Karmayog

Corporate Social Responsibility Ratings

2007-2008
of the largest 1000 Indian Companies

www.karmayog.org/csr2008
Summary of the Presentation

What is Corporate Social Responsibility?

Importance of CSR Ratings for Stakeholders
Results of the CSR Ratings of 1000 largest Indian Companies
CSR Reporting
Parameters of Karmayog CSR Ratings 2008
Sector Analysis
Observations
Mandatory and Non Mandatory Recommendations
View on CSR by Group companies
Recent Trends and Developments
Closing Statement
 What is
Corporate Social Responsibility?
“Every company harms the environment!”
(Just as an individual does)

Corporate Social Responsibility is thus only about two aspects:

1) Reducing the Negative Effects: Steps taken by a company

to neutralise, minimise or offset the harmful effects caused by
its processes and product-usage
2) Increasing the Positive Contributions: Further steps by
a company using its resources, core competence, skills,
location and funds for the benefit of people and the
environment
Triple Bottom Line and CSR

• TBL is a concept whereby a company will have to look at not just

where the company should deploy its profits but how it made its
profits in the first place .This implies looking at impacts on all its
stakeholders which in essence is the base of CSR
 Did you know that….

• A paper company manufactures paper from waste cloth to reduce the use of
pulp from trees
• A Chemical manufacturer has protected the largest stretch of mangroves
along Mumbai’s coast
• A software company has developed a special call receiving software for
1098-Childline , India’s national helpline for children in distress
• An FMCG company is working to protect and conserve endangered plant
species in India through re-forestation programmes

• A construction company (in Mumbai) posted a 60 % profit in 2008 amounting

to Rs.1400 cr. and did not do any activity to benefit society
• Don’t Drink and Drive is the CSR campaign of a leading company that makes
alcoholic beverages
• A drug manufacturer in India provides gifts and vacations abroad to doctors
who prescribe its products.
• A power generating company is the highest CO2 emitter in India
 Importance of the
CSR Ratings
for
different stakeholders
Actual Stakeholders of Companies

ENVIRONMENT

• GOVT. AGENCIES • COMMUNITY/CITIZENS

COMPANY
SHAREHOLDERS
• EMPLOYEES

CONSUMERS SUPPLIERS
Importance of the CSR Ratings for
different stakeholders

Some examples of each

Board of Directors To sensitise employees about the value of CSR

Industry and Trade To understand the huge scale and magnitude of the
Associations benefits that are possible if an entire sector spends
even 0.2% of turnover on CSR.

Government Bodies To develop industry-wise guidelines for CSR

continued…
Importance of the CSR Ratings for
different stakeholders
Media To highlight companies practising good CSR, and to negate
those companies which are actually engaged in marketing of
their products under the guise of CSR

NGOs To know about the areas of CSR work undertaken by

companies, thus enabling partnerships with them

Citizens, To ensure that our purchase choices align companies to do

Investors, business in a way that reflect our desirable values for society
Shareholders
Students To join a company that is working to benefit society and not
one that is harming it
 Results of the
Karmayog CSR Rating 2008
of the
1000 largest Indian companies
 Results of CSR Ratings 2008
of 1000 largest Indian Companies
Karmayog CSR Number of Companies % of Companies
Rating

Level 5 (highest) 0 0%

4 10 1%

3 45 5%

2 221 22%

1 232 23%

0 (lowest) 492 (no CSR) 49%

Total 1000 100%

 CSR Ratings BAR Chart
Karmayog CSR Ratings

60%
49%
50%
% of Com panies

40%

30% 23%
22%
20%

10% 5%
0% 1%
0%
Level 5 Level 4 Level 3 Level 2 Level 1 Level 0
Rating Levels
Companies with the highest rating of Level 4
No. Company Sector
1 ACC Ltd. Cement
2 Ballarpur Industries Ltd. Paper
3 HDFC Ltd. * Finance
4 Infosys Technologies Ltd. * Software and ITES
5 Jubilant Organosys Ltd. Pharmaceuticals
6 Kansai Nerolac Paints Ltd. Paints
7 Moser Baer Ltd. Hardware
8 Tata Consultancy Services Ltd. Software and ITES
9 Tata Steel Ltd. * Steel
10 Titan Industries Ltd. * Watches & Jewelry

