The Department of Empowerment of Persons with Disabilities (Divyangjan), Ministry of Social Justice & Empowerment, Government of India recently organized Sensitization Workshop on ‘Accessibility & Inclusion at Workplace: Rights of Persons with Disabilities Act, 2016' in collaboration with FICCI at Federation House, New Delhi. The objective of the workshop was to sensitize private sector, about the recently enacted Rights of Persons with Disabilities Act, 2016 which came into force from 19.04.2017 in place of earlier PwD Act, 1995. The workshop also included the discussion on ‘Popularization of Accessibility Index', ‘CSR Funding and Employability of PwDs' and ‘Incentives to Private Employer Scheme'. Inaugurating the session Secretary, DEPwD, Shakuntala Doley Gamlin emphasized the need of private sector to make their environment and workplace accessible and inclusive. Also, she highlighted the fact that self-realization and self-actualization would be achieved only if we take rights of persons with disabilities seriously.

The Department of Empowerment of Persons with Disabilities (DEPwD), Ministry of Social Justice and Empowerment , Govt of India, launched the 'Inclusiveness and Accessibility Index' to mark the next chapter of its flagship campaign, the 'Sugamya Bharat Abhiyan'. The Index, prepared in collaboration with the Federation of Indian Chambers of Commerce and Industry (FICCI) was launched by M. Venkaiah Naidu, at a function held in New Delhi.

The Department of Empowerment of Persons with Disabilities (DEPwD), Ministry of Social Justice and Empowerment , Govt of India, launched the 'Inclusiveness and Accessibility Index' to mark the next chapter of its flagship campaign, the 'Sugamya Bharat Abhiyan'. The Index, prepared in collaboration with the Federation of Indian Chambers of Commerce and Industry (FICCI) was launched by Minister of Urban Development, Housing and Urban Poverty Alleviation and Parliamentary Affairs M. Venkaiah Naidu at a function held at the Plenary Hall of Vigyan Bhawan in New Delhi

Majority of corporates expect to spend more on social welfare activities in the next financial year as CSR increasingly becomes part of strategic decision making process, says a survey. However, the FICCI survey revealed that firms find lack of clarity on laws in implementing CSR projects.

Majority of corporates expect to spend more on social welfare activities in the next financial year as CSR increasingly becomes part of strategic decision making process, says a survey by FICCI

Punjab National Bank got the FICCI Corporate Social Responsibility Award 2013-14. Dr. Rakesh Gupta, General Manager Punjab National Bank received the Award in an event organized by Federation of Indian Chambers of Commerce at New Delhi. The Award was conferred by Shri Thaawar Chand Gehlot, Minister for Social Justice & Empowerment, Government of India, in the presence of his Excellency CHO Hyun, Ambassador of the Republic of Korea , Padma Bhushan Smt. Rajashree Birla, Chairperson, FICCI CSR & Community Development Committee, Padmashree Vikramjiit Singh Sahney,Co-Chairperson, CSR & Community Development Committee & Dr. Jyotsna Suri, President, FICCI.

The corporate sector through its corporate social responsibility (CSR) arm has the ability to provide mobile connectivity to 50,000 villages, says a report by the Federation of Indian Chambers of Commerce and Industry (FICCI) and consulting firm Accenture.

As per the Companies Act, 2013, most businesses are required to allocate 2 per cent of their profit for CSR activities.

According to estimates around 16,000 companies would spend about Rs.20,000 crore towards CSR activities in 2014-15.

“This (amount) equals to the Central Government’s total allocation to provide mobile connectivity to 50,000 villages, which wireless telephony has yet to touch. CSR budgets that stand to be unlocked this year tantamount to 80 per cent of the budgetary allocation towards fertilizer subsidy bill for 2014-15.

“Given that companies’ CSR spending will be pegged to their past three years net profit, the CSR budget nationwide will likely increase in the future,” the report says.

Opportunities for companies

“The new law presents several opportunities for companies to not only strengthen their CSR efforts but also shape India’s economic future and their own global competitiveness,” says the report, “Organizing for success on corporate responsibility: the path to high performance.”

New era of inclusive growth

In the report, Rajashree Birla, chairperson, FICCI’s CSR Committee, said that the Companies Act, 2013, heralded a new era of inclusive growth. “Even as many companies have been reaching out to the underprivileged since decades, there are several organisations that have not been engaged in the community development space,” she said.

According to Shaifalika Panda, co-chairperson, FICCI young leaders, the Act provides an opportunity for companies to move away from a narrow vision of CSR to a broader vision of ‘Corporate Responsibility’ (CR) comprising actions that will help create a people and planet-friendly business environment. “The board and senior management must take up the corporate social responsibility agenda and align it to business strategy,” Ms. Panda said. “In the short run, a large section of businesses in India will continue to focus on building their CSR muscle. At the same time, we strongly believe that they will embrace the CR paradigm, as they bridge capability gaps and gain experience on the way,” said Accenture Strategy India Managing Director Sanjay Dawar.

The large presence of Korean companies in India is set to become bigger in view of the sea change in the economic and business environment following the installation of the new government in this country.

“I see a renewed interest amongst Korean companies in coming as the economic vision unveiled by Prime Minister Modi is acting as a big catalyst,” said Mr Joon-Gyu Lee, Korean Ambassador to India at the 4th Korea-India CSR Forum hosted by the Korean Embassy and the Federation of Indian Chambers of Commerce and Industry (FICCI) here today.

He said the Korean companies were committed to undertaking CSR activities and emphasised that it presents a huge opportunity for them to earn corporate goodwill and win the hearts and minds of the Indian people. The Korean Ambassador said CSR rested on three pillars ~ the 3Ps, representing People, Planet and Profit.

People, he said, were the ultimate stakeholders of any enterprise and therefore industry must pursue socially responsible business strategies for the benefit of all. The corporate sector must factor in the impact of the business activities and invest in environment-friendly technologies for the sake of Planet earth and remember that CSR was not antithetical to generation of Profit. Corporates, he added, must go beyond tax planning and profit-making by adhering to the 3Ps for reaping long-term dividends.

Doing good to society is doing good to industry, he said, adding that the Korean Embassy is holding regular meetings with Korean companies in India to review the individual CSR practices being followed by them.

Ms Sibani Swain, economic adviser, ministry of corporate affairs, said that contributions to the ‘Swachh Bharat Kosh’ has been added by the government to the list of CSR activities.

Mr A Didar Singh, secretary-general, FICCI, said CSR must be recognised as creative value-addition for the community, not just as shared value which is meant to benefit industry. He said Bill Gates’ call for ‘creative capitalism’ was an approach where governments, business and not-for-profit organisations work together.

Korean firms are now more keen to invest in India, upbeat about the country's investment climate after the new government led by Narendra Modi unveiled its economic vision, the country's Ambassador today said.

"I see a renewed interest amongst Korean companies in coming as the economic vision unveiled by Prime Minister Modi is acting as a big catalyst," Korean Ambassador to India Joon-Gyu Lee said at a FICCI conference here.

Besides, Lee said, Korean companies were committed to undertaking corporate social responsibility (CSR) activities in the right earnest and emphasised that CSR presents a huge opportunity for them to earn corporate goodwill and win the hearts and minds of the Indian people.

The Korean Ambassador said CSR rests on three pillars - the 3Ps, representing People, Planet and Profit. People, he said, were the ultimate stakeholders of any enterprise and therefore industry must pursue socially responsible business strategies for the benefit of all.

The corporate sector must factor in the impact of the business activities and invest in environment-friendly technologies for the sake of Planet Earth. Corporates, Lee added, must go beyond tax planning and profit-making by adhering to the 3Ps for reaping long term dividends.

"Doing good to society is doing good to industry," Lee said, adding that the Korean Embassy is holding regular meetings with Korean companies in India to review the individual CSR practices being followed by them.

Korean firms are now more keen to invest in India, upbeat about the country's investment climate after the new government led by Narendra Modi unveiled its economic vision, the country's Ambassador on Thursday said.

"I see a renewed interest amongst Korean companies in coming as the economic vision unveiled by Prime Minister Modi is acting as a big catalyst," Korean Ambassador to India Joon-Gyu Lee said at a FICCI conference.

Besides, Lee said, Korean companies were committed to undertaking corporate social responsibility (CSR) activities in the right earnest and emphasised that CSR presents a huge opportunity for them to earn corporate goodwill and win the hearts and minds of the Indian people.

The Korean Ambassador said CSR rests on three pillars - the 3Ps, representing People, Planet and Profit. People, he said, were the ultimate stakeholders of any enterprise and therefore industry must pursue socially responsible business strategies for the benefit of all.

The corporate sector must factor in the impact of the business activities and invest in environment-friendly technologies for the sake of Planet Earth. Corporates, Lee added, must go beyond tax planning and profit-making by adhering to the 3Ps for reaping long term dividends.

"Doing good to society is doing good to industry," Lee said, adding that the Korean Embassy is holding regular meetings with Korean companies in India to review the individual CSR practices being followed by them.

In the Sundarbans, when tigers are trapped for monitoring, they send an SMS. Thanks to WWF India’s change in focus in its work — from tigers to the ecosystem — the model of development has also evolved in the past few years.

Now people of the area run a power station and intend to sell the surplus outside.

Anurag Danda, head of Climate Change Adaptation, WWF India, said at a symposium on CSR here that the paradigm shifts have taken place in the development narrative in India.

He said there could not be a rigid model for delivering corporate social responsibility.

For example, we got corporate sponsorship for erecting lamps in the forest area to keep away tigers from straying into the human habitats during the night.

The event, organised by the Bengal Chamber in collaboration with USAID and the US Consulate General, was designed to create a space where companies and non-government organisations can learn from one another and work together.

USAID, which is seeking innovations to develop, test and scale development success in India, showcased some of its partner organisations at the event.

To foster sustainability, USAID is collaborating with the private sector as implementer and resource partner. In association with FICCI and the Government of India’s Technology Development Board, USAID is involved in a project that links Indian innovators with seed financing in six major development sectors: maternal and child health, family planning and reproductive health, early grade reading, clean energy, water and agriculture.

This alliance also has the provision of interfacing CSR programmes. ICICI Bank and Foundation, UKAID and ICCo India recently joined the alliance.

Nazib Arif of ITC Ltd said the company’s CSR activity currently reached out to 40,000 villages and 70 lakh people and involved 70 NGOs. In the area of health it collaborates with USAID.

With the implementation of the new company law from April 1, India has become the only country in the world with legislated corporate social responsibility (CSR) and a spending threshold of up to USD 2.5 billion (Rs.15,000 crore).

The new law mandates that all companies, including foreign firms, with a minimum net worth of Rs.500 crore, turnover of Rs.1,000 crore and net profit of at least Rs.5 crore, spend at least two percent of their profit on CSR.

According to industry estimates, around 8,000 companies will fall into the ambit of the CSR provisions and this would translate into an estimated CSR spend of USD 1.95 billion to USD 2.44 billion. With higher economic growth and increase in companies profits, this mandatory spending will go up.

"India is the only country that has made legislation for CSR spending," Sai Venkateshwaran, partner and head of accounting advisory services at KPMG India, told agency.

He said the new law would lead to a significant increase in spending by companies on CSR activities.

