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CSR NEWS: DECEMBER 2015 / JANUARY 2016

Laura Quinn

By Anant Shrivastava

BSE’s Samman platform launched

BSE’s much talked about platform to connect companies with credible NGOs for CSR initiatives finally went live on 9th December. Although the site specifies that it’s a Beta version, and it feels the same way, this is certainly a step forward in helping companies pick the right partner for implementing their CSR initiatives. The actual usefulness of the platform for both companies and NGOs will become clearer as feedback starts to come in next year. But as we’ve said before, we hope this list of “govt. vetted NGOs” as a quick solution to CSR needs doesn’t kill the much needed innovation and game changing approach practiced by a handful of NGOs, lest they miss out registering on the platform.

 

MCA FAQs on CSR

These FAQs released by the MCA answer some important questions around the CSR legislation. As companies gain maturity and understanding of the Companies Act, 2013, such periodical communication serves as a useful tool to help them build their expertise on the subject. Important areas such as tax benefit from CSR, monetization of employee time, CSR obligation for Section 8 companies etc. have been covered. A useful read, indeed!

 

PSUs to focus on CSR for the poor?

The Committee on Public Undertakings (CoPU) has urged the govt. to amend the Companies Act so that benefit from CSR initiatives reaches the poor. An analysis of the CSR expenditure pattern of companies in 2014-15 revealed that the largest spend was done by companies in Maharashtra, which is already India’s wealthiest state and is not exactly “backward”. Therefore, if such an initiative by PSUs ensures CSR funds reach more backward states in India, it can potentially deliver benefits to areas with a greater need. The private sector may also follow PSUs in modifying their CSR to benefit the poorest. What’s important is that the Act is amended to avoid any ambiguity around what those poor and backward areas are. All that comes with a big IF, that is if the recommendation is ever heeded.

 

Has the CSR legislation killed employee volunteering?

With the Companies Act clearly specifying that employee volunteering cannot be monetized to count towards the CSR spend, has this negatively impacted volunteering in the corporate sector? This Livemint article talks about the volunteering and its contribution to CSR and employee engagement within a company. What’s clear is that volunteering is certainly useful to keep up employee satisfaction while also making them more effective at their jobs. Smarter companies have managed to continue with structured employee engagement programmes outside of the CSR legislation for the benefits it offers.

  

Why businesses that are good at CSR are bad at paying taxes?

It’s fairly easy to think that tax avoidance goes against the spirit of CSR. After all, paying due taxes is responsible behaviour! But opinions in the business world vary. This Economist article explores some of the reasons why firms that are good at CSR are also keen to avoid taxes. Reasons suggested vary from hypocrisy to different objectives of the various people and departments in a company to how CSR and tax avoidance are tools for maximising profits – the ultimate goal of a business to high rate of corporate taxes. Even though individual reasons for tax avoidance vary, an important takeaway is that firms are responsible to pay their fair share of taxes and must differentiate between moves that promote business while reducing tax burden and dodgy manoeuvres carried out to avoid paying taxes anywhere.

 

More data on CSR performance in FY 2014-15

With the disclosures for FY 2014-15 finally out, it’s clear how companies in India are reacting to the CSR legislation in the Companies Act. According to this article that references a CII study, 87% of the 1181 listed companies on BSE complied with the legislation and spent around Rs 6400 crore on CSR in the financial year. 52% of the companies that spent money on CSR failed to spend the required amount. Another study by Crisil indicates that large companies fared worse than SMEs with only 31% (with turnover greater than Rs. 10,000 crore or more) spending the required amount. There is clearly a lot of room for improvement. Hopefully, things should get better in the second year of the legislation. If they don’t, it would mean that corporate India and the govt. need to introspect on what’s not working out – the CSR law or the companies’ understanding and acceptance of it. Changes in either the legislation or the approach companies take to CSR may be required.

 

Maharashtra govt. asks companies to address development priorities through CSR funds

In a meeting with representatives from the corporate sector, the state govt. requested companies to use their CSR funds for addressing states development priorities and announced availability of a dedicated resource in the Chief Minister’s office to allow facilitation of government-corporate partnerships for the same. While this step can surely be an effective way to address challenges in the state, CSR funds are not meant to fill resource gaps in govt. schemes and this move has a potential to become just that. Further, the present rules on CSR in the Companies Act are already inhibitive for innovation in the CSR space so it’s essential that this move doesn’t add to limiting the ways companies do CSR.

 

Inclusion – beyond CSR and as a business strategy

Companies in India have been at work for some time now to be seen as “inclusive” workplaces. While inclusion is certainly a must for any progressive company and adds to the social responsibility values of a business, firms are beginning to realise its benefit for business growth and are incorporating it in their business strategies. This article by Navi Radjou, co-author of Frugal Innovation, talks about some of the leading players to embrace inclusivity and the business advantages it offers. 

Creating a more employable India: Less talk more action

Laura Quinn

By Laura Quinn

IMG_20160129_104910.jpg

Last Friday I was very happy to make it to the Godrej Good Conclave in Mumbai, which focused on how to create a more employable India, and how to do it at scale. As part of its “Good & Green” strategy, Godrej has an ambitious aim to train one million youth in skills that enhance their earning potential, by 2020. Apart from some guts, an aim like that takes a genuine commitment to work with stakeholders across the ecosystem in order to find new solutions to the numerous issues in India’s employability landscape. And so the Godrej Good Conclave was initiated, by Mr. Nadir Godrej himself.

The speakers and audience were as well-curated as you’d expect at an invite-only event like this, with CSR funders, skilling NGOs, and advisory organisations all present. Overall it was an intelligent and enjoyable day of conversations that threw up some interesting debates. But for me some key issues emerged that absolutely need to be addressed if we’re to tackle India’s employability gap with any real success in the coming years. Issues that need not only require debate but that require action, innovation, and multi-stakeholder commitments.