* Indicates companies that received a Level 4 rating in the Karmayog CSR Ratings 2007
 Parameters
of the
Karmayog CSR Ratings 2008
 Minimum necessary parameters for
different rating levels
If undertaking any CSR Activity Level 1

If CSR is linked to reducing the negative impacts of Level 2

company’s own products or processes

If CSR initiatives are for the local community Level 3

If CSR is embedded in the business operations Level 4

If innovative ideas and practices are developed for CSR Level 5

Note: - Companies that manufacture liquor, tobacco, genetically modified crops have been
given a Level 0 rating

The criteria stated above are only the minimum criteria needed to qualify for a particular
rating; apart from this, there are other negative and positive criteria that are also
applicable, and a combination of these determines the final rating.
 Sector–wise analysis
of the
CSR activities
of the
largest 1000 Indian companies
 Sector Analysis
• 35 industry sectors were studied

• Best Sectors in CSR- Banking, Software,FMCG, Paper

• Poor performing sectors in CSR-Retail, Entertainment

and Media, Mining , Construction

• Each sector shows the the possible impact with the

recommended CSR expenditure of 0.2% of Sales.
 CSR in 35 Industry Sectors
An analysis of 35 sectors has been done for the 1000 companies
(Number of companies in each sector is in brackets)

Auto Ancillaries (48) Logistics (17)

Automobiles (13) Metal (14)
Banking (40) Mining (6)
Cement (30) Miscellaneous (42)
Chemicals (63) Oil and Gas (19)
Construction (56) Packaging (10)
Computers (7) Paper (13)
Diversified (13) Petroleum and Petrochemicals (8)
Electronics (18) Pharmaceuticals (48)
Engineering (44) Polymers and Plastics (10)
Entertainment and Media (15) Power (46)
Fertilizers (19) Retail (5)
Financial Services (32) Software and ITES (40)
FMCG and Consumer Durables (60) Sugar (25)
Heavy Engineering (10) Telecommunications (20)
Hotels (9) Textiles (78)
Iron and Steel (93) Trading (18)
Jewelry (11)
 Importance of the Sector-wise analysis

Snapshot of sector It presents a picture of an entire industry, their CSR

initiatives, including examples of companies doing good CSR

Potential CSR impact It presents sales of the entire sector, and possible impact with
the recommended CSR expenditure

Sector-specific Uniform norms can get created for processes and CSR
guidelines activities for different sectors, & also a level playing field

Best practices for the Benchmarking of best practices internal to & externally by
sector the companies

Comparison between It presents a comparison between industry sectors with low

sectors and high CSR
 Example of Poor Performing Industry sector

Construction Sector Ratings

• Total of 57 companies were analyzed
70% 61% • 36 Companies are doing no CSR
60%
• Only 3 Companies have disclosed the
50% amount spent
40%
panies

• Two Level 3 companies are DLF and

30% GMR Infrastructure
om

18% 18%
%of C

20%
• Total Sales of 57 Companies is
10% 4% Rs.65000 cr.
0% 0%
0%
• As per Karmayog’s recommendation
Level 5 Level 4 Level 3 Level 2 Level 1 Level 0 CSR expenditure amounts to Rs.130
cr.
Rating Levels
 Example of an industry sector with good CSR
• 40 out of 1000 companies are in the banking industry
Banking Sector Ratings
• 57% of these companies do CSR

45% 43% • 60% of the companies are working in the area of Rural
development
40%
35% • There are 6 Level 3 companies: (Andhra Bank, Canara
Bank, ICICI Bank, PNB, Union Bank of India, Yes
30% Bank)

25% 23%
20% • Mandatory regulations on CSR for PSU banks makes
ies

this sector high performance

20%
an

15%
omp

15%
fC

• Total Sales of 40 companies is Rs.2,60,000 cr.

