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CORPORATE SOCIAL RESPONSIBILITY – RESHAPING OUR FUTURE

CORPORATE SOCIAL RESPONSIBILITY – RESHAPING OUR FUTURE. CA. Ashish Makhija FCA, FCMA, LLM (INDIA), LLM (USA). There can be little doubt that a certain amount of corporate philanthropy is simply good business and works for the long-term benefit of the investors. ………..John Mackey.

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CORPORATE SOCIAL RESPONSIBILITY – RESHAPING OUR FUTURE

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  1. CORPORATE SOCIAL RESPONSIBILITY – RESHAPING OUR FUTURE CA. Ashish Makhija FCA, FCMA, LLM (INDIA), LLM (USA)

  2. There can be little doubt that a certain amount of corporate philanthropy is simply good business and works for the long-term benefit of the investors. ………..John Mackey Corporate Sustainable Development : Reshaping our Future

  3. Meaning of Philathropy • The effort or inclination to increase the well-being of human kind, by charitable aid or donations. • Something, such as an activity or institution, intended to promote human welfare « Welfare of Society at Large » Corporate Sustainable Development : Reshaping our Future

  4. Why Society Needs Welfare? Society is besetted with problems Deprivation Gap is Widening day by day Humans have triggered Nature’s fury Corporate Sustainable Development : Reshaping our Future

  5. Problems Faced By Society Poverty Unemployment Healthcare Environmental Issues Illiteracy Corporate Sustainable Development : Reshaping our Future

  6. Problems Faced By Society Nuclear Threat Hygeine Water Scarcity Climate Change Energy Shortfall Corporate Sustainable Development : Reshaping our Future

  7. Problems Faced By Society Emissions Rise in Sea Levels Resource Constraints Waste Disposal Bio-diversity Corporate Sustainable Development : Reshaping our Future

  8. Problems Faced By Society Deforestation Rising Population Rising Crime Declining Standards of Living Corporate Sustainable Development : Reshaping our Future

  9. What Society Needs? Sustainable Development Emotional Bonding Optimisation of Economic & Societal Benefits Corporate Sustainable Development : Reshaping our Future

  10. Who Will Do It? Society Government Corporates Corporate Sustainable Development : Reshaping our Future

  11. "There's enough in the world to meet the needs of everyone but there's not enough to meet the greed of everyone". ……Mahatma Gandhi Corporate Sustainable Development : Reshaping our Future

  12. Corporate Objectives • To maximize Profit • To maximize Shareholder’s Wealth • To create Assets Corporate Sustainable Development : Reshaping our Future

  13. What is Needed? • Corporates to participate in Societal Benefit Programmes • Corporates to contribute / earmark funds to support societal causes • To adopt CSR model Corporate Sustainable Development : Reshaping our Future

  14. Why Sustainable Development? No Company/Business can flourish if Society fails Corporate Sustainable Development : Reshaping our Future

  15. What is Needed? • Long-term focus • Philanthropy Integrated with Sustainability • Align Societal causes with Business objectives Corporate Sustainable Development : Reshaping our Future

  16. Sustainable Development Meeting the needs of the present without compromising the ability of the future generations to meet their own needs …..Burtland Commission (1987) Corporate Sustainable Development : Reshaping our Future

  17. Corporate Sustainbility Investing in Future For A Sustainable Environment Where Business can GROW Corporate Sustainable Development : Reshaping our Future

  18. Corporate Sustainbility 3 P’s Approach Planet People Profit Corporate Sustainable Development : Reshaping our Future

  19. Corporate Social Responsbility • Long-term Focus • Capacity Building • Quality Health/Education • Mindset • Good CSR – Good Marketing Corporate Sustainable Development : Reshaping our Future

  20. Economic Sustainability Social Sustainability Environmental Sustainability Economic Sustainability Corporate Sustainable Development : Reshaping our Future

  21. Corporate Social Responsbility • What is CSR ? • It is the ideology to pay back the society what it has taken from the society.   • It is a self-regulation integrated into a business model.  • Resources of the Company are used not only for the purpose of increasing profits of the Company, but also activities that benefit society at large Corporate Social Responsibility

  22. Corporate Social Responsbility • CSR is the process by which an organization thinks and evolves its relationships with stakeholders for the common good • CSR is not charity or mere donation • CSR is a way of conducting business, by which corporate entities visibly contribute to the social good Corporate Social Responsibility

