By Anant Shrivastava
It’s been an exciting couple of months with significant buzz in the world of CSR and sustainability. DOT brings you news from India and beyond with articles ranging from recommended changes to the Companies Act, benefits of impact investing and creating shared value to how luxury brands stepping up their CSR game. It’s becoming increasingly evident that strategic and well-integrated CSR is the way forward and is no longer a nice-to-have!
CLC recommends changes in Section 135 of the Companies Act
The Companies Law Committee (CLC) setup in 2015 to make recommendations to the govt. on issues arising from implementation of the Companies Act, 2013, has recommended several changes to the Act, including Section 135 of the Act pertaining to CSR. Recommendations on CSR have been made after considering the suggestions contained in the High Level Committee on CSR report that came out in October 2015. The complete CLC report can be found here. Recommendations have been made around the following points:
- Information on annual disclosure of companies around CSR should be compiled by MCA and made available in public domain
- The govt. should play no role in monitoring CSR implemented by companies and it will be the companies’ responsibility to systematically monitor their CSR activities
- Composition of CSR committee for companies not required to have independent directors should be prescribed as ‘having two or more directors’
- Clarity on computing net profits for determining whether a company qualifies for mandatory CSR spend
- Specific inclusion of requirement of foreign companies to comply with the CSR obligation
- Areas for CSR listed under Schedule VII to be interpreted as ‘subjects’ rather than specific activities – allowing companies to interpret them liberally
- No carry forward of unspent CSR fund to the next year
- Companies, including PSUs, to be given flexibility for some years to experience the implementation of mandatory CSR before any steps on unspent funds are taken
- Section 8 ‘not for profit’ companies should also implement CSR activities if they cross the financial threshold specified in the Act
The next steps will likely involve these recommendations being presented in the parliament in the form of a bill which could either be passed or rejected.
While some of the above recommendations are indeed helpful for companies in terms of ease of understanding the Act and implementation of CSR activities, this report missed any suggestion on a crucial issue – tax treatment of CSR activities. It’s high time the govt. provided clarity on the same as companies seem to be struggling to understand tax implications of CSR spends in various areas. A uniform tax treatment can prove to be really useful and prohibit a bias for activities that allow more tax benefits than others.
Leveraging social media for effective CSR communication
Social media is ubiquitous. People, companies, even governments use it in some way to communicate. Businesses have been using the power of social media to reach out to all their stakeholders but, according to a study, social media is heavily underused for communicating the social good done by companies. This Economic Times blog explores how firms can utilise social media to effectively communicate about their CSR and the numerous benefits it has to offer. Social media is a powerful but fast evolving tool and companies will need to build expertise if they wish to use it as a communications medium for CSR.
Going beyond CSR – creating shared value
Even though companies are embracing CSR and ensuring they undertake efforts that benefit society and/or the environment, CSR is still viewed as something that’s extra to the business. We’ve stressed before that CSR is beneficial for both the communities and businesses and plenty of studies exist to support that. Maybe, what’s needed to emphasise the point is looking at social responsibility from a different angle. This article, co-authored by one of the co-founders of the Shared Value Initiative India, attempts to do that. Shared value is an essential concept for businesses where they operate with the aim of creating a more equitable world, maximising shareholders’ wealth in the process. The initiative has seen some success in bringing together companies, government, and civil society organisations to adopt and share practices that allow creation of shared value through business. We hope more business leaders are listening and will work to align their firms in this direction.
A short refresher on what makes a good CSR programme
Every few months, we try to highlight articles that show what constitutes an effective CSR initiative. This article by Paroma Roy Chaudhary succinctly captures the essential components of CSR that benefit both the community and the business – alignment with business, brand impact, local relevance, robust monitoring and evaluation, and professional management. Perhaps the one vital component missing is effective communications around CSR. We’ll continue to provide such refreshers in the hope that more companies take note and do good by doing it well!
Impact investing – Need of the hour for India?
Impact investing is often mixed up with philanthropy, CSR, and other similar sounding terms. As a result, its true meaning is often lost. This article defines it from an academic viewpoint and goes on to discuss its benefits especially in the Indian context. Impact investing in microfinance has already benefited millions in India and has provided significant returns to investors. Being a tried and tested model in India’s developing economy, it is high time that companies and individuals focus their attention on it. This could be the answer to the currently limiting CSR legislation because it provides opportunities for innovation in the development space while giving social and financial returns.
Good news – More companies view CSR as a strategic process!
Findings from a survey conducted by FICCI show that an increasing number of companies consider CSR to be a strategic decision making process in the business. Around 150 companies participated in the survey which captured responses on management involvement in CSR, implementation and monitoring of CSR activities, clarity of Section 135 etc. It’s heartening to see companies making efforts in understanding and complying with the Act. However, companies also raised some concerns in terms of clarity of the Act (especially tax related regulations), finding credible NGOs, lack of CSR professionals to manage implementation etc. It’s clear that a collaborative effort by the govt. and corporate sector is needed to mitigate these issues and allow ease of planning, executing, and monitoring of CSR.
Are luxury brands doing their bit of social good?
Although a number of luxury brands across the world have been involved in social initiatives, they’re not synonymous with CSR to an extent that some other sectors are. The luxury sector has so far taken a very traditional approach to benefiting the community, mostly through charity. Strategic CSR is yet to be largely taken up. This may be changing. This article talks about the work that’s being done by brands such as Louis Vuitton, Gucci, and Chopard and while it may not exactly be “strategic CSR”, these brands are going beyond philanthropy and thinking of long-term social initiatives. A good move considering any business that works with customers who are socially conscious and judge companies on their social footprint stands to only gain through social responsibility initiatives!
CSR and sustainability as tools for attracting investment
Indian companies stand to gain in another area through robust CSR and sustainability initiatives – fund raising. This article by Singapore based investment consultancy CSR Works mentions that Indian companies need to step up their CSR disclosures and sustainability reporting if they need to tap in to the $21.4 trillion pool of Socially Responsible Investment (SRI) funds. Sometime back, we’d written about the poor quality of CSR and sustainability reporting by Indian companies and this news highlights how companies are missing out on investments as a result of it. Will firms take up this issue soon? We can only wish as we wait and watch.