Companies Act 2013 – Changing Landscape in Corporate Social Responsibility Summit in Vibrant Gujarat

Companies Act 2013:

Changing Landscape in

Corporate Social Responsibility

Date:20thJanuary, 2014

2, Mahatma Mandir-Gandhinagar

Organized By:

Partner:

Report on

Companies Act 2013:



January, 2014 Venue: Seminar Hall

Gandhinagar

Knowledge Partner:



Seminar Hall

National

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INDEX

Table of Contents The event ....................................................................................................................................................... 3

Inaugural Session ........................................................................................................................................... 4

List of Dignitaries ....................................................................................................................................... 4

Sh. Saurabhbhai Patel: Hon’ble Minister for Energy and Petrochemicals, Mines and Minerals, Cottage

Industries, Salt Industries, Printing, Stationery, Planning, Tourism, Civil aviation, Labour and

Employment-Government of Gujarat ....................................................................................................... 5

Sh. Maheshwar Sahu, IAS: Additional Chief Secretary, Industries and Mines Department- Government

of Gujarat .................................................................................................................................................. 5

Shri Raajeev Batra: Head of the Department, Governance Risk & Compliance Services (GRCS), KPMG . 6

Shri Atul Garg: Past Chairman, CII Gujarat State Council and Chairman, Chief Operating Officer InteQ IT

Services (India) Pvt Ltd.. ............................................................................................................................ 6

Panel Discussion 1: Leveraging the CSR amendments in Companies Act-2013 ............................................ 7

List of Panel Members: .............................................................................................................................. 7

Sh. P.K. Taneja, IAS: ............................................................................................................................... 8

Sh. Nikhil Pant: ...................................................................................................................................... 8

Sh. Nitin Parekh: .................................................................................................................................... 8

Sh. Shardul Shroff: ................................................................................................................................. 9

Sh. Bimal Patel: ...................................................................................................................................... 9

Concluding Remarks to Session 1: ............................................................................................................. 9

Panel Discussion 2: New Models for Driving Sustainable & Inclusive CSR Initiatives in Gujarat ................ 10

List of Panel Members: ............................................................................................................................ 10

Sh. Ibrahim H Rehman: ........................................................................................................................ 11

Smt. Sushama Oza: .............................................................................................................................. 11

Sh. Rajiv Gandhi: .................................................................................................................................. 11

Smt. Prerana Langa: ............................................................................................................................ 12

Concluding Remarks to Session 2: ........................................................................................................... 12

Shri P.K. Parmar, IAS:Principal Secretary, Panchayats, Rural Housing & Rural Development

Department, Government of Gujarat ..................................................................................................... 12

Outcome/Suggestions by Panelists: ............................................................................................................ 13

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Background Companies Act 2013 has introduced sections 134 and 135 mandating companies to comply with

requirements on Corporate Social Responsibility (CSR). The new obligation of two percent spend on CSR

has substantially changed the dynamics of this subject. Traditional CSR spend was voluntary, and being

philanthropic / charitable in nature, limited to token contributions. The new regulation prescribes a

substantially higher contribution and that too carved out of distributable profits. This will force

companies to think carefully, both from the governance and the business standpoint.

While Companies Act 2013 has prescribed CSR activities that companies should consider spending on,

the Draft Companies Rules seem to provide the required flexibility to consider other legitimate projects

too. Corporate India’s increased obligation is speculated to range between INR 100 – 250 billion. CSR

spends going forward may cover wider societal objectives instead of limiting themselves to smaller

community initiatives, and the sustainability factor could influence a healthy alignment between social

and commercial business goals.

Aligned with the prime objective of raising the bar on governance, the Companies Act 2013 mandates

the Board of Directors in companies to appoint a separate CSR committee; formulate, regulate, monitor

spends; and appropriately report CSR activity in the annual report and on the website. The Ministry of

Corporate Affairs seems keen for the company’s CSR policy to be scrutinized by the wider society rather

than by the regulators.

The state of Gujarat has a large number of profit-making companies with a notable share in Corporate

India’s CSR obligation. It will help Gujarat based companies to identify some pressing and relevant social

challenges and develop innovative business solutions to address them. It is important to develop CSR

ideas for the benefit of society on a long-term and sustainable basis. Industry in Gujarat transcends

sectors such as power, oil & gas, pharmaceuticals, infrastructure, automotive, industrial goods,

consumer goods etc. Companies from these sectors may appropriately develop a CSR strategy that

optimally aligns social benefits with commercial goals.

The event The Industrial Extension Bureau (iNDEXTb, Gandhinagar) along withKPMG as the Knowledge Partner and

CII as the National Partner had organized a Half Day Session on ‘Companies Act-2013-Changing

Landscape in Corporate Social Responsibility’.Senior bureaucrats from the Government of Gujarat,

eminent Industrialists, legal advisors, finance advisors and NGOs graced the event.

