Professional Documents
Culture Documents
Handbook On CSR
Handbook On CSR
in
Handbook on
Corporate Social
Responsibility in
India
Message from the Chairman
CII’s Development Initiative Council
A robust and thriving development sector is central to India’s quest for equitable, inclusive
and sustainable growth. India’s development sector has evolved substantially over the last few
decades and is now witnessing unprecedented interest and investments across the value chain.
With the passage of the Companies Act, 2013 the mandate for corporate social responsibility
(CSR) has been formally introduced to the dashboard of the Boards of Indian companies. The
industry has responded positively to the reform measure undertaken by the government with a
wide interest across the public and private sector, Indian and multinational companies.
The practice of CSR is not new to companies in India. However, what this Act does is bring
more companies into the fold. Also, it is likely that the total CSR spends will increase. What is
clear to many companies is that if this increased spending is to achieve results on the ground
– which is the intent of the Act – then it needs to be done strategically, systematically and
thoughtfully.
It is in this context, that the ‘Handbook on Corporate Social Responsibility in India’ developed
by PwC India for CII can play an important role. The CII being the leading industry body,
through this handbook, envisages equipping companies for this shift of structured engagement
with communities. This handbook is aimed both at companies that are veteran CSR
practitioners as well as those that are just entering the fray. It suggests steps to develop a CSR
strategy and Policy and identifies the key building blocks for initiating and developing the CSR
programs. It walks the CSR practitioner through some of the key choices that may be required
to be made while pursuing CSR objectives and develop an organisation that is socially sensitive
and responsible.
Building a society which provides equal access to opportunities negates disparities and, is a
collective responsibility. This Act presents a unique opportunity to stand up to the challenge. It
is a call for action. And this handbook is a significant step in that direction.
The constitutional structure of the country was laid with an objective of one man equals one
vote, equals one value. However the socio-economic realities of the country still have a long
way to go to match this vision of independent India where today there are many first among
equals. The country presently is under intense debate of developmental growth versus welfare
based development. Our political realities and our economic senses are at cross-roads. How do
we strike a balance between the two? The choices we make today are going to influence our
generations to come.
Every single major policy initiative in this country has been driven with a perspective that an
overwhelming concern for the disadvantaged and marginalised, a multidimensional view of
poverty and human deprivation, the focus on our fundamental rights and the need to expand
opportunities while ensuring its equal distribution are fundamental for achieving strong
human development. But disparity, inequality and the growing divide in our societies define
our existence today. The inclusion of the CSR mandate under the Companies Act, 2013 is an
attempt to supplement the governments efforts of equitably delivering the benefits of growth
and to engage the Corporate World with the country’s development agenda.
Philanthropy and CSR is not a novel concept for Indian companies, however a few
organisations are likely to struggle. The role of civil society in fuelling this change is bound to
be extremely important. With the new corporate resources in their tool bag much will depend
on their ability to innovate and adapt.
The handbook is a guidance document which will facilitate development of CSR mandate
within organisations and help streamline dialogue within the industry. An addendum will
follow with details of the rules once the same have been notified by the Government. The
members of the industry are likely to find their output helpful, informative and enabling.
Confederation of Indian Industry has been in the forefront in sensitising industry on CSR
and creating necessary enablers for promoting CSR for over a decade. I am confident that all
companies will be immensely benefitted from this document too.
I would like to extend my warm appreciation to the PwC team, including Sachin Shukla,
Sharique Ahmad, Anjan Katna, Ankit Gupta and Shankar Venkateswaran who worked towards
the development of this document.
Harpal Singh
Mentor and Chairman Emeritus,
Fortis Healthcare Limited
List of abbreviations
6 PwC
What is CSR? though the latter can also make a valuable lists out the CSR activities, suggests
contribution to poverty reduction, will communities to be the focal point. On the
The global context directly enhance the reputation of a company other hand, by discussing a company’s
While there may be no single universally and strengthen its brand, the concept of CSR relationship to its stakeholders and
accepted definition of CSR, each definition clearly goes beyond that.” integrating CSR into its core operations,
that currently exists underpins the impact the draft rules suggest that CSR needs
From the above definitions, it is clear that:
that businesses have on society at large and to go beyond communities and beyond
the societal expectations of them. Although • The CSR approach is holistic and the concept of philanthropy. It will be
the roots of CSR lie in philanthropic integrated with the core business strategy interesting to observe the ways in which this
activities (such as donations, charity, for addressing social and environmental will translate into action at the ground level,
relief work, etc.) of corporations, globally, impacts of businesses. and how the understanding of CSR is set to
the concept of CSR has evolved and now • CSR needs to address the well-being undergo a change.
encompasses all related concepts such as of all stakeholders and not just the CSR and sustainability
triple bottom line, corporate citizenship, company’s shareholders.
philanthropy, strategic philanthropy, shared Sustainability (corporate sustainability)
• Philanthropic activities are only a part of is derived from the concept of sustainable
value, corporate sustainability and business
CSR, which otherwise constitutes a much development which is defined by the
responsibility. This is evident in some of the
larger set of activities entailing strategic Brundtland Commission as “development
definitions presented below:
business benefits. that meets the needs of the present without
The EC1 defines CSR as “the responsibility of compromising the ability of future generations
enterprises for their impacts on society”. To CSR in India
to meet their own needs” 4. Corporate
completely meet their social responsibility, CSR in India has traditionally been sustainability essentially refers to the role
enterprises “should have in place a process seen as a philanthropic activity. And in that companies can play in meeting the
to integrate social, environmental, ethical keeping with the Indian tradition, it was agenda of sustainable development and
human rights and consumer concerns into an activity that was performed but not entails a balanced approach to economic
their business operations and core strategy in deliberated. As a result, there is limited progress, social progress and environmental
close collaboration with their stakeholders” documentation on specific activities related stewardship.
