This document discusses strategic corporate social responsibility (CSR) under the Indian Companies Act of 2013. It provides examples of companies that implement strategic CSR to gain competitive advantages while benefiting communities. It also summarizes the key aspects of the Act, including spending requirements, acceptable CSR activities, and implementation methods. Finally, it analyzes sector-specific CSR spending patterns and priorities in India, finding that most companies focus on community development, healthcare, and education.

1. Strategic CSR

2. 2
Whatever I dig from Earth, may that have quick growth again.
O Purifier, may we not injure your vitals or your heart
-Atharva Veda
XII
Sarvo lokah Hitam
-Rig Veda (1-
8)
The King has to submerge his personality into the
development of his subjects
-Arthasashtra, Chankya
Bahujana sukhaya, Bahujana hityacha
-Arthasashtra, Chankya

3. 3
Strategic CSRNow What in God’s nameis this
Incorporates both ethical CSRandaltruistic CSR by performing
activities that areadvantageous to the community, as well as
providingprofit throughgoodwill.
A well-knownexample ofthis is Toyota's developmentof the
hybrid electric/gasolinecar Prius. Asenvironmental concernshave
increased, Toyotastolea marchonmajor competitors suchas
General Motors and Ford by creatinga series ofinnovativecar
models that havebothproducedcompetitiveadvantage and
environmental benefits.
Similarly, Mexican constructioncompany,Urbis, builds houses for
disadvantagedbuyers usingdifferent payment options suchas
flexible mortgages madethroughpayroll deductions.Thesocial
impact is clearly aroundhelping thedisadvantagedafforddecent
homes whilst,at thesame time, Urbis has business benefits.
Sub-category of Corporate Social
Responsibility (CSR)

4. 4
Company Act 2013An Insight into CSR
What if they can’t Spend
If the company fails tospend this
amount on CSR, theboard must
disclose why in its annual report
(the act does not provideany
guidanceonwhat constitutes
acceptable reasons for which a
companymay avoidspending2
percent on CSR)
Setting Up
Set up a CSR board
committee,whichmust
consist of at leastthree
directors, oneof whom must
be independent.
How much to spend
Companyspends “atleast 2
percent of theaveragenet
profits of thecompanymade
during thethreeimmediately
precedingfinancial years” on
“CSR” activities
According to IndianInstituteof
Corporate Affairs,a minimumof
6,000 Indiancompanies will be
required to undertake CSR
projects and CSR commitments
from companiescan amount to
as much as 20,000crore INR
Any companythat is incorporated in
India, whether it is domesticor a
subsidiaryof a foreign company
• net worth of Rs. 5 billion or more
• turnover of Rs. 10 billion or
more
• net profit of Rs. 50 million or
more

5. 5
Interpreting CSRDeep Dive into theAct
A
O
P
Activities
CSR as activities that promote povertyreduction, education, health, environmental sustainability,
gender equality, combatinghumanimmunodeficiency virus, ensuringenvironmental sustainability,
social business projectand employment enhancingvocational skills vocational skills development
Options
Companies can choosewhich areato investin, or contributetheamountto central or stategovernment
funds earmarkedfor socioeconomic development
Preference
The CSR Committeeshall also prepare the CSR Policy in whichit includes the projectsandprogram.Theact
specify that companies“shall give preference tothelocal area andareasaroundwhere it operates.”

6. 6
E
H
S
E
O
Environment
• Environmental Sustainability
• Sanitation and Hygiene
Others
• Employment Enhancing Vocational
Skills
• Contribution to Prime Minister’s
relief fund and other funds
Education
• Promotionof Education
• Creating Infrastructure
Health
• Reducing Child Mortality and
improving maternal health
• Combating HIV-AIDS, Malaria and
other diseases
Society
• Social Business Projects
• Gender Equality and Women
Empowerment
What ActivitiesThese areneither mutuallyexclusive nor collectivelyexhaustive;)

7. 7
Key Points of the Act
1
2
Surplus arising outof CSR activities will have tobereinvested intoCSR
initiatives, andthiswill be over andabovethe2%figure
The companycanimplement its CSRactivitiesthroughthefollowingmethods:
• Directly on its own
• Throughits ownnon-profit foundationset- up soas tofacilitatethis initiative
• Throughindependently registerednon-profit organizations thathave a
record of at least threeyears in similar suchrelatedactivities
• Collaborating or poolingtheir resources with other companies
Only CSR activities undertakenin Indiawill be takenintoconsideration
3
4 Activities meantexclusively for employees andtheir families will not qualify