%o

10% • If 0.2% of sales is spent on CSR (as per Karmayog’s

recommendation), then annual CSR expenditure would
5%
0% 0% amount to Rs.520 cr.
0%
Level 5 Level 4 Level 3 Level 2 Level 1 Level 0
Rating Levels
 Some sector specific best CSR practices
No. Sector Expected CSR Company that is
undertaking this
1 Cement Quarry Rehabilitation ACC Ltd
2 Paper Farm Forestry programme generating rural Ballarpur Industries
employment Ltd.
3 Finance Enabling access to affordable housing HDFC Ltd.

4 Software Developing software to improve public Infosys Technologies

systems Ltd., TCS Ltd.
5 Pharmaceutical Reducing environment pollution through Jubliant Organosys
process improvement Ltd.
6 Paints Development of environmentally-friendly Kansai Nerolac Paints
paints Ltd.
7 Hardware Improvement in product design and use to Moser Baer Ltd.
benefit society
8 Steel Mitigating impact on the natural and human Tata Steel Ltd.
environment
9 Watches and Employment of handicapped and village Titan Industries Ltd.
Jewellery artisans
 Observations
from
the Karmayog CSR Ratings
 Observations
51% 509 Companies reporting their CSR activities in either the Annual
Report or Website
2% 21 Companies have published a separate Sustainability Report

3% 30 out of 1000 companies have reported the amount spent on CSR

10% 107 out of 1000 companies are doing CSR through a trust or
foundation
90% More than 90% high impact companies have no separate environment
report
40% Widely done CSR area is Education followed by Healthcare and Rural
upliftment.
 Observations….
All PSU’s undertake a basic minimum level of CSR based on mandatory
regulations (e.g. relating to employment)

Individual companies that are part of a larger group do not list their individual CSR
activities; the same CSR activities are listed for all companies of a Group

Poor performing Sectors- Construction, Entertainment and Media, Mining,Retail

Best Sectors- Banking, Software, FMCG, Paper

 Mandatory CSR:
our 5
Recommendations
Mandatory CSR:- Our 3 Recommendations
Every Company must do CSR
1) Minimum annual Every company must spend a minimum of 0.2% of its
CSR expenditure sales on CSR activities (i.e. Rs. 20 Lakhs per Rs. 100
Crores)

Table showing Rupee impact of 0.2% of sales for CSR expenditure

Size Company Sales in Net Profit Minimum CSR
by Rs. (cr.) Rs. (cr.) Rs. (cr.)
Sales at 0.2% of Sales
1 Indian Oil Corp. 226000 7000 452
200 Indian Hotels 1800 370 3.6
400
Ahluwalia Contracts 880 51 1.8
600 Trent 500 30 1.0
800
Technocraft Industries 310 30 0.6
1000
Marathon NextGen Realty 100 60 0.2
Total sales of 1000 companies: Rs. 25,00,000 crores
If recommended minimum CSR is spent @ 0.2% of sales, this = Rs. 5000 crores
Mandatory CSR: Our 3 Recommendations…
2) Reporting Sustainability Reporting in the Annual Report
A Corporate Sustainability section to be included in the Annual
Report and preferably a separate Corporate Sustainability Report
(as per the Global Reporting Initiative framework) to be published.
3) Process for a) Adoption of industry guidelines for processes
CSR
Common guidelines on Environment, Health and Safety (EHS)
applicable to most industries
Industry-specific guidelines linked to the processes of that sector.
b) CSR linked to the skills of a company  
Companies must use their core competence, skills and strengths
while undertaking CSR activities
c) CSR linked to the location of a company
Companies must first undertake CSR activities in the areas they are
located in. (factories, plants, offices, etc.) and focus on improving
conditions in the communities in which they operate.
 Non Mandatory CSR:
Our Recommendations
 Some of our Voluntary Recommendations
Define the Define the company’s Vision and Mission: as this leads to
company’s vision the company’s CSR philosophy being defined
and mission
Create inclusive Create Inclusive Employment - for marginalised groups such
employment as the physically-challenged, with a special emphasis on the
local community
Ensure responsible Every company should make efforts towards ensuring
behavior in supply responsible behavior for their supply chain
chain
Use core A company’s unique skills and resources should be utilised
competence to benefit its stakeholders & society for e.g.: financial
education program by banks
Link CSR to Link CSR activities to government’s development plans -It
government’s is important that companies CSR efforts are connected to
development plans and supplement the government’s social & development
goals and plans. e.g. Sarva Shiksha Abhiyan
 Some of our Voluntary Recommendations…
All employees to be A company should involve their employees in its social
involved in CSR responsibility efforts. This ensures sustainability of CSR
initiatives, as there is a commitment to CSR throughout
the organisation
CSR activity linked to Companies, through the CSR activities that they
industry sector undertake, work towards raising standards and setting
benchmarks for their specific sectors
Expand Reach to benefit Companies must extend their products and process to
society markets and areas that may not be as profitable to the
company

