Skill India Senet gece MN Colne Go Cl Rolt) Certified CSR Professionals (CS) THE INSTITUTE OF . Company Secretaries of India afaaCe ee Ce ee ee es ce eee authenticity of legal provisions / contents in this reading material. Nether the publisher nor the printer would be liable in any ‘manner fo any person / organisation’ institution by reason of any mistakelerrorjomission in the reading material or for any action, taken oromitied to he taken or advice rendered ar accepted on thebesis of his work All laims, disputes or complaints willbe subject Peres mine cates ee MSM ren iret llrightsreserved, Contents ofthis reading material should not be reproduced anywhere without taking prior permission from CSIContents... Compliance of Section 135 of Co. Act, 2013 Regulatory requirement of CSR Compliance in India; guidelines and notifications issued by the Ministry from time to time; penalty for non-compliance of section 135 ‘Due -diligence on CSR funding Charity Governance Code of ICSI; types of due diligence; Social Return on Investment (SRol); Compliance Checklist for CSR; transparency in funding; procedure of CSR funding; related party transactions with respect to CSR. CSR Audit & Standard CSR Audit; various issues relating to CSR Audit; Preparing and filing of annual CSR report; sustainability of CSR Audit; developing a CSR Audit program; CSR audit checklist; benefits of CSR audit; Review of successful corporate initiatives & challenges of CSR; CSR Ratings CSR Case studies Five case studies each from health, education, women empowerment, environment and hunger and poverty Project Report on CSR Guideline for preparation of CSR project reportChapter-1 Compliance of Section 135 of Companies Act, 2013 Bama 1. Regulatory requirement of CSR Compliance in India, Preparing CSR Report and presenting before the Board 2. Guidelines and notifications issued by the Ministry from time to time 3, Penalty for non-compliance of section 135 1, Regulatory requirement of CSR Compliance in India 1.1. Statutory Provisions: Section 135 of the Companies Act, 2013, which deals with the Corporate Social Responsibility aspect, providesasunder: (Every company having net worth of rupees five hundred crore or more, or turnover of rupees one thousand crore or more or a net profit of rupees five crore or more during the immediately preceding financial year shall constitute a Corporate Social Responsibility Committee of the Board consisting of three or more directors, out of which at least one director shall bean independent director. Provided that where a company is not required to appoint an independent director under sub-section (4) of section 149, it shall have in its Corporate Social Responsibility Committee two or more directors. (2) The Board's report under sub-section (3) of section 134 shall disclose the composition of the Corporate Social Responsibility Committee. (3) The Corporate Social Responsibility Committee shall,- (@) formulate and recommend to the Board, a Corporate Social Responsibility Policy which shall indicate the activities to be undertaken by the company in areas or subject, specified in Schedule VII. (b) recommend the amount of expenditure to be incurred on the activities referred to in clause (@jand (©) monitor the Corporate Social Responsibility Poliey of the company from time to time. MODULE-IIl(4) The Board of every company referred to in sub-section (1) shall,- (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 (b) ensure that the activities as are included in Corporate Social Responsibility Policy of the company are undertaken by the company. (5) The Board of every company referred to in sub-section (1), shall ensure that the company spends, in every financial year, at least two per ‘made during the three immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy: 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: Provided further that if the company fails to spend such amount, the Board shall, in its report made under clause (0) of sub-section (3) of section 134, specify the reasons for not spending theamount. Explanation.--For the purposes of this section "net profit” shall not include such sums as may be prescribed, and shall be calculated in accordance with the provisions of section 198. cent of the average net profits of the company Comments: Afer the enactment of the Companies Act, 2013 the Corporate Social Expenditure has been made compulsory for certain types of companies. ‘These provisions are applicable on the all companies, whether listed or unlisted (even a private limited company), provided they fulfill any of the following. criteria, in the immediately preceding financial year: + Net worth of Rs. 500 Crores ormore; or + TurnoverofRs. 1000 Crores or more; or + Netprofit of Rs.5 Cr ‘The words |the immediately preceding financial year] was substituted for “any financial year" by the ‘Companies (Amendment) Act, 2017, with effect from 19-9-2018, ‘The bone of contention is the Net worthiturnover/net profit for the immediately preceding financial. year or the current financial year. General circular No.21/2014 dated 18.06.2014 clarified that “any financial year” referred under Section 135(1) of the Act read with Rule 3(2) of Companies CSR rule, 2014, implies ‘any of the three preceding financial year’. There was a concern that the CSR rules may be overriding the 2013 Act. The 2017 amendment Act replaces the words “any financial year” with the word “the immediately preceding financial year”. Now it is very clear that the applicability of CSR requirement would be decided only and only for the immediately preceding financial year. Hence, if the company is not fulfilling any of the above criteria in the immediately preceding financial year, it needs not to constitute a CSR Committee as required by sub-section (1) of section 135. ‘There was different connotation about the term “net profit” under the existing provision of the 2013 Act, Section 135(1) used the word “net profit” to determine applicability of CSR provisions, whereas Section 135(5) used the word “average net profit” in accordance with the provisions of Section 198, of the Companies Act, 2013. As per CSR Rule 2(f: (i) any profit arising from any overseas branches of the company and (ii) dividend received from other companies in India, shall be deducted while computing the net profit of the company; whereas the Act (Companies Act, 2013) does not contain those deductions. Besides, the High Level CSR Committee (appointed by MCA) had recommended in their Report in para 4.16 that the term “average net profit” as per Section 135(5) should be changed to net profit to bring harmony and uniformity in the Act. By including the CSR rules MODULE-IIT 3clarification in the Act itself, the 2017 Amendment Act addressed this concern and clarified that the Central Government may prescribe sums, which will not be included for computation of net profit of the company. Section 136(1) are applicable to every company having a net worth of Rs.500 Cr. or more; a turnover of Rs,1000 Cr. or more; or a net profit of Rs.5 Cr. or more in the immediately preceding financial years. Out of these three conditions, the most important condition is the net profit criteria because it increases the ability to address the manner in which companies engage their economic, social and environmental aspect and their stakeholder’s relationship ete. The creation of social value (SV) have Positive correlation with the company’s earning capacity. If any company with meagre profit or negative profit but having their turnover or net worth crosses the triggered limit, has to form CSR committee, adopt CSR policy in the board and comply with provisions of Section 135(1) of the Companies Act, 2018. Therefore, no exemption has been provided to those companies whose profit or earning capacity are at break-even point or even at loss even if, their insignificant value creation. Number of directors in CSR Committee: + Where independent director is required: A Corporate Social Responsibility Committee of the Board shall consist of three or more directors, out of which at least one director shall be an independent director. + Where independent director is not required: However, if a company is not required to appoint an independent director under sub-section (4) of section 149, it shall have in its Corporate Social Responsibility Committee two or more directors. + Composition of CSR Committee: The composition of the Corporate Social Responsibility Committee shall be recorded by the Board in its Board’s report as required under sub-section (3) of section 134. Comments: Rule 5(1) of CSR Policy Rule 2014 relaxes the requirement of Independent director in the CSR Committee of non-listed public company, private company and foreign company. The ‘requirement of ID on the CSR committee was arising from the principal Act, 2013. Later on, the CSR Policy Rule, 2014 allows to have the committee with less than 8 directors without ID and overrides the Companies Act, 2013. There was a great concern that how rules override the Act. By including the CSR rules clarification in the Act itself, the 2017 Amendment: Act addressed this concern and also clarify that CSR committee may be formed with two or more directors, This is a welcome provision in the Act. After the enactment of Amendment Act, 2017, Rule (1) of CSR Policy Rule 2014 would be non- operational and have no use among the companies. ‘Case Law: In the case of Chettinad Earth Movers (P) Ltd., In re, CA NO. 1096/CB/2018, Dated 4th October, 2018, the National Company Law Tribunal, Chennai bench opined that where applicant ‘company and its directors failed to disclose details about policy developed for implementation by ‘company on Corporate Social Responsibility initiatives in reports of Board of Directors, same being first offence was to be compounded. 1.2. Display of CSR activities on its website: Rule 9 of the CSR Rules provides that the Board of Directors of the company shall, after taking. into account the recommendations of CSR Committee, approve the CSR Policy for the company and disclose contents of such policy in its report and the same shall be displayed on the company's website, if any, as per the particulars specified in the Annexure-IIT. 1.8. CSR Reportin; Rule 8 of the Companies (Corporate Social Responsibility Policy) Rules, 2014 provides that the Board's Report ofa company covered under these rules pertaining to a financial year commencing on or after the 1st MODULE-IIrday of April, 2014 shall include an annual report, ‘on CSR containing particulars specified in Annexure. In case of a foreign company, the balance sheet filed under sub-clause (b) of sub-section (1) of section 381 shall contain an Annexure regarding report on CSR. 1.4, Format of reporting of CSR: Please refer Annexure III given at the end of this Module. 2, Guidelines and notifications issued by the Ministry from time to time: The Guidelines, Circulars and Notifications issued by the MCA from time to time (in descending order) are appended below to have a fair idea about the CSR concepts and its implementation, GENERAL CIRCULAR NO. 2/2019 [RNO.12/03/2018-CSR], DATED 8-3-2019 ‘The High Level Committee on Corporate Social Responsibility, 2018 was constituted under the Chairmanship of Secretary, Ministry of Corporate Affairs vide OM of even no. dated 22.11.2018 to review the existing framework and formulate a coherent policy on Corporate Social Responsibility. The Committee has been granted extension of three months with effect. from 04.03.2019 with the approval of Hon'ble Union Minister for Corporate Affairs to submit its report OFFICE ORDER [FNO.10/19/2018-CSR_ (PART FILE-2), DATED 14-11-2018 The Secretary, Corporate Affairs has constituted a Committee for finalizing the Business Responsibility Reporting (BRR) Format for Listed and unlisted companies based on the BRR. Framework of the updated NVGs/ OFFICE ORDER [FNO.12/03/2018-CSR], DATED 11-10-2018 Pursuant to orders of Hon'ble Minister for Corporate Affairs and in supersession of earlier Office order of even No. dated 28-9-2018, the High Level Committee on Corporate Social Responsibility - 2018 (HLC-2018) is hereby re- constituted under the Chairmanship of Shri. Injeti Srinivas, Secretary, Ministry of Corporate Affairs (MCA) to review the existing framework and guide and formulate the roadmap for a coherent policy on CSR. GENERAL CIRCULAR NO.6/2018 [ENO.08/05/2018-CSR], DATED 28-5-2018 ‘The first proviso to sub-section (5) of section 135 of the Companies Act, 2013, lays down 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. The above provision has to be followed in letter and spirit. OFFICE ORDER [FNO.12/03/2018-CSR. (PART FILE)], DATED 4-4-2018 (a) To revisit Schedule VII of Companies Act, 2013, on the basis of references received from stakeholders including ministries and department of Centre and State, Hon'ble ‘Member of Parliament, Hon'ble Member of State Legislatures and Civil Societies; (b) Torevisit guidelines for enforcement of CSR provisions and basis including structure of Centralized Scrutiny and Prosecution ‘Mechanism (CSPM); (©) To examine the role and function of NFCSR under ICA (a) To recommend the requirement of human and logistic resources for effective CSPM which would include: () Methodologies for monitoring compliance of the provisions of Section 135 of the ‘Companies Act, 2013, Gi) To suggest measures keeping in view legal and technical issues arising while formulating for CSPM. ii) Any other matter PIB PRESS RELEASE, DATED 6-3-2018 ‘The Government has accorded permission for initiating penal action against 199 companies for non-compliance of provisions of section 135 read with section 134 (3) (0) ofthe Act. ‘The Government has no proposal to review the state of implementation of the provisions of the existing Act related to Corporate Social Responsibility. Whenever violation of Corporate Social Responsibility (CSR) provisions is found, action under section 134 (8) of the Companies ‘Act, 2013 (the ‘Act’ is initiated. GENERAL CIRCULAR NO.11/2016 [FNO.02/04/2016-CSR], DATED 15-9-2016 tional CSR Award is being set-up by the ‘Ministry of Corporate Affairs. MODULE-IIIGENERAL CIRCULAR NO.5/2016 [NO.05/01/2014-CSR], DATED 16-5-2016 In continuation to this Ministry's General Circular 1 of 2016, dated 12-1-2016, itis clarified that companies, while undertaking Corporate Social Responsibility activities under provision of the Companies Act, 2013, shall not contravene any other prevailing laws of the land including, Cigarettes and Other Tobacco Products Act (COTPA), 2003, GENERAL CIRCULAR 1/2016 [NO.05/19/2015-CSR], DATED 12-1-2016 Section 135 of the Companies Act, 2013, Schedule VII of the Act and Companies CSR Policy Rules, 2014 read with General Circular dated 18.06.2014 issued by the Ministry of Corporate Affairs, provide the broad contour within which eligible Companies are required to formulate their CSR policies including activities to be undertaken and implement the same in the right earnest. While complying with the Corporate Social Responsibility (CSR) provisions of the Act, Board of the eligible companies are empowered to appraise and approve their CSR policy including CSR projects, or programmes or activities to be undertaken. In. this connection. Ministry has been receiving several queries and references seeking further clarifications on various issues relating to CSR provision of the Act. In continuation to this Ministry's General Cireular dated 18th June, 2014 and 17th September, 2014, a set of FAQs along with response of the Ministry is provided for facilitating effective implementation of CSR. For FAQ, please refer the Annexure-T at the end. ofthis Module, GENERAL CIRCULAR 13/2015 URNO.05/09/2014-CSR}, DATED 16-9-2015 ‘A High level Committee was constituted to suggest measures for improved monitoring of the implementation of Corporate Social ‘Responsibility policies by the companies under section 135 of the Companies Act, 2013, vide OM of even no. dated 3-2-2015. The Committee has been granted extension of another one month. with the approval of Hon'ble Union Minister for Corporate Affairs to submit its report by 22-9- 2015. GENERAL CIRCULAR 1/2015 [F.NO. 05/09/2014-CSR], DATED 3-2-2015, A High Level Committee has been constituted under the Chairmanship of Shri Anil Baijal, Former Secretary, Govt. of India to suggest measures for monitoring the progress of implementation of Corporate Social Responsibility (CSR) policies by companies at their level and by the Government under the provisions of section 135 of the Companies Act, 2013and Rules thereunder. ‘Terms of Reference of the Committee are asunder: ( To recommend suitable methodologies for monitoring compliance of the provisions of section 135 (Corporate Social Responsibility) of the Companies Act, 2013 by the companies covered thereunder. Gi) To suggest measures to be recommended by the Government for adoption by the companies for systematic monitoring and evaluation of their own CSR initiatives. (iii) To identify strategies for monitoring and evaluation of CSR initiatives through expert agencies and institutions to facilitate adequate feedback to the Government with regard to efficacy of CSR expenditure and quality of compliance by the companies. iv) To examine if a different monitoring mechanism is warranted for Government Companies undertaking CSR, and if s0 to make suitable recommendations in this behalf. GENERAL CIRCULAR NO. 36/2014 [ENO.05/01/2014-CSR}, DATED 17-9-2014 Incontinuation of the General Circular No. 21 of 2014, dated 18-6-2014, the following clarifications are hereby issued: (i) Rule 4(6) of the Companies (Corporate Social Responsibility Policy) Rules, 2014 as notified on 27-2-2014 has been amended by notification, dated 12-9-2014; and Gi) Consequently, clarification (iv) in General Circular No. 21 of 2014, dated 186-2014, stands omitted, PRESS RELEASE, DATED 227-2014 The provisions of Corporate Social Responsibility under Section 135 of the Companies Act, 2013 and Rules made there under have come into force only recently, ie. 01.04.2014, Details about the funds utilized by the companies under CSR would be available to MODULE-IIrMinistry of Corporate Affairs only after the mandatory disclosures of CSR expenditure are ‘made by companies, which would be due within six months after completion of financial year 2014-15, ic, after September 2015. GENERAL CIRCULAR NO.21/2014 [FNO.05/01/2014-CSR], DATED 18-6-2014. CLARIFICATIONS ON SCHEDULE VII OF SECTION 135 OF THE COMPANIES ACT, 2013. Please refer Annexure II at the end of this Module. 