Overview of

Corporate Social Responsibility

Presentation by : S. Ravi, FCA
Corporate Social Responsibility (CSR): Definitions
‘The continuing commitment by business to behave ethically and contribute to
economic development while improving the quality of life of the workforce and
their families as well as of the local community and society at large’.
– World Business Council For Sustainable Development

‘A commitment to improve community well being through discretionary

business practices and contributions of corporate resources’.
– Philip Kotler and Nancy Lee (2005)

‘A way companies manage the business processes to produce an overall positive

impact on society.’
– Mallen Baker, Founding Director, Business Respect

‘A multi layered concept that can be differentiated into four interrelated aspects
– economic, legal, ethical and philanthropic responsibilities’.
– Archie Carroll (1991)

Overview of Corporate Social Responsibility

By: S. Ravi, FCA 2
 The Pyramid of CSR

Philanthropic Contribute resources to the

(Be a good corporate community, improve quality
citizen) of life

Ethical Obligation to do what is

(Be ethical) right, just and fair

Legal Law is society’s codification of

(Obey the law) right and wrong

Economic The foundation upon

(Be profitable) which all others rest

Overview of Corporate Social Responsibility

By: S. Ravi, FCA 3
 Second Phase
First Phase
(1914-1960)
(1850-1914)
Largely influenced by Mahatma
Driven by noble deeds Gandhi’s theory of trusteeship.
of philanthropists and charity Industrialists pressurized to show
their dedication towards the
benefit of the society
Four Phases of
CSR
Development in
India
Fourth Phase
Third Phase
(1980 until the present)
(1960 – 1980)
Indian companies
CSR influenced by the
integrated CSR into a sustainable
emergence of Public sector
business strategy. What started as
undertakings to ensure proper
charity is now understood and
distribution of wealth
accepted as responsibility.

Overview of Corporate Social Responsibility

By: S. Ravi, FCA 4
 Current state of CSR in India
 Priority of business is getting widened from 1 P to 3 Ps by inclusion
of People and Planet with Profit.
 Short-term, charity based welfare interventions are being replaced by
long-term, empowerment – based CSR.
 Based on the realization that business cannot succeed in a society
that fails, CSR is being considered as an imperative for carrying on
business in the society rather than as a charity.
 The new Companies bill passed by both Lok Sabha and Rajya Sabha
mandates the corporates to spend 2% of their average net profits of
the last three financial years towards CSR. This is applicable for
companies with a turnover of 1000 Cr/ PAT of 5 Cr/ or net worth of
500 cr. The new bill replaces the Companies act 1956 and emphasizes
carrying forward the agenda of Corporate Social Responsibility.

Overview of Corporate Social Responsibility

By: S. Ravi, FCA 5
 Current state of CSR in India
 It is mandatory for Central Public Sector Enterprises to allocate 2-3%
of the PAT for the inclusive development of a backward district (CSR
& Sustainability guidelines by Department of Public Enterprises 2013),
in which one key project has to be in CSR and the other in
Sustainability for the development of the disadvantaged and
marginalized communities.

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By: S. Ravi, FCA 6
 CSR Importance and its Relevance Today
CSR as a strategy is becoming increasingly important for
businesses today because of three identifiable trends

• Consumers and society in general expect more from

1. the companies whose products they buy. This sense has
Changing increased in the light of recent corporate scandals,
social which reduced public trust of corporations, and
expectations reduced public confidence in the ability of regulatory
bodies and organizations to control corporate excess.

• This is true within developed nations, but also in

comparison to developing nations. Affluent consumers
2. can afford to pick and choose the products they buy. A
Increasing society in need of work & inward investment is less
affluence likely to enforce strict regulations and penalize
organizations that might take their business & money
elsewhere.
Overview of Corporate Social Responsibility
By: S. Ravi, FCA 7
 CSR Importance and its Relevance Today
CSR as a strategy is becoming increasingly important for
businesses today because of three identifiable trends

• Growing influence of media sees any mistakes’ by

companies brought immediately to the attention of
3.
the public. In addition, the Internet fuels
Globalization communication among like-minded groups and
and free flow
of Information consumers - empowering them to spread their
message, while giving them the means to co-ordinate
collective action.

