with global standards • Global Compact – Communication on Progress (COP) • GRI Principles
Immediate Next Steps • Recommend Guideline Principles • Detailed comments on Rules • Draft Reporting format
Draft Rule Changes Guiding Principles could include: • Simple rules , less prescriptive approach , having greater impact, allowing flexibility to business to choose the relevant activities. • Quantification of the 2% PAT - income from foreign operations must be excluded, same as double taxation between countries ma • Filter for qualified CSR activities - social and environmental impact • Inclusion NVGs and the Shared Value principle to include both internal and external initiatives. Will lead to greater inclusive growth and GDP impact. • Collaborative efforts should be emphasized to leverage efforts and avoid duplication.
Draft Rule Changes continued… • Reporting on the 2% spend • should be part of existing reporting and standards • as well integrated with Annual Reports such as SEBI • focus should be on the impact (both qualitative and quantitative) rather than the financial spend. • Specific differentiated activities between services and manufacturing need to be considered. • Schedule VII : Instead of Inclusion, exclusions e.g. Employee Welfare programs in general