8. Penalty for non-compliance of section 135 3.1. There is no specific penalty for noi ‘compliance of CSR provisions under section 135 of the companies act read with rules. The second. proviso to Section 135(6) provides 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 notspending the amount. Comments: According to the second proviso to Section 185(6), it can be interpreted that ‘company shall make the prescribed amount of expenditure on CSR, if for any reason it could not make such expenditure; it shall narrate the reasons for not making such expenditure. Thus, in terms of this, ‘Either Comply or Explain’ maybe the interpretation, ‘However, penalties can be levied under following, provisions, 8.2. Section 134(3)(0): In term of this sub- section, there shall be attached to statements laid before a company in general meeting, a report by its Board of Directors, which shall include the details about the policy developed and implemented by the company on corporate social responsibility initiatives taken during the year. 8.3, Section 134(8): As per section 134(3) of the Companies Act, 2013, companies shall include in its board report the details about the policy developed and implemented by the company on. corporate social responsibility initiatives taken during the year. If company contravenes the provisions of section 134 then + The company shall be punishable with fine which shall not be less than Rs. 50000/- but which may extend to Rs.25,00,000 and + Every officer in default shall be punishable with Imprisonment for a term which may extend to three years or a fine which shall not less than Rs.50000/- but which may extend Rs. 5, 00,000/- or both. + The above two are basically the provisions relating to the Board’s Report but since there are certain disclosures which relates tothe CSR of the company are required tobe disclosed in the Board's Report. ‘Therefore indirectly the non-compliance of CSR provisions to that extent becomes punishable as part of contravention of provisions of Board’s Report + Inaddition to above, the penalty also comes from the below provision of Companies Act, 2013 3.4, Section 450: Punishment where no specific penalty or punishment is provided. Ifa company or any officer of a company or any other person contravenes any of the provisions ofthis Act or the rules made thereunder, or any condition, limitation or restriction subject to which any approval, sanction, consent, confirmation, recognition, direction or ‘exemption in relation to any matter has been accorded, given or granted, and for which no penalty or punishment is provided elsewhere in this Act, the company and every officer of the ‘company who is in default or such other person shall be punishable with fine which may extend to Rs. 10000, and where the contravention is continuing one, with a further fine which may extend to Rs. 1000 for every day after the first during which the contravention continues. MODULE-IIIChapter-2 Due-diligence on CSR funding 1. Charity Governance code of ICSI 1.1 The Companies Act, 2013 (‘Act’) has recognized charitable entities undertaking activities for public good to be a channel for implementing Corporate Social Responsibility (CSR) activities as mandated under the Act. Thus, a statutory recognition has been conferred upon the charitable entities, which ‘qualify the parameters as stipulated under the Act. and Rules made thereunder. 1.2. The ICSI has released the Code for Charity Governance in November, 2017. There are NINE, Principlesof the Code astisted belo Principle 1: Vision and Objectives Principle 2: Adherence to laws Principle 3: Effective Governing Body Principle 4: Diversity Principle 5: Conflict of Interest Prineiple 6; Disclosures and Transparency Prineiple 7: Community Engagement Principle 8: Integrity Principle 9: Sustainability ‘The justification and its implementing guidelin« ‘each of the above Principles are as under: Principle 1: Vision and Objectives Justification: Every entity, irrespective of their purpose of establishment must have a clear line of sight. No entity can function without direction. It is this very rationale that is the guiding light of the said Principle. MODULE-IIl9 Principles of Code for Charity Governance AN iver Vision & Community Objectives Engagement ™ Adherence Conflict § to laws of Interest Integrity ee | Effective a 4 Governing Disclonunai Sustainability Body e a Guidelines: Principle2: Adherence to laws L.L-The entity should have a well-defined, clear ‘and concise Vision and Mission statements duly approved by the Governing Body and ‘communicated to the public. 1,2,Such Vision and Mission statements must be reviewed on a regular basis to adapt to the ever-changing environmental scenarios. 1.8.The goals for which the entity has been established should be well-chalked out and encased together to be called the Charter of Objectives. 14.The Charter of Objectives shall act as a guiding light for the Governing Body in effective decision-making as well as in resolution of contention arising during selection or otherwise of a particular project or programme. 1.6.The entity shall not be required to draft a separate Charter of Objectives, in case the same forms part of bye-laws of the entity. ‘The Governing Body of the entity should censure that its operations and programmes are in line with its Vision and Mission directed towards the achievement of its objectives as listed in the Charter in pursuit ofthe public good. Justification: As far as the entities are concerned, it has been witnessed that with every State, the list of applicable laws alters drastically, not to mention the laws applicable to specific entity by virtue of being established or formed in a certain format. It goes without saying that the set of laws applicable to a ‘Trust’ shall diverge to a large extent from those applicable to a ‘Society’. In such a scenario it is very much imperative that every entity takes due care of the laws, bye-laws, rules and regulations encasing it and strive to adhere to them intrueletter and spirit. Guidelines: 2.1, Every entity must prepare a list of all the laws including Acts, bye-laws, rules and regulations applicable to it at agiven time. 2.2, Such list must be placed before the Governing Body of the entity at its meeting ‘ona periodic basis. 2.3, A certificate should be obtained by an independent professional stating that the entity has duly complied with the provisions ofall the applicable laws. MODULE-IITPrinciple 3: Effective Governing Body ‘Justification: The roles and responsibilities that ‘may be affixed with the Governing Body of an entity in general and designation of the member of the Governing Body in particular must be well chalked out in black and white. Not only does this demarcates their area of authority but also provides them with an idea regarding the expectations of stakeholders as well as regulatory authorities. It is a good practice to prepare a written charter enlisting the terms of reference which clearly set out the roles, responsibilities and duties of the Governing Body of the entity. Guidelines: 3.1 Roles and Responsibilities: The roles and responsibilities entrusted with the Governing Body should include the following: + Drafting the Vision and Mission statements, setting the entity’s values and standards (including ethical standards). + Providing leadership, both entrepreneurial and strategic, to ensure the achievement of the objectives of the entity. + Ensuring the availability, effective and efficient deployment of the financial and human resources for the achievement of the objectives of entity. + Establishment of an effective and prudent control framework enabling the assessment and management of possible risks, including safeguarding ofthe assets of the entity. + Reviewing the performance of the entity and its various constituent segments. + Identifying the key stakeholder groups, recognising the obligations towards each of ‘them and ensuring that the objectives are met. + Managing sustainability issues, e.g, environmental and social factors, as part of its strategic formulation for the long-term presence, functioning and operations of the entity. + Appointment of Key Management Executives for day to day operations of such entity. 3.2 Policy framework: The entity should be guided by a well formulated policy framework covering the various areas of activity in the entity including but not limited to: + Sustainability; + Fundraisingand investments; + Projectimplementation; + Whistle blowing; + Sexual Harassment; and + Remuneration of members of the Governing Body and Key Management Executives. Such Policies should be duly approved by the Governing Body and be made available in the public domain, 3.8 The entity should ensure that the outlay and the proposed outcome of each programme are placed before the Governing Body before operationalization and the same are monitored onaregular basis Principle 4: Diversity Justification: The members of Governing Body are responsible for carrying out the affairs of the entity, devise strategies through analysis, and effective problem solving. Having an optimal mix of skills, expertise and experience is paramount to ensuring that the Governing Body is equipped to make appropriate decisions. Diversity in the Governing Body has been considered from a number of aspects, including but not limited to gender, age, cultural, religion, region, educational background, professional experience, skills and knowledge, Given the diversity of expertise, information, and availability that is needed to understand and govern an entity, it is unrealistic to expect an. individual member to be knowledgeable and informed about all aspects requiring decision making. The objectives behind promoting diversity in the Governing Body include but are notlimited to the following: + Enhancement in the quality of performance; + Effective decision-making; + Adequate gender representation; and + Harnessing of unique individual skills, experiences, knowledge of the members in a collective way. Guidelines: 4.1, Optimum composition: The Governing Body must have an optimum combination of independent, executive and non-executive members possessing appropriate skills, knowledgeand experience. MODULE-III4.2, Gender Diversity: Women members bring in their own perspective in decision making and it is proven that gender neutral and diverse Boards lead to better Board performance. It is, therefore recommended that the Governing Body should have at least one women member. ‘This will go a long way in improving the creativity and quality in the decision making. Principle 5: Conflict of Interest Justification: A conflict of interest arises when an individual's private interests compete with his fiduciary obligations, which may result in the ‘exercise of partial and biased judgment. Such situations can have potentially damaging consequences and reputation of the entity Ttean also arise when an individual's decisions and/or ‘actions actually have, or have the appearance of, being influenced by considerations of personal financial gains. This does not mean that a member of Governing Body can never have dealingsitransactions of commercial/financial nature with affiliate or group entities. Rather, such transactions shall be subject to a higher degree of disclosure and scrutiny, ifrequired. Guidelines: 5.1 Ifa member of the Governing body or the Chairman thereat is interested in any item of agenda, such fact shall be disclosed by him/her at the meeting of Governing Body before the consideration of such item, 5.2 The disclosure of interest by a member having such conflict in a subject matter of consideration at the Meeting and their abstinence from the discussion/voting at the ‘meeting on the said matter shall be recorded inthe Minutes, 5.8 The Chairman shall leave the Chair to any non-interested Member for discussion in respect of the item of agenda wherein he/she isinterested, 5.4 A member of the Governing Body having disclosed his conflict of interest shall neither be counted for determining the quorum nor shall the member participate during discussion and vote on the item in which such member isinterested, 5.5 Every member of the Governing Body and Key Management Executive shall at the boginning of each financial year disclose the entities in which he/she is holding the position of promoter, director, partner, member of the Governing Body and other information declaring his conflict of interest, ifany. 5.6 All transactions involving conflict of interest undertaken by an entity should be on an arm’s length basis. Such transactions must be duly approved by the Governing Body and the details of transactions with affiliate or group entities must be made available in the Annual Report. Principle 6: Disclosures and Transparency Justification: The Governing Body of an entity, alike every other entity, is accountable to stakeholders more than one. It is highly unlikely that putting the interests of one stakeholder at stake for the benefit of other may yield good governance. Herein, care must be taken to disclose information to the stakeholders while undertaking programmes. The compliance with this principle shall have multi-dimensional effects of enhancing the overall integrity of the Governing Body by bringing about transparency in operations. The fact that transparency and disclosures form the basis of good governance hasbeen reiterated across thelength and beyond of every corporate governance code developed to guide the respective entities. As far as the entities are concerned, the scenario is no different. The responsibility of maintaining transparency in selection of and disclosures pertaining to the implementation of projects falls within the ambit of the role of the Governing Body. More so, the sources of funds, the record-keeping of donations received in a timely and orderly manner goes a long way in ensuring that the highest principles of good governance are maintained in the entity. Guidelines: 6.1 Allthe documents and records relating to the functioning and operations of the entity shall be properly maintained, 62The information regarding every programme or project undertaken by the entity should be disclosed at relevant intervals on acontinuous basis. 6.3 The entity should make necessary filing at the online platform as and when made available by the Regulator, 6.4 Charities and donations: 6.4.1. A record of all the donors and members 10 MODULE-IIrshall be prepared whether in electronic format or otherwise. 6.4.2. The donations, charities, receipts, subscriptions, grants and the like should be placed before the Governing Body at its subsequent meeting. 64.3. The entity should ensure that all donations, charities, receipts, subscriptions, grants and the like are properly accounted for and are put to use for the intended purpose. 