Understanding impact
In general, understanding the impact of employability programmes feels stuck in the dark ages. It was absolutely surprising to hear how NGOs and funders are starting to shift from measuring the number of people trained to measuring the impact of the training. That should be absolute basic hygiene in any programme from the beginning. Of course it’s critical to note that the particular complexities of skilling make impact-tracking more complex that some other programmatic areas but that’s exactly why, instead of putting in place basic tracking mechanisms now, we need to be talking about how to innovate methods of impact assessment within the space, with employers and trainers working together. If we work together effectively we can combine forces to undertake large-scale tracking, compare different methodologies, and sharing smart, “best-practice” learnings across all stakeholders.
 

The conversation was captured live by illustrator Santosh Nair

The conversation was captured live by illustrator Santosh Nair

The critical role of employers
Employers are one of the critical end goals of any employability programme but their role as stakeholders in the dialogue is too often understated, including a noticable absence of voices from the formal employment sector at Friday’s event. Some of the key messages coming out on Friday involved issues of making formal sector jobs attractive to young people and aligning their aspirations and attitudes with those of employers. Anyone interested in training for employability needs to be working actively with employers to successfully close the loop from training to sustained, long-term employment.


Market-based solutions
Overall the biggest issue that came out of the conversations for me was that working towards a market-based solution is critical. Industry needs a workforce, and people need and want jobs. It’s an industry in its own right and a natural market-based process. Non-profits that provide employability training tread a very fine line in potentially undermining the inherent value of that training and preventing the natural market of a skilling economy from taking hold. Although NSDC has done come commendable work in standardising training courses, there’s too much complexity and poor delivery to build “consumer” confidence that training is being done to the highest standard and will lead to long-term employment.

Santosh Nair captured session 3 on the role of life skills

Santosh Nair captured session 3 on the role of life skills

It was great to debate some of these issues on Friday, but it would be even better if we could get together to act on them. There’s a lot of talk around the problems but not enough around how we create and test new, innovative solutions. So, inspired by Godrej’s first step in convening the right stakeholders together, we might just take on that mantle and see if we can make it happen...

CSR NEWS: OCTOBER/NOVEMBER 2015

Laura Quinn

By Anant Shrivastava

Created by Diego Naïve, from the Noun Project

Created by Diego Naïve, from the Noun Project

BSE CSR platform ‘Samman’ to launch finally?

According to this Hindu article, the platform which has been talked about since April 2015 and aims to connect companies with NGOs to facilitate both parties in undertaking social activities using CSR funding will go live before the end of this year. It will certainly be useful for companies to find credible, transparent organizations and programmes of interest to be funded. However, NGOs that cannot/do not get themselves listed on the platform stand at a risk of not being funded. We hope companies are open-minded while looking for programmes to fund and don’t limit themselves to just the thousand or so organisations that will be listed on Samman.

Companies Act may be amended for clarity on CSR norms

Based on the recommendations submitted by the Government appointed Baijal Committee in September, certain rules as well as the Act could be changed to allow greater transparency around CSR spending. The panel is expected to submit the final report to the MCA in December. Changes are expected to provide greater clarity on many ambiguous areas of the CSR rules including the differential tax treatment of various forms of CSR expenditure as mentioned in this Business-Standard article. In the present scenario where the rules are vague in places and left open to interpretation, such an amendment should prove to be beneficial for all stakeholders in the game.

India ranks no.1 on CSR reporting (but there’s more to it in the fine print..)

India tops the world in CSR reporting with 100% of its top 100 companies reporting on their CSR initiatives. While this is good news, it is hardly surprising given that the government mandates companies above a certain size to report on CSR activities. What is worrying though is the quality of reporting – something where India lags behind many countries. According to this Livemint article, it’s clear that corporate India still has a long way to go before it starts to produce high quality responsibility reporting especially issues such as carbon emissions. Perhaps decisions taken in the ongoing CoP 21 in Paris will distill down to corporate India and make them realize the importance of accurate and high quality sustainability reporting. Only time will tell.

State govt. requests CSR funds for tribal development

Maharashtra CM Devendra Fadnavis requested corporates to utilize CSR funds for the benefit of the tribal population of Maharashtra. This is a good example of government identifying the challenges that can then be addressed by corporate India through CSR funding. However we’ve stressed this before and would like to say this again – participation in such govt. led initiatives should be voluntary and unwillingness on companies’ part to contribute for such initiatives should not come at a cost or penalization in any way.

Transparency for CSR funds should be a two way street

Companies often go to great lengths to ensure that the NGO partners they work with are transparent, ethical, and corruption free organisations. This involves a rigorous due diligence process and rightly so as there are many NGOs that are corrupt and end up utilising CSR funds for vested interests. But shouldn’t the companies be transparent as well when it comes to their expectations from NGOs, processes for grant giving etc. to help NGOs apply for funding? This article written by the development director of a hospital describes the tedious and unnecessary process NGOs often have to go through to just gather information about available corporate funding. We feel that just as NGOs need to step up their game and become professional in order to secure funding, companies also need to structure their grant giving mechanisms efficiently to benefit the NGOs and ultimately the society in the most efficient way. 

Mark Kramer on why a philanthropic model of CSR has limited benefits

Mark Kramer, co-founder and Managing Director of consultancy FSG, stressed in an interview the limitations of a purely philanthropic model and talks about the need for a profit-driven business model for addressing social issues. We agree entirely that, although the traditional CSR model can help to address social problems, there is a critical need to look at social issues from a business perspective. A commercial angle brings greater accountability, professionalism, and often, better resources to tackle challenges than a purely charity-based approach.

Social mission and profit are not mutually exclusive, even for startups

India is on its way to becoming a startup hub (if it’s not there already). But not many startups have a clear social mission or ‘purpose’. The reason is often that they are too busy focusing on other vital aspects of business like, well, starting up! But social consciousness can and should be a part of business strategy for start-ups from day one. Plenty of studies exist to show that a social agenda adds to long term profitability of a company. The same applies to start-ups as well. This article tells the story of how Warby Parker, an online glasses retailer, was able to derive success by being a socially responsible company from the beginning.

