CSR in India

From voluntary to mandatory?

February 25, 2011 David Karlsson

Outline
Background CSR in the Companies Bill 2009 Whats next?

Background
CSR traditionally practiced mainly as philanthropy Changing conditions call for a more holistic approach?

CSR in the private sector

Voluntary Guidelines, December 2009

Core elements; 1. Care for all Stakeholders 2. Ethical Functioning 3. Respect for Workers Rights and Welfare 4. Respect for Human Rights 5. Respect for Environment 6. Activities for Social and Inclusive Development

 business practices that ensures the distribution of wealth and well-being of communities in which the business operates. Salman Khursheed [ ] large section of the population remaining as un-included from the mainstream R. Bandyopadhyay

CSR in the public sector

Guidelines, March 2010

CSR spending already mandatory for CPSEs

(CSR) is a concept whereby organisations serve the interests of society by taking responsibility for the impact of their activities on customers, employees, shareholders, communities, and the environment in all aspects of their operations.

Companies Bill 2009

Revision of Companies Bill from 1956 Some suggestions:
Rotation of auditor/audit firms every five years Restrictions on Layers of Subsidiaries Capping the number of maximum directorships Managerial remuneration limits

Companies Bill 2009

Proposal by the Parliamentary Standing Committee on Finance (August 2010)
Every company having a net worth of 70 million or more, turnover of 140 million or more, or a net profit of 0,7 million or more, during a year, shall be required to spend every year at least 2% of the companys average net profit during the three immediately preceding financial years, on CSR activities of the companys choosing

Comparison of Guidelines for Private/Public sector CSR spending

Private companies Criteria CSR Spend Profit CPSEs CSR Spend

Net worth of > 70 million Turnover of > 140 million Net profit of > 0,7 million

At least 2%

< 14 million

3-5%

At least 2%

14-70 million

2-3%

At least 2%

> 70 million

0,5-2%

Stakeholder consultations
Reactions of India Inc.

CSR is about conscience The issue is on the practical side No definition of CSR how to implement and monitor? Consequences for noncompliance? Law will be counterproductive

 What does CSR spending mean? According to voluntary guidelines;

Identification of projects/activities Physichal targets with time frame Implementation and monitoring

Whats next?
Revised Companies Bill ready in April? Clause on mandatory CSR spending likely to be included But what will the exact formulation be?