6.4.4. A certificate shall be obtained from an independent professional governed by the code of conduct of their respective bodies stating that all the donations, charities, receipts, subscriptions, grants and the like received during the year have been utilized towards the respective projects and programmes. 6.5 Disclosuresin the Annual Report: + Composition of the Governing Body + Number of meetings of the Governing Body ofthe entity + Attendance of members of the Governing Body in the meetings held + Overview ofthe projects and programmes + Remuneration of the members of the Governing body, Key Management Executives and theirrelatives + ‘Transactions undertaken by the entity with its affiliates or group entities % Confirmation of compliance of code of conduct by the members of Governing Body + List of major donors during the year along with other relevant details + Certificate by an independent professional stating that the entity is in compliance with this Code. 6.6 Disclosures on website: The following items should be placed on the website of the entity which should be updated at regular basis, at east on quarterly basis: + Vision and Mission + Brief updated profile of the members of Governing Body and Key Management Executives + Overview ofthe projects and programmes + Policies approved by the Governing Body + Annual Report along with Audited Financial Statements + Awards and Recognitions; ifany + Transactions undertaken by the entity with the members of Governing Body, their relatives and Key Management Executives + Any event or information which, in the opinion of the Governing Body is material. + Confirmation of compliance of code of conduct by the members of Governing Body + Certificate by an independent professional stating that the entity is in compliance with this Code. + List of major donors along with relevant details for past throe years Principle 7: Community Engagement Justification: At the heart of every entity is the ultimate goal of benefitting certain sections of the society for whom the projects and programmes have been initiated. In light of this, the significance of engagement with the community, the stakeholders and more so the target group of the project, increases manifold. It is imperative for the entity to realise, assess and. understand the impact of the projects, programmes and activities undertaken by the entity. Guidelines: 7.1 The Governing Body should by itself or through its dedicated personnel engage in ‘community interactions on aregular basis 7.2 Such engagement and interaction shall include assessment on atleast two fronts: + Base-Line & end-of project; and + Event-based. 7.8 The Base-Line & ond-of-project assessment shall be conducted to gauge the event based interaction with the aim of pursuing impact assessment. of the projects undertaken by the entity analysing whether the outcomes are in line with the ones proposed and expected at the time of taking up a project and helps an entity to maintain a proper tracking mechanism. Principle 8: Integrity Justification: Honesty and integrity form the basis and foundation of leadership, the role of which in an entity is played by the Governing Body. The modern day scenario, wherein issues. of misuse of corporate vehicles and even foundations and trusts for siphoning of funds MODULE-III uhogs the limelight, it becomes way more than imperative that the Governing Body, at all times, inall their decisions, maintains a very high level of honesty and integrity. It goes without saying that an ethical and professional entity is the best safeguard against risks to integrity, including improper conduct, misconduct and corruption in any economy. Therefore, itis imperative for such, entities to have a code of conduct. A code of conduct is a set of rules outlining the opposite practices pertaining to the ethics, morals and values belonging toa certain individual or entity. ‘An entity and more so the Governing Body thereat are no different, rather in this ease the significance of the Governing Body further heightens. The code of conduct need not be a prodigious document containing elaborate policies but a simple basis of the expectations from those signing and confirming tot. Guidelines: 8.1 The Governing Body should ensure transparency and honesty in all its decisions and disclosures towards its stakeholders, thereby enhancing its accountability manifold. 8.2 The Governing Body should promote a working environment that values respect, fairness and integrity. 8.3 Code of conduct: 8.3.1 The entity should propagate the highest. standards of integrity thereby giving a message both to the stakeholders outside and the members inside that divergence from the Code of Conduct shall be dealt with seriously. 8.3.2 A Code of Conduct shall be laid down for the members of the Governing Body. A Model Code of Conduct for the members of the Governing Body is placed at Annexure C of this Code. 8.3. The Code of Conduct should be duly signed by every member of Governing Body on the date of appointment or on the date of the enforcement of this Code, as the case may be, 8.3.4 The entity should also strive to put in place a Code of Conduct for Key Management Executives and employees. 8.3.5 Adherence to the Code of Conduct may be ensured by all the members of the Governing Body and Key Management Executives and adequate mechanisms must be put in place to deal with divergence to the said Code. Principle 9: Sustainability ‘Justification: Sustainability is the capacity of an enterprise to endure or to maintain a process or situation over time. A system or an entity is considered sustainable when it is supportive of not just itself but its surroundings as well. An entity, which is generally formed with the intent of serving public at large, is required to be more sustainable than any other organization prevailing in the economy and more so precisely ‘on three fronts - financial, organizational and programmatic While being sustainable is need of the hour for the entity, its significance cannot be regarded any less for the stakeholders and donors for the development of faith and trust in the entity. Guidelines: 9.1 Sustainability of the projects undertaken by the entity simply implies the continuation of project activities and outcomes after the initial/primary grant expires. In this regard, the entity should ensure steady and continuous flow of funds and generating revenue for maintaining continuity in the projects. 9.2 The entity should not depend on traditional inflow from donors but diversify its donor subscription base, accept financial support in kind, develop long term partnerships and explore new opportunities as well. 9.8 The entity should have a communication strategy that can help in showcasing the ‘outcome of project results to the public. It can be achieved by releases on social media, journals, webpage, ete. 9.4 The entity can sustain its projects through engaging volunteers as human resource for performing activities, which would help in continuity of mission without financial outlay, 9.5 The entity can involve local agencies and government to ensure improved access to the government initiatives in the projects, which would help in sustaining the project activities to meet the objectives. Such checks and balances go a long way in stabilizing the foundations of the entity, thereby making its presence and operations sustainable. 2 MODULE-IIrCertified CSR Professionals - Compliance, CSR Standard and Audit 2. Types of Due- Diligence 2.1. Impact of Community CSR Initiatives: + Community support in terms of percentage ofpre-tax profit + Impact evaluation carried out on community programs such as improved educational attainment, number of jobs created, professional support for community organizations, etc. The appropriate parameters should be defined by the CSR Committee at the beginning of the year basis, which the impact to evaluated so that the midyear correction or modification is possible if required at any stage where the activities are not following within the parameters and the parameters looks to be little out of the way. + Project progress and achievement measures terms of percentage and numbers + Perception measures of the company on its ‘goodwill and brand, + Positive and negative media comments on community activities and the instant impact thereof + Employee volunteering and the cost to organization thereof ‘+ Frequency of formal and informal dialogue between the stakeholders. It recommended to have communities meetings to take their feedback, inputs and impacts + Measuring impact on the beneficiaries. The stories from the beneficiaries /communities MODULE-I — / 2.2. Diligence of Workplace Initiatives: + Workplace profile (race, gender, disability, ageetc.) + Staff absenteeism. It is recommended to have standard questionnaire for work culture measurement: + Number of legal non-compliance (on health and safety, equal opportunities and other logislation) Tt is recommended to have standard compliance report published on a quarterly basis. + Number of staff grievances. It is recommended to measure this on quarterly basis, + Upheld cases of corrupt or unprofessional behavior. + Staff turnover. It is recommended to have quarterly reporting of staff turnover. + Training and development provided to staff. Tt is recommended to measure this in percentage wrt. KRAs of each and every staff member. + Pay and conditions compared against local equivalent averages. It is recommended to take peer review annually, + Workforce profile compared to the ‘community profile forthe travel to work area orequivalent. + Evaluating impact as a result of downsizing, reskilling, ete, + Perception measure of the company (e g: ‘equal opportunities, workilife balance). TYPES OF DUE-DILIGENCE Community CSR Myo aety Environmental Marketplace 132.3, Diligence of Environmental Initiatives: + Overall energy consumption: It is recommended to publish energy efficiency report annually. ‘+ Water Usage: It is recommended to declare per person consumption per annum, + Quantity of solid waste produced (measured by weightivolume).It is recommended to declare per person waste produced per + Upheld cases of prosecution for environmental offences. It is recommended to declare such cases annually. + CO2/Greenhouse gas emissions. It is recommended to declare per person per annum CO2/Greenhouse gas emission per + Use of recycled material. It is recommended todeclare the same annually. + Positive and negative media comment for environmental activities. It is recommended to declare the sameannually. + Environmental impact over the supply chain. + Disposing the waste responsibly and the Level of waste that is recyclable, It is recommended to declare the same annually. 2.4, Diligence of Marketplace Initiatives: + Number of products complaints regarding products and services. + Advertisingcomplaints upheld. + Complaints about late payment ofbills, + Upheld cases of anti-corruptive behavior, + Customer satisfaction levels, + Customerretention + Provision for customers with special needs. + Average time to pay bills to suppliers. + Extra sales gained attributable to social policy/cause related marketing + Customer loyalty measures. + Recognizing and catering for diversity in advertising and product labeling. + Perception of a company as a desirable commercial partner. + Social impact, benefits costs of core produets/serviees 3. Social Return on Investment (SRol) 8.1, Social Return on Investment (SRol) is a framework that helps organizations measure and account for much broader concepts of value. SROI is a tool for measuring the total value generated for every rupee invested in development sector interventions. 8.2. Why SRolis important? 3.2.1. The SRol framework helps measure change in ways that are relevant to the people or organizations that experience or contribute to it. It tells the story of how change is being created. by measuring social, environmental and ‘economic outcomes, and uses monetary values to represent them. This story enables organizations to calculate a cost-benefit ratio. 3.2.2. SRol helps manage and communicate the social value a project creates in the form of a ‘measurable number that can be understood by all relevant stakeholders. The SRol ‘measurement also helps to increase the social value orimpact the project creates. 3.3. Principles of SRol ‘There are seven principles that form the basis of ‘SRol. These principlesare as mentioned below: + Identify all stakeholders in the beginning of the year and continuous review during the year + Understand the impact of projects on frequentintervals + Value thethings that matter + Onlyinclude whatis material + Donotover-claim + Betransparent + Verify the result, 8.4, SRol analysis involves six stages + Establishing scope and identifying key stakeholders: It is important to have clear boundaries about what your SRol analysis will cover, who will be involved in the process and how. + Mappingoutcomes: Through engaging with your stakeholders, you will develop an impact map, or theory of change, which shows the relationship between inputs, outputs and outcomes. + Evidencing outcomes and giving them a value: This stage involves finding data to show whether outcomes have happened and then valuing them, u“ MODULE-IIr+ Establishing impact: Having collected evidence on outcomes and monetized them, those aspects of change that would have eventually happened or are a result of other factors are eliminated from consideration, + Calculating the SRol: This stage involves adding up all the benefits, subtracting any negatives and comparing the result to the investment. This is also where the sensitivity of the results ean be tested. + Reporting, using and embedding ‘results: This vital last step involves sharing findings with stakeholders and responding to them, embedding good outcomes, ‘processes and verification of the report. 3.5, Types of SRol + EvaluativeSRol: Conducted retrospectively and based on actual outcomes that have already taken place. Evaluative SRol is useful post implementation of projects. + ForecastedSRol: Predicts how much social value will be created if the activities meet their intended outcomes. Forecasted SRol is useful during the project planning stage, 8.6, How SRol can help improve services + Providing guidance for strategic discussions and help you to assess and increase the social value a CSR activity creates or the potential tocreateasocial value. + Helping in targeting appropriate resources to manage unexpected positive and negative outcomes, + Demonstrating the importance of working with other organizations and people contributing to creating change. + Identifying the overlapping areas between an organization's goals and the expectations of its stakeholders, thus help with improved SRol. + Facilitating formal dialogue with stakeholders that enable them to make serviees accountable and involve them in service design more meaningfully. 3.7, How SRol can help your organization enhance sustainability + Improvingyour brand image + Strengthening your case for more financial grants + Making your proposition to pursue CSR projects moreattractive + Redefining CSR investment strategy + Estimating future impacts and evaluating impacts of existing or past projects + Build stronger relationships with community stakeholders and project providers, 4, Compliance Checklist for CSR 4.1. The following is a Compliance checklist for assisting companies for evaluation and monitoring their CSR initiatives. 4.1.1. Company CSR Management Involvement: 1, Does the company have a separate department/cell or their own implementing ageney for CSR initiatives? 2, Does the company produce an annual sustainable/CSR report? 8, What is the vision of the organization? And doesit flow from Top Management? 4, How does the vision integrate CSR issues? The interest of top management? Are the top management / business heads part of the discussions on CSR? 5. How does the organization propose to meet future economic, environmental & social challenge? 6 Who are the key stakeholders (e.g. employees, customers, suppliers, ‘government, community ete)? 4.1.2. Marketplace: Products/Services! Business Operations 1. Give the unique selling features of the products/services, highlighting the following points: + The innovative initiatives taken by the company for enhanced quality with regard to the environmental and social issues. + Minimizing environmental impacts arising out of the use ofits products/services. + Ensuring safety during the use or storage of ‘the product + Ensuring healthissues. + Facilitatingafter-sale service Any other, 2, Has the company conducted a feedback survey to gauge public pereeption/customer satisfaction of its products/services/business MODULE-IIIoperations, to assess to the social and environmental impacts ofits activities? 