The event comprised of two panel discussions preceded by an inauguration ceremony.

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Inaugural Session The event was inaugurated by Sh.

Saurabhbhai Patel, Hon’ble Minister for

Energy and Petrochemicals, Mines and

Minerals, Cottage Industries, Salt

Industries, Printing, Stationery, Planning,

Tourism, Civil aviation, Labor and

Employment - Government of Gujarat.

Various other eminent government

officials, industrialists and NGOs of

Gujarat were also present.

List of Dignitaries

Name Organization

Shri Saurabhbhai Patel Hon’ble Minister for Energy and

Petrochemicals, Mines and Minerals, Cottage

Industries, Salt Industries, Printing,

Stationery, Planning, Tourism, Civil aviation,

Labour and Employment

Government of Gujarat

Shri Maheshwar Sahu, IAS Additional Chief Secretary

Industries & Mines Department


Sh. P.K.Parmar, IAS Principal Secretary, Panchayats, Rural

Housing & Rural Development Department,


Sh. P.K. Taneja, IAS Principal Secretary(PH) and

Commissioner, Commissionerate of Health,

Family Welfare, Medical Services & Medical

Education


Shri Raajeev Batra Head of the Department, Governance Risk &

Compliance Services (GRCS), KPMG

Shri Atul Garg Past Chairman, CII Gujarat State Council and

Chairman, Chief Operating Officer InteQ IT

Services (India) Pvt Ltd.

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Sh. Maheshwar Sahu, IAS: Additional Chief Secretary, Industries and

Mines Department- Government of

Gujarat

Welcome Address

Sh. Sahu welcomed all the dignitaries and audience present at

the session. In his welcome speech, he stressed on ethical

values related to CSR for an inclusive growth. He said, “I trust

the corporate sphere of Gujarat will take this new act as an

opportunity to broaden their CSR landscape.”He mentioned

that Gujarat will become a role model for the entire nation

and will lead India’s CSR initiatives.

Sh. Saurabhbhai Patel: Hon’ble Minister for Energy and

Petrochemicals, Mines and Minerals, Cottage Industries, Salt Industries,

Printing, Stationery, Planning, Tourism, Civil aviation, Labour and

Employment-Government of Gujarat

Chief Guest

Sh. Saurabhbhai Patel inaugurated the

sessionwith the lighting of a lamp along with

other dignitaries. He congratulated iNDEXTb,

KPMG and CII for putting up such a grand event.

In his speech he said “Gujarat being one of the

believers of Inclusive Growth, has been involved

in many social welfare activities. With the

implementation of Companies Act 2013, he

emphasized on necessity of the significant

contribution from companies in Gujarat to

promote CSR activities in the state. He

highlighted that manufacturing sector being one

of the major contributor to states GSDP, has a

pivotal role to play. ”

He also wished good luck to all the participants, hopingthat they can come up with constructive

conclusions for the benefit of society by the end of the session.

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Shri Raajeev Batra: Head of the Department, Governance Risk &

Compliance Services (GRCS), KPMG

Address on CSR: An inclusive approach

Sh. Raajeev Batra started his presentation by defining CSR and explained how the definition had evolved

over time from ‘Sustainable Development’ to a ‘Shared Value’ concept. He explained that CSR involves

increased efforts to align corporate goals with those of the society. He also emphasized on the fact that

the major CSR spending in India has been from the PSUswith focus sectors being Education and Health.

Covering different aspects of the latest amendments in companies act, he also talked about what

businesses expect from the government. Laying stress on public-private and B2B partnerships, he ended

his presentation saying that “CSR can be seen as a useful framework within which new ways of

collaboration between corporations, governments and civil societies can be found creating innovative

mechanisms of governance.”

Shri Atul Garg:Past Chairman, CII Gujarat State Council and Chairman,

Chief Operating Officer InteQ IT Services (India) Pvt Ltd..

Concluding Remarks

Sh. Atul Garg thanked everyone for taking time out of their busy schedules and coming together to

discuss on the much needed issue for an inclusive growth. He said that“Indian concept of CSR translates

largely to philanthropic activities and upliftment of the poor. However, CSR covers a much larger

manifesto. It has more to do with shared value.” He also referred to the triple bottom approach of CSR

i.e. Sustainability in Environment, Social Community and Business.

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Panel Discussion 1:Leveraging the CSR amendments in Companies Act-

2013

List of Panel Members:

Leveraging the CSR amendments in Companies Act-2013

Name Organization

Shri Vishal

Gada(Moderator)

Partner, KPMG

Shri P. K. Taneja, IAS Principal Secretary(PH) and

Commissioner, Commissonerate of Health,

Family Welfare, Medical Services & Medical

Education


Shri Nikhil Pant

Chief Program Executive – National

Foundation for CSR (NFCSR)

Indian Institute of Corporate Affairs

Shri Nitin Parekh Chief Financial Officer

Zydus Cadila

Shri Shardul Shroff Senior Partner,Amarchand & Mangaldas &

Suresh A Shroff &Co.