The WBCSD defines CSR as2 “the continuing to this concept. However, what was clearly
evident that much of this had a national CSR in India tends to focus on what is
commitment by business to contribute to done with profits after they are made. On
economic development while improving the character encapsulated within it, whether
it was endowing institutions to actively the other hand, sustainability is about
quality of life of the workforce and their factoring the social and environmental
families as well as of the community and participating in India’s freedom movement,
and embedded in the idea of trusteeship. impacts of conducting business, that is,
society at large.” how profits are made. Hence, much of the
According to the UNIDO3, “Corporate As some observers have pointed out, the Indian practice of CSR is an important
social responsibility is a management practice of CSR in India still remains within component of sustainability or responsible
concept whereby companies integrate the philanthropic space, but has moved from business, which is a larger idea, a fact
social and environmental concerns in institutional building (educational, research that is evident from various sustainability
their business operations and interactions and cultural) to community development frameworks. An interesting case in point
with their stakeholders. CSR is generally through various projects. Also, with global is the NVGs for social, environmental
understood as being the way through which influences and with communities becoming and economic responsibilities of business
a company achieves a balance of economic, more active and demanding, there appears issued by the Ministry of Corporate Affairs
environmental and social imperatives to be a discernible trend, that while CSR in June 2011. Principle eight relating to
(Triple-Bottom-Line Approach), while at remains largely restricted to community inclusive development encompasses most
the same time addressing the expectations development, it is getting more strategic in of the aspects covered by the CSR clause
of shareholders and stakeholders. In this nature (that is, getting linked with business) of the Companies Act, 2013. However, the
sense it is important to draw a distinction than philanthropic, and a large number of remaining eight principles relate to other
between CSR, which can be a strategic companies are reporting the activities they aspects of the business. The UN Global
business management concept, and charity, are undertaking in this space in their official Compact, a widely used sustainability
sponsorships or philanthropy. Even websites, annual reports, sustainability framework has 10 principles covering
reports and even publishing CSR reports. social, environmental, human rights and
The Companies Act, 2013 has introduced governance issues, and what is described as
1 http://ec.europa.eu/enterprise/policies/sustainable- the idea of CSR to the forefront and CSR is implicit rather than explicit in these
business/corporate-social-responsibility/index_ through its disclose-or-explain mandate, principles.
en.htm is promoting greater transparency and
2 http://www.wbcsd.org/work-program/business- disclosure. Schedule VII of the Act, which
role/previous-work/corporate-social-responsibility.
aspx
3 http://www.unido.org/what-we-do/trade/csr/what-
is-csr.html#pp1[g1]/0/
4 Brundtland Commission’s Report, 1987
Handbook on Corporate Social Responsibility in India 7
Globally, the notion of CSR and Benefits of a robust CSR
sustainability seems to be converging, as programme
is evident from the various definitions of
CSR put forth by global organisations. The As the business environment gets
genesis of this convergence can be observed increasingly complex and stakeholders
from the preamble to the recently released become vocal about their expectations,
draft rules relating to the CSR clause within good CSR practices can only bring in greater
the Companies Act, 2013 which talks benefits, some of which are as follows:
about stakeholders and integrating it with • Communities provide the licence to
the social, environmental and economic operate: Apart from internal drivers
objectives, all of which constitute the such as values and ethos, some of the key
idea of a triple bottom line approach. It stakeholders that influence corporate
is also acknowledged in the Guidelines behaviour include governments (through
on Corporate Social Responsibility and laws and regulations), investors and
Sustainability for Central Public Sector customers. In India, a fourth and
Enterprises issued by the DPE in April 20135. increasingly important stakeholder is
The new guidelines, which have replaced the community, and many companies
two existing separate guidelines on CSR have started realising that the ‘licence
and sustainable development, issued in to operate’ is no longer given by
2010 and 2011 respectively, mentions the governments alone, but communities
following: that are impacted by a company’s
“Since corporate social responsibility and business operations. Thus, a robust CSR
sustainability are so closely entwined, it can programme that meets the aspirations
be said that corporate social responsibility of these communities not only provides
and sustainability is a company’s commitment them with the licence to operate, but
to its stakeholders to conduct business in an also to maintain the licence, thereby
economically, socially and environmentally precluding the ‘trust deficit’.
sustainable manner that is transparent and • Attracting and retaining employees:
ethical.” Several human resource studies have
linked a company’s ability to attract,
Why is the CSR clause of the retain and motivate employees with
new Companies Act, 2013 so their CSR commitments. Interventions
that encourage and enable employees
critical for SMEs? to participate are shown to increase
employee morale and a sense of
By requiring companies, with a belonging to the company.
minimum net profit of 5 crore INR,
• Communities as suppliers: There
to spend on CSR activities, the
are certain innovative CSR initiatives
Companies Act, 2013 is likely to bring emerging, wherein companies have
in many SMEs into the CSR fold. This invested in enhancing community
will usher in a fresh set of challenges livelihood by incorporating them into
to a sector that is increasingly their supply chain. This has benefitted
being asked by its B2B customers communities and increased their income
to comply with environmental and levels, while providing these companies
social standards, while remaining with an additional and secure supply
competitive in terms of price and chain.
quality. Thus, SMEs will have to • Enhancing corporate reputation:
quickly learn to be compliant with The traditional benefit of generating
these diverse set of requirements and goodwill, creating a positive image and
it is hoped that this handbook will branding benefits continue to exist for
facilitate their ability to comply with companies that operate effective CSR
the CSR clause of the Companies Act, programmes. This allows companies
to position themselves as responsible
2013.
corporate citizens.