8. 8
Impact of the Act
Average CSR expenditure
in India has gone up
Indian Firms are spending
more than foreign firms
Public companies are
spending more on CSR
than Private companies

9. 9
Benefits of CSR
1
3
4
Communities as Suppliers
There are certaininnovativeCSR initiatives
emerging, wherein companies haveinvestedin
enhancing community livelihoodby incorporating
them into their supply chain. Thishasbenefitted
communities and increasedtheir incomelevels,
while providingthesecompanies withan
additional andsecure supply chain
2
Employer Branding
Several human resourcestudies have
shown that companies that encourageand
enableemployees toparticipate in CSR
activities are better at attracting,retaining
and motivating them.
Avoiding community unrest:
CSR initiatives in local communities by
environmentally pollutingcompaniesalso
help in avoiding protestmovements and
future governmental regulations. The
‘license to operate’ is nolonger givenby
governments alone, but communities
that are impactedby a company’s
businessoperations
Enhancing Corporate
Reputation
Expenditureon CSR
increasesfirms’ profitabilityby
buildinggoodwill and a
positive imagein theeyes of
consumers, suppliersandthe
government.

10. 10
Relationship between CSR & Profitability
Corporategroups havecriticizedthemandatoryclausein theAct, as it will
decreasethe profitability offirms.
However, this doesn’t seem tobe thecase.
Not only is therea positivecorrelationbetweenprofit andCSR, the probabilityof
higher spendingonCSR increases as the firm becomes bigger.
Smaller firms with lesser resources at their disposal areless likelyto adopt
strategic CSR. They usually adopt philanthropy and community development
activities suchas schoolsfor kids ofemployees,donations to religious
organizations etc.Larger companies,ontheother hand, indulgein strategicCSR
activities that areclosely linkedto thecompany’s business goalsandhavehigher
payoffs.
Charity
Community Development
Strategic CSR

11. 11
Pattern of CSR by Major Sectors in 2013
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
Oil & Gas Automobile Consumer
Durables
Iron & Steel Banking &
Financial
Services
Power Infrastructure Cement Paper &Pulp Pharmaceutical
Health Education Community Development/Rural Development Environment
• Contrary to developedcountries where CSR activities are undertaken mainly in theareaof environment, in Indiait is mainly undertakenin thesocial sector.
• Most firms undertake CSR expenditurefor thewelfareof rural communities, especially aroundtheir areasof operation.
• Apossible reason couldbeto generate goodwill amongstpeoplein theneighborhood andbecomefamiliar with the areaand its needs, whichin turn would
minimize costs of providing services.
Source: Analysis of CSR Expenditure In India, http://www.epw.in/web-exclusives/analysis-corporate-social-responsibility-expenditure-india.html

12. 12
Sector-wise CSRCommunity Development
Oil and Gas: PSUs havebeenfoundto spendthe most ondevelopment of
townships andcommunity, witha special focus oneducation.
• They undertakecommunitydevelopment in andaround their
areas of operation.
• This may be becausethecommunities livingclose totheir areaof
operationare most affectedby negativeproductionexternalities.
• For example,theIndian Oil Corporationruns mobilemedical units
in Mathura andhas setupa nursetraininginstitutein Digboi,
Assam. It has also spenta lot ontheschool education ofchildren
who live near their plants andin their townships.
• Power Sector:In thepower sector, firms spendpredominantly on community
and rural development.
• They undertakedevelopment measures for communitieswhichstaycloseto
their plantsthroughfoundationandtrusts.
• They emphasizeon theprovisionof educational facilities andskill
development programs.
• For example,Jindal Steel carries out its CSR activities throughits own
trusts, which leadto savingoftransactioncosts and creationof goodwill in
the local area.Public sector units like NHPCandNTPC focus on
rehabilitation andresettlement ofthecommunities displaced by construction
projects.