  23. Corporate Social Responsbility • Corporates use CSR to integrate economic, environmental and social objectives with the company’s operations and growth • CSR policy functions as a built-in, self-regulating mechanism whereby a business monitors and ensures its active compliance with the spirit of the law, ethical standards, and international norms Corporate Social Responsibility

  24. Corporate Social Responsbility • The term "corporate social responsibility" came into common use in the late 1960s and early 1970s after many multinational corporations coined the term stakeholder - meaning those on whom an organization's activities have an impact. Corporate Social Responsibility

  25. Corporate Social Responsbility • From a third world nation, Indianeconomyis the 10th largest in terms of the grossdomesticproduct (GDP) • Corporates have played a major role in Indianeconomy • Relianceaccounts for around 3% of the GDP • Acquisition of Overseas Corporations by IndianCompanies • Growth in IT Sector Corporate Social Responsibility

  26. Why CSR in Companies Act, 2013 • Seeks to create an enablingenvironment • Promotes and facilitatesbetterconnectbetween businesses and communities • Assists in synergizingpartnershipsbetweenCorporates, Governments, Civil Society Organizations, Academic Institutions and Social Entrepreneurs Corporate Social Responsibility

  27. CSR in Companies Act, 2013 • CSR has been recognized in the CA, 2013 for the first time • Section 135 (Chapter IX) deals withCorporate Social Responsibility • Schedule VII of the CompaniesAct, 2013 lists out the CSR activities • The provisions of Section 135, Schedule VII (amended) and Rulesshall come into force from April 1, 2014 Corporate Social Responsibility

  28. CSR in Companies Act, 2013 • Applicable to every company (both Public & Private) having : • Net worth of Rs. 500 crore or more, or • Turnover of Rs. 1000 crore or more or • Net profit of Rs. 5 Crore or more during any financial year • CSR Spend: At least 2% of the average net profits of the company made during the three immediately preceding financial years Corporate Social Responsibility

  29. CSR in Companies Act, 2013 • Every Company which ceases to be a company covered under Section 135(1) for 3 consecutive financial years shall not be required to : • constitute a CSR committee • Comply with the provisions of Section 135(2) to (5) of CA, 2013 Corporate Social Responsibility

  30. Applicability • CSR Provisions are effective from 1st April, 2014 • « During any financial year » Networth, Turnover, Net Profit (NTN) – 500/1000/5 • 1st Financial Year – From 1.4.2014 to 31.3.2015 • Applicability to be seen during 2014-15 • If criteria is met, Company must constitute CSR Committee Corporate Social Responsibility

  31. Applicability • When provisions would cease to apply • For Example – • Meets criteria in 2014-15 – CSR provisions will apply • Does not meet criteria in 2015-16 – CSR provisions will continue to apply • Does not meet criteria in 2016-17 – CSR provisions will continue to apply • Does not meet criteria in 2017-18 – CSR provisions will cease to apply in 2018-19 Corporate Social Responsibility

  32. CSR Committee • Everysuchcompanyshallconstitute a CSR Committee • 3 or more directors, • At least one directorshallbe an independentdirector • An unlisted public company or a privatecompanycoveredundersub-section (1) of section 135 whichis not required to appoint an independentdirectorpursuant to sub-section (4) of section 149 of the Act, shall have its CSR Committeewithoutsuchdirector Corporate Social Responsibility

  33. CSR Committee • A private company having only two directors on its Board shall constitute its CSR Committee with two such directors; • With respect to a foreign company covered under these rules, the CSR Committee shall comprise of at least two persons of which one person shall be as specified under clause (d) of sub-section (1) of section 380 of the Act and another person shall be nominated by the foreign company. Corporate Social Responsibility

  34. Role of CSR Committee • The CSR Committeeshall: • formulate and recommend to the Board, a CSR Policywhichshallindicate the activities to beundertaken by the company as specified in Schedule VII; • recommend the amount of expenditure to beincurred on the activities • monitor the CSR Policy of the companyfrom time to time Corporate Social Responsibility

  35. Role of Board • Approve the CSR policy as recommended by CSR committee • Ensure the CSR activities are beingundertaken by the Company • Ensure the expenditure on CSR activitiesis met yearly • Disclose in its report the policyadopted, anyreasons for not spending the amount Corporate Social Responsibility

