This paper predominantly enumerates the role of Corporate Social responsibilities in the present scenario, its evolution, impact of Clause 135 of Companies Act, 2013, Role of CSRs in SMEs and also its Global Impact.
|Clause 135, Companies Act, 2013 | Companies (CSR policies) Rules, 2014 |
Meaning & definition of CSR
History & evolution of CSR
Motives of CSR
Benefits and internal scope of CSR
Enterprise social responsibility
Concept of sustainability & stakeholder management
CSR through triple bottom line and sustainable business
Environmental aspect of CSR
Chronological evolution of CSR in India
Syllabus as prescribed by RTM Nagpur University for the course 'CSR and Sustainability, for MBA Programme
India's ancient wisdom, which is still relevant today, inspires people to work for the larger objective of the well-being of all stakeholders. For example, our Rushees, Munees and Saints preached us to serve the society. The idea of CSR first came up in 1953 when it became an academic topic in HR Bowen’s “Social Responsibilities of the Business”. Since then, there has been continuous debate on the concept and its implementation. Although the idea has been around for more than half a century, there is still no clear consensus over its definition. Post 1991, there is increasingly a receding role of the state in the economic and social sphere. An increasing acceptance of CSR by large number of corporate, post liberalization can thus be seen in the context of the larger role being consciously carved for the private sector in an economy which was earlier largely controlled and managed by the State. The corporate world is keen to exploit the opportunities that are being provided by the new economic outlook of the State. Today, 93% of the world’s largest 250 companies now publish annual corporate responsibility reports, almost 60% of which are independently audited.
Meaning & definition of CSR
History & evolution of CSR
Motives of CSR
Benefits and internal scope of CSR
Enterprise social responsibility
Concept of sustainability & stakeholder management
CSR through triple bottom line and sustainable business
Environmental aspect of CSR
Chronological evolution of CSR in India
Syllabus as prescribed by RTM Nagpur University for the course 'CSR and Sustainability, for MBA Programme
India's ancient wisdom, which is still relevant today, inspires people to work for the larger objective of the well-being of all stakeholders. For example, our Rushees, Munees and Saints preached us to serve the society. The idea of CSR first came up in 1953 when it became an academic topic in HR Bowen’s “Social Responsibilities of the Business”. Since then, there has been continuous debate on the concept and its implementation. Although the idea has been around for more than half a century, there is still no clear consensus over its definition. Post 1991, there is increasingly a receding role of the state in the economic and social sphere. An increasing acceptance of CSR by large number of corporate, post liberalization can thus be seen in the context of the larger role being consciously carved for the private sector in an economy which was earlier largely controlled and managed by the State. The corporate world is keen to exploit the opportunities that are being provided by the new economic outlook of the State. Today, 93% of the world’s largest 250 companies now publish annual corporate responsibility reports, almost 60% of which are independently audited.
A Handbook on Corporate Social Responsibility in India developed by CII and PWC has been released at the CII National CSR- CSO Bridge 2013. The Handbook, brought out against the backdrop of the recently passed Companies Bill, which necessitates the provision of 2 percent spend on CSR, is a guidance document for industry for (a) Facilitate development of CSR mandate within organisations and help streamline dialogue within the industry (b) Provide a framework that companies can use to plan and implement CSR activities by addressing the ‘why CSR’ and ‘How to put CSR into action.’ (c) Help industry in identifying NGO partners for CSR implementation.
CSR-Legislation In India & the world
Section 135 of Companies Act 2013
Scope for CSR Activities under Schedule VII
Appointment of Independent Directors on the Board
The Drivers of CSR in India
Changing expectations of social responsibility
four faces of social responsibility
the regulatory environment in India Counter trends
Performance in major business and programs
The Companies Bill 2012 was passed in the Lok Sabha on 18 December 2012. The bill seeks to consolidate and improve corporate governance and further strengthen the regulations for the corporates. One of the noticeable features of the bill is introduction of the most debated concept of Corporate Social Responsibility (CSR). The attached presentation by Ms Gayatri Subramanian, Program Coordinator - CSR & Corporate Governance, Indian Institute of Corporate Affairs, New Delhi, presents a clear picture on the new CSR Bill.
this ppt includes general meaning of csr
its 5 bottom line concepts
its types
principles and strategies
arguments for and against
then csr activities of 4 diff. companies
Current trends and opportunities in CSR
CSR as a strategic business tool for sustainable development
Review of successful corporate initiatives & challenges of CSR
Case Studies of Major CSR Initiatives
Framework of social orientations
Management and social theories
Five types of managers
Organization classification
International framework for corporate social responsibility
Millennium development goals
Sustainable development goals
Relationship between CSR and MDGs
United Nations (UN) Global Compact 2011
UN guiding principles on business and human rights
OECD CSR policy tool
ILO tri-partite declaration of principles on multinational enterprises & social policy
A Handbook on Corporate Social Responsibility in India developed by CII and PWC has been released at the CII National CSR- CSO Bridge 2013. The Handbook, brought out against the backdrop of the recently passed Companies Bill, which necessitates the provision of 2 percent spend on CSR, is a guidance document for industry for (a) Facilitate development of CSR mandate within organisations and help streamline dialogue within the industry (b) Provide a framework that companies can use to plan and implement CSR activities by addressing the ‘why CSR’ and ‘How to put CSR into action.’ (c) Help industry in identifying NGO partners for CSR implementation.
