Corporate Social Responsibility: Mission

PossibleBy:

Dr. Manoj Kumar GCCBA, Chandigarh

mkbhambu@hotmail.com

Corporate Social Responsibility: Mission Possible

O Indian society has always been pioneer in social responsibility from the very early days of civilization.

O Duty “Dharma” has been given great importance in the Indian society from the Vedic period.

O Sarva loka hitam in Vedanta referred to ‘well-being of stakeholders’.

O Sukhasya mulam dharma - the basis of happiness is dharma (Kautilya).

O Vashudhaiva Kutumbakam- the whole world is like a family; the concept given in Hitopadesa by Narayana

O As per Bhagwat Geeta teaching of “Dharma-Duty” and “Karma-Action” CSR should begin with Individual Social Responsibility or Personal Social Responsibility and should go beyond Corporate Social Responsibility to Global Social Responsibility.

Corporate Social Responsibility: Western Society

O Wallace B. Donham, Dean of Harvard Business School in 1920s indicated that the “future of civilization” was also part responsibility of businesses.

O Then by the beginning of the welfare state in the 1930s, literature on CSR started to appear fueling debate about business and society.

O The term “corporate social responsibility” was not coined until 1953 by Howard Bowen in his book, “Social Responsibilities of the Businessman”.

O Between the 1960s to the 1980s, further debates on CSR, particularly about the nature of responsibilities and who was/were to be responsible for society continued .

O Edward Freeman’s ‘Stakeholder Theory’ in 1984, that CSR became a management practice.

O CSR has grown to include environmental management, corporate social performance, stakeholder partnerships, poverty, and sustainability.

Definitions of CSR O Corporate Social Responsibility (CSR) is a management

concept whereby companies integrate social and environmental concerns in their business operations and interactions with their stakeholders. (UNIDO).

O The 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.”

O In short, CSR is a voluntary management action for well-being of the society with a view to create a positive image as a corporate citizen.

CSR Lead in Companies Act, 2013

O The Companies Act, 2013 states under section 135(1):

O Every company having net worth of Rs. 500 crore or more, or

O turnover of Rs. 1,000 crore or more orO a net profit of Rs. 5 crore or more during any

financial year shallO 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.

O (2) The Board's report under sub-section (3) of section 134 shall disclose the composition of the Corporate Social Responsibility Committee.

O (3) The Corporate Social Responsibility Committee shall,—

O (a) 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;

O (b) recommend the amount of expenditure to be incurred on the activities referred to in clause (a); and

O (c) monitor the Corporate Social Responsibility Policy of the company from time to time.

O (4) The Board of every company referred to in sub-section (1) shall,—

O (a) after taking into account the recommendations made by the Corporate Social Responsibility Committee, approve the Corporate Social Responsibility Policy for the company and disclose contents of such Policy in its report and also place it on the company's website, if any, in such manner as may be prescribed; and

O (b) ensure that the activities as are included in Corporate Social Responsibility Policy of the company are undertaken by the company.

O (5) The Board of every company referred to in sub-section (1), shall ensure that the company spends, in every financial year, at least 2% of the average net profits of the company made during the three immediately preceding financial years, in pursuance of its CSR Policy:

O 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:

O Provided further 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.

O Explanation.—For the purposes of this section “average net profit” shall be calculated in accordance with the provisions of section 198. (Ministry of Corporate Affairs, Government of India, 2013)

Schedule VII of the Companies Act, 2013

O Activities which may be included by companies in their Corporate Social Responsibility Policies

O Activities relating to:—O (i) eradicating extreme hunger and poverty;O (ii) promotion of education;O (iii) promoting gender equality and empowering

women;O (iv) reducing child mortality and improving

maternal health;O (v) combating human immunodeficiency virus,

acquired immune deficiency syndrome, malaria and other diseases;

O (vi) ensuring environmental sustainability;O (vii) employment enhancing vocational skills;O (viii) social business projects;O (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 socio-economic development and relief and funds for the welfare of the Scheduled Castes, the Scheduled Tribes, other backward classes, minorities and women; and

O (x) such other matters as may be prescribed. (Ministry of Corporate Affairs, Government of India, 2013)

Potential of CSR @ 2%Activities Impact

Eradicating extreme hunger and poverty(Can feed throughout the year @ Rs. 60/day) 

1,14,15,525 Persons below poverty  

Potential of CSR @ 2%Activities Impact

Promotion of Education(Annual Fee and cost of books @ Rs. 3000 p.a.

 

8,33,33,333 Student in Government Schools 

Potential of CSR @ 2%Activities Impact

Promoting Gender Equality and Empowering Women; (Rs. 10000 per women)

2,50,00,000 Women

Potential of CSR @ 2%Activities Impact

Reducing child mortality and improving maternal health; (Rs. 10000 per pregnancy for care)

2,50,00,000 Women & Children

Potential of CSR @ 2%Activities Impact

Combating Human Immunodeficiency Virus, acquired immune deficiency syndrome, malaria and other Diseases (Rs. 100000 cost of ART p.a.)

25,00,000 HIV with CD4 count between 350-500 cell/mm3

Potential of CSR @ 2%Activities Impact

Ensuring environmental sustainability; (Rs 200 for planting and caring 1 sapling to protect it to become a tree)

1,25,00,00,000 New tree per annum to fulfill the Dream of each one Plant one p.a. or We can clean one big river p.a. completely)

Potential of CSR @ 2%Activities Impact

Employment enhancing vocational skills(Rs. 25,000 per Youth for skill development)

1,00,00,000 Youth with Enhanced skill p.a.

Potential of CSR @ 2%Activities Impact

Social Business Project (Rs 5,00,000 per business)

5,00,000 new social Entrepreneurs p.a.

Potential of CSR @ 2%Activities Impact

Prime Minister’s Relief Fund  

 

Those eligible companies who will fall short of CSR spending target will tend to donate in PM Relief Fund and such other funds than to report the fact in Final Accounts.

Is it PossibleO Yes, any of the above item

individuallyO Or right combinations of above all

What is Happening?O Studies have established: More the CSR spending

better the reputation & profits of the company. So, Companies will tend to spend more than the minimum stipulated 2% of average profits in the years to come.

O Even groups with good standing are doing it already.

O Tata group is spending at an average of Rs. 1,000 crore per annum.

O But it is not the case with all the companies. Top 100 companies based on net sales in the year 2012 has spent only Rs. 1765 Crore against a stipulated amount of Rs.5611 Crores, that amount to just 31.46% of the target amount. (Mitu Jayashankar, 2013).

What will Happen?O HDI will improve from the present position

of 135.O Social Progress Index will improve.O Credibility of the companies will improveO Brand India will improve

THANK YOU