"Many big companies have been actively engaged in the CSR activities, but the number is low. The new law will lead to a significant increase in the numbers," said Venkateshwaran, adding the mandated spending would be in the range of Rs.10,000 crore to Rs.15,000 crore annually.

Sidharth Birla, president of industry body FICCI, said the businesses by and large welcome the new legislation. However, some issues continue to trouble that need to be addressed by the regulator.

"This is an evolutionary concept and will gradually evolve over a period of time. Industry is therefore anxious on the implementation of this new provision," Birla told agency.

The new Companies Act 2013 that came into effect from April 1, 2014, replaced six-decade old legislation Companies Act 1956. CSR has been made mandatory under the new regulation and there are provisions of penalties, in case of failure.

Venkateshwaran said the industries' concerns about the new legislation were largely related to taxation and limit on activities that fall under the ambit of CSR.

Birla also shared a similar view and said: "The biggest concern of Industry is with respect to the impact of CSR contribution from a tax deductibility point of view."

"Industry hopes that the ministry of finance will find it fit to ensure CSR spend remains tax-deductible, more so since this spend is an integral cost of responsible business," he said.

Under the current income tax law, the CSR spending cannot be treated as expenditure. It will be part of profit and attract taxes.

As per the current law, unless expenditure is in the course of the business of the company, the same is disallowed and the question may arise as to whether CSR expenditure is incurred in the course of the business of the company or not. Therefore, the CSR Rules could lead to substantial expenses being disallowed in course of tax assessments.

"Unless the Income Tax law is also changed simultaneously, this could lead to years of protracted litigation and disputes," said Birla.

With the implementation of the new company law from April 1, India has become the only country in the world with legislated corporate social responsibility (CSR) and a spending threshold of up to $2.5 billion (Rs 15,000 crore).

The new law mandates that all companies, including foreign firms, with a minimum net worth of Rs.500 crore, turnover of Rs.1,000 crore and net profit of at least Rs.5 crore, spend at least two percent of their profit on CSR.

According to industry estimates, around 8,000 companies will fall into the ambit of the CSR provisions and this would translate into an estimated CSR spend of $1.95 billion to $2.44 billion. With higher economic growth and increase in companies profits, this mandatory spending will go up.

"India is the only country that has made legislation for CSR spending," Sai Venkateshwaran, partner and head of accounting advisory services at KPMG India, told IANS.

He said the new law would lead to a significant increase in spending by companies on CSR activities.

"Many big companies have been actively engaged in the CSR activities, but the number is low. The new law will lead to a significant increase in the numbers," said Venkateshwaran, adding the mandated spending would be in the range of Rs.10,000 crore to Rs.15,000 crore annually.

Sidharth Birla, president of industry body FICCI, said the businesses by and large welcome the new legislation. However, some issues continue to trouble that need to be addressed by the regulator.

"This is an evolutionary concept and will gradually evolve over a period of time. Industry is therefore anxious on the implementation of this new provision," Birla told IANS.

The new Companies Act 2013 that came into effect from April 1, 2014, replaced six-decade old legislation Companies Act 1956. CSR has been made mandatory under the new regulation and there are provisions of penalties, in case of failure.

Venkateshwaran said the industries' concerns about the new legislation were largely related to taxation and limit on activities that fall under the ambit of CSR.

Birla also shared a similar view and said: "The biggest concern of Industry is with respect to the impact of CSR contribution from a tax deductibility point of view."

"Industry hopes that the ministry of finance will find it fit to ensure CSR spend remains tax-deductible, more so since this spend is an integral cost of responsible business," he said.

Under the current income tax law, the CSR spending cannot be treated as expenditure. It will be part of profit and attract taxes.

As per the current law, unless expenditure is in the course of the business of the company, the same is disallowed and the question may arise as to whether CSR expenditure is incurred in the course of the business of the company or not. Therefore, the CSR Rules could lead to substantial expenses being disallowed in course of tax assessments.

"Unless the Income Tax law is also changed simultaneously, this could lead to years of protracted litigation and disputes," said Birla.

With the implementation of the new company law from April 1, India has become the only country in the world with legislated corporate social responsibility (CSR) and a spending threshold of up to $2.5 billion (Rs 15,000 crore).

The new law mandates that all companies, including foreign firms, with a minimum net worth of Rs 500 crore, turnover of Rs 1,000 crore and net profit of at least Rs 5 crore, spend at least two percent of their profit on CSR.

According to industry estimates, around 8,000 companies will fall into the ambit of the CSR provisions and this would translate into an estimated CSR spend of $1.95 billion to $2.44 billion. With higher economic growth and increase in companies profits, this mandatory spending will go up.

"India is the only country that has made legislation for CSR spending," Sai Venkateshwaran, partner and head of accounting advisory services at KPMG India, told IANS.

He said the new law would lead to a significant increase in spending by companies on CSR activities.

"Many big companies have been actively engaged in the CSR activities, but the number is low. The new law will lead to a significant increase in the numbers," said Venkateshwaran, adding the mandated spending would be in the range of Rs 10,000 crore to Rs 15,000 crore annually.

Sidharth Birla, president of industry body FICCI, said the businesses by and large welcome the new legislation. However, some issues continue to trouble that need to be addressed by the regulator.

"This is an evolutionary concept and will gradually evolve over a period of time. Industry is therefore anxious on the implementation of this new provision," Birla told IANS.

The new Companies Act 2013 that came into effect from April 1, 2014, replaced six-decade old legislation Companies Act 1956. CSR has been made mandatory under the new regulation and there are provisions of penalties, in case of failure.

Venkateshwaran said the industries' concerns about the new legislation were largely related to taxation and limit on activities that fall under the ambit of CSR.

Birla also shared a similar view and said: "The biggest concern of Industry is with respect to the impact of CSR contribution from a tax deductibility point of view."

"Industry hopes that the ministry of finance will find it fit to ensure CSR spend remains tax-deductible, more so since this spend is an integral cost of responsible business," he said.

Under the current income tax law, the CSR spending cannot be treated as expenditure. It will be part of profit and attract taxes.

As per the current law, unless expenditure is in the course of the business of the company, the same is disallowed and the question may arise as to whether CSR expenditure is incurred in the course of the business of the company or not. Therefore, the CSR Rules could lead to substantial expenses being disallowed in course of tax assessments.

"Unless the Income Tax law is also changed simultaneously, this could lead to years of protracted litigation and disputes," said Birla.

The prospect of mandated corporate social responsibility (CSR), as directed by the India’s Companies Act, 2013, prompts revealing reactions from all and sundry. For the sceptics of organised, especially large-scale, enterprise, CSR is an oxymoron. For those who fear the encroaching hand of the state, it smacks of an incremental tax by another name (and, worse, another one that people will evade).

Nonetheless, CSR mandated by law is now a fait accompli, under the new Companies Act. Publicly traded companies exceeding certain size and profitability thresholds must spend 2 per cent of their net profits on CSR. Even prior to this, Indian corporations, like others worldwide, engaged in a spectrum of activities they deemed their social responsibility, for better or worse. Virtually all the websites of the top 10 (by revenue) publicly traded enterprises in each of India’s public and private sectors trumpet their CSR efforts. Companies feel that a stated commitment to CSR will burnish their brands and attract talent, or it might just be a managerial perquisite, that is, a licence for managers to spend on their favourite activities in the guise of doing something seemingly legitimate.

The amounts under the new law are large, conservatively estimated at Rs 15,000 crore annually by Minister of Corporate Affairs Sachin Pilot. An annual flow of this amount ($2.5 billion), suitably levered, represents a game-changing fund dedicated to infrastructural investments, anywhere in the world, certainly in India. Some introspection about how this money is used seems sensible, notwithstanding ambient scepticism about the wisdom of the mandate in the first instance. Therefore, the World Bank and the government of India’s department of public enterprises organised a seminar on CSR in Mumbai in February, under the auspices of Harvard University’s South Asia Institute. The workshop was directed towards the large PSUs, including the navratnas and maharatnas, which do spend, and stand to spend, vast sums.

A week of immersion with luminaries from the PSUs, along with some senior managers from Indian and multinational private sector enterprises, and a collection of NGOs, left me with a renewed appreciation of how much wastage is already inherent in the dispensation of CSR funds. Companies have no knowledge of other organisations’ related activities. A stylised example might be of a medical centre being established with little knowledge of pre-existing facilities that could be more usefully augmented, or knowledge of impending duplicative plans that might well be launching concurrently.

Information sharing can help here. Publicising details on individual company websites is a simple step. This can be done more effectively if one can organise a pre-existing body that would collate such information, perhaps under the auspices of the ministry of corporate affairs, or under an industry body like FICCI or CII. It goes without saying that this transparency in what people are planning to do with CSR funds is a good idea in and of itself. It will minimise, if not prevent, the current meddling of some in the political classes seeking to divert CSR funds for their own private purposes.

There is another issue, even after accounting for greater transparency. Not every company is going to think of good uses for the amount it is mandated to spend.

In 2012, for example, six of the 10 largest PSUs were able to spend only one-third of their mandate of roughly Rs 1,200 crore. One might interpret this as good news, in that money presumably wasn’t wasted wantonly, but it’s hard to believe that there are no productive infrastructure-augmenting uses that such money could be directed to, were a mechanism to be divined.

Further, companies lack a process to allocate funds. Targeted investments should be driven by a knowledge of how CSR fits into company strategy. It often appears to be driven, rather, by the background of the line manager in charge. Only partly facetiously, an engineer will tend to build a bridge, for example, and a social scientist will tend to monitor schools. The lack of process means that even managers trying to do the right thing don’t have formal support to prevent unethical and inappropriate funnelling of so-called CSR funds for private purposes. Only a Pollyanna would have imagined otherwise in the India of today.

These processes will emerge over time. In the interim, perhaps it makes sense to consider a mechanism for companies to direct their CSR funds to opportunities shepherded by other companies, rather than forcibly wasting the funds themselves under some warped interpretation of “compliance”.

There is an intellectual precedent. In a nutshell, polluting entities in many geographic and industry jurisdictions have a choice — they either spend money to mitigate their ill effects, or they buy carbon credits, that is, the “right to pollute”, from those who are able to take this money and use it to offset the pollution (for example, by planting trees). The market for carbon credits determines the price of the right to pollute. If there are too many polluters, relative to those offsetting the effects of ambient carbon, the right to pollute becomes more expensive, thus creating a self-correcting mechanism. In economists’ jargon, the polluter internalises the “negative externality” it is otherwise imposing on society.

How might companies consider whether it makes sense to coordinate on occasion? Modest coordination of CSR can be done by industry bodies. The state-created National Skill Development Corporation (NSDC) provides useful proof-of-concept, albeit in a different context, by cajoling companies in several industries to agree to “skill” standards, and then working to catalyse these into existence.

A common fund to pool CSR resources to make sure the corpus is spent intelligently can also be useful. Of course, such a fund is not without its own issues. Those employees deriving intrinsic motivation from their direct involvement with CSR would be deprived of this feel-good effect. Companies that remit to a fund would lose control over how their money could be used, indeed, they would think of the mandate purely as a tax. Inevitably, such a fund will itself be subject to lobbying and corruption. This last factor can be partly managed through a board with representation from different sectors of society and some multilateral engagement. And the fact that companies, under this proposal, always have the alternative to eschew the fund in favour of direct CSR expenditure, will restrain egregious behaviour by the fund.