CSR-Legislation In India & the world
Section 135 of Companies Act 2013
Scope for CSR Activities under Schedule VII
Appointment of Independent Directors on the Board
The Drivers of CSR in India
Changing expectations of social responsibility
four faces of social responsibility
the regulatory environment in India Counter trends
Performance in major business and programs
The Companies Bill 2012 was passed in the Lok Sabha on 18 December 2012. The bill seeks to consolidate and improve corporate governance and further strengthen the regulations for the corporates. One of the noticeable features of the bill is introduction of the most debated concept of Corporate Social Responsibility (CSR). The attached presentation by Ms Gayatri Subramanian, Program Coordinator - CSR & Corporate Governance, Indian Institute of Corporate Affairs, New Delhi, presents a clear picture on the new CSR Bill.
this ppt includes general meaning of csr
its 5 bottom line concepts
its types
principles and strategies
arguments for and against
then csr activities of 4 diff. companies
Current trends and opportunities in CSR
CSR as a strategic business tool for sustainable development
Review of successful corporate initiatives & challenges of CSR
Case Studies of Major CSR Initiatives
Framework of social orientations
Management and social theories
Five types of managers
Organization classification
International framework for corporate social responsibility
Millennium development goals
Sustainable development goals
Relationship between CSR and MDGs
United Nations (UN) Global Compact 2011
UN guiding principles on business and human rights
OECD CSR policy tool
ILO tri-partite declaration of principles on multinational enterprises & social policy
CSR 2.0: The Future of Corporate Social ResponsibilityWayne Visser
Describes the failure of corporate social responsibility (CSR 1.0) due to the Triple Curse, and introduces Wayne Visser's model of CSR 2.0, including its 5 Principles and 4 DNA Codes. Prof/Dr Visser is CEO of CSR International
Present Scenario of Corporate Social Responsibilities in BangladeshMasum Hussain
The purpose of business is to make money. However, the profit motive is sometimes viewed as less than virtuous because it emphasizes self-interest. Nevertheless, self-interest is not the same as selfishness, which emphasizes one's own interests at others' expense. Self interest is simply a concern for financial reward and is arguably necessary if society is to be maximally productive and efficiently allocate its resources. Business is an inseparable and embedded part of the society. In addition to its economic role in society, business also has several other roles and responsibilities towards society viz. responsible conduct of business activities while pursuing economic gains; the social and environmental responsibilities of the business towards its stakeholders; and business’s contributions that would benefit the society at large. Companies around the globe are recognizing the importance of engaging in Corporate Social Responsibility (CSR) that is crucial to their survival and growth. It is evident that when an organization integrates appropriate CSR practices in its strategy that embed the societal and environmental concerns, these practices undoubtedly bring tangible benefits to the business along with a sustainable competitive advantage.
It is mandatory for companies to conform to the legal responsibilities as they are prescribed by law. So, organizations have no alternative but to comply with the basic law of the land. On the other hand, Ethical responsibilities of corporations are taken as additional responsibilities going beyond legal compliance and profit making and include those that firms believe are the right things to do. Ethical responsibility originates from humanistic, religious and moral orientation of corporations. The voluntary responsibilities to the society refer to the discretionary nature of obligations rooted in the altruistic principles which are not required by law. The motivation for such sense of responsibilities arises from the reciprocal obligation of giving back to the society in exchange of profit and power that companies receive from society. This school of thought gave rise to CSR which is seen as continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce, their families, local community, and society at all, including the environment. Even though Bangladesh is one of the world’s poorest countries, CSR activities in Bangladesh have risen significantly in importance. It is believed that the interest in CSR initiatives in Bangladesh has been fueled by MNCs’ global activities.
United Nations Principles and Guidelines on Access to Legal Aid in Criminal Justice Systems - Linee Guida ONU e principi per l'accesso al patrocinio a spese dello Stato.
The Future of Corporate Social Responsibility - employee volunteering. Cross-sector initiatives to accelerate social innovation. A presentation of Social Entrepreneurs Melbourne.
Faculty presentation was done by Dr. Nalin Abesyekera on “CSR and future of Open University” by highlighting following projects done by Department of Management Studies.
1. Community Service Project at National Cancer Institute Maharagama-MBA Cohort eight
2. CSR (Corporate Social Responsibility) project at RVS (Rana Viru Sevana) in Ragama-IPM MBA-Batch three
3. CSR for Udugama Khanisita Vidyalaya,Padukka- MBA Cohort eight
4. CSR for needy people in Sabaragamuwa(cataract surgery project)- MBA Cohort nine
Corporate social responsibility - Aadhit B Balaji Aadhit B
This paper predominantly enumerates the role of Corporate Social responsibilities in the present scenario, its evolution, impact of Clause 135 of Companies Act, 2013, Role of CSRs in SMEs and also it’s Global Impact.