Tying CSR with climate change

The climate change conference in Paris in November and December, aimed at helping around 196 nations make decisions on mitigating climate change, is expected to be followed by significant policy changes at national and global levels. Implementation of such policies will come at an added cost that will be borne by multiple stakeholders including governments and the corporate sector. How can the government and companies work together to utilise the mandatory CSR spending to ensure maximum positive environmental impact? A Didar Singh, the secretary general of FICCI, provides insights in this article.

PSUs fare better than private sector in Oxfam’s IRBF 2015 index

Oxfam Foundation released the India Responsible Business Index in October that measures the BSE top 100 companies’ on voluntary disclosures and policy commitments against the National Voluntary Guidelines (NVGs). According to this index, PSUs are doing better than private sector on criteria such as non-discrimination at workplace, community development, respecting human rights and employee dignity, and involving the community as stakeholders in business. The only area where private companies fare better is instituting sustainable policies in their supply chain. We think that initiatives like this that put out such information in the public domain have an effect of motivating companies to do more on sustainability and reporting front. For complete information on IRBF, visit http://www.responsiblebiz.org/   

Do One Thing writes in Mint: India Inc. and the Global Goals

Laura Quinn

Last week, Payal, our director of social investment, wrote a great opinion piece for Mint on the role that India Inc. can and should play in helping India reach the post-2015 Sustainable Development Goals. Market-oriented solutions, investing in innovation, skilling the workforce and closed-loop manufacturing - a good read on a Monday morning! Get the full piece here

CSR NEWS: AUGUST/SEPTEMBER 2015 ROUND-UP

Laura Quinn

By Anant Srivastava

Image from Skoll World Forum

Image from Skoll World Forum

Grameen Bank founder on the need to create social businesses from CSR

Muhammad Yunus, Economist and founder of Grameen bank speaks briefly on utilising CSR funds to create and support social businesses. It is something we’ve always agreed with. For-profit social enterprises are a great way to ensure that social causes become sustainable in the long run. Presently, CSR funds can only be invested in a technology incubator at a government approved institute. The urgent need of the hour is to expand the scope of impact investing through CSR funds. We can only hope the government is listening.

Strategic CSR – using CSR to build your brand

The only way to do good CSR is to do it strategically. As companies continue to learn from their mistakes and challenges faced in the first year of mandatory CSR and realign their CSR strategies for the future, this Economic Times article provides a fresh take on an old, sound business advice of using CSR to benefit perhaps a company’s most valuable asset – its brand.

Incubators evoke little interest of corporates for CSR money

The first year of mandatory CSR spending proved to be dismal for incubators hoping for CSR funds. 85 of the top 100 companies on Bombay Stock Exchange for which data is currently available, spent just Rs 6.23 cr in total on incubators, that’s less than one percent of their total spend of Rs 6,500 cr. The reasons as mentioned in detail in this Livemint article range from lack of awareness and closed mindedness of companies on considering what counts as CSR to inadequate information on the government approved incubators that can receive CSR funding. It has to be seen if with time, companies’ understanding and perspective on CSR improves and funding incubators becomes a part of mainstream CSR.

Mandatory CSR at the cost of effectiveness and broader sustainability?

From the annual reports being filed, it’s clear that around two-thirds have complied with the government mandated CSR spending. This percentage can be expected to go up in the coming years as companies mature in their understanding of the mandate as well as their internal capacities to undertake CSR activities.

But is this happening at the cost of effectiveness of the activities being implemented? Are companies doing CSR only to comply without bothering about the actual social impact? It may be too early to tell. Thorough impact assessment of CSR initiatives can only happen 2-3 years after the implementation but it is important from the beginning that companies design and follow robust monitoring and evaluation mechanisms to assess impact.

Compliance with the law can also come at an added cost of companies losing focus of broader sustainability principles as pointed out by Shankar Venkateswaran, chief of Tata Sustainability Group, who has been a part of the drafting committee for the National Voluntary Guidelines (NVGs). In our view, this can be prevented if companies take a strategic approach to CSR and consider it as a subset of their broader sustainability practices.

MCA appointed Baijal Committee publishes recommendations on the CSR legislation

The 6 member committee headed by Anil Baijal to come with guidelines on the effective implementation of the CSR legislation as well as monitoring and evaluation of the activities has come out with its first report.

Some important recommendations made by the Committee which could be followed after the government’s approval are:

  1. Companies (especially smaller ones) should get leniency for the first 2-3 years in complying with the legislation
  2. Differential tax treatment for various activities under Schedule VII should be curbed to prevent companies forsaking societal benefit for tax saving in choosing CSR activities
  3. Companies that need to spend more than Rs 5 cr on CSR should take a programme based sustainable approach to CSR while companies spending less than 5 cr can take a less intensive project based approach
  4. Private companies like public companies should be allowed to carry forward the unspent amount to the next year to be spent in addition to a fresh spend requirement of 2% of the profit.
  5. Administrative overheads cap can be increased from 5% to 10% of the overall CSR spend. Also, expenditure on capacity building should not count as overhead
  6. Instead of a govt. vetted databank of implementation agencies, the onus of due diligence before selecting an agency should rest with the board and the CSR committee of the company. Similarly, for monitoring and evaluation of CSR activities, the boards and CSR committees should develop and follow methodologies instead of relying on the government and are free to leverage external firms if required

Hubristic CEOs less likely to spend on CSR than narcissistic CEOs

As absurd a headline as it is, it’s actually true! A study of 464 companies conducted by faculty members from premier universities including the world renowned INSEAD business school found out that hubristic (those full of self-confidence) CEOs are less likely to engage in CSR activities as they attribute the success of their firm solely to their ability and actions rather than external factors. Thus, CSR as a means of engaging and benefiting stakeholders’ just isn’t necessary for them. Narcissistic CEOs, on the end, tend to do better at CSR as they crave for external validation often fulfilled by CSR in the form of good publicity for the company and leadership. Perhaps a little narcissism isn’t all that bad...