Support areas and issues Companies must come forward to take up these. E.g.
that are neglected Sports such as chess, endangered species of wildlife,
heritage, etc
Karmayog’s views on
Group Companies CSR
CSR by Group companies
No. of Groups Of the 1000 companies studied there are 30 groups with individual
in this study companies ranging from 2 to 24
The 5 largest groups in this study are: Tata Group, Aditya Birla
Group, Mahindra Group, Reliance (ADAG), and Essar Group.
Same CSR Most of the companies under the group report the same CSR
reported activities across the group
Philanthropy Some Group companies contribute money to the group
Foundation/ Trust as a part of their CSR
CSR Individual companies do not mention the amount spent by the
Expenditure company; instead the group expenditure is listed
Group The common Foundation of the group undertakes all the CSR
Foundation activities, as a result of which CSR is often not connected to the
processes & core competence of the individual companies

• While there are synergies and various managerial reasons for companies to do CSR
activities at a group level, it is necessary for each company to undertake its own CSR
activities (linked to its processes and skills), while also contributing to the group’s CSR
work
Recent Trends and Developments
in CSR in India
 Recent Trends in CSR-2008
Expectations of the There are vast majority of stakeholders that have come to
stakeholders expect more from corporates which would extend beyond
their profits.
Government’s Role The government has become sensitive towards the CSR issue
for eg: RBI notification for non financial reporting.
Increasing awareness There is an increasing awareness and interest among the
amongst consumers, consumers towards CSR.
management colleges More seminars and discussions are being held in management
and students colleges to sensitize the CSR issue among the students
Suppliers Responsibility Companies are encouraging suppliers to adopt socially
responsible business practice.

Disclosure of social and Almost every stakeholder is asking for more information on
environmental companies social and environmental performance. As a part
performance of this move 2% of the companies have Sustainability Report
and 5% have information on CSR on website or Annual
report.
Some developments in CSR in India since
the first Karmayog CSR Ratings – 2007
Dec. 2007 RBI Notification to all Banks & Financial Institutions recommending
that Non Financial Reporting (NFR) be undertaken as a step towards
‘Responsible Banking’
June 2008 Ministry of Corporate Affairs has stated that it would like to
encourage all companies to “disclose on their balance sheets the social
work that they do”
Sep. 2008 Government of Gujarat: mandates CSR expenditure - directs 6 PSUs
to set aside 30% of their profit before tax to carry out welfare activities
across Gujarat.
Draft industrial policy of Gujarat Govt. mandates CSR for industry
associations and corporate houses in the state
Feb. 2009 Petroleum Ministry says that it will be mandatory for public sector oil
companies to spend a minimum of 2% of their net profits on CSR
activities
Closing Statement…
• Enlightened businesses worldwide, small and large, have begun to realise
that responsible practices enhance profitability and ensure long term
survival. Companies not doing CSR will not survive –it’s only a question
of when

• For those companies which disrespect the environment or living beings,

we, as responsible citizens, need to individually and collectively, reward
or penalise them through our voices and our wallets.

…..
“We believe that Corporate Social Responsibility is not
an externalised activity nor is it only philanthropy. It is
an internal process reflecting the soul of the Company.”

Titan Industries Ltd.

Corporate Social Responsibility Report 2008
 Karmayog
Corporate Social Responsibility Ratings
2007-2008
of the largest 1000 Indian Companies

www.karmayog.org/csr2008