By Indian law, CSR is here to stay. So it’s time to move on, beyond debates between its aficionados and sceptics, and figure out how to make it work. Harnessing the spirit of the market to nudge it in the right direction seems feasible and efficient.

GMR Hyderabad International Airport has bagged FICCI CSR Award 2012-13 for its CSR (Corporate social responsibility) initiatives. The award was conferred by FICCI Aditya Birla CSR Centre for Excellence under the winner category in private sector companies. This airport's CSR activities include setting up a CBSE English medium school, adopting government anganwadis to improve educational standards and so on.

The much-awaited corporate social responsibility rules have been notified by the Ministry of Corporate Affairs and they allay many, but unfortunately not all, of industry’s concerns. For instance, exempting overseas branch profits from the calculation of net profit is an equitable step.

Similarly, the clarification on excluding independent directors in the formation of CSR committees for private and unlisted public companies is a huge relief for companies that are not required to appoint such directors under the law.

There are numerous companies in India which already have CSR initiatives in crucial sectors of the economy such as health, education, environment and so on.

However, when the rules come into force on April 1, 2014, around 8,000 companies in India will fall under the ambit of the CSR provision. This mandate will translate into an estimated CSR spending of $1,954-$2,442 million annually.

Therefore, the implementation aspect of the CSR provision is very significant; if implemented in the right spirit, CSR will facilitate the desired investment in human development.

India is one of the first countries in the world to have legislated this provision; it is a positive step paving the way for the corporate sector to play a larger and more conscious role in shaping communities and participating in the social side of the economy. The areas covered under the Revised Schedule VII such as healthcare, education, gender equality, environmental sustainability and rural development are critical for inclusive growth.

Rewriting business

CSR is increasingly being viewed as an important part of business operations. The growing importance of CSR has rewritten the relationship of business not just with shareholders but also with its stakeholders, including employers, supply chain partners, government, creditors, customers and communities.

However, as a concept it will evolve over a period of time. In order for it to be able to make a genuine social impact, it is important to integrate it with the model of ‘shared value’.

An increasing number of companies in India and abroad are making this concept an integral part of their strategy and the benefits accruing from this integration are manifold.

On the one hand, it enhances the competitiveness of a company while simultaneously advancing economic and social wellbeing in communities, therefore increasing the long-term sustainability of the company. On the other hand, it enhances the possibility of cooperation between business, society and government.

Corporate social responsibility in the form of shared value creation is the key to establishing a symbiotic link between corporations and communities and in taking forward the India growth story.

But for that, CSR should be embedded in the corporate culture which, in turn, requires inspiration from the leadership and commitment across the organisation.

Going forward, we hope the concept of ‘shared value’ in the CSR Rules is captured.

Being non-intrusive

The underlying intent of the new Companies Act is to promote self-regulation, non-intrusion and accountability. However, the rules have limited CSR expenditure to the activities listed under Schedule VII.

Even though the list is wide and covers a lot of sectors that have been neglected so far, industry expects that the implementation of the CSR provision will allow boards reasonable flexibility to decide their own CSR activities. Such flexibility will certainly facilitate greater participation and engagement of the private sector.

Industry has been a responsible proponent of CSR, called by whatever name, for decades. However it should be seen in the context of building deeper trust in society through a structured approach; it should also help institutionalise the practice as opposed to discretionary participation.

The Minister for Corporate Affairs Sachin Pilot has, on various occasions, assured industry that all steps will be taken by his Ministry to ensure that CSR expenditure does not impose itself as a kind of tax.

Industry views this with great optimism and hopes that the finance ministry will find it fit to ensure CSR spend remains tax-deductible, more so since this spend is a part and parcel of doing responsible business. India Inc anxiously awaits clarity and certainty on this matter.

While most concerns on CSR provisions have been attended to, there remain practical concerns on flexibility within legitimate boundaries, and how the monitoring and interpretation of companies’ efforts will take place.

The government has, till date, been receptive to legitimate concerns but will need to ensure a conducive environment so that companies can sincerely adapt to the new requirements.

The writer is the president of FICCI

The Federation of Indian Chambers of Commerce and Industry (FICCI) today announced the establishment of an in-house Centre for Corporate Governance, which would aim to contribute to the enhancement of corporate governance standards in India and provide services in this area internationally.

The Centre will be chaired by Mr Arun Duggal, chairman, Shriram Capital Ltd and will have its own advisory board, staff and funding, a Press release from FICCI said.

The launch of the Centre has happened at an opportune time since corporate governance is an issue of vital interest to the business community and with the passage of the new Companies Act, 2013, there is now a larger focus on corporate governance.

One of the major initiatives of the Centre for 2014 would be ‘Women on Corporate Boards’ which was launched last year. It involves a mentoring programme under which experienced board members will mentor and coach professional women to become ready to join corporate boards.

“We are certain that this unique initiative will improve gender balance and increase the number of women as independent directors on corporate boards”, said Mr Siddharth Birla, president of FICCI. He requested industry captains to help in the placement of the first batch of mentees and also refer high potential women capable of serving the boards of companies for the second batch of the programme.

In 2014, the Centre will also set up a peer group forum for directors called the Directors’ Forum and a Board Support Centre that would act as a confidential help desk for board members to get advice on any board agenda item or any governance issue.

Educational programmes on corporate governance would also be organised for board members in partnership with academic institutions.

FICCI and CII on Friday expressed hope that new rules would provide boards of companies flexibility in deciding 'Corporate Social Responsibility' activities.

Both groupings have welcomed the clarity around provisions related to CSR activities.

The Corporate Affairs Ministry yesterday notified the rules for CSR activities. Under the new companies law, certain class of entities are required to shell out at least two per cent of their three-year annual average net profit towards social welfare spending.

The rules, to be effective from April 1, would be applicable to companies with at least Rs 5 crore net profit, or Rs 1,000 crore turnover or Rs 500 crore net worth.

FICCI President Sidharth Birla said he expects that implementation of the CSR provisions "will allow boards all reasonable flexibility, as the underlying intent of the law is to promote self-regulation, non-intrusion and accountability".

The consultative process followed by the Ministry in finalising these rules helped in taking care of many, "but unfortunately not all of, industry concerns," he said in a statement.

CII Director General Chandrajit Banerjee said the rules seek to limit the scope of CSR activities to those enshrined under Schedule VII of the Companies Act.

Industry body FICCI has said the notification of the much-awaited CSR rules by the ministry of corporate affairs is a positive step in the overall implementation of the Companies Act, 2013.

This provision paves the way for the corporate sector to play a larger and more conscious role in shaping communities and participate in the social side of the economy, it said. The consultative process followed by the ministry of corporate affairs in finalising these rules helped in taking care of many, but unfortunately not all industry concerns, FICCI said in a statement here today. “We are pleased that most of our recommendations find place in the rules,” it said.

The rules regarding the mandatory clause on corporate social responsibility (CSR) will be notified within the next few days, Sachin Pilot, the corporate affairs minister, said on Tuesday. CSR norms have been awaited by India Inc to know the dos and don'ts on how to go about implementing the new CSR norms mandated in the Companies Act, 2013.

Under the Companies Act, 2013, firms having a net worth of at least Rs 500 crore, a minimum turnover of Rs 1,000 crore,or a net profit of Rs 5 crore are required to spend at least 2% of their net profit of the preceeding three years on CSR activities as approved by their respective CSR board. Inability to spend the amount may attract penalty if not disclosed to the board, as per the section on CSR clause in the new law.

Going by the various estimates prepared by India Inc, the total spending on CSR activities is estimated to be around Rs 15,000-20,000 crore annually.

Pilot said the government has made all efforts to make CSR rules exhaustive and flexible to ensure that firms will have the freedom to decide the social welfare work they want to support. Pilot was speaking on the sidelines of the Pravasi Bharatiya Divas event.

Pilot, who is steering the implementation of the new legislation, said: "It (CSR rules notification) will be out soon... We have finally tried to accommodate as many requests that came our way."

"Now we are having the law ministry vet those rules for any legality that may be missing or needs to be added. In a few days’ time, as soon as we get the go-ahead from the law ministry in the formulation of the rules, we will notify them," he said.

When asked about the changes that are being made to CSR norms compared to the draft stage, Pilot said they would be very flexible and very exhaustive.

According to him, not only the rules but Schedule VII of the Companies Act, pertaining to CSR activities, has also been modified. In the new companies law, CSR is in Section 135 under Schedule VII.

The Corporate Affairs Ministry has revamped a company law schedule to add more activities that may be included by companies in their corporate social responsibility (CSR) policies.

The revamp comes in the wake of nearly one lakh suggestions received by the Ministry, said Sachin Pilot, Minister of State for Corporate Affairs, on the sidelines of the 12th edition of Pravasi Bharatiya Divas (PBD) here, adding that the schedule on CSR activities had been modified and expanded.

“We felt there is no harm in upfront expanding the list of activities since so many suggestions have come in this area,” Pilot said, adding that the CSR rules had been forwarded to the Law Ministry for vetting.

The Corporate Affairs Ministry has tried to accommodate as many suggestions as possible and the CSR rules will soon be notified, he said.

The revamped schedule will be flexible and exhaustive. It will also provide more freedom to the board in choosing their CSR activity, Pilot said.

Earlier, in his address at the PBD event 2014, Pilot said India was now a favourable destination for not only investments, but was also looking to be one for ideas and skills.

“We want to be a hospitable place to business. We have eased up the process of getting information (from the Ministry) and also for setting up business here. They will be made easier as we move along in future,” he said.

Even as the new Companies Act rolls out stressing inclusive growth, there is cynicism and resistance by bigger, richer companies at the manner in which they are being bulldozed to spend two per cent of their profits towards corporate social responsibility (CSR). "We are already spending more than two per cent, some even 10 per cent. Tap into corporate minds not just their money" for better management of development programmes, is one reaction.

Other reactions vary from "the government has not shown vision in drafting the Companies Act-the framework could have been better" to "laws cannot change the ethics of corporations." The primary role of corporations is to ensure that shareholders gain, but we also want society to benefit.

An estimated 8,000 companies will be liable to CSR. The amount garnered for development is expected to be between Rs 15,000 crore and Rs 20,000 crore.

Corporate houses fear that the mandatory funding will over time be regulated and grabbed by the government to run programmes that are their responsibility. A CSR head, who does not wish to be quoted, says, governments are asking companies to put money into welfare activities like building toilets and providing drinking water, which are primarily their responsibility.

It is like an additional tax on the corporates, was another response. The inclusion of support for relief funds like that of the PM and CM raise questions of accountability, political patronage and fear of corruption. Going against the spirit of the Act, the Chhattisgarh government has even announced the mandatory CSR would go into the CM's Community Development Fund.

Doubts are being expressed about more money coming into the development kitty - not because the corporate intent is weak, but because many of the companies operate in industrial and urban areas and not in rural outback where development is needed.

There is also a possibility that companies putting in money to recharge groundwater and other such extension work, which for many is really a business imperative, will show it as CSR. Companies that work with local communities do so to win goodwill around the workplace rather than because the law demands it.

K K Upadhyay, who heads FICCI's CSR division, says neither repackaging of existing programmes nor "compliance" to a business requirement can be shown as CSR. Bringing in machinery for generating clean energy is "compliance not CSR" because efficiency improves energy production as well as profits.

