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www.pwc.<strong>in</strong><br />
Handbook <strong>on</strong><br />
Corporate Social<br />
Resp<strong>on</strong>sibility <strong>in</strong><br />
India
Message from the Chairman<br />
CII’s Development Initiative Council<br />
A robust and thriv<strong>in</strong>g development sector is central to India’s quest for equitable, <strong>in</strong>clusive<br />
and susta<strong>in</strong>able growth. India’s development sector has evolved substantially over the last few<br />
decades and is now witness<strong>in</strong>g unprecedented <strong>in</strong>terest and <strong>in</strong>vestments across the value cha<strong>in</strong>.<br />
With the passage of the Companies Act, 2013 the mandate for <strong>corporate</strong> <strong>social</strong> resp<strong>on</strong>sibility<br />
(CSR) has been formally <strong>in</strong>troduced to the dashboard of the Boards of Indian companies. The<br />
<strong>in</strong>dustry has resp<strong>on</strong>ded positively to the reform measure undertaken by the government with a<br />
wide <strong>in</strong>terest across the public and private sector, Indian and mult<strong>in</strong>ati<strong>on</strong>al companies.<br />
The practice of CSR is not new to companies <strong>in</strong> India. However, what this Act does is br<strong>in</strong>g<br />
more companies <strong>in</strong>to the fold. Also, it is likely that the total CSR spends will <strong>in</strong>crease. What is<br />
clear to many companies is that if this <strong>in</strong>creased spend<strong>in</strong>g is to achieve results <strong>on</strong> the ground<br />
– which is the <strong>in</strong>tent of the Act – then it needs to be d<strong>on</strong>e strategically, systematically and<br />
thoughtfully.<br />
It is <strong>in</strong> this c<strong>on</strong>text, that the ‘Handbook <strong>on</strong> Corporate Social Resp<strong>on</strong>sibility <strong>in</strong> India’ developed<br />
by PwC India for CII can play an important role. The CII be<strong>in</strong>g the lead<strong>in</strong>g <strong>in</strong>dustry body,<br />
through this <str<strong>on</strong>g>handbook</str<strong>on</strong>g>, envisages equipp<strong>in</strong>g companies for this shift of structured engagement<br />
with communities. This <str<strong>on</strong>g>handbook</str<strong>on</strong>g> is aimed both at companies that are veteran CSR<br />
practiti<strong>on</strong>ers as well as those that are just enter<strong>in</strong>g the fray. It suggests steps to develop a CSR<br />
strategy and Policy and identifies the key build<strong>in</strong>g blocks for <strong>in</strong>itiat<strong>in</strong>g and develop<strong>in</strong>g the CSR<br />
programs. It walks the CSR practiti<strong>on</strong>er through some of the key choices that may be required<br />
to be made while pursu<strong>in</strong>g CSR objectives and develop an organisati<strong>on</strong> that is <strong>social</strong>ly sensitive<br />
and resp<strong>on</strong>sible.<br />
Build<strong>in</strong>g a society which provides equal access to opportunities negates disparities and, is a<br />
collective resp<strong>on</strong>sibility. This Act presents a unique opportunity to stand up to the challenge. It<br />
is a call for acti<strong>on</strong>. And this <str<strong>on</strong>g>handbook</str<strong>on</strong>g> is a significant step <strong>in</strong> that directi<strong>on</strong>.<br />
Rakesh Bharti Mittal<br />
Chairman, CII’s Development Initiative Council and<br />
Vice Chairman and Manag<strong>in</strong>g Director, Bharti Enterprises
Message from the Mentor and<br />
Chairman Emeritus<br />
Fortis Healthcare Limited<br />
The c<strong>on</strong>stituti<strong>on</strong>al structure of the country was laid with an objective of <strong>on</strong>e man equals <strong>on</strong>e<br />
vote, equals <strong>on</strong>e value. However the socio-ec<strong>on</strong>omic realities of the country still have a l<strong>on</strong>g<br />
way to go to match this visi<strong>on</strong> of <strong>in</strong>dependent India where today there are many first am<strong>on</strong>g<br />
equals. The country presently is under <strong>in</strong>tense debate of developmental growth versus welfare<br />
based development. Our political realities and our ec<strong>on</strong>omic senses are at cross-roads. How do<br />
we strike a balance between the two? The choices we make today are go<strong>in</strong>g to <strong>in</strong>fluence our<br />
generati<strong>on</strong>s to come.<br />
Every s<strong>in</strong>gle major policy <strong>in</strong>itiative <strong>in</strong> this country has been driven with a perspective that an<br />
overwhelm<strong>in</strong>g c<strong>on</strong>cern for the disadvantaged and marg<strong>in</strong>alised, a multidimensi<strong>on</strong>al view of<br />
poverty and human deprivati<strong>on</strong>, the focus <strong>on</strong> our fundamental rights and the need to expand<br />
opportunities while ensur<strong>in</strong>g its equal distributi<strong>on</strong> are fundamental for achiev<strong>in</strong>g str<strong>on</strong>g<br />
human development. But disparity, <strong>in</strong>equality and the grow<strong>in</strong>g divide <strong>in</strong> our societies def<strong>in</strong>e<br />
our existence today. The <strong>in</strong>clusi<strong>on</strong> of the CSR mandate under the Companies Act, 2013 is an<br />
attempt to supplement the governments efforts of equitably deliver<strong>in</strong>g the benefits of growth<br />
and to engage the Corporate World with the country’s development agenda.<br />
Philanthropy and CSR is not a novel c<strong>on</strong>cept for Indian companies, however a few<br />
organisati<strong>on</strong>s are likely to struggle. The role of civil society <strong>in</strong> fuell<strong>in</strong>g this change is bound to<br />
be extremely important. With the new <strong>corporate</strong> resources <strong>in</strong> their tool bag much will depend<br />
<strong>on</strong> their ability to <strong>in</strong>novate and adapt.<br />
The <str<strong>on</strong>g>handbook</str<strong>on</strong>g> is a guidance document which will facilitate development of CSR mandate<br />
with<strong>in</strong> organisati<strong>on</strong>s and help streaml<strong>in</strong>e dialogue with<strong>in</strong> the <strong>in</strong>dustry. An addendum will<br />
follow with details of the rules <strong>on</strong>ce the same have been notified by the Government. The<br />
members of the <strong>in</strong>dustry are likely to f<strong>in</strong>d their output helpful, <strong>in</strong>formative and enabl<strong>in</strong>g.<br />
C<strong>on</strong>federati<strong>on</strong> of Indian Industry has been <strong>in</strong> the forefr<strong>on</strong>t <strong>in</strong> sensitis<strong>in</strong>g <strong>in</strong>dustry <strong>on</strong> CSR<br />
and creat<strong>in</strong>g necessary enablers for promot<strong>in</strong>g CSR for over a decade. I am c<strong>on</strong>fident that all<br />
companies will be immensely benefitted from this document too.<br />
I would like to extend my warm appreciati<strong>on</strong> to the PwC team, <strong>in</strong>clud<strong>in</strong>g Sach<strong>in</strong> Shukla,<br />
Sharique Ahmad, Anjan Katna, Ankit Gupta and Shankar Venkateswaran who worked towards<br />
the development of this document.<br />
Harpal S<strong>in</strong>gh<br />
Mentor and Chairman Emeritus,<br />
Fortis Healthcare Limited
List of abbreviati<strong>on</strong>s<br />
BRR<br />
CSR<br />
DPE<br />
EC<br />
ESG<br />
ILO<br />
ISO<br />
LBG<br />
MCA<br />
NVG<br />
OECD<br />
SEBI<br />
SME<br />
SAAS<br />
SGAAP<br />
SROI<br />
UN<br />
UNGC<br />
UNIDO<br />
WBCSD<br />
Bus<strong>in</strong>ess Resp<strong>on</strong>sibility Report<br />
Corporate <strong>social</strong> resp<strong>on</strong>sibility<br />
Department of Public Enterprises<br />
European Commissi<strong>on</strong><br />
Envir<strong>on</strong>mental, <strong>social</strong> and governance<br />
Internati<strong>on</strong>al Labour Organisati<strong>on</strong><br />
Internati<strong>on</strong>al Organisati<strong>on</strong> for Standardisati<strong>on</strong><br />
L<strong>on</strong>d<strong>on</strong> Benchmark<strong>in</strong>g Group model<br />
M<strong>in</strong>istry of Corporate Affairs<br />
Nati<strong>on</strong>al Voluntary Guidel<strong>in</strong>es<br />
Organisati<strong>on</strong> for Ec<strong>on</strong>omic Co-operati<strong>on</strong> and Development<br />
Securities and Exchange Board of India<br />
Small and medium enterprises<br />
Social accountability accreditati<strong>on</strong> services<br />
Social generally accepted account<strong>in</strong>g pr<strong>in</strong>ciples<br />
Social return <strong>on</strong> <strong>in</strong>vestments<br />
United Nati<strong>on</strong>s<br />
United Nati<strong>on</strong>s Global Compact<br />
United Nati<strong>on</strong>s Industrial Development Organisati<strong>on</strong><br />
World Bus<strong>in</strong>ess Council for Susta<strong>in</strong>able Development<br />
C<strong>on</strong>tents<br />
6 What is CSR?<br />
11 The Companies Act, 2013<br />
14 CSR: Plann<strong>in</strong>g and strategis<strong>in</strong>g<br />
23 CSR and SMEs<br />
26 Appendices
About the <str<strong>on</strong>g>handbook</str<strong>on</strong>g><br />
India is a country of myriad c<strong>on</strong>tradicti<strong>on</strong>s. On the <strong>on</strong>e hand, it has grown to<br />
be <strong>on</strong>e of the largest ec<strong>on</strong>omies <strong>in</strong> the world, and an <strong>in</strong>creas<strong>in</strong>gly important<br />
player <strong>in</strong> the emerg<strong>in</strong>g global order, <strong>on</strong> the other hand, it is still home to the<br />
largest number of people liv<strong>in</strong>g <strong>in</strong> absolute poverty (even if the proporti<strong>on</strong><br />
of poor people has decreased) and the largest number of undernourished<br />
children. What emerges is a picture of uneven distributi<strong>on</strong> of the benefits of<br />
growth which many believe, is the root cause of <strong>social</strong> unrest.<br />
Companies too have been the target of those perturbed by this uneven<br />
development and as a result, their c<strong>on</strong>tributi<strong>on</strong>s to society are under<br />
severe scrut<strong>in</strong>y. With <strong>in</strong>creas<strong>in</strong>g awareness of this gap between the haves<br />
and the have-nots, this scrut<strong>in</strong>y will <strong>on</strong>ly <strong>in</strong>crease over time and societal<br />
expectati<strong>on</strong>s will be <strong>on</strong> the rise. Many companies have been quick to sense<br />
this development, and have resp<strong>on</strong>ded proactively while others have d<strong>on</strong>e so<br />
<strong>on</strong>ly when pushed.<br />
Governments as well as regulators have resp<strong>on</strong>ded to this unrest and the<br />
Nati<strong>on</strong>al Voluntary Guidel<strong>in</strong>es for Social, Envir<strong>on</strong>mental and Ec<strong>on</strong>omic<br />
Resp<strong>on</strong>sibilities of Bus<strong>in</strong>ess or the NVGs (accompanied by the Bus<strong>in</strong>ess<br />
Resp<strong>on</strong>sibility Reports mandated by the SEBI for the top 100 companies)<br />
and the CSR clause with<strong>in</strong> the Companies Act, 2013 are two such <strong>in</strong>stances<br />
of the steps taken.<br />
Accord<strong>in</strong>g to Indian Institute of Corporate Affairs, a m<strong>in</strong>imum of 6,000<br />
Indian companies will be required to undertake CSR projects <strong>in</strong> order<br />
to comply with the provisi<strong>on</strong>s of the Companies Act, 2013 with many<br />
companies undertak<strong>in</strong>g these <strong>in</strong>itiatives for the first time. Further, some<br />
estimates <strong>in</strong>dicate that CSR commitments from companies can amount to as<br />
much as 20,000 crore INR.<br />
This comb<strong>in</strong>ati<strong>on</strong> of regulatory as well as societal pressure has meant<br />
that companies have to pursue their CSR activities more professi<strong>on</strong>ally.<br />
This <str<strong>on</strong>g>handbook</str<strong>on</strong>g> attempts to br<strong>in</strong>g together good practices of companies<br />
and grant-mak<strong>in</strong>g foundati<strong>on</strong>s so as to assist companies pursue their CSR<br />
activities effectively, while rema<strong>in</strong><strong>in</strong>g aligned with the requirements of the<br />
Companies Act, 2013.<br />
This <str<strong>on</strong>g>handbook</str<strong>on</strong>g> beg<strong>in</strong>s by build<strong>in</strong>g a comm<strong>on</strong> understand<strong>in</strong>g of the c<strong>on</strong>cept<br />
of CSR, based <strong>on</strong> global practices, Indian traditi<strong>on</strong>, and the <strong>in</strong>tent and<br />
provisi<strong>on</strong>s of the Companies Act, 2013. It then goes <strong>on</strong> to br<strong>in</strong>g out the key<br />
aspects of clause 135 of the Companies Act, 2013 and the recently released<br />
draft rules, and highlights its implicati<strong>on</strong>s to companies.<br />
A major part of the <str<strong>on</strong>g>handbook</str<strong>on</strong>g> focuses <strong>on</strong> the ‘what’ and ‘how’ of strategis<strong>in</strong>g,<br />
plann<strong>in</strong>g, execut<strong>in</strong>g and m<strong>on</strong>itor<strong>in</strong>g the CSR activities of companies. It<br />
provides a detailed guidance (rather than prescripti<strong>on</strong>s) for each of these<br />
processes cover<strong>in</strong>g the follow<strong>in</strong>g:<br />
• Objective of the process<br />
• Process owners<br />
• Key <strong>in</strong>puts and outputs<br />
• Activities or tasks to be covered, <strong>in</strong>clud<strong>in</strong>g methodology and timel<strong>in</strong>es<br />
• Tools, technical guidance or standards to be employed<br />
It also has a secti<strong>on</strong> <strong>on</strong> what small and medium enterprises, some of whom<br />
will be required to comply with the Act, can do collectively.
What is CSR?<br />
6 PwC
What is CSR?<br />
The global c<strong>on</strong>text<br />
While there may be no s<strong>in</strong>gle universally<br />
accepted def<strong>in</strong>iti<strong>on</strong> of CSR, each def<strong>in</strong>iti<strong>on</strong><br />
that currently exists underp<strong>in</strong>s the impact<br />
that bus<strong>in</strong>esses have <strong>on</strong> society at large and<br />
the societal expectati<strong>on</strong>s of them. Although<br />
the roots of CSR lie <strong>in</strong> philanthropic<br />
activities (such as d<strong>on</strong>ati<strong>on</strong>s, charity,<br />
relief work, etc.) of corporati<strong>on</strong>s, globally,<br />
the c<strong>on</strong>cept of CSR has evolved and now<br />
encompasses all related c<strong>on</strong>cepts such as<br />
triple bottom l<strong>in</strong>e, <strong>corporate</strong> citizenship,<br />
philanthropy, strategic philanthropy, shared<br />
value, <strong>corporate</strong> susta<strong>in</strong>ability and bus<strong>in</strong>ess<br />
resp<strong>on</strong>sibility. This is evident <strong>in</strong> some of the<br />
def<strong>in</strong>iti<strong>on</strong>s presented below:<br />
The EC 1 def<strong>in</strong>es CSR as “the resp<strong>on</strong>sibility of<br />
enterprises for their impacts <strong>on</strong> society”. To<br />
completely meet their <strong>social</strong> resp<strong>on</strong>sibility,<br />
enterprises “should have <strong>in</strong> place a process<br />
to <strong>in</strong>tegrate <strong>social</strong>, envir<strong>on</strong>mental, ethical<br />
human rights and c<strong>on</strong>sumer c<strong>on</strong>cerns <strong>in</strong>to<br />
their bus<strong>in</strong>ess operati<strong>on</strong>s and core strategy <strong>in</strong><br />
close collaborati<strong>on</strong> with their stakeholders”<br />
The WBCSD def<strong>in</strong>es CSR as 2 “the c<strong>on</strong>t<strong>in</strong>u<strong>in</strong>g<br />
commitment by bus<strong>in</strong>ess to c<strong>on</strong>tribute to<br />
ec<strong>on</strong>omic development while improv<strong>in</strong>g the<br />
quality of life of the workforce and their<br />
families as well as of the community and<br />
society at large.”<br />
Accord<strong>in</strong>g to the UNIDO 3 , “Corporate<br />
<strong>social</strong> resp<strong>on</strong>sibility is a management<br />
c<strong>on</strong>cept whereby companies <strong>in</strong>tegrate<br />
<strong>social</strong> and envir<strong>on</strong>mental c<strong>on</strong>cerns <strong>in</strong><br />
their bus<strong>in</strong>ess operati<strong>on</strong>s and <strong>in</strong>teracti<strong>on</strong>s<br />
with their stakeholders. CSR is generally<br />
understood as be<strong>in</strong>g the way through which<br />
a company achieves a balance of ec<strong>on</strong>omic,<br />
envir<strong>on</strong>mental and <strong>social</strong> imperatives<br />
(Triple-Bottom-L<strong>in</strong>e Approach), while at<br />
the same time address<strong>in</strong>g the expectati<strong>on</strong>s<br />
of shareholders and stakeholders. In this<br />
sense it is important to draw a dist<strong>in</strong>cti<strong>on</strong><br />
between CSR, which can be a strategic<br />
bus<strong>in</strong>ess management c<strong>on</strong>cept, and charity,<br />
sp<strong>on</strong>sorships or philanthropy. Even<br />
1 http://ec.europa.eu/enterprise/policies/susta<strong>in</strong>ablebus<strong>in</strong>ess/<strong>corporate</strong>-<strong>social</strong>-resp<strong>on</strong>sibility/<strong>in</strong>dex_<br />
en.htm<br />
2 http://www.wbcsd.org/work-program/bus<strong>in</strong>essrole/previous-work/<strong>corporate</strong>-<strong>social</strong>-resp<strong>on</strong>sibility.<br />
aspx<br />
3 http://www.unido.org/what-we-do/trade/csr/whatis-csr.html#pp1[g1]/0/<br />
4 Brundtland Commissi<strong>on</strong>’s Report, 1987<br />
though the latter can also make a valuable<br />
c<strong>on</strong>tributi<strong>on</strong> to poverty reducti<strong>on</strong>, will<br />
directly enhance the reputati<strong>on</strong> of a company<br />
and strengthen its brand, the c<strong>on</strong>cept of CSR<br />
clearly goes bey<strong>on</strong>d that.”<br />
From the above def<strong>in</strong>iti<strong>on</strong>s, it is clear that:<br />
• The CSR approach is holistic and<br />
<strong>in</strong>tegrated with the core bus<strong>in</strong>ess strategy<br />
for address<strong>in</strong>g <strong>social</strong> and envir<strong>on</strong>mental<br />
impacts of bus<strong>in</strong>esses.<br />
• CSR needs to address the well-be<strong>in</strong>g<br />
of all stakeholders and not just the<br />
company’s shareholders.<br />
• Philanthropic activities are <strong>on</strong>ly a part of<br />
CSR, which otherwise c<strong>on</strong>stitutes a much<br />
larger set of activities entail<strong>in</strong>g strategic<br />
bus<strong>in</strong>ess benefits.<br />
CSR <strong>in</strong> India<br />
CSR <strong>in</strong> India has traditi<strong>on</strong>ally been<br />
seen as a philanthropic activity. And <strong>in</strong><br />
keep<strong>in</strong>g with the Indian traditi<strong>on</strong>, it was<br />
an activity that was performed but not<br />
deliberated. As a result, there is limited<br />
documentati<strong>on</strong> <strong>on</strong> specific activities related<br />
to this c<strong>on</strong>cept. However, what was clearly<br />
evident that much of this had a nati<strong>on</strong>al<br />
character encapsulated with<strong>in</strong> it, whether<br />
it was endow<strong>in</strong>g <strong>in</strong>stituti<strong>on</strong>s to actively<br />
participat<strong>in</strong>g <strong>in</strong> India’s freedom movement,<br />
and embedded <strong>in</strong> the idea of trusteeship.<br />
As some observers have po<strong>in</strong>ted out, the<br />
practice of CSR <strong>in</strong> India still rema<strong>in</strong>s with<strong>in</strong><br />
the philanthropic space, but has moved from<br />
<strong>in</strong>stituti<strong>on</strong>al build<strong>in</strong>g (educati<strong>on</strong>al, research<br />
and cultural) to community development<br />
through various projects. Also, with global<br />
<strong>in</strong>fluences and with communities becom<strong>in</strong>g<br />
more active and demand<strong>in</strong>g, there appears<br />
