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Corporate Social Responsibility - What is it all about?
Whom to seek advice?
Corporate Social Responsibility (CSR) has been in news in India for last few months, since passage of Company Bill 2012 in Lok Sabha in December 2012. Once passed by Rajya Sabha, it will soon become Company Act 2012 replacing Company Act 1956. The term “ Corporate Social Responsibility” came into common use during late1960's and early 1970s globally.
There has been growing consensus in civic society that there is a need for organizations in both public and private sectors to behave in a socially responsible way. In recent past there have been cases of gross misconduct and irresponsible behaviour of Companies and Corporate Directors, which resulted into huge losses to investors and all other stake holders.
CSR: Vaguely Defined
Corporate Social Responsibility (CSR) has been defined vaguely in many different ways. There is no one definition. CSR has been called as Corporate Conscience, Social Performance, Sustainable Responsible Business and Responsible Business. It has been referred by some as “the businesses are managed to bring about an overall positive impact on the communities, cultures, societies and environments in which they operate. CSR has also been described as a form of corporate self regulation integrated inot a business model.
Company Bill 2012 has a new Clause 135- Corporate Social Responsibility. Extract of clause 135 is reproduced here :
Clause 135- Corporate Social Responsibility
135. (1) Every company having net worth of rupees five thousand crores or more or turnover of rupees one thousand crores or a net profit of rupees five crores or more during any financial year shall constitute a Corporate Social Responsibility Committee of the Board consisting of three or more directors, out of which at least one director shall be an independent director.
(2) The Board's report under sub-section (3) of section 134 shall disclose the composition of the Corporate Social Responsibility Committee.
(3) The Corporate Social Responsibility Committee shall :-
- formulate and recommend to the Board, a Corporate Social Responsibility Policy which shall indicate the activities to be undertaken by the company as specified in Schedule VII.
- recommend the amount of expenditure to be incurred on the activities referred to in clause (a) : and
- monitor the Corporate Social Responsibility Policy of the company from time to time.
(4) The Board of every company referred to in sub-section (I) shall-
- after taking into account the recommendations made by the Corporate Social Responsibility Committee, approve the Corporate Social Responsibility Policy for the company and disclose contents of such Policy in its report and also place it on the company and disclose contents of such Policy in its report and also place it on company's website, if any, in such manner as may be prescribed: and
- ensure that activities as are included in Corporate Social Responsibility Policy of the company are undertaken by the company
(5) The Board of every company referred to in sub-section (1) shall to ensure that the company spends, in every financial year, at least two percent of average net profit of the company made during the three immediate preceding financial years, in pursuance of its Corporate Social Responsibility Policy:
- Provided that the company shall give preference to the local area and areas around it where it operates, for spending the amount earmarked or the Corporate Social Responsibility activities.
- Provided further that if the company fails to spend such amount the Board shall, in its report made under clause (o) of sub section (3) of section 134, specify the reasons for not spending the amount
- Explanation -For the purpose of this section “ average net profit “ shall be calculated in accordance with provisions of section 198.
It is evident from above that all companies having net worth of rupees five thousand crores or more or turnover of rupees one thousand crores or a net profit of rupees five crores or more during any financial year will have to make budgetary provisions, work out list of activities to be loaded in Company Web-Site, make comprehensive CSR projects implementation plans. If Corporate Social Responsibility projects not acted upon, Companies will have to give reasons for not doing so. This may not go well with all stake holders, community, regulatory bodies and government as well. Such a situation will also put company's reputation at stake. It would devoid indirect economic benefits by way of good reputation leading to product popularity and higher sales.
The problem with corporate social responsibility is that nobody is very clear about what exactly it is and who should they consult to get CSR put on ground to take off.