3. Does the company have a management system that addresses customer redressals grievances? 4, Does the company adhere to any specific ethical standards for its advertising campaigns? 5. Does the company create awareness among consumers about their rights and social obligations? 4.1.3, Workplace CSR Practices: 1. Does the company have CSR policy/policies? 2, Doos the company have a policy on any of the following? HIV/AIDS. Child labor Fair labor practices Sexual harassment at the workplace Employment of the differentially abled Business ethies Environment Quality Any other (please specify) 3. What active steps are taken to increase awareness on company policies among employees? Any training programmes? 4, Is the company an equal-opportunity organization (social origin)? 5. Have any special measures been taken to improve gender representation in the organization? 6. What are the indicators used in monitoring theimplementation of policies? Does the company have a separate section to monitor and control pollution and effluent levels? 8, Does the company focuses on tree plantations, soil conservations, cleaning programs ete,? 9, How much interdepartmental coordination in place within various connected teams such as CSR team, EHS Team, Sustainability team, ete 4.1.4. Governance and Legal issues: 1. What steps are undertaken by the company to enhance corporate governance in the organization? 2. Are issues like transpareney/disclosure/anti- corruption integral to the fulfillment of CSR policy? 3, Has the company been involved in litigation involving breach of corporate law in the last fouryears? 4, Have any managers been convicted of illegal activities? 5, Has any demand been pending against the company from any tax and/or any revenue authorities? Has the company complied with SEBI corporate governance guidelines? 7. Have the company accounts been audited by aqualified chartered accountant? 8, Has the company or its directors been convicted/prosecuted for any offence? 9. Is there any Public Interest Litigation been. lodged or any agitation by the local community against the company’s practices? 4.1.5. Employee welfare/human resources practices: Training & Development: 1. Does the company have clear employee guidelines concerning recruitment, termination, career development, performance, appraisal? 2, Does the company have an exit process such. asexitinterview? 8, What are the motivational incentives provided by the company toitsemployees? 4, What are the mechanisms installed to identify training needs of the employces (skill/performance enhancement/work culture /ethies/ others)? 5. Does the company surveys employee satisfaction and/or their perception on work culture? 6. Are effective steps taken to provide good quality of work life, environment, safety and well-beingof employees? 4.1.6. Labor Relations! Health and Safety measure 1. Has the company faced labor disputes (strikes, dharnas, lockouts ete.) and average number of working days lost? Does the company report on labor practices? 3. What are the steps taken to monitor the implementation of fair labor practices? 4, What employee welfare programs are organized by the company? 16 MODULE-IIr5. What mechanisms are in place for ensuring occupational safety for employeesiworkers at the workplace? 4.1.7. Social and Community Initiatives: 1, What is the mechanism adopted to assess societal requirements and identify community needs? 2. Is there an established trusts/ foundation/NGO set up by the company to implement social initiatives? 3. What are the key positive impacts created by ‘the company, which benefit the community (e.g. employment for the differentially abled poor, social infrastructure, environmental protection, ote.) 4, What strategies has the company adopted to undertake developmental activities for the marginalized/underprivileged/poor communities? + Philanthropic initiatives/donations + Community investments/socially responsible investments. + Public-Private Partnerships. + Anyother. 5. What is the mode of dialogue with NGOs, local government and local Communities? What percentage of annual profits is allocated as CSR funds? 7. What are the kinds of partnerships that are created with civil society organizations! NGOs for CSR? (Indicate the sectors) Healtheare/Education, Literacy Promotion/ Improving Rural Infrastructure/Rural, Community development/Welfare Programs/Economic Empowerment of ‘Women Income Generating programs, child welfare/Community relations/Providing Social amenities, micro-financing, credit assistance/Any other. 8 Does the company encourage employee giving/volunteering for imparting skills to local community, Secondments, Time-off for employees, Pay-Roll giving. 9. Are there any incentives provided to employees for volunteering in CSR projects? 10, How are CSR projects monitored and reported? LL. Frequeney of reporting to the Board or committee should be decided in the beginning ofthe year. 5. Transparency in funding Transpareney is the buzz word of Corporate Governance and CSR Practices is its integral part. The budgeted CSR expenditure shall be judiciously expended on the activities narrated in Schedule VII of the Companies Act, 2013, ‘The financial and economie crisis aver the last. year has caused society to assign a completely new priority to the issue of transparency and credibility in business activity. With regard to corporate social responsibility, questions about the transparency of corporate commitment are the focus of attention in civil society, among policy-makers and within companies themselves. Dialogue processes are needed to define the possibilities and limits of social and environmental reporting more clearly, to clarify additional related questions such as how transparency can be increased without undue bureaucracy, and to contribute to a shared understanding of what can reasonably be expected of companies, Reasons for public communication of CSR. commitment: Transparency with regard to CSR can build trust among customers, ‘employees and the local community, and help to strengthen the credibility of companies. ‘This is important for companies, for a variety of ‘+ Trust binds existing customers and helps to ‘win new ones in B2C (business to consumer) and B2B (business to business) business. + ‘Trust increases the positive acceptance of the company in the local community and ‘ereates.a good basis on which conflicts can be resolved constructively and successfully + ‘Trust helps companies to attract the best brains and to keep employees. Furthermore, transparency has an effect internally and can help to identify business risks and optimise processes. On the financial market, a company’s social and ecological performances play an increasing role. Financial market. participants, in particular sustainability funds, wreasing require transparency with regard to companies’ social and ecological behaviour. ‘The benefits to the business of CSR and CSR. reporting differ from one company to the next, and must be assessed individually for each ‘company. The business case cannot be made with generalised findings. Depending on company. size, sector and the individual requirements of the different target groups, companies also deploy transparency regarding their social MODULE-III wwresponsibility in different ways. The question of ‘transparency in relation to CSR is as complex as the issue of CSR itself, Companies use a range of methods to generate transparency: There are various ways for a company to communicate CSR internally and externally. Depending on the company and the relevant target groups, the need to make particular communication efforts also differs: In particular small and medium-sized enterprises (SMEs), which have few employees and are firmly rooted in the local community, often need to make no formal communication efforts in order to pass on information about their social responsibility. Employees, customers and local community know the entrepreneur personally and know about his commitment and behaviour. Information is passed in informally in direct contacts, In B2B business and on the financial market (SRD), transparency is generated by answering targeted questions. Customer firms and SRI funds send their suppliers questionnaires about. their social responsibility and behaviour. There is no generally recognised and standardised survey and assessment procedure in place. ‘Mainstream investors are also increasingly interested in companies’ emission data. In addition, companies are increasingly asked, about their corporate behaviour by researchers, NGOs, consumer associations as well as individual citizens, In BAC business, companies make considerable efforts through supplementary voluntary information on packaging, the label or in direct communication with consumers in order to provide them with information about the product and the production process, Via Internet visits, contact forms, emails or hotlines, consumers and companies are in close contact with each other, and companies also demonstrate transparency with regard to their social and ecological behaviour. In this context, it is legitimate for companies also to use transparency in the area of CSR to build up their profile and image, and to appeal to their customers on the basis of their social responsibility. Companies organise workshops in order to come into contact with stakeholders, to account for their activities and to discuss social as well as ‘ecological issues. Via information to the press, companies report on new developments, initiatives and projects, Via internal communication channels, companies regularly ‘keep their employees informed. In addition, ever more companies draft a CSR or sustainability report in which they talk about their social and ecological behaviour. Lastly, they present themselves with their experiences on CSR websites, in good practice collections and in addresses, In the framework of the UN Global Compact, companies draw up so-called progress reports on implementation of the principles of the UN Global Compact. Moreover, there are numerous initiatives ~ some of them sectoral as in the Wittenberg process involving social partners in the chemicals industry - in which ‘companies and employees, employer federations. and trade unions work jointly on social responsibility in their sector. ‘The form of CSR communication is shaped by the company's possibilities, the needs of target. groups as well as a cost-benefit analysis. How a company should generate transparency regarding its CSR activities is a business decision, CSR communication is an issue is flux, and an end to its development is not yet in sight. ‘The fact that transparency is voluntary does not. ‘mean that there is no binding element. On the contrary, there is a finely meshed system of virtually binding rules and obligations, in particular concerning requirements in B2B business and also in the area of the capital ‘market which shifts the issue of transparency and CSR into thecore area of business activity. Possible reasons for avoiding public communication of social responsibility: Not every company reports on is social commitment. However, itis wrong to jump to the automatic conclusion that such companies behave irresponsibly. Companies can have very good reasons for declining to report CSR is often pursued out of moral considerations which seem self-evident to the company. Companies want to avoid communication of their commitment being misunderstood as an advertising message, Reporting costs resources. Unless it can be ‘ensured for a fairly long period, itis questionable to start a reporting process which then sometimes has to be quickly halted due to circumstances Communication of a CSR commitment can generate a dialogue with interested parties for 18 MODULE-IIrwhich no resources are available 6. Procedure of CSR funding One of the means for getting CSR funding is through is get empanelled with “National CSR Hub” at the “Tata Institute of Social Sciences (TISS)" typically for CSR funding by PSUs. Another means is reaching out to corporate even, smaller companies coming under ambit of section 135 of the companies act. Partnering with various schemes of state as well as central govt. isalso one of the means of CSR funding. 7. Related party transactions with respect toCSR 7.1. In business, a related party transaction is a transaction that takes place between two parties who hold a pre-existing connection prior to the transaction, "7.2. Section 2(76) of the Companies Act, 2013 explains, who are related party: Related party’, with reference to a company, means- i, adirectororhis relative; ii, _akey managerial personnel or his relative; ili, a firm, in which a director, manager or his, relative isa partner; iva private company in which a director or manager or his relative is a member or director; ¥. a public company in which a director or manager is a director and holds along with his relatives, more than two per cent of its paid-up share capital; vi. any body corporate whose Board of Directors, managing director or manager is accustomed to act in accordance with the advice, directions or instructions of a director or manager; vii, any person on whose advice, directions or instructions a director or manager is accustomed to act: Provided that nothing in sub-clauses (vi) and. (vii) shall apply to the advice, directions or instructions given in a professional capacity; viii, any body corporate which is- (A)a holding, subsidiary or an associate company of such company; (B) a subsidiary ofa holding company to which it isalsoasubsidiary;or (© an investing company or the venturer of the company. Explanation. - For the purpose of this clause, the investing company or the venturer of a company” means a body corporate whose investment in the company would result in the ‘company becoming an associate company of the body corporate. ix. such other person as may be prescribed; 7.8. Section - 188, of the Companies Act, 2018, deals with the Related party transactions. (1) Except with the consent of the Board of Directors given by a resolution at a meeting of the Board and subject to such conditions as may bo prescribed, no company shall enter into any contract or arrangement with a related party with respect to- a, sale, purchase or supply of any goods or materials; b. selling or otherwise disposing of, or buying, property of any kind; leasing of property of any kind; ._ availing or rendering of any services; ©. appointment of any agent for purchase or saleof goods, materials, services or property; f such related party’s appointment to any office or place of profit in the company, its subsidiary company or associate company; and & underwriting the subseription of any securities or derivatives thereof, of the ‘company: Provided that no contract or arrangement, in the ‘case of a company having a paid-up share capital ofnot less than such amount, or transactions not. ‘exceeding such sums, as may be preseribed, shall be entered into except with the prior approval of the company by a resolution: Provided further that no member of the company shall vote on such resolution, to approve any contract or arrangement which may be entered into by the company, if such member isarelated party: Provided also that nothing contained in the second proviso shall apply to a company in which ninety per cent or more members, in number, are relatives of promoters or are related parties: Provided also that nothing in this sub-section shall apply to any transactions entered into by " hltpesinww-spercelilescxipartneri/BDA_ diseussion_paper_CSR_Transparencypaf MODULE-III 19the company in its ordinary course of business other than transactions which are not on an arm's length basis Provided also that the requirement of passing the resolution under first proviso shall not be applicable for transactions entered into between a holding company and its wholly owned subsidiary whose accounts are consolidated with such holding company and placed before the shareholders at the general meeting for approval. Explanation, -In this sub-section, - (a) the expression "office or place of profit means any office or place- i, where such office or place is held by a director, if the director holding it receives from the company anything by way of remuneration over and above the remuneration to which he is entitled as director, by way of salary, fee, commission, perquisites, any rent-free accommodation, orotherwise; ii, where such office or place is held by an individual other than a director or by any firm, private company or other body corporate, if the individual, firm, private company or body corporate holding it receives from the company anything by way of remuneration, salary, fee, commission, perquisites, any rent-free accommodation, or otherwis: (b) the expression “arm's length transaction” means a transaction between two related parties that is conducted as if they were unrelated, so that there is no conflict of interest, (2) Every contract or arrangement entered into under sub-section (1) shall be referred to in the ‘Board's report to the shareholders along with the justification for entering into such contract or arrangement. (3) Where any contract or arrangement is centered into by a director or any other employee, without obtaining the consent of the Board or approval by a resolution in the general meeting under sub-section (1) and if it is not ratified by the Board or, as the case may be, by the shareholders at a meeting within three months from the date on which such contract or arrangement was entered into, such contract or arrangement shall be voidable at the option of the Board or, as the case may be, of the shareholders and if the contract or arrangement is with a related party to any director, or is authorised by any other director, the directors. concerned shall indemnify the company against. any loss incurred by it. (4) Without prejudice to anything contained in sub-section (3), it shall be open tothe company to proceed against a director or any other employee who had entered into such contract or arrangement in contravention of the provisions. of this section for recovery of any loss sustained byitasaresult ofsuch contractor arrangement. (5) Any director or any other employee of a ‘company, who had entered into or authorised the contract or arrangement in violation of the provisions ofthis section shall,- i, incase oflisted company, be punishable with imprisonment for a term which may extend to one year or with fine which shall not be less than twenty-five thousand rupees but. which may extend to ive lakh rupees, or with both; and ii, in case of any other company, be punishable with fine which shall not be less than twenty- five thousand rupees but which may extend tofive lakh rupees. ‘Thus, looking to above provisions, wherever the CSR related expenditure are made, the company shall ensure that such transactions do not hit the provisions of related party transactions. 