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The first discussion was on “Leveraging the CSR Amendments in Companies Act 2013” which was

moderated by Mr. Vishal Gada (Senior Partner, KPMG). In this discussion, Sh. P. K. Taneja, IAS, Health

and Family Welfare, Government of Gujarat, came out with a message “Reach the Unreached, Serve the

Unserved”. Sh. Nikil Pant, Chief Program Executive – National Foundation for CSR (NFCSR), Indian

Institute of Corporate Affairs said that around 16000 companies currently qualify for CSR. The discussion

also touched upon various legal aspects of the act with the help of Sh. Shardul Shroff and Sh. Bimal

Patel.

Sh. P.K. Taneja, IAS:

o 15% of Gujarat’s population is tribal and 7% lives in rural areas

o Proposed to have a Special Purpose Vehicles (SPVs) for different departments of the government

of Gujarat that can serve as an implementing arm for companies spending on CSR

o Lay focus on neglected areas

o Gujarat Socio Economic Development Society can play a pivotal role for facilitating an effective

and efficient platform for deployment and monitoring of CSR contributions to ensure lesser

wastage

Sh.Nikhil Pant:

o Act provides a structured way by which the money from well off companies can be aligned to

the evolving national agenda

o 16000 companies qualify under the companies act

o CSR has to be ‘Rupee Measurable’, decided by the board as a budget

o Need of ‘Gap analysis’for all districts at the taluka level. This will help identify areas that require

focus.

o Companies contributing to CSR should also conduct an ‘Impact Assessment’ so that at a national

level, their effort creates a difference, even if it satisfies the legal aspects

Sh.Nitin Parekh:

o A larger, extended role is expected from corporates

o Monitoring of the money spent in CSR is an important duty of the corporates as per the new

Act, which differentiates CSR from philanthropy or donations

o Governments and NGOs can help in channelizing the efforts of different companies having small

contributions to CSR to create a synergetic effect

o Courses on ‘CSR management’ and ‘CSR laws’ can be started in existing educational institutes

that would help in creating awareness

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Sh. Shardul Shroff:

o CSR is a ‘Non-Delegable Corporate Activity’

o CSR expenditure is not mandatory but reporting of the CSR policy and expenditure of the

company is mandatory

o Draft rules contemplate that if contribution is made to non-promoter created NGO or SPV, it

must have a three year track record

o SPVs or NGOs can only be the implementing arm for the corporates

Sh. Bimal Patel:

o Education institutes should be ready to tap the funds that are about to release next year

o Academic institutions can help prepare CSR guidelines for the companies

o CSR index is bound to give a brand value to the companies

Concluding Remarks to Session 1:

Corporates need to understand the importance of CSR, which is that to flourish in business, one cannot

ignore the society. Also, CSR has to be different from the ongoing process of philanthropy. Companies

need to monitor and report their expenditure on CSR activities making it a non-delegable activity.

Governments, NGOs and educational institutions can play a pivotal role in drafting CSR guidelines,

conducting ‘gap analysis’ and aggregating small contributions for a synergetic effect.

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Panel Discussion 2:New Models for Driving Sustainable & Inclusive CSR

Initiatives in Gujarat

List of Panel Members:

New Models for Driving Sustainable & Inclusive CSR Initiatives in Gujarat

Name Organization

Shri Santosh

Jayaram

(Moderator)

Technical Director-

Sustainability & Climate Change-

KPMG

Shri Rajiv Gandhi Company Secretary &

Compliance Officer,

Ambuja Cements Ltd.

Smt. Prerana Langa Chief Executive Officer,

YES Foundation

Smt. Sushama Oza Chief Executive Officer,

Adani Foundation

Shri Ibrahim H Rehman Director, Social Transformation Division

TERI (The Energy and Resources Institute)

Second panel discussed on the topic “New Models for Driving Sustainable & Inclusive CSR Initiatives in

Gujarat.”In this session, Ms. Sushma Oza from Adani Foundation emphasized on networking and sharing

knowledge and experiences through CSR. She said, “Corporates can not only bring finances but also

professionalism, Knowledge, expertise into the whole system.” Ms.Prerana Langa from Yes Foundation

gave impetus to the idea of working to improve the existing infrastructure for the society as a part of

CSR activities.