Schedule 7 lists several areas in which corporates could invest but Upadhyay gives priority to employment. Just a small percentage of the population in tribal and rural areas is employable because they have neither the skills nor the discipline to work for the stipulated seven to eight hours at a stretch. Skill development, employment generation and management of natural resources are FICCI's area of focus. Mining and manufacturing companies need to ensure employment for local communities.

CSR should be part of the business strategy of corporates says a company that deals with milk and nutrition supplements. From CSR it has evolved to CSV (creating shared values). According to the CSV concept 'for business to be successful it must consider the needs of two primary stakeholders - the people in countries it operates and its shareholders.'

As business strategy, there is collaboration with schools and college across the country to create awareness on health and nutrition among adolescent girls. This company has participated in the Science Express Train by putting up an exhibition on nutrition; it has been supplying drinking water for village school children and talking to farmers and women on water conservation. Village women are being encouraged to be financially independent through good dairy practises. The economic growth of 100,000 dairy farmers of Moga who provide milk to the company is reflected in the story of Jitendra Singh who started his association with the company in 1996 with just two cows. Today he owns 78 cows.

A bottling company sponsors FIFA (football) and supports the Olympics to promote health and wellbeing; it supports India's equivalent of the Guinness Book of World Records; programmes in 250 schools; recharges groundwater through rainwater harvesting and improves environment through tree plantation. Under the Women Economic Empowerment initiative, some 5 million women will become small business women selling and distributing the company's beverages. To operate in areas where there is no electricity, they are given solar coolers chilling beverages. To market its popular mango drink, it encouraged farmers to adopt ultra high density farming practises (more trees in less space) of a selected pulpy variety. Combined with drip irrigation, mango yields increased and farmers as well as the company benefitted. To earn credit for gender sensitivity, 15 to 20 per cent of the 50,000 farmers it plans to support will be women. Many of these well thought out CSR activities are indeed good business strategies.

The private sector also needs to adopt a corporate disability policy for inclusion of the differently abled in the workforce.

There are an estimated 3,000 NGOs or civil society organisations working with people with various disabilities in the country. There is, however, no clarity on the number of differently abled — estimates vary from 2.19 per cent of the population (Census 2001) to World Bank and WHO figures of 10 per cent of the population in developing countries. This is a huge human resource whose potential needs to be tapped. With a broad spectrum of disabilities, this is also a sector that needs a lot of monetary and moral support to make them equal partners in development.

However, the new Companies Act seems to have left out disabilities from the mandatory 2 per cent CSR spending of corporation whose net worth is over Rs 500 crore, or those making a profit of over Rs 5 crore a year. It could, however, merely be a listing omission, because marginalised groups have been included.

The National Trust for Disabilities is lobbying for the inclusion of disabilities as a separate category. Though the government has been steadily increasing its budget for disabilities, since it is a state subject, the responsibility of caring for this segment lies with the states. The brunt of caring, nurturing and promoting those with disabilities lies with civil society. Since disability is not a standalone issue but a multi-sectoral, cross-cutting one, hopefully it will be possible to access CSR even before its inclusion as a separate entity.

As Poonam Natrajan, who heads the National Trust, points out, people with disabilities need the same resources as non-disabled people, in terms of schooling, livelihood or residential facilities. They need reasonable accommodation and specific supports. They also need a barrier-free environment. Above all, they need a ramping up of attitudes. People need to include disabled people in all institutions. The accommodations and specific supports may cost a bit, but they are reasonable amounts. So, supporting people with disabilities is more about attitude than money.

One problem is that most NGOs work for specific disabilities. This leads to a kind of a specialisation, perhaps even a ghettoisation. Of late, organisations for disabled persons that work across disabilities have been coming up. However, even here, intellectual and development disabilities, as well as other neurological disabilities and mental illnesses, get left out.

The bigger problem is getting CSR support for the challenged in rural areas, where a sizeable population lives, often cutoff from schooling, health and other facilities available in urban centres. In these areas, they have little to no access to government programmes. Most of the funding comes from foreign donors, unless there is a company adjacent to a rural area. Most work in rural areas focuses on education, water and sanitation. It is important that such programmes be inclusive, responsive and sensitive to the needs of persons with disabilities.

Corporations involved with disabilities per se include ITC, Infosys, Mphasis, Ashok Leyland, Lemon Tree Hotels, Engineers India Limited, ONGC, SAIL, Ascendas and Wipro. CII and FICCI also have included disability in CSR. The Amar Jyoti Charitable Trust in Delhi, which has been running an integrated school for the able and challenged since 1981, gets sporadic support for various events.

Getting jobs for the differently abled has been a major challenge despite the 3 per cent reservation mandated by the 1995 Persons with Disabilities Act in identified government jobs. The reservation is never fulfilled. Recently, the Supreme Court ruled that the 3 per cent reservation has to be earmarked across Group A, B, C and D posts in entities established by or owned and controlled by Central, state governments and local authorities. In three months, vacancies have to be computed and posts for disabled identified.

As far as the private sector is concerned, the act suggested incentives to ensure that persons with disabilities comprised at least 5 per cent of the workforce. Subsequently, the Centre announced an incentive policy, but it is not clear how many corporations took up the government's offer. However, recently, the minister for social justice and empowerment, Kumari Selja, wrote to the minister of corporate affairs, Sachin Pilot, to ask the private sector to adopt a corporate disability policy for the inclusion of the differently abled in their workforce. It's heartening to hear of several differently abled people getting jobs due to their excellence and hard work. Employing such people cannot be claimed as CSR. Companies such as Infosys, Mphasis, Vinyas Innovative Technologies Pvt Ltd and IBM are equal opportunity employers and have employed many people with disabilities. The list is growing, but not fast enough.

There are an estimated 3,000 NGOs or civil society organisations working with people with various disabilities in the country. There is, however, no clarity on the number of differently abled — estimates vary from 2.19 per cent of the population (Census 2001) to World Bank and WHO figures of 10 per cent of the population in developing countries. This is a huge human resource whose potential needs to be tapped. With a broad spectrum of disabilities, this is also a sector that needs a lot of monetary and moral support to make them equal partners in development.

However, the new Companies Act seems to have left out disabilities from the mandatory 2 per cent CSR spending of corporation whose net worth is over Rs 500 crore, or those making a profit of over Rs 5 crore a year. It could, however, merely be a listing omission, because marginalised groups have been included.

The National Trust for Disabilities is lobbying for the inclusion of disabilities as a separate category. Though the government has been steadily increasing its budget for disabilities, since it is a state subject, the responsibility of caring for this segment lies with the states. The brunt of caring, nurturing and promoting those with disabilities lies with civil society. Since disability is not a standalone issue but a multi-sectoral, cross-cutting one, hopefully it will be possible to access CSR even before its inclusion as a separate entity.

As Poonam Natrajan, who heads the National Trust, points out, people with disabilities need the same resources as non-disabled people, in terms of schooling, livelihood or residential facilities. They need reasonable accommodation and specific supports. They also need a barrier-free environment. Above all, they need a ramping up of attitudes. People need to include disabled people in all institutions. The accommodations and specific supports may cost a bit, but they are reasonable amounts. So, supporting people with disabilities is more about attitude than money.

One problem is that most NGOs work for specific disabilities. This leads to a kind of a specialisation, perhaps even a ghettoisation. Of late, organisations for disabled persons that work across disabilities have been coming up. However, even here, intellectual and development disabilities, as well as other neurological disabilities and mental illnesses, get left out.

The bigger problem is getting CSR support for the challenged in rural areas, where a sizeable population lives, often cutoff from schooling, health and other facilities available in urban centres. In these areas, they have little to no access to government programmes. Most of the funding comes from foreign donors, unless there is a company adjacent to a rural area. Most work in rural areas focuses on education, water and sanitation. It is important that such programmes be inclusive, responsive and sensitive to the needs of persons with disabilities.

Corporations involved with disabilities per se include ITC, Infosys, Mphasis, Ashok Leyland, Lemon Tree Hotels, Engineers India Limited, ONGC, SAIL, Ascendas and Wipro. CII and FICCI also have included disability in CSR. The Amar Jyoti Charitable Trust in Delhi, which has been running an integrated school for the able and challenged since 1981, gets sporadic support for various events.

Getting jobs for the differently abled has been a major challenge despite the 3 per cent reservation mandated by the 1995 Persons with Disabilities Act in identified government jobs. The reservation is never fulfilled. Recently, the Supreme Court ruled that the 3 per cent reservation has to be earmarked across Group A, B, C and D posts in entities established by or owned and controlled by Central, state governments and local authorities. In three months, vacancies have to be computed and posts for disabled identified.

As far as the private sector is concerned, the act suggested incentives to ensure that persons with disabilities comprised at least 5 per cent of the workforce. Subsequently, the Centre announced an incentive policy, but it is not clear how many corporations took up the government's offer. However, recently, the minister for social justice and empowerment, Kumari Selja, wrote to the minister of corporate affairs, Sachin Pilot, to ask the private sector to adopt a corporate disability policy for the inclusion of the differently abled in their workforce. It's heartening to hear of several differently abled people getting jobs due to their excellence and hard work. Employing such people cannot be claimed as CSR. Companies such as Infosys, Mphasis, Vinyas Innovative Technologies Pvt Ltd and IBM are equal opportunity employers and have employed many people with disabilities. The list is growing, but not fast enough.

Government asks large businesses to spend 2% of their profits on "Corporate Social Responsibility"

Government still struggles to provide reliable basic services to a majority of its citizens, trapping hundreds of millions of them in poverty. Now the country's richest firms have been told they must help.

Under the new amended Companies Act passed last month by parliament, large businesses have been asked to spend 2.0 percent of their profits each year on "Corporate Social Responsibility" (CSR).

"The idea is that if we could divert some corporate energy and the corporate way of doing business into our development sector, for a country like India it could help enormously," the head of the Indian Institute of Corporate Affairs (IICA), Bhaskar Chatterjee, explained to AFP.

CSR is broadly -- some say vaguely -- defined in the law to mean funding programmes for education, poverty alleviation, protecting the environment or tackling disease, among others.

It's one of the first such laws of its kind in the world, promising a cash bonanza for charities and non-government organisations (NGOs) while raising serious concerns the funds could worsen India's endemic corruption.

CSR has been imposed across much of corporate India. Any business with sales of more than 10 billion rupees ($156 million), a net worth of 5.0 billion rupees, or bottom-line profits of 50 million rupees is liable.

They must set up a board to implement and report on the company's CSR policy, in theory ensuring that an average of 2.0 percent of the net profits of the previous three years is spent annually.

Failure to report on this spending, as with other financial disclosure requirements, will result in fines and possibly imprisonment for a company's directors.

IICA, a business group established by the ministry of corporate affairs, calculates that 7,000 companies qualify, creating a possible annual pool of funds estimated at 120-150 billion rupees ($1.9-2.4 billion).

Sidharth Birla, president-elect of business group FICCI, says that corporate India lobbied hard against previous drafts of the law that would have forced companies to spend their profits.

"If they had made it mandatory then what would have stopped any other authority from imposing a burden on the company?" he told AFP, reprising one of the arguments against mandatory spending.

The final law says companies should set aside 2.0 percent of profits for CSR and must report on their activities, but it also gives them an easy get-out by claiming there is nothing suitable to spend the money on.

"We have been given to understand that you could well report that 'I have seen everything and I can't spend it'," Birla said.