20 MODULE-IIrChapter-3 CSR Audit & Standard Bama CSR Audit Various issues relating to CSR Audit Preparing and filing of annual CSRreport Sustainability of CSR Audit Developinga CSR Audit program CSRaudit checklist Benefits of CSR audit, . Review of successful corporate initiatives & challenges of CSR. ). CSR Ratings wasp ee 1.CSR Andi 1.1. The objective of the Social Audit is to provide an actionable framework for the Business and CSR Leadership to assess the effectiveness of their CSR programs on the ground and provide recommendations to further the social impact. The Social Audit Framework has been created keeping in mind this core objective. ‘This is in alignment with the definition of Social Audit in the report submitted by Vision Foundation to the Planning Commission of India as they define Social Audit as “a process in which, details of the resource, both financial and non-financial, used by public agencies for development initiatives are shared with the people, often through a public platform, Social Audit allows people to enforce accountability and transparency, providing the ultimate users an opportunity to serutinize development initiatives”. 1.2. The Social Audit approach used to evaluate CSR, performance has been derived from the criteria for Evaluating Development Assistance as defined by the Organization for Economic Co-operation and Development (OECD) Development Assistance Committee. The guidelines have been designed to provide information that is credible and useful, enabling the incorporation of lessons learnt into the decision-making process of stakeholders. 1.2.1. The guidelines serve as the foundation for the Social Audit Framework which has been specifically “ MODULE-ILdesigned keeping in mind the following guidelines: + Ensure alignment to the statutory and compliance guidelines outlined by the Section. 135 of the Companies Act 2013, + Take into account context of communities and CSR for companies that are primarily focused on socio-economic development of communities around their areas of operations. + Include focus on adherence to internal process and governance guidelines of towards Corporate Social Responsibility. + Ensure a participative approach by engaging all key stakeholders on the ground including beneficiaries, implementation partners, plant stakeholders, community groups, local administration as well as the local businesses where relevant. + Provide an objective, data-oriented structure to assess plant performance based on quantitative data and qualitative insights collected through a process of stakeholder engagement and observation. + Provide room for contextual and situational evidence based on ground realities of plants observed during social audit visit. + Ensure continuous improvement so that it aligns to the evolving needs of the organization over time. 2. Various issues relating to CSR Audit’ : ‘The issues faced in the course of CSR Audit may be listed as under: + Human Rights: Fundamental Human Rights, Freedom of association and Collective bargaining, Nondiscrimination, Forced labor, Child labor + Business Behavior: Relations with clients, suppliers and sub-contractors, Prevention of corruption and anti-competitive practices + Human Resources: Labor relations, Working conditions, health and safety, career development and training, Remuneration system + Corporate Governance: Board of Directors, Audit and internal controls, Treatment of shareholders, Executive remuneration. + Environment: Incorporation of * httpuleweccaaa.inmageart_ca CSR pat environmental considerations into the manufacturing and distribution of products, and into their use and disposal + Community Involvement: Impacts on local communities, contribution to social and economic development, General interest 3. Preparing and filing of annual CSR report: In terms of Rule 8 of the CSR Rules, the Board’s Report of a company pertaining to a financial year commencing on or after the Ist day of April, 2014 shall inchide an annual report on CSR containing particulars as specified under CSR Rules. In case of a foreign company, the balance sheet filed under sub-clause (1) of sub-section 1 of section 381 shall contain an Annexure regarding report on CSR. ‘The reporting format of CSR expenditure is given by way of Annexure inthe CSR Rules. CSR reporting Format is given at endofthis Module, marked as Annexure IIT 4, Sustainability of CSR Audit: ‘Sustainability is based on a simple principle: Everything that we need for our survival and well-being depends, either directly or indirectly, on our natural environment, Sustainability creates and maintains the conditions under which humans and nature can exist in productive harmony, that permit fulfilling the social, economic and other requirements of present and future generations. While undergoing CSR Audit, the four fundamental Principle of Sustainable ‘Development agreed by the world community be kept in view, which are + Principle of Intergenerational equity: need to preserve natural resources for future generation, + Principle of sustainable use: use of natural resources in a prudent manner without or with minimum tolerable impact onnature, + Principle of equitable use or intergenerational equity: Use of natural resourees by any state / country must take into account its impact on other states. + Principle of integration: Environmental aspects and impacts of socio-economic MODULE-IIractivities should be integrated so that prudent use of natural resources is ensured. 5. Developing a CSR Audit program: An illustrative CSR Audit program may be as under: Objectives: + Coverage: The exhaustiveness of CSR objectives + Integration: The extent to which the CSR objectives of the company are aligned with its business goals. + Commitment: The clarity of roles and powers assigned to management for fulfillment of CSR objectives. Integration of Social responsibility throughout the organisation. Implementation + Processes: Identification of the implementation procedures, time frames, risk and performance management tools for fulfilment of CSR objectives. Manner of delivering CSR activities either by way of foundation/ Trust route or by imbibing them into day to day activities. Judgement exercised, ifany. + Resources: Allocation of funds, manpower, infrastructure ete. + Monitoring/Reporting: Internal control systems to monitor the adequacy of mechanisms (including periodic reviews) in rolation to fulfillment of CSR objectives. Reporting: Communication of adequate data in relation to CSR objectives to various stakeholders. Analysing the impact of CSR activities carried out by the company in various areas and the quality maintained. + Feedback: Identification of control weaknesses and make recommendations for improvement to CSR programs of the company. Identification of areas requiring changes. 6. CSR audit checklist: The following checklist would be helpful, while conducting the CSR Audit: + Company’s Policy on CSR. + Company's Vision and Mission Statement + Eligibility criteria of Company to adopt the CSR Practices + Evaluate the role of the CSR Committee + Meetings of CSR Committee + Board's approval of CSR Policy and Budget + Calculation of Net Profit ofthe Company + Calculation of Turnover of the Company + Calculation of Net worth of the Company + Calculation of the minimum CSR amount to be expended + Budgetary allocation/ funding on CSR by the company + Adherence to the Provisions of CSR (Section 135 and CSR Rules) + Expenses incurred on the CSR projects and due diligence of such expenses + Reporting to the Board on activities ‘undertaken andits impact + Reporting of the CSR activity in the prescribed format in the annual report of the company Benefits of CSR audit: ‘The CSR Audit, also called as social audit, is a blue print for corporates to evaluate their performance on social front. The benefits from the social audit can be listed as under: + It helps the organization to be a socially responsible corporate citizen. + It builds a good image among the stakeholders. + Itoptimizes the resource utilization + Teminimizes the wastage of resources + It inculeates the culture of corporate philanthropy amongst enterprises. + It helps business to achieve the economic ends by employing social concerns as means, + It helps the business units to critically examine their social front. + Itserves.as early warning systems to pinpoint cost or damages corporation may have to incur for lapses like poor technology, poor quality products and environmental disasters. 8. Review of successful corporate initiatives & challenges of CSR: MODULE-IIIThe successful corporate initiatives of CSR have been discussed in the chapter of Case Studies of csr. 9. CSR Rating: ‘The draft CSR Ratings is being developed by Bureau of Indian Standard (BIS) vide their preliminary draft MSD10 (12371) C dated July 2018 given herein: For a company seeking ‘CSR Star Rating’, it is mandatory for the company to define, develop and implement a proper CSR System with the following criteria. For a company that is not required to comply with the provisions of CSR as per the Companies Act 2013 and CSR Rules, it would also need to adhere to the following requirements to be offered with an appropriate CSR Star Rating, under the category of ‘CSR Rules -Not Applicable’. ‘There are 5 levels to the Advance Level Certification. The marks achieved under each of the prescribed level(s) will determine the Star Rating of the company applying for the ALC. A company upon fulfilling the criteria of Basie Level Certification will be eligible to apply for the Advance Level Certification (ALC). In the ALC there will be a provision for certification at 5 levels (6 Stars). ‘The Star Rating (1, 2, 3 rating etc.) will be awarded on the basis of a company’s performance in the ALC assessment. There will be a graded scale of 1-100 and the position obtained in the scale will indicate the star rating. ‘An applicant will be required to answer all the questions in serial order from 1-28 as enlisted below. Upon meeting all the criterions for the BLG, an applicant will automatically be given One Star Rating and the scoring will commence from this specific rating. The overall ALC Assessment Framework has been provided below with the assigned weightage. tok kk 900R ABOVE Tek a 80-89 kK 70-79 ** 60-69 * 50-59 LEVELIL-Twostar rating 1.| Hasthe company done or more CSR projects in each of 2 the 3 preceding financial years (FY)? 2.| Hasthe company evaluated at least 40% ofthe CSR projects 2 completed by it for the past two or more years? — (2years here signifies appearance before the committee). Has the company worked with at least 2 different. 2 implementing agencies in each of the last FY preceding years? 4,| Has the company done photographic /video graphic/narrative 2 documentation of at least 3 projects in each of the3 preceding years? Has the company put in place a credible monitoring process 2 forat least 3 ofits projects in the last 3 FYs? (ifso give details) Maximum Marks 10 Qualifying Percentage 60-69 \\MODULEAITLEVEL III -Three starrating MAXIMUM MARKS = 40 (10X4) 1. | Has the company done or more CSR projects in each of the 4 3 preceding financial years (FY)? 2, | Hasthe company worked with at least 4 different implementing 4 agencies in each ofthe last FY preceding years? 8, | Has the company evaluated at least 50% of the projects completed 4 byit for the past two or more years? ~ (2 years here signifies appearance before the committee) 4, | Has the company done photographic /video graphic narrative 4 documentation of at least 5 projects in each of the 3 preceding years. 5. | Has the company put in place a credible monitoring process for 4 atleast 5 of ts projects in the last 3 FYs? Iso, please provide details for the same. 6. | Has the expenditure of the company on CSR in each of the last 3 4 yoars been inexcess of 1.5% of its average net profits. 7, | Has the average cost of each of the 5 projects mentioned above 4 been more than 10 lacs? 8, | Has the company developed a specific monitoring mechanism for 4 monitoring each of the projects as mentioned above in question 0.5? 9, | Hasthe company undertaken external evaluation for atleastone 4 of its project, please refer to question no. 5 as mentioned above 10] Do the CSR activities feature in at least two of the Board Mecting, 4 ineach ofthe last 3 FYs? Maximum Marks 40(10x4) Qualifying Percentage 70-79 MODULE-IIILEVELIV- Fourstar rating 1, | Has the expenditure of the company on CSRin each ofthe last 3 4 years been in excess of 2% of ts average net profits? Has the average cost of each oftheS projects mentionedabovebeen | 4 more than20 las. 3. | Has the company done 10 or more CSR projectsin each of the 3 4 preceding financial years (FY)? 4, | Hasyour company externally evaluated at least 40% ofits CSR 4 projects? 5, |Has your company consistently reported to the MCA inthe format 4 proscribed such as column 8.and AOC in each the last 3 years? Maximum Marks 20 (5x4) Qualifying Percentage 80-89 2. LEVELV-Fivestarrating MAXIMUMMARKS Has the expenditure of the company on CSR ineach of the last Byears been in excess of 2.2% of its average net profits? 2, | Has the average cost of each of the 5 projects mentioned above 5 been more than 50 lacs? 3, | Has the company done 20 or more CSR projects in each of the 3 5 preceding financial years (FY)? 4, | Hasyour company undertaken externally evaluation of at least 5 ‘50% of its CSR projects that are impact and outcome oriented? 