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Sh.Ibrahim H Rehman:

o Government should help only in identifying focus areas, conducting gap analysis, up scaling new

models and thus act as a facilitator instead of acting as an implementing arm

o Other than money, we need to bring into perspective the corporates’ spirit of financial and

marketing expertise, scalability aspects and professionalism into the system. It is in this purview

that the monitoring of expenditure has been made mandatory

o Corporates should design ‘Cross-Sectoral Programs’ and thus have a holistic approach rather

than a sectoral approach. It is for the government to bring different corporates working in

different sectors in the same geographical area to work collectively.This would help in an overall

development of the area by leveraging sectoral expertise of the government.

o Have a more enterprise based approach rather than earlier philanthropic approach

Smt. Sushama Oza:

o Corporates can not only bring the finances. They can also bring technical knowledge, R&D,

professionalism and thus help in bridging the gaps and seal the loop holes

o Smaller NGOs or Govt may not be able to do the piloting. Under CSR, we can develop new

models which other CSRs can implement like the ‘Health Card for Senior Citizens’ initiative of

Adani Foundation at Mundra

o Different CSR initiatives can be mapped geographically, and thus conduct a ‘Gap Analysis’ so as

to identify areas that need focus in different sectors. This would also help corporates to adopt

best practices and thereby learn from each other

Sh. Rajiv Gandhi:

o Shared Value Concept is the most important aspect for an effective CSR initiative. Local

community needs to be engaged from inception

o Traditional wisdom of the community when combined with entrepreneurial, engineering,

managerial skills of the corporates can bring can help seal the loopholes in areas where

government initiatives have been lagging or the services not reaching the community

o ‘Krishi Vigyan Kendra’ at Ambuja’s Kodinar Plant is a unique example where corporates (here

Ambuja) acts just as an implementing arm leveraging its technical and entrepreneurial expertise

while the funding comes from other institutions (here Junagadh University and the Government

of Gujarat)

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Smt. Prerana Langa:

o Public Private Partnership programs can have a synergetic effect

o Instead of creating new institutions (like schools etc.), It’s better to create a sustainable impact

by working with the government and thus corporates can look into betterment of these

institutions and thereby align with the national agenda

Concluding Remarks to Session 2:

Community involvement is necessary for successful CSR initiatives wherein communities can share their

needs with the corporates and get direct benefits. Such networking and PPP models can effectively help

in creating an impact with the help of gap analysis and prioritizing initiatives required for community

development. In this way, companies can leverage their technical, managerial and entrepreneurial

expertise besides financial contributions.

Shri P.K. Parmar, IAS:Principal Secretary, Panchayats, Rural Housing &

Rural Development Department, Government of Gujarat

Wrap-up Speech and Thank

You Note

Sh. P.K. Parmar summarizing all the speakers

and panel discussions talked on how

networking can help aggregate the efforts,

leading to a bigger impact. He also threw

some light on the upcoming ‘Brown

Revolution’ in Gujarat where the government

plans to generate ‘Gobar-Gas’ through

individual and community Gobar Gas plants at

a large scale. He congratulated all the

organizers, speakers and participantsfor their

respective contributions to make the event a success.

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Outcome/Suggestions by Panelists:

• IICA has suggested the signing of an MoU with the State Government of Gujarat/ Relevant

Department regarding the promotion & implementation of CSR initiatives as per the new Act

• Within Schedule 7 of the Companies Act, the last point says, “as may be prescribed” should be

changed to “ as the board of the companies may decide”

• Create a model CSR guideline for the State

• Conduct various trainings and awareness programs to disseminate information regarding CSR

• Government needs to give a clearer picture on Income tax rules for companies involved in CSR

• Educational institutions should start dedicated courses on ‘CSR laws’ and ‘CSR management’ to

create skilled professionals in the domain of CSR

• Conduct a ‘Gap-Analysis’ of all districts atthe taluka level. This will help identify areas that require

focus.

• Besides financial, corporates can contribute to CSR initiatives in forms of technological,

entrepreneurial and managerial expertise

• ‘Cross-Sectorial Programs’ need to be taken up by the corporates instead of sector specific programs

as a holistic approach

• Public-Private partnership (PPP) models should be adopted to enhance the impact of initiatives

• Smt. Avantika Singh,IAS, District Collector of Bharuch shared her experience about formation

of‘District CSR Coordination Committee’ at Bharuch. The committee under chairmanship of the

collector, consists of government functionaries of focus areas and key industry personnel. Sub –

Committeesdecided several focus areas by conducting a gap analysis at the district level and framed

projects for implementation and presented them to different companies in the region to choose and

thus avoid duplication. Several industrialists in the region have shown positive interest in the project

and are actively helping the government in community building

• Sh. P.K. Taneja, IAS, proposed that the government can launch different Special Purpose Vehicles

(SPVs) like ‘Gujarat Socio Economic Development Society’ for various sectors. These SPVs would help

aggregate small CSR contributions of different industries and implement it for larger public welfare

projects. This method would facilitate equitable distribution of CSR spends across geographies and

thus complement and supplement the government effort

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