  36. Schedule VII • Eradicating hunger, poverty and malnutrition, promoting preventive health care and sanitation and making available safe drinking water; • Promoting education, including special education and employment enhancing vocational skills especially among children, women, elderly, and the differently abled and livelihood enhancement projects; Corporate Social Responsibility

  37. Schedule VII • Promoting gender equality, empowering women, setting up homes and hostels for women and orphans; setting up old age homes, day care centres and such other facilities for senior citizens and measures for reducing inequalities faced by socially and economically backward groups; Corporate Social Responsibility

  38. Schedule VII • Ensuringenvironmentalsustainability, ecological balance, protection of flora and fauna, animal welfare, agroforestry, conservation of naturalresources and maintainingquality of soil, air and water; • Protection of national heritage, art and culture includingrestoration of buildings and sites of historical importance and works of art; setting up public libraries; promotion and development of traditional arts and handicrafts; Corporate Social Responsibility

  39. Schedule VII • Measures for the benefit of armed forces veterans, war widows and their dependents; • Training to promote rural sports, nationally recognised sports, paralympic sports and Olympic sports; • Contribution to the Prime Minister’s National Relief Fund or any other fund set up by the Central Government for socio-economic development and relief and welfare of the Scheduled Castes, the Scheduled Tribes, other backward classes, minorities and women; Corporate Social Responsibility

  40. Schedule VII • Contributions or fundsprovided to technologyincubatorslocatedwithinacademic institutions which are approved by the Central Government; • Rural developmentprojects Corporate Social Responsibility

  41. CSR Rules, 2014 • Effective April 1, 2014 • Applicable to every company including its holding or subsidiary, and a foreign company u/s 2(42) of the Act having branch office or project office in India, which fulfills the criteria of networth, turnover or net profit in Section 135 of the CA, 2013 calculated under Section 381(1)(a) & 198 of the CA, 2013 . Corporate Social Responsibility

  42. CSR Rules, 2014 • Net profit shall not include: • Profit fromoverseasbranch, • Dividendreceivedfromothercompanies in Indiawhich are complyingwith provisions of Section 135 of the CA, 2013 Corporate Social Responsibility

  43. CSR Policy • CSR Policy shallinclude the following: • List of CSR projectsfallingwithin the purview of Schedule VII • Specify the modalities of execution of suchproject or programms • Implementationschedules for the CSR activities • Monitoring process of suchprojects or programms • Specifythat the surplus arising out of the CSR projects or programms or activitiesshall not form part of the business profits of the Company Corporate Social Responsibility

  44. CSR Activities • CSR activitiesshallbeundertaken as per stated CSR Policy • Boardmaydecide to undertakeits CSR activitiesapproved by the CSR Committee, through a trust, society or a Section 8 companyestablished by the company or its holding or subsidiary or associatecompany Corporate Social Responsibility

  45. CSR Activities • If not then the Trust, Society or Section 8 Companyaboveshould have an establishedtrack record of 3 years in undertakingsimilarprojects • Onlysuch CSR activitieswillbetakenintoconsideration as are undertakenwithinIndia Corporate Social Responsibility

  46. CSR Activities • Companies may collaborate or pool resources with other companies to undertake CSR activities • CSR activities benefitting only the employees of the company and their families shall not be considered • Contribution to any political party u/s 182 of CA, 2013 shall not be considered Corporate Social Responsibility

  47. CSR Activities • Companies may build CSR capacities of their own personnel as well as those of their implementing agencies with established record of 3 years but such expenditure shall not exceed 5% of total CSR expenditure of the Company in one financial year Corporate Social Responsibility

  48. CSR Reporting • In Board’s Report • Brief outline & contents of company’s CSR Policy • Overview of projects proposed to be undertaken, details about policy developed & implemented • Reference to weblink to the CSR Policy of the Company • Composition of CSR Committee Corporate Social Responsibility

  49. CSR Reporting • In Board’s Report • Average net profits of the Company for last 3 financial years • 2% of the prescribed CSR Expenditure • Details of CSR spent during the financial year • Total amount to be spent for the financial year • Amount unspent, if any, • Manner in which the amount spent project wise clearly mentioning the details pertaining to sector, location of project, budget, expenditure and whether spent direct or through any implementing agency Corporate Social Responsibility

  50. CSR Reporting • Responsibility statement of the CSR Committee that the implementation and monitoring of CSR policy is in compliance with CSR objectives and Policy of the Company • Reasons to be stated if requisite amount not spent Corporate Social Responsibility

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