5, | Has the company collaborated with another corporate entity in 5 undertaking any project in any ofthe last 3 years? How many CSR project sites have been visited by amember of 5 the CSR Committee of the Board in each ofthe last 3years? Maximum Marks 30 (6X5) Qualifying Percentage 90 or above 26) \_MODULEAILChapter-4 CSR Case Studies Bama Case studies on Health, Education, Women empowerment, Environment, Hunger & Poverty 1. State Bankof India 2 L&T 3. DaburIndia 1. Case Study of State Bank of India’ As per the Sustainability Report 2018-1! OSR spend of SBI Foundation for FY 2018-19 was Rs 16.46 crore. The CSR fund has been invested in various flagship social development programmes. During FY 2018-19, the SBI spent Rs. 6.24 crore towards its CSR activities. A total of Rs. 10 crore h been contributed towards the Chief Minister Distress Relief Fund for the Kerala floods, of which Rs. 5 crore has been contributed by the Bank's employees and Rs. 5 crore has been matched by the Bank. ‘The CSR activities are spread across healthcare, education, skill development and livelihood creation, environmental protection and sanitation. The CSR programs are implemented by the Bank as well the ‘SBI Foundation. ‘The SBI Foundation (SBIF) was established in 2015 as a Section VIII Company under Companies Act (2013) to undertake the CSR activities of SBI Group and its subsidiaries in a focused manner. The Foundation aims to give back to society by working towards the socio-economic development and well- being of the marginalised and vulnerable ‘communities with a vision to provide services beyond banking. “SBIF is presently working on various projects to build a momentum for a transforming India by creating an inclusive development paradigm that serves all Indians without any discrimination on the basis of region, language, caste, creed, religion, ete.”, report revealed. SBI Children’s Welfare Fund ‘The Bank established a ‘Children’s Welfare Fund’ as * bitpsing -foundation-spends.25-16-46-c-on- Aagship-esrprogrammes! © MODULE-Ila Trust in 1983, which extends grants to ‘educational institutions engaged in the welfare of underprivileged children like orphans, destitutes, divyangs, ete. The corpus of the fund is created through donations made by the employees, which are matched by the Bank. During the reporting period, SBI donated approximately Rs 50 lakh to six institutions- all working for the welfare of underprivileged children. CSRExpenditure + SBIFoundation: Rs 16.46 Crores + Bank's CSR Expenditure: Rs, 6.24 Crores + Skill development through RSETIS: Rs, 42.57 Crores Rural Self Employment Training Institutes (RSETIs) SBI has established 151 Rural Self Employment ‘Training Institutes (RSETIs) across the country to help mitigate the issue of youth unemployment and underemployment. Around 60% of candidates trained in SBI’s RSETIs ‘belong to the ‘Below Poverty Line (BPL,’ category. RSETIs are non-profit institutions established with the support of the State and Central Government, which offers upto 30 skill development programmes in a financial year across 60 different avenues approved by the ‘Ministry of Rural Development (MoRD) through auniform and standardised curriculum. Developing Sustainable Communities : ‘The need to ereate social good has always been ingrained within the Bank’s working culture. SBI has been undertaking social welfare initiatives much before the formal concept of Corporate Social Responsibility was coined- placing the interest of the common man at the forefront. The Bank earmarks 1% of the previous year's net profit as the budget for CSR spend for theyear, Corporate Social Responsibility Committee : The Corporate Social Responsibility Committee at SBI was constituted in 2014 to review the activities undertaken by the Bank under the Corporate Social Responsibility Policy. The Committee was last reconstituted in March 2018 and currently has seven members. The Chairman of the Committee is the Senior Managing Director. 2. Case Study of L&T* L&T is an engineering and construction conglomerate with a concern for the community. Even before the CSR section was introduced in the Companies Act 2013, L&T had been interacting with the community around L&T facilities and providing health, education and skills development services to those who needed itmost. According to the company’s annual report 2017- 2018, the prescribed CSR spend was 97.29 Cr, the actual spend amounted to 100.92 Cr in this financial year, Building on many decades of social responsibility activities, the company contributes to inclusive growth by empowering communities and accelerating development. through interventions in water & sanitation, health, education and skill development. L&Teering, a structured volunteering programme, inspires and empowers employee volunteers or L&T-eers to contribute their time to community development programmes supported by the Company. The employees’ wives and female employees power the Prayas ‘Trust, driving CSR initiatives in their own capacity and reaching out to remote ‘communities. Here is a snapshot of the company’s CSR interventions across four key thrust areas: Water & sanitation, education, health and skill- development, 1. Health : L&T’s CSR programme inthe health sector aims at making quality healthcare services accessible and affordable without. anyone having to face financial hardship. L&T’ focuses on strengthening the Government's health programmes like family welfare, mother and child health, HIV-AIDS, Tuberculosis, Blindness control, Diabetes detection and treatment and reproductive health services. It also provides services related to lifestyle diseases like hypertension and cardiac problems, Interventions + Health Centres: A team around ninety well- qualified medical rehabilitation consultants and 12 professionally staffed, well-equipped multi-speciality centres provide the following + Physical health: Health Centre offers tertiary health services including Family Planning surgeries, Day Care General ‘Surgeries, Endoscopy Procedures and Dental “ hutpelthecerjournal.incer-report-lt-in-100-crore-club-obconporate-socal-responsbility! 28 MODULE-IIrProcedures, It also provides eye checks, mother and child health care, physiotherapy and occupational therapy, infertility treatment, hearing-speech services and a skin clinic focusing on leprosy treatment and communicable diseases. + Psychological health: Psychiatric OPDs and family counselling services address mental health and stress related issues, while a Child Guidanee Clinie helps younger members of the eommunity. Health Camps: + Mobile health vans visit the communities around the centre, + Specialised health camps covering Hye care, dental, Paediatric and Gynaecological care. + Specialised health promotion programme with focus on hygiene, reproductive health and family life education for children and adolescents in Government remand and corrective homes and homes for neglected children + HIV and AIDS Management Programme: L&T’s state-of-the-art Anti-Retroviral ‘Treatment (ART) centre provides diagnostic, medical and counselling services in association with National AIDS Control Organisation (NACO). ‘TB related services: Comprehensive TB related treatment in Mumbai including individualised treatment OPD, check-up, diagnostics, medicines and nutrition, support, home visits and counselling, L&T runs an exclusive TB clinic in Koldongri, in the suburbs ‘of Mumbai, in partnership with the Municipal Corporation of Greater Mumbai (MCGM) providing CAT T, TI and TV treatment to the patients, witha eure rate of 85-90%. Dialysis centres: 2384 dialysis sessions have been conducted at the L&T-run kidney dialysis centre at Thane, Cancer detection camps: Targeted at women, L&T promotes preventive edueation and early diagnosis of cervical and breast cancer through cancerdetection camps. ‘Impact: 350076 Lives touched through various. health services. 2. Education : L&T tries to make quality ‘education accessible to each and every child by introducing relevant curriculum, improving teaching methods and ensuring parent and ‘community participation in creating learning environment. Interventions : Basie Infrastructural support. includes construction or repair of the classrooms, toilet blocks and water stations for basic hygiene facilities, midday meal kitchens ‘and sports ground, Educational support: Supplies such as uniforms, textbooks, notebooks and sports kits are provided to underprivileged students in government and unaided low-income schools in rural and tribal villages. Balwadi program: L&T’ strengthens early childhood development program by improving the quality of balwadis and anganwadis in urban slums and rural areas, ensuring entry into the mainstream education system and improved enrolment in the primary schools. + Supplementary food is provided in tribal balwadis + Toy vans visiting anganwadis provide necessary childhood development activities + Training of Trainers for Balwadi teachers for capacity building, Afterschool community study centres offer supplementary education and reach out to the first generation learners and children from weaker sections. + Efforts are directed towards designing a curriculum for easy learning that is aligned with the school curriculum, Focus on Science Innovation and Technology + L&T has supported Government initiatives and sponsored Mini Science Centres in rural schools, simplifying complex scientific concepts + A Science on Wheels program reaches out to 3293 children in 17 schools, encouraging students to develop interest in science and technology-related subjects. + To facilitate the access of e-learning technology to rural and tribal students, L&T has provided computer labs and digital classroomsin several rural schools. Capacity building: Teacher Training Programmes are conducted to enhance the quality of education being imparted to students, studying in Government schools and low-income trust run schools. Overall development of children: MODULE-III+ Children are also given inputs on life-skills and extra-curricular activities such as dance, musicand drawing. + Educational and recreational outings are organised + Specialised health camps are organised for children for eye check-up, early detection and treatment of anaemia, malnutrition and other childhood diseases. + Education sessions on health and hygiene with children and adolescents are conducted for preventive care and for promotinghealthy sanitation practices, Creating learning environment: The community level School Management Committee (SMC) and parents are invited for a dialogue to encourage students to continue their ‘education, as well as for sustaining L&T’s efforts in future. Impact + 250 schools gained better facilities that increased enrolment and retention of students, + 1,56,168 students covered through our education projects this year. 8. Women Empowerment: Employable skills training for women : At many L&T sites, local women, young girls and. physically-challenged persons are trained in various employable skills as per their interests and aptitude, The courses include Tailoring, Embroidery, Beautician Course, Food Processing, Home Management, Computer Skills, Basie Edueation and Basie Health. Impact + 7365 youth completed various courses at CSTIsthisyear + 15338 people have been trained in employable vocational skills this year. 2000 women became self-reliant! The objective of the programme run by L&T Kolkata, was to empower women in the slums of Kolkata and neighbouring villages, by providing. them with alternative paid employment by manufacturing products for the local and overseas markets, and to improve the status of ‘women and girls in the society. More than 2000 ‘women are engaged in small enterprise such as tailoring of garments, beauty culture, home furnishing, spices, jam, pickle, crochet, weaving, knitting, block printing and Kantha stitch, ete. ‘This programme is not only empowering the ‘women economically but also helping instil self: confidence. Their monthly average income is between INR 5000 and INR 8000. ‘The Integrated Community Development Program of L&T started in 2014-15, focused on making water ~ the very ‘necessity of life’ ~ available to four water stressed districts in Rajasthan, ‘Maharashtra and Tamil Nadu, covering 11006 households across an area of 9337 hectares. With ‘an agenda focused on community empowerment, through Integrated Community Development, they have ensured water availability for drinking, sanitation and agriculture, Interventions + The water and soil conservation structures like check dams, anicuts, contour trenches, farm bunds and farm ponds constructed with the participation and contribution of the community helped in increasing the water level in the water bodies in these villages and retain soil moisture, + The community groups like Village Development Committees (VDCs) with 50 per cent participation from women and Self Help Groups (SHGs) were created. They assumed the responsibility to maintain the structures created through the project + Farmers were trained in agricultural practices with optimal use of water and use of zero budget natural fertilisers to retain the fertility of the land. The community members also devised methods that improve the arability ofland. Sanitation drives : The Swachha Bharat Program gave the necessary impetus to initiate the sanitation drive in villages. L&T trained Jocal youth in masonry skills and used local materials to achieve the following: + Construction of over than 970 well-designed toilet-cum-bathrooms + Community-based monitoring committees to deter open defecation Impact + Access to water for drinking, sanitation, irrigation, cultivation of fodder and extra crops 30 MODULE-IIr+ Two revenue villages and 13 hamlets are open defecation free, benefitting 1100 households + Improved economies, for 11000 households, raising the aspirations of the people. + Chettipalayam watershed project, South Coimbatore, enabled water holding of 47 lakh litres in one year and made 18 hectares of barren land cultivable. 8. Case Study of Dabur India* Dabur India's CSR Policy : Dabur India’s CSR Policy is inspired by the words ofits founder DrS K Burman who said "What is that life worth which cannot bring comfort to others’. While pursuing our business strategy of introducing products that give our consumers health & wellness, Dabur operates in a manner that not. just continues to generate an attractive return for shareholders, but also minimizes our impact on the environment and helps in replenishing the planet; while lending a helping hand to the ‘community. CSR Vision : Through sustainable measures, actively contribute to the Social, Economic and Environmental Development of the community jin which we operate ensuring participation from ‘the community and thereby create value for the nation, CSR Mission 1. Ensuring socio-economic development of the community through different participatory and need- based initiatives in the best interest of the poor and deprived sections of the society so as to help them to become SELF-RELIANT and build a better tomorrow forthemselve 2, Ensuring environmental sustainability through ecological conservation and regeneration, protection & re growth of endangered plant species, and promoting biodiversity. Activities ‘The CSR activities we pursue will be in line with, our stated Vision and Mission, focused not just around our plants and offices, but also in other geographies based on the needs of the ‘communities. ‘The four focus areas where special Community Development programmes would berun are: 1. Eradieating hunger, poverty and © hitpesiiwwe dabur-comiinfen-uslesr-be-the-changelcer- policy malnutrition: + Provision of food, nutrition supplement, clothes ete for the poor, children and other deprived sections of the society. + Supporting nutrition in anganwadi centres and building capacities of anganwadi workers tothis effect. + Provision of shelter for homeless. + Promoting sanitation, making available safe drinkingwater 2. Promoting Health care including Preventive Health eare through awareness programmes, health check-ups, provision of medicine & treatment facilities, providing pre natal & post natal healtheare facilities, prevention of female foeticide through awareness creation, program for preventing diseases and building immunity, 3. Ensuring environmental sustainability and ecological balance through: + Plantation drives in schools, villages, our manufacturing units & offices/business premisesand other areasin genoral; + Reviving endangered plants, promoting agro- forestry; *+ Protection of flora & fauna; + conservation of natural resources + Maintaining quality of sil, air & water. + Adoption of wastelands to cultivate plants; + Promotingbiodiversity; + Animal welfare and veterinary services. + Technical support and Knowhow for improving farming and building capacities of small farmers. + Promotingalternate energy resources. 4, Employment and livelihood enhancing vocational skills and projects including tailoring, beautician, mehndi application, bee Keeping, food processing and preservation, vermi-composting and other Life Skill Training, and livelihood enhancement projects. In addition, the Company has identified the following areas for Community Development interventions: 5. Promotion of education especially among children, women, elderly and the differently abled including: + Non-formal education programmes. + Supporting schools with infrastructure like benches, toilets, potable water, fans ete, MODULE-III 31+ Supportingother educational institutions. + Improving educational facilities in general + Supporting children for higher education, 6. Promoting gender equality and empowering women including: + Adult literacy for women. + Promoting and providing credit support to women's self-help and joint liability groups + Trainingin vocations pursued by women, + Settingup homes for women & orphans; + Sottingup old-age homes & other facilities for senior citizens + Setting up hostels for working and student women, day care centers for kids of working women 7. Contribution or funds provided to technology incubators located within academic institutions which are approved by the Central Government. 