This presentation will help to clear the concept of CSR.

1. CORPORATE SOCIAL
RESPONSIBILITY (CSR)
Mr. Vishal Ranaware

2. Objectives
■ After going through this unit, you will be able to:
 Explain the meaning of CSR
 Analyse the provisions of the Company Law relating to CSR
 Evaluate the current position in India
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3. Structure
■ Introduction
■ What is meant by CSR?
■ Objectives of CSR/Reasons to have CSR provisions
■ Indian Scenario – Indian Company Law
– CSR Committee
– Functions of the Committee
– CSR Activities
– Computation of Net Profit
– Disclosure Requirements
■ Company Law Amendment
■ Critical Analysis of Implementation of CSR Projects in India
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4. Introduction
■ Role of the Welfare State
■ Concept of Corporate Citizenship
■ International footprint
■ CSR mandate in India
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5. Definition
CSR
Management -
beyond
compliance
Economic -
sacrificing
profits
Institutionalist
- socio-political
movement
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6. Conti…
■ “Social responsibility is the obligation of decision makers to take actions
which protect and improve the welfare of society along with their own
interests” (Keith Davis 1975).
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8. Conti…
■ In general, CSR has typically been understood as policies and practices
that business people employ to be sure that society, or stakeholders,
other than business owners, are considered and protected in their
strategies and operations.
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9. Objectives of CSR
■ Nation/Society
– To give back the community in the best possible way in return to the
resources.
– To support national campaigns on social and develop issues that need
support to have a greater impact.
■ Company
– To maximize the company’s overall impact on society and stakeholder.
– To create awareness about the company & build its public profile.
– To maintain long run success of the business & achieve customer loyalty.
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10. Historical Background
■ CSR is not new to the World
■ in Ancient Mesopotamia around 1700 BC, King Hammurabi introduced
a code - builders, innkeepers or farmers were put to death if their
negligence caused the deaths of others, or major inconvenience to local
citizens.
■ In Ancient Rome senators grumbled about the failure of businesses to
contribute sufficient taxes to fund their military campaigns.
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11. Conti…
■ “modern” CSR movement
– impacts of business on society and the environment
– The “corporate paternalists” of the late nineteenth and early twentieth
centuries used some of their wealth to support philanthropic ventures. By
the 1920s discussions about the social responsibilities of business had
evolved into what we can recognise as the beginnings of the “modern”
CSR movement.
– “The phrase Corporate Social Responsibility was coined in 1953 with the
publication of Bowen’s Social Responsibility of Businessmen”.
– By 80’s and 90’s CSR was taken into discussion, the first company to
implement CSR was Shell in 1998.
– At the end of 20th century, CSR was standard in the industry with
companies like Price Waterhouse Copper and KPMG.
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12. Indian Scenario – Indian Company
Law
Applicability:
■ As per section 135 of the Companies Act 2013, the CSR provision is
applicable to companies which fulfills any of the following criteria during
the immediately preceding financial year: Companies having -
Net Worth Turnover Net Profit
Rs. 500
Crore or
more
Rs. 1000
Crore or
more
Rs. 5
Crore or
more
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13. Conti…
■ The CSR Rules - compliance obligations - include holding and subsidiary
companies, foreign companies with branches or project offices in India.
■ Cessation
– Rule 3 of the Companies (Corporate Social Responsibility Policy) Rules,
2014
– not satisfy the specified criteria for a consecutive period of three financial
years - not required to comply with the CSR obligations,
– However, a company not satisfying any of the specified criteria in a
subsequent financial year would still need to undertake CSR activities
unless it ceases to satisfy the specified criteria for a continuous period of
three years.
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14. Conti…
■ CSR Expenditure:
– 2% of average net profits made during three preceding financial years
– The Board of every company shall ensure spending according to its
Corporate Social Responsibility Policy.
– If fails to spend, specify reasons in the Board Report
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15. Conti…
■ CSR Committee
■ Fulfils criteria must constitute a CSR Committee to formulate and
monitor the CSR policy of a company.
■ According to Sec 135 (1): the CSR Committee to consist of at least three
directors, including at least one independent director.
■ The Board's report under sub-section (3) of section 134 (attached to the
financial statement) shall disclose the composition of the Corporate
Social Responsibility Committee.
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16. Conti…
■ Functions of the Committee
– To formulate and recommend to the Board, a CSR Policy which would
indicate the activities to be undertaken in areas or subject, specified
in Schedule VII of the Act.
– To recommend the amount of the expenditure to be incurred on the
activities undertaken in pursuance of the CSR policy.
– To institute a transparent monitoring mechanism for implementation
of the CSR projects or programs or activities undertaken by the
company.
– To monitor the CSR policy of the company time to time.
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17. Conti…
■ CSR Activities
■ The CSR activities shall be undertaken by the company, as per its stated CSR Policy,
excluding activities undertaken in pursuance of its normal course of business.
■ The CSR Committee of the company may decide to undertake its CSR activities approved
by the Board, through
– (a) a company established under section 8 of the Act or a registered trust or a
registered society, established by the company, either singly or along with any other
company, or
– (b) a company established under section 8 of the Act or a registered trust or a
registered society, established by the Central Government or State Government
or any entity established under an Act of Parliament or a State legislature.
CSR activities through company/trust/society other than those specified above, such
company or trust or society shall have an established track record of three years in
undertaking similar programs or projects; and the company has specified the projects
or programs to be undertaken, the modalities of utilization of funds of such projects and
programs and the monitoring and reporting mechanism.
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19. Conti…
■ Activities would not qualify as CSR:
– The CSR projects or programs or activities that benefit only the
employees of the company and their families.