The success of the CSR revolution will therefore depend on how companies approach the new rules, says Samir Saran from the New Delhi-based think-tank Observer Research Foundation.

The money could become a sort of "slush fund" channelled into charities and NGOs run by politicians -- "a legal way of bribing," says Saran -- or into foundations run as pet projects by the family members of business owners.

"We have to be sure that this is not another policy with good intentions and horrible consequences," he told AFP. "It is how it is implemented that will decide its success."

One early alarm bell was the government in the central state of Chhattisgarh asking companies to deposit their CSR funds with the chief minister's Community Development Fund earlier this week.

Saran favours mandatory CSR overall as a way of forcing good corporate behaviour. The Indian private sector "is notorious for not having participated in the social agenda," he says.

Though broadly true, not all can be tarred. The sprawling Tata conglomerate, owner of Jaguar LandRover and India's biggest software company, is a global leader in corporate giving and is controlled by a charitable trust.

The founder of software group Wipro, Azim Premji, has followed the example of US billionaires Bill Gates and Warren Buffett by handing large parts of his fortune to his education charity.

But for the majority of companies with little or no experience in CSR, they will depend on external charities, foundations and NGOs amid questions about their capacity to absorb the cash.

India's charity sector is rich in organisations -- 1.2 million, according to the Charities Aid Foundation (CAF) -- and low in regulation.

In November 2011, the national audit authority published a damning report showing that only 3.5 percent of the NGOs which received grants from the environment ministry completed their projects.

Peter ter Weeme, co-founder of international sustainability consultancy Junxion, which has an office in New Delhi, stresses that capacity as well as corruption is a huge problem.

"I've seen in North America where large corporations wrote one-million-dollar cheques to NGOs," he told AFP. "The NGOs couldn't handle that sort of money."

State-run companies have been subject to mandatory CSR for years but they are sitting on cash piles with "no idea how to spend it," he said.

He commended India becoming "probably the first country to have the most broad far-reaching legislation on the subject" -- Nigeria and Malaysia are considering something similar -- but there are obvious flaws.

"One of the biggest issues it doesn't address is corruption. If anything it might even exacerbate it," he concluded.

The Chhattisgarh government has asked private companies to deposit the money they spend on corporate social responsibility (CSR) in the chief minister's fund. It is a bad idea, akin to charging an extra tax on companies when the whole effort should be to cut their burden on taxes.

It must be clear that CSR is neither charity nor philanthropy. The recently-enacted companies law says that firms should spend at least 2% of their profits on CSR projects or explain why they could not, in their annual reports. The point is that every company already contributes to the larger good of society by creating jobs and income, investing in technology and converting people's pooled savings into productive capital. They create wealth for shareholders and also pay taxes.

Industry bodies such as CII and FICCI should provide a common template to explain how companies are doing corporate service to society. Firms that do not undertake CSR can use this in their annual reports.

CSR activity that does not shore up profits is misuse of shareholder funds. However, if companies can do activities that also raise their own revenues, it fits the bill for CSR. One example is Hindustan Unilever. It educates people about the benefits of washing their hands with soap for better hygiene, improving public health. Similarly, an IT company that provides, say, engineering education and improves the company's business is also contributing to welfare. But it should be left to companies to decide whether they want to spend on such activities and also how much to spend, if shareholders are fine with the idea.

CSR cannot be mandated. And the money should not be misused to divert funds into the pockets of politicians. The need is to clean up political funding so that companies do not pick up the tab, off their books.

The Chhattisgarh government has asked private companies to deposit the money they spend on corporate social responsibility (CSR) in the chief minister's fund. It is a bad idea, akin to charging an extra tax on companies when the whole effort should be to cut their burden on taxes. It must be clear that CSR is neither charity nor philanthropy. The recently-enacted companies law says that firms should spend at least 2% of their profits on CSR projects or explain why they could not, in their annual reports. The point is that every company already contributes to the larger good of society by creating jobs and income, investing in technology and converting people's pooled savings into productive capital. They create wealth for shareholders and also pay taxes. Industry bodies such as CII and FICCI should provide a common template to explain how companies are doing corporate service to society. Firms that do not undertake CSR can use this in their annual reports.

CSR activity that does not shore up profits is misuse of shareholder funds. However, if companies can do activities that also raise their own revenues, it fits the bill for CSR. One example is Hindustan Unilever. It educates people about the benefits of washing their hands with soap for better hygiene, improving public health. Similarly, an IT company that provides, say, engineering education and improves the company's business is also contributing to welfare. But it should be left to companies to decide whether they want to spend on such activities and also how much to spend, if shareholders are fine with the idea.

CSR cannot be mandated. And the money should not be misused to divert funds into the pockets of politicians. The need is to clean up political funding so that companies do not pick up the tab, off their books.

Mahatma Gandhi had stated in 1931, at FICCI’s fourth Annual General Meeting: “Industry should consider themselves as trustee and servants of the poor”.

This proposition holds true to this day. Gandhiji was reflecting on the role of business in society and flagging a compassion that Indian society has traditionally shown.

Indian business has a rich history of philanthropy and organisations such as FICCI have long adhered to the spirit of promoting responsible businesses.

Today, it has become mandatory so businesses have to identify ways to integrate corporate social responsibility into their business strategies and strengthen the delivery mechanisms to make a genuine social impact, while continuing to ensure their own profitability and sustainability. That’s the challenge.

Though philanthropy is an age-old concept, the term ‘corporate social responsibility’ began to emerge in the 1980s, thereby enlarging the responsibility of business and shifting the focus from just “stockholders” to “stakeholders”.

In the last 20 years, a large percentage of British and American companies have been at the forefront of CSR activities to demonstrate themselves as socially responsible corporate citizens.

Both Japan and South Korea have had a long tradition of CSR, while emerging markets such as Brazil have witnessed an active CSR movement in recent times.

NURTURING CSR SPIRIT

Even in China, there is an increasing realisation among corporates to be seen as socially responsible.

In India, the culture of philanthropy, especially among big, family-owned businesses, has found reflection in their active promotion of education, healthcare and basic services for communities.

With the recent passage of the Companies Bill, which stipulates a spend of 2 per cent of net profits towards CSR, corporate social responsibility will join the core business operations of companies.

India is perhaps one of the first countries in the world to have mandated this, and it paves the way for the corporate sector to play a big role in shaping communities and improving the national economy.

In several countries, including Sweden, Norway, the Netherlands, Denmark, France, and Australia, it is not legally mandatory to carry out CSR activities, though there are mandatory CSR reporting requirements. With the inclusion of CSR as provided in the new companies legislation in India, there is a lot that the corporate sector can do to contribute to employment, health, education and poverty eradication.

The spirit behind the provision is well meant and can be of immense benefit to the society; however, implementation could be a challenge. The recently legislated CSR provision, being a new concept, needs to evolve over time.

Though many large Indian companies have been engaged in doing meaningful work for society, this spirit cannot be mechanically enforced; it needs to be cultivated and nurtured over time.

To make such a movement sustainable, it is important to flag the concept of ‘Shared Value’.

This dwells on the connection between societal and economic progress as one of the ways in which businesses have been working towards enhancing welfare for society, while doing business as usual.

This concept was initially developed by Michael E. Porter and Mark R. Kramer, in a December 2006 Harvard Business Review article, “Strategy and Society: The Link Between Competitive Advantage and Corporate Social Responsibility.”

An increasing number of companies such as Nestle, Johnson & Johnson, or closer home, ITC, have already begun to successfully embark on important shared value initiatives.

Companies all over the world are increasingly making this concept an integral part of their strategy. Creating shared value helps contribute to society while promoting business.

BROADER SPIN-OFFS

The benefits arising out of this integration are manifold. It enhances the competitiveness of a company, while simultaneously advancing economic and social well-being in communities, therefore increasing the long term sustainability of the company.

It also enhances the possibility of co-operation between business, society and government.

While the new Act defines the broad contours of CSR provision, the final Rules or subordinate legislation will carry the finer details. The government has been receptive to the legitimate concerns of India Inc and redressal of some practical hardships will provide the corporate sector with a more conducive environment to do business and help adapt to the new requirements.

Industry views with optimism the assurance by the Minister of Corporate Affairs that all steps will be taken to ensure that CSR expenditure is not construed as a tax on business, and hopes that the CSR spend would be fully tax-deductible.

This is all the more because expenditure on CSR would become an integral cost of doing business for companies in the future.

It is also widely felt that the large operating subsidiaries within a Group may lack the organisational capabilities to undertake CSR on their own.

Therefore, group-level CSR spending based on consolidated accounts could be permitted, instead of CSR spending at the level of individual entities.

Furthermore, the Rules could clarify that CSR expenditure incurred by companies in keeping with conditions, stipulations and orders of Government departments, such as the Ministry of Environment and Forests, would count towards CSR spend.

Value creation should not be viewed in a narrow sense, as simply a means of optimising short-term financial gains.

Corporate social responsibility in the form of shared value creation is the key to establishing a symbiotic linkage between corporations and the communities and in taking forward the India growth story.

But for that, CSR should be embedded in the corporate culture, which, in turn, requires inspiration from the leadership and commitment across the organisation.

The author is Secretary General, FICCI.

With the new Companies Bill coming through, making it mandatory for industry to invest in corporate social responsibility (CSR) programmes, a lot of companies in the fast-moving consumer goods (FMCG) segment, as well drug makers, are identifying malnutrition as an area to work on. While FMCG players such as Nestle and Danone, already present in the nutrition segment, are keen to spread awareness and campaign about the issue, pharmaceutical companies such as Glenmark and Biocon, which currently do not have products in the segment, are working in the area as part of their CSR initiative.

Glenmark, which recently joined hands with the FICCI Aditya Birla CSR Centre for Excellence to combat child malnutrition, feels there is a need for innovative solution to counter the crisis. “We need to introduce innovative ways to disseminate information on right and healthy practices among rural masses. Time has now come to employ practical solutions rather than theoretical ones to ensure that our children remain healthy,” says Cheryl Pinto, director corporate affairs, Glenmark. While the company has no plans to foray into neutraceutical segment, it says it is committed to work towards the social cause.

Similarly, Biocon, which is currently largely focused on oncology and preventive care-related CSR, is now exploring new areas such as child malnourishment to work on. “When we work on ground, we see there is a need to spread awareness and work in this area. Child malnourishment is a major problematic area in our country and needs to be addressed,” says Rani Desai, head-Biocon Foundation.

Unlike various developing countries, in India, child malnutrition is a bigger problem than infant mortality. According to experts, while India has been able to save children from dying as infants, most of these children survive as unhealthy and disabled population because of malnorishment, which is an even dangerous situation.

While the industry is of the view that resources should be used adequately by the government to cater to rural areas and address the problem, the civil society insists the problem of malnourishment be solved by the government alone as a public service.

Alex George, director, Action Aid India, insists marketisation of the campaign against malnutrition be barred as that results in introduction of unnecessary products in the market.

Some also feel the government needs to address the problem with proper regulations and checks in place. Vandana Prasad, member, National Commission for Protection of Child Rights, says there is a need for a systematic implementation of government programmes to address malnutrition. As a market, the segment is growing rapidly. Currently, the neutraceutical market is pegged at around Rs 1,000 crore with major players from both FMCG and pharma sectors entering the space.