ISO Working Group on Social Responsibility (WGSR) made ISO 26000 based on Swedish Standards Institute (SIS) and ABNT, Brazilian Association of Technical Standards. International Organization for Standardization (ISO) issued on I November 2010, Standards for Corporate Social Responsibilities providing guidelines for social responsibilities. (ISO SR). Standards provide guidelines on socially responsible behaviour and possible actions. It does not give requirements and therefore is not certifiable. Scope of ISO 20006 states– "This International Standard is not a management system standard. It is not intended or appropriate for certification purposes or regulatory or contractual use. Any offer to certify, or claims to be certified, to ISO 26000 would be a misrepresentation of the intent and purpose and a misuse of this International Standard. As this International Standard does not contain requirements, any such certification would not be a demonstration of conformity with this International Standard."
ISO 26000 states clearly that it cannot be used as basis for audits, conformity tests and certificates or for any other kind of compliance statements. As a guidance document the ISO 26000 is voluntary in use and encourages organizations to deliberate their social responsibility issues and possible actions with relevant stakeholders.
The term “Corporate Social Responsibility” (CSR) came into common use in late 1960s and early 1070, after many MNCs coined the term Stakeholders, terming those on whom an organisation's activities have an impact. It was theorised that corporate owners were different that stake holders. Those in favour of CSR stated that corporations make more long term profits by operating with CSR philosophy and those against stated that CSR distracts from the economic role of business. It has been stated that in India CSR has developed in four phases :
The Distinct Features of Four Phases are :
First Phase- Charity and philanthropy were the main drivers of CSR. Culture, religion, family values and tradition had influential effect on CSR. In pre-industrialization period, lasting up to 1850, wealthy business community spent part of their income for building temples for religious cause. During famine and epidemics, these wealthy businessmen gave grains and money. During British period after 1850, concept of CSR changed. Indian Business Houses focused on economic and social well being aspects. Political & Cast considerations were also the ers for industrial and social development Second Phase- During struggle for freedom from British rule, based on philosophy of Mahatma Gandhi, concept of trusteeship was adopted by industrial leaders and adopted concept of nation building and socio-economic development. Business houses established trusts for schools and colleges and helped in opening of training and scientific institutions.
Third Phase - During 1960-1980s, emergence of Public Sector Undertakings, enactment of labour and environment related laws and mixed economy had overall influence. During this period of enactment of stringent regulations and era of permit and license raj, industrial licensing, levying of high taxes, PSUs took over the roles of private sector business houses. PSUs were established by Government to ensure suitable distribution of resources to the needy population. The effectiveness of Public sector was limited as compared to performance of private sector. In 1965 businessmen, politician and academicians set up a national workshop on CSR. They emphasized upon transparency, social accountability and regular stake holder dialogues. However not much progress was made in the field of CSR.
Fourth Phase -During this phase (1980 –till date) Indian Business houses left the practice of traditional CSR and merged into a sustainable business strategy. In1990s post liberalisation period, company's economy improved with many fold growth. Many companies took to CSR with positive attitude. India became a hub for manufacturing and production ny multinational companies. Indian companies had to meet the requirements of international companies concerning labour practices and child labour etc.
Present state of CSR - Big Corporate houses have been involved in community service and development through charity and community development. The basic objective of CSR in these days is to maximize the company's overall impact on the society and stakeholders. CSR policies, practices and programs are being comprehensively integrated by an increasing number of companies throughout their business operations and processes. A growing number of Corporates feel that CSR is not just another form of indirect expense but is important for protecting the goodwill and reputation, defending attacks and increasing business competitiveness. Provision of improved medical and sanitation facilities, building schools and houses, and empowering the villagers and in process making them more self-reliant by providing vocational training and a knowledge of business operations are the facilities that these corporations focus on. Many of the companies are helping other people by providing them good standard of living by way of building schools, conducting various healthcare related awareness programmes in schools and community, medical camps, eye check up and cataract surgery camps, school children health screening programs, HIV/AIDS awareness programs etc. Many Corporates houses have started collaborative programs with Non Governmental Organisations for the community social upliftment projects. Many Corporates have been doing social development program for local community without naming or considering it as corporate social responsibility.