to be a discernible trend, that while CSR<br />
rema<strong>in</strong>s largely restricted to community<br />
development, it is gett<strong>in</strong>g more strategic <strong>in</strong><br />
nature (that is, gett<strong>in</strong>g l<strong>in</strong>ked with bus<strong>in</strong>ess)<br />
than philanthropic, and a large number of<br />
companies are report<strong>in</strong>g the activities they<br />
are undertak<strong>in</strong>g <strong>in</strong> this space <strong>in</strong> their official<br />
websites, annual reports, susta<strong>in</strong>ability<br />
reports and even publish<strong>in</strong>g CSR reports.<br />
The Companies Act, 2013 has <strong>in</strong>troduced<br />
the idea of CSR to the forefr<strong>on</strong>t and<br />
through its disclose-or-expla<strong>in</strong> mandate,<br />
is promot<strong>in</strong>g greater transparency and<br />
disclosure. Schedule VII of the Act, which<br />
lists out the CSR activities, suggests<br />
communities to be the focal po<strong>in</strong>t. On the<br />
other hand, by discuss<strong>in</strong>g a company’s<br />
relati<strong>on</strong>ship to its stakeholders and<br />
<strong>in</strong>tegrat<strong>in</strong>g CSR <strong>in</strong>to its core operati<strong>on</strong>s,<br />
the draft rules suggest that CSR needs<br />
to go bey<strong>on</strong>d communities and bey<strong>on</strong>d<br />
the c<strong>on</strong>cept of philanthropy. It will be<br />
<strong>in</strong>terest<strong>in</strong>g to observe the ways <strong>in</strong> which this<br />
will translate <strong>in</strong>to acti<strong>on</strong> at the ground level,<br />
and how the understand<strong>in</strong>g of CSR is set to<br />
undergo a change.<br />
CSR and susta<strong>in</strong>ability<br />
Susta<strong>in</strong>ability (<strong>corporate</strong> susta<strong>in</strong>ability)<br />
is derived from the c<strong>on</strong>cept of susta<strong>in</strong>able<br />
development which is def<strong>in</strong>ed by the<br />
Brundtland Commissi<strong>on</strong> as “development<br />
that meets the needs of the present without<br />
compromis<strong>in</strong>g the ability of future generati<strong>on</strong>s<br />
to meet their own needs” 4 . Corporate<br />
susta<strong>in</strong>ability essentially refers to the role<br />
that companies can play <strong>in</strong> meet<strong>in</strong>g the<br />
agenda of susta<strong>in</strong>able development and<br />
entails a balanced approach to ec<strong>on</strong>omic<br />
progress, <strong>social</strong> progress and envir<strong>on</strong>mental<br />
stewardship.<br />
CSR <strong>in</strong> India tends to focus <strong>on</strong> what is<br />
d<strong>on</strong>e with profits after they are made. On<br />
the other hand, susta<strong>in</strong>ability is about<br />
factor<strong>in</strong>g the <strong>social</strong> and envir<strong>on</strong>mental<br />
impacts of c<strong>on</strong>duct<strong>in</strong>g bus<strong>in</strong>ess, that is,<br />
how profits are made. Hence, much of the<br />
Indian practice of CSR is an important<br />
comp<strong>on</strong>ent of susta<strong>in</strong>ability or resp<strong>on</strong>sible<br />
bus<strong>in</strong>ess, which is a larger idea, a fact<br />
that is evident from various susta<strong>in</strong>ability<br />
frameworks. An <strong>in</strong>terest<strong>in</strong>g case <strong>in</strong> po<strong>in</strong>t<br />
is the NVGs for <strong>social</strong>, envir<strong>on</strong>mental<br />
and ec<strong>on</strong>omic resp<strong>on</strong>sibilities of bus<strong>in</strong>ess<br />
issued by the M<strong>in</strong>istry of Corporate Affairs<br />
<strong>in</strong> June 2011. Pr<strong>in</strong>ciple eight relat<strong>in</strong>g to<br />
<strong>in</strong>clusive development encompasses most<br />
of the aspects covered by the CSR clause<br />
of the Companies Act, 2013. However, the<br />
rema<strong>in</strong><strong>in</strong>g eight pr<strong>in</strong>ciples relate to other<br />
aspects of the bus<strong>in</strong>ess. The UN Global<br />
Compact, a widely used susta<strong>in</strong>ability<br />
framework has 10 pr<strong>in</strong>ciples cover<strong>in</strong>g<br />
<strong>social</strong>, envir<strong>on</strong>mental, human rights and<br />
governance issues, and what is described as<br />
CSR is implicit rather than explicit <strong>in</strong> these<br />
pr<strong>in</strong>ciples.<br />
Handbook <strong>on</strong> Corporate Social Resp<strong>on</strong>sibility <strong>in</strong> India 7
Globally, the noti<strong>on</strong> of CSR and<br />
susta<strong>in</strong>ability seems to be c<strong>on</strong>verg<strong>in</strong>g, as<br />
is evident from the various def<strong>in</strong>iti<strong>on</strong>s of<br />
CSR put forth by global organisati<strong>on</strong>s. The<br />
genesis of this c<strong>on</strong>vergence can be observed<br />
from the preamble to the recently released<br />
draft rules relat<strong>in</strong>g to the CSR clause with<strong>in</strong><br />
the Companies Act, 2013 which talks<br />
about stakeholders and <strong>in</strong>tegrat<strong>in</strong>g it with<br />
the <strong>social</strong>, envir<strong>on</strong>mental and ec<strong>on</strong>omic<br />
objectives, all of which c<strong>on</strong>stitute the<br />
idea of a triple bottom l<strong>in</strong>e approach. It<br />
is also acknowledged <strong>in</strong> the Guidel<strong>in</strong>es<br />
<strong>on</strong> Corporate Social Resp<strong>on</strong>sibility and<br />
Susta<strong>in</strong>ability for Central Public Sector<br />
Enterprises issued by the DPE <strong>in</strong> April 2013 5 .<br />
The new guidel<strong>in</strong>es, which have replaced<br />
two exist<strong>in</strong>g separate guidel<strong>in</strong>es <strong>on</strong> CSR<br />
and susta<strong>in</strong>able development, issued <strong>in</strong><br />
2010 and 2011 respectively, menti<strong>on</strong>s the<br />
follow<strong>in</strong>g:<br />
“S<strong>in</strong>ce <strong>corporate</strong> <strong>social</strong> resp<strong>on</strong>sibility and<br />
susta<strong>in</strong>ability are so closely entw<strong>in</strong>ed, it can<br />
be said that <strong>corporate</strong> <strong>social</strong> resp<strong>on</strong>sibility<br />
and susta<strong>in</strong>ability is a company’s commitment<br />
to its stakeholders to c<strong>on</strong>duct bus<strong>in</strong>ess <strong>in</strong> an<br />
ec<strong>on</strong>omically, <strong>social</strong>ly and envir<strong>on</strong>mentally<br />
susta<strong>in</strong>able manner that is transparent and<br />
ethical.”<br />
Why is the CSR clause of the<br />
new Companies Act, 2013 so<br />
critical for SMEs?<br />
By requir<strong>in</strong>g companies, with a<br />
m<strong>in</strong>imum net profit of 5 crore INR,<br />
to spend <strong>on</strong> CSR activities, the<br />
Companies Act, 2013 is likely to br<strong>in</strong>g<br />
<strong>in</strong> many SMEs <strong>in</strong>to the CSR fold. This<br />
will usher <strong>in</strong> a fresh set of challenges<br />
to a sector that is <strong>in</strong>creas<strong>in</strong>gly<br />
be<strong>in</strong>g asked by its B2B customers<br />
to comply with envir<strong>on</strong>mental and<br />
<strong>social</strong> standards, while rema<strong>in</strong><strong>in</strong>g<br />
competitive <strong>in</strong> terms of price and<br />
quality. Thus, SMEs will have to<br />
quickly learn to be compliant with<br />
these diverse set of requirements and<br />
it is hoped that this <str<strong>on</strong>g>handbook</str<strong>on</strong>g> will<br />
facilitate their ability to comply with<br />
the CSR clause of the Companies Act,<br />
2013.<br />
5 Guidel<strong>in</strong>es <strong>on</strong> Corporate Social Resp<strong>on</strong>sibility and<br />
Susta<strong>in</strong>ability for Central Public Sector Enterprises<br />
-http://www.rec<strong>in</strong>dia.nic.<strong>in</strong>/download/DPE_Guidel<strong>in</strong>es_CSR_Sust.pdf<br />
8 PwC<br />
Benefits of a robust CSR<br />
programme<br />
As the bus<strong>in</strong>ess envir<strong>on</strong>ment gets<br />
<strong>in</strong>creas<strong>in</strong>gly complex and stakeholders<br />
become vocal about their expectati<strong>on</strong>s,<br />
good CSR practices can <strong>on</strong>ly br<strong>in</strong>g <strong>in</strong> greater<br />
benefits, some of which are as follows:<br />
• Communities provide the licence to<br />
operate: Apart from <strong>in</strong>ternal drivers<br />
such as values and ethos, some of the key<br />
stakeholders that <strong>in</strong>fluence <strong>corporate</strong><br />
behaviour <strong>in</strong>clude governments (through<br />
laws and regulati<strong>on</strong>s), <strong>in</strong>vestors and<br />
customers. In India, a fourth and<br />
<strong>in</strong>creas<strong>in</strong>gly important stakeholder is<br />
the community, and many companies<br />
have started realis<strong>in</strong>g that the ‘licence<br />
to operate’ is no l<strong>on</strong>ger given by<br />
governments al<strong>on</strong>e, but communities<br />
that are impacted by a company’s<br />
bus<strong>in</strong>ess operati<strong>on</strong>s. Thus, a robust CSR<br />
programme that meets the aspirati<strong>on</strong>s<br />
of these communities not <strong>on</strong>ly provides<br />
them with the licence to operate, but<br />
also to ma<strong>in</strong>ta<strong>in</strong> the licence, thereby<br />
preclud<strong>in</strong>g the ‘trust deficit’.<br />
• Attract<strong>in</strong>g and reta<strong>in</strong><strong>in</strong>g employees:<br />
Several human resource studies have<br />
l<strong>in</strong>ked a company’s ability to attract,<br />
reta<strong>in</strong> and motivate employees with<br />
their CSR commitments. Interventi<strong>on</strong>s<br />
that encourage and enable employees<br />
to participate are shown to <strong>in</strong>crease<br />
employee morale and a sense of<br />
bel<strong>on</strong>g<strong>in</strong>g to the company.<br />
• Communities as suppliers: There<br />
are certa<strong>in</strong> <strong>in</strong>novative CSR <strong>in</strong>itiatives<br />
emerg<strong>in</strong>g, where<strong>in</strong> companies have<br />
<strong>in</strong>vested <strong>in</strong> enhanc<strong>in</strong>g community<br />
livelihood by <strong>in</strong>corporat<strong>in</strong>g them <strong>in</strong>to<br />
their supply cha<strong>in</strong>. This has benefitted<br />
communities and <strong>in</strong>creased their <strong>in</strong>come<br />
levels, while provid<strong>in</strong>g these companies<br />
with an additi<strong>on</strong>al and secure supply<br />
cha<strong>in</strong>.<br />
• Enhanc<strong>in</strong>g <strong>corporate</strong> reputati<strong>on</strong>:<br />
The traditi<strong>on</strong>al benefit of generat<strong>in</strong>g<br />
goodwill, creat<strong>in</strong>g a positive image and<br />
brand<strong>in</strong>g benefits c<strong>on</strong>t<strong>in</strong>ue to exist for<br />
companies that operate effective CSR<br />
programmes. This allows companies<br />
to positi<strong>on</strong> themselves as resp<strong>on</strong>sible<br />
<strong>corporate</strong> citizens.
Global pr<strong>in</strong>ciples and guidel<strong>in</strong>es<br />
A comprehensive guidance for companies<br />
perta<strong>in</strong><strong>in</strong>g to CSR is available <strong>in</strong> the form<br />
of several globally recognised guidel<strong>in</strong>es,<br />
frameworks, pr<strong>in</strong>ciples and tools, some of<br />
which are discussed below. It must be noted<br />
that most of these guidel<strong>in</strong>es relate to the<br />
larger c<strong>on</strong>cept of susta<strong>in</strong>ability or bus<strong>in</strong>ess<br />
resp<strong>on</strong>sibility, <strong>in</strong> keep<strong>in</strong>g with the fact that<br />
these c<strong>on</strong>cepts are closely aligned globally<br />
with the noti<strong>on</strong> of CSR.<br />
UNGC<br />
UNGC is world’s largest <strong>corporate</strong> citizenship<br />
<strong>in</strong>itiative with the objective to ma<strong>in</strong>stream the<br />
adopti<strong>on</strong> of susta<strong>in</strong>able and <strong>social</strong>ly resp<strong>on</strong>sible<br />
policies by bus<strong>in</strong>esses around the world. The 10<br />
pr<strong>in</strong>ciples of the UN Global Compact have been<br />
derived from various UN c<strong>on</strong>venti<strong>on</strong>s such as<br />
the Universal Declarati<strong>on</strong> of Human Rights,<br />
ILO’s Declarati<strong>on</strong> <strong>on</strong> Fundamental Pr<strong>in</strong>ciples<br />
and Rights at Work, the Rio Declarati<strong>on</strong> <strong>on</strong><br />
envir<strong>on</strong>ment and development, and the UN<br />
C<strong>on</strong>venti<strong>on</strong> Aga<strong>in</strong>st Corrupti<strong>on</strong>. These pr<strong>in</strong>ciples<br />
cover four broad areas:<br />
• Human rights (support and respect the<br />
protecti<strong>on</strong> of <strong>in</strong>ternati<strong>on</strong>al human rights<br />
and ensure that bus<strong>in</strong>ess is not complicit<br />
with human rights abuses)<br />
• Labour rights (uphold the freedom of associati<strong>on</strong><br />
and effective recogniti<strong>on</strong> of the<br />
right to collective barga<strong>in</strong><strong>in</strong>g, elim<strong>in</strong>ati<strong>on</strong><br />
of all forms of forced and compulsory<br />
labour, effective aboliti<strong>on</strong> of child labour<br />
and elim<strong>in</strong>ati<strong>on</strong> of descripti<strong>on</strong> <strong>in</strong> respect<br />
of employment and occupati<strong>on</strong>)<br />
• Envir<strong>on</strong>ment (support a precauti<strong>on</strong>ary<br />
approach to envir<strong>on</strong>mental challenges,<br />
undertake <strong>in</strong>itiatives to promote greater<br />
envir<strong>on</strong>mental resp<strong>on</strong>sibility and encourage<br />
the development of envir<strong>on</strong>mental<br />
friendly technology)<br />
• Governance (work aga<strong>in</strong>st corrupti<strong>on</strong> <strong>in</strong><br />
all forms, <strong>in</strong>clud<strong>in</strong>g bribery and extorti<strong>on</strong>).<br />
For more details refer the website of UNGC 6<br />
The UN Guid<strong>in</strong>g Pr<strong>in</strong>ciples <strong>on</strong> Bus<strong>in</strong>ess and<br />
Human Rights<br />
The UN guid<strong>in</strong>g pr<strong>in</strong>ciples provide assistance<br />
to states and bus<strong>in</strong>esses to fulfil their exist<strong>in</strong>g<br />
obligati<strong>on</strong>s towards respect<strong>in</strong>g and protect<strong>in</strong>g<br />
human rights and fundamental freedoms and<br />
comply with the exist<strong>in</strong>g laws. These pr<strong>in</strong>ciples<br />
act as global standards for address<strong>in</strong>g the risk<br />
of human rights violati<strong>on</strong> related to bus<strong>in</strong>ess<br />
activity. In circumstances when these laws<br />
are breached or the guidance is not adhered<br />
to, suitable remedies have also been recommended.<br />
The primary focus is <strong>on</strong> the protecti<strong>on</strong><br />
of human rights by both, the state and the<br />
bus<strong>in</strong>ess enterprises, and the pr<strong>in</strong>ciples broadly<br />
outl<strong>in</strong>e the manner <strong>in</strong> which the framework can<br />
be implemented.<br />
For more details refer the website of Office of<br />
the High Commissi<strong>on</strong>er for Human Rights 7<br />
ILO’s tripartite declarati<strong>on</strong> of pr<strong>in</strong>ciples <strong>on</strong><br />
mult<strong>in</strong>ati<strong>on</strong>al enterprises and <strong>social</strong> policy<br />
This is another voluntary declarati<strong>on</strong> whose<br />
adopti<strong>on</strong> by governments, employers and mult<strong>in</strong>ati<strong>on</strong>al<br />
organisati<strong>on</strong>s is encouraged, with the<br />
<strong>in</strong>tenti<strong>on</strong> of further ensur<strong>in</strong>g labour and <strong>social</strong><br />
standards. This is particularly for organisati<strong>on</strong>s<br />
that operate across multiple countries. Focus is<br />
<strong>on</strong> core labour standards such as (i) freedom of<br />
associati<strong>on</strong> and the right to collective barga<strong>in</strong><strong>in</strong>g<br />
(prohibiti<strong>on</strong> of discrim<strong>in</strong>ati<strong>on</strong>, b<strong>on</strong>ded and<br />
forced labour) (ii) <strong>in</strong>dustrial relati<strong>on</strong>s (no trade<br />
uni<strong>on</strong> restricti<strong>on</strong>s, regular discussi<strong>on</strong>s between<br />
management and labour, and the provisi<strong>on</strong> of<br />
a forum to lodge compla<strong>in</strong>ts <strong>in</strong> case of labour<br />
standard violati<strong>on</strong>) (iii) employment opportunities<br />
(creati<strong>on</strong> of job security, improved liv<strong>in</strong>g<br />
and work<strong>in</strong>g c<strong>on</strong>diti<strong>on</strong>s and ensur<strong>in</strong>g that<br />
wages are <strong>on</strong> par with those of other enterprises<br />
<strong>in</strong> the same country).<br />
For more details refer the website of ILO 8<br />
OECD Guidel<strong>in</strong>es: Mult<strong>in</strong>ati<strong>on</strong>al enterprises<br />
OECD Guidel<strong>in</strong>es for mult<strong>in</strong>ati<strong>on</strong>al enterprises<br />
elaborate <strong>on</strong> the pr<strong>in</strong>ciples and standards for<br />
resp<strong>on</strong>sible bus<strong>in</strong>ess c<strong>on</strong>duct for mult<strong>in</strong>ati<strong>on</strong>al<br />
corporati<strong>on</strong>s. These guidel<strong>in</strong>es were recently<br />
updated <strong>in</strong> 2011. They cover areas such as<br />
employment, human rights, envir<strong>on</strong>ment,<br />
<strong>in</strong>formati<strong>on</strong> disclosure, combat<strong>in</strong>g bribery,<br />
c<strong>on</strong>sumer <strong>in</strong>terests, science and technology,<br />
competiti<strong>on</strong> and taxati<strong>on</strong>. They c<strong>on</strong>ta<strong>in</strong> def<strong>in</strong>ed<br />
standards for <strong>social</strong>ly and envir<strong>on</strong>mentally<br />
resp<strong>on</strong>sible <strong>corporate</strong> behaviour, and also provide<br />
procedures for resolv<strong>in</strong>g disputes between<br />
corporati<strong>on</strong>s and communities or <strong>in</strong>dividuals<br />
adversely impacted by bus<strong>in</strong>ess activities.<br />
For more details refer the website of OECD 9<br />
6 www.unglobalcompact.org/<br />
7 http://www.ohchr.org/Documents/Publicati<strong>on</strong>s/Guid<strong>in</strong>gPr<strong>in</strong>ciplesBus<strong>in</strong>essHR_EN.pdf<br />
8 http://www.ilo.org/empent/Publicati<strong>on</strong>s/WCMS_094386/lang--en/<strong>in</strong>dex.htm<br />
9 http://oecdwatch.org/about-oecd/guidel<strong>in</strong>es<br />
10 http://www.accountability.org/standards/<br />
11 http://www.sa-<strong>in</strong>tl.org/<strong>in</strong>dex.cfm?fuseacti<strong>on</strong>=Page.ViewPage&PageID=937<br />
Institute of Social and Ethical Accountability:<br />
AccountAbility’s AA1000 series of<br />
standards<br />
This is a series of standards which enable organisati<strong>on</strong>s<br />
to become accountable, resp<strong>on</strong>sible<br />
and susta<strong>in</strong>able. It c<strong>on</strong>sists of the (i) AA1000<br />
accountability pr<strong>in</strong>ciples (AP) standard (ii)<br />
AA1000 assurance standard (AS) (iii) AA1000<br />
stakeholder engagement (SE) standard. S<strong>in</strong>ce<br />
these standards have been formulated through<br />
a multi-stakeholder c<strong>on</strong>sultati<strong>on</strong> process, they<br />
ensure that those impacted (that is, enterprises,<br />
governments and civil societies) stand<br />
to ga<strong>in</strong>. The Vodaf<strong>on</strong>e Group Plc has adopted<br />
the AA1000AP standard by focuss<strong>in</strong>g <strong>on</strong> three<br />
broad areas: (i) <strong>in</strong>clusivity (stakeholder engagement<br />
to develop and implement a strategic<br />
approach to susta<strong>in</strong>ability) (ii) materiality<br />
(assess the management effort required for<br />
each material issue and determ<strong>in</strong>e the c<strong>on</strong>tent<br />
of susta<strong>in</strong>ability reports) (iii) resp<strong>on</strong>siveness<br />