8, Rural Development Projects 9, Other Activities: + Promotion of Sports with special focus on training for rural sports, nationally recognised sports, Paralympic sports, Olympic sports, + Welfare for differently disabled persons + Settingup publielibraries + Reducing inequalities faced by the socially and economically backward groups + Protection of national heritage, art, culture and handicraft; Restoration of Buildings & sites of historical importance & works of art. + Welfare of armed forces personnel, war widows and theirdependants 10. Incidental Activities : Employing people and incurring other costs to carry out aforesaid activities. 11. Such other activities as the Board may consider to be appropriate. Approach to Implementation : We will strive toimplement the aforesaid CSR activities on our ‘own to the extent possible. However, the principle implementer of our CSR activities ‘would continue to be our foundation SUNDESH, supported by Dabur Foundation and Dr. S.K. Burman Charitable Trust. At the same time, we recognize need to work in partnership with other playersalso. This would include: 1, Collaborating with various organisation, which are registered as a ‘Trust or a section 8 company under the Companies Act, 2013 or Society or NGOs or any other form of entity incorporated in India that specialise in the aforesaid activities, 2. Contribution to various funds which are aligned with our Vision and Mission e.g. + Prime Minister's National Relief Fund + Any other fund set up by the Central Government for © socio-economic development and relief, © for the welfare of Scheduled Castes, the Scheduled Tribes, other Backward classes, minorities and women, 8. Collaborating or pooling resources with other companies to undertake aforesaid CSR activities. CSR Funds : The corpus for the purpose of carrying on the aforesaid activities would include the followings: * 2% of the average Net Profit made by the Company during immediately preceding three Financial Years. + any income arising there from, + surplus arising out of CSR activities carried out by the company and such surplus will not be part of business profit of the company. Monitoring : The CSR department will provide regular progress report to the CSR Committee of the Board. This report would indicate: 1. Achievement since last progress report / during the last quarter in terms of coverage compared to the target and reasons for variance, 2. Achievement of the year-to-date in terms of coverage compared to the target, plans to overcome shortfalls if any and support required from the CSR Committee/Board to overcome the shortfalls. 3. Actual year-to-date spends compared to the budget and reasons for variance. 4, In respect of activities undertaken through outside Trust/Society/NGO's ete. there will be mechanism of monthly reporting of progress on each such activities and the amount incurred thereon. 32 MODULE-IIrGuideline for preparation of CSR project report For CSR projects and other social projects it is ‘important to look beyond routine economic aspects and further evaluate the benefits of proposed project onasocial andenvironmental plane + Social Return On Investment (SROD is an impact assessment tool that measures the total value generated for every rupee that is spent in the development sector by undertaking a cost-benefit analysisand impact assessment + SROI helps to understand the value of all ‘outcomes including outcomes having no direct + economic benefit to the company. It gives a monetary value to social and environmental outcomes i.e. how much social value is created per rupee of investment CSR should be an integral part of the organizational strategy. Companies must strike a balance between the economic dimension of doing business (profit, return on investment and continuity) and the cthical, social and ecological side (people, society and the environment) A Baseline study is carried out to capture the views of| the people as to what are the issues faced by them, their requirements for development, and areas that they would like to beaddressed for their Benefit + Typically the baseline study is carried out after an initial Needs Assessment is done but before project starts unless the baseline study is required for investment decision inputs + Key initial pre-project conditions (indicators) are measured before a project/Program begins from MODULE-IIlwhich change and progress can be later measured and evaluated + Baseline data is collected at project / program outset to capture and analyze the existing state of people, business environment, demographic information ete. of the select village, town or district covering project's affected area + A need assessment and a baseline study should be done before starting any project or concept to ensure that projects taken up are based on theneeds of the society + Study should focus on analysis of findings andconclusions Without a baseline against which to monitor and ‘measure the changes, it will be difficult to know theimpact of the project on the lives of the people andthe ecosystem Information gathered and analyzed in the baseline should: + Consist of data or indicators specifically chosen to monitor project performance on a regular basis + Consider the use of these indicators at a later time to investigate project effects and impacts + Data collection methods ean be qualitative or quantitative Geographic and demographic scope of the study should cover: + Critical conditions /assumptions for the study + Available budget + Who will conduct baseline study - external/internal/both + Methodology to beused + Time frameete. Primary Data Collection: Collect factual data, = in depth personal individual and group interviews and surveys of beneficiaries or families using structured questionnaire with number of relevant questions Secondary Data Collection: Information gathering ~ can use Government statistics on population, employment, agriculture, business, industry ete. census data, media reports, NGO studies, university research, relevant websites ete ‘The success of the baseline assessment largely depends: On proper research design and format. of questionnaire + Questions should be relevant that will throw light on needs and priorities for effective CSR activities for intended beneficiaries + Most questions in questionnaire should have close ended options with predefined selections with some open ended questions that allow respondent to express their opinion + The research design will guide us on number of interviews into households, business, trade, commerce, society, professionals, industry associations, opinion, leaders ete. Qualitative data: Explains what is being studied with words such as documented observations, representative case descriptions, perceptions, opinions of value, ete. eg. In community meetings women said they spend a significant amount of time collecting drinking water so less water is available for cleaning and household chores Quantitative data, ‘Measures and explains what is being studied with numbers such as counts, ratios, percentages, proportions, average scores, ete. e.g. 42% of the households spend more than two hours gathering water for their needs ‘The sample respondents covered must be representative of all types of stakeholders who are residing in or will be affected by the proposed CSR project activities Choose a suitable sample size for deciding the research design and have complete demographic information for a realistic picture of the existing status and their needs and priorities. Cover aspects like: + Number ofhouseholds + Population + Occupation + Education + Healthcare + Infrastructure—water, sanitation, toilets ete. Points to consider for effective baseline assessment: + Create awareness in the area when beginning thesurvey MODULE-IIr+ Provide necessary authority letters to field investigators collecting the data + Have clarity on the research design, sampling techniques and methodologies to be used + Check needs and priorities in areas like water, sanitation, health care, education, women empowerment, environment, child care etc. + Check that all stakeholders have been identified ‘Have a data validation and back checking mechanisms. Points to consider for effective baseline assessment: + Researchers should interact frequently with their field team members to get first hand inputs and assessment of the needs and priorities ofthe local populacebeing surveyed + Carry out data analysis, and interpretation of the data with conclusions + Monitor and evaluate theassignment + Suggest short term and longterm projects Ensure sustainable, tangible and actionable recommendations for implementation. Example - Healthcare Need Assessment & Baselinestudy Methods used: + Focus group discussions + Questionnaires + Physical visits to primary health centers, anganwadi enters, panchayats, local doctors + Village health profiledata Indicators covered in study: + Disease profiling + Health indicators + Height and weight ofchildren Malnutrition CSR Project Proposal: Organizations should aim to achieve a balance of economic, environmental and social imperatives Consider: + Their CSR policy + Institutional mechanisms + Information from the government sourees, previous studiesdone in thearea, ete, + Information on programs targeting similar geographies and beneficiary groups or strategies + Monitoring impact measurement reports from any earlier projects Detail + Theproject context + Rolesofother developmentbodies + Keynceds of the target beneficiaries + Project goals, KPIs, baselines + Project milestones for progress monitoring purposes + Activities and timelines to achieve stated project goals + Budgets alongwith the basis or estimation + Risks and mitigation strategies ee a oe Project Charter: All project must be formally approved by the CSR committee to ensure that: + Project is line with the company’s CSR strategy, policy and guidelines + Monitoring indicators are relevant and have been clearly defined + Required budget will be available for the project: + The CSR committee can also delegate approval authority to an internal or external project approval committee CSR Reporting Format: Refer Annexure IIL MODULE-III36 Annexure-I FREQUENTLY AS QUESTIONS ON CORPORATE SOCIAL RESPONSIBILITIES Whether CSR provisions of the Companies Act, 2013s applicable to all ‘companies? CSR provisions of the Companies Act 2013is applicable to every company registered under the Companies Act 2018 and any other previous Companies law having + net worth of rupees five hundred crore or + turnover of rupees one thousand crore or moreor + a net profit of rupees five crore or more duringany financial year What is meaning of ‘any financial year’ mentioned above? "Any Finaneial year" referred under Sub- Section (1) of Section 135 of the Act read with Rule 3(2) of Companies CSR Rule, 2014 implies the immediately preceding financial years (refer General Circular No. 21/2014, dated: 18.06.2014) Whether CSR expenditure of a company can be claimed as a business expenditure? The amount spent by a company towards CSR cannot be claimed as_ business expenditure. The Finance Act, 2014 provides that any expenditure incurred by fan assessee on the activities relating to Corporate Social Responsibility referred to in section 135 of the Companies Act, 2013 shall not be deemed to be an expenditure incurred by the assessce for the purposes of the business or profession. Whether the ‘average net profit’ criteria for section 135(6) is Net profit before tax or Net profit after tax? 5 Computation of net profit for section 135 is ‘as per section 198 of the Companies Act, 2013 which is primarily PROFIT BEFORE TAX (PBT), Can the CSR expenditure be spent on the activities beyond Schedule VII? General Circular No, 21/2014 dated June 18, 2014 of MCA has clarified that the statutory provision and provisions of CSR Rules, 2014, is to ensure that activities undertaken in pursuance of the CSR policy must be relatable to Schedule VII of the Companies Act, 2013. The entries in the said Schedule VII must be interpreted liberally so as to capture the essence of the subjects ‘enumerated in the said Schedule. The items enlisted in the Schedule VII of the Act, are broad-based and are intended to cover a wide range of activities. The General Circular also provides an illustrative list of activities that can be covered under CSR. In a similar way many more ean be covered. It is for the Board of the company to take acallon this. ‘What tax benefits can be availed under CSR? No specific tax exemptions have been extended to CSR expenditure per se. The finance Act, 2014 also clarifies that expenditure on CSR does not form part of business expenditure, While no specific tax exemption has been extended to ‘expenditure incurred on CSR, spending on several activities like contributions to Prime Minister's Relief Fund, scientific research, rural development projects, skill development projects, agricultural extension projects, ete., which find place in Schedule VII, already enjoy exemptions under different sections of the Income Tax Act, 1961. MODULE-IIr10. Which activities would not qualify as CSR? + The CSR projects or programs or activities that benefit only the employees of the company and their families. + One-off events such as marathons! awards/eharitable contribution! advertisement/ sponsorships of TV programmesete. + Expenses incurred by companies for the fulfilment of any other Act/ Statute of regulations (such as Labour Laws, Land ‘Acquisition Act, 2013, Apprentice Act, 196 ete.) + Contribution of any amount directly or indirectly to any political party. + Activities undertaken by the company in pursuance of its normal course of business. + The project or programmes or activities undertaken outside India. Whether a holding or subsidiary of a company which fulfils the criteria under section 135(1) has to comply with section 135, even if the holding and subsidiary itself does not fulfil the criteria. Holding or subsidiary of a company does not have to comply with section 135(1) unless the holding or subsidiary itself fulfils the criteria. Whether provisions of CSR are applicable on Section 8 Company, if it fulfils the criteria of section 135(1) of the Act. Section 136 of the Act reads "Every company ie. no specific exemption is given to section 8 companies with regard to applicability of section 135, hence section 8 companies are required to follow CSR provisions. Can contribution of money to a trust/ Society/Section 8 Companies by a company be treated as CSR expenditure of the company? General Circular No. 21/2014 of MCA dated June 18, 2014 clarifies that Contribution to Corpus ‘of a Trust/ Society/ Section 8 un. 12. 13. 14. companies ete. will qualify as CSR expenditure as long as: (a) the Trust! Society/ Section 8 company te. is created exclusively for undertaking CSR activities or (b) where the corpus is created exclusively for a purpose directly relatable to a subject covered in Schedule VIL ofthe Act. Whether display of CSR policy of a company on website of the company is mandatory ornot? As per section 135(4) the Board of Directors of the company shall, after taking into account the recommendations of CSR Committee, approve the CSR Policy for the company and disclose contents of such policy in its report and the same shall be displayed on the company's website, if any (refer Rules 8 & 9 of CSR Policy, Rules 2014). Whether reporting of CSR is mandatory in Board's Report? ‘The Board's Report of a company qualifying under section 135(1) pertaining to a financial year commencing on or after the Astday of April, 2014 shall include an annual report on CSR containing particulars specified in Annexure, (refer Rule 9 of CSR Policy, Rules 2014), Whether it is mandatory for Foreign Company to give report on CSR activity? In case of a foreign company, the balance sheet filed under sub-clause (b) of sub- section (1) of section 381 shall contain an Annexure regarding report on CSR. Whether contribution towards disaster relief qualifies as CSR or not? (May please refer point no. 7to the annexure to General Circular dated 18.06.2014 issued by Ministry of Corporate Affairs). Whether contribution in kind can be monetized to be shown as CSR expenditure? Section 135 prescribes "...shall ensure that company spends...". The company has to spend the amount. MODULE-III 3716. If a company spends in excess of 2% of its average net profit of three preceding years on CSR in a particular year, can the excess amount spent be carried forward to the next year and be offset against the required 2% CSR expenditure of thenext year? Any excess amount spent (i.e., more than 2% as specified in Section 135) cannot be carried forward to the subsequent years and adjusted against that year's CSR expenditure. 