Overview of Corporate Social Responsibility

By: S. Ravi, FCA 8
Few Key Steps to Implement CSR Successfully

 Better communication between top management and

organisation
 Appoint for CSR position
 Good relationship with customer, supplier, stakeholder
 Annual CSR audit
 Feedback process

Overview of Corporate Social Responsibility

By: S. Ravi, FCA 9
 Companies Bill and CSR

Allow corporates to harness

and channelize their core Promote and facilitate far
competencies as well as better connect between
develop effective business businesses and communities
models

Purpose of
Inclusion of CSR
in the
Companies Bill

Assist in synergizing
Facilitate deeper thought and
partnerships between
longer term strategies for
Corporates, Governments, Civil
addressing some of our most
Society Organizations,
persistent social, economic and
Academic Institutions and
environmental problems
Social Entrepreneurs

Overview of Corporate Social Responsibility

By: S. Ravi, FCA 10
 Companies Bill and CSR – Clause 135

Every Company
With

Net Worth of Turnover of Net Profit of

Rs. 500 Rs. 1000 Rs. 5 Crores
Crores or Crores or or more
more more

During any 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 be an independent director.

Overview of Corporate Social Responsibility

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 Companies Bill and CSR
Activities Required for Qualifying Companies
Duty of the Board
 Disclose the composition of the CSR
Committee in its report
 Approve the Company’s CSR policy after
considering the recommendations of the
committee
 Disclose the CSR policy in its report and on
Company Website
 Ensure the implementation of the policy
 To spend at least 2% of the Company’s average
profit for the last 3 financial years for this
purpose
 Give preference to spending in local areas
where it operates
 Specify reasons in report in case of failure
Overview of Corporate Social Responsibility
By: S. Ravi, FCA
Duty of the Corporate Social
Responsibility Committee
 Formulate and recommend a CSR
Policy to the Board indicating the
activities to be undertaken by the
Company
 Recommend the amount of
expenditure to be incurred on
CSR related activities
 Monitor the Company’s CSR
policy from time to time.
12
Companies Bill – Permissible CSR Activities
Schedule VII of the Companies Bill requires the CSR policy created by
the CSR committee involve at least one of the following focus areas:

 Eradicating extreme hunger and poverty;

 Promotion of education;
 Promoting gender equality and empowering women;
 Reducing child mortality and improving maternal health;
 Combating [HIV], [AIDS], malaria and other diseases;
 Ensuring environmental sustainability;
 Employment-enhancing vocational skills;
 Social business projects;
 Contribution to the Prime Minister’s National Relief Fund or any other
fund set up by the Central Government or the state governments for
socioeconomic development, and relief and funds for the welfare of the
Scheduled Castes, the Scheduled Tribes, other backward classes, minorities
and women; and
 Such other matters as may be prescribed.

Overview of Corporate Social Responsibility

By: S. Ravi, FCA 13
 Points of Concern
 The Companies Bill does not define CSR only contains a list of activities
that may be included by a company in its CSR policy. The bill does not
prescribe the proportion of funds to be contributed towards any activity.
 2% spending on CSR is not mandatory for Companies, the rules are in
line with the ‘Comply or Explain’ principle with penalties applicable only if
an explanation is not offered. This could really be an escape clause for
companies not meeting the necessary CSR requirements.
 Tax treatment to CSR spending by companies whether it is to be treated
as non-deductible income since it is an allocation of profit, or, whether it
is to be treated as an allowable expenditure under the Income Tax Act.
 Even central public sector enterprises, subject to CSR norms under
separate guidelines, will, on enactment of the bill, come within the
purview of these new provisions.

Overview of Corporate Social Responsibility

By: S. Ravi, FCA 14
 Tax Exemption
 Section 80G of Income Tax Act – Donations

 This section does not restrict the deduction to individuals, companies or any
specific category of taxpayer.Allowable to all kind of Assessee.
 Donations made to foreign trusts do not quality for deduction under
this section.
 Deduction cannot be claimed for donations made to political
parties for any reason, including paying for brochures, souvenirs or pamphlets
brought out by such parties.
 Only donation made to prescribed funds and institutions qualify
for deduction.
 Maximum allowable deduction:- If aggregate of the sums donated exceed
10% of the adjusted gross total income, the amount in excess of 10% ceases
to be entitled for tax benefit.
 Only donations in cash/ cheque are eligible for the tax deduction.
 NRIs are also entitled to claim tax benefits against donations, subject
to the donations being made to eligible institutions and funds.

Overview of Corporate Social Responsibility

By: S. Ravi, FCA 15
 Tax Exemption
 Section 35 AC of Income Tax Act – Expenditure on eligible
projects/ schemes
 To promote reinvestment of business profits in areas where massive capital
input is required for socio-economic development, a tax incentive has been
provided under Section 35AC of the Income Tax Act, 1961.
 The section provides that where an assessee incurs any expenditure by
way of payments of any sum to:
i) a public sector company or;
ii) a local authority or;
iii) to an association/ institution approved by the National Committee
for carrying out any eligible project or scheme for promoting the social and
economic welfare or upliftment of the public as the Central Government may
specify, then the amount so paid shall be allowed as deduction from the
business income of the assessee/ contributor of such amount.