5 Guidelines on Corporate Social Responsibility and
Sustainability for Central Public Sector Enterprises
-http://www.recindia.nic.in/download/DPE_Guide-
lines_CSR_Sust.pdf
8 PwC
Global principles and guidelines The UN Guiding Principles on Business and Institute of Social and Ethical Account-
A comprehensive guidance for companies Human Rights ability: AccountAbility’s AA1000 series of
standards
pertaining to CSR is available in the form The UN guiding principles provide assistance
of several globally recognised guidelines, to states and businesses to fulfil their existing This is a series of standards which enable or-
frameworks, principles and tools, some of obligations towards respecting and protecting ganisations to become accountable, responsible
which are discussed below. It must be noted human rights and fundamental freedoms and and sustainable. It consists of the (i) AA1000
comply with the existing laws. These principles accountability principles (AP) standard (ii)
that most of these guidelines relate to the
act as global standards for addressing the risk AA1000 assurance standard (AS) (iii) AA1000
larger concept of sustainability or business of human rights violation related to business stakeholder engagement (SE) standard. Since
responsibility, in keeping with the fact that activity. In circumstances when these laws these standards have been formulated through
these concepts are closely aligned globally are breached or the guidance is not adhered a multi-stakeholder consultation process, they
with the notion of CSR. to, suitable remedies have also been recom- ensure that those impacted (that is, enter-
mended. The primary focus is on the protec- prises, governments and civil societies) stand
UNGC tion of human rights by both, the state and the to gain. The Vodafone Group Plc has adopted
UNGC is world’s largest corporate citizenship business enterprises, and the principles broadly the AA1000AP standard by focussing on three
initiative with the objective to mainstream the outline the manner in which the framework can broad areas: (i) inclusivity (stakeholder en-
adoption of sustainable and socially responsible be implemented. gagement to develop and implement a strategic
policies by businesses around the world. The 10 approach to sustainability) (ii) materiality
For more details refer the website of Office of
principles of the UN Global Compact have been (assess the management effort required for
the High Commissioner for Human Rights7
derived from various UN conventions such as each material issue and determine the content
the Universal Declaration of Human Rights, ILO’s tripartite declaration of principles on of sustainability reports) (iii) responsiveness
ILO’s Declaration on Fundamental Principles multinational enterprises and social policy (respond with solutions to material issues and
and Rights at Work, the Rio Declaration on This is another voluntary declaration whose challenges).
environment and development, and the UN adoption by governments, employers and mul- For more details refer the website of Account-
Convention Against Corruption. These prin- tinational organisations is encouraged, with the Ability10
ciples cover four broad areas: intention of further ensuring labour and social
standards. This is particularly for organisations Social Accountability International (SAI): SA
• Human rights (support and respect the 8000 Standard
protection of international human rights that operate across multiple countries. Focus is
and ensure that business is not complicit on core labour standards such as (i) freedom of This is one of the world’s first auditable social
with human rights abuses) association and the right to collective bargain- certification standard. It is based on ILO, UN
ing (prohibition of discrimination, bonded and and national law conventions, and adopts
• Labour rights (uphold the freedom of as- forced labour) (ii) industrial relations (no trade a management system approach in order to
sociation and effective recognition of the union restrictions, regular discussions between ensure that companies that adopt this approach
right to collective bargaining, elimination management and labour, and the provision of also comply with it. This standard ensures the
of all forms of forced and compulsory a forum to lodge complaints in case of labour protection of basic human rights of workers.
labour, effective abolition of child labour standard violation) (iii) employment opportu- The nine basic elements of this standard in-
and elimination of description in respect nities (creation of job security, improved living clude (i) child labour (ii) forced and compul-
of employment and occupation) and working conditions and ensuring that sory labour (iii) health and safety (iv) freedom
• Environment (support a precautionary wages are on par with those of other enter- of association and the right to collective
approach to environmental challenges, prises in the same country). bargaining (v) discrimination (vi) disciplinary
undertake initiatives to promote greater practices (vii) working hours (viii) remunera-
For more details refer the website of ILO8
environmental responsibility and encour- tion (ix) management systems. According to
OECD Guidelines: Multinational enterprises SAAS, there are 695 facilities in India that have
age the development of environmental
friendly technology) OECD Guidelines for multinational enterprises been accredited with this standard. Out of
elaborate on the principles and standards for these, Aditya Birla Chemicals (India) Limited,
• Governance (work against corruption in Bhilai Steel Plant Steel Authority of India
responsible business conduct for multinational
all forms, including bribery and extor- Limited, Birla tyres, Dr Reddy’s Laboratories
corporations. These guidelines were recently
tion). Limited and Reliance Infrastructure Limited
updated in 2011. They cover areas such as
For more details refer the website of UNGC 6 employment, human rights, environment, figure prominently in the list of certified facili-
information disclosure, combating bribery, ties within India.
consumer interests, science and technology, For more details refer the website of SAI11
competition and taxation. They contain defined
standards for socially and environmentally
responsible corporate behaviour, and also pro-
vide procedures for resolving disputes between
corporations and communities or individuals
adversely impacted by business activities.
For more details refer the website of OECD9
6 www.unglobalcompact.org/
7 http://www.ohchr.org/Documents/Publications/GuidingPrinciplesBusinessHR_EN.pdf
8 http://www.ilo.org/empent/Publications/WCMS_094386/lang--en/index.htm
9 http://oecdwatch.org/about-oecd/guidelines
10 http://www.accountability.org/standards/
11 http://www.sa-intl.org/index.cfm?fuseaction=Page.ViewPage&PageID=937
Handbook on Corporate Social Responsibility in India 9
ISO 26000: Social responsibility The SROI Network National Voluntary Guidelines on Social,
This is a guidance tool provided by the ISO The SROI Network is a framework based on Environmental and Economic Responsibili-
which enables organisations to understand the social generally accepted accounting principles ties of Business
meaning and significance of social responsi- (SGAAP) that can be used to help manage and These guidelines rolled-out by the Ministry
bility. It is important to note that this is not a understand the social, economic and environ- of Corporate Affairs in India, were developed
certification but only a guiding tool. Hence, or- mental outcomes created by an organisation or through an extensive consultative process with
ganisations which comply with these standards a person. In order to increase the social value or the objective of providing a distinctive India-
are self-certified. It covers six core areas of impact of a task, SROI helps in understanding, centric approach for Indian businesses to un-
social responsibility, including (i) human rights managing and communicating the social value derstand the nuances of responsible business,
(ii) labour practices (iii) environment (iv) fair that a particular task creates in a clear and applicable to large and small businesses alike.
operating practices (v) consumer issues (vi) consistent way with customers, beneficiaries They are easy to comprehend and implement,
community involvement and development. and funders. It also helps in managing risks and and encourage businesses to adopt the triple
This ensures a holistic approach to the concept identifying opportunities and raise finances. bottom line approach. These guidelines consist
of social responsibility and sustainable develop- It flags potential improvements to services, of nine principles which relate to ethics and
ment. information systems and the way to govern the transparency, product life cycle sustainability,
businesses. By forecasting the value a company employee well-being, stakeholder engagement,
For more details refer the website of ISO12
expects to create using SROI, one can identify human rights, environmental stewardship,
OECD CSR policy tool the areas where changes are required and a responsible policy advocacy, inclusive develop-
The OECD CSR policy tool aims to help comparison of performance against forecasts ment and consumer well-being. Each principle
companies gain insight into their current CSR will help create additional value. consists of core elements that further articulate
activities, assess its value and determine other the purpose and sense of each principle. It
For more details refer the website of SROI15
CSR activities that can be employed. This policy also provides an approach for adopting these
tool is based on the OECD Guidelines and the The LBG model guidelines.