- Clause 135, Companies Act, 2013
- Companies (CSR Policy) Rules, 2014
Assessment of CSR Law in Companies Act, 2013 – An Analysis of the Performance...inventionjournals
Introduction: The new law making CSR expenditure and reporting mandatory for certain companies is a new chapter in the Indian corporate world and has provided a necessary boost to the status of companies’ responsibility towards the stakeholders, and transparency and accountability of their actions. Need: The mandatory 2% spending of profits on CSR activities got mixed reaction from corporate executives. To ensure that the enforcement of the law isn’t limited to the term “cheque-book CSR”, regular exploration of the companies’ CSR expenditures and their consequent outcomes is absolutely essential. Objective: The paper aims to assess the outcome of Section 135 of the Companies Act, 2013, in the first year of its implementation among the BSE-SENSEX companies. Research methodology: Secondary sources were utilized for collecting profits and CSR expenditure figures of the selected 30 companies for conducting an ex-post analysis for the year 2014-15. Key findings of the study: Less than 15% of the BSE-SENSEX companies had spent on CSR activities an amount that is equal to or greater than the stipulated 2% of the average profits of the preceding 3 years as per Section 135 of Companies Act, 2013. Implications: Immediate attention of regulatory bodies is desired towards companies failing to dispense the funds earmarked for CSR as stipulated by the law to ensure compliance.
Corporate social responsibility an opportunity to improve the status of soc...CA. (Dr.) Rajkumar Adukia
This article will provide us the overall idea about corporate social responsibility from root level to top level. The main motive behind the formation of this concept is the economic contribution of companies to society
Concept of Corporate social responsibility
2. Types of CSR
3. Advantages
4. Concept of CSR under Indian law
5. Companies involved in CSR
6. Concept of CSR under English law
7. Conclusion
International Journal of Business and Management Invention (IJBMI) is an international journal intended for professionals and researchers in all fields of Business and Management. IJBMI publishes research articles and reviews within the whole field Business and Management, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online.
Corporate Social Responsibility and its alignment with Business needs and Soc...Rupak Ghosh
Ministry of Corporate affairs is encouraging the companies to have some CSR activities. The companies are taking some Social Welfare activities to show that they have CSR activities. However a proper CSR policy should not merely some social welfare activities but a holistic responsibility of business organization towards its shareholders, employees, consumers, related communities and environment however it’s sometime neglected. Companies may have sound HR, Marketing, Operation policies etc. but somehow they are confused regarding their CSR policies. They are sometime depending on some social welfare organizations who have very limited knowledge toward the need and responsibility of business organizations. Unoptimized CSR Activities is not creating any value addition to the company as well as to the society in true sense. A proper structure for CSR policy is required to be developed so that companies can exercise its responsibility towards 3P’s (Profit, People and planet) effectively.
This study is done by combining primary data with secondary data related to CSR Activity of some major companies, in order to move forward in designing road map for future CSR activities.
CSR Activities of Companies having manufacturing Infrastructure like SAIL, Indian Oil, Power Sectors like NTPC, Adani Power, Tata Power etc. focused on defensive CSR Activities such as, Activities related to Environment, Care and Development of local community. Companies of Service Sector like Banking Sector like SBI, IDBI, HDFC etc are not focused to any fixed area.
Despite of some limitations the study addressed a scientific approach in this aspect.
CSR Contribution made by selected Indian Manufacturing Multinational Companiesijtsrd
"The concept of CSR has gained lot of significance lately. But in India, complying provisions of CSR becomes mandatory after introduction of CSR policy in Indian Companies Act, 2013 for the companies who fulfill the certain criteria as mentioned. The rationale behind CSR is to embrace the responsibility for companies’ action and encouraging the positive impact through its activities on environment, healthcare, livelihood, rural development, education and so on. The present study has made an attempt to understand the CSR policy initiatives made by four major companies in India. All the data collected and used for research work is secondary in nature like official websites and reports published by companies, magazines, journals and other reference books. The purpose of this paper is to know the contribution made by four top Indian manufacturing MNC and analyze the same. These companies are drawn from ‘The CSR Journal Miss. Charuta P. Kulkarni ""CSR Contribution made by selected Indian Manufacturing Multinational Companies"" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Special Issue | Fostering Innovation, Integration and Inclusion Through Interdisciplinary Practices in Management , March 2019, URL: https://www.ijtsrd.com/papers/ijtsrd23055.pdf
Paper URL: https://www.ijtsrd.com/management/strategic-management/23055/csr-contribution-made-by-selected-indian-manufacturing-multinational-companies/miss-charuta-p-kulkarni"
Changing Dimensions of Corporate Social Responsibility in Indiaprofessionalpanorama
philanthropy to a broader set of activities and integrates the practice of CSR into
the core strategy of the organisation. CSR is evolving in response to profound external
forces, including meeting legal and regulatory obligations and responding to the broader
public opinions. For many developing countries, a major limitation to CSR studies
has been the difficulties associated with proper legislative measures and measuring
CSR practices. CSR index can be used to calculate the level of a company’s CSR
practices. Developing countries need a suitable CSR structure to implement CSR practices
in order to be able to identify the advantages for their stakeholders. Companies need
to identify the importance of cultivating a new set of CSR practices in order to compete
successfully in a global market. CSR is gradually metamorphosing from a mere philosophy
to a strong business case for Indian industry.