Overview of Corporate Social Responsibility

By: S. Ravi, FCA 16
Public Sector Undertakings – Key Contributors To
Socio-Economic Development of India & CSR

 The government of India formed public sector undertakings (PSUs)

with the purpose of building industrial capacity, creating employment
opportunities and improving the socio-economic condition.
 Both, central public sector enterprises (CPSEs) and state level PSUs
have played a vital role in supporting the socio-economic development
of the country. They are actively involved in various areas of CSR such
as education, healthcare, improving infrastructure, social
empowerment, vocational training and environmental protection
among others.
 With a high degree of support from the government, CSPEs acts as a
catalyst of social enterprise by providing such diverse services for
grass root development.

Overview of Corporate Social Responsibility

By: S. Ravi, FCA 17
Public Sector Undertakings – Key Contributors
To Socio-Economic Development of India & CSR

 Over the past two decades, India has emerged as one of the world’s
strongest emerging markets and PSUs have played a vital role in
achieving this growth and development.
 In order to sustain this growth, CSR initiatives have become
important as they form a crucial part of the companies’ strategic
decision-making process. In order to integrate this into their business
models and achieve the nation’s aim of inclusive growth, the revised
CSR and sustainability guidelines issued by the Department of Public
Enterprises (DPE) in December 2012 (effective April 2013) are
expected to play a crucial role. The revised guidelines has urged
the CPSEs to embrace a robust CSR practice that is in the
interest of all stakeholders.

Overview of Corporate Social Responsibility

By: S. Ravi, FCA 18
 Key Highlights of the Revised CSR and
Sustainability Guidelines for CPSEs
 CPSEs expected to formulate their policies with a balanced
emphasis on all aspects of CSR and Sustainability – equally with
regard to their internal operations, activities and processes, as well
as in their response to externalities. Earlier guidelines focused
mainly on CSR activities for external stakeholders.
 Earlier, CSR and sustainable development treated as two separate
subject areas and were dealt with differently for the purpose of
memorandum of understanding (MoU) evaluation. However, now
they are combined into a single set of guidelines for greater
transparency.

Overview of Corporate Social Responsibility

By: S. Ravi, FCA 19
 Key Highlights of the Revised CSR and
Sustainability Guidelines for CPSEs
 The revised CSR and sustainability budgetary allocation for CPSEs is as
under:
PAT of CPSE Budgetary allocation
in the previous year (as % of PAT in previous year)
Less than Rs. 100 Crore 3% - 5%
Rs. 100 Crore to Rs. 500 Crore 2% - 3%
Rs. 500 Crore and above 1% - 2%

 CPSEs to take up at least one major project mandatorily for

development of a backward district.
 CPSEs expected to act in a socially responsible manner at all times. Even
in their normal business activities, CPSEs should try to conduct business
in a manner that is beneficial to both, business and society.

Overview of Corporate Social Responsibility

By: S. Ravi, FCA 20
 Key Highlights of the Revised CSR and
Sustainability Guidelines for CPSEs
 CPSEs have to disclose the reasons for not fully utilizing the budget
allocated for CSR and Sustainability activities for a year. Further, if the
CPSEs are unable to spend the earmarked amount for CSR in a
particular year, it would have to spend the amount in the next two
financial years, failing which, it would be transferred to ‘Sustainability
Fund’.
 Emphasis is placed on the scalability of CSR and Sustainability projects, in
terms of their size and impact, rather than on their numbers.
 Employees to avail the infrastructure facilities created by the company
from its CSR and Sustainability budget, provided the facilities are
originally created essentially for the external stakeholders, and the use of
these facilities by the CPSE’s employees (internal stakeholders) is only
incidental and confined to less than 25 percent of the total number of
beneficiaries.

Overview of Corporate Social Responsibility

By: S. Ravi, FCA 21
 SEBI - Making CSR Reporting Compulsory
 SEBI vide its circular CIR/CFD/DIL/8/2012 dated August13, 2012 has made it
mandatory for top 100 listed companies (by market capitalization) to
report certain critical information as part of their business responsibility.
 This includes how much the company is spending on CSR as a percentage of
its net profit, the number of stakeholders' complaints received and resolved,
details of any pending case filed by stakeholder against any unfair trade
practice, irresponsible advertising or anti-competitive behaviour adopted by
the company.
 The provisions of this circular shall be applicable with effect from financial year
ending on or after December 31, 2012.
 This will enable the shareholders to have a better understanding of the
manner in which their companies' function and adopt responsible business
practices.
 The circular exhorts the companies to follow the national voluntary
guidelines on social, environmental and economic responsibility that
have been formulated by Ministry of Corporate Affairs in July 2011.