ISO26000 implementation guidelines. The re- Companies across the world adopt LBG’s For more details refer the website of MCA17
sult of the policy tool is a complete CSR policy, measurement model in order to assess the real
including an action plan with tasks, responsi- value and impact of their community invest-
bilities and a communication strategy plan. ment to both, the business and society. This
model helps companies to understand the total
For more details refer the website of OECD13
amount of cash, time and in-kind invested with-
Global Compact Self-Assessment Tool in the community, and enables them to under-
The Global Compact Self Assessment Tool is an stand the geographic spread of their commu-
easy-to-use guide designed for use by compa- nity support and the kind of themes supported
nies of all sizes and across sectors committed such as education, health and arts and culture.
to upholding the social and environmental Through this model, companies can track the
standards within their respective operations. manner in which their community programme
The tool consists of 45 questions with a set of supports wider business goals such as building
three to nine indicators for each question. It employee morale or creating reputational
consists of a ‘management section’ and four advantages. Also, it helps to measure the differ-
other sections, including human rights, labour, ence their programmes make to the community
environment and anti-corruption that relate to at large. Under this model, member companies
the principles of the UN Global Compact. The share data and best practices which in turn help
tool is in line with the UN Guiding Principles in the benchmarking process.
on Business and Human Rights. For a small For more details refer the website of LBG16
company, this tool acts as a measure of the
company’s performance in all areas of the UN
Global Compact and how well these issues are
managed. For a large organisation, this tool
helps to continuously improve existing policies
and systems, engage subsidiaries, suppliers or
other stakeholders, and improves internal and
external reporting.
For more details refer the website of Global
Compact Self-Assessment Tool14
12 http://www.iso.org/iso/home/standards/iso26000.htm
13 http://www.oecdguidelines.nl/get-started/creating-a-csr-policy/
14 http://www.globalcompactselfassessment.org/aboutthistool
15 http://www.thesroinetwork.org/117-home/all-regions/167-why-should-i-use-sroi10
16 http://www.lbg-online.net/about-lbg.aspx
17 http://www.mca.gov.in/Ministry/latestnews/National_Voluntary_Guidelines_2011_12jul2011.pdf
10 PwC
Clause 135,
Companies Act,
2013
12 PwC
guidelines to be followed by companies activities, including the expenditure, the Reporting
while developing their CSR programme. type of activities, roles and responsibilities
The new Act requires that the board of the
of various stakeholders and a monitoring
The CSR committee will be responsible company shall, after taking into account
mechanism for such activities. The CSR
for preparing a detailed plan on CSR the recommendations made by the CSR
committee can also ensure that all the kinds
committee, approve the CSR policy for
of income accrued to the company by way of
the company and disclose its contents in
CSR activities should be credited back to the
their report and also publish the details
community or CSR corpus.
on the company’s official website, if any,
in such manner as may be prescribed. If
the company fails to spend the prescribed
amount, the board, in its report, shall
specify the reasons.
Role of the board and the CSR committee
Business responsibility
reporting
Net worth > 500 Crore INR
Turnover > 1000 Crore INR The other reporting requirement
Net profit > 5 Crore INR mandated by the government of
India, including CSR is by the SEBI
which issued a circular on 13 August
2012 mandating the top 100 listed
companies to report their ESG
Role of the board CSR committee initiatives. These are to be reported
in the form of a BRR as a part of the
annual report. SEBI has provided a
template for filing the BRR. Business
responsibility reporting is in line with
Form a CSR commiittee Three or more directors with at least one
independent director
the NVG published by the Ministry
Approve the CSR policy of Corporate Affairs in July 2011.
Formulate and recommend a CSR Provisions have also been made in
Ensure implementation of the activties policy to the board the listing agreement to incorporate
under CSR
Recommend activities and the amount
the submission of BRR by the relevant
Ensure 2% spend of expenditure to be incurred companies. The listing agreement
also provides the format of the BRR.
Disclose reasons for not spending the Monitor the CSR policy from time to The BRR requires companies to report
amount (if applicable) time
their performance on the nine NVG
principles. Other listed companies
have also been encouraged by SEBI
to voluntarily disclose information
on their ESG performance in the BRR
format.
14 PwC
CSR: Planning and This is an excellent starting point for any • repetitive processes such as the
company new to CSR. In case a company annual CSR policy, due diligence of
strategising the implementation partner, project
already practices CSR, this committee
The first step towards formalising CSR should be set up at the earliest so that it development, project approval,
projects in a corporate structure is the can guide the alignment of the company’s contracting, budgeting and payments,
constitution of a CSR committee as per the monitoring, impact measurement and
activities with the requirements of the Act.
specifications in the Companies Act, 2013, reporting and communication
clause 135. For effective implementation, the CSR
A set of such enabling processes, their
committee must also oversee the systematic
inter-relationships and the sequence in
Background development of a set of processes and
which they need to be developed have been
guidelines for CSR to deliver its proposed
Clause 135 of the Companies Act, 2013 identified below:
value to the company, including:
requires a CSR committee to be constituted
• one-time processes such as developing
by the board of directors. They will be
the CSR strategy and operationalising
responsible for preparing a detailed plan the institutional mechanism
of the CSR activities including, decisions
regarding the expenditure, the type of CSR processes
activities to be undertaken, roles and
responsibilities of the concerned individuals
and a monitoring and reporting mechanism.