Tackling malnutrition is not a difficult task and a grassroot level approach that works with communities - particularly tribal and rural areas - and teaching them simple measures will help in addressing the issue, NGOs said here Friday.

"Malnutrition is not rocket science. It can be tackled with simple measures. It is not a question of food intake only, health and sanitation play a vital role. Many in rural, tribal areas still don't wash their children's hands before a meal or cut infants' nails regularly. They should be sensitised about these steps," said Ashish Satav, founder of NGO Mahan Trust.

NGOs working at grassroot levels with villages and tribal communities to eradicate malnutrition shared the best practices on how to combat child malnutrition at an event organised by the Federation of Indian Chambers of Commerce and Industry (FICCI) CSR centre for excellence and Glenmark, a pharma firm.

"I have seen how a two-year-old tribal child, who was affected by pneumonia, died as she was not given treatment. Instead, they had put a garlic garland around her neck and were praying to the local deity in Malghat village in Maharashtra. We started home-based childcare in the village and taught mothers and village healthcare workers what is diarrhea, pneumonia and sanitation," Satav said.

We provide protein rich, hot meals to severely malnourished children. Now the severe malnutrition level among the community has dropped from nine percent to three percent," Satav added.

Talking about another tribal community, Korku in Jharkhand, Prakash Michael from Spanda Samaj Sewa Samiti said: "Children in the tribal community eat less than 10 kg cereal and one kg vegetable a month. If we analyse their dietary plan, one would be surprised how the children survive with such low calorie food. Along with anganwadi centres, we also started daycare centres."

According to NGOs working in the grassroot level, anganwadi centres are equipped to meet the dietary requirements of children.

"Ground level workers like the anganwadi and Asha workers of each district are addressing issues of malnutrition to young mothers," said Sila Deb, deputy commissioner (child health), Ministry of Health and Family Welfare.

According to a report by the United Nations Children's Fund (UNICEF), only one third (33 percent) Indian children receive any service from an anganwadi centre, less than 25 percent receive supplementary foods through Integrated Child Development Scheme (ICDS) and only 18 percent have their weights measured at anganwadi centres.

The Indian Institute of Corporate Affairs is launching a first-of-its-kind certificate programme on corporate social responsibility to meet the industry's growing demand for trained professionals.

The nine-month programme, likely to begin in January, is part of a series of initiatives planned by the Manesar, Haryana-based institute to promote good and ethical business practices in the country.

"It is the first such course anywhere in the world," Bhaskar Chatterjee, director general and CEO of the institute told ET. "Once the final guidelines of the new Companies Bill are out, there will be a huge demand for qualified professionals to manage CSR operations, and this programme will help address that requirement."

The new Companies Bill seeks to make it mandatory for companies of a certain financial strength to spend at least 2% of their average net profit over three years on corporate social responsibility.

The bill, passed by the Lok Sabha in December and likely to be taken up by the Rajya Sabha during the ongoing monsoon session, is the first such legislation in the world.

The Indian Institute of Corporate Affairs was established by the ministry of corporate affairs for building capacity and training industry executives and government officials in corporate regulation and governance.

Speaking on the sidelines of a seminar on CSR organised by FICCI in Mumbai, Chatterjee said his institute is putting together the course content for the programme, which will be a combination of online and offline training. He said the programme would have capacity to train about 200 people aspiring for CSR roles in companies.

The Indian Institute of Corporate Affairs (IICA) said on Wednesday that donations to government contingency funds, such as the Prime Minister’s relief fund, won’t be treated as corporate social responsibility (CSR) expenditure if more companies opt for this route merely to show their participation in this on paper.

It makes no sense to route CSR spending to these funds as against the objective-oriented project model recommended by IICA, said Bhaskar Chatterjee, IICA deputy general, speaking on the sidelines of a seminar organized by the Federation of Indian Chambers of Commerce and Industry (FICCI).

He said the objective of CSR funds was to make a change in the social scenario of the country and merely routing this money to national funds may not lead to this.

Chatterjee also said that the IICA had a directory of about 7,000-8,000 companies in India that are eligible for the enforcement of Section 135 of the new Companies Bill that makes it mandatory for corporations with an average turnover of Rs500 crore and more for the past three years to invest at least 2% of the profits into CSR.

“IICA’s first priority is to compile all the annual reports provided by the companies to get visibility on the national picture of CSR for the first time,” Chatterjee said.

The Lok Sabha passed the new Companies Bill in March this year. It is to be taken up in the Rajya Sabha during the monsoon session.

Business associations and civil societies have a crucial role to play in the government's corporate social responsibility agenda, according to industry leaders and government officials.

"They (business associations and chambers of commerce) could act as hubs to further facilitate a process of constructive engagement and collective action with their respective organisations," Bhaskar Chatterjee, DG & CEO, IICA said at a seminar orgainsed by Federation of Indian Chamber of Commerce and Industry (FICCI) in Mumbai on Wednesday.

"Success or failure of CSR programme in India rests more with civil societies than with companies. NGOs have to demonstrate their capability to implement," said Chatterjee.

The seminar on "Corporate Social Responsibility - Companies Bill 2012 & Impact of Section 135", organised in partnership with IICA and with the support of Next Gen, British High Commission and HPCL, dwelled on what activities qualify as CSR and what does not, the critical role of industry associations and chambers of commerce, the role of civil society and NGOs in reaching the 'bottom of the pyramid' through CSR, among other issues. The seminar also had a panel discussion on integrating social delivery into business.

The new Companies Bill, passed in the Lok Sabha in December, made it mandatory for firms to report on how much they spend on CSR every year. If companies spend less than 2% of their average net profit over the last three years, they are required to explain the reasons. India is the first nation in the world to frame such legislation.

Speaking on the occasion Rashesh Shah, chairman, FICCI, Maharashtra State Council, said: "We must look at CSR as not a binding legal requirement but a commitment to imbibe it in our corporate culture, which contributes substantially towards betterment of society holistically."

According to Abhishek Humbad, co-founder of sustainability management firm NextGen, one of the partners in the seminar: "In order to realise the full potential of Clause-135, the companies need to innovate and evolve new areas intervention like social entrepreneurship, startup incubation, social business models etc. and develop new methods of delivery. Greater collaboration and greater use of technology will play a critical role in the success of Clause-135."

Corporate India today welcomed the passage of the Companies Amendment Bill by the Lok Sabha yesterday, saying the amendment of the original Companies Act 1956 will balance various stakeholder interests and encourage greater social responsibility by profitable companies. The Bill has been through much iteration in its draft stage and has emerged as a contemporary legislation and a worthy replacement to the time tested Companies Act, 1956, said Mrs Naina Lal Kidwai, president of FICCI. “The Bill intends to simplify regulations, bring greater clarity, accountability and oversight in managing businesses and balance various stakeholder interests including encouraging greater social responsibility by profitable corporates,” she said.

The Aditya Birla Group has plans to start a vocational training centre (VTC) in Mavoor near Kozhikode in Kerala where it retains a substantial land holding since the shutdown in 2001 of its flagship pulp plant the Grasim Industries.

Interacting with reporters on the sidelines of an event hosted by the FICCI (Federation of Indian Chambers of Commerce and Industry) Ladies Organisation on Friday, Rajashree Birla who is on the Board of Directors of Grasim said the Rs. 100 crore project was mooted as a Corporate Social Responsibility (CSR) initiative and aimed to impart multiple skills in areas such as hospitality, computer operations, carpentry and electrician works.

“We have submitted the plans to the government and are awaiting a response,” Ms. Birla said of the project that would target training 10,000 candidates annually. The Birla Group still holds about 320 acres in Mavoor.

The other major CSR initiatives — for which the Aditya Birla Group for Community Initiatives and Rural Development has earmarked Rs. 150 crore this year — include establishing a cancer care centre in its hospital in Chinchwad, Pune, launching telemedicine services at the Shree G.D. Birla Memorial Hospital in Ujjain, building homes for the poor and even teaching Tanjore painting to women in Cuddalore.

Earlier, in her address on “Corporate Social Responsibility,” Ms. Rajashree Birla, who spearheads community and rural initiatives, said as a partner with the NGO Habitat for Humanity the CSR division aimed to cross the 1 lakh houses mark by 2015.

Urging corporates to embed CSR in their DNA, Ms. Rajashree Birla felt that when a “company pushes its energies and helps resolve social issues..., it indirectly stimulates its own business development.”

The Aditya Birla group plans to set up a vocational training centre in Mavoor, Kerala, where the group’s manufacturing units once were.

In 1968, Grasim (an Aditya Birla company) set up viscose staple fibre and rayon grade pulp units across 320 acres in Mavoor.

In the backdrop of alleged environmental concerns, the company closed down the units in 1999 citing lack of raw material.

The 320 acres of land, which the Aditya Birla group owns, will now be used for a vocational training centre. The Aditya Birla Centre for Community Initiatives and Rural Development, the group’s CSR (corporate social responsibility) arm, plans to invest Rs 100 crore in this project.

The training facility expects to train 10,000 people a year across vocations such as Ayurveda, tailoring, carpentry, masonry and plumbing, said Rajashree Birla, wife of the late Aditya Birla, who is spearheading the corporate social responsibility (CSR) initiatives of the group.

The Aditya Birla Centre for Community Initiatives and Rural Development already runs 22 vocational training units across the country.

The Centre plans to pump in Rs 150 crore this year into other CSR initiatives.

They include a cancer centre at the Aditya Birla Memorial Hospital in Pune and a telemedicine set-up at the G. D. Birla Hospital in Ujjain.

FICCI tie-up

The Aditya Birla group has tied up with the Federation of Indian Chambers of Commerce and Industry (FICCI) to mentor companies, especially small and medium enterprises, on CSR activities. The group hopes this initiative will gather steam this year, said Rajashree Birla, on the sidelines of a seminar organised by FICCI on CSR.

Speaking at the seminar, she said that organisations must embed CSR in their mainstream activities.

“CSR must be integrated into the marketing and community initiatives. Companies must also encourage employ volunteerism.

“CSR stimulates business development. Customers prefer companies with a social conscience.

“Shareholders and investors also gravitate towards organisations with social responsibility,” she elaborated.

A decade after closing down its pulp and fibre production plants in Mavoor, Kerala, Aditya Birla Group is planning to set up a vocational training centre in the location. The new centre is expected to come up with an investment of around Rs 100 crore, said Rajashree Birla, chairperson of the Aditya Birla Centre for Community Initiatives and Rural Development and director of Aditya Birla Group.

Speaking to reporters in Chennai, after delivering her views in an interactive session on Corporate Social Responsibility (CSR) organised by Federation of Indian Chambers of Commerce and industry (FICCI) Ladies Organisation, FICCI Flo, she said, "We are planning to set up a vocational training centre for development of various skills. The investment would be around Rs 100 crore."

The Group has around 320 acres in Mavoor, where it established production facility for Gwalior Rayons in 1960s and later changed the name to Grasim Industries, according to information available.

The Aditya Birla Centre for Community Initiatives and Rural Development, the apex body for development projects spearheading the company's CSR activities, has submitted request with the relevant authorities with the government for approval to set up the training centre in Mavoor.

The centre is expected to offer training in different segments like hospitality and computer related jobs, plumbing and electrical works. Once they get the approval, the training centre would come up and the target is to train around 10,000 people every year.