 

India’s CSR is a mess: It's time to tidy up

Laura Quinn

By Laura Quinn

Icon by Ervin Bolat. From the Noun Project.

Icon by Ervin Bolat. From the Noun Project.

A confusing place to be

Imagine an annual budget of Rs. 20,000 crores managed by 80 managers, none of whom ever speak to each other. Now imagine it’s actually 8,000 managers overseeing that budget, without ever meeting or sharing a word. And turn those managers into three to five-person management committees instead of individuals. Oh and tell each of the 8,000 committees to produce and submit its own, separate annual report. Now think about analysing each of those reports individually because that’s the only way to know how the Rs. 20,000 crores was actually spent. And finally try to make sense of what was achieved, what the impact was, or what was missed out entirely.

Impossible? Correct. Welcome to the world of Indian CSR.

Since the Companies Act, 2013 came into force last April, around 8,000 companies have been mandated to spend two percent of their average net profit from the past three years on Corporate Social Responsibility, within some ambiguous yet fairly restrictive rules set out in Section 135. Estimated as a total CSR budget of around Rs. 20,000 crores per year, the opportunity is tantalisingly close to being incredible. It’s the first legislation of its type in the world - no other country has ever even attempted it - and a funding injection of this scale could represent a critical turning point for India’s development sector, which was variably estimated to have annual revenues of only Rs. 30-35,000 crores before the legislation came into effect. But this funding can only make a difference if it is managed well and directed effectively.

Unfortunately, the reality after the first year of the mandate is quite the opposite. In fact, it’s all a bit of a mess.

  • In the best cases, funds are being managed by a CSR manager or team that understands the development sector. But in most, CSR falls under the remit of Corporate Communications or HR departments without the necessary skills and resource to assess NGO partners or measure impact effectively.
  • Companies aren’t talking to each other meaning the same mistakes, inefficiencies and failures are getting repeated hundreds of times over from company to company.
  • Grey areas in the legislation, and lack of collective experience in interpreting it, are creating a sense of risk-aversion that’s stifling innovation, boldness, and the progress of new ideas for tackling development issues.
  • Those social causes which are most attractive (to employees, investors, the Government, and media) are getting a glut of funds - with the Government’s pet missions attracting inflated investments with big tax incentives.
  • Tried-and-tested, grass-roots programmes with simple metrics, immediate impact on-ground, and annual funding schedules, are seen as safe options while long-term, more experimental initiatives that have the potential to be real game-changers, are seen as too risky to attract the investment they need.

Ultimately, 70 percent of companies failed to meet their spending targets within the rules of the CSR legislation in 2014-15

 

An incredible opportunity

However, as messy as it seems - and it really is - companies are in fact trying. Across the board corporates are struggling with similar issues, trying to interpret the rules, looking for the best programmes to support, and broadly wanting to make a difference. And it’s critical that they do; the CSR ecosystem needs companies see the value of their social investment in order to create a virtuous circle of increasing spends for the long-term. But despite this, the CSR scenario in India right now is inefficient, old-fashioned, eager for easy wins and, perhaps most distressingly, the enemy of innovation.

These are not the qualities of great businesses, and it’s certainly not how to go about changing the world. If Indian CSR continues in the direction it went in 2014-15, India Inc. is going to waste a truly incredible opportunity to transform this great nation.

What we need is a collective strategy, and we need it now.

Let’s imagine the best-case scenario. Try to envisage the collective brainpower of India’s 8,000 most successful companies and all the skills, talent, technology and capabilities they hold.  Think about efficiency; think strategy; think “lean” approaches and cloud-based monitoring systems. Think of business-based, financially-sustainable solutions that enable people to lift themselves of out poverty. Think of companies combining forces without the concerns of competition. Imagine being free to invest Rs. 20,000 cores a year in social development without the burden of the public purse. Think of all the innovation and technology that’s at the forefront of one of the world’s biggest markets being directed towards solving its greatest social problems. It's dizzying to even think about the positive impact it could have. And it’s not even that far from being possible.

 

It’s time to tidy up

Sorting out the CSR mess isn’t going happen overnight. But this opportunity – the first of its kind in the world - is too important to fail. So we, as the CSR “industry”, need to start tidying it up now, and not rest until we make it something to be truly proud of. And there are three simple places to start.

1. Measure and manage

Before we can even begin to figure things out we need a simple way to know what’s being spent, where, with whom, and for what (social) return. ROI is one of the basics of doing business and we must make it a basic of CSR too. A simple, customisable, low-cost, SaaS system would enable companies to measure the effectiveness of their spend, and enable a macro analysis of where money is going, what’s most impactful, and how improvements can be made. We need a Tally for CSR, simple to use and open to all.

2. Share learnings and benchmark programmes

Even after just a year of the CSR mandate, the more able companies are already reassessing their CSR investments based on learnings so far. But most companies don’t have a CSR specialist, and the job of selecting NGO partners and monitoring programmes is left to another function to manage, without past experience in social impact. Inexperienced teams aren’t sure what to look for, or even which questions to ask and the result is hundreds of companies all wasting time (and money) learning the same lessons and funding potentially inefficient programmes. By creating platforms where companies investing in the same CSR space can share best-practice, discuss failures, build on mutual ambitions and eventually pool funds, we can ensure that investment is being directed to the programmes and ideas that will prove to be most effective in the long-term.

3. Inject innovation into impact

One of the great seductions of enterprise is its demand for innovation. Finding the cracks in what’s been done before, combining disconnected ideas into something ingenious, taking leaps of faith that others say it’s foolish to even dream of, is the lifeblood of any great entrepreneur. And social development isn’t so different. But taking a leap of faith, finding an unlikely new macro-solution, or simply thinking differently, are all impossible when your brief is to stay safe and not attract any unnecessary attention. We need to build a critical mass of companies who are ready to take risks with CSR spending and apply the pioneering nature of business to their CSR strategy. If we bring smart companies and great private sector leaders together in innovating CSR and social impact, there’s almost nothing they won’t be able to achieve.

