Mandatory CSR in India – Is it a Win – Win? Effective approach and methodology in implementation of CSR

activity vis-vis the Company Act 2013

-Samruddhi Borkar-Pratik Joshte

-Karan Ved

• Why do businesses exist?• What is the purpose of a business, or in the bigger

picture, any economic system?• - The derivation of the word “Company” comes from two

Latin words cum and panis which means breaking bread together.

• How does this translate in today’s Business Environment?• What are or should be the goals of the modern

corporation?• - Opinions differ and cover a wide spectrum

• People assume wrongly that a company exists simply to make money.

• While this is an important result of a companies existence, we have to go deeper and find the real reason of our being.

• CSR represents an attempt to answer these questions.• In broader terms CSR covers the responsibilities

corporations or (other for-profit organizations) have for the societies in which they are based and operate.

Definition

• The sense of belongingness and oneness inculcated within the corporations to serve the deserving is CSR.

• The business, other than business which serves the society for growth & development is CSR.

• So, what is the business of business? Is it profit maximization or else contribution to the society i.e. the CSR community?

• What CSR is not• CSR is not about pursuing the CEO’s pet interest and “saving

the whales”.• CSR should be distinguished from the concepts such as

“strategic philosophy” & “cause related marketing” which are valid businesses strategies and form an element of an organizations CSR policy, but not a central component of CSR.

• CSR is a much more holistic approach to business, which is designed to enhance corporate success because of its relevance, rather than represent something unconnected to an organizations core business.

• The origins of CSR• The history of CSR is almost as long as that of

companies.• East India Company• Tradition of benevolent capitalism in UK• Barclays and Cadbury• Engels and Morris

• The answer to this was given by Mohandas Karamchand Gandhi – Father of the Nation who gave the concept of Trusteeship.

• Gandhiji gave importance to two quotations through the concept of Trusteeship –

• "Enjoy the wealth by renouncing it."• "Excel in your work, produce wealth, take the

minimum which you need, leave the rest to the welfare of the community."

Emergence of CSR & its Prevailing Justifications

Strategically, CSR can become a source of tremendous social progress as the business applies its considerable resources, expertise and insights.

The 4 prevailing justifications:

Moral Obligations

Sustainability

License to Operate

Reputation

The Mandatory

w.e.f 1stApril,2014, every company private ltd or public ltd which either has he foll –

Or New worth of Rs.500 croresOr Turnover of Rs.1000 crores Or net profit of Rs.5 croresNeeds to spend atleast 2% of its average net

profit for the immediately preceeding 3 financial years on CSR activities

PRKASA (Methodology)

What? Why? How?

•External influences•Caux Round Table•Stephen Young – Global Executive Director (CRT)•Intangile assets•CSR

•External influences•The Reputation Institute•3 dimension (focusing on CSR)•Perceptional analysis

•External influences3 Theatre given by HBR – •Philanthropic giving•Re-engineering value chain•Transforming ecosystem

How? (Approach)

Philanthropic giving

Transforming ecosystem

Re-engineering Value Chain

“SEE” dimensions vis – vis Companies Act

Sanitation• Combating HIV aids,

malaria and other diseases

• Reducing child mortality and improving maternal health

Education• Gender equity • Promotion of

education

Employment• Enhancing vocational

skills• Women

empowerment

Integrating Business & SocietyThe mutual dependence of corporations and society implies that both business decisions and social policies must follow the principles of shared value i.e. the choices must benefit both sides.

To put these broad principles into practice a company must investigate a social perspective into core frameworks:a. Identifying the points of intersection

a. Inside-Outb. Outside-in

b. Choosing which Social Issues to addressa. Generic Social Issuesb. Value Chain Social Impactsc. Social Dimensions of Competitive Context

c. Creating a corporate social agendaa. Responsive CSRb. Strategic CSR

Conclusion

• The answer is YES mandatory CSR in India is a win-win situation.

• One of the key reasons is by following the competitive advantage approach. (company perspective)

• Allocation of resources in terms of monetary aspect, human capital and intellectual form. (government perspective)

• Customers are the ONLY contributors to the 3 financial criteria embarked upon by the Companies Act 2013 on corporations. (customer perspective)

• CSR is an important business strategy because,• Consumers want to buy products from companies they trust• Suppliers want to form business partnerships with companies they

can rely on• Employees want to work for companies they respect• And NGO’s increasingly want to work together with companies

seeking feasible solutions and innovations in areas of common concern

• Satisfying each of these stakeholders allows companies to maximize their commitment to another important stakeholder group – their investors, who benefit most when the needs of these other stakeholders groups are met.

CSR as in important business strategy

Consumers

Suppliers

EmployeesNGO’s

Investors

Recommendation• The sacred concept of CSR should not be restricted to the

large corporations.• MSME’s should be given an equal opportunity based on

their capacity to contribute, since they are the backbone of the economy.

• Why restrict to a 2% mandate given by Companies Act, 2013?

• If individuals, corporates believe in the concept of sustainability, then we do not need a CSR mandate.

• Willingness and belief of the individual towards society is important and is the only thing which matters.