Changing dimensions of corporate social responsibility in indiaTapasya123
Corporate Social Responsibility is gradually moving from its historical focus on business
philanthropy to a broader set of activities and integrates the practice of CSR into
the core strategy of the organisation. CSR is evolving in response to profound external
forces, including meeting legal and regulatory obligations and responding to the broader
public opinions. For many developing countries, a major limitation to CSR studies
has been the difficulties associated with proper legislative measures and measuring
CSR practices. CSR index can be used to calculate the level of a company’s CSR
practices. Developing countries need a suitable CSR structure to implement CSR practices
in order to be able to identify the advantages for their stakeholders. Companies need
to identify the importance of cultivating a new set of CSR practices in order to compete
successfully in a global market. CSR is gradually metamorphosing from a mere philosophy
to a strong business case for Indian industry.
Article on Corporate Social Responsibility - an insightFCS BHAVIK GALA
India is the first country in the world to have a regulatory framework for CSR by law. The Companies Act, 2013 has introduced the idea of CSR to the forefront and through its disclose-or-explain mandate, is promoting greater transparency and disclosure. Schedule VII of the Act, which lists out the CSR activities, suggests communities to be the focal point. On the other hand, by discussing a company’s relationship to its stakeholders and integrating CSR into its core operations, the rules suggest that CSR needs to go beyond communities and beyond the concept of philanthropy.This Article provides insight to the regulatory aspects of CSR in India
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Corporate social responsibility | 2015 - Recent Trends
1. THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA
[ICAI]
NATIONAL CONVENTION
11TH
& 12TH
AUGUST, 2015
Corporate Social
Responsibility
Aadhit B Balaji
Goa Branch of WIRC of ICAI
&
Goa Branch of WICASA
This paper predominantly enumerates the role of Corporate Social
responsibilities in the present scenario, its evolution, impact of Clause
135 of Companies Act, 2013, Role of CSRs in SMEs and also its Global
Impact.
|Clause 135, Companies Act, 2013 | Companies (CSR policies) Rules, 2014 |
2. Corporate Social Responsibility
July 11 & 12, 2015
Page 2
Introduction |03
The Global Aspect – CSR|04
CSR – Definition, CSR Hierarchy Model|05
Clause 135 – Companies act, 2013, CSR Provisions|07
CSR – Committees, Expenditures|10
Guidance note on CSR – Issued by ICAI|13
CSR Reporting, CSR & SMEs, Present Scenario|15-17
3. Corporate Social Responsibility
July 11 & 12, 2015
Page 3
ntroduction:
India is a largest growing economy in the world with abundant opportunities and
resources. This largest scaling up economy is known for its largest poverty as well as
largest undernourished children. These wide dissimilarities and inequalities has
prevailed through many decades due to social unrest.
The concept of CSR has wholly re-altered the economic parameters of success, ie., creating
wealth and jobs. Their market position has traditionally been a function of financial
performance and profitability.
Stakeholders (employees, community, suppliers and shareholders)
Today, are redefining the role of corporate taking into account the corporate broader
responsibility towards society and environment, beyond economic performance, and are
evaluating whether they are conducting their role in an ethical and socially responsible
manner.
As a result of this shift (from purely economic to ‘economic with an added social
dimension’), many forums, institutions and corporates are endorsing the term Corporate
Social Responsibility (CSR).
Let’s completely analyse the CSR’s impact and role in the corporate, as well as role of
Government and regulatory bodies that assist and provide guidelines for planning and
strategising the same by effective means and resources, while remaining aligned with the
requirements of the Companies Act, 2013.
I
4. Corporate Social Responsibility
July 11 & 12, 2015
Page 4
The Global Aspect – CSR:
CSR has profoundly emerged with the many definitions and view across the world. There is
no universally accepted definition by any regulatory body or management gurus’. Though
the thought has been invited and definitions have fostered the essence of CSR. Although the
roots of CSR lie in philanthropic activities (such as relief work, charity, donations, etc) of
corporations, globally, the concept of CSR has evolved and now encompasses all related
concepts such as;
Triple bottom line
Corporate citizenship
Philanthropy
Business responsibility
Corporate sustainability
5. Corporate Social Responsibility
July 11 & 12, 2015
Page 5
Major Definitions –
The totality of CSR can be best understood by three words: ‘corporate,’ ‘social,’ and
‘responsibility.’ In broad terms, CSR relates to responsibilities corporations have towards
society within which they are based and operate, not denying the fact that the purview of
CSR goes much beyond this. CSR is comprehended differently by different people.
World Business Council for Sustainable Development defines CSR as “the
continuing commitment by business to contribute to economic development while
improving the quality of life of the workforce and their families as well as of the community
and society at large.”
Management Definitions:
By considering the evolution of CSR from the early 1950’s, there have been a numerous
debates on the views regarding the CSR.