The CSR committee will also be required to
ensure that all the income accrued to the 1
company by way of CSR activities is credited
Developing a CSR strategy
and policy + Operationalising the
institutional mechanism
back to the CSR corpus.
Report consolidation
5 Impact measurement + and communication
16 PwC
Activities • Determining the implementation Step two: Operationalising the
mechanism: institutional mechanism
• Reviewing the past as well as the
current CSR activities and examining -- grant-making or direct
their alignment with Schedule VII of implementation
Purpose
the Companies Act, 2013. In order for a corporate to gain the greatest
-- institutional mechanism: in-house
• Studying the publicly available leverage and a strategic advantage through
department, corporate foundation,
information on national and local the investment of intellectual and financial
partnerships with other NGOs
development priorities. resources, they are required to select their
• Annually developing a CSR policy in implementation mechanism. In terms of
• Meeting development experts in the
line with the Companies Act, 2013 rules implementation mechanism, a company has
government as well as the NGOs to
that defines programmes, geographies
understand priorities and identifying several options, which are permitted under
and budgets for the following financial
potential areas of intervention. the CSR draft rules:
year, aligned with the strategy and
• Conducting internal meetings with ensuring that the 2% requirement of • Self-execution through:
business leaders to establish the funds allocation is met
relevance of potential CSR activities to -- an in-house CSR department
• Establish methods for monitoring and
the company’s core business. -- a company foundation with execution
reporting
• Studying the good CSR practices capabilities
of other companies and their Tools, technical guidance and • Making grants to an independent
achievements. standards to be used: implementation partner (which has a
• Developing a CSR strategy that defines • The 10 principles of the UN global track record of at least three years).
for the next three to five years, what compact • The grants can be made:
the company’s CSR activities will cover
in terms of: • UN guiding principles on business -- directly by an in-house CSR
and human rights department
-- vision and mission
• ILO tri-partite declaration of -- through the company’s grant-making
-- sectors and issues principles on multinational foundation
-- geographies: states and districts enterprises and social policy
The factors that a company needs to
-- beneficiaries • OECD CSR policy tool consider while deciding between in-house
-- KPIs • Global compact self assessment execution and grant-making (whether
by the department or the company
• Clause 135, Companies Act, 2013 foundation) are as follows:
18,19 The non-profit organization formerly known as Section 25 companies are now called Section 8 companies after the introduction of Companies Act, 2013.
18 PwC
Issue Sub-issue Description
Competence of the Geography Capacity, expertise and the number of years of experience with the geography under consideration
implementation Sector Capacity, expertise and the number of years of experience with the sector under consideration
partner Issue Capacity, expertise and the number of years of experience with the issue under consideration
History of existence The number of years the implementation partner has been in existence
Legal identity The organisation is registered either as a trust, a society or Section 8 company, a charitable company,
Identity a co-operative society or is unregistered
Affiliations The desired level of affiliation with governments, local administration and international bodies
Litigations Any ongoing litigation
Composition of the board Number of members, advisors, term of members and advisors and board renewal procedures
Profile of the board Bios of the members on the board, their number of years and depth of experience and relevant
members and advisors achievements
Diversity in expertise The expertise available at the disposal of the board for development activities
Board meetings Regularity of meetings, attendance records and recent topics of discussion
Management
Vision, mission and The management outlines its vision, mission and strategy in its operational plans or other documents.
strategy These plans are communicated to all relevant employees
Experience of the The management personnel responsible for the day-to-day activities have the necessary depth of
management experience and skill set to manage the current and the future growth plans.
Conflict of interest Any conflict of interest between the board members, the advisors or the management personnel with
the company. There is no conflict of interest with the local governments.
Transparency Transparency Awareness of the disclosure and the transparency requirements for all stakeholders (including
regulators and funders) like periodic reporting, external audits and ratings
Financial statements Availability of audited financial statements
Adequacy of reserves A formalised and institutionalised system for keeping reserves for times of financial need
Financial capability Section 12A registration Status of Section 12A registration
80G registration Status of 80G registration.
FC(R)A registration Status of the registration with the Foreign Contribution (Regulation) Act 2010.
A more detailed due-diligence can also • studying the books of accounts and the Step four: Project development
undertake the evaluation of the following auditor’s report
five issues: Purpose
Output(s):
• organisation structure The CSR strategy of a company will be
• a due diligence report
implemented through a series of projects
• operations, systems and processes Activities: which will have definite beginnings, ends,
• human resource expected outputs and outcomes as well as
• Establishing a due diligence criteria
• financial capability to evaluate the implementation or budgets associated with it. These projects
concept development agency including may be of a short duration (a few months)
• risk management its incorporation, permits and licenses, or multi-year.
CII and Credibility Alliance’s guidelines for systems, processes, public image,
management, team deployment, A company may choose to implement
identifying NGO partners are mentioned in
track record, financial soundness, projects through its in-house teams or
Appendix 4.
competence level, presence in desired in partnership with other agencies or a
Process geography, compatibility with company combination of both. Whatever path it
CSR policy and any conflicts of interest. takes, it is important for the project to be
Objective: Selecting the implementation
• Establishing a due diligence criteria developed clearly with distinct baselines,
partner.
for evaluation and empanelment of defined activities, ‘monitorable’ targets and
Process owners: The CSR department or private funders for partnership and budgets. In the case of multi-year projects,
Company Foundation joint projects. it is important to include a provision to
Inputs: • Evaluating the partnership undertake annual reviews which can form
opportunities for its risks and benefits. the basis to revise the project.
• the CSR strategy and policy
• discussions with communities, board, Tools, technical guidance and
staff, other funders, local government standards to be used:
officials, local leaders or influencers, • To be tailored as per corporate
auditors requirements.
