Under Section 135 of The Indian Companies Act, 2013 the public or private companies who have net worth of Rs. 500 crores or above, turnover of Rs.1000 crore or above or average yearly net profits of Rs.5 crore above are supposed to spend 2% of the net profits before tax on Corporate Social Responsibility. One estimate says about 8,000 to 9,000 companies qualify for this 2% CSR spent each year with accumulated CSR spent to the tune of Rs.16,000 crore or so in the areas as specified by Schedule VII of the Act. The companies are supposed to file their return on CSR spent with the Ministry of Corporate Affairs on or before 30th September 2015 for the year ended 31st March, 2015.
Current Scenario on CSR
Having spent more than 3-4 years in the area of CSR and after gathering feedback, reading articles, interaction with CSR experts, listening to the views of the participants in CSR training programs, I have come to a conclusion that nothing great has been done by many companies on the front of CSR. Many companies have not spent even a single rupee nor have complies with any of the provisions of Section 135 of the Indian Companies Act. The fact is not going to be encouraging and it appears that the companies may show dismal performance in complying with the mandatory 2% spent on CSR for some excuse or the other. Many companies have not taken this provision very seriously and waiting for what the Govt. does. The IICA has estimated that not more than Rs.6,000 crores have been spent under CSR for the year ended March 2015. This is too optimistic a figure. I however feel that the actual figure is even much less than this may be around 3,500 to 4,500 crores at the most that to including PSUs. We will come to know the actual money spent by end September 2015. The Govt. of India, Ministry of Corporate Affairs has appointed a Committee to assess performance of companies on CSR for the year ended on 31st March 2015 and make recommendations to the Govt. for its effective implementation. The said Committee is expected to submit its report by end August 2015. It is expected that the said Committee will make robust suggestions in stricter implementation in the area of CSR spent, projects, monitoring & evaluation, CSR audit, fines for non performance and such other remedial measures after taking into consideration view of the companies.
Benefits in doing CSR:
The Companies who qualify for CSR spent need to be proactive and find out way how can they comply with these guidelines considering innumerable benefits company can get out of this implementation. The benefits include loyalty of customers, employees, vendors and other stakeholders of the company they develop a sense of pride while dealing with socially responsible company. CSR also improves overall image and brand value of the company and helps in achieving higher sales and profits ultimately.
Issues in CSR Compliance:
Many companies who desire to implement CSR guidelines do not have trained manpower, they also do not know how to identify, implement, monitor and evaluate the CSR project. The CSR guidelines do make it clear on how to address all these issues but it appears companies are on defence for some reasons or the other. I have even heard many company officials questioning as to why do we do CSR it is Govt.’s responsibility as we pay taxes. I certainly feel pity about them when they say so. In fact the company does business and earns profits only when there is a society around consisting customers, employees, vendors who help company in producing and selling goods and sewrvices. The company also uses natural resources like air, water, minerals, oil, energy etc. for producing goods. The process of manufacturing certainly causes some damage to the planet by way of pollution. It is therefore the responsibility of the company to compensate for such losses to the planet and should voluntarily carry out social activities under CSR irrespective of the law. You as a Company owe something to the Society.
There is absence of clarity on which projects can be treated as CSR and which are not. There is acute shortage of CSR trained manpower or company officials do not get adequate time to look at CSR functions as they do not think it is a priority over business. In fact CSR is a part of business but it looks it may take time to change attitude of the company officials. Some companies claim that they do not find suitable NGO for implementation of the project and such other lame excuses. It is absolutely essential for the companies to find out ways to comply with CSR guidelines than run away from the same. There are several ways and means on how can the companies make themselves CSR compliant. It is also expected that the companies need to explain reasons for not complying with the CSR budgets. The CSR works on principle of – Comply or Explain.
Suggested Action Plan by the Company:
In such a situation it necessary that the Board and CSR Committee makes introspection and comes out with solutions on how to make the company CSR Compliant. The Company may form an independent trust, foundation or Section 8 company (not for profit) for carrying out CSR activities independently. Depute employees of the Company as well as that of NGO for training on Corporate Social Responsibility to study legal provisions, what is CSR and what is not, how to identify a project, baseline and impact assessment, reporting and disclosure, responsibilities of CSR Committee and the Board of the Company. This would help the company to carry out CSR activities successfully without any fault as expected by the CSR Guidelines. 5% of the amount of CSR budget need to be allocated and utilized for training employees of the company as well as of your NGO as capacity building which are allowed as per guidelines towards meeting your CSR commitments. Involvement of the stake holders and engaging and involving them in the CSR intervention is also one of the ways to make good impact in the Society. It is expected that within 1 or 2 years the companies need to gear and building the design, develop and deliver CSR.
Recommendations to the Govt. of India
The Ministry of Corporate Affairs, Govt. of India, New Delhi has formed a Committee under the Chairmanship of Mr.Anil Baijal, former Secretary to the Govt.of India to study and evaluate the CSR scenario in the country post implementation of the first year ended March 2015. The Committee is expected to interact with all the stakeholders viz. representatives of corporate sector, NGOs, Industry Associations, CSR Professionals and give recommendations to the Govt.of India to accelerate the CSR movement as expected. I am of the opinion that considering the trends as being observed during last 12 months the Committee may recommend following:-
1. Communicate with the Industry Leaders and find out what are the grievances, reasons or the issues of the companies as to why they have not been able to carry out CSR activities as expected and suggest remedial action plan.
2. Recommend to the Government to be little firm and stricter on CSR compliance and issue show cause notices to the defaulting companies.
3. Strengthen the force of NGOs to effectively deal with the CSR interventions by imparting training and capacity building.
4. Enforce, streamline and regulate the CSR spends by effective monitoring and evaluation mechanism to avoid companies spending in a wrong way or siphon off funds under CSR
5. Make certain provisions which would induce companies to become CSR compliant on their own.
6. Encourage and promote CSR training and make it mandatory to board members, CSR heads and employees in the CSR Department, NGOs and CSR professionals.
7. Make Industry Associations like CII, FICCI, ASSOCHEM, MCCIA, BCC and such other industry bodies to work as promoters, counsellors and advisors of CSR.
8. Also involve Industry Associations in collaborating with companies having smaller CSR budgets and pull them together to do a joint CSR project which will make impact.
9. Develop rating and ranking model to the CSR compliant companies and promote them through media and Govt. platforms and forums.
10. Create Help Desk or May I Help You ! concept at IICA or Industry Associations supported by IICA.
11. The PSUs have been doing CSR over last 4 years and their case studies need to be publicised to create how to implement CSR in letters and spirit.
I am sure the Committee may come up with some suggestions on the above lines to encourage and promote the concept of CSR in India which would be Win:Win to Companies and its stakeholders. This would certainly add to the brand value and top lines. I hope the situation will improve over next 2-3 years and the CSR will make impact on the livelihood of the Society in all the areas as mentioned in Schedule VII of Section 135 of the Indian Companies Act, 2013.
Dr.Charusheela Birajdar Principal, Pune
Anil Dhaneshwar, CSR Professional & IICA Certified Trainer on CSR