Peter Drucker – Famous Management Guru:
“If u find an executive who is ready to take on social responsibilities, then fire him fast.”
Companies Act, 2013 – Clause 135 & Companies (Corporate Social
Responsibility Policy) Rules, 2014:
“Corporate Social Responsibility Policy (CSR)” means and includes but it is not limited to
(i) Projects and programmes related to activities specified in Schedule VII of the act,
or
(ii) Projects or programmes relating to activities undertaken by the Board of
Directors of a company in pursuance of recommendations of the CSR Committee
of the board as per declared CSR policy of the company subject to Schedule VII of
the Companies act, 2013.
CSR – Hierarchy Model:
The evolution of CSR in India has followed a chronological order of four thinking approaches,
though the stakeholder model came into existence during 1990s as a consequence of
realisation that with growing economic profits, businesses also have certain societal roles to
fulfil. The model expects companies to perform according to “triple bottom line” approach.
The businesses are also focusing on accountability and transparency through several
mechanisms.
6. Corporate Social Responsibility
July 11 & 12, 2015
Page 6
Benefits of a CSR programme in a Global Aspect:
A Good CSR practices can only bring in greater benefits by fostering the below aspects, (two
main)
Attracting and retaining employees – Increasing the employee morale and sense of
belonging to the company
Enriching the corporate reputation – positive image and branding benefits are
created to place the company as a responsible corporate citizen in the world market.
Cost savings,
Revenue increase from higher sale and market share
Brand value,
Can avoid negative press and customer boycotts (risk reduction/management).
Some of the Principles and guidelines recognised by various institutions
across the globe - To enhance the larger concept of sustainability or business
responsiveness.
1. United Nations Global Compact (see below)
2. International Labour Organisation
3. Institute of Social and Ethical Accountability – AA1000
4. Social Accountability International – SA 8000 standard (First Auditable social
responsibility standard)
5. Organisation of Economic Co-operation and Development
(OECD Guidelines)
Ethical Model
(1930-1950s)
Statist Model (1950-
1970s)
Liberal Model (1970-1990s)
Stakeholder Model (1990s - to Present)
7. Corporate Social Responsibility
July 11 & 12, 2015
Page 7
6. ISO 26000 – Social responsibility
7. Social Return on Investments – SROI
8. London Benchmarking Group Model
United Nations Global Impact – The Largest CSR initiative in the world which includes
principles on human rights, labour, environment and anti-corruption.
“Globally 120000+ companies has committed from 170 countries in all sectors & size”
To infuse the above initiative into practice a company needs a good strategic leadership
team and strategies that are imbibed in every action of the employees and working close to
their business objectives.
Clause 135, Companies Act, 2013 & Companies (CSR Policy) Rules,
2014
In India, the concept of CSR is governed by clause 135 of the Companies Act, 2013, which
was passed by both Houses of the Parliament, and had received the assent of the President
of India on 29 August 2013.
The provisions relating to CSR, within the Act is applicable to companies;
The new rules, which will be applicable from fiscal year 2014-2015 onwards, also require
companies to set-up a CSR committee consisting of their board members, including at least
one independent director.
Companies Act,
2013 - CSR
Provisions
Annual Turnover of
1000 Crore or more
NetWorth of 500
Crore or more
Net Profit of 5 Crore
or more(Or)
(Or)
8. Corporate Social Responsibility
July 11 & 12, 2015
Page 8
The Act encourages companies to spend at least 2% of their
average net profit in the previous three years on CSR
activities. The ministry’s draft rules, that have been put up for
public comment, define net profit as the profit before tax as
per the books of accounts, excluding profits arising from
branches outside India.
Highlights of CSR Provisions:
Surplus arising out of CSR activities will have to be reinvested
into CSR initiatives, and this will be over and above the 2%
figure
• The company can implement its CSR activities through
the following methods:
- Directly on its own;
- Through its own non-profit foundation set- up so as
to facilitate this initiative;
- Through independently registered non-profit
organisations that have a record of at least three years in
similar such related activities;
- Collaborating or pooling their resources with other
companies.
• Only CSR activities undertaken in India will be taken into
consideration
• Activities meant exclusively for employees and their
families will not qualify
• A format for the board report on CSR has been provided
which includes amongst others, activity-wise , reasons for
spends under 2% of the average net profits of the previous
three years and a responsibility statement that the CSR policy,
implementation and monitoring process is in compliance with
the CSR objectives, in letter and in spirit. This has to be signed
by either the CEO, or the MD or a director of the company
Clarifications On CSR Provision u/s 135, Companies
Act, 2013.[Dated 18th
June 2014]
In Order to clear the doubts on the activities undertaken and
expenditures incurred by the company, the Ministry has
issued clarifications on the provisions under Section 135 of the
Companies Act, 2013 and the Companies (Corporate Social
CSR – Schedule VII of the
Act, eligible activities.
- Environmental
Sustainability
- Social Business
projects
- Contribution to Prime
Ministers Relief Fund
and such other
prescribed funds
- Promotion of
Education
- Eradication of
extreme hunger and
poverty
- Gender Equity and
women
empowerment
9. Corporate Social Responsibility
July 11 & 12, 2015
Page 9
Responsibility Policy) Rules, 2014, as well as activities to be undertaken as per Schedule VII
of the Companies Act, 2013.