Handbook on Corporate Social Responsibility in India 19
Process • Detailing the project: the objectives, Inputs:
the beneficiaries and the impact on
Objective: Developing a feasible project • a project proposal
the beneficiaries, the assumptions,
proposal. the expected outputs and outcomes, • a due diligence report
Process owners: The implementation detailed activities, potential to Output(s): An approved project proposal
agency (the CSR department, company influence public policy and practice.
including a monitoring process and
foundation or the NGO partner) • Identifying the indicators of success reporting and responsibility for this.
with the means of verification and
Inputs: establish the baseline for each. This can Activities:
• the CSR policy be commissioned as a separate study • Determining the delegation of power
or can even be included in the needs for the project approval.
• institutional mechanisms
assessment stage.
• information from the government • Establishing an evaluation framework
• Estimating the budget and how it will for the appraisal of the project concepts
sources, previous studies done in the
be funded specifying the community and implementing agencies that ensure
area, etc
contributions, leveraging of the complete alignment with the CSR
• information on programs targeting government schemes and contributions policy.
similar geographies and beneficiary from the other donors.
groups or strategies • Establishing tests for the theory of
• Indicating the monitoring and change; whether the concept will be
• monitoring impact measurement evaluation methodologies for impact able to deliver the intended results.
reports from any earlier projects measurement. Establishing tests for the value for
Output(s): money, economy, effectiveness and
Tools, technical guidance and efficiency.
A project proposal that details: standards to be used: • Reviewing risks and mitigation
• a project context including the roles of • Social return on investments (SROI), measures.
other development actors the SROI network • Identifying resource availability
• key needs of the target beneficiaries • Global impact investing network and any specific organisational
• project goals, KPIs, baselines and (GIIN) requirements and constraints.
expected end lines
• ISO 26000: social responsibility • Laying down organisational supervision
• project milestones for progress and oversight requirements.
monitoring purposes Step five: Project approval
Tools, technical guidance and
• activities and timelines to achieve the
stated project goals
Purpose standards to be used:
Every project, whether developed by the • To be tailored as per corporate
• budgets along with the basis for
estimation in-house team or an external agency, must requirements.
be formally examined and approved. This
• risks and mitigation strategies Step six: Finalising the
is to ensure that each project is in line with
• progress reporting: content, frequency the CSR strategy and policy, the monitoring arrangement with the
Activities: indicators are clearly defined and relevant implementing agency
and there is an adequate budget available.
• Developing a framework to identify Projects that go on for longer durations Purpose
key stakeholder groups including the
or demand a larger amount of resources While working with an external agency,
local community, the local government
or bodies, academia and research must be scrutinised more carefully than the it is very important to enter into a formal
institutions, investors, etc. others. arrangement which is referred to here
• Conducting a needs assessment (if The CSR committee is ultimately the as a Memorandum of Understanding or
required) to assess development one responsible for every project. It can, MoU. It defines the roles, responsibilities,
priorities. The methodology for this can however, choose to delegate authority to deliverables, commitments and
be participatory processes, surveys or a a project approval committee consisting consequences in case of any breach. This is
combination of the two. of company staff and outside experts with essentially a formal acknowledgement that
• Studying and adopting good practices clearly defined roles and responsibilities. all the partners have voluntarily consented
to address similar challenges based on to work together to achieve an agreed
prior experiences or lessons available Process outcome that requires each one to play their
from other practitioners and develop Objective: Approve the project based on respective roles.
the approach. the CSR policy objectives, principles and The term MoU is used more generically
guidelines. here to refer to the arrangements between
Process owners: The CSR committee or the partners which can range from a formal,
delegated project approval committee. legally enforceable contract on the one hand
to a simple exchange of written documents
20 PwC
on the other. However, what is important Process To ensure objectivity, it is critical that the
for the company to keep in mind is that monitoring is done by someone other
Objective: Agree upon and sign the MoU than the people directly engaged in the
it is entering into an arrangement with a
with the partner. project implementation. In cases where
partner, not a supplier and there is a greater
sense of mutuality in this relationship. Process owners: The CSR department or the implementation is done by a partner or
company foundation corporate foundation, this role can either be
It may also be noted that the MoU is
outsourced or played by the company’s CSR
relevant only if the project is being Inputs:
department. In case the CSR department
implemented by a legal entity other than • an approved project proposal itself is implementing a project, then
the company’s own CSR department. It
• a due diligence report monitoring should either be outsourced to
must also be executed if the project is being
a third party or the department structure
implemented by the company foundation if Output(s): MoU with the implementing
should include an independent monitoring
it is a separate legal entity. agency including the disbursement
cell. This decision should be taken by the
schedule.
Disbursement scheduling CSR committee.
Activities:
For a project to deliver the desired results, Process
it should have sufficient funds to carry out • Developing template MoUs based
on the context. Specify the outputs Objective: Monitoring progress, distilling
the planned activities. At the same time,
and outcomes, the approach and lessons and forming the basis for reporting.
having excess funds in the bank account
methodology, the KPIs, key parameters Process owners: The CSR committee
is not prudent financial management.
to be monitored and reported, the
Thus, the scheduling of disbursements is mode of communication, contract Inputs:
important both for the company (to plan its management team, scope of change
cash flows from the CSR budget) and the • The approved project proposal
in management procedures, dispute
implementing agency and hence needs to be or conflict resolution mechanisms, • Previous monitoring reports
detailed in the MOU. inspection and audit requirements,
Output(s):
contract closeout requirements, time-
A good practice suggests that the scheduling lines, milestones and deliverables, • Determining mid-course corrections
of disbursements should be linked with budgets, process of invoicing and
the activities planned for the each period; • Recommendations for future project
release of payments, etc designs
this can be a quarter, six months or a
• Establishing a process for negotiation • Project monitoring reports to the CSR
year depending upon the administrative
of the MoU with the implementing
convenience and budget sizes. Thus, the committee
agency.
project budget needs to be broken up Activities:
accordingly and the funds required for the • Negotiating, agreeing upon and signing
subsequent period should be made available the MoU • Determining the monitoring schedule
for each project based on the approved
in advance. Tools, technical guidance and project proposal.