– One- off events such as marathons/ awards/ charitable contribution/
advertisement/ sponsorships of TV programmes etc.
– Expenses incurred by companies for the fulfilment of any other Act/
Statue of regulations (such as Labour Laws, Land Acquisition Act, 2013,
Apprentice Act, 2013, Apprentice Act, 1961 etc.)
– Contribution of any amount directly or indirectly to any political party.
– Activities undertaken by the company in pursuance of its normal course
of business.
– The project or programmes or activities undertaken outside India.
Statue of Unity - CAG report & Wire Case Study
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20. Conti…
■ Disclosure Requirements:
■ It is mandatory for companies to disclose in Board’s Report, an annual report on CSR. The report of the
Board of Directors attached to the financial statements of the Company would also need to include an
annual report on the CSR activities of the company in the format prescribed containing following
particulars –
– A brief outline of the company's CSR policy, including overview of projects or programs proposed to
be undertaken and a reference to the web-link to the CSR policy and projects or programs.
– The Composition of the CSR Committee.
– Average net proflt of the company for last three financial years
– Prescribed CSR Expenditure
– Details of CSR spent during the financial year.
– In case the company has failed to spend the two per cent of the average net profit of the last three
financial years or any part thereof, the company shall provide the reasons for not spending the
amount in its Board report.
– A responsibility statement of the CSR Committee that the implementation and monitoring of CSR
Policy, is in compliance with CSR objectives and Policy of the company.
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21. Key highlights of the Amendment
relevant to CSR
■ Transfer of unspent funds: If there are any unspent CSR funds during a financial year (in respect
of an ongoing CSR Project), in accordance with its CSR policy, the company must transfer such
unspent CSR funds into a special account within a period of 30 (thirty) days from the end of the
financial year. Such account, to be opened with a scheduled bank by the company, will be called
an Unspent Corporate Social Responsibility Account (Unspent CSR Account) and the proceeds of
the Unspent CSR Account will have to be spent by the company towards the CSR projects (under
its CSR policy) within 3 (three) financial years from the date of such transfer. If the company is
unable to spend the sum in the Unspent CSR Account within the prescribed period of 3 (three)
financial years, then, such unspent amount should be transferred to a fund specified under
Schedule VII of the Companies Act (Schedule VII Fund) within 6 (six) months from the end of the
relevant financial year.
■ However, if there are any unspent CSR funds at the end of a financial year and there are no
ongoing CSR projects, the funds should be directly transferred to the Schedule VII Fund, within 6
(six) months from the end of the relevant financial year.
■ In effect, the Schedule VII Fund means, Prime Minister's National Relief Fund or any other fund
set up by the central government for socio-economic development and relief and welfare of the
scheduled castes / tribes, other backward classes, minorities and women.
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22. Conti…
■ Penal liability for non-compliance: If a company fails to comply with
above mentioned obligations, the Amendment provides for imposition of
penalty of not be less than INR 50,000 but which may extend to INR 2.5
million (Rs. 25 lacs). Additionally, the Amendment also provides for
imprisonment of every officer of the company who is in default for up to
3 (three) years or a fine of not be less than INR 50,000 but which may
extend up to INR 500,000 or with both. Additionally, separate penalty
for continuing offences has also been prescribed.
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23. Conti…
■ CSR in case new companies: It has now been clarified in the
Amendment that if the company has not completed 3 (three) years from
incorporation, the amount to be spent on a CSR fund will be equivalent
to 2 percent of the net profits made by the company in the previous
financial year (as against average net profits made by the company in 3
(three) immediately preceding financial years).
■ Central government to have rule making power: Under the
Amendment, the central government has been empowered to make rules
and issue directions to ensure compliance.
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24. Critical Analysis of Implementation
of CSR Projects in India
■ Rs. 50,000 Cr.: total CSR spend by March 2019.
■ In FY’16, only Rs 46.51 crore was spent under the conservation of national heritage category,
according to the data of 92 companies analyzed by Goodera, a CSR and sustainability management
platform. There was a sudden spurt in spending under this category to Rs 155.78 crore in FY ’17.
■ The reason is that five PSUs – the Oil and Natural Gas Corporation, Hindustan Petroleum
Corporation Limited, Bharat Petroleum Corporation Limited, Indian Oil Corporation Limited and
Oil India Limited – have contributed Rs 146.83 crore together (ONGC: Rs 50 crore, IOCL: Rs 21.83
crore, BPCL, HPCL, OIL: Rs 25 crore each) towards the construction of the ruling party’s pet
project, the Statue of Unity. The expenditure came from funds earmarked for CSR under the
conservation of national heritage category. In addition, 14 PSUs from Gujarat also contributed Rs
104.88 crore under CSR for the same project.
■ CSR fund has been used by the political parties or organizations to complete their dream projects
or used for the activities which are not the part of CSR Policy as per schedule VII of the Companies
Act 2013.
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25. Conti…
■ CAG Report 2019: 33% CSR fund utilized through Swatch Bharat
Abhiyan
■ India is developing country, there are many other areas which need a
special attention or initiatives like,
– a) Poverty, as in India most people living in extreme poverty,
– b) Malnutrition, as India ranked 103 as per the Global Hunger Index
where hunger is serious,
– c) Skills education, 2018 report published by the Centre for
Monitoring Indian Economy (CMIE), there are around 31 million
unemployed Indians seeking jobs, etc.
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26. Now We Know
■ Meaning & Definition of CSR
■ Objectives of CSR
■ Indian Company Law Provisions Relating to CSR
■ International Footprint of CSR
■ Controversies Surrounding CSR in India
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27. Q & A
■ Thank you!
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