Activities undertaken in pursuance of the CSR policy must be relatable to the
Schedule VII of the Companies Act, 2013, and the entries should be interpreted
liberally so as to capture the essence of the subjects. These are broad-based and
are intended to cover a wide range of activities.
CSR activities should be undertaken by the companies in project or programme
mode. One-off events such as marathons, awards, charitable contribution,
advertisement, sponsorships of TV programmes etc. would not be qualified as
part of CSR expenditure.
Expenses incurred by companies for the fulfilment of any Act or Statute of
regulations (such as Labour Laws, Land Acquisition Act etc.) would not count as
CSR expenditure under the Companies Act.
Salaries paid by the companies to regular CSR staff as well as to volunteers of the
companies can be factored into CSR project cost as part of the CSR expenditure.
Expenditure incurred by Foreign Holding Company for CSR activities in India will
qualify as CSR spend of the Indian subsidiary if, the CSR expenditures are routed
through Indian subsidiaries and if the Indian subsidiary is required to do so as per
section 135 of the Act.
Illustrative Example (By applying provisions relating to CSR):
1. The requirements concerning CSR are applicable from 1 April 2014. For companies
covered under the requirement, how does the requirement concerning 2%
expenditure apply in the first year?
According to 2013 Act and the CSR rules, that in the first year of application, a
company covered under the requirement needs to incur 2% of its average net profit
for past 3 years (i.e., financial year 2011-12, 2012-13 and 2013-14) on the CSR
activities. Let us assume that a company covered under the CSR requirements has
earned net profit of 50 crores, [(12 crores) (net loss)] and 34 crores during the
immediately preceding three years. In this case, the company’s average net profit is
24 crores i.e., one-third of (50 crores - 12 crores + 34 crores). Hence, the company
needs to spend 2% of its average net profit, i.e., 2% of 24 crores, on CSR activities.
2. For companies having other than 31 March year-end, an additional issue is
whether they are required to apply the CSR requirements from 1 April 2014 or
from the beginning of their next financial year. Will a company having 31
December year- end apply the requirement from 1 April 2014 or 1 January 2015
onward?
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10
Interestingly, the CSR Rules state that reporting requirements of the 2013 Act will
apply to financial years commencing on or after 1 April 2014. However, there is no
such clear guidance on the constitution of CSR committee and/or CSR expenditure.
a. One view is that a company determines if it meets the thresholds specified in
section 135(1) on a financial year basis. Once the applicability criteria is met, the
company sets up a CSR committee and starts spending 2% of its average net
profits determined in accordance with section 198 of the 2013 Act. Thus, a
company with a calendar year end will examine this requirement at 1 January
2015 and start spending for the calendar year 2015. Thus, it will not be required
to spend on CSR for the year ended 31 December 2014.
b. The second view is that since the section is applicable from 1 April 2014, the
intention is to make companies spend from that date onwards. The three years
of average net profit for a calendar year company would comprise of calendar
year 2011, 2012 and 2013.
The MCA may clarify this issue. Pending the issue of such guidance/clarification, it
may be noted that CSR requirements of the 2013 Act are primarily driven by
disclosure requirements. Since it is clear that disclosures will apply from the financial
year beginning on or after 1 April 2014, it may be argued that other CSR
requirements will also apply from the same date. Hence, view 1 is the preferred
approach. This implies that a company, which has calendar year-end and meets the
prescribed criteria, will apply CSR requirements from 1 January 2015 onward.
CSR – Role of Board & CSR Committee:
The CSR committee shall institute a transparent monitoring mechanism for the
implementation of the CSR projects or programmes or activities undertaken by the
company.
The Companies act, 2013, has provided detailed guidance regarding the formation of CSR
committees by injecting the responsibilities of its formation, Policy Framework, effective
policy implementation and adequate over the control on the expenditures, to the Board of
Directors of the company. The below hierarchy model will clearly jot down the same.
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11
CSR – Triple Bottom Line (People – Planet – Profit):
Networth >= 500 Crore
(or)
Turnover > =1000 Crore
(or)
Netprofit > =5 Crore
Role Of Directors
- Form a CSR Committee
- Approving a CSR policy also Additions
& Deletions.
- Implementation
- 2% Expenditure
- Disclosure Aspects
- Business Responsibility Report.
CSR Committee
- Three or more directors with atleast
one Independent director
- Formulate and recommend a CSR policy
to the board
- Recommend activities and the amount
to be incurred
- Monitor the CSR from time to time
Providing Support
to organisations for
Social Cause
Water & Energy
Consumption,
Protection of
trees and
Pollution and
Waste
management
Road Accidents
Communicable Diseases
Respect and Humanity
Supporting the
educational efforts of the
schools
Employee volunteerism
Natural Disaster
Illiteracy
Support to Schools
Employability Skill
development
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12
Vehicles to carry out CSR activities- CSR Implementation:
(i) By establishing a Special Purpose Vehicle in the form of registered
Trust/Society/Section 8 Company
(ii) Through such entities established by the Holding/Subsidiary/Associate
Company*
(iii) Through third party trust/society/Section 8 company;
a. Subject to the fact that the aforesaid Companies should have track record of
three years with such similar activities as enumerated in Notification vide
dated 27.02.2014 on CSR expenditures.