(resp<strong>on</strong>d with soluti<strong>on</strong>s to material issues and<br />
challenges).<br />
For more details refer the website of Account-<br />
Ability 10<br />
Social Accountability Internati<strong>on</strong>al (SAI): SA<br />
8000 Standard<br />
This is <strong>on</strong>e of the world’s first auditable <strong>social</strong><br />
certificati<strong>on</strong> standard. It is based <strong>on</strong> ILO, UN<br />
and nati<strong>on</strong>al law c<strong>on</strong>venti<strong>on</strong>s, and adopts<br />
a management system approach <strong>in</strong> order to<br />
ensure that companies that adopt this approach<br />
also comply with it. This standard ensures the<br />
protecti<strong>on</strong> of basic human rights of workers.<br />
The n<strong>in</strong>e basic elements of this standard <strong>in</strong>clude<br />
(i) child labour (ii) forced and compulsory<br />
labour (iii) health and safety (iv) freedom<br />
of associati<strong>on</strong> and the right to collective<br />
barga<strong>in</strong><strong>in</strong>g (v) discrim<strong>in</strong>ati<strong>on</strong> (vi) discipl<strong>in</strong>ary<br />
practices (vii) work<strong>in</strong>g hours (viii) remunerati<strong>on</strong><br />
(ix) management systems. Accord<strong>in</strong>g to<br />
SAAS, there are 695 facilities <strong>in</strong> India that have<br />
been accredited with this standard. Out of<br />
these, Aditya Birla Chemicals (India) Limited,<br />
Bhilai Steel Plant Steel Authority of India<br />
Limited, Birla tyres, Dr Reddy’s Laboratories<br />
Limited and Reliance Infrastructure Limited<br />
figure prom<strong>in</strong>ently <strong>in</strong> the list of certified facilities<br />
with<strong>in</strong> India.<br />
For more details refer the website of SAI 11<br />
Handbook <strong>on</strong> Corporate Social Resp<strong>on</strong>sibility <strong>in</strong> India 9
ISO 26000: Social resp<strong>on</strong>sibility<br />
This is a guidance tool provided by the ISO<br />
which enables organisati<strong>on</strong>s to understand the<br />
mean<strong>in</strong>g and significance of <strong>social</strong> resp<strong>on</strong>sibility.<br />
It is important to note that this is not a<br />
certificati<strong>on</strong> but <strong>on</strong>ly a guid<strong>in</strong>g tool. Hence, organisati<strong>on</strong>s<br />
which comply with these standards<br />
are self-certified. It covers six core areas of<br />
<strong>social</strong> resp<strong>on</strong>sibility, <strong>in</strong>clud<strong>in</strong>g (i) human rights<br />
(ii) labour practices (iii) envir<strong>on</strong>ment (iv) fair<br />
operat<strong>in</strong>g practices (v) c<strong>on</strong>sumer issues (vi)<br />
community <strong>in</strong>volvement and development.<br />
This ensures a holistic approach to the c<strong>on</strong>cept<br />
of <strong>social</strong> resp<strong>on</strong>sibility and susta<strong>in</strong>able development.<br />
For more details refer the website of ISO 12<br />
OECD CSR policy tool<br />
The OECD CSR policy tool aims to help<br />
companies ga<strong>in</strong> <strong>in</strong>sight <strong>in</strong>to their current CSR<br />
activities, assess its value and determ<strong>in</strong>e other<br />
CSR activities that can be employed. This policy<br />
tool is based <strong>on</strong> the OECD Guidel<strong>in</strong>es and the<br />
ISO26000 implementati<strong>on</strong> guidel<strong>in</strong>es. The result<br />
of the policy tool is a complete CSR policy,<br />
<strong>in</strong>clud<strong>in</strong>g an acti<strong>on</strong> plan with tasks, resp<strong>on</strong>sibilities<br />
and a communicati<strong>on</strong> strategy plan.<br />
For more details refer the website of OECD 13<br />
Global Compact Self-Assessment Tool<br />
The Global Compact Self Assessment Tool is an<br />
easy-to-use guide designed for use by companies<br />
of all sizes and across sectors committed<br />
to uphold<strong>in</strong>g the <strong>social</strong> and envir<strong>on</strong>mental<br />
standards with<strong>in</strong> their respective operati<strong>on</strong>s.<br />
The tool c<strong>on</strong>sists of 45 questi<strong>on</strong>s with a set of<br />
three to n<strong>in</strong>e <strong>in</strong>dicators for each questi<strong>on</strong>. It<br />
c<strong>on</strong>sists of a ‘management secti<strong>on</strong>’ and four<br />
other secti<strong>on</strong>s, <strong>in</strong>clud<strong>in</strong>g human rights, labour,<br />
envir<strong>on</strong>ment and anti-corrupti<strong>on</strong> that relate to<br />
the pr<strong>in</strong>ciples of the UN Global Compact. The<br />
tool is <strong>in</strong> l<strong>in</strong>e with the UN Guid<strong>in</strong>g Pr<strong>in</strong>ciples<br />
<strong>on</strong> Bus<strong>in</strong>ess and Human Rights. For a small<br />
company, this tool acts as a measure of the<br />
company’s performance <strong>in</strong> all areas of the UN<br />
Global Compact and how well these issues are<br />
managed. For a large organisati<strong>on</strong>, this tool<br />
helps to c<strong>on</strong>t<strong>in</strong>uously improve exist<strong>in</strong>g policies<br />
and systems, engage subsidiaries, suppliers or<br />
other stakeholders, and improves <strong>in</strong>ternal and<br />
external report<strong>in</strong>g.<br />
For more details refer the website of Global<br />
Compact Self-Assessment Tool 14<br />
The SROI Network<br />
The SROI Network is a framework based <strong>on</strong><br />
<strong>social</strong> generally accepted account<strong>in</strong>g pr<strong>in</strong>ciples<br />
(SGAAP) that can be used to help manage and<br />
understand the <strong>social</strong>, ec<strong>on</strong>omic and envir<strong>on</strong>mental<br />
outcomes created by an organisati<strong>on</strong> or<br />
a pers<strong>on</strong>. In order to <strong>in</strong>crease the <strong>social</strong> value or<br />
impact of a task, SROI helps <strong>in</strong> understand<strong>in</strong>g,<br />
manag<strong>in</strong>g and communicat<strong>in</strong>g the <strong>social</strong> value<br />
that a particular task creates <strong>in</strong> a clear and<br />
c<strong>on</strong>sistent way with customers, beneficiaries<br />
and funders. It also helps <strong>in</strong> manag<strong>in</strong>g risks and<br />
identify<strong>in</strong>g opportunities and raise f<strong>in</strong>ances.<br />
It flags potential improvements to services,<br />
<strong>in</strong>formati<strong>on</strong> systems and the way to govern the<br />
bus<strong>in</strong>esses. By forecast<strong>in</strong>g the value a company<br />
expects to create us<strong>in</strong>g SROI, <strong>on</strong>e can identify<br />
the areas where changes are required and a<br />
comparis<strong>on</strong> of performance aga<strong>in</strong>st forecasts<br />
will help create additi<strong>on</strong>al value.<br />
For more details refer the website of SROI 15<br />
The LBG model<br />
Companies across the world adopt LBG’s<br />
measurement model <strong>in</strong> order to assess the real<br />
value and impact of their community <strong>in</strong>vestment<br />
to both, the bus<strong>in</strong>ess and society. This<br />
model helps companies to understand the total<br />
amount of cash, time and <strong>in</strong>-k<strong>in</strong>d <strong>in</strong>vested with<strong>in</strong><br />
the community, and enables them to understand<br />
the geographic spread of their community<br />
support and the k<strong>in</strong>d of themes supported<br />
such as educati<strong>on</strong>, health and arts and culture.<br />
Through this model, companies can track the<br />
manner <strong>in</strong> which their community programme<br />
supports wider bus<strong>in</strong>ess goals such as build<strong>in</strong>g<br />
employee morale or creat<strong>in</strong>g reputati<strong>on</strong>al<br />
advantages. Also, it helps to measure the difference<br />
their programmes make to the community<br />
at large. Under this model, member companies<br />
share data and best practices which <strong>in</strong> turn help<br />
<strong>in</strong> the benchmark<strong>in</strong>g process.<br />
For more details refer the website of LBG 16<br />
Nati<strong>on</strong>al Voluntary Guidel<strong>in</strong>es <strong>on</strong> Social,<br />
Envir<strong>on</strong>mental and Ec<strong>on</strong>omic Resp<strong>on</strong>sibilities<br />
of Bus<strong>in</strong>ess<br />
These guidel<strong>in</strong>es rolled-out by the M<strong>in</strong>istry<br />
of Corporate Affairs <strong>in</strong> India, were developed<br />
through an extensive c<strong>on</strong>sultative process with<br />
the objective of provid<strong>in</strong>g a dist<strong>in</strong>ctive Indiacentric<br />
approach for Indian bus<strong>in</strong>esses to understand<br />
the nuances of resp<strong>on</strong>sible bus<strong>in</strong>ess,<br />
applicable to large and small bus<strong>in</strong>esses alike.<br />
They are easy to comprehend and implement,<br />
and encourage bus<strong>in</strong>esses to adopt the triple<br />
bottom l<strong>in</strong>e approach. These guidel<strong>in</strong>es c<strong>on</strong>sist<br />
of n<strong>in</strong>e pr<strong>in</strong>ciples which relate to ethics and<br />
transparency, product life cycle susta<strong>in</strong>ability,<br />
employee well-be<strong>in</strong>g, stakeholder engagement,<br />
human rights, envir<strong>on</strong>mental stewardship,<br />
resp<strong>on</strong>sible policy advocacy, <strong>in</strong>clusive development<br />
and c<strong>on</strong>sumer well-be<strong>in</strong>g. Each pr<strong>in</strong>ciple<br />
c<strong>on</strong>sists of core elements that further articulate<br />
the purpose and sense of each pr<strong>in</strong>ciple. It<br />
also provides an approach for adopt<strong>in</strong>g these<br />
guidel<strong>in</strong>es.<br />
For more details refer the website of MCA 17<br />
12 http://www.iso.org/iso/home/standards/iso26000.htm<br />
13 http://www.oecdguidel<strong>in</strong>es.nl/get-started/creat<strong>in</strong>g-a-csr-policy/<br />
14 http://www.globalcompactselfassessment.org/aboutthistool<br />
15 http://www.thesro<strong>in</strong>etwork.org/117-home/all-regi<strong>on</strong>s/167-why-should-i-use-sroi10<br />
16 http://www.lbg-<strong>on</strong>l<strong>in</strong>e.net/about-lbg.aspx<br />
17 http://www.mca.gov.<strong>in</strong>/M<strong>in</strong>istry/latestnews/Nati<strong>on</strong>al_Voluntary_Guidel<strong>in</strong>es_2011_12jul2011.pdf<br />
10 PwC
Clause 135,<br />
Companies Act,<br />
2013<br />
Handbook <strong>on</strong> Corporate Social Resp<strong>on</strong>sibility <strong>in</strong> India 11
The Companies Act, 2013<br />
In India, the c<strong>on</strong>cept of CSR is governed<br />
by clause 135 of the Companies Act, 2013,<br />
which was passed by both Houses of the<br />
Parliament, and had received the assent<br />
of the President of India <strong>on</strong> 29 August<br />
2013. The CSR provisi<strong>on</strong>s with<strong>in</strong> the Act<br />
is applicable to companies with an annual<br />
turnover of 1,000 crore INR and more, or a<br />
net worth of 500 crore INR and more, or a<br />
net profit of five crore INR and more. The<br />
new rules, which will be applicable from the<br />
List of activities under Schedule VII<br />
Reduc<strong>in</strong>g child<br />
mortality and<br />
improv<strong>in</strong>g maternal<br />
health<br />
Envir<strong>on</strong>mental<br />
susta<strong>in</strong>ability<br />
Eradicati<strong>on</strong> of extreme<br />
hunger and poverty<br />
And such<br />
other matters<br />
as may be<br />
prescribed<br />
Combat<strong>in</strong>g<br />
HIV-AIDS,<br />
malaria and other<br />
diseases<br />
Social<br />
bus<strong>in</strong>ess<br />
projects<br />
Employment<br />
enhanc<strong>in</strong>g<br />
vocati<strong>on</strong>al<br />
skills<br />
fiscal year 2014-15 <strong>on</strong>wards, also require<br />
companies to set-up a CSR committee<br />
c<strong>on</strong>sist<strong>in</strong>g of their board members,<br />
<strong>in</strong>clud<strong>in</strong>g at least <strong>on</strong>e <strong>in</strong>dependent director.<br />
The Act encourages companies to spend at<br />
least 2% of their average net profit <strong>in</strong> the<br />
previous three years <strong>on</strong> CSR activities. The<br />
m<strong>in</strong>istry’s draft rules, that have been put<br />
up for public comment, def<strong>in</strong>e net profit<br />
as the profit before tax as per the books of<br />
accounts, exclud<strong>in</strong>g profits aris<strong>in</strong>g from<br />
branches outside India.<br />
Promoti<strong>on</strong> of<br />
educati<strong>on</strong><br />
Gender equity and<br />
women empowerment<br />
C<strong>on</strong>tributi<strong>on</strong> to<br />
Prime M<strong>in</strong>ister’s<br />
relief fund and other<br />
such state and<br />
central funds<br />
The Act lists out a set of activities eligible<br />
under CSR. Companies may implement<br />
these activities tak<strong>in</strong>g <strong>in</strong>to account the local<br />
c<strong>on</strong>diti<strong>on</strong>s after seek<strong>in</strong>g board approval.<br />
The <strong>in</strong>dicative activities which can be<br />
undertaken by a company under CSR have<br />
been specified under Schedule VII of the<br />
Act.<br />
The draft rules (as of September 2013)<br />
provide a number of clarificati<strong>on</strong>s and while<br />
these are await<strong>in</strong>g public comment before<br />
notificati<strong>on</strong>, some the highlights are as<br />
follows:<br />
• Surplus aris<strong>in</strong>g out of CSR activities will<br />
have to be re<strong>in</strong>vested <strong>in</strong>to CSR <strong>in</strong>itiatives,<br />
and this will be over and above the 2%<br />
figure<br />
• The company can implement its CSR<br />
activities through the follow<strong>in</strong>g methods:<br />
--<br />
Directly <strong>on</strong> its own<br />
--<br />
Through its own n<strong>on</strong>-profit<br />
foundati<strong>on</strong> set- up so as to facilitate<br />
this <strong>in</strong>itiative<br />
--<br />
Through <strong>in</strong>dependently registered<br />
n<strong>on</strong>-profit organisati<strong>on</strong>s that have a<br />
record of at least three years <strong>in</strong> similar<br />
such related activities<br />
--<br />
Collaborat<strong>in</strong>g or pool<strong>in</strong>g their<br />
resources with other companies<br />
• Only CSR activities undertaken <strong>in</strong> India<br />
will be taken <strong>in</strong>to c<strong>on</strong>siderati<strong>on</strong><br />
• Activities meant exclusively for<br />
employees and their families will not<br />
qualify<br />
• A format for the board report <strong>on</strong> CSR<br />
has been provided which <strong>in</strong>cludes<br />
am<strong>on</strong>gst others, activity-wise , reas<strong>on</strong>s<br />
for spends under 2% of the average net<br />
profits of the previous three years and<br />
a resp<strong>on</strong>sibility statement that the CSR<br />
policy, implementati<strong>on</strong> and m<strong>on</strong>itor<strong>in</strong>g<br />
process is <strong>in</strong> compliance with the CSR<br />
objectives, <strong>in</strong> letter and <strong>in</strong> spirit. This has<br />
to be signed by either the CEO, or the MD<br />
or a director of the company<br />
Governance<br />
Clause 135 of the Act lays down the<br />
12 PwC
guidel<strong>in</strong>es to be followed by companies<br />
while develop<strong>in</strong>g their CSR programme.<br />
The CSR committee will be resp<strong>on</strong>sible<br />
for prepar<strong>in</strong>g a detailed plan <strong>on</strong> CSR<br />
Role of the board and the CSR committee<br />
Role of the board<br />
Form a CSR commiittee<br />
Approve the CSR policy<br />
Ensure implementati<strong>on</strong> of the activties<br />
under CSR<br />
Ensure 2% spend<br />
Disclose reas<strong>on</strong>s for not spend<strong>in</strong>g the<br />
amount (if applicable)<br />
Net worth > 500 Crore INR<br />
Turnover > 1000 Crore INR<br />
Net profit > 5 Crore INR<br />
activities, <strong>in</strong>clud<strong>in</strong>g the expenditure, the<br />
type of activities, roles and resp<strong>on</strong>sibilities<br />
of various stakeholders and a m<strong>on</strong>itor<strong>in</strong>g<br />
mechanism for such activities. The CSR<br />
committee can also ensure that all the k<strong>in</strong>ds<br />
of <strong>in</strong>come accrued to the company by way of<br />
CSR activities should be credited back to the<br />
community or CSR corpus.<br />
CSR committee<br />
Three or more directors with at least <strong>on</strong>e<br />
<strong>in</strong>dependent director<br />
Formulate and recommend a CSR<br />
policy to the board<br />
Recommend activities and the amount<br />
of expenditure to be <strong>in</strong>curred<br />
M<strong>on</strong>itor the CSR policy from time to<br />
time<br />
Report<strong>in</strong>g<br />
The new Act requires that the board of the<br />
company shall, after tak<strong>in</strong>g <strong>in</strong>to account<br />
the recommendati<strong>on</strong>s made by the CSR<br />
committee, approve the CSR policy for<br />
the company and disclose its c<strong>on</strong>tents <strong>in</strong><br />
their report and also publish the details<br />
<strong>on</strong> the company’s official website, if any,<br />
<strong>in</strong> such manner as may be prescribed. If<br />
the company fails to spend the prescribed<br />
amount, the board, <strong>in</strong> its report, shall<br />
specify the reas<strong>on</strong>s.<br />
Bus<strong>in</strong>ess resp<strong>on</strong>sibility<br />
report<strong>in</strong>g<br />
The other report<strong>in</strong>g requirement<br />
mandated by the government of<br />
India, <strong>in</strong>clud<strong>in</strong>g CSR is by the SEBI<br />
which issued a circular <strong>on</strong> 13 August<br />
2012 mandat<strong>in</strong>g the top 100 listed<br />
companies to report their ESG<br />
<strong>in</strong>itiatives. These are to be reported<br />
<strong>in</strong> the form of a BRR as a part of the<br />
annual report. SEBI has provided a<br />
template for fil<strong>in</strong>g the BRR. Bus<strong>in</strong>ess<br />
resp<strong>on</strong>sibility report<strong>in</strong>g is <strong>in</strong> l<strong>in</strong>e with<br />
the NVG published by the M<strong>in</strong>istry<br />
of Corporate Affairs <strong>in</strong> July 2011.<br />
Provisi<strong>on</strong>s have also been made <strong>in</strong><br />
the list<strong>in</strong>g agreement to <strong>in</strong><strong>corporate</strong><br />
the submissi<strong>on</strong> of BRR by the relevant<br />
companies. The list<strong>in</strong>g agreement<br />
also provides the format of the BRR.<br />
The BRR requires companies to report<br />
their performance <strong>on</strong> the n<strong>in</strong>e NVG<br />
pr<strong>in</strong>ciples. Other listed companies<br />
have also been encouraged by SEBI<br />
to voluntarily disclose <strong>in</strong>formati<strong>on</strong><br />
<strong>on</strong> their ESG performance <strong>in</strong> the BRR<br />
format.<br />
Handbook <strong>on</strong> Corporate Social Resp<strong>on</strong>sibility <strong>in</strong> India 13
CSR: Plann<strong>in</strong>g<br />
and strategis<strong>in</strong>g<br />
14 PwC
CSR: Plann<strong>in</strong>g and<br />
strategis<strong>in</strong>g<br />
The first step towards formalis<strong>in</strong>g CSR<br />
projects <strong>in</strong> a <strong>corporate</strong> structure is the<br />
c<strong>on</strong>stituti<strong>on</strong> of a CSR committee as per the<br />
specificati<strong>on</strong>s <strong>in</strong> the Companies Act, 2013,<br />
clause 135.<br />
Background<br />
Clause 135 of the Companies Act, 2013<br />
requires a CSR committee to be c<strong>on</strong>stituted<br />
by the board of directors. They will be<br />
resp<strong>on</strong>sible for prepar<strong>in</strong>g a detailed plan<br />
of the CSR activities <strong>in</strong>clud<strong>in</strong>g, decisi<strong>on</strong>s<br />
regard<strong>in</strong>g the expenditure, the type of<br />
activities to be undertaken, roles and<br />
resp<strong>on</strong>sibilities of the c<strong>on</strong>cerned <strong>in</strong>dividuals<br />
and a m<strong>on</strong>itor<strong>in</strong>g and report<strong>in</strong>g mechanism.<br />