 

Do One Thing is an impact consultancy based in Delhi that applies strategic thinking and innovation to corporate responsibility.

SALT: New Mag for Compassionate Consumer Citizens

Laura Quinn

Hot on the heels of Collectively, a new online magazine for the conscious consumer-citizen hit virtual news stands last month. Introducing: Salt.

We like what they stand for; “compassionate business thinking” sums up a lot of what we also believe in.

Although the launch content isn't spectacular, Salt already feels a bit more serious than Collectively which, whilst being super cool, veers into Buzzfeed space a bit too often for comfort. Let's see what “compassionate business” content Salt manages to come up with for the next editions.

CSR NEWS: JUNE/JULY 2015 ROUND-UP

Anant Shrivastava

Here's our topical round up of the most important CSR stories in India throughout June and July.

Two-thirds of companies miss the CSR spend targets

Apparently two-thirds of companies have failed to meet the two percent spending mandate including some surprises such as HSBC and Axis Bank. Reasons for failing to comply aren’t yet clear but here we elucidate on how issues with the legislation itself may have contributed.

But it’s not all bleak news for CSR initiatives

Even though the corporate sector on the whole failed to spend the required amount on CSR, the IT sector did quite well. The cumulative spend on CSR by TCS, Infosys, Wipro and Mahindra was almost five times its previous year’s value. Thus, not all is gloomy and we’re hopeful that as companies build their understanding of the act and recognise the needs of the social sector better in the coming years, channelising of funds in social programmes will grow as will the impact created.

Infographic from  Live Mint , 30th July 2015

Infographic from Live Mint, 30th July 2015

Government launches ‘Skill India’ initiative, plans to use CSR funds

With talent shortage being identified as a concern across all sectors, the Government seems to be working towards a resolution. It recently launched the Skill India initiative on the World Youth Skills day (15 July). The National Skill Development Corporation plans to work with corporates on utilising CSR funds to fulfil this objective. Considering NSDC’s standardised curriculum and certification, youth trained through NSDC’s programmes stand a higher chance of gaining employment and, if implemented well, this initiative could provide companies with a talented workforce and gainful employment to possibly millions of youth across India. However, the impact of NSDC’s work on the ground and its ability to work effectively with CSR funders, still remains to be seen. We for one have tried and failed to engage with them more than once.

Ratan Tata calls for a robust monitoring mechanism for CSR spending

JuneJuly round up_Ratan-Tata.jpg

Tata Group’s Chairman Emeritus, Ratan Tata, called for strong need to monitor companies’ CSR spend fearing it may be wasteful or siphoned off for other purposes. We agree that compliance with the mandatory CSR spending is in its nascent stage and a robust monitoring mechanism is needed to ensure optimal utilisation of funds. Perhaps the government’s proposed platform for monitoring CSR projects will do what’s required. The six member panel in the MCA headed by Anil Baijal is expected to come out with its initial recommendations on the monitoring and evaluation of CSR programmes sometime in August as mentioned in this Economic Times article. 

Regulations around FCRA may be hurting the CSR ecosystem

The Government has mandated that companies with over 50% foreign shareholding have to carry out their CSR initiatives through NGOs, trusts, or foundations that have FCRA clearance. As examined here, both the corporate and the social sector feels this limits the social good that can be brought through CSR funding. With the govt. tightening the regulations around FCRA clearance and the complexities involved in getting the clearance in the first place, this move is proving to be prohibitive than encouraging for companies to do CSR.

Gujrat to set-up CSR authority to channel CSR funds for state development

The Gujarat govt. has set up a CSR authority which will ask companies for their CSR funds so the same can be used for development across sectors where the need is highest. This could be a good thing, provided there is transparency and accountability around the use of funds and the impact created which, as we know, can be a big ask from government departments! Even though the govt. is giving corporates the option of contributing CSR funds directly to NGOs instead, could this move instil fear in companies of antagonizing the govt. if they don’t channel funds through the new authority? If that happens, there is a chance that some smaller but interesting social projects that could have benefited from CSR funding might lose out to large-scale development initiatives favoured by the government.

CSR NEWS: APRIL & MAY 2015 ROUND-UP

Anant Shrivastava

As we move into the new financial year conversations on the future of CSR abound. We’ve rounded up a few of the more pertinent updates, comments, and happenings, including our take on the President’s speech at the CII’s National Summit on CSR.

The Hindu talks long-term business benefits of CSR spend

Will CSR investment pay off for the company in the long-term? The Hindu has a crack at how it might, including market development, and increasing customer buying power – we think there are some much more tangible benefits for businesses but good to see the debate is alive and kicking.

Huff Post gives an articulate overview of the watch-outs of “CSR” in India right now

Hyperlocalisation around areas of operation, paying from products instead of processes, desperate alignment with the government agenda – some CSR watch-outs from Amitangshu Acharya in the Huff Post that we are definitely inclined to agree with.

States get micro with yet more guidelines

States are now forming their own CSR guidelines, as evidenced by this piece about Odisha’s plans in the Business Standard, and rumours that the same might be happening across the country. Companies are still struggling to adopt the rules of the Companies Act, which are cloudy enough to have kept many corporate legal teams busy throughout the last year – so we’re dreading more guidelines from states that are likely to add to the confusion, make the idea of CSR even less desirable for India Inc, and prevent companies from making innovative, meaningful impact at scale.

Sammaan: Can a new mega platform bring corporates and NGOs together effectively?

Sammaan is a new platform for CSR created by the Bombay Stock Exchange, CII and IICA announced in April 2015 and set to launch this summer. It will enable companies to browse verified NGO partners and programmes, invest through the platform itself, and monitor spend through a custom dashboard. It’s an ambitious concept and one that will require intensive resource to keep it relevant and updated, let’s see if BSE can make it happen.