(iv) Collaborating or pooling their resources with other companies.
*Sec-2(6): Associate Co. means a company over which another has significant influence
(20% including JV); other than subsidiaries.
CSR – Expenditures:
CSR expenditure shall include all expenditures including contribution to corpus, for projects
or programmes relating to CSR activities approved by the Board on the recommendation of
its CSR Committee, but does not include any expenditure on an item not in the conformity
or not in the line with activities which fall within the purview of Schedule VII of the Act
(amended as on 27th
February, 2014 w.e.f 1st
April, 2014).
S:No Schedule VII as amemded;
1
Eradicating hunger and poverty and malnutrition, promoting preventive
healthcare and sanitation and making available safe drinking water.
2
Promoting education; including special education and employment enhancing
vocation skills especially among children, woman, elderly and the differently-
abled and livelihood enhancement projects
3
Promoting gender equality, empowering women; setting up homes and
hostels for women and orphans, setting up old age homes, day care centres,
and such other facilities for senior citizens and measures for reducing
inequalities faced by socially and economically backward groups.
4
Ensuring environmental sustainability, ecological balance, protection of flora
and fauna, animal welfare, agro-forestry, conservation of natural resources
and maintaining of quality of soil, air and water
5
Contribution to the Prime Minister's National Relief 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.
6
Protection of national heritage, art and culture including restoration of
buildings and sites of historical importance and works of art; setting up of
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public libraries; promotion and development of traditional arts and
handicrafts.
7
Measures for the benefit of armed forces veterans, war widows and their
dependents.
8
Training to promote rural sports, nationally recognised sports, and
Paralympics sports and Olympic sports
9
Contributions or funds provided to technology incubators located within
academic institutions which are approved by the Central Government
10 Rural development projects
Guidance Note For accounting for expenditure on Corporate Social
Responsibility Activities [GN (34), issued on May 15, 2015 by ICAI].
In order to enrich the clarity on provisions and rules related to expenditure made towards
CSR activities’ measurement and disclosure, the Institute of Chartered Accountants Of India
has published a guidance note as on May 15, 2015. The following FAQs might clear clouded
areas and conceptualize the intention and requirements of the section 135 of Companies
act, 2013.
1. Whether provision for Unspent amount required to be created?
a. As per section 135, the company must ensure that it spends atleast 2% of the
average net profits of the company during the financial year. A proviso to this
section states that, if the company fails to spend such amount, the Board
shall, in its report specify the reasons for not spending the amount”.
b. The expenditure of the CSR activities are to be disclosed only in board’s
report.
c. There should be no provision to be made on the expenditures which are not
spent during the year, in respect of this any shortfall in the expenditure
should be disclosed in the board’s report.
d. In case, the company has already undertaken certain CSR activity for which a
liability has been incurred by entering in to a contractual obligation, then in
accordance with the GAAP, a provision for the amount representing the
extent to which the CSR activity was completed during the year, needs to be
recognised in the financial statements.
e. Where a provision is made in accordance with paragraph 8 above the same
should be presented as per the requirements of Schedule III to the
Companies Act, 2013. Further, movements in the provision during the year
should be shown separately.
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2. Can a company carry forward its expenditure which has expended more than the
requirement (2%)?
Where a company spends more than that required under law, the excess amount
cannot be carried forward for set off against the CSR expenditure required to be
spent in future.
3. Recognition and disclosure in case of companies carrying on CSR activities on their
Own;
a. Expenditures that are revenue in nature, and that are within the scope of
schedule VII, the same should be charged off as expense to the Statement of
profit and loss.
b. In case of Capital in nature, where the expenditure might give rise to an
“asset”, subject to control of the CSR asset rests with the company, then it
would be examined whether any future economic benefits would arise from
the said asset. Therefore, the surplus from CSR asset should not flow to the
company, as surplus from aforesaid cannot be included in the business profits
of the company as per Rule 6(2) of the Companies (Corporate Social
Responsibility policy) Rules, 2014.
4. How income earned from CSR project or programmes during the course of conduct
of CSR activities are recognised?
a. As discussed above, any surplus from the CSR project/programme during the
course of conduct of CSR activities should not be recognised as income from
business of the enterprise. It may be noted that according to paragraph 5 of
Accounting Standard 5, Net profit or Loss for the period, Period period items
and changes in accounting policies, requires that all items of income which
are recognised in a period should be included in the determination of net
profit or loss for the period unless an Accounting Standard requires or
permits otherwise.
b. In view of the aforesaid requirement any surplus arising out of CSR project or
programme or activities shall be recognised in the statement of profit and
loss and since this surplus cannot be a part of business profits of the
company, the same should immediately be recognised as liability for CSR
expenditure in the balance sheet and recognised as a charge to the
statement of profit and loss. Accordingly, such surplus would not form part of
the minimum 2% of the average net profits of the company made during the
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three immediately preceding financial years in pursuance of its Corporate
Social Responsibility Policy.