The CSR committee will also be required to<br />
ensure that all the <strong>in</strong>come accrued to the<br />
company by way of CSR activities is credited<br />
back to the CSR corpus.<br />
This is an excellent start<strong>in</strong>g po<strong>in</strong>t for any<br />
company new to CSR. In case a company<br />
already practices CSR, this committee<br />
should be set up at the earliest so that it<br />
can guide the alignment of the company’s<br />
activities with the requirements of the Act.<br />
For effective implementati<strong>on</strong>, the CSR<br />
committee must also oversee the systematic<br />
development of a set of processes and<br />
guidel<strong>in</strong>es for CSR to deliver its proposed<br />
value to the company, <strong>in</strong>clud<strong>in</strong>g:<br />
• <strong>on</strong>e-time processes such as develop<strong>in</strong>g<br />
the CSR strategy and operati<strong>on</strong>alis<strong>in</strong>g<br />
the <strong>in</strong>stituti<strong>on</strong>al mechanism<br />
CSR processes<br />
1<br />
Develop<strong>in</strong>g a CSR strategy<br />
and policy<br />
• repetitive processes such as the<br />
annual CSR policy, due diligence of<br />
the implementati<strong>on</strong> partner, project<br />
development, project approval,<br />
c<strong>on</strong>tract<strong>in</strong>g, budget<strong>in</strong>g and payments,<br />
m<strong>on</strong>itor<strong>in</strong>g, impact measurement and<br />
report<strong>in</strong>g and communicati<strong>on</strong><br />
A set of such enabl<strong>in</strong>g processes, their<br />
<strong>in</strong>ter-relati<strong>on</strong>ships and the sequence <strong>in</strong><br />
which they need to be developed have been<br />
identified below:<br />
+<br />
Operati<strong>on</strong>alis<strong>in</strong>g the<br />
<strong>in</strong>stituti<strong>on</strong>al mechanism<br />
Companies Act, 2013, Clause 135: CSR<br />
committee requirements<br />
• A CSR committee of the board should<br />
be c<strong>on</strong>stituted. It should c<strong>on</strong>sist of at<br />
least three directors out of whom at<br />
least <strong>on</strong>e is an <strong>in</strong>dependent director.<br />
This compositi<strong>on</strong> will be disclosed <strong>in</strong><br />
the board’s report as per sub-secti<strong>on</strong><br />
(3) of secti<strong>on</strong> 134.<br />
• The CSR committee shall:<br />
--<br />
formulate and recommend a CSR<br />
policy to the board, <strong>in</strong>dicat<strong>in</strong>g the<br />
activities as specified <strong>in</strong> Schedule<br />
VII of the Act<br />
--<br />
recommend the amount of<br />
expenditure to be <strong>in</strong>curred <strong>on</strong> the<br />
activities <strong>in</strong>dicated <strong>in</strong> the policy<br />
--<br />
m<strong>on</strong>itor the CSR policy regularly<br />
2<br />
3<br />
4<br />
Due diligence of the<br />
implementati<strong>on</strong> partner<br />
Project approval<br />
+<br />
+<br />
Project implementati<strong>on</strong><br />
Progress m<strong>on</strong>itor<strong>in</strong>g<br />
and report<strong>in</strong>g<br />
Project development<br />
F<strong>in</strong>alis<strong>in</strong>g the<br />
arrangenment with the<br />
implement<strong>in</strong>g agency<br />
5<br />
Impact measurement<br />
+<br />
Report c<strong>on</strong>solidati<strong>on</strong><br />
and communicati<strong>on</strong><br />
Handbook <strong>on</strong> Corporate Social Resp<strong>on</strong>sibility <strong>in</strong> India 15
While develop<strong>in</strong>g these processes, no<br />
standard set of recommendati<strong>on</strong>s exist for<br />
all companies. However, an overview of the<br />
required details, the activities required to be<br />
completed for each of these processes al<strong>on</strong>g<br />
with some additi<strong>on</strong>al guidance <strong>on</strong> critical<br />
issues has been provided below:<br />
Step <strong>on</strong>e: Develop<strong>in</strong>g a CSR<br />
strategy and policy<br />
Purpose<br />
The Companies Act, 2013 requires every<br />
company to put out its CSR policy <strong>in</strong> the<br />
public doma<strong>in</strong>. The guidance provided<br />
<strong>in</strong> the Act and the draft rules <strong>on</strong> what<br />
c<strong>on</strong>stitutes a CSR policy are that it should:<br />
• exclude normal bus<strong>in</strong>ess activities of<br />
the company<br />
• c<strong>on</strong>ta<strong>in</strong> a list of the CSR projects or<br />
programmes which the company<br />
plans to undertake dur<strong>in</strong>g the<br />
implementati<strong>on</strong> year<br />
While specify<strong>in</strong>g the annual report<br />
requirements, the draft rules go <strong>on</strong> to say is<br />
that the company must provide:<br />
• a brief outl<strong>in</strong>e of its CSR policy,<br />
<strong>in</strong>clud<strong>in</strong>g ‘the statement of <strong>in</strong>tent<br />
reflect<strong>in</strong>g the ethos of the company,<br />
broad areas of CSR <strong>in</strong>terest and an<br />
overview of activities to be undertaken’<br />
• a web l<strong>in</strong>k to the CSR policy <strong>in</strong>clud<strong>in</strong>g<br />
‘the full list of projects, activities<br />
and programmes proposed to be<br />
undertaken by the company’<br />
S<strong>in</strong>ce most of the development requires<br />
l<strong>on</strong>g-term commitments and their impact<br />
often takes a while to accrue, a good CSR<br />
practice requires that a company that is<br />
serious about its CSR should develop a<br />
l<strong>on</strong>g-term (three to five years) visi<strong>on</strong> and<br />
strategy which is reviewed annually and the<br />
activities and budgets are planned <strong>on</strong> an<br />
annual basis. The latter will comply with the<br />
CSR policy requirements of the Companies<br />
Act, 2013.<br />
To avoid c<strong>on</strong>fusi<strong>on</strong> regard<strong>in</strong>g terms like<br />
policy, strategy, project and programme, a<br />
brief explanati<strong>on</strong> has been provided here:<br />
• CSR strategy refers to what the<br />
company expects to achieve <strong>in</strong> the next<br />
three to five years and <strong>in</strong><strong>corporate</strong>s the<br />
visi<strong>on</strong>, missi<strong>on</strong> and goals <strong>on</strong> a broader<br />
level. It also entails how it plans to<br />
achieve these <strong>in</strong> terms of organisati<strong>on</strong><br />
and approach.<br />
• CSR policy refers to what the company<br />
expects to achieve over the next year.<br />
This is aligned with the requirements of<br />
the Companies Act, 2013 .<br />
• Programme refers to a sector or an<br />
issue that the company proposes to<br />
address through its CSR. This can,<br />
for <strong>in</strong>stance, be ‘educati<strong>on</strong> of the girl<br />
child’ or ‘agriculture development’.<br />
Programmes will be clearly outl<strong>in</strong>ed <strong>in</strong><br />
the company’s CSR strategy.<br />
• Programme goals will be achieved<br />
through a series of <strong>in</strong>dividual projects<br />
and, a project refers to a set of<br />
<strong>in</strong>terventi<strong>on</strong>s, typically <strong>in</strong> a specific<br />
geography and address<strong>in</strong>g a specific<br />
stakeholder group, with a def<strong>in</strong>ite set of<br />
goals, beg<strong>in</strong>n<strong>in</strong>g and end and a budget<br />
attached to it.<br />
• Each project <strong>in</strong> turn will c<strong>on</strong>sist of<br />
a number of activities. All of which<br />
c<strong>on</strong>tribute towards the project goals.<br />
Framework<strong>in</strong>g CSR strategy<br />
An effective CSR strategy should articulate:<br />
• who it wishes to address i e the target<br />
group<br />
• where it wishes to work i e the<br />
geography<br />
• what sectors or issues it wishes to<br />
address<br />
A brief understand<strong>in</strong>g of these terms is<br />
outl<strong>in</strong>ed below:<br />
Target group: While development and<br />
welfare programmes <strong>in</strong> India address all the<br />
citizens, the focus is <strong>on</strong> the disadvantaged,<br />
marg<strong>in</strong>alised and excluded. Marg<strong>in</strong>alisati<strong>on</strong><br />
<strong>in</strong> India is primarily <strong>on</strong> the basis of gender,<br />
disability, ethnicity and locati<strong>on</strong>. This leads<br />
to <strong>social</strong> and physical exclusi<strong>on</strong> of such<br />
groups from all k<strong>in</strong>ds of development.<br />
Engag<strong>in</strong>g the marg<strong>in</strong>alised <strong>in</strong> India is<br />
further complicated due to language and<br />
literacy variances, <strong>in</strong>formati<strong>on</strong> asymmetry,<br />
<strong>in</strong>frastructure c<strong>on</strong>stra<strong>in</strong>ts, geographical<br />
challenges and cultural barriers to name<br />
a few. The CSR strategy should ideally<br />
<strong>in</strong>dicate which of these marg<strong>in</strong>alised groups<br />
it proposes to target.<br />
Geography: The Companies Act, 2013<br />
encourages companies to target their CSR<br />
<strong>in</strong>terventi<strong>on</strong>s <strong>in</strong> their local regi<strong>on</strong>. While<br />
this is an obvious choice for companies that<br />
are <strong>in</strong> manufactur<strong>in</strong>g, those <strong>in</strong> the services<br />
sector (like bank<strong>in</strong>g and telecom) with a<br />
wider footpr<strong>in</strong>t have no c<strong>on</strong>centrated local<br />
regi<strong>on</strong>. Companies must decide whether<br />
their CSR activities will be focused <strong>on</strong> a<br />
few geographies (this can be around their<br />
plants or <strong>in</strong> specific backward districts) or<br />
whether they will prefer to particularly work<br />
anywhere <strong>in</strong> India.<br />
Sector and issue: Sector refers to the<br />
development area that the company wishes<br />
to focus <strong>on</strong>; typically, health, educati<strong>on</strong>,<br />
livelihood, envir<strong>on</strong>ment, and so <strong>on</strong>.<br />
Issue refers to a specific aspect of a sector<br />
for example, primary educati<strong>on</strong> <strong>in</strong> the<br />
educati<strong>on</strong> sector, skills development or<br />
<strong>social</strong> enterprise <strong>in</strong> the livelihoods sector.<br />
It is important for a company to determ<strong>in</strong>e<br />
which sector and issues it will focus <strong>on</strong> to<br />
ensure significant positive impact. Also,<br />
the report<strong>in</strong>g format <strong>in</strong> draft rules of the<br />
Companies Act, 2013 requires that the<br />
company report aga<strong>in</strong>st the sector mak<strong>in</strong>g it<br />
all the more important.<br />
Process<br />
Objective: Develop<strong>in</strong>g the CSR strategy and<br />
policy.<br />
Process owners: The CSR committee<br />
Inputs:<br />
• Guidance from the board<br />
• Companies Act requirements<br />
• Corporate bus<strong>in</strong>ess strategy, plan and<br />
supply cha<strong>in</strong><br />
• Development priorities: both, nati<strong>on</strong>al<br />
and wherever the company has<br />
bus<strong>in</strong>ess <strong>in</strong>terests<br />
Output(s): the CSR policy document and an<br />
<strong>in</strong>dicati<strong>on</strong> of sectors and issues, geographies<br />
and a profile of the beneficiaries.<br />
16 PwC
Activities<br />
• Review<strong>in</strong>g the past as well as the<br />
current CSR activities and exam<strong>in</strong><strong>in</strong>g<br />
their alignment with Schedule VII of<br />
the Companies Act, 2013.<br />
• Study<strong>in</strong>g the publicly available<br />
<strong>in</strong>formati<strong>on</strong> <strong>on</strong> nati<strong>on</strong>al and local<br />
development priorities.<br />
• Meet<strong>in</strong>g development experts <strong>in</strong> the<br />
government as well as the NGOs to<br />
understand priorities and identify<strong>in</strong>g<br />
potential areas of <strong>in</strong>terventi<strong>on</strong>.<br />
• C<strong>on</strong>duct<strong>in</strong>g <strong>in</strong>ternal meet<strong>in</strong>gs with<br />
bus<strong>in</strong>ess leaders to establish the<br />
relevance of potential CSR activities to<br />
the company’s core bus<strong>in</strong>ess.<br />
• Study<strong>in</strong>g the good CSR practices<br />
of other companies and their<br />
achievements.<br />
• Develop<strong>in</strong>g a CSR strategy that def<strong>in</strong>es<br />
for the next three to five years, what<br />
the company’s CSR activities will cover<br />
<strong>in</strong> terms of:<br />
--<br />
visi<strong>on</strong> and missi<strong>on</strong><br />
--<br />
sectors and issues<br />
--<br />
geographies: states and districts<br />
--<br />
beneficiaries<br />
--<br />
KPIs<br />
• Determ<strong>in</strong><strong>in</strong>g the implementati<strong>on</strong><br />
mechanism:<br />
--<br />
grant-mak<strong>in</strong>g or direct<br />
implementati<strong>on</strong><br />
--<br />
<strong>in</strong>stituti<strong>on</strong>al mechanism: <strong>in</strong>-house<br />
department, <strong>corporate</strong> foundati<strong>on</strong>,<br />
partnerships with other NGOs<br />
• Annually develop<strong>in</strong>g a CSR policy <strong>in</strong><br />
l<strong>in</strong>e with the Companies Act, 2013 rules<br />
that def<strong>in</strong>es programmes, geographies<br />
and budgets for the follow<strong>in</strong>g f<strong>in</strong>ancial<br />
year, aligned with the strategy and<br />
ensur<strong>in</strong>g that the 2% requirement of<br />
funds allocati<strong>on</strong> is met<br />
• Establish methods for m<strong>on</strong>itor<strong>in</strong>g and<br />
report<strong>in</strong>g<br />
Tools, technical guidance and<br />
standards to be used:<br />
• The 10 pr<strong>in</strong>ciples of the UN global<br />
compact<br />
• UN guid<strong>in</strong>g pr<strong>in</strong>ciples <strong>on</strong> bus<strong>in</strong>ess<br />
and human rights<br />
• ILO tri-partite declarati<strong>on</strong> of<br />
pr<strong>in</strong>ciples <strong>on</strong> mult<strong>in</strong>ati<strong>on</strong>al<br />
enterprises and <strong>social</strong> policy<br />
• OECD CSR policy tool<br />
• Global compact self assessment<br />
• Clause 135, Companies Act, 2013<br />
Step two: Operati<strong>on</strong>alis<strong>in</strong>g the<br />
<strong>in</strong>stituti<strong>on</strong>al mechanism<br />
Purpose<br />
In order for a <strong>corporate</strong> to ga<strong>in</strong> the greatest<br />
leverage and a strategic advantage through<br />
the <strong>in</strong>vestment of <strong>in</strong>tellectual and f<strong>in</strong>ancial<br />
resources, they are required to select their<br />
implementati<strong>on</strong> mechanism. In terms of<br />
implementati<strong>on</strong> mechanism, a company has<br />
several opti<strong>on</strong>s, which are permitted under<br />
the CSR draft rules:<br />
• Self-executi<strong>on</strong> through:<br />
--<br />
an <strong>in</strong>-house CSR department<br />
--<br />
a company foundati<strong>on</strong> with executi<strong>on</strong><br />
capabilities<br />
• Mak<strong>in</strong>g grants to an <strong>in</strong>dependent<br />
implementati<strong>on</strong> partner (which has a<br />
track record of at least three years).<br />
• The grants can be made:<br />
--<br />
directly by an <strong>in</strong>-house CSR<br />
department<br />
--<br />
through the company’s grant-mak<strong>in</strong>g<br />
foundati<strong>on</strong><br />
The factors that a company needs to<br />
c<strong>on</strong>sider while decid<strong>in</strong>g between <strong>in</strong>-house<br />
executi<strong>on</strong> and grant-mak<strong>in</strong>g (whether<br />
by the department or the company<br />
foundati<strong>on</strong>) are as follows:<br />
Decisi<strong>on</strong> criteria Grant mak<strong>in</strong>g Self executi<strong>on</strong><br />
Availability and access to<br />
implementati<strong>on</strong> partner<br />
Customisati<strong>on</strong><br />
Cost of implementati<strong>on</strong><br />
C<strong>on</strong>trol<br />
Build<strong>in</strong>g expertise<br />
Preferred when there is an easy availability and<br />
access to the implementati<strong>on</strong> partners (<strong>in</strong> the target<br />
geography work<strong>in</strong>g <strong>on</strong> identified sector and issue) who<br />
can work towards the objective that the company wants<br />
them to pursue.<br />
The flexibility of customis<strong>in</strong>g a CSR project to suit the<br />
company needs is low to medium.<br />
Implementati<strong>on</strong> partners are more likely to have lower<br />
costs due to their c<strong>on</strong>centrated focus <strong>in</strong> pursu<strong>in</strong>g<br />
development activities, cumulative time spent <strong>on</strong><br />
the field, cost of human resources deployed and<br />
<strong>in</strong> general operati<strong>on</strong>al efficiencies. Fixed costs are<br />
usually averaged down as the implementati<strong>on</strong> partners<br />
usually try to tap multiple sources of fund<strong>in</strong>g <strong>in</strong>clud<strong>in</strong>g<br />
government assistance.<br />
Low to medium levels of c<strong>on</strong>trol over day to day<br />
activities, efficiencies and outputs.<br />
Project management know-how is sufficient and <strong>in</strong>depth<br />
doma<strong>in</strong> knowledge of development issues is not<br />
expected.<br />
Preferred when there is a lack of availability and<br />
access to the implementati<strong>on</strong> partners (<strong>in</strong> the<br />
target geography work<strong>in</strong>g <strong>on</strong> identified sector and<br />
issue) who can work towards the objective that the<br />
company wants them to pursue.<br />
The flexibility of customis<strong>in</strong>g a CSR project to suit<br />
the company needs is high.<br />
Overheads are usually higher and ec<strong>on</strong>omic<br />
efficiencies lower (at least dur<strong>in</strong>g <strong>in</strong>cepti<strong>on</strong> and<br />
growth phases). Higher fixed costs are <strong>in</strong>volved.<br />
High levels of c<strong>on</strong>trol over day to day activities,<br />
efficiencies and outputs.<br />
Project management know-how is required al<strong>on</strong>g<br />
with <strong>in</strong>-depth doma<strong>in</strong> knowledge of development<br />
issues.<br />
Handbook <strong>on</strong> Corporate Social Resp<strong>on</strong>sibility <strong>in</strong> India 17
It must be noted that whatever<br />
implementati<strong>on</strong> mechanism the company<br />
chooses, it must have a basic CSR<br />
department <strong>in</strong> place to support the CSR<br />
committee. The role and structure of the<br />
department will be determ<strong>in</strong>ed by the CSR<br />
committee.<br />
Select<strong>in</strong>g legal structure of the<br />
company foundati<strong>on</strong><br />
Many companies have set up their own<br />
foundati<strong>on</strong>s (a term used loosely to describe<br />
a n<strong>on</strong>-profit entity promoted by a company)<br />
to implement their CSR activities. The<br />
advantages that they see <strong>in</strong> this are:<br />
• It enables leverag<strong>in</strong>g of funds from<br />
other sources i e the government<br />
schemes and other foundati<strong>on</strong>s.<br />
Typically, profit organisati<strong>on</strong>s are not<br />
eligible for such funds.<br />
• S<strong>in</strong>ce the skills, job titles, career paths<br />
and cost structures required for the<br />
executi<strong>on</strong> of CSR projects are quite<br />
different from a company’s operati<strong>on</strong>s,<br />
a separate foundati<strong>on</strong> enables the<br />
company to keep these dist<strong>in</strong>ct.<br />
Under the draft CSR rules, an entity<br />
that a company sets up to facilitate the<br />
implementati<strong>on</strong> of its CSR activities is to<br />
be registered <strong>in</strong> India as a trust, society,<br />
or a n<strong>on</strong>-profit company under secti<strong>on</strong> 8 18<br />
of the Companies Act, 2013. N<strong>on</strong>-profit<br />
organisati<strong>on</strong>s <strong>in</strong> India are:<br />
• self-governed by a board of trustees or<br />
a manag<strong>in</strong>g committee or a govern<strong>in</strong>g<br />
council, compris<strong>in</strong>g <strong>in</strong>dividuals who<br />