The company closed down the plants at Mavoor in 2001, pointing that the closure is "primarily due to non availability of raw materials and the resultant poor quality of fibre and overall unviable operations," according to a company report.

According to Grasim Industries' annual report for the year 2001-02, the company has provided Rs 55 crore during the fiscal year towards payment to the 2,300 employees at its Mavoor plants, and an obsolescence charge of Rs 19 crore towards value of fixed assets retired from active use. "Importantly, the closure of the Mavoor plants translates into savings in recurring expenditure on employees and other standing charges to the tune of Rs 27 crore annually," said the report.

Aditya Birla Centre for Community Initiatives and Rural Development currently conducts skill development and vocational training through Aditya Birla Technology Park for integrated training programme and has Vocational Training centres at most of our plants in collaboration with Industrial Training Institutes (ITIs). It is providing training in around 10-15 sectors, said company officials.

The apex body is planning to spend around Rs 150 crore in the year for its regular activities. It is currently indulged in activities related to education, healthcare and family welfare, sustainable livelihood including agricultural and livestock development, microenterprises development, infrastructure development and social causes like dowry-less marriage and widow remarriage and women empowerment.

The textiles ministry is organising a conclave appealing to Indian industries to source domestic handlooms and handicrafts for corporate gifting instead of regular gift such as sweets thus also giving a fillip to the sector which needs recognition on a larger platform.

"The aim of this event is to create awareness about the versatility of craftsmanship of Indian hand-made goods and weaves among the corporate and industrial sector of India and forge a partnership with them for preservation and promotion of the same," said Kiran Dhingra, secretary, Ministry of Textiles.

"We are hopeful that they (corporates) will (do so) because they have the CSR (corporate social responsibiliy) money... we have targeted the ones with large turnovers. They can support them with design investment-cum-creation of a market," she added.

The ministry has invited over 400 corporates and industrial houses and over 350 of them, including IDBI Bank, Hindustan Fibre, Metro Hospitals and ITC, have shown keen interest.

The exhibition -- Hastkala Conclave -- which is scheduled Aug 17 will act as an introductory platform for the corporates and the workers.

It will have three components -- display of handicrafts and handloom by master craftpersons and weavers, a demonstration by them and seminars on market promotion of Indian handicrafts and handloom in organized retail sector.

"Sourcing gifts is just one aspect. There are several things that can be done once the two groups come into direct contact. The workers and their families can be provided support for improving their living conditions," S.S. Gupta, development commisioner, Handicrafts told IANS.

"The corporates can also spend some of their CSR fund to adopt handloom and handicrafts clusters and take care of primary health services of these people, can help them who are struggling with bad water supplies, roads and lighting problems," he added.

The handloom and handicraft sectors provide direct employment to more than 15 million artisans, crafts persons and weavers etc. mainly belonging to economically and socially weaker sections of the society in the interiors of the country.

The share of Indian handicrafts in the world market is less than two percent as against China's share of 30 percent.

Out of the estimated production of Rs.30,000 crore of handicrafts including carpet, around Rs.17,000 crore is being exported. In the handloom sector, cloth of more than 6,930 million sq mts is being produced. The export of handloom cloth stood at Rs.2,503.23 crore in 2011-12.

The draft report of the steering committee for the 12th Five Year Plan has identified handlooms as one of the priority sectors that will create large scale employment opportunities.

It has proposed steps such as celebrity endorsement, celebration of 'India Weaves Week', and creation of a unified 'Handmade in India' brand to promote Indian craft product.

Federation of Indian Chambers of Commerce and Industry (FICCI), Confederation of Indian Industry (CII) and Confederation of Indian Textile Industry (CITI) will be providing support to this initiative by the ministry.

Specific marketing requirement will be met by organisations like Central Cottage Industry Corporation (CCIC) and Handicrafts and Handloom Export Corporation (HHEC).

The textiles ministry is organising a conclave appealing to Indian industries to source domestic handlooms and handicrafts for corporate gifting instead of regular gift such as sweets thus also giving a fillip to the sector which needs recognition on a larger platform.

"The aim of this event is to create awareness about the versatility of craftsmanship of Indian hand-made goods and weaves among the corporate and industrial sector of India and forge a partnership with them for preservation and promotion of the same," said Kiran Dhingra, secretary, Ministry of Textiles.

"We are hopeful that they (corporates) will (do so) because they have the CSR (corporate social responsibiliy) money... we have targeted the ones with large turnovers. They can support them with design investment-cum-creation of a market," she added.

The ministry has invited over 400 corporates and industrial houses and over 350 of them, including IDBI Bank, Hindustan Fibre, Metro Hospitals and ITC, have shown keen interest.

The exhibition -- Hastkala Conclave -- which is scheduled Aug 17 will act as an introductory platform for the corporates and the workers.

It will have three components -- display of handicrafts and handloom by master craftpersons and weavers, a demonstration by them and seminars on market promotion of Indian handicrafts and handloom in organized retail sector.

"Sourcing gifts is just one aspect. There are several things that can be done once the two groups come into direct contact. The workers and their families can be provided support for improving their living conditions," S.S. Gupta, development commisioner, Handicrafts told IANS.

"The corporates can also spend some of their CSR fund to adopt handloom and handicrafts clusters and take care of primary health services of these people, can help them who are struggling with bad water supplies, roads and lighting problems," he added.

The handloom and handicraft sectors provide direct employment to more than 15 million artisans, crafts persons and weavers etc. mainly belonging to economically and socially weaker sections of the society in the interiors of the country.

The share of Indian handicrafts in the world market is less than two percent as against China's share of 30 percent.

Out of the estimated production of Rs.30,000 crore of handicrafts including carpet, around Rs.17,000 crore is being exported. In the handloom sector, cloth of more than 6,930 million sq mts is being produced. The export of handloom cloth stood at Rs.2,503.23 crore in 2011-12.

The draft report of the steering committee for the 12th Five Year Plan has identified handlooms as one of the priority sectors that will create large scale employment opportunities.

It has proposed steps such as celebrity endorsement, celebration of 'India Weaves Week', and creation of a unified 'Handmade in India' brand to promote Indian craft product.

Federation of Indian Chambers of Commerce and Industry (FICCI), Confederation of Indian Industry (CII) and Confederation of Indian Textile Industry (CITI) will be providing support to this initiative by the ministry.

Specific marketing requirement will be met by organisations like Central Cottage Industry Corporation (CCIC) and Handicrafts and Handloom Export Corporation (HHEC).

The government is looking at making corporate social responsibility (CSR) more than mere lip service, toying with the idea of converting it into a tradeable commodity just like carbon credits.

Corporate affairs minister Salman Khurshid mooted the idea at a conference of industry chamber FICCI and asked India Inc to consider the proposal. He said the first effort should be to identify a method to quantify CSR activities. "And then you should debate the possibility of establishing a CSR exchange to deal in CSR credits, akin to trading in carbon credits," the minister said.

The minister said there was an urgent need to internalise CSR as an ethical way of doing business and making profits. "CSR is about the way we conduct our business, and not about keeping something apart for community welfare.... If there is a business that is inherently destructive and unwholesome, a way has to be found to offset the negativity of that business," the minister said.

The industry reacted positively to Khurshid's suggestion. "India needs not just growth, but inclusive growth and the corporate sector is increasingly concerned with and supportive of inclusive growth as much an economic imperative as it is socially desirable," FICCI president Harsh Pati Singhania said.

DS Rawat, secretary general of Assocham, said trading of CSR would be an incentive for companies to actively look at such programmes. "This mechanism will encourage corporates to voluntarily take up CSR programmes. We need more corporates to come forward and carry out CSR prograames," Rawat said.

Rajashree Birla, chairperson of FICCI Aditya Birla CSR Centre for Excellence, also welcomed the proposal and said there was a need to move CSR activities from the backburner of "cheque book philanthropy" to mainstream business.

It may be mentioned here that the Institute of Chartered Accountants of India is working on a new set of rules on CSR, making it a must for companies to report on social, environmental and economic initiatives.

The Indian government came out in support of the impending deal where Bharti Airtel is to acquire African assets of Kuwaiti telco Zain, with minister of corporate affairs Salman Khurshid on Wednesday saying the government will forward all possible help ‘provided the Indian telco asks for it’.

“The Bharti management has not approached us yet. If they do, I will be very happy to help them because when they go out, it’s not the company alone but they are our flag-bearers. We will do the utmost of what we can,” Mr Khurshid told reporters at the sidelines of a FICCI event in Delhi.

“We will be happy to pitch in to compete with the best in the world,” Mr Khurshid said. “We have matured enough to see multinational companies emerge out of India and are very happy to see an Indian company expand its footprint overseas,” the minister added.

While the proposed transaction does not involve any regulatory hurdles, the Indian government will provide any clarification, if required, to facilitate the deal, Mr Khurshid said, “Nothing has been brought to our notice yet. As in the past (Bharti’s bid for South Africa’s MTN), there were obviously policy issues. But if anything comes to us, we will do whatever we can.”

The statement holds significance as a proposed deal between Bharti Airtel and MTN of South Africa fell through due to regulatory issues last year.

In the latest transaction, Bharti Airtel is to buy all of African assets of Zain(excluding Morocco and Sudan) for $10.7 billion. As per the agreement, Bharti Airtel is to shell out $10 billion when the deal is completed and a further $700 million, a year after signing the agreement.

Bharti Airtel scrip rose 2.7% to close at 279.05 at NSE on Wednesday, ending two days of bearish tone where investors feared a large overseas acquisition would strain balance sheet of the India’s largest telecom operator.

Bharti group chief Sunil Mittal in an exclusive interview to ET on Tuesday lashed out at analysts who put a negative rating on the stock. Mr Mittal on Wednesday also dispelled concerns over Econet Wireless, a small shareholder in Zain Nigeria that is trying to block sale of Zain’s Nigerian assets to Bharti.

Mr Mittal told this paper’s sister channel ET Now, “The seller has to deal with what he is selling. As far as we are concerned we are looking at buying Zain’s African assets in Nigeria. I am sure the selling party would have an idea about what they are selling. I am not concerned about that.”

Meanwhile, Zain share price also continued to rally in the stock market rising 6.7% to close at 1.26 dinar on Wednesday, despite the Kuwait Stock Exchange market index declining almost 1%. The share price had risen over 9% on Tuesday soon after the authorities lifted a trading halt on the company as Zain came out with a public statement disclosing details of the deal with Bharti Airtel.

Ajai Malhotra, Indian ambassador to Kuwait, also issued a statement on Wednesday: “It is always most welcome when our companies pursue arrangements that both partners consider to be attractive and mutually beneficial, as is the case in the present instant.”

The statement also commended Bharti Airtel on being on the verge of acquiring a global profile by venturing into international markets and bringing its strengths to the telecom sector of a large number of African countries.

Corporate Affairs Minister Salman Khurshid has said the government is willing to assist Bharti Airtel in its bid to acquire telecom operations in Africa. The company is having talks with Kuwait-based Zain to acquire its African operations.

The Bharti-MTN deal had last year fallen through after the South African government insisted on dual listing of the merged entity, which was not possible under the Indian laws due to the issue of rupee convertibility.

Speaking to reporters after the launch of the FICCI Aditya Birla CSR Centre for Excellence, here today, Khurshid said the ministry is yet to hear from the company.

“No one has approached us, if they do, we will provide all possible help,” he said.