5. Presentation and Disclosure in respect of CSR in Financial statements;
According to General Instructions to Preparation of Statement of Profit and loss
under Schedule III of Companies act, 2013, companies covered under the clause 135,
the amount incurred on CSR activities shall be disclosed by way of a foot note to the
statement of profit and loss.
For a better financial reporting and in line with the requirements of Schedule III, it is
recommended that all CSR expenditures are recognised as expense as a separate line
item in the statement of profit and loss as “CSR Expenditures”. Further, relevant
note must disclose the various heads of expenses classified under the CSR activities.
CSR – Reporting:
The new Act requires that the board of the company shall, after taking into account the
recommendations made by the CSR committee, approve the CSR policy for the company
and disclose its contents in their report and also publish the details on the company’s official
website, if any, in such manner as may be prescribed. If the company fails to spend the
prescribed amount, the board, in its report, shall specify the reasons.
Business Reporting Responsibility – BRR (Clause 55:
The other reporting requirement mandated by the government of India, including CSR is by
the SEBI (Securities and Exchange Board of India) which issued a circular mandating the top
100 listed companies to report their Environmental, Social and Governance (ESG) initiatives.
These are to be reported in the form of a BRR as a part of the annual report. SEBI has
provided a template for filing the BRR. Business responsibility reporting is in line with the
National Voluntary guidelines (NVG) published by the Ministry of Corporate Affairs.
Provisions have also been made in the listing agreement to incorporate the submission of
BRR by the relevant companies. The listing agreement also provides the format of the BRR.
The BRR requires companies to report their performance on the nine National Voluntary
guidelines (NVG) principles. Other listed companies have also been encouraged by SEBI to
voluntarily disclose information on their Environmental, Social and Governance (ESG)
performance in the BRR format.
CSR and SMEs
Small and Medium enterprises, as the name purports the contribution of their role in the
economy is predominant. Their share towards employability of the workforce as well as the
output is more than 40% of the total.
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Therefore it must be supplemental for the government to expect the SMEs to also
contribute towards the CSR activities by injecting a clause, Net profit more than 5 Crores
INR, which might involve most of the SMEs in the ambit of the CSR clause 135, of Companies
act, 2013
With the introduction of the new Companies Act, 2013, the SME’s approach to CSR has to
be modified while keeping operational costs low. One viable alternative is to pool resources
with other SMEs in the cluster and create joint CSR programmes managed by a single entity.
This collaboration can be formed within the units in a cluster as they interact with the same
communities and have already established associations that cater to the business needs of
the units.
Advantages of Collaboration for CSR activities:
- Reduces the operational Cost
- Undertake Long-term projects
- Learning from Experiences
- Better reach and implementation
- Enhances the transparency and straightforwardness
- Better resources as an single SME cannot provide huge involvement in CSR activities
- Enriching the professional approach
CSR – Penal Provisions:
(i) Failure to disclose in the Board’s Report attracts minimum fine of Rs. 50,000
upto Rs.25 lakhs to the Company. Additionally, every officer in default’ is also
punishable with imprisonment for 3 years apart from the fine too [sec 134(8)].
(ii) Defaults where for no penalty is indicated -Company and every office in default
a. One time fine of upto Rs. 10,000/-and
b. Rs. 1,000/-per day in case of continuing default [Sec 450: residuary penal
section]
Taxation Aspects:
The expenditures incurred related to CSR shall not be qualified as expenditure deducted
with the purview of Income tax Act, 1961.
“If expenses qualify as tax deduction it would amount to subsidising around one-third of
such expenditure. “ – Mr R.K. Tiwari, CBDT Chairman
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Present Scenario:
According to Indian Institute of Corporate Affairs, a minimum
of 6,000 Indian companies will be required to undertake CSR
projects in order to comply with the provisions of the
Companies Act, 2013 with many companies undertaking these
initiatives for the first time. Further, some estimates indicate
that CSR commitments from companies can amount to as
much as 20,000 crore INR.
Building a society which provides equal access to
opportunities negates disparities and, is a collective
responsibility. This Act presents a unique opportunity to stand
up to the challenge. It is a call for action.
Some of the well known socially responsible companies that
have been engaged in the CSR expenditures even before the
provisions were enacted:
- Reliance Industries
- Oil and Natural Gas Corporation
- Tata Steel
- State Bank of India
- ICICI Bank
- Indian Tobacco Company
- Indian Oil Corporation
- Larsen & Turbo
“In order to foster CSR activities and implementation
in India, The Institute of Chartered Accountants Of
India has been honouring companies annually by
awarding the “BEST Company” for its CSR policies
and implementation. In verge of that ICAI has
awarded Hindustan Unilever Limited for its best
policies in health and environment.”
-------------------------Thank You------------------------
Actual CSR Spending
Requirement for the FY
2014-15:
- 6000 Crores
(Approx.) CSR
Expenditure to be
incurred during FY
2014-15 as per the
Companies Act,
2013 for top 100
listed companies