Overview of Corporate Social Responsibility

By: S. Ravi, FCA 22
 World Bank - CSR Initiatives

According to the World Bank, “Corporate social responsibility is the

commitment of business to contribute to sustainable economic development
by working with employees, their families, the local community and society at
large to improve their lives in ways that are good for business and for
development”.
 The World Bank in India is working with the Department
of Public Enterprises (DPE), GoI, to evolve CSR policies
and guidelines through its knowledge missions and
advocacy initiatives. They together are working to create an
institution that will undertake capacity building for CSR in Public
Sector Enterprises and to develop a strong communications
strategy for the CSR work of Public Sector Enterprises.

Overview of Corporate Social Responsibility

By: S. Ravi, FCA 23
 World Bank - CSR Initiatives
 The Ministry of Corporate Affairs has also set up through the
Indian Institute of Corporate Affairs, the National
Foundation for CSR in partnership with the World Bank. The
mission of the foundation includes building an enabling environment
for the corporate sector to work in partnership with the government,
non- governmental & civil society organizations and local communities
towards goal of inclusive growth, reduction of poverty, and
achievement of Millennium Development Goals.
 The World Bank is supporting the GoI to develop and
coordinate CSR activities across the country through
workshops, knowledge missions, international seminars and training
programs to bring about learning from international best practices and
experiences as well as evolving CSR concepts worldwide and CSR
policies evolved by Govts world over.

Overview of Corporate Social Responsibility

By: S. Ravi, FCA 24
 What the Companies should do?

 Determining the Corpus earmarked for CSR

 Identifying the areas/activities for CSR
– Education, Healthcare, Social business project,
Donation, Environmental Sustainability, Employment
etc.
 Identifying the Agencies
 Baseline Survey
 Dispersing
 Monitoring and Impact Analysis

Overview of Corporate Social Responsibility

By: S. Ravi, FCA 25
 Some of the Positive Outcomes That can Arise
When Businesses Adopt a Policy of Social
Responsibility and Sustainability
Company Benefits

• Improved financial performance

• Lower operating costs
• Enhanced brand image and reputation
• Increased sales and customer loyalty
• Greater productivity and quality
• More ability to attract and retain employees
• Reduced regulatory oversight
• Access to capital
• Workforce diversity
• Product safety and decreased liability

Overview of Corporate Social Responsibility

By: S. Ravi, FCA 26
 Some of the Positive Outcomes That can Arise
When Businesses Adopt a Policy of Social
Responsibility and Sustainability
Benefits to Community Environmental Benefits
and General Public
• Charitable contributions • Greater material recyclability
• Employee volunteer • Better product durability and
programs functionality
• Corporate involvement in • Greater use of renewable
community education, resources
employment and • Integration of environmental
homelessness programs management tools into business
• Product safety and quality plans, including life-cycle
assessment and costing,
environmental management
standards, and eco-labeling
Overview of Corporate Social Responsibility
By: S. Ravi, FCA 27
CSR and Sustainability Initiatives - Examples

 Tata Consultancy Services

The Adult Literacy Program (ALP) was conceived and set up by Dr.
F C Kohli along with Prof. P N Murthy & Prof. Kesav Nori of TCS in
May 2000 to address the problem of illiteracy. ALP believes illiteracy
is a major social concern affecting a third of the Indian population
comprising old and young adults. To accelerate the rate of learning,
it uses a TCS-designed Computer–Based Functional Literacy
Method (CBFL), an innovative teaching strategy that uses
multimedia software to teach adults to read within about 40
learning hours.

Overview of Corporate Social Responsibility

By: S. Ravi, FCA 28
CSR and Sustainability Initiatives - Examples
 Larsen & Toubro (L & T) Limited
Considering that construction industry is the second largest employer in India
after agriculture, employing about 32 million-strong workforce, L&T set out to
regulate and promote Construction Vocational Training (CVT) in India by
establishing a Construction Skills Training Institute (CSTI) on a 5.5 acre land,
close to its Construction Division Headquarters at Manapakkam, Chennai. CSTI
imparts, totally free of cost, basic training in formwork, carpentry, masonry, bar-
bending, plumbing and sanitary, scaffolder & electrical wireman trades to wide
spectrum of the rural poor.
CSTI has also set up a branch at Panvel, Mumbai, initially offering training in
formwork, carpentry and masonry trades. The Manapakkam and Panvel facilities
together provide training to about 300 candidates annually who are inducted
after a process of selection, the minimum qualification being tenth standard.
Since inception, these two units have produced about 2,000 skilled workmen in
various trades, with about sixty percent of them being deployed to L&T’s
jobsites spread across the country.