generally serve <strong>in</strong> a fiduciary capacity<br />
• <strong>in</strong>tended to benefit others outside the<br />
membership of the organisati<strong>on</strong><br />
• prohibited from distribut<strong>in</strong>g a<br />
m<strong>on</strong>etary residual to its members<br />
A detailed comparative analysis of the<br />
three choices of n<strong>on</strong>-profit legal structures<br />
is attached <strong>in</strong> Appendix 1: Comparative<br />
analysis of the three choices for legal<br />
entity.<br />
Process<br />
Objective: Establish<strong>in</strong>g a legal entity and<br />
align<strong>in</strong>g the account<strong>in</strong>g, tax, f<strong>in</strong>ance,<br />
adm<strong>in</strong>istrati<strong>on</strong>, HR and IT systems to deliver<br />
the commitments made <strong>in</strong> the CSR policy.<br />
Process owners: The CSR committee<br />
Inputs: The CSR strategy<br />
Output(s):<br />
• creati<strong>on</strong> of a separate legal entity or a<br />
CSR department for CSR activities<br />
• other <strong>in</strong>stituti<strong>on</strong>al mechanisms<br />
to align the account<strong>in</strong>g, f<strong>in</strong>ance,<br />
adm<strong>in</strong>istrati<strong>on</strong>, HR and IT systems with<br />
CSR activities<br />
Activities:<br />
• Select<strong>in</strong>g the organisati<strong>on</strong> model for<br />
the CSR implementati<strong>on</strong>: <strong>in</strong>-house<br />
versus outsourced and its legal entity<br />
(trust, society, Secti<strong>on</strong> 8 19 company ,<br />
<strong>in</strong>-house department, etc)<br />
• Identify<strong>in</strong>g the implementati<strong>on</strong> model<br />
(grant mak<strong>in</strong>g, direct project executi<strong>on</strong>,<br />
etc)<br />
• Formalis<strong>in</strong>g the job descripti<strong>on</strong>,<br />
the roles and resp<strong>on</strong>sibilities and<br />
the report<strong>in</strong>g relati<strong>on</strong>ships for the<br />
CSR team (whether <strong>in</strong>-house or <strong>in</strong> a<br />
foundati<strong>on</strong>)<br />
• Integrat<strong>in</strong>g budget<strong>in</strong>g, procurement,<br />
payments and report<strong>in</strong>g for CSR with<br />
the exist<strong>in</strong>g f<strong>in</strong>ance, adm<strong>in</strong>istrati<strong>on</strong><br />
and IT systems<br />
• Analys<strong>in</strong>g account<strong>in</strong>g systems and<br />
chart of accounts and make required<br />
changes to record all expenses<br />
appropriately. Establish a method of<br />
allocati<strong>on</strong> for the expenses (or assets<br />
created) that are partly for the CSR<br />
and partly for bus<strong>in</strong>ess or employee<br />
use.<br />
Tools, technical guidance and<br />
standards to be used:<br />
• To be tailored as per <strong>corporate</strong><br />
requirements<br />
Step three: Due diligence of the<br />
implementati<strong>on</strong> partner<br />
Purpose<br />
Due diligence refers to the process a<br />
company undertakes to determ<strong>in</strong>e the<br />
risks as well as the benefits of work<strong>in</strong>g<br />
with a potential implementati<strong>on</strong> partner.<br />
This process has to be sufficiently robust to<br />
ensure that a company’s implementati<strong>on</strong><br />
partners have the reputati<strong>on</strong>, competence<br />
and <strong>in</strong>tegrity to deliver effective<br />
programmes <strong>on</strong> the ground.<br />
It beg<strong>in</strong>s as so<strong>on</strong> as the discussi<strong>on</strong>s with<br />
the implementati<strong>on</strong> partner suggest that<br />
there is prima facie <strong>in</strong>terest of both parties<br />
to enter <strong>in</strong>to a partnership. A detailed<br />
due-diligence is essential for large and<br />
l<strong>on</strong>g partnerships but may be brief for a<br />
relatively small or opportunistic partnership<br />
opportunity.<br />
The due diligence process c<strong>on</strong>sists of five<br />
primary areas for <strong>in</strong>vestigati<strong>on</strong>:<br />
• competence of the implementati<strong>on</strong><br />
partner<br />
• identity<br />
• management<br />
• accountability<br />
• transparency and f<strong>in</strong>ancial capability<br />
These have been outl<strong>in</strong>ed below:<br />
18,19 The n<strong>on</strong>-profit organizati<strong>on</strong> formerly known as Secti<strong>on</strong> 25 companies are now called Secti<strong>on</strong> 8 companies after the <strong>in</strong>troducti<strong>on</strong> of Companies Act, 2013.<br />
18 PwC
Issue Sub-issue Descripti<strong>on</strong><br />
Competence of the<br />
implementati<strong>on</strong><br />
partner<br />
Identity<br />
Management<br />
Geography<br />
Sector<br />
Issue<br />
History of existence<br />
Legal identity<br />
Affiliati<strong>on</strong>s<br />
Litigati<strong>on</strong>s<br />
Compositi<strong>on</strong> of the board<br />
Profile of the board<br />
members and advisors<br />
Diversity <strong>in</strong> expertise<br />
Board meet<strong>in</strong>gs<br />
Visi<strong>on</strong>, missi<strong>on</strong> and<br />
strategy<br />
Experience of the<br />
management<br />
C<strong>on</strong>flict of <strong>in</strong>terest<br />
Capacity, expertise and the number of years of experience with the geography under c<strong>on</strong>siderati<strong>on</strong><br />
Capacity, expertise and the number of years of experience with the sector under c<strong>on</strong>siderati<strong>on</strong><br />
Capacity, expertise and the number of years of experience with the issue under c<strong>on</strong>siderati<strong>on</strong><br />
The number of years the implementati<strong>on</strong> partner has been <strong>in</strong> existence<br />
The organisati<strong>on</strong> is registered either as a trust, a society or Secti<strong>on</strong> 8 company, a charitable company,<br />
a co-operative society or is unregistered<br />
The desired level of affiliati<strong>on</strong> with governments, local adm<strong>in</strong>istrati<strong>on</strong> and <strong>in</strong>ternati<strong>on</strong>al bodies<br />
Any <strong>on</strong>go<strong>in</strong>g litigati<strong>on</strong><br />
Number of members, advisors, term of members and advisors and board renewal procedures<br />
Bios of the members <strong>on</strong> the board, their number of years and depth of experience and relevant<br />
achievements<br />
The expertise available at the disposal of the board for development activities<br />
Regularity of meet<strong>in</strong>gs, attendance records and recent topics of discussi<strong>on</strong><br />
The management outl<strong>in</strong>es its visi<strong>on</strong>, missi<strong>on</strong> and strategy <strong>in</strong> its operati<strong>on</strong>al plans or other documents.<br />
These plans are communicated to all relevant employees<br />
The management pers<strong>on</strong>nel resp<strong>on</strong>sible for the day-to-day activities have the necessary depth of<br />
experience and skill set to manage the current and the future growth plans.<br />
Any c<strong>on</strong>flict of <strong>in</strong>terest between the board members, the advisors or the management pers<strong>on</strong>nel with<br />
the company. There is no c<strong>on</strong>flict of <strong>in</strong>terest with the local governments.<br />
Transparency Transparency Awareness of the disclosure and the transparency requirements for all stakeholders (<strong>in</strong>clud<strong>in</strong>g<br />
regulators and funders) like periodic report<strong>in</strong>g, external audits and rat<strong>in</strong>gs<br />
F<strong>in</strong>ancial capability<br />
F<strong>in</strong>ancial statements<br />
Adequacy of reserves<br />
Secti<strong>on</strong> 12A registrati<strong>on</strong><br />
80G registrati<strong>on</strong><br />
Availability of audited f<strong>in</strong>ancial statements<br />
A formalised and <strong>in</strong>stituti<strong>on</strong>alised system for keep<strong>in</strong>g reserves for times of f<strong>in</strong>ancial need<br />
Status of Secti<strong>on</strong> 12A registrati<strong>on</strong><br />
Status of 80G registrati<strong>on</strong>.<br />
FC(R)A registrati<strong>on</strong> Status of the registrati<strong>on</strong> with the Foreign C<strong>on</strong>tributi<strong>on</strong> (Regulati<strong>on</strong>) Act 2010.<br />
A more detailed due-diligence can also<br />
undertake the evaluati<strong>on</strong> of the follow<strong>in</strong>g<br />
five issues:<br />
• organisati<strong>on</strong> structure<br />
• operati<strong>on</strong>s, systems and processes<br />
• human resource<br />
• f<strong>in</strong>ancial capability<br />
• risk management<br />
CII and Credibility Alliance’s guidel<strong>in</strong>es for<br />
identify<strong>in</strong>g NGO partners are menti<strong>on</strong>ed <strong>in</strong><br />
Appendix 4.<br />
Process<br />
Objective: Select<strong>in</strong>g the implementati<strong>on</strong><br />
partner.<br />
Process owners: The CSR department or<br />
Company Foundati<strong>on</strong><br />
Inputs:<br />
• the CSR strategy and policy<br />
• discussi<strong>on</strong>s with communities, board,<br />
staff, other funders, local government<br />
officials, local leaders or <strong>in</strong>fluencers,<br />
auditors<br />
• study<strong>in</strong>g the books of accounts and the<br />
auditor’s report<br />
Output(s):<br />
• a due diligence report<br />
Activities:<br />
• Establish<strong>in</strong>g a due diligence criteria<br />
to evaluate the implementati<strong>on</strong> or<br />
c<strong>on</strong>cept development agency <strong>in</strong>clud<strong>in</strong>g<br />
its <strong>in</strong>corporati<strong>on</strong>, permits and licenses,<br />
systems, processes, public image,<br />
management, team deployment,<br />
track record, f<strong>in</strong>ancial soundness,<br />
competence level, presence <strong>in</strong> desired<br />
geography, compatibility with company<br />
CSR policy and any c<strong>on</strong>flicts of <strong>in</strong>terest.<br />
• Establish<strong>in</strong>g a due diligence criteria<br />
for evaluati<strong>on</strong> and empanelment of<br />
private funders for partnership and<br />
jo<strong>in</strong>t projects.<br />
• Evaluat<strong>in</strong>g the partnership<br />
opportunities for its risks and benefits.<br />
Tools, technical guidance and<br />
standards to be used:<br />
• To be tailored as per <strong>corporate</strong><br />
requirements.<br />
Step four: Project development<br />
Purpose<br />
The CSR strategy of a company will be<br />
implemented through a series of projects<br />
which will have def<strong>in</strong>ite beg<strong>in</strong>n<strong>in</strong>gs, ends,<br />
expected outputs and outcomes as well as<br />
budgets associated with it. These projects<br />
may be of a short durati<strong>on</strong> (a few m<strong>on</strong>ths)<br />
or multi-year.<br />
A company may choose to implement<br />
projects through its <strong>in</strong>-house teams or<br />
<strong>in</strong> partnership with other agencies or a<br />
comb<strong>in</strong>ati<strong>on</strong> of both. Whatever path it<br />
takes, it is important for the project to be<br />
developed clearly with dist<strong>in</strong>ct basel<strong>in</strong>es,<br />
def<strong>in</strong>ed activities, ‘m<strong>on</strong>itorable’ targets and<br />
budgets. In the case of multi-year projects,<br />
it is important to <strong>in</strong>clude a provisi<strong>on</strong> to<br />
undertake annual reviews which can form<br />
the basis to revise the project.<br />
Handbook <strong>on</strong> Corporate Social Resp<strong>on</strong>sibility <strong>in</strong> India 19
Process<br />
Objective: Develop<strong>in</strong>g a feasible project<br />
proposal.<br />
Process owners: The implementati<strong>on</strong><br />
agency (the CSR department, company<br />
foundati<strong>on</strong> or the NGO partner)<br />
Inputs:<br />
• the CSR policy<br />
• <strong>in</strong>stituti<strong>on</strong>al mechanisms<br />
• <strong>in</strong>formati<strong>on</strong> from the government<br />
sources, previous studies d<strong>on</strong>e <strong>in</strong> the<br />
area, etc<br />
• <strong>in</strong>formati<strong>on</strong> <strong>on</strong> programs target<strong>in</strong>g<br />
similar geographies and beneficiary<br />
groups or strategies<br />
• m<strong>on</strong>itor<strong>in</strong>g impact measurement<br />
reports from any earlier projects<br />
Output(s):<br />
A project proposal that details:<br />
• a project c<strong>on</strong>text <strong>in</strong>clud<strong>in</strong>g the roles of<br />
other development actors<br />
• key needs of the target beneficiaries<br />
• project goals, KPIs, basel<strong>in</strong>es and<br />
expected end l<strong>in</strong>es<br />
• project milest<strong>on</strong>es for progress<br />
m<strong>on</strong>itor<strong>in</strong>g purposes<br />
• activities and timel<strong>in</strong>es to achieve the<br />
stated project goals<br />
• budgets al<strong>on</strong>g with the basis for<br />
estimati<strong>on</strong><br />
• risks and mitigati<strong>on</strong> strategies<br />
• progress report<strong>in</strong>g: c<strong>on</strong>tent, frequency<br />
Activities:<br />
• Develop<strong>in</strong>g a framework to identify<br />
key stakeholder groups <strong>in</strong>clud<strong>in</strong>g the<br />
local community, the local government<br />
or bodies, academia and research<br />
<strong>in</strong>stituti<strong>on</strong>s, <strong>in</strong>vestors, etc.<br />
• C<strong>on</strong>duct<strong>in</strong>g a needs assessment (if<br />
required) to assess development<br />
priorities. The methodology for this can<br />
be participatory processes, surveys or a<br />
comb<strong>in</strong>ati<strong>on</strong> of the two.<br />
• Study<strong>in</strong>g and adopt<strong>in</strong>g good practices<br />
to address similar challenges based <strong>on</strong><br />
prior experiences or less<strong>on</strong>s available<br />
from other practiti<strong>on</strong>ers and develop<br />
the approach.<br />
• Detail<strong>in</strong>g the project: the objectives,<br />
the beneficiaries and the impact <strong>on</strong><br />
the beneficiaries, the assumpti<strong>on</strong>s,<br />
the expected outputs and outcomes,<br />
detailed activities, potential to<br />
<strong>in</strong>fluence public policy and practice.<br />
• Identify<strong>in</strong>g the <strong>in</strong>dicators of success<br />
with the means of verificati<strong>on</strong> and<br />
establish the basel<strong>in</strong>e for each. This can<br />
be commissi<strong>on</strong>ed as a separate study<br />
or can even be <strong>in</strong>cluded <strong>in</strong> the needs<br />
assessment stage.<br />
• Estimat<strong>in</strong>g the budget and how it will<br />
be funded specify<strong>in</strong>g the community<br />
c<strong>on</strong>tributi<strong>on</strong>s, leverag<strong>in</strong>g of the<br />
government schemes and c<strong>on</strong>tributi<strong>on</strong>s<br />
from the other d<strong>on</strong>ors.<br />
• Indicat<strong>in</strong>g the m<strong>on</strong>itor<strong>in</strong>g and<br />
evaluati<strong>on</strong> methodologies for impact<br />
measurement.<br />
Tools, technical guidance and<br />
standards to be used:<br />
• Social return <strong>on</strong> <strong>in</strong>vestments (SROI),<br />
the SROI network<br />
• Global impact <strong>in</strong>vest<strong>in</strong>g network<br />
(GIIN)<br />
• ISO 26000: <strong>social</strong> resp<strong>on</strong>sibility<br />
Step five: Project approval<br />
Purpose<br />
Every project, whether developed by the<br />
<strong>in</strong>-house team or an external agency, must<br />
be formally exam<strong>in</strong>ed and approved. This<br />
is to ensure that each project is <strong>in</strong> l<strong>in</strong>e with<br />
the CSR strategy and policy, the m<strong>on</strong>itor<strong>in</strong>g<br />
<strong>in</strong>dicators are clearly def<strong>in</strong>ed and relevant<br />
and there is an adequate budget available.<br />
Projects that go <strong>on</strong> for l<strong>on</strong>ger durati<strong>on</strong>s<br />
or demand a larger amount of resources<br />
must be scrut<strong>in</strong>ised more carefully than the<br />
others.<br />
The CSR committee is ultimately the<br />
<strong>on</strong>e resp<strong>on</strong>sible for every project. It can,<br />
however, choose to delegate authority to<br />
a project approval committee c<strong>on</strong>sist<strong>in</strong>g<br />
of company staff and outside experts with<br />
clearly def<strong>in</strong>ed roles and resp<strong>on</strong>sibilities.<br />
Process<br />
Objective: Approve the project based <strong>on</strong><br />
the CSR policy objectives, pr<strong>in</strong>ciples and<br />
guidel<strong>in</strong>es.<br />
Process owners: The CSR committee or the<br />
delegated project approval committee.<br />
Inputs:<br />
• a project proposal<br />
• a due diligence report<br />
Output(s): An approved project proposal<br />
<strong>in</strong>clud<strong>in</strong>g a m<strong>on</strong>itor<strong>in</strong>g process and<br />
report<strong>in</strong>g and resp<strong>on</strong>sibility for this.<br />
Activities:<br />
• Determ<strong>in</strong><strong>in</strong>g the delegati<strong>on</strong> of power<br />
for the project approval.<br />
• Establish<strong>in</strong>g an evaluati<strong>on</strong> framework<br />
for the appraisal of the project c<strong>on</strong>cepts<br />
and implement<strong>in</strong>g agencies that ensure<br />
complete alignment with the CSR<br />
policy.<br />
• Establish<strong>in</strong>g tests for the theory of<br />
change; whether the c<strong>on</strong>cept will be<br />
able to deliver the <strong>in</strong>tended results.<br />
Establish<strong>in</strong>g tests for the value for<br />
m<strong>on</strong>ey, ec<strong>on</strong>omy, effectiveness and<br />
efficiency.<br />
• Review<strong>in</strong>g risks and mitigati<strong>on</strong><br />
measures.<br />
• Identify<strong>in</strong>g resource availability<br />
and any specific organisati<strong>on</strong>al<br />
requirements and c<strong>on</strong>stra<strong>in</strong>ts.<br />
• Lay<strong>in</strong>g down organisati<strong>on</strong>al supervisi<strong>on</strong><br />
and oversight requirements.<br />
Tools, technical guidance and<br />
standards to be used:<br />
• To be tailored as per <strong>corporate</strong><br />
requirements.<br />
Step six: F<strong>in</strong>alis<strong>in</strong>g the<br />
arrangement with the<br />
implement<strong>in</strong>g agency<br />
Purpose<br />
While work<strong>in</strong>g with an external agency,<br />
it is very important to enter <strong>in</strong>to a formal<br />
arrangement which is referred to here<br />
as a Memorandum of Understand<strong>in</strong>g or<br />
MoU. It def<strong>in</strong>es the roles, resp<strong>on</strong>sibilities,<br />
deliverables, commitments and<br />
c<strong>on</strong>sequences <strong>in</strong> case of any breach. This is<br />
essentially a formal acknowledgement that<br />
all the partners have voluntarily c<strong>on</strong>sented<br />
to work together to achieve an agreed<br />
outcome that requires each <strong>on</strong>e to play their<br />
respective roles.<br />
The term MoU is used more generically<br />
here to refer to the arrangements between<br />
partners which can range from a formal,<br />
legally enforceable c<strong>on</strong>tract <strong>on</strong> the <strong>on</strong>e hand<br />
to a simple exchange of written documents<br />
20 PwC
<strong>on</strong> the other. However, what is important<br />
for the company to keep <strong>in</strong> m<strong>in</strong>d is that<br />
it is enter<strong>in</strong>g <strong>in</strong>to an arrangement with a<br />
partner, not a supplier and there is a greater<br />
sense of mutuality <strong>in</strong> this relati<strong>on</strong>ship.<br />
It may also be noted that the MoU is<br />
relevant <strong>on</strong>ly if the project is be<strong>in</strong>g<br />
implemented by a legal entity other than<br />
the company’s own CSR department. It<br />
must also be executed if the project is be<strong>in</strong>g<br />
implemented by the company foundati<strong>on</strong> if<br />
it is a separate legal entity.<br />
Disbursement schedul<strong>in</strong>g<br />
For a project to deliver the desired results,<br />
it should have sufficient funds to carry out<br />
the planned activities. At the same time,<br />