New financial norms from ICAI, interpret at your own risk

Companies are to debit (charge) its profit and loss account (P&L a/c) with CSR expenses incurred by it during the year – and such expenses are to be shown as a separate line item in the P&L a/c. This is according to new norms issues by ICAI in May 2015.

And finally… President fails to impress in CSR keynote

We attended the “National Summit for CSR” organised by CII in April. The President of India was scheduled to make the opening address amidst much fanfare so we were curious to see what big ideas he might table. After a long delay and six introductory speeches he finally took to the stage but the outcome was disappointing to say the least. This was his opportunity to rally the corporate community around the potential of CSR and responsible business to bring fresh energy and expertise to India’s development agenda and drive private-sector thinking in new, exciting ways. Instead he regurgitated a familiar spiel around the Companies Act mandate and the government’s priority areas, which everyone in the room was well aware of already. A disappointing morning and more reason to feel concerned that, whilst setting out a good CSR spending mandate, the government has forgotten to inspire businesses to be truly responsible and revolutionary in their everyday operations.

 

CSR NEWS: FEBRUARY 2015 ROUND-UP

Anubhav Gupta

Another month another ferocious period of change and in India's CSR landscape. Here are some of the top stories for the month...

/ Making CSR work

In a time when most companies are jumping on the CSR bandwagon, how can companies ensure that their CSR programme is effective? What works and what doesn't? This Business Standard article explores through real life examples what approaches are effective. A good reiteration of the balancing act that companies need to achieve to make their CSR programmes as impactful as possible.

/ PSU banks - combined CSR?

Modi has suggested public sector banks to pool their resources and collectively undertake a single CSR project. Potentially a great idea to pool huge resources into a single cause, but how do you get multiple organisations with multiple subsidiaries (and let’s not forget multiple CSR committees!) all on the same page backing the same programme? It’s a challenge that might turn out to be just too difficult.

/ The rise of crowd-based CSR platforms

As CSR becomes mandatory and hopefully more common across India, we’re seeing a rise of crowd-based CSR and NGO support platforms. One such startup is Power For One, which enables companies to create a win-win situation by simultaneously promoting their CSR support whilst garnering more support for their partner NGOs from their own consumer base. But it’s very easy to be misguided in this area too, lots of bright young things are seeing potential in the CSR “market”, if you could call it that, and filling the gap with apps and platforms theat may not turn out to be necessary or useful in the grander scheme of things. We fear this Kochi-based startup might fall into that category.

/ Soon, a platform by Ministry of Corporate Affairs to track CSR spending

The MCA is in the planning stages of launching a data analytics platform to monitor the CSR spending of companies. We found a circular on the MCA website stating the formation of the committee, its members and core responsibilities. A report from this committee is expected within 6 months after its first meeting. Although a standardised system of tracking CSR spend and monitoring of CSR activities is a good step forward to bring transparency and accountability, it remains to be seen whether the MCA has really got the resources to back it up, or whether a system like this will ever be able to ensure against corruption or fraudulent claims.

/ Employee volunteering to count as CSR spend?

The Government is considering including employees’ volunteering as a part of a company’s CSR spend. More than just helping partner organisations, employee volunteering serves to instiutionalise the idea of CSR and community investment within a business so it’s definitely worth supporting companies who incorporate this into their CSR planning. However, it could also be the simplest way for less-transparent companies to artificially their CSR burden by over-claiming the number of volunteer hours. This article in HT discusses some of the issues in evaluating pro-bono work.

/ CSR priorities in 2015

In our December round-up, we published a study done by responsiblefuture.in on the leading companies in the Indian CSR space. Here is a follow up on that by the same website discussing the emerging trends in the space for the year 2015. The article rightly talks about the emergence of manufacturing companies as CSR champions after the ‘Make in India’ push by the current government. It reiterates what we and others in the CSR space have been saying – CSR is an essential part of business strategy of a company. The article also touches on the importance of finding CSR managers who are insightful and can adapt to the changing needs and trends in the space.

Collectively: Making Sustainable Content Cool

Anubhav Gupta

It was great to stumble upon Collectively this weekend, an awesome global content site to “expose the most sustainable options and innovations from the worlds of fashion, food, design, architecture and technology, among other things.” 

Hip, well-designed, and independently curated by the team at VICE, it’s got all the things we love about sustainable living, packaged in a way that doesn’t make us feel like we have to wear hemp trousers.

What’s doubly interesting is who’s behind it. Non-profit Forum for the Future has brought together partners across the corporate landscape, including Coca Cola, Carlsberg, BT Group, and Unilever to fund and support the platform – hopefully making it a sustainable model that will start to mainstream some of the issues we really love and care about. 

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The World's Most Successful Companies Pursue Mission Before Profit

Anubhav Gupta

brilliant piece from Fast Company that's a must-read for anyone interested in responsible business. A departure from anything we tend we see in India's "CSR" space, it discusses how the world's most successful companies integrate a mission into the very core of their business.

That mission doesn't have to be an idealistic, social one. But it has to be something that people can rally around, a purpose to exist, a meaning behind the money. And more often than not that purpose tends to have some level of social, sustainable, or human basis.

Even Apple, the world's most valuable company, places more emphasis on mission than it does on money, at least judging by Tim Cook's rhetoric...

If you want me to make decisions that have a clear ROI," another renegade CEO declared at a public shareholder meeting earlier this year, "then you should get out of the stock, just to be plain and simple." A few months earlier, that same renegade had announced that his company was committed to "advancing humanity." He claimed that his frame for decision making was moral: "We do things because they're just and right." This emphasis on social goals over financial performance seems almost revolutionary—and yet the renegade is none other than Tim Cook of Apple, CEO of the most valuable company in the world.

Apart from sounding wonderfully modern and progressive (and being part of "Generation Flux", as Fast Comany has termed it), this pursuit of mission has an interesting impact on employee engagement and productivity too...