Overview of Corporate Social Responsibility

By: S. Ravi, FCA 29
CSR and Sustainability Initiatives - Examples
 ITC Limited
ITC partnered the Indian farmer for close to a century. ITC is now engaged
in elevating this partnership to a new paradigm by leveraging information
technology through its trailblazing 'e-Choupal' initiative. ITC is significantly
widening its farmer partnerships to embrace a host of value-adding activities:
 Creating livelihoods by helping poor tribals make their wastelands
productive;
 Investing in rainwater harvesting to bring much-needed irrigation to
parched dry lands;
 Empowering rural women by helping them evolve into entrepreneurs; and
 Providing infrastructural support to make schools exciting for village
children.
Through these rural partnerships, ITC touches the lives of nearly 3 million
villagers across India.

Overview of Corporate Social Responsibility

By: S. Ravi, FCA 30
CSR and Sustainability Initiatives - Examples
 CISCO System Inc.
The company pursues a strong “triple bottom line” which is
described as profits, people and presence. It promotes a culture of
charitable giving and connects employees to nonprofit organizations
serving the communities where they live. It invests its best-in-class
networking equipment to those nonprofit organizations that best
put it to work for their communities, eventuating in positive global
impact. It takes its responsibility seriously as a global citizen.
Education is a top corporate priority for Cisco, as it is the key to
prosperity and opportunity.

Overview of Corporate Social Responsibility

By: S. Ravi, FCA 31
CSR and Sustainability Initiatives - Examples
Successful companies allocate resources to ensure well being of
stakeholders which also enables the company to acquire a key
differentiator vis-à-vis its competition, thereby making the business
sustainable.
 Tata Chemicals and HUL pioneered iodization of salt to combat iodine
deficiency. Their market campaign to change the mindset of BPL
customers to pay a little extra for the pack of iodized salt was clearly
laudable. These efforts not only increased their market share and
profitability but at the same time addressed an important nutritional issue
of national importance.
 Hindustan Unilever (HUL), for example, invests in research working with
nutrition and health specialists to further improve its “ready to eat” food
business, enhance hygiene through its “regular hand wash” campaign, etc.
These initiatives not only position its products distinctively against the
competitors and enhance brand equity, but also ensure well being of
customers and the environment.
Overview of Corporate Social Responsibility
By: S. Ravi, FCA 32
CSR and Sustainability Initiatives - Examples

Linking sustainability to business strategy can also improve access

to supply chains.
 In order to combat the global shortage of pulp-wood for paper
board production, ITC and Ballarpur Industries are helping small
farmers with degraded land pieces by providing them saplings,
financial and technical support and an assured buy back of timber.
This ensures sustainable raw material supply for the company, and
also improves farmer’s livelihood.

Overview of Corporate Social Responsibility

By: S. Ravi, FCA 33
CSR and Sustainability Initiatives - Examples

Social initiatives can also help enhance ethical values in society

and at the same time can offer a distinctive edge to companies.
 Fluor Corporation, one of the largest construction companies in
the world, worked for three decades with Transparency
International to fight corruption; today its “anti-corruption”
movement has 150 large companies across industries having signed
a “zero-tolerance” policy on bribery. In industries marred by
corruption, Flour is today perceived as an ethical player, thereby
positioning itself with a significant competitive advantage.

Overview of Corporate Social Responsibility

By: S. Ravi, FCA 34
CSR and Sustainability Initiatives - Examples
Socially responsible initiatives has potential to improve
employability in the society and at the same time provide
companies access to skilled labor, a key driver of profitability
across many industry sectors.
 Maruti has recently adopted forty Industrial Training Institutes (ITI)
which not only enhances skill level of youth making them
employable, but also guarantees supply of skilled personnel to
Maruti. Similar investments in skills development training are made
by companies like Microsoft, Infosys,Tata Steel and L&T.

Rather than paying donations, using core strengths to address

social issues is the best form of sustainable corporate social
responsibility.

Overview of Corporate Social Responsibility

By: S. Ravi, FCA 35
 Thank You

Overview of Corporate Social Responsibility

By: S. Ravi, FCA 36