hav<strong>in</strong>g excess funds <strong>in</strong> the bank account<br />
is not prudent f<strong>in</strong>ancial management.<br />
Thus, the schedul<strong>in</strong>g of disbursements is<br />
important both for the company (to plan its<br />
cash flows from the CSR budget) and the<br />
implement<strong>in</strong>g agency and hence needs to be<br />
detailed <strong>in</strong> the MOU.<br />
A good practice suggests that the schedul<strong>in</strong>g<br />
of disbursements should be l<strong>in</strong>ked with<br />
the activities planned for the each period;<br />
this can be a quarter, six m<strong>on</strong>ths or a<br />
year depend<strong>in</strong>g up<strong>on</strong> the adm<strong>in</strong>istrative<br />
c<strong>on</strong>venience and budget sizes. Thus, the<br />
project budget needs to be broken up<br />
accord<strong>in</strong>gly and the funds required for the<br />
subsequent period should be made available<br />
<strong>in</strong> advance.<br />
Actual disbursements have to then be l<strong>in</strong>ked<br />
to the progress <strong>on</strong> the ground. The MoU<br />
should also specify the c<strong>on</strong>diti<strong>on</strong>s that the<br />
implement<strong>in</strong>g agency should fulfil and the<br />
documentati<strong>on</strong> it should provide <strong>in</strong> support<br />
of a disbursement request. Typically, these<br />
<strong>in</strong>clude the status of:<br />
• activities orig<strong>in</strong>ally planned <strong>in</strong> the<br />
period<br />
• changes and the reas<strong>on</strong>s thereof<br />
• planned and required funds for the<br />
period<br />
• utilised funds and bank balances<br />
• net funds required<br />
Process<br />
Objective: Agree up<strong>on</strong> and sign the MoU<br />
with the partner.<br />
Process owners: The CSR department or<br />
company foundati<strong>on</strong><br />
Inputs:<br />
• an approved project proposal<br />
• a due diligence report<br />
Output(s): MoU with the implement<strong>in</strong>g<br />
agency <strong>in</strong>clud<strong>in</strong>g the disbursement<br />
schedule.<br />
Activities:<br />
• Develop<strong>in</strong>g template MoUs based<br />
<strong>on</strong> the c<strong>on</strong>text. Specify the outputs<br />
and outcomes, the approach and<br />
methodology, the KPIs, key parameters<br />
to be m<strong>on</strong>itored and reported, the<br />
mode of communicati<strong>on</strong>, c<strong>on</strong>tract<br />
management team, scope of change<br />
<strong>in</strong> management procedures, dispute<br />
or c<strong>on</strong>flict resoluti<strong>on</strong> mechanisms,<br />
<strong>in</strong>specti<strong>on</strong> and audit requirements,<br />
c<strong>on</strong>tract closeout requirements, timel<strong>in</strong>es,<br />
milest<strong>on</strong>es and deliverables,<br />
budgets, process of <strong>in</strong>voic<strong>in</strong>g and<br />
release of payments, etc<br />
• Establish<strong>in</strong>g a process for negotiati<strong>on</strong><br />
of the MoU with the implement<strong>in</strong>g<br />
agency.<br />
• Negotiat<strong>in</strong>g, agree<strong>in</strong>g up<strong>on</strong> and sign<strong>in</strong>g<br />
the MoU<br />
Tools, technical guidance and<br />
standards to be used:<br />
• To be tailored as per <strong>corporate</strong><br />
requirements.<br />
Step seven: Progress m<strong>on</strong>itor<strong>in</strong>g<br />
and report<strong>in</strong>g<br />
Purpose<br />
Rout<strong>in</strong>e progress m<strong>on</strong>itor<strong>in</strong>g serves the<br />
follow<strong>in</strong>g three important purposes:<br />
• It highlights any slippages and helps to<br />
determ<strong>in</strong>e a corrective acti<strong>on</strong> that must<br />
be taken if need be.<br />
• It provides an excellent opportunity<br />
for learn<strong>in</strong>g: what worked and what<br />
did not. This can then be immediately<br />
applied to other projects.<br />
• This is an essential part of the directors’<br />
report as per the CSR clause of the<br />
Companies Act, 2013<br />
To ensure objectivity, it is critical that the<br />
m<strong>on</strong>itor<strong>in</strong>g is d<strong>on</strong>e by some<strong>on</strong>e other<br />
than the people directly engaged <strong>in</strong> the<br />
project implementati<strong>on</strong>. In cases where<br />
the implementati<strong>on</strong> is d<strong>on</strong>e by a partner or<br />
<strong>corporate</strong> foundati<strong>on</strong>, this role can either be<br />
outsourced or played by the company’s CSR<br />
department. In case the CSR department<br />
itself is implement<strong>in</strong>g a project, then<br />
m<strong>on</strong>itor<strong>in</strong>g should either be outsourced to<br />
a third party or the department structure<br />
should <strong>in</strong>clude an <strong>in</strong>dependent m<strong>on</strong>itor<strong>in</strong>g<br />
cell. This decisi<strong>on</strong> should be taken by the<br />
CSR committee.<br />
Process<br />
Objective: M<strong>on</strong>itor<strong>in</strong>g progress, distill<strong>in</strong>g<br />
less<strong>on</strong>s and form<strong>in</strong>g the basis for report<strong>in</strong>g.<br />
Process owners: The CSR committee<br />
Inputs:<br />
• The approved project proposal<br />
• Previous m<strong>on</strong>itor<strong>in</strong>g reports<br />
Output(s):<br />
• Determ<strong>in</strong><strong>in</strong>g mid-course correcti<strong>on</strong>s<br />
• Recommendati<strong>on</strong>s for future project<br />
designs<br />
• Project m<strong>on</strong>itor<strong>in</strong>g reports to the CSR<br />
committee<br />
Activities:<br />
• Determ<strong>in</strong><strong>in</strong>g the m<strong>on</strong>itor<strong>in</strong>g schedule<br />
for each project based <strong>on</strong> the approved<br />
project proposal.<br />
• Obta<strong>in</strong><strong>in</strong>g all relevant progress reports<br />
from the project, study<strong>in</strong>g them and<br />
mak<strong>in</strong>g a note of the gaps.<br />
• Hold<strong>in</strong>g discussi<strong>on</strong>s with the<br />
implementati<strong>on</strong> team <strong>on</strong> reas<strong>on</strong>s for<br />
slippages (if any) and agree<strong>in</strong>g <strong>on</strong> a<br />
corrective acti<strong>on</strong>. This may be d<strong>on</strong>e<br />
through a field visit or remotely, based<br />
<strong>on</strong> what has been agreed <strong>in</strong> the MoU.<br />
• Hold<strong>in</strong>g discussi<strong>on</strong>s with the<br />
implementati<strong>on</strong> team regard<strong>in</strong>g what<br />
less<strong>on</strong>s are emerg<strong>in</strong>g and how they can<br />
be applied with<strong>in</strong> the project as well as<br />
outside.<br />
Tools, technical guidance and<br />
standards to be used:<br />
• To be tailored as per <strong>corporate</strong><br />
requirements.<br />
Handbook <strong>on</strong> Corporate Social Resp<strong>on</strong>sibility <strong>in</strong> India 21
Step eight: Impact measurement<br />
Purpose<br />
Impacts of the development projects<br />
typically take a while to manifest. For<br />
<strong>in</strong>stance, a girl child educati<strong>on</strong> programme<br />
can show an <strong>in</strong>creased enrolment and<br />
retenti<strong>on</strong> of girls and <strong>on</strong> a m<strong>on</strong>thly basis,<br />
but further impacts such as improved<br />
learn<strong>in</strong>g levels will take at least a year.<br />
So, impact measurement studies have<br />
different objectives from project m<strong>on</strong>itor<strong>in</strong>g<br />
and typically have to be undertaken after<br />
provid<strong>in</strong>g sufficient time for them to<br />
manifest.<br />
Impact measurement is often quite<br />
specialised and needs to be undertaken<br />
by an <strong>in</strong>dependent team with specific<br />
skills depend<strong>in</strong>g up<strong>on</strong> project design.<br />
For <strong>in</strong>stance, if a girl child educati<strong>on</strong><br />
programme has a str<strong>on</strong>g comp<strong>on</strong>ent<br />
for mobilis<strong>in</strong>g communities, then the<br />
members of the evaluati<strong>on</strong> team must not<br />
<strong>on</strong>ly understand educati<strong>on</strong> but also have<br />
knowledge of gender and the community <strong>in</strong><br />
order to assess the impact.<br />
There are several tools and frameworks<br />
for measur<strong>in</strong>g impact. Each has its pros<br />
and c<strong>on</strong>s depend<strong>in</strong>g up<strong>on</strong> the nature of<br />
<strong>in</strong>terventi<strong>on</strong>s, time and budgets available<br />
for the study and the availability of people.<br />
Thus, select<strong>in</strong>g the impact measurement<br />
methodology is important.<br />
Thus, impact studies have to be carefully<br />
planned <strong>in</strong> terms of team compositi<strong>on</strong>,<br />
tim<strong>in</strong>g and methodology. The process must<br />
be driven by the CSR committee which can<br />
delegate the day-to-day management of the<br />
process to an appropriate structure with<strong>in</strong><br />
the company.<br />
Process<br />
Objective: Measur<strong>in</strong>g the outcome and<br />
impact of the projects.<br />
Process owners: The CSR committee<br />
Inputs:<br />
• resource plann<strong>in</strong>g<br />
• the project MoU<br />
Output(s):<br />
• impact measurement report<br />
• recommendati<strong>on</strong>s for the future project<br />
designs<br />
22 PwC<br />
Activities:<br />
• Identify<strong>in</strong>g methods for c<strong>on</strong>duct<strong>in</strong>g<br />
the impact assessment and outcome<br />
measurement suited to the c<strong>on</strong>text<br />
and the size of the project and budgets<br />
available.<br />
• Identify<strong>in</strong>g the skills set required for<br />
the impact measurement team and<br />
accord<strong>in</strong>gly identify<strong>in</strong>g, select<strong>in</strong>g and<br />
appo<strong>in</strong>t<strong>in</strong>g the team.<br />
• Assist<strong>in</strong>g the team to prepare the<br />
methodology for select<strong>in</strong>g a sample,<br />
c<strong>on</strong>duct<strong>in</strong>g surveys, focus group<br />
discussi<strong>on</strong>s collect<strong>in</strong>g <strong>in</strong>formati<strong>on</strong> <strong>on</strong><br />
the identified <strong>in</strong>dicators.<br />
• Mak<strong>in</strong>g the provisi<strong>on</strong>s for the site visits<br />
by the team, <strong>in</strong>volvement of the agency<br />
<strong>in</strong>volved dur<strong>in</strong>g the basel<strong>in</strong>e and needs<br />
assessment.<br />
• Undertak<strong>in</strong>g the impact measurement<br />
exercise and prepar<strong>in</strong>g the report.<br />
• Identify<strong>in</strong>g the less<strong>on</strong>s for future<br />
<strong>in</strong>terventi<strong>on</strong>s.<br />
Tools, technical guidance and<br />
standards to be used:<br />
• L<strong>on</strong>d<strong>on</strong> Benchmark<strong>in</strong>g Group(LBG)<br />
model<br />
• Social return <strong>on</strong> <strong>in</strong>vestments (SROI),<br />
The SROI network<br />
• Global impact <strong>in</strong>vest<strong>in</strong>g network<br />
(GIIN)<br />
• Accountability -: AA 1000, Institute<br />
of Social and Ethical Accountability<br />
• ISO 26000: <strong>social</strong> resp<strong>on</strong>sibility<br />
• Public c<strong>on</strong>sultati<strong>on</strong> guidel<strong>in</strong>es of<br />
Government of India, etc<br />
Step n<strong>in</strong>e: Report c<strong>on</strong>solidati<strong>on</strong><br />
and communicati<strong>on</strong><br />
Purpose<br />
Report<strong>in</strong>g and communicati<strong>on</strong> closes the<br />
loop between <strong>in</strong>tent and achievement and is<br />
hence a crucial element of the CSR process.<br />
In the c<strong>on</strong>text of the Companies Act, 2013<br />
this is also a mandatory requirement as it<br />
provides crucial <strong>in</strong>puts to prepar<strong>in</strong>g the<br />
directors’ report.<br />
Project-level report<strong>in</strong>g forms the base<br />
and hence gett<strong>in</strong>g it right is critical.<br />
Project reports have to be c<strong>on</strong>solidated <strong>in</strong><br />
programme related reports, aligned with<br />
the CSR policy stated by the company<br />
as a requirement under the Companies<br />
Act, 2013. The report has to c<strong>on</strong>form to<br />
the requirements of CSR rules under the<br />
Companies Act, 2013 <strong>in</strong> terms of form<br />
and c<strong>on</strong>tent as n<strong>on</strong>-compliance attracts<br />
penalties. This report will also form a key<br />
<strong>in</strong>put <strong>in</strong>to the company’s SEBI Bus<strong>in</strong>ess<br />
Resp<strong>on</strong>sibility Report and susta<strong>in</strong>ability<br />
report. The CSR committee may choose<br />
to go bey<strong>on</strong>d the requirements of the<br />
Companies Act, 2013 and issue a standal<strong>on</strong>e<br />
CSR report.<br />
Process<br />
Objective: Report<strong>in</strong>g the CSR at an<br />
<strong>in</strong>dividual project level, c<strong>on</strong>solidated at<br />
a programme level and aligned with the<br />
requirements under the Companies Act,<br />
2013 and the CSR committee.<br />
Process owners: The CSR department<br />
Inputs:<br />
• CSR strategy and policy<br />
• the project MoU<br />
• m<strong>on</strong>itor<strong>in</strong>g reports from <strong>in</strong>dividual<br />
projects<br />
Output(s):<br />
• c<strong>on</strong>solidated CSR reports<br />
• external stakeholder communicati<strong>on</strong><br />
Activities:<br />
• Identify<strong>in</strong>g the recipient of the report:<br />
the board of directors, <strong>in</strong>vestors,<br />
government agencies, beneficiaries, etc.<br />
• Select<strong>in</strong>g the appropriate report<strong>in</strong>g<br />
framework that is aligned with the<br />
requirements of the Companies Act,<br />
2013 and the global best practices.<br />
• C<strong>on</strong>solidat<strong>in</strong>g project reports <strong>in</strong>to<br />
programme reports and an overall CSR<br />
report.<br />
The report<strong>in</strong>g format will form a part of the<br />
CSR rules be<strong>in</strong>g drafted by the M<strong>in</strong>istry of<br />
Corporate Affairs.<br />
Tools, technical guidance and<br />
standards to be used:<br />
• SEBI directive <strong>on</strong> ESG disclosure (if<br />
applicable) , RBI guidel<strong>in</strong>es <strong>on</strong> CSR,<br />
susta<strong>in</strong>able development and n<strong>on</strong>f<strong>in</strong>ancial<br />
report<strong>in</strong>g (if applicable)<br />
• Clause 135, Companies Act, 2013 (if<br />
applicable)
CSR and SMEs<br />
Handbook <strong>on</strong> Corporate Social Resp<strong>on</strong>sibility <strong>in</strong> India 23
CSR and SMEs<br />
What are SMEs?<br />
Small and medium enterprises (SMEs)<br />
significantly c<strong>on</strong>tribute towards<br />
India’s ec<strong>on</strong>omic growth. These serve<br />
<strong>in</strong>dependently and also as ancillary to larger<br />
units and help generate employment and<br />
<strong>in</strong>dustrialise the rural and backward regi<strong>on</strong>s<br />
of India. They employ nearly 40% of India’s<br />
workforce and c<strong>on</strong>tribute around 45% to<br />
India’s manufactur<strong>in</strong>g output 20 .<br />
What do they do?<br />
The bus<strong>in</strong>ess activities of SMEs are<br />
performed <strong>in</strong> proximity to the locals. This<br />
enables them to be aware of community<br />
needs, manage expectati<strong>on</strong>s and develop<br />
CSR programmes appropriately.<br />
Now that the CSR clause <strong>in</strong> the Companies<br />
Act, 2013 covers companies that have a<br />
net profit of five crore INR and above, it<br />
is expected that while micro-enterprises<br />
will not qualify, many small and medium<br />
enterprises (SMEs) will.<br />
SMEs are be<strong>in</strong>g treated separately <strong>in</strong> this<br />
<str<strong>on</strong>g>handbook</str<strong>on</strong>g> because of their dist<strong>in</strong>ct features.<br />
The CSR activities of these enterprises<br />
are driven by the pers<strong>on</strong>al <strong>in</strong>terests of<br />
promoters who hold a significant f<strong>in</strong>ancial<br />
stake <strong>in</strong> the bus<strong>in</strong>ess. They tend to be <strong>in</strong><br />
clusters and engaged <strong>in</strong> similar bus<strong>in</strong>ess<br />
activities. While the quantum of revenue<br />
available for CSR with <strong>in</strong>dividual SMEs is<br />
expected to be small, all eligible companies<br />
<strong>in</strong> a specific geographical cluster, who s<strong>in</strong>gle<br />
handed as well as collectively impact the<br />
same community, can pool their resources<br />
to create a sizeable CSR fund.<br />
How can SMEs c<strong>on</strong>tribute to CSR<br />
<strong>in</strong>itiatives?<br />
This secti<strong>on</strong> analyses the opti<strong>on</strong> of<br />
undertak<strong>in</strong>g collaborative CSR activities<br />
by SMEs. This collaborati<strong>on</strong> can also be<br />
used by other companies to maximise<br />
the impact of their CSR <strong>in</strong>itiatives while<br />
reduc<strong>in</strong>g the operati<strong>on</strong>al costs for fund<br />
management.<br />
Why collaborate for CSR<br />
<strong>in</strong>itiatives?<br />
CSR is for all companies. SMEs <strong>in</strong> India<br />
have participated <strong>in</strong> CSR activities but these<br />
efforts have not been optimally delivered. 21<br />
One possible reas<strong>on</strong> can be the fact that CSR<br />
activities depend <strong>on</strong> the profits of an SME<br />
and any fluctuati<strong>on</strong>s <strong>in</strong> profits can adversely<br />
affect their capability to c<strong>on</strong>t<strong>in</strong>ue their<br />
c<strong>on</strong>tributi<strong>on</strong> for CSR. Another reas<strong>on</strong> can<br />
be the limited human resources available to<br />
SMEs which may also result <strong>in</strong> the lack of a<br />
professi<strong>on</strong>al approach.<br />
SMEs tend to focus <strong>on</strong> short-term activities<br />
that <strong>in</strong>volve lesser operati<strong>on</strong>al costs. A<br />
survey c<strong>on</strong>ducted by UNIDO <strong>in</strong> 2008 <strong>on</strong> five<br />
SME clusters <strong>in</strong> India, found that 31% to<br />
79% of the SMEs <strong>in</strong> these clusters, preferred<br />
charity d<strong>on</strong>ati<strong>on</strong>s rather than l<strong>on</strong>g-term<br />
programmes for local communities.<br />
With the <strong>in</strong>troducti<strong>on</strong> of the new Companies<br />
Act, 2013, the SME’s approach to CSR has<br />
to be modified while keep<strong>in</strong>g operati<strong>on</strong>al<br />
costs low. One viable alternative is to pool<br />
resources with other SMEs <strong>in</strong> the cluster<br />
and create jo<strong>in</strong>t CSR programmes managed<br />
by a s<strong>in</strong>gle entity. This collaborati<strong>on</strong> can be<br />
formed with<strong>in</strong> the units <strong>in</strong> a cluster as they<br />
<strong>in</strong>teract with the same communities and<br />
have already established associati<strong>on</strong>s that<br />
cater to the bus<strong>in</strong>ess needs of the units.<br />
Collaborati<strong>on</strong> has the follow<strong>in</strong>g<br />
advantages:<br />
• Reduces operati<strong>on</strong>al cost: Individual<br />
CSR efforts by a company c<strong>on</strong>sist<br />
of establish<strong>in</strong>g a CSR department,<br />
assess<strong>in</strong>g the needs of local<br />
communities, undertak<strong>in</strong>g programmes<br />
directly or through an NGO and<br />
c<strong>on</strong>duct<strong>in</strong>g regular impact assessment<br />
studies. A comm<strong>on</strong> organisati<strong>on</strong><br />
cater<strong>in</strong>g to a number of companies will<br />
carry out these activities collectively<br />
and thus reduce the operati<strong>on</strong>al cost of<br />
management.<br />
• Undertake l<strong>on</strong>g-term projects: A<br />
major h<strong>in</strong>drance <strong>in</strong> develop<strong>in</strong>g l<strong>on</strong>gterm<br />
projects is the uncerta<strong>in</strong>ty <strong>in</strong> the<br />
CSR budget. This is dependent <strong>on</strong> the<br />