A more effective contract, he says, meshes an individual's sense of purpose with that of the company. The Gallup report notes that millennials, gen-Xers, and baby boomers consider "mission and purpose" a valuable motivator. As Daniel Pink eloquently explained in the book Drive, higher pay leads to better performance only for routine, repeatable tasks; for higher cognitive efforts and creative tasks, maximizing rewards actually hurts performance.

The article includes compelling examples from Chipotle, Google and Eileen Fisher amongst others, which really do compel one to think beyond the realms of old-fashioned CSR, towards a much more holistic responsible vision.

Will Indian CEOs be inspired by Fast Company's call to arms to find their mission? Will we start to see our own version of "Generation Flux" stepping into the light and changing the way business is done? One can only hope that our progressive CEOs are waiting in the shadows to unleash this way of thinking on to Indian industry. Well, hope is eternal after all.

CSR NEWS: DECEMBER 2014 ROUND-UP

Anubhav Gupta

It's been a crazy January so apologies for a rather belated round-up of the top CSR stories from December. Happy new year!

Indian corporates show serious CSR attitude

This Mercer survey shows the positive outlook of Indian companies towards CSR with more and more of them aligning CSR with their core business strategy. It's clear that the law on mandatory CSR has already made its impact and it's heartening to see that a large percentage of companies are leveraging their internal expertise in trying to make a positive social impact and some are even transforming their product and services to account for social and environmental factors. However, as with any research, it's hard to know whether what companies claim and what they action are necessarily the same thing. 

Taking toilets seriously 

Since our Prime Minister launched the Swacch Bharat Abhiyaan (Clean India Initiative) on Oct 2, 2014, corporates have already pledged a few thousand crore rupees to the cause. We agree that this is a wonderful initiative and a much needed one right now. Apart from the obvious benefits it brings to people, environment, the general image of our country, it also holds an interesting significance for corporates as highlighted by this article. We feel that even though everyone may have their own reasons to take up this initiative, in the end, it is leading towards a cleaner India which is a good thing!

The hard data: are companies spending their CSR dollars, and on what?

We came across an Economic and Political Weekly report on how corporate houses in India are spending their CSR money. It compares CSR spending between public and private companies and Indian and Foreign firms, it also shows the gap that exists between the amount companies are required to spend as per the mandate and the actual current spend. But perhaps the best part of the report is on the industry wise spend areas. It gives a great idea of where the priorities on CSR spend are across different sectors.

India's CSR journey is only just beginning

It's been almost a year since the Companies Act with the mandatory CSR provision was passed, and this report shows who the leading stars are in the Indian CSR space. The study by responsiblefuture.in took into account the governance structure for CSR, stakeholder integration, pervasiveness of CSR efforts etc. to come up with the overall leaders and those in the public and private space. The positive take away from the report is that companies are strong on governance. But companies still have a long way to go in terms of disclosure, stakeholder engagement and sustainability. We hope that in the coming years, corporate India will mature in these aspects and deliver better results across all areas in the CSR space.

2014's top CSR stories

As the year ends, we thought of sharing this round-up of the top 5 CSR stories of 2014. One of the major things to happen was the enhanced focus on sustainability reporting with bodies like the United States advocacy group Ceres, Singapore Stock Exchange taking up the agenda. The renewed interest in sustainability couldn't have come at a better time as 2015 onwards, companies will have to follow the G4 reporting guidelines published by the Global Reporting Initiative to showcase their sustainability efforts. The review also talks about some studies that have shown that responsible business is proving to be profitable business and makes the case for incorporating sustainability into core business strategy - something most firms have already realized but it's still good to have it backed by solid data.

The CSR Bill is not dead (wake up DNA!) 

DNA goofed up big time by saying that the government has dropped provisions in Companies Bill to make it mandatory for companies to spend and report its CSR initiatives. Though this is absolutely incorrect and we pointed out the mistake to them, sadly, they still haven't removed it. In spite of there being some talks that the government might retract the policy, our point of view is that this looks increasingly impossible for this FY – however, the financial reports that will be published in September 2015 will no doubt give fuel to the debate of whether the policy is working or not in its current form.

CSR Rules: Guide to the Companies Act 2013

Anubhav Gupta

NOTE: THIS PAGE HAS BEEN REVISED TO REFLECT THE FINAL RULES AS PUBLISHED ON 27 FEBRUARY 2014, AND INCLUDED AMENDMENTS MADE TO THE RULES ON 31 MARCH 2014, 6 AUGUST 2014, 24 OCTOBER 2014.

On 8th August 2013 the proposed new Companies Bill, 2012 was passed by Rajya Sabha. This became the new Companies Act, 2013 - it replaces the Companies Act, 1956, which has governed Indian business for over 50 years.

The new Act contains an important clause (Clause 135) that mandates CSR regulations for Indian companies. After a conultation of the draft rules, the final rules were notified on 27th Feburuary 2014, coming into force on 1st April 2014.

Below is our one-stop guide to the clause, the rules surrounding it, and how these rules affect your business.

If your company would like a consultation session on the new rules please contact us: consultation@doonething.in


HOW IT AFFECTS YOU:

1 / which companies are included

Only companies of a certain size are included in Clause 135... 

The rules define the companies affected as those having net worth of Rs 500 crore or more; or annual turnover of Rs 1000 crore or more; or annual net profit of Rs 5 crore or more (net profit before tax, not include profits arising from branches outside India).

2 / what you have to do

There are four major directives your company will have to comply with:

1. Create a “CSR Committee”, made up of three or more Directors, one of whom must be an independent director.

2. Allocate at least two percent of net profits* to implementing CSR activities.

3. Create a “Corporate Social Responsibility Policy” that details which activities will be undertaken by the company, and what budget will be spent on them. This should be published on the company’s website.

4. At the end of each year, the details of all CSR initiatives undertaken by the company must be reported in the Directors’ Report and on the company website.

*(The two percent CSR spending needs to be computed as two percent of the average net profits made by the company during every block of three years. For the purpose of the first CSR reporting, the net profit should be calculated as average of the annual net profit of the preceding three financial years ending on or before 31 March 2014.)