Actual disbursements have to then be linked standards to be used:
• Obtaining all relevant progress reports
to the progress on the ground. The MoU • To be tailored as per corporate from the project, studying them and
should also specify the conditions that the requirements. making a note of the gaps.
implementing agency should fulfil and the
• Holding discussions with the
documentation it should provide in support Step seven: Progress monitoring implementation team on reasons for
of a disbursement request. Typically, these
and reporting slippages (if any) and agreeing on a
include the status of: corrective action. This may be done
• activities originally planned in the Purpose through a field visit or remotely, based
period on what has been agreed in the MoU.
Routine progress monitoring serves the
• changes and the reasons thereof following three important purposes: • Holding discussions with the
implementation team regarding what
• planned and required funds for the • It highlights any slippages and helps to lessons are emerging and how they can
period determine a corrective action that must be applied within the project as well as
be taken if need be.
• utilised funds and bank balances outside.
• It provides an excellent opportunity
• net funds required for learning: what worked and what Tools, technical guidance and
did not. This can then be immediately
standards to be used:
applied to other projects.
• To be tailored as per corporate
• This is an essential part of the directors’
report as per the CSR clause of the requirements.
Companies Act, 2013
22 PwC
CSR and SMEs
20. http://articles.economictimes.indiatimes.com/2013-06-09/news/39834857_1_smes-workforce-small-and-medium-enterprises
21. http://www.business-standard.com/article/sme/smes-to-get-professional-help-on-corporate-social-responsibility-108060501090_1.html
24 PwC
certain extent as the other partners The steps other than the guidelines
can increase their share in case there mentioned by the steering committee in the
is variance in allocation from a certain section “CSR: Planning and strategising” of
segment of the cluster. The long- this handbook, include the following:
term programmes also have greater
impact than the short-term projects. • Deciding the thematic areas from
Communities are increasingly realising Schedule VII of the Companies
the importance of the support offered Act, 2013, beneficiary groups and
by these programmes in making their geographies that it will target based on
lives better. Long-term programmes the inputs from participants.
also lead to better community relations • Developing internal processes to track
and this ensures avoiding situations individual contribution by members
of community unrest that hamper and their utilisation in CSR activities,
business activities. finalising long-term projects based on
• Learning from experiences: A common projected contributions by members
entity with multiple participants from and addressing non-payment by
the cluster will help assess community members.
needs, undertake relevant programmes The CSR policy of individual SMEs should
based on past experiences and address be designed to allow for flexibility in case of
a greater number of community issues.
a collaborative effort to undertake CSR. This
Collaboration among the SMEs in a cluster implies that the policy, over and above the
also provides an opportunity to manage guidelines mentioned in the section “Step
social and environmental issues and one: Develop CSR strategy and policy”,
respond better to the pressure from buyers, should allow the following:
who are trying to establish ethical supply • Flexibility in selecting thematic areas
chains and gain appreciation from the from Schedule VII of Companies
international community. Collaborations Act, 2013, beneficiary groups and
can also be forged amongst larger geographies as per the priorities of the
companies, possibly through industry entire association.
associations, to enable them to address • Support to initiate CSR programmes
common issues plaguing a geographical to the extent possible, in case the
region or an industry. association is abandoned.
The process for an SME The next steps involved in the due
diligence of implementation or the concept
The first step involved in collaborating is to
development partner are:
create an alliance of interested SMEs. This
may be initiated by the cluster association • Project development
in case of large-scale participation from the • Operationalising institutional
cluster. Alternatively, it can be initiated by mechanism
an individual SME in case there are only • Contracting
a few units interested in undertaking CSR
activities in collaboration. Involvement of • Budgeting and payments
the cluster association will ensure that the • Monitoring
local priorities are given due consideration • Impact measurement
while developing CSR programmes. In case
a sufficient number of SMEs in a cluster do Reporting and communication are as
described in section “CSR: Planning and
not wish to participate or are not required
strategising”
under the Companies Act, 2013 to spend
on CSR activities, the boundary may be In cases where the total CSR funds
extended to other clusters, though this are insufficient to cover the cost of
increases complexity. collaboration, SMEs can also contribute to
the Prime Minister’s National Relief Fund
The alliance should then form a steering
or any other fund set up by the central
committee with the representatives from
government or the state governments as
each SME so as to democratically decide on
per activity ix of the Schedule VII of the
issues. The steering committee should study
Companies Act, 2013.
the institutional method of implementation,
i.e. undertaking activities through an
established trust, society, a Section 8
company or forming a new entity or directly
managing the funds.
Handbook on Corporate Social Responsibility in India 25
Appendix 1
Comparative analysis of the three choices for legal entity
Objectives Social benefits and charitable Literary, charitable, scientific and Nonprofit activities
resource oriented
Re-amendment Alteration can be undertaken only Easy, legal procedures Complicated, legal procedures
or modification of by the founder or settler
objects
Required members Minimum = 2, maximum = no limit Minimum = 7, maximum = no limit Minimum = 7, maximum = no limit
Registration As trust with the registrar As society with society registrar As per Companies Act under Section 8 (earlier
Section 25)
Stamp duty 4% of trust property value will be No stamp paper required for No stamp paper required for memorandum and
executed in non judicial stamp paper memorandum of association, and articles of association
with the registrar rules and regulations
Name Easy to choose Easy to choose Prior approval required from Registrar of
Companies
Management board Trustees Governing body Board of directors and management
committee
Succession in By election By election By appointment
management
Meetings No provisions Annual meeting as per law, Quite extensive as per the provision of
governing body meeting as per the Company Law
rules of society,
Statutory regulations Nominal Limited Maturable and exhaustive
Membership transfer Not possible Not possible Free or control as per desire
Member admission Not applicable Governing body control General body or board control through issue
of capital
Payment to members As notified in trust deed Not restricted As approved by company and state
22 The non-profit organizsation formerly known as Section 25 companies are now called Section 8 companies after the introduction of Companies Act,
2013.