f<strong>in</strong>ancial performance of the company.<br />
A fluctuat<strong>in</strong>g performance implies<br />
that the CSR budget allocati<strong>on</strong>s can<br />
be unreliable and can jeopardise a<br />
programme <strong>in</strong>itiated earlier. Pool<strong>in</strong>g<br />
resources addresses this issue to a<br />
20. http://articles.ec<strong>on</strong>omictimes.<strong>in</strong>diatimes.com/2013-06-09/news/39834857_1_smes-workforce-small-and-medium-enterprises<br />
21. http://www.bus<strong>in</strong>ess-standard.com/article/sme/smes-to-get-professi<strong>on</strong>al-help-<strong>on</strong>-<strong>corporate</strong>-<strong>social</strong>-resp<strong>on</strong>sibility-108060501090_1.html<br />
24 PwC
certa<strong>in</strong> extent as the other partners<br />
can <strong>in</strong>crease their share <strong>in</strong> case there<br />
is variance <strong>in</strong> allocati<strong>on</strong> from a certa<strong>in</strong><br />
segment of the cluster. The l<strong>on</strong>gterm<br />
programmes also have greater<br />
impact than the short-term projects.<br />
Communities are <strong>in</strong>creas<strong>in</strong>gly realis<strong>in</strong>g<br />
the importance of the support offered<br />
by these programmes <strong>in</strong> mak<strong>in</strong>g their<br />
lives better. L<strong>on</strong>g-term programmes<br />
also lead to better community relati<strong>on</strong>s<br />
and this ensures avoid<strong>in</strong>g situati<strong>on</strong>s<br />
of community unrest that hamper<br />
bus<strong>in</strong>ess activities.<br />
• Learn<strong>in</strong>g from experiences: A comm<strong>on</strong><br />
entity with multiple participants from<br />
the cluster will help assess community<br />
needs, undertake relevant programmes<br />
based <strong>on</strong> past experiences and address<br />
a greater number of community issues.<br />
Collaborati<strong>on</strong> am<strong>on</strong>g the SMEs <strong>in</strong> a cluster<br />
also provides an opportunity to manage<br />
<strong>social</strong> and envir<strong>on</strong>mental issues and<br />
resp<strong>on</strong>d better to the pressure from buyers,<br />
who are try<strong>in</strong>g to establish ethical supply<br />
cha<strong>in</strong>s and ga<strong>in</strong> appreciati<strong>on</strong> from the<br />
<strong>in</strong>ternati<strong>on</strong>al community. Collaborati<strong>on</strong>s<br />
can also be forged am<strong>on</strong>gst larger<br />
companies, possibly through <strong>in</strong>dustry<br />
associati<strong>on</strong>s, to enable them to address<br />
comm<strong>on</strong> issues plagu<strong>in</strong>g a geographical<br />
regi<strong>on</strong> or an <strong>in</strong>dustry.<br />
The process for an SME<br />
The first step <strong>in</strong>volved <strong>in</strong> collaborat<strong>in</strong>g is to<br />
create an alliance of <strong>in</strong>terested SMEs. This<br />
may be <strong>in</strong>itiated by the cluster associati<strong>on</strong><br />
<strong>in</strong> case of large-scale participati<strong>on</strong> from the<br />
cluster. Alternatively, it can be <strong>in</strong>itiated by<br />
an <strong>in</strong>dividual SME <strong>in</strong> case there are <strong>on</strong>ly<br />
a few units <strong>in</strong>terested <strong>in</strong> undertak<strong>in</strong>g CSR<br />
activities <strong>in</strong> collaborati<strong>on</strong>. Involvement of<br />
the cluster associati<strong>on</strong> will ensure that the<br />
local priorities are given due c<strong>on</strong>siderati<strong>on</strong><br />
while develop<strong>in</strong>g CSR programmes. In case<br />
a sufficient number of SMEs <strong>in</strong> a cluster do<br />
not wish to participate or are not required<br />
under the Companies Act, 2013 to spend<br />
<strong>on</strong> CSR activities, the boundary may be<br />
extended to other clusters, though this<br />
<strong>in</strong>creases complexity.<br />
The alliance should then form a steer<strong>in</strong>g<br />
committee with the representatives from<br />
each SME so as to democratically decide <strong>on</strong><br />
issues. The steer<strong>in</strong>g committee should study<br />
the <strong>in</strong>stituti<strong>on</strong>al method of implementati<strong>on</strong>,<br />
i.e. undertak<strong>in</strong>g activities through an<br />
established trust, society, a Secti<strong>on</strong> 8<br />
company or form<strong>in</strong>g a new entity or directly<br />
manag<strong>in</strong>g the funds.<br />
The steps other than the guidel<strong>in</strong>es<br />
menti<strong>on</strong>ed by the steer<strong>in</strong>g committee <strong>in</strong> the<br />
secti<strong>on</strong> “CSR: Plann<strong>in</strong>g and strategis<strong>in</strong>g” of<br />
this <str<strong>on</strong>g>handbook</str<strong>on</strong>g>, <strong>in</strong>clude the follow<strong>in</strong>g:<br />
• Decid<strong>in</strong>g the thematic areas from<br />
Schedule VII of the Companies<br />
Act, 2013, beneficiary groups and<br />
geographies that it will target based <strong>on</strong><br />
the <strong>in</strong>puts from participants.<br />
• Develop<strong>in</strong>g <strong>in</strong>ternal processes to track<br />
<strong>in</strong>dividual c<strong>on</strong>tributi<strong>on</strong> by members<br />
and their utilisati<strong>on</strong> <strong>in</strong> CSR activities,<br />
f<strong>in</strong>alis<strong>in</strong>g l<strong>on</strong>g-term projects based <strong>on</strong><br />
projected c<strong>on</strong>tributi<strong>on</strong>s by members<br />
and address<strong>in</strong>g n<strong>on</strong>-payment by<br />
members.<br />
The CSR policy of <strong>in</strong>dividual SMEs should<br />
be designed to allow for flexibility <strong>in</strong> case of<br />
a collaborative effort to undertake CSR. This<br />
implies that the policy, over and above the<br />
guidel<strong>in</strong>es menti<strong>on</strong>ed <strong>in</strong> the secti<strong>on</strong> “Step<br />
<strong>on</strong>e: Develop CSR strategy and policy”,<br />
should allow the follow<strong>in</strong>g:<br />
• Flexibility <strong>in</strong> select<strong>in</strong>g thematic areas<br />
from Schedule VII of Companies<br />
Act, 2013, beneficiary groups and<br />
geographies as per the priorities of the<br />
entire associati<strong>on</strong>.<br />
• Support to <strong>in</strong>itiate CSR programmes<br />
to the extent possible, <strong>in</strong> case the<br />
associati<strong>on</strong> is aband<strong>on</strong>ed.<br />
The next steps <strong>in</strong>volved <strong>in</strong> the due<br />
diligence of implementati<strong>on</strong> or the c<strong>on</strong>cept<br />
development partner are:<br />
• Project development<br />
• Operati<strong>on</strong>alis<strong>in</strong>g <strong>in</strong>stituti<strong>on</strong>al<br />
mechanism<br />
• C<strong>on</strong>tract<strong>in</strong>g<br />
• Budget<strong>in</strong>g and payments<br />
• M<strong>on</strong>itor<strong>in</strong>g<br />
• Impact measurement<br />
Report<strong>in</strong>g and communicati<strong>on</strong> are as<br />
described <strong>in</strong> secti<strong>on</strong> “CSR: Plann<strong>in</strong>g and<br />
strategis<strong>in</strong>g”<br />
In cases where the total CSR funds<br />
are <strong>in</strong>sufficient to cover the cost of<br />
collaborati<strong>on</strong>, SMEs can also c<strong>on</strong>tribute to<br />
the Prime M<strong>in</strong>ister’s Nati<strong>on</strong>al Relief Fund<br />
or any other fund set up by the central<br />
government or the state governments as<br />
per activity ix of the Schedule VII of the<br />
Companies Act, 2013.<br />
Handbook <strong>on</strong> Corporate Social Resp<strong>on</strong>sibility <strong>in</strong> India 25
Appendix 1<br />
Comparative analysis of the three choices for legal entity<br />
Differential factors Trust Society Secti<strong>on</strong> 8 company 22<br />
Basic document<br />
Trust deed which c<strong>on</strong>ta<strong>in</strong>s objects of<br />
the trust (bye-law)<br />
Memorandum of associati<strong>on</strong><br />
Articles of associati<strong>on</strong> with rules and<br />
regulati<strong>on</strong>s<br />
(earlier known as Secti<strong>on</strong> 25 company)<br />
Memorandum of associati<strong>on</strong><br />
Articles of associati<strong>on</strong><br />
Formati<strong>on</strong> Simple Simple Slightly difficult<br />
Jurisdicti<strong>on</strong><br />
Deputy registrar or charity<br />
commissi<strong>on</strong>er<br />
Registrar of Societies<br />
Registrar of Companies<br />
Legislati<strong>on</strong> / statute Relevant state trust act Societies Registrati<strong>on</strong> Act 1860 Companies Act 2013<br />
Objectives Social benefits and charitable Literary, charitable, scientific and<br />
resource oriented<br />
N<strong>on</strong>profit activities<br />
Re-amendment<br />
or modificati<strong>on</strong> of<br />
objects<br />
Alterati<strong>on</strong> can be undertaken <strong>on</strong>ly<br />
by the founder or settler<br />
Easy, legal procedures<br />
Complicated, legal procedures<br />
Required members M<strong>in</strong>imum = 2, maximum = no limit M<strong>in</strong>imum = 7, maximum = no limit M<strong>in</strong>imum = 7, maximum = no limit<br />
Registrati<strong>on</strong> As trust with the registrar As society with society registrar As per Companies Act under Secti<strong>on</strong> 8 (earlier<br />
Secti<strong>on</strong> 25)<br />
Stamp duty<br />
4% of trust property value will be<br />
executed <strong>in</strong> n<strong>on</strong> judicial stamp paper<br />
with the registrar<br />
No stamp paper required for<br />
memorandum of associati<strong>on</strong>, and<br />
rules and regulati<strong>on</strong>s<br />
No stamp paper required for memorandum and<br />
articles of associati<strong>on</strong><br />
Name Easy to choose Easy to choose Prior approval required from Registrar of<br />
Companies<br />
Management board Trustees Govern<strong>in</strong>g body Board of directors and management<br />
committee<br />
Successi<strong>on</strong> <strong>in</strong><br />
management<br />
By electi<strong>on</strong> By electi<strong>on</strong> By appo<strong>in</strong>tment<br />
Meet<strong>in</strong>gs No provisi<strong>on</strong>s Annual meet<strong>in</strong>g as per law,<br />
govern<strong>in</strong>g body meet<strong>in</strong>g as per the<br />
rules of society,<br />
Quite extensive as per the provisi<strong>on</strong> of<br />
Company Law<br />
Statutory regulati<strong>on</strong>s Nom<strong>in</strong>al Limited Maturable and exhaustive<br />
Membership transfer Not possible Not possible Free or c<strong>on</strong>trol as per desire<br />
Member admissi<strong>on</strong> Not applicable Govern<strong>in</strong>g body c<strong>on</strong>trol General body or board c<strong>on</strong>trol through issue<br />
of capital<br />
Payment to members As notified <strong>in</strong> trust deed Not restricted As approved by company and state<br />
22 The n<strong>on</strong>-profit organizsati<strong>on</strong> formerly known as Secti<strong>on</strong> 25 companies are now called Secti<strong>on</strong> 8 companies after the <strong>in</strong>troducti<strong>on</strong> of Companies Act,<br />
2013.<br />
26 PwC
Appendix 2<br />
Design<strong>in</strong>g a volunteer<strong>in</strong>g programme<br />
As part of their <strong>corporate</strong> <strong>social</strong><br />
resp<strong>on</strong>sibility efforts, companies encourage<br />
their employees to volunteer for a cause<br />
(usually pre-selected by <strong>corporate</strong><br />
human resources or foundati<strong>on</strong>s) dur<strong>in</strong>g<br />
work hours under formalised employee<br />
volunteer<strong>in</strong>g programmes (EVPs). These<br />
EVPs <strong>in</strong>volve substantial opportunity<br />
cost for employers and therefore must be<br />
carefully planned and executed.<br />
Who is a <strong>corporate</strong><br />
volunteer?<br />
A <strong>corporate</strong> volunteer is an employee who<br />
actively takes <strong>on</strong> a task, resp<strong>on</strong>sibility, or<br />
project <strong>on</strong> his or her own accord without<br />
need<strong>in</strong>g to be assigned or told to do so as<br />
part of his or her daily job duties. Corporate<br />
volunteer<strong>in</strong>g is generally c<strong>on</strong>sidered an<br />
altruistic activity and is <strong>in</strong>tended to promote<br />
larger <strong>social</strong> or envir<strong>on</strong>mental good or<br />
improve the quality of life of a target<br />
beneficiary or a community.<br />
Most often, there are no f<strong>in</strong>ancial ga<strong>in</strong>s<br />
for the work or service provided by such<br />
volunteers. However, sometimes this<br />
volunteer<strong>in</strong>g <strong>in</strong>volves <strong>in</strong>centives such as<br />
pers<strong>on</strong>ality or profile development, skill<br />
development, <strong>social</strong>isati<strong>on</strong>, and fun. In<br />
certa<strong>in</strong> areas of volunteer<strong>in</strong>g work such as<br />
health services, educati<strong>on</strong> or emergency<br />
rescue volunteers receive tra<strong>in</strong><strong>in</strong>g before<br />
they can c<strong>on</strong>tribute.<br />
However, most volunteers serve <strong>on</strong> a need<br />
basis without any prior educati<strong>on</strong>al or work<br />
experience of related background.<br />
Several design parameters and related<br />
activities need to c<strong>on</strong>sidered while<br />
develop<strong>in</strong>g an EVP:<br />
Design parameter<br />
Organisati<strong>on</strong> goals: Lay<strong>in</strong>g out the overall<br />
objective of a company from its EVP.<br />
Employee volunteer<strong>in</strong>g mechanism:<br />
Develop<strong>in</strong>g the <strong>in</strong>stituti<strong>on</strong>al framework under<br />
which employee volunteerism can be channelled<br />
for a larger good.<br />
Recruitment and enrolment: Attract<strong>in</strong>g,<br />
screen<strong>in</strong>g and select<strong>in</strong>g qualified <strong>in</strong>dividuals for<br />
a specific volunteer role.<br />
Induct<strong>in</strong>g and tra<strong>in</strong><strong>in</strong>g: Welcom<strong>in</strong>g new<br />
volunteers to the EVP and prepar<strong>in</strong>g them for<br />
their role. It provides an <strong>in</strong>troducti<strong>on</strong> to the<br />
work<strong>in</strong>g envir<strong>on</strong>ment where they will volunteer<br />
and available resources. The process will cover<br />
volunteer rights, the terms and c<strong>on</strong>diti<strong>on</strong>s of<br />
volunteer<strong>in</strong>g, legal and compliance requirements<br />
and health and safety guidance. It also covers<br />
any necessary tra<strong>in</strong><strong>in</strong>g needs of the volunteers to<br />
perform their duties.<br />
Mentor<strong>in</strong>g and supervis<strong>in</strong>g: Ad hoc assistance<br />
by a more experienced and knowledgeable<br />
pers<strong>on</strong> to help facilitate a less experienced<br />
and knowledgeable pers<strong>on</strong> to reach his or<br />
her <strong>in</strong>dividual goals and objectives <strong>in</strong> the<br />
volunteer<strong>in</strong>g programme. Supervisi<strong>on</strong> <strong>in</strong>volves<br />
management of the <strong>in</strong>dividual’s performance<br />
aga<strong>in</strong>st a prescribed objective <strong>on</strong> a rout<strong>in</strong>e basis<br />
and provid<strong>in</strong>g acti<strong>on</strong>able feedback.<br />
Reward<strong>in</strong>g and recognis<strong>in</strong>g: Rewards and<br />
recogniti<strong>on</strong> are given when an organisati<strong>on</strong><br />
wants to motivate volunteers <strong>in</strong> achiev<strong>in</strong>g a<br />
goal or organisati<strong>on</strong>al objective. Rewards and<br />
recogniti<strong>on</strong> are designed to dist<strong>in</strong>guish and<br />
motivate employees. This is important <strong>in</strong> the case<br />
of volunteer<strong>in</strong>g where employees do not have<br />
any f<strong>in</strong>ancial <strong>in</strong>centives.<br />
Encourag<strong>in</strong>g diversity: Encourag<strong>in</strong>g employees<br />
with unique experiences and backgrounds<br />
to work together to <strong>in</strong>crease productivity,<br />
effectiveness and resp<strong>on</strong>siveness to chang<strong>in</strong>g<br />
c<strong>on</strong>diti<strong>on</strong>s to enhance their c<strong>on</strong>tributi<strong>on</strong> and<br />
benefit from the volunteer<strong>in</strong>g exercise.<br />
Activities<br />
• Identify volunteer<strong>in</strong>g goals of your<br />
organisati<strong>on</strong>.<br />
• Establish <strong>in</strong>stituti<strong>on</strong>al ownership of<br />
volunteer<strong>in</strong>g programme.<br />
• Establish volunteer codes of practice.<br />
• Establish volunteer<strong>in</strong>g govern<strong>in</strong>g pr<strong>in</strong>ciples.<br />
• Design volunteer programmes and projects.<br />
• Draft volunteer<strong>in</strong>g agreement <strong>in</strong>clud<strong>in</strong>g<br />
the statement of volunteer rights and<br />
resp<strong>on</strong>sibilities.<br />
• Lay out roles and resp<strong>on</strong>sibilities of<br />
coord<strong>in</strong>ators for the EVP.<br />
• Ensure c<strong>on</strong>t<strong>in</strong>uity <strong>in</strong> volunteer work.<br />
• Lay out the volunteer recruitment and<br />
enrolment process.<br />
• Create volunteer roles and writ<strong>in</strong>g positi<strong>on</strong><br />
descripti<strong>on</strong>s.<br />
• Segment and target volunteers.<br />
• Write volunteer advertisements.<br />
• Process enquiries and applicati<strong>on</strong>s.<br />
• Undertake selecti<strong>on</strong> and <strong>in</strong>terview process.<br />
• Design and deliver <strong>in</strong>ducti<strong>on</strong> and orientati<strong>on</strong><br />
programmes.<br />
• Tra<strong>in</strong> volunteers.<br />
• Design and deliver mentor<strong>in</strong>g programme.<br />
• Assign, supervise and establish key<br />
performance <strong>in</strong>dicators for volunteer work.<br />
• Provide performance feedback to volunteers.<br />
• Keep volunteers motivated.<br />
• Manage disputes and grievances.<br />
• Make volunteer<strong>in</strong>g attractive.<br />
• Develop awards and recogniti<strong>on</strong> framework.<br />
• Communicate the value of diversity.<br />
• Develop programmes to encourage diversity.<br />
• Recruit and enroll volunteers from diverse<br />
backgrounds.<br />
Handbook <strong>on</strong> Corporate Social Resp<strong>on</strong>sibility <strong>in</strong> India 27
Appendix 3<br />
Community engagement<br />
A community can be def<strong>in</strong>ed as a<br />
homogenous group of <strong>in</strong>dividuals bound<br />
together geographically, politically,<br />
culturally or by certa<strong>in</strong> values, pr<strong>in</strong>ciples or<br />
shared characteristics. For the purposes of<br />
this discussi<strong>on</strong>, we def<strong>in</strong>e community as the<br />
collecti<strong>on</strong> of stakeholders who reside <strong>in</strong> the<br />
local vic<strong>in</strong>ity of company operati<strong>on</strong>s and<br />
who rely <strong>on</strong> or are impacted by its shared<br />
resources.<br />
Community engagement is def<strong>in</strong>ed as<br />
a process <strong>in</strong> which the needs, priorities<br />
and values of various <strong>in</strong>dividuals (not<br />
directly associated with or dependent<br />
<strong>on</strong> a given company) and that of other<br />
external organisati<strong>on</strong>s <strong>in</strong> a community<br />
are <strong>in</strong><strong>corporate</strong>d <strong>in</strong>to <strong>corporate</strong> decisi<strong>on</strong>mak<strong>in</strong>g<br />
and management activities.<br />
Tools, technical guidance and<br />
standards to be used:<br />
• Participatory rural appraisal<br />
• Focus group discussi<strong>on</strong>s<br />
• Door-to-door surveys<br />
Steps for robust community engagement<br />
Assess the local c<strong>on</strong>text: Understand<strong>in</strong>g the<br />
characteristics and complexities of the local<br />
landscape and use this <strong>in</strong>formati<strong>on</strong> for strategic<br />
plann<strong>in</strong>g of community engagement.<br />
Involve communities: Support and facilitati<strong>on</strong><br />
of the process of community-driven plann<strong>in</strong>g to<br />