FICCI Aditya Birla CSR centre is meant to assist industrial houses in implementing CSR initiatives through incubation and nurturing of such activities.

The minister also said the parliamentary standing committee that is looking into the Companies (Amendment) Bill, 2009, is expected to submit its recommendations soon. “The committee has almost completed its hearing. We are also conducting internal evaluation of the changes that needs to be made. The bill will become legislation during the current year itself”, he said.

The Bill, once enacted, is expected to strengthen the rights of minority shareholders and call for more disclosures and accountability in the functioning of company boards.

Earlier, Khurshid urged the industry to internalise corporate social responsibility (CSR) within their businesses to go beyond allocating a portion of their profits towards CSR initiatives.

The minister reiterated his support towards a CSR credit trading system that can incentivise such initiatives from the industry.

“If you are speaking of external evaluation and measureable targets for CSR initiatives, we should also go for CSR credits”, he said.

The Corporate Affairs Minister, Mr Salman Khursheed, said on Thursday that the Government wants to explore the possibility of having an index based on corporate social responsibility (CSR).

Addressing a FICCI event on CSR here, Mr Khursheed said in the West, there are indices that benchmark the performance of companies on the basis of their CSR activities.

Fiscal sops

“We want to see whether it is possible to take that a step further,” the Minister said, adding that companies should integrate CSR strategies into their manner of doing business. He said the Government could give fiscal incentives to companies for their CSR activities.

Last month, the Minister had said the Government could come up with norms on CSR credits on the lines of carbon credits and companies can, in turn, trade in such credits. The Minister said the companies would have to get certification for their CSR activities from a government body and earn credits. The credits could then be traded in a CSR credit exchange.

DIVERSIONARY TACTIC

Speaking at the same event, the former SEBI Chairman, Mr M. Damodaran, sounded alarm bells on companies that are using CSR activities to divert attention from their illegal acts.

Mr Damodaran said even some companies -- whose leaders have been lauded as heroes by reputed organisations such as Forbes for their philanthropy -- are using CSR activities as diversionary tactics to cover up their non-compliance of laws.

“We seem to equate philanthropy with heroes,” he said, adding, however, that some of the activities of the companies of those heroes are anything but heroic. Without naming any companies that are committing such illegal acts, Mr Damodaran said, “Merit lists, honours lists and badges of courage are just to deflect attention from what is really happening.”

He said companies are treating CSR as just an expenditure item in their balance sheet by spending money on completely irrelevant activities instead of doing something useful for the communities in which they live and work. Mr Damodaran said CSR as a theme has remained in the margins for corporate India for far too long, adding that it was time that CSR occupied central space.

RCom issue

Mr Khursheed said his Ministry will look into the allegations of financial irregularities against Reliance Communications (RCom) only if systems like MCA-21 throws up any aberrations regarding its financial statements.

“If there is a violation of Companies Act (by RCom) that is picked up by MCA-21, then we will look at it. Also, if the Department of Telecom asks us (Corporate Affairs Ministry), we will look into it. But if individuals write to us (about RCom) we will just pass it on to regulators,” the Minister said. He, however, said the issues of company law violations will come only at the fag end of the probe.

More benefits will spur voluntary Activity

The ministry of corporate affairs, under the leadership of Salman Khurshid, has become proactive on corporate social responsibility (CSR), in addition to its charge on corporate governance. Obviously, the two are different from each other and must not be put in the same basket. Corporate governance involves regulating a corporate that has chosen to list on the stock market and, thus, has major responsibilities towards its shareholders. Therefore, mandatory laws, statutes and accounting norms are invoked to bring transparency and accountability. On the other had, CSR is a voluntary activity by a company, listed or privately-owned, to serve bigger goals of society, beyond its routine market functions. In fact, India Inc is taking several initiatives in the space of CSR for the welfare of society. FICCI, for the last 10 years, has been recognising industry’s CSR initiatives through an annual CSR award. The question here is whether the voluntary activity of CSR can be spurred through fiscal incentives.

Interestingly, many fiscal measures already exist in our Income-Tax Act. If a corporate donates funds to an approved NGO for social projects, it is eligible for 50% deduction of that amount, and 100% if it funds a not-for-profit organisation (registered under Section 25 of the Companies Act). A stellar example of this nature is the creation of the FICCI Aditya Birla Centre for Excellence in CSR, paid for by companies of the Aditya Birla group. Similarly, if a company contributes to an approved scientific research association, it can get up to 125% deduction.

The moot point is: should we have more of such exemptions to attract larger number of corporates into the CSR net? Certainly. We may have to provide weighted deduction of 150% or 125% to motivate enough for encouraging corporates to make such voluntary CSR contributions.

This could possibly be done by inserting a new clause in either section 35(2AA) or section 35(2AB), to provide for 150% deduction of the amount paid to the approved institution/NGOs involved in CSR. With such bold measures to promote CSR, the UPA government will truly live up to its pledge for inclusion of the underprivileged and usher in a new paradigm of private-public partnership (PPP).

Dr. Amit Mitra, Secretary General, FICCI

Coal India Ltd will not hand over any coal mine to private companies for exploration but will be open to joint exploration with private players, according to the Chairman, Mr Partha Bhattacharya.

Tata Steel and SAIL recently submitted a joint proposal to the Government seeking allotment of Coal India's unexplored coking coal mines.

In reply to a question from the media persons on the sidelines of FICCI's convention on CSR here on Monday, Mr Bhattacharya said that a 7-mt coal block in the BCCL area had been identified by Tata Steel and seven to eight more blocks were in the process of being identified for exploration in joint collaboration with private parties.

The private players would provide technology in these collaborations, he added.

Coal India was upbeat about achieving its target of producing 435 mt coal in 2009-10, Mr Bhattacharya said, pointing out that it was, however, unlikely to meet the target of importing 4 mt coal.

“Last year we did not import anything and there is some doubt over imports this year also due to the lack of domestic demand,” he said. Importing coal through the proposed subsidiary of CIL was also unlikely to start before March, he pointed out.

Meanwhile, speaking to mediapersons, the West Bengal Industry Secretary, Mr Sabyasachi Sen, said the Centre's proposal for open auctions of coal mines for captive use and foregoing of the State open dispensation route was likely to affect industrial projects requiring coal in West Bengal.

“The proposed projects which may be affected are Vedanta's proposed aluminium plant, petrochemical factory by South Asian Petrochem, Poly-silicon project by Bhaskar Group and the steel proposed projects by Bhushan Steel, Videcon and Shyam Steel,” Mr Sen said.

Out of the nine coal blocks proposed to be given to West Bengal under the State dispensation route, three – Kulti, Sitarampur and Ichhapur – had so far been allotted to the State, he said, adding that exploration had not started in any of the three blocks.

Coal from these blocks has been promised to the Jindal Group for their proposed Shalboni project.

The apex industry body FICCI has suggested that the government should encourage companies to invest in corporate social responsibility initiatives by giving tax incentives instead of making it binding.

“The government may consider incentivising CSR (corporate social responsibility) activities perhaps through tax incentives... create a market for CSR credits like carbon credits,” the FICCI said in its CSR draft on which the ministry of corporate affairs has invited comments from the public by December 10.

The industry body also suggested that the CSR activities should not be made mandatory and companies should be encouraged to adopt the norms on voluntary basis.

“If such a compulsion (of CSR) is imposed on companies... it may turn counter productive as companies may resort to camouflaging activities to meet such regulations, particularly, during recessionary periods and economic downturns,” the chamber argued.

Earlier, the corporate affairs minister, Mr Salman Khurshid, had said issues like the annual spend on CSR would be debated by the parliamentary standing committee, which is scrutinising the provisions of the new Companies Bill tabled in Lok Sabha in August.

“We need to go beyond affirmative action and CSR efforts could be given a fillip through fiscal relief... these issues need to be debated threadbare for their possible incorporation in new Bill,” Mr Khurshid had said. The report further suggested that companies should earmark specified resources or a proportion of their post-tax profit for CSR initiatives.

Besides, the chamber also advocated for a CSR Advisory Committee led by an expert, to facilitate executive participation in forming a CSR policy and also specify a time after which the policy could be reviewed.

Union Minister for Corporate Affairs Salman Khurshid has asked the industry to propose a corporate social responsibility (CSR) system that rewards the industry.

Industry should think along the lines of the ‘carbon credit’ system and see if they could come up with a system that remunerates them for their CSR initiatives, the minister said.

Addressing a conference on ‘Companies Bill 2009’ organised by the Federation of Indian Chambers of Commerce and Industry (FICCI) here today, Khurshid suggested that the incentives for CSR could even be fiscal incentives that are proportionate to the CSR initiatives being undertaken.

“There can even be some way of trading your CSR credits, like carbon credits,” the minister suggested.

He said the ministry’s attempt was to see that the industry takes up CSR activities in such a manner that it turned out to be a next-generation affirmative action that went beyond reservations for weaker sections of the society.

On the issue of the remuneration to managing directors, the minister wanted industry to suggest if they require further changes in the current system. He invited industry’s views on the remuneration issue and the role of remuneration committees.

The minister said the ‘Companies Bill 2009’, that is currently being scrutinised by the Parliamentary Standing Committee on Finance will give a final shape to the legislative changes that are required in such matters. “The parliamentary committee has given top priority to the Bill and has held several consultations on the topic. We expect the committee to come up with its recommendations very soon,” the minister said. Once the committee’s recommendations are in place, the government will take the Bill to Parliament for legislation, he added.

Speaking on the occasion, corporate affairs ministry secretary R Bandyopadhyay sought industry opinion on the responsibilities of key management professionals in a company.

“Administration of the company and the role of the board should be discussed for any changes in the proposed amendments to the Bill,” he said.

Companies may soon be able to trade in Corporate Social Responsibility (CSR) credits, akin to trading in Certified Emission Reductions (CERs or carbon credits, in common parlance).

At a FICCI event, the Corporate Affairs Minister, Salman Khursheed, said the Government could come up with norms on CSR credits on the lines of carbon credits and companies can, in turn, trade in such credits.

Mr Khurshid told Business Line later, “Industry should seriously think about this idea (trading in CSR credits) and send us their suggestions. We are studying the practical implications and will seek the opinion of other ministries.” If the response is positive, the Government may include it in the new Companies Bill.

The Minister said the companies would have to get certification for their CSR activities from a government body and earn credits. The credits could then be traded in a CSR credit exchange.

The company that does not want to do a CSR activity would then have to purchase CSR credits from companies that have earned them.

This is similar to carbon credit where the polluter gets his right to pollute by buying the carbon credits from companies that have earned them through environment-friendly activities.

The Ministry has roped FICCI into the CSR credits project and has asked the Indian Institute of Corporate Affairs to undertake a study on the scope of CSR credit trading.

“Though CSR initiatives are part of normal functioning of companies, they don’t get any tax exemptions. But if a company donates money to a charitable trust, it gets tax exemption. We want companies to do their own CSR activities and get some exemptions for them and not just passively donate to charity,” Khursheed said.

The activities that are likely to earn CSR credits are education, housing, health and sustainable projects, not just for employees but also for the company’s ‘catchment’ areas, the Minister said.

Ms Vijaya Sampath, Group General Counsel and Company Secretary, Bharti Enterprises, told Business Line that though the idea is innovative and interesting, the Government and the corporate sector needs to look at its viability.