13. Automobile Sector: Most of thecompanies in the automobilesector spend
mostly on environmental sustainability,
• Mahindra and Mahindrafocuses moreon environmentby
committing toreducegreenhouse gasemissions.
• It has introducedvarious sustainability measures in its plantslike
xeriscaping,greenbuildings and water efficient plants.
• This can be attributedto the fact that theautomobile sector is oneof
the most pollutingindustriesin India.
• Some like Tata Motorsfocus oneducationandskill development as
well.
Cement Industry: Cement industry is another highly pollutingindustry.
• Shree Cementswhichwasgiven avery low ratingby the CSE Green
Rating program has focusedmoreonsustainability.
• It has adoptedthe“triplebottom line” approach, wherethefocus is on
profit maximization, employeewelfareandenvironmental
sustainability.
• In its sustainability report, it hasfocusedonclimatechange and
reductionofgreenhousegases duringproduction.
• Grasim Cements, whichhas a comparatively higher rating, has
focusedmoreon community development andrural development.
Sector-wise CSREnvironmental Sustainability

14. 14
Sector-wise CSRHealthcareand Education
• Consumer Durables: Intheconsumer durablesandfast movingconsumer
goods industry, companies focus onhealthcareand education.
• The Godrej groupsupportsenvironmental sustainability by supporting
conservation ofmangroveforests and undertakes philanthropic activities in
the health andeducation sector.
• They conduct blood donation camps, conduct cleft lip surgerieswith Smile
Train, a NGO.
• Similarly, Hindustan Unilever (HUL) focuses onimproving healthand
well-beingandreducingthe environmental impactof its production
activities.
• Banking Sector: Companiesin thebankingsector spendmainly
on priority sector areas.
• They count the 40%mandatory priority sector lendingas a part of
their CSR activities.
• However, bankssuchas Jammu and Kashmir Bank undertake
activities other than priority sector lendingalso.
• They support schools andprovidefunds for meetingeducational
expenses. Studieshave shown that banks spendmore on
educationandenvironment in order tostrengthentheir imageand
increase consumer satisfaction.

15. 15
Communities as suppliers
ITC e-Choupal
There are certaininnovativeCSR initiatives emerging,whereincompanieshave investedin enhancing community livelihood
by incorporatingthem intotheir supply chain. Thishas benefittedcommunitiesand increasedtheir income levels, while
providingthesecompanies withanadditional and secure supply chain

16. 16
CSR DisparityAmongStates
• Economic activity in a state depends on 2 factors:
per capita income and headquarters of largest
companies
• The top 10 states have an average per capita income
of $2,073, well over double the per capita income of
the bottom 10 states—$944
• States such as Bihar, Assam, Jammu, Kashmir, and
others on the lower end will likely receive a much
lower infusion of corporate CSR distributions as
fewer companies have operations there
• In the 10 states with the highest per capita
income levels, about 1.2 percent of children are
severely malnourished while for the bottom 10,
its 3.6 percent
• Poverty rates is 12.3 percent for the wealthier
ones as compared to poorer states
• Infant mortality rate is 30 against 46.5 for
wealthier states against non wealthy ones
• Eradicating hunger, poverty, malnutrition,
promoting health care, including preventive
health care and sanitation; and making
available safe drinking water are six of the
social issues highlighted in the Companies Act
for a company’s CSR activities
• Just seven states—Maharashtra, New Delhi,
Karnataka, Tamil Nadu, Haryana, West Bengal, and
Gujarat—are home to 87 percent of ET250
companies

17. 17
Size and EconomicVibrancyof States
We make great solution to your problem
Lorem Ipsum has been the industry's standard
dummy text ever since the 1500s, when an
unknown.
Retro Product 2

18. 18
CSR Expenditureof India’s Largest Private-sector
Companies
0
1
2
3
4
5
6
0
20
40
60
80
100
120
140
Reliance
Industries
Tata MotorsTata Steel Hindalco Bharti Airtel L&T TCS ICICI Mahindra &
Mahindra
Sesa
Sterlite
Adani
Enterprises
Infosys JSW Steel HDFC
Bank
2013-14CSR Spending(USD Millions) CSR spendingas Percentageof NetProfits

19. 19
CSR Expenditureof India’s Largest Public-sector
Companies
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
0
10
20
30
40
50
60
IOCL BPCL HPCL SBI ONGC
2013-14CSR Spending(USD Millions) CSR spendingas Percentageof NetProfits

20. 20
Mismatch
Mismatch prevails betweenregions withhighlevels of
economicactivity, and thoseareas withthemostcritical
social development needs, such aspublic health,
disease prevalence, gender equality,poverty, infant
mortality levels,and other important indicators
Companies tendtospendin the areas wherethey have
they haveoperations; yet many ofIndia’s mostserious
social and healthproblems are locatedfar awayfrom
key industrial centers
Companies maynothave“operations” in an areathat is
critical to their growth,therebylimiting thebenefitof
brand exposure throughdoingCSR programsin that
other region
The world is movingto a
dematerializedform of commerce.
With the rise in electronic
commerce, some oftheworld’s
largest companies today andin
the futurewill haveaneven
smaller operational footprint viz.
Flipkart, Amazon

