2. Scholar Views
John Elikngton Milton Friedman
He coined the term Triple
Bottom Line (TBL) in year
1994. TBL includes 3Ps
ie. Profit, Planet & People.
According to him business
is responsible for making
profit, protection of planet
and towards interest of
people which form the
society in which any
business operates.
He said that 'there is one
and only one social
responsibility of business
- to use its resources and
engage in activities
designed to increase its
profits so long as it stays
within the rules of the
game, which is to say,
engages in open and free
competition without
deception or fraud."
4. CSR Bill 2013
The newly enacted Companies Act 2013 has
brought remarkable changes in 60 years old
Companies Act 1956. Section 135 is among
one of the remarkable changes that makes
spending on community development say
Corporate Social Responsibility (CSR)
mandatory from 1st April 2014.
Though there are many minute details in the
CSR Bill but most important are Section 135
and Schedule VII.
5. Section 135
As per Section 135 (1) All listed companies who
fulfil the following criteria:
Net worth Rs 500cr or
Turnover Rs 1,000cr or
Net profit Rs 5cr; during any financial year
Has to constitute a CSR Committee of the Board
consisting of three or more Directors of which
at least one should be independent Director.
All such companies have to spend 2% of their
average net profit for preceding three FY on
activities listed in Schedule VII and/or activities
as per their CSR Policy.
6. Section 135
CSR Committee will:
Recommend to Boards CSR policies and activities to be
undertaken.
Recommend the amount of expenditure to be incurred
on activities.
Monitor CSR policy of company from time to time
Board of Directors will:
Approve the recommendation and CSR policy
Disclose companies CSR policies in report/website
Ensure that 2% of average net profit of preceding 3
financial years are spent on CSR activities.
7. Section 135
Every company which ceases to comply with
Section 135 (1) for consecutive 3 FY shall not be
required to:
Constitute a CSR Committee,
Comply with the provisions contained in sub-section 2-
5 of Section 135.
Till such time it meets the criteria specified in Section
135 (1)
8. Guidelines
Board Resolution required for constitution of CSR
committee and approval of CSR policy
The activities to be undertaken by CSR committee
should not directly or indirectly benefit the
Company or employees of the Company and their
families or any other person related to the
Company.
Not exceeding 5 % of total CSR expenditure can
be spent by Companies for building CSR capacity
of their own personnel as well as those of their
implementing agencies.
Earmarked amount should be spent in same FY,
carry forward is not available.
9. Guidelines
Company may undertake its CSR activities
approved by CSR Committee through a registered
trust or registered society or a registered society
or company established by the company or its
holding under Section 8 of the Act.
Companies may also collaborate with other
companies for undertaking project or programme
or CSR activities in such a manner that respective
CSR committee of the company is position to
report separately on such projects or programme
as per defined rules.
CSR projects or programme or activities that
solely employees and their family shall not be
considered as CSR
10. Schedule VII
The Schedule enlists the activities which
qualifies to be considered as CSR activity and
the cost incurred on such activities only will be
considered as CSR expenditure.
Thus Schedule VII becomes the most critical part
of CSR Bill 2013 because of existing ambiguity
in the activities. Corporate have to align their
existing CSR activities as per these guidelines.
11. CSR under Schedule VII
Activities in Schedule VII MDG Subsumed
1. Eradicating hunger and
poverty
1. Eradicate Extreme Hunger
and Poverty
2. Promotion of Education 2. Achieve Universal Primary
Education
3. Promoting gender equality
and Empowering Women
3.Promote Gender Equality
and Women Empowerment
4. Reducing Child mortality
and Improving Maternal
Health
4. Reduce Child Mortality
5. Improve Maternal Health
12. Activities in Schedule VII MDG Subsumed
5. Combating HIV/AIDS,
Malaria and other
Diseases
6. Combating HIV/AIDS,
Malaria and other Diseases
6. Ensuring Environmental
Sustainability
7. Ensuring environmental
sustainability
8. Develop a Global
Partnership for
Development
7. Employment Enhancing
Vocational skills
8. Social Business Projects
13. Activities in Schedule VII MDG Subsumed
9. Contribution to the Prime
Minister's National Relief
Fund or any
other fund set up by the
Central Government or
the State
Governments for socio-
economic development
and relief and
funds for the welfare of the
Scheduled Castes, the
Scheduled
Tribes, other backward
classes, minorities and
women; and
10. Such other matters as
may be prescribed
14. Challenges of CSR
CSR Bill has received a mixed response from
different stake holders, viz. Society and Social
Activist and many Corporate has welcomed it. On
the other hand many corporate have shown
resentment citing it Government responsibility to
work for the welfare of the state where they are
already paying all sort of taxes and following all
compliances. Where as Govt. has already
appealed for public privet partnership for common
goods. Besides there are many companies which
has been doing work for social goods before the
advent of the bill but many still find it hard to
loose their pockets because of many reasons.
15. Major Challenges of CSR
Few states which are already industrialised will
get an edge in development.
It will increase regional disparity in growth as
industries are concentrated in shorter geography
There is still ambiguity over the tax treatment of
the money spent on CSR
To spend such a huge amount with proper
monitoring is another major challenge.
16. Major Challenges of CSR
Though CSR spending has been made mandatory
but if company fails to meet that threshold they
have to give reasons for the same. So it will be
challenging for Govt. as well to monitor so many
companies.
It will add another level of bureaucracy to look
after the CSR where so many companies qualifies
whether it will be free from bias is yet another
challenge.
17. Cont....
Within the existing Govt. Welfare Schemes
Companies have to identify its own area of
intervention or establish a synergy with them
such that local bodies do no misappropriate the
Govt. Funds.