3 / what the money can be spent on

Below are the ten areas exactly as worded in Schedule VII:

i) Eradicating hunger, poverty and malnutrition, promoting preventative health care and sanitation(including contribution to the Swach Bharat Kosh set-up by the Central Government for the promotion of sanitation) and making available safe drinking water;

ii) promoting education including special education and employment enhancing vocation skills especially among children, women, elderly, and the differently abled and livelihood enhancement projects.

iii) promoting gender equality, empowering women, setting up homes and hostels for women and orphans; setting up old age homes, day care centres and other such facilities for senior citizens and measures for reducing inequalities faced by socially and economically backward groups;

iv) ensuring environmental sustainability, ecological balance, protections of flora and fauna, animal welfare, agroforestry, conversation of natural resources and maintaining quality of soil, air and water (including contribution to the Clean Ganga Fund set-up by the Central Government for rejuvenation of river Ganga).

v) protection of national heritage, art and culture including restoration of buildings and sites of historical importance and works of art; setting up public libraries; promotion and development of traditional arts and handicrafts’

vi) measures for the benefit of armed forces veterans, war widows and their dependents

vii) training to promote rural sports, regionally recognised sports, Paralympics sports

viii) 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, minorites and women;

ix) contributions or funds provided by technology incubators located within academic institutions which are approved by the Central Government;

x) rural development projects;

xi) [added 06/08/14] slum area development - where the term ‘slum area’ shall mean any area declared as such by the Central Government or any State Government or any other competent authority under any law for the time being in force.”

4 / creating your CSR policy

The rules of the new Act have some guidance on what the policy should and shouldn’t include:

  * The policy should specify the projects and programmes that are to be undertaken.

  * It should include a list of CSR projects/programmes which the company plans to undertake during the implementation year, specifying modalities of execution and an implementation schedule for each.

  * In specifying the CSR projects/programems, the policy should “give preference” to the local areas around it and where it operates.

  * The CSR projects/programmes may focus on integrating business models with social and environmental priorities and processes in order to create shared value.

  * It should be clear that any financial surplus arising out of CSR activity will not be part of business profits of a company.

  * The Committee should prepare a transparent monitoring mechanism for ensuring implementation of the projects/programmes proposed in its policy.

5 / foundations, trusts, and collaborations

If a company has already set up a Trust or Section 8 Company, or Society or Foundation, to implement its CSR activities, the company would have to specify the exact projects and programmes to be implemented by the organisation as per the company’s CSR policy. In addition the company would have to set up a monitoring system to ensure that its two percent contribution (under Clause 135) was spent for this purpose only.

A company may also funnel its CSR spending through a Foundation, Trust or Section 8 company that is not set up by the company itself. However, this is acceptable only if the organisation has a track record of more than three years in implementing activities in the specified areas, and if the company has a monitoring system in place to ensure the funds were spent as per the activities set out in its CSR policy.

Companies may collaborate or pool resources with other companies to undertake CSR activities, within the areas specified in their CSR policy. Any expenditure incurred on such collaborative efforts would qualify for computing CSR spending for the year.

6 / capacity building

CSR funds can also be spent on capacity building for both the CSR team inside your company, and for management at beneficiary organisation. This means you can use your spend to train your own staff to think strtegically about how and where the money is being spent, as well as how to effectively manage NGOs and other organisations, to communicate stories, and write useful reports.

You can also spend it on training the NGO or organisation you are supporting. Our recommendation is that a small investment training them in manageing money effectively, measuring impact, reporting effectively, and doing all this in a professional manner, will save your company a considerable amount of time, money and probably frustration in the long term.

There are two provisions to this rule:

a// the amount spent on this cannot make up more than 5% of the overall CSR spend for the year

b// the organisation providing the capacity-building training must have a track record of more than three years in implementing such training

7 / employee benefits 

The Rules specify that CSR initiatives exclude any activities undertaken in pursuance of the normal course of business of a company. So even though point (vii) above references “employment enhancing vocational skills”, this does not extend to vocational training undertaken in your company as part of your normal HR operations.

The rules state further that activities or programmes that are solely for the benefit of your employees and their families will not be considered part of the CSR spending. Our interpretation of this is that it's acceptable for your employees and their families to benefit from any projects/programmes set up for the broader community, assuming they are in the target social demographic of the programme.

8 / important links

The full Companies Act 2013 can be found here, skip to page 80 to find Clause 135 on CSR: http://egazette.nic.in/WriteReadData/2013/E_27_2013_425.pdf

And don't forget you can contact us for advice or a consultation session any time. 


GENERAL CIRCULAR: CLARIFICATION ON CSR CLAUSE 135 FROM MCA

Anubhav Gupta

The Ministry of Corporate Affairs has issued a new circular on the CSR mandate in Clause 135 of the Companies Act 2013. There are some interesting clarifications around Schedule VII, the areas in which CSR monies can be spent. The key points to note are:

  • It recommends that Schedule VII (the ten spending areas) are “interpreted liberally”, covering the broad essence of the area, instead of being taken literally or exhaustively.
  • Spending should be on ongoing “projects/programmes” and not on one-off events (although obviously events can be part of an ongoing programme). For example, sponsoring a marathon would not count, but if it was part of a long-term preventative health campaign to get the nation exercising then it could be included potentially. 
  • Included in the reportable CSR spend are “Salaries paid by the companies to regular CSR staff as well as to volunteers of the companies”. That means any staff specifically engaged in managing CSR, plus a financial equivalent for any employee volunteering time for CSR activities, calculated against their company salary.
  • Contribution to the corpus of a trust or society is also included, providing it gets spent on activity that fits within schedule VII. That means companies can give a cheque to charity for their ongoing work in a specific area, rather than having to establish specific CSR programmes from scratch.

This is broadly good news as it means companies have more freedom to implement projects that create shared value without be restricted by the wording of Schedule VII.

But the more "liberal" the interpretation is allowed to be, the more open it becomes to misuse - so let's see how this pans out by next April.