26 PwC
Appendix 2
Designing a volunteering programme
A community can be defined as a Steps for robust community engagement Key activities
homogenous group of individuals bound
Assess the local context: Understanding the • Undertake socioeconomic assessment.
together geographically, politically,
characteristics and complexities of the local • Map local communities and networks.
culturally or by certain values, principles or landscape and use this information for strategic
shared characteristics. For the purposes of • Map key institutions engaged with local
planning of community engagement. communities.
this discussion, we define community as the
collection of stakeholders who reside in the • Identify potential partners.
local vicinity of company operations and Involve communities: Support and facilitation • Identify objectives of community engagement
who rely on or are impacted by its shared of the process of community-driven planning to and its guiding principles.
resources. enable communities to define their own goals, • Enable community planning, visioning and
identify opportunities and assets they plan to prioritisation through participatory methods.
Community engagement is defined as utilise or share, and prioritise areas of potential • Manage community expectations and
a process in which the needs, priorities engagement with the company and other local perceptions.
and values of various individuals (not development actors.
directly associated with or dependent
on a given company) and that of other Identify and categorise key stakeholders: • Identify and segment various target groups.
external organisations in a community Creation of a list of the individuals, groups, and • Undertake needs assessment.
are incorporated into corporate decision- institutions that could affect or be affected by any
making and management activities. community engagement project. This step identi-
fies and generates knowledge about individuals
and local organisations in order to understand
Tools, technical guidance and their behaviours, intentions, inter-relations and
standards to be used: interests.
• Participatory rural appraisal • Develop a baseline.
Set operational parameters: Setting up the • Identify the company and any shared assets
• Focus group discussions
scope and target of such an engagement in line available.
• Door-to-door surveys with the activities a company will support. • Identify investment areas and budgets.
• Develop key performance indicators.
• Select implementation model: in-house or
Project implementation: Identifying the foundation, implementation partner, multi-
best way to deliver a project in view of several stakeholder partnership, any other hybrid
variables, such as the objectives of community model.
engagement, project timeframe, budget and local • Engage and influence key opinion leaders in
operating context. local community.
• Develop community forums.
• Invest in capacity building of community.
• Co-design detailed development projects with
community participation.
• Operationalise development projects and
manage project cycle.
Measure and communicate results: Monitoring • Document results on key performance
and evaluation to use the information collected indicators.
in future planning and communicating these • Calculate social return on investments.
results to all stakeholders including the com- • Develop communications strategy to
munity, the company and other development periodically disseminate information to
partners. community and other stakeholders.
28 PwC
Appendix 4
CII and Credibility Alliance’s guidelines for identifying NGO partners
1. Identity: The NGO should exist and be • The organisation is not for profit and • Signed audited statements are prepared
registered under the appropriate law its resources are deployed only for annually and available on request:
under which it is governed. It should accomplishing the objectives for which balance sheet, income and expenditure
comply with the provisions of the Act it has been formed. statement, receipts and payments
and other relevant laws. account, schedules to these, notes on
• The organisation has attained
accounts and the statutory auditor’s
• The organisation has been functioning recognition under Section 12A of the
report.
for a minimum of one year from the Income Tax Act. (80G of the Income Tax
date of registration. Act is preferable). • Statement of accounts indicating
whether constructed on a cash or
• The physical address given by the • Minutes of board meetings are
accrual basis.
organisation is verifiable. documented and circulated.
• There are no serious adverse notes on
• The organisation is registered as a trust • The board approves programmes,
the veracity of the functioning of the
or society or Section 25 company. budgets, annual activity reports and
organisation.
audited financial statements.
• Registration certificates and documents
• There are no material transactions
issued by the appropriate authority are • The board ensures the organisation’s
involving conflict of interest between a
available upon request. compliance with applicable laws and
board or staff member and/or adverse
statutory regulations.
2. Vision, aims, objectives, comment and observation relating to
achievements: The vision, purpose and • All pending legal disputes are declared. operational issues or financial dealing
aims of the NGO should be explicitly in the record of public authority.
4. Operations: Operations refer to the
stated and be reflected in the activities capacity to conduct programmes and • The organisation’s annual report is
being undertaken. administrative activities efficiently and distributed and communicated to
• A vision, purpose or mission, which effectively in the public interest. The stakeholders and others and is made
drives the organisation, is articulated NGO should have norms in respect available upon request every year,
beyond the registration documents in to the nature of the programme it within eight months of the end of the
the form of activities and projects, etc. undertakes, the nature and style of organisation’s financial year.
its management; and the roles and
• The organisation has a defined aim and • The annual report contains a
responsibilities of its human resources
a set of objectives. description of the main activities, a
including personnel and volunteers.
• The organisation is able to show review of the progress and results
• The activities are in line with the vision, achieved in the year and information
performance through defined indicators
aim and objectives of the organisation. on board member names, positions,
against stated objectives.
• The organisation periodically reviews remuneration or reimbursement as well
3. Governance: There must be a as brief financial details.
the progress of programmes.
clear commitment towards good
governance for the NGO to enhance its • The accounts of the organisation are • The NGO shall disclose their funding
effectiveness, serve all stakeholders, regularly maintained and those with an details i.e. the sources of funds,
meet the needs of society and to ensure annual income above 50,000 INR are annual revenue (O&M) and project
its accountability towards society in audited by the chartered accountant. expenditure. The organisation shall
accordance with its charter of objects produce timely reports on the use and
• The roles and responsibilities management of funds which should be
and purposes. are defined for all personnel and made available on request.
• The organisation has a governing volunteers.
board. • Dovetailing with government schemes
• All personnel are issued letters of will be preferred.
• The organisation follows a consultative contract and appointment.
and democratic decision-making • The NGO should give out accurate
• An appropriate HR policy is in place. information regarding their projects
process.
5. Accountability and transparency: i.e. survey reports, target population,
• There is disclosure of the details of location, sustainability of the projects,
Accountability and transparency are
board members viz, name, age, gender, their success ratio, etc on request.
key requirements of good governance
position and occupation. All family and necessary for building trust among The organisation should be ready to
affiliations should be indicated. stakeholders. This works as a testimony submit an affidavit by the authorised
• The board has at least two meetings to the fact that the organisation has signatory attesting to the authenticity of
a year suitably spaced with quorum been working efficiently and effectively. the information given.
stipulated in its own articles of • A financial management policy has
association, reviewing the functioning been developed and is adhered to.
of the NGO, evaluating the projects
undertaken by them and discussing the
way forward.
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