enable communities to def<strong>in</strong>e their own goals,<br />
identify opportunities and assets they plan to<br />
utilise or share, and prioritise areas of potential<br />
engagement with the company and other local<br />
development actors.<br />
Identify and categorise key stakeholders:<br />
Creati<strong>on</strong> of a list of the <strong>in</strong>dividuals, groups, and<br />
<strong>in</strong>stituti<strong>on</strong>s that could affect or be affected by any<br />
community engagement project. This step identifies<br />
and generates knowledge about <strong>in</strong>dividuals<br />
and local organisati<strong>on</strong>s <strong>in</strong> order to understand<br />
their behaviours, <strong>in</strong>tenti<strong>on</strong>s, <strong>in</strong>ter-relati<strong>on</strong>s and<br />
<strong>in</strong>terests.<br />
Set operati<strong>on</strong>al parameters: Sett<strong>in</strong>g up the<br />
scope and target of such an engagement <strong>in</strong> l<strong>in</strong>e<br />
with the activities a company will support.<br />
Project implementati<strong>on</strong>: Identify<strong>in</strong>g the<br />
best way to deliver a project <strong>in</strong> view of several<br />
variables, such as the objectives of community<br />
engagement, project timeframe, budget and local<br />
operat<strong>in</strong>g c<strong>on</strong>text.<br />
Measure and communicate results: M<strong>on</strong>itor<strong>in</strong>g<br />
and evaluati<strong>on</strong> to use the <strong>in</strong>formati<strong>on</strong> collected<br />
<strong>in</strong> future plann<strong>in</strong>g and communicat<strong>in</strong>g these<br />
results to all stakeholders <strong>in</strong>clud<strong>in</strong>g the community,<br />
the company and other development<br />
partners.<br />
Key activities<br />
• Undertake socioec<strong>on</strong>omic assessment.<br />
• Map local communities and networks.<br />
• Map key <strong>in</strong>stituti<strong>on</strong>s engaged with local<br />
communities.<br />
• Identify potential partners.<br />
• Identify objectives of community engagement<br />
and its guid<strong>in</strong>g pr<strong>in</strong>ciples.<br />
• Enable community plann<strong>in</strong>g, visi<strong>on</strong><strong>in</strong>g and<br />
prioritisati<strong>on</strong> through participatory methods.<br />
• Manage community expectati<strong>on</strong>s and<br />
percepti<strong>on</strong>s.<br />
• Identify and segment various target groups.<br />
• Undertake needs assessment.<br />
• Develop a basel<strong>in</strong>e.<br />
• Identify the company and any shared assets<br />
available.<br />
• Identify <strong>in</strong>vestment areas and budgets.<br />
• Develop key performance <strong>in</strong>dicators.<br />
• Select implementati<strong>on</strong> model: <strong>in</strong>-house or<br />
foundati<strong>on</strong>, implementati<strong>on</strong> partner, multistakeholder<br />
partnership, any other hybrid<br />
model.<br />
• Engage and <strong>in</strong>fluence key op<strong>in</strong>i<strong>on</strong> leaders <strong>in</strong><br />
local community.<br />
• Develop community forums.<br />
• Invest <strong>in</strong> capacity build<strong>in</strong>g of community.<br />
• Co-design detailed development projects with<br />
community participati<strong>on</strong>.<br />
• Operati<strong>on</strong>alise development projects and<br />
manage project cycle.<br />
• Document results <strong>on</strong> key performance<br />
<strong>in</strong>dicators.<br />
• Calculate <strong>social</strong> return <strong>on</strong> <strong>in</strong>vestments.<br />
• Develop communicati<strong>on</strong>s strategy to<br />
periodically dissem<strong>in</strong>ate <strong>in</strong>formati<strong>on</strong> to<br />
community and other stakeholders.<br />
28 PwC
Appendix 4<br />
CII and Credibility Alliance’s guidel<strong>in</strong>es for identify<strong>in</strong>g NGO partners<br />
1. Identity: The NGO should exist and be<br />
registered under the appropriate law<br />
under which it is governed. It should<br />
comply with the provisi<strong>on</strong>s of the Act<br />
and other relevant laws.<br />
• The organisati<strong>on</strong> has been functi<strong>on</strong><strong>in</strong>g<br />
for a m<strong>in</strong>imum of <strong>on</strong>e year from the<br />
date of registrati<strong>on</strong>.<br />
• The physical address given by the<br />
organisati<strong>on</strong> is verifiable.<br />
• The organisati<strong>on</strong> is registered as a trust<br />
or society or Secti<strong>on</strong> 25 company.<br />
• Registrati<strong>on</strong> certificates and documents<br />
issued by the appropriate authority are<br />
available up<strong>on</strong> request.<br />
2. Visi<strong>on</strong>, aims, objectives,<br />
achievements: The visi<strong>on</strong>, purpose and<br />
aims of the NGO should be explicitly<br />
stated and be reflected <strong>in</strong> the activities<br />
be<strong>in</strong>g undertaken.<br />
• A visi<strong>on</strong>, purpose or missi<strong>on</strong>, which<br />
drives the organisati<strong>on</strong>, is articulated<br />
bey<strong>on</strong>d the registrati<strong>on</strong> documents <strong>in</strong><br />
the form of activities and projects, etc.<br />
• The organisati<strong>on</strong> has a def<strong>in</strong>ed aim and<br />
a set of objectives.<br />
• The organisati<strong>on</strong> is able to show<br />
performance through def<strong>in</strong>ed <strong>in</strong>dicators<br />
aga<strong>in</strong>st stated objectives.<br />
3. Governance: There must be a<br />
clear commitment towards good<br />
governance for the NGO to enhance its<br />
effectiveness, serve all stakeholders,<br />
meet the needs of society and to ensure<br />
its accountability towards society <strong>in</strong><br />
accordance with its charter of objects<br />
and purposes.<br />
• The organisati<strong>on</strong> has a govern<strong>in</strong>g<br />
board.<br />
• The organisati<strong>on</strong> follows a c<strong>on</strong>sultative<br />
and democratic decisi<strong>on</strong>-mak<strong>in</strong>g<br />
process.<br />
• There is disclosure of the details of<br />
board members viz, name, age, gender,<br />
positi<strong>on</strong> and occupati<strong>on</strong>. All family<br />
affiliati<strong>on</strong>s should be <strong>in</strong>dicated.<br />
• The board has at least two meet<strong>in</strong>gs<br />
a year suitably spaced with quorum<br />
stipulated <strong>in</strong> its own articles of<br />
associati<strong>on</strong>, review<strong>in</strong>g the functi<strong>on</strong><strong>in</strong>g<br />
of the NGO, evaluat<strong>in</strong>g the projects<br />
undertaken by them and discuss<strong>in</strong>g the<br />
way forward.<br />
• The organisati<strong>on</strong> is not for profit and<br />
its resources are deployed <strong>on</strong>ly for<br />
accomplish<strong>in</strong>g the objectives for which<br />
it has been formed.<br />
• The organisati<strong>on</strong> has atta<strong>in</strong>ed<br />
recogniti<strong>on</strong> under Secti<strong>on</strong> 12A of the<br />
Income Tax Act. (80G of the Income Tax<br />
Act is preferable).<br />
• M<strong>in</strong>utes of board meet<strong>in</strong>gs are<br />
documented and circulated.<br />
• The board approves programmes,<br />
budgets, annual activity reports and<br />
audited f<strong>in</strong>ancial statements.<br />
• The board ensures the organisati<strong>on</strong>’s<br />
compliance with applicable laws and<br />
statutory regulati<strong>on</strong>s.<br />
• All pend<strong>in</strong>g legal disputes are declared.<br />
4. Operati<strong>on</strong>s: Operati<strong>on</strong>s refer to the<br />
capacity to c<strong>on</strong>duct programmes and<br />
adm<strong>in</strong>istrative activities efficiently and<br />
effectively <strong>in</strong> the public <strong>in</strong>terest. The<br />
NGO should have norms <strong>in</strong> respect<br />
to the nature of the programme it<br />
undertakes, the nature and style of<br />
its management; and the roles and<br />
resp<strong>on</strong>sibilities of its human resources<br />
<strong>in</strong>clud<strong>in</strong>g pers<strong>on</strong>nel and volunteers.<br />
• The activities are <strong>in</strong> l<strong>in</strong>e with the visi<strong>on</strong>,<br />
aim and objectives of the organisati<strong>on</strong>.<br />
• The organisati<strong>on</strong> periodically reviews<br />
the progress of programmes.<br />
• The accounts of the organisati<strong>on</strong> are<br />
regularly ma<strong>in</strong>ta<strong>in</strong>ed and those with an<br />
annual <strong>in</strong>come above 50,000 INR are<br />
audited by the chartered accountant.<br />
• The roles and resp<strong>on</strong>sibilities<br />
are def<strong>in</strong>ed for all pers<strong>on</strong>nel and<br />
volunteers.<br />
• All pers<strong>on</strong>nel are issued letters of<br />
c<strong>on</strong>tract and appo<strong>in</strong>tment.<br />
• An appropriate HR policy is <strong>in</strong> place.<br />
5. Accountability and transparency:<br />
Accountability and transparency are<br />
key requirements of good governance<br />
and necessary for build<strong>in</strong>g trust am<strong>on</strong>g<br />
stakeholders. This works as a testim<strong>on</strong>y<br />
to the fact that the organisati<strong>on</strong> has<br />
been work<strong>in</strong>g efficiently and effectively.<br />
• A f<strong>in</strong>ancial management policy has<br />
been developed and is adhered to.<br />
• Signed audited statements are prepared<br />
annually and available <strong>on</strong> request:<br />
balance sheet, <strong>in</strong>come and expenditure<br />
statement, receipts and payments<br />
account, schedules to these, notes <strong>on</strong><br />
accounts and the statutory auditor’s<br />
report.<br />
• Statement of accounts <strong>in</strong>dicat<strong>in</strong>g<br />
whether c<strong>on</strong>structed <strong>on</strong> a cash or<br />
accrual basis.<br />
• There are no serious adverse notes <strong>on</strong><br />
the veracity of the functi<strong>on</strong><strong>in</strong>g of the<br />
organisati<strong>on</strong>.<br />
• There are no material transacti<strong>on</strong>s<br />
<strong>in</strong>volv<strong>in</strong>g c<strong>on</strong>flict of <strong>in</strong>terest between a<br />
board or staff member and/or adverse<br />
comment and observati<strong>on</strong> relat<strong>in</strong>g to<br />
operati<strong>on</strong>al issues or f<strong>in</strong>ancial deal<strong>in</strong>g<br />
<strong>in</strong> the record of public authority.<br />
• The organisati<strong>on</strong>’s annual report is<br />
distributed and communicated to<br />
stakeholders and others and is made<br />
available up<strong>on</strong> request every year,<br />
with<strong>in</strong> eight m<strong>on</strong>ths of the end of the<br />
organisati<strong>on</strong>’s f<strong>in</strong>ancial year.<br />
• The annual report c<strong>on</strong>ta<strong>in</strong>s a<br />
descripti<strong>on</strong> of the ma<strong>in</strong> activities, a<br />
review of the progress and results<br />
achieved <strong>in</strong> the year and <strong>in</strong>formati<strong>on</strong><br />
<strong>on</strong> board member names, positi<strong>on</strong>s,<br />
remunerati<strong>on</strong> or reimbursement as well<br />
as brief f<strong>in</strong>ancial details.<br />
• The NGO shall disclose their fund<strong>in</strong>g<br />
details i.e. the sources of funds,<br />
annual revenue (O&M) and project<br />
expenditure. The organisati<strong>on</strong> shall<br />
produce timely reports <strong>on</strong> the use and<br />
management of funds which should be<br />
made available <strong>on</strong> request.<br />
• Dovetail<strong>in</strong>g with government schemes<br />
will be preferred.<br />
• The NGO should give out accurate<br />
<strong>in</strong>formati<strong>on</strong> regard<strong>in</strong>g their projects<br />
i.e. survey reports, target populati<strong>on</strong>,<br />
locati<strong>on</strong>, susta<strong>in</strong>ability of the projects,<br />
their success ratio, etc <strong>on</strong> request.<br />
The organisati<strong>on</strong> should be ready to<br />
submit an affidavit by the authorised<br />
signatory attest<strong>in</strong>g to the authenticity of<br />
the <strong>in</strong>formati<strong>on</strong> given.<br />
Handbook <strong>on</strong> Corporate Social Resp<strong>on</strong>sibility <strong>in</strong> India 29
Appendix 5<br />
Illustrative list of NGOs and platforms for <strong>in</strong>formati<strong>on</strong> <strong>on</strong> NGOs prepared by CII<br />
1. GiveIndia (http://www.give<strong>in</strong>dia.org/): GiveIndia is a d<strong>on</strong>ati<strong>on</strong> platform that<br />
allows companies to support a cause of choice from about 200 NGOs that have been<br />
scrut<strong>in</strong>ised for transparency and credibility.<br />
2. Voluntary Acti<strong>on</strong> Network India (http://www.vani<strong>in</strong>dia.org/): Voluntary Acti<strong>on</strong><br />
Network India works towards build<strong>in</strong>g a society where voluntarism and voluntary<br />
organisati<strong>on</strong>s play a dom<strong>in</strong>ant role <strong>in</strong> <strong>social</strong> cohesi<strong>on</strong>, ec<strong>on</strong>omic empowerment and<br />
nati<strong>on</strong>-build<strong>in</strong>g.<br />
3. Charities Aid Foundati<strong>on</strong> (http://www.caf<strong>in</strong>dia.org/): CAF India provides strategic<br />
and management support to <strong>corporate</strong>s, <strong>in</strong>dividuals and PSUs <strong>in</strong> order to ensure<br />
greater impact of their philanthropic and CSR <strong>in</strong>vestments.<br />
4. Oxfam India (http://www.oxfam<strong>in</strong>dia.org/): The Oxfams are rights-based<br />
organisati<strong>on</strong>s that fight poverty and <strong>in</strong>justice by l<strong>in</strong>k<strong>in</strong>g grassroots programm<strong>in</strong>g<br />
(through partner NGOs) to local, nati<strong>on</strong>al and global advocacy and policy-mak<strong>in</strong>g.<br />
5. C<strong>on</strong>federati<strong>on</strong> of Voluntary Associati<strong>on</strong>s (covanetwork.org/): COVA works <strong>in</strong> the<br />
areas of communal harm<strong>on</strong>y, peace and <strong>social</strong> justice through sensitisati<strong>on</strong> of all<br />
secti<strong>on</strong>s of society and empowerment of the marg<strong>in</strong>alised and the poor.<br />
6. Partners <strong>in</strong> Change (http://www.pic<strong>in</strong>dia.org/): PiC focusses <strong>on</strong> build<strong>in</strong>g susta<strong>in</strong>able<br />
partnerships between the <strong>corporate</strong> sector and <strong>social</strong> development <strong>in</strong>itiatives <strong>in</strong> India.<br />
PiC’s goal has been to become an organisati<strong>on</strong> that is recognised both by companies<br />
as well as civil society as a reliable facilitator for build<strong>in</strong>g partnerships for <strong>social</strong><br />
development.<br />
7. Credibility Alliance (http://credibilityalliance.org): Credibility Alliance’s missi<strong>on</strong> is to<br />
build the credibility of the voluntary sector through the creati<strong>on</strong> and promoti<strong>on</strong> of the<br />
norms of good governance and public disclosure.<br />
8. Samhita (http://samhita.org/): Samhita provides a platform for NGOs to showcase<br />
their work and attract d<strong>on</strong>ati<strong>on</strong>.<br />
9. Indian C<strong>on</strong>federati<strong>on</strong> of NGOs (http://www.ic<strong>on</strong>go.<strong>in</strong>/): iCONGO is a collective of<br />
various credible, transparent and accountable NGO members registered as promot<strong>in</strong>g<br />
members and privilege members.<br />
10. GuideStar India (http://www.guidestar<strong>in</strong>dia.org/): GuideStar India is India’s lead<strong>in</strong>g<br />
provider of NGO <strong>in</strong>formati<strong>on</strong>. Their portal provides a fully searchable database of<br />
reliable and comparable <strong>in</strong>formati<strong>on</strong> <strong>on</strong> over 3,500 NGOs.
About CII<br />
The C<strong>on</strong>federati<strong>on</strong> of Indian Industry (CII) works to create and susta<strong>in</strong> an envir<strong>on</strong>ment<br />
c<strong>on</strong>ducive to the growth of <strong>in</strong>dustry <strong>in</strong> India, partner<strong>in</strong>g <strong>in</strong>dustry and government alike<br />
through advisory and c<strong>on</strong>sultative processes. CII is a n<strong>on</strong>-government, not-for-profit,<br />
<strong>in</strong>dustry-led and <strong>in</strong>dustry-managed organisati<strong>on</strong>, play<strong>in</strong>g a proactive role <strong>in</strong> India’s<br />
development process. Founded over 117 years ago, it is India’s premier bus<strong>in</strong>ess associati<strong>on</strong>,<br />
with a direct membership of over 8100 organisati<strong>on</strong>s from the private as well as public<br />
sectors, <strong>in</strong>clud<strong>in</strong>g SMEs and MNCs, and an <strong>in</strong>direct membership of over 90,000 companies<br />
from around 400 nati<strong>on</strong>al and regi<strong>on</strong>al sectoral associati<strong>on</strong>s.<br />
CII catalyses change by work<strong>in</strong>g closely with government <strong>on</strong> policy issues, enhanc<strong>in</strong>g<br />
efficiency, competitiveness and expand<strong>in</strong>g bus<strong>in</strong>ess opportunities for <strong>in</strong>dustry through<br />
a range of specialised services and global l<strong>in</strong>kages. It also provides a platform for<br />
sectoral c<strong>on</strong>sensus build<strong>in</strong>g and network<strong>in</strong>g. Emphasis is laid <strong>on</strong> project<strong>in</strong>g a positive<br />
image of bus<strong>in</strong>ess, assist<strong>in</strong>g <strong>in</strong>dustry to identify and execute <strong>corporate</strong> citizenship<br />
programmes. Partnerships with over 120 NGOs across the country carry forward our<br />
<strong>in</strong>itiatives <strong>in</strong> <strong>in</strong>tegrated and <strong>in</strong>clusive development, which <strong>in</strong>clude health, educati<strong>on</strong>,<br />
livelihood, diversity management, skill development and water, to name a few. CII has<br />
envisaged a nati<strong>on</strong>al movement for ma<strong>in</strong>stream<strong>in</strong>g CSR for susta<strong>in</strong>ed <strong>in</strong>clusiveness as<br />
part of its <strong>social</strong> development agenda. The CII Nati<strong>on</strong>al Committee <strong>on</strong> Corporate Social<br />
Resp<strong>on</strong>sibility and Community Development was c<strong>on</strong>stituted <strong>in</strong> 2001 to make CSR an<br />
acti<strong>on</strong>able bus<strong>in</strong>ess agenda. The committee develops CSR guidel<strong>in</strong>es and promotes the<br />
shar<strong>in</strong>g of CSR experiences and best practices. CII also organises an annual CSR summit<br />
to enable stakeholders to review and strengthen the CSR movement. CII development<br />
<strong>in</strong>itiatives ensure the c<strong>on</strong>t<strong>in</strong>uity of these programmes, particularly with respect to women<br />
empowerment, <strong>in</strong>dustry-NGO partnership, and pers<strong>on</strong>s with disabilities.<br />
With 64 offices, <strong>in</strong>clud<strong>in</strong>g n<strong>in</strong>e Centres of Excellence, <strong>in</strong> India, and 7 overseas offices<br />
<strong>in</strong> Australia, Ch<strong>in</strong>a, Egypt, France, S<strong>in</strong>gapore, UK, and USA, as well as <strong>in</strong>stituti<strong>on</strong>al<br />
partnerships with 224 counterpart organizati<strong>on</strong>s <strong>in</strong> 90 countries, CII serves as a reference<br />
po<strong>in</strong>t for Indian <strong>in</strong>dustry and the <strong>in</strong>ternati<strong>on</strong>al bus<strong>in</strong>ess community.<br />
C<strong>on</strong>federati<strong>on</strong> of Indian<br />
Industry<br />
249-F, Sector 18 Udyog Vihar,<br />
Phase IV, Gurga<strong>on</strong>-122015, Haryana,<br />
India<br />
Teleph<strong>on</strong>e: +91 124 4014060-67<br />
Fax:+91 124 4014080<br />
Email: jawahar.k@cii.<strong>in</strong><br />
sarbani.chakravarty@cii.<strong>in</strong><br />
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