21. 21
Role of SMEs
• Serve independently and also asancillary tolarger units
• Employ nearly 40% of India’s workforce andcontributearound45%to India’s
manufacturingoutput
• CSR clause in theCompaniesAct, 2013covers companiesthat havea net profit of
five crore INR andabove,it is expectedmanySMEswill
• Roadblocksin deliveringvaluesfor SMEs in CSR
• Fluctuations in profits affectingtheir capability
• Limited humanresourcesresulting in lack of professional approach

22. 22
CollborationModel
• Poolingresources withother SMEsin thecluster andcreatejointCSR programs managed
by a single entity
• Acommon organizationcateringto a number of companieswill take care ofimpact
assessment studies, settingup ofa CSR departmentetc andthus reducetheoperational
cost
• Long term programshavegreater impact thanshort term ones. Profit fluctuationsmay
hinder long term schemes. Incollaborations, other partnerscangivelarger share in case
there is variationin allocation.
• Acommon entity with participants from different clusterswill help assess a greater number
of communityissues

23. 23
Process of an SME
• First, they createanalliance of interestedSMEs
• Involvement of thecluster associationwill ensurethat the local priorities aregiven dueconsiderationwhiledevelopingCSR
programmes
• In case a sufficientnumber of SMEs in a cluster donotwish toparticipate or arenot requiredunder theCompaniesAct, 2013 to
spend onCSR activities,theboundary may beextendedto other clusters,thoughthis increasescomplexity
• In such a case, the allianceshould form a steering committeewith representatives from eachSMEto democratically decidethe
issues.
• The next steps involved in theduediligence ofimplementationor theconcept development partner are:
• Project development,Operationalizinginstitutional mechanism ,Contracting ,Budgeting andpayments ,Monitoring,Impact
measurement ,Reportingand communication
• In cases where the total CSR funds areinsufficientto cover thecost of collaboration, SMEs canalsocontributeto the Prime
Minister’s National ReliefFund or any other fundsetupby thecentral government or thestate governments as per activity ix of the
ScheduleVII oftheCompanies Act,2013.

24. 24
Nestlé – Creating shared value
The Indian subsidiary of FMCGconglomerateNestlé,believes in givingback tothe
society becauseofwhichthey havesuch strong CSRactivity culture. Theycall it
creating sharedvalue.
• Today Moga,a small town in Punjab produces 1.3millionliters of milk everyday.
This volume is very hugein comparisonto thevolumes produced beforeNestlé
came to Punjab.
• In 1961 whenNestléstartedits operations at theMoga factory, their wereonly 180
farmers who werewilling tosupply milk.
• Nestlé team wentdoor todoor educating people andteachingthem waysto
increase the Milk production.
• Over the years Nestlé investments in providingtechnical assistanceto improve
heard management, farm productivity andfarm economics havecontinued to
increase.
• Nestlé tries to helpfarmers by providing
• Financial assistance
• Farmer trainingand education
Milk Economyof Moga

25. 25
TATASteel
Adetailed inspectionwasdoneby ateam of experts around theTATASTEELplantsite assessingtheneeds
of all the internal andexternal stakeholdersat Gopalpur to createa CSR activityplan.
TATASteel has taken steps in areasof
• Healthcare
• EducationandEmployability
• Livelihood
• Infrastructure development
• Sports andcultural integration
Project Gopalpur has contributedtowardsincreasinggrowthandprogress in therural societyandtouched
life of millions
Gopalpur Industrial Park& SEZ
Mobile Medical Units
In order to raiseawareness ofpreventive healthcareandtreatment ofcommon
ailments TATASTEELis running3 highly equippedmedical vans.Cateringto29
peopleof neighboringvillages providingdoorsteptreatmentalongwithfreemedicine. A
total of 47474peoplehave beenbenefittedby thiseffort till 2013.
Tata Memorial Hospital
Tata Steel is settingupa 500bed‘TataMediaHospital’ atSitallapalli under Luhajhar
panchayat.
Mega Health Camps
Huge healthcamps are being organized byTATASTEELin collaborationwith TATA
steel rural developmentsociety in order to providefreemedical assistanceto the
neighboringvillages. Freemedical assistanceby specialist doctors from medicine,
obstetrics andother fieldis beingprovidedat these campsalongwith medicine.

26. Banaspatye Shanti
Osadhaye Shanti
Prithvi Shanti