17. Can the unspent amount from out of the minimum required CSR expenditure be carried forward to the next year? ‘The Board is free to decide whether any unspent amount from out of the minimum required CSR expenditure is to be carried forward to the next year, However, the carried forward amount should be over and above the next year's CSR allocation ‘equivalent to at least 2% of the average not profit of the company of the immediately preceding three years. 18. What is the role of Government in monitoring implementation of CSR by companies under the provision of the Companies Act, 2013? ‘The main thrust and spirit of the law is not to monitor but to generate conducive environment for enabling the corporates to conduct themselves in a socially responsible manner, while contributing towards human development goals of the country. ‘The existing legal provisions like mandatory disclosures, accountability of the CSR Committee and the Board, provisions for audit of the accounts of the company ete., provide sufficient safeguards in this regard, Government has no role to play in monitoring implementation of CSR by companies 19. Whether government is proposing to establish any mechanism for third parties to monitor the quality and efficacy of CSR expenditure as well as to have an impact assessment of CSR by Companies? Government has no role to play in engaging 20. 21. external experts for monitoring the quality and efficacy of CSR expenditure of companies, Boards/CSR Committees are fully competent to engage third parties to have an impact assessment of its CSR programme to validate compliance of the CSR provisions of the law. Can CSR funds be utilized to fund Government Scheme? The objective of this provision is indeed to involve the corporates in discharging their social responsibility with their innovative ideas and management skills and with greater efficiency and better outcomes, ‘Therefore, CSR should not be interpreted as 4 source of financing the resource gaps in Government Scheme. Use of corporate innovations and management skills in the delivery of public goods is at the core of CSR implementation by the companies. In- principle, CSR fund of companies should not bbe used as a source of funding Government Schemes. CSR projects should have a larger multiplier effect than that under the Government schemes. However, under CSR provision of the Act and rules made thereunder, the Board of the cligible company is competent to take decision on supplementing any Government Scheme provided the scheme permits corporates participation and all provisions of Section 135 of the Act and rules thereunder are compiledby the company. Who is the appropriate authority for approving and implementation of the CSR programmes/projects of a Company? What is Government's role inthisregard? Government has no role to play in this regard. Section 135 of the Act, Schedule VIT and Companies CSR Policy Rules, 2014 read with General Circular dated 18.06.2014 issued by the Ministry of Corporate Affairs, provide the broad contour within which eligible companies are required to formulate their CSR policies including activities to be undertaken and implement the same in the right earnest. Therefore, all CSR programmes/projects should be approved by the Boards on the recommendations of their CSR Committees. Changes, if any, in the programme/project should also be 38 MODULE-IIrundertaken only with the approval of the ‘Committee/Board. 22. How can companies with small CSR. funds take up CSR activities in a project/ programme mode? A well designed CSR project or programme can be managed with even small fund. Further, there is a provision in the CSR Policy Rules, 2014 that such companies can combine their CSR programs with other similar companies by way of pooling their CSR resources. (refer rule 4 in Companies (CSR Policy) Rules, 2014). 28. Whether involvement of employees of the company in CSR project/ programmes of a company can be monetized and accounted for under the head of ‘CSR expenditure? Contribution and involvement of employees in CSR activities of the company will no doubt generate interest/pride in CSR work and promote transformation from Corporate Social Responsibility (CSR) as an obligation, to Socially Responsible Corporate (SRC) in all aspects of their functioning. Companies therefore, should be encouraged to involve their employees in CSR activities. However monetization of pro bono services of employees would not be ‘counted towards CSR expenditure. MODULE-IIT 39ANNEXURE -II SECTION 135 OF THE COMPANIES ACT, 2013 - CORPORATE SOCIAL RESPONSIBILITY - CLARIFICATIONS ON SCHEDULE VII GENERAL CIRCULAR NO.21/2014 [ENO.05/01/2014-CSR], DATED 18-6-2014 ‘This Ministry has received several references and representation from stakeholders seeking clarifications on the provisions under Section 185 of the Companies Act, 2013 (herein after referred as ‘the Act) and the Companies (Corporate Social Responsibility Policy) Rules, 2014, as well as activities to be undertaken as per Schedule VII of the Companies Act, 2013, Clarifications with respect to representations received in the Ministry on Corporate Social Responsibility (hereinafter referred as (CSR) areasunder:- (‘The statutory provision and provisions of CSR Rules, 2014, is to ensure that while activities undertaken in pursuance of the CSR policy must be relatable to Schedule ‘ViLof the Companies Act 2013, the entries in the said Schedule VIT must be interpreted liberally so as to capture the essence of the subjects enumerated in the said Schedule, The items enlisted in the amended Schedule VII of the Act, are broad-based and are intended to cover a wide range of activities as Mustratively mentioned in the Annexure. Gi) It is further clarified that CSR activities should be undertaken by the companies in project/programme mode [as referred in Rule 4(1) of Companies CSR Rules, 2014) One-off events such as marathons! awards/eharitable contribution/ advertisement/sponsorships of TV programmes ete, would not be qualified as part of CSR expenditure. ii) Expenses ineurred by companies for the fulfilment of any Act/Statute of Gv) o wid wii) witt) regulations (such as Labour Laws, Land Acquisition Aet ete.) would not count as CSR expenditure under the Companies Act. Salaries paid by the companies to regular CSR staff as well as to volunteers of the companies (in proportion to company's time/hours spent specifically on CSR) can be factored into CSR project cost as part of the CSR expenditure. "Any financial year” referred under Sub- Section (1) of Section 185 of the Act read with Rule 3(2) of Companies CSR Rule, 2014, implies 'the immediately preceding financial years’. Expenditure incurred by Foreign Holding Company for CSR activities in India will qualify as CSR spend of the Indian subsidiary if, the CSR expenditures are routed through Indian subsidiaries and if the Indian subsidiary is required to do so sper section 135 of the Act. ‘Registered Trust’ (as referred in Rule 4(2) of the Companies CSR Rules, 2014) would include Trusts registered under Income ‘Tax Act 1956, for those States where registration of Trust is not mandatory. Contribution to Corpus of a Trust/ socioty/ section 8 companies ete. will qualify as CSR expenditure as long as (a) the Trust society/ section 8 companies etc. is created exclusively for undertaking CSR activities or (b) where the corpus is created exclusively for a purpose directly relatable to a subject covered in Schedule VIT of the Act. 40 MODULE-IIrANNEXURE 2.This issues with the approval of Competent Authority. SL. | Additional items requested to be included in. Whether covered under No] Schedule Vitorto be clarified as already being Schedule Vitof the Act covered under Schedule VII of the Act 1, | Promotion of Road Safety through CSR: (a) Schedule VII (ii) under yromoting education’, (b) For drivers training ete. (@)(@) Promotions of Education, "Educating the Masses and Promotion of Road Safety awareness in all facets of road usage, Schedule VI (ii) under (b) Drivers training, vocational skills ) Trai (©) It is establishment (o) Training to enforcement personnel, functions af Goreenment (d) Safety traffic engineering and awareness through print, (cannot be covered). audio and visual media" shouldbe included, (@) Schedule VII (ii) under ‘promoting education’, (Gi) Social Business Projects : "giving medical and Legal aid, treatment to road accident victims" should be included, i) Schedule VIL @) under ‘promoting health care including preventive health care.’ Schedule VII (i) under ‘promoting health care including preventive health care.’ 2. |Provisions for aids and appliances to the differently. able persons -Request for inclusion 3. |'The company contemplates of setting up ARTIIC (Applied | Item no. (ii) of Schedule VIL Research Training and Innovation Centre) at Nasik. Centre will | under the head of ‘promoting cover the following aspects as CSR initiatives for the benefit of | education’ and "vocational the predominately rural farming community: skills" and "rural (a) yacity buil for farmers covering best sustainable farm | d@velopment’. () Cansei building roa ie peat eaeaale fe (a) "Vocational skill" a a livelihood enhancement (b) Training Agriculture Labour on skill development, projects. (©) "Vocational skill” (©) ‘Ecological balance’, ‘maintaining quality of soil, airand water. (©) Doing our own research on the field for individual crops to find out the most cost optimum and Agri-ccological sustainable farm practices. (Applied research) with a focus ‘on water management semen (@) "Conservation of natural (d) To do Product Life Cycle analysis from the soil conservation resource” and point of view. ‘maintaining quality of soil, air and water’ 4, |'To make "Consumer Protection Services" eligible under CSR. (Reference received by Dr. VG. Patel, Chairman of Consumer Education and Research Centre). @ Providing effective consumer grievance redressal mechanism, (i) Protecting consumer's health and safety, sustainable consumption, consumer service, support and complaint resolution, ii) Consumer protection activities. (iv) Consumer Rights tobe mandated Consumer education and awareness can be covered under Schedule VII (i) “promoting education’. MODULE-III aSI. | Additional items requested to be included in. Whether covered under No] Schedule VIL or to be clarified as already being Schedule VI of the Act covered under Schedule VII of the Act (iv) Consumer Rights to be mandated (v) all consumer protection programs and activities" on the same lines as Rural Development, Education ete. 5. | (@) Donations to TIM [A] for conservation of buildings and | Consorvation and renovation renovation of classrooms would qualify as "promoting | of school buildings and education’ and hence eligible for compliance of companies with | classrooms relates to CSR Corporate Social Responsibility. activities under Schedule VII (b) Donations to IIMA for conservation of buildings and | as "promoting education’. renovation of classrooms would qualify as ‘protection of national heritage, art and culture, including restoration of buildings and sites of historical importance’ and hence eligible for compliance of companies with CSR. Non Academie Technopark TBI not located within an academic | Schedule VII (ii) under Institution but approved and supported by Department of | "promoting education", if Science and Technology. approved by Department of Science and Technology. Disaster Relief Disaster relief ean cover wide range of activities that can be appropriately shown under various items listed in Schedule VII. For example, () medical aid can be covered under ‘promoting health care including preventive health care. Gi) food supply can be covered under eradicating hunger, poverty and malnutrition. ii) supply of clean water can bbe covered under ‘sanitation and making available safe drinking water’ 8, | Trauma care around highways in case of road accidents. Under'health care! 9. | Clarity on ‘rural development projects" Any project meant for the development of rural India will be covered under this. 10.| Supplementing of Govt. schemes like mid-day meal by | Yes, Under Schedule VI, corporates through additional nutrition would qualify under | item no. (i) under ‘poverty Schedule VIL and malnutrition’. 11. ] Research and Studies in the areas specified in Schedule VII, Yes, under the respective areas of items defined in Schedule VII, Otherwise under'promoting edueation’ 42 MODULE-IIrSI. | Additional items requested to be included in. Whether covered under No] Schedule VIL or to be clarified as already being Schedule VI of the Act covered under Schedule VII of the Act 12.| Capacity building of government officials and elected | No, representatives - both in the area of PPPs and urban infrastructure. 13.| Sustainable urban development and urban public transport | Not covered. systems 14. | Enabling access to, or improving the delivery of, public health | Can be covered under both systems be considered under the head "preventive healthcare’ or | the heads of "healthcare" or "measures for reducing inequalities faced by socially & | “measures for reducing economically backward groups"? inequalities faced by socially & economically backward groups’, depending on the context. 15.| Likewise, could slum re-development or EWS housing be | Yes, covered under "measures for reducing inequalities faced by socially & economically backward groups"? 16. | Renewable energy projects Under ‘Environmental sustainability, ecological balance and conservation of natural resources’, 17.| (i) Arethe initiatives mentioned in Schedule VII exhaustive? (i) & (ii) Schedule VIT is to be (i) In case a company wants to undertake initiatives for the | liberally interpreted so as to beneficiaries mentioned in Schedule VII, but the activity isnot | capture the essence of included in Schedule VII, then will it count (as per 2(c)(i) ofthe | subjects enumerated in the Final Rules, they will count)? schedule. 18. | US-India Physicians Exchange Program - broadly speaking, | No. this would be program that provides for the professional exchange of physicians between Indiaand the United States. MODULE-III 43ANNEXURE III FORMAT FOR THE ANNUAL REPORT ON CSR ACTIVITIES TO BE INCLUDED IN THE BOARD'S REPORT 1. Abriefoutline ofthe company’s CSR policy, including overview of projects or programs proposed to be undertaken and areference to the web-link to the CSR policy and projects or programs, 2. ‘The Composition of the CSR Committee. 3. Averagenet profit of the company for last three financial years 4. Proseribed CSR Expenditure (two per cent. Of the amount.as in item 3 above) Details of CSR spent during the financial year. a. Total amount to be spent for the financial year; b. Amount unspent, ifany; ¢. Manner in which the amount spent during the financial year is detailed below. 8, [CSR Sector [Projectsor | Amount | Amount Cumulative | Amount No| Projector | inwhich programs | outlay | spentonthe | expenditure | spent: activity | the L.Local (budget) | projectsor | upto the | Director identified | Project |areaofother | projector | programs | reporting | through iscovered |2.Specify | program | Sub-heads: | period implementing theStateand | wise 1 Direct agency District where expenditure projects or on projects, programs was or programs. undertaken 2. Overheads 1 2 3 4 5 6 7 8 *Give details ofimplementingageney: 6. Incase the company has failed to spend the two per cent, of the average net profit of the last three financial years or any part thereof, the company shall provide the reasons for not spending the amount in its Board report, 7. Aresponsibility statement of the CSR Committee that the implementation and monitoring of CSR Policy, isin compliance with CSR objectives and Policy of the company. 4 MODULE-IIrNOTESNOTESNOTESDOING OUT BIT FOR A Brighter Society, a better dawnVision “To be a global leader in promoting good corporate governance” Mission “To develop high calibre professionals facilitating good corporate governance” (GS) THE INSTITUTE OF Company Secretaries of India wear Headquarters ICSI House, 22, Inst tel 011-4534 1000 ‘rea, Lodi Road, New Delhi 110 003 1-11-2462 6727 iesiedu