However in many cases small and big companies have acquired land, displacing population by promising jobs in upcoming industry, shops nearby area, good business opportunities, housing, local area development for poor with better living conditions, electricity, drinking water accessibility and so on, but all these promises remain a dream to original inhabitants of the area and even distant population gets affected due to pollution of air, water, law crimes due to migrant population and other social evils.
India has rich history of Corporate philanthropy also without any act in place. Tata Cancer Research Centre, Mumbai, Tata Institute of Fundamental Research and many social development project initiatives of Tata Group of companies is well known. However many such activities need to be emulated by many more Corporates. Examples of work done by international philanthropists Bill Gates & Warren Buffet are cited very often but very few like to replicate their examples.
In the recent past, since 2008, debates and seminars have been held regarding CSR by private sector and government. The Ministry of Corporate Affairs in 2009 released the first government paper on CSR which discussed about health, cultural and social welfare and education coming under the CSR ambit. An Ernst & Young paper titled “The Emerging Role of Business- Not Just for Profit” offers few alternative options viz : “CSR could be and is used synonymously with terms like corporate responsibility, corporate citizenship, sustainable responsible business, corporate social performance and corporate sustainability.” Institute of Chartered Accountants of India (ICAI ) set up a subcommittee to identify what all activities to be included in CSR with no final outcome. KPMG & ASSOCHAM during the first summit on CSR held in New Delhi in 2008 stated in their report titled, “CSR : Towards a Sustainable Future” state that until the 1990s, CSR was dominated by the idea of philanthropy and that business efforts were often limited to one-time financial grants. Moreover, businesses never kept the stakeholder in mind while planning such initiatives, thereby reducing the efficacy and efficiency of CSR initiatives. It further stated that CSR is comprehended differently by different people.”
Now that Company Bill 2012 will be promulgated as an Act of Parliament in due course of time, Companies have to start brainstorming sessions as to what to include in their inidual companies' CSR programs to be put on web site first followed by chalk out project management strategy. Companies not only have to meet social responsibility but also legal & regulatory liability. Funds should be expended in a manner that it really benefits the society at large not merely as a legal formality to be complied with or to satisfy the Comptroller & Auditor General of India.
Number of activities can be done in CSR which have short term and long term lasting beneficial effect for the community. Some of these are enumerated below :
1. Local community development projects and empowerment programs - whose land has been acquired or dependent population and nearby inhabitant. Women & child education, vocational education. Skill development.
2. Improvement and maintenance of environment - pollution control, forestation (plantation of trees keeping ecology in view), sewage treatment plants to avoid discharge in open drain/ rivers. Industries producing toxic gases, smoke and health hazard dusts as in chemicals & paint plants, plastic material manufacturing industries, Cement & asbestos factories need suitable technological measures to eliminate the health & environmental hazards and close monitoring for compliance 24X7. Disposal of non degradable hazardous waste pose a major challenge today. Awareness regarding proper collection, disposal and regulatory compliance is urgently needed. Government may seek the help of nongovernmental organisations for this task.
3. Education- good quality primary schools, & colleges, degree colleges with state of art teaching aids and quality teaching. Coaching institutes for preparing competitive examinations- Medical , Dental, Bank, Engineering, State & Central Govt Class I& II Services, Banking services and so on for poor and underprivileged class students. This will help in abolishing the controversial quota system in these services.
4. Healthcare System- Providing free to subsidised health insurance policies for OPD & IPD treatment upto 1-2 lakhs. Opening up of primary care clinics in rural & tribal & hilly areas. Mobile diagnostic services -Lab & imaging services. Adoption of 2-3 districts by each corporate house for total healthcare of urban & rural poor. To avoid duplication, State Health Departments could coordinate geographical limits for each industry. Training in First Aid for accident, poisoning, snake bite ,drowning cases for school children in rural & semi urban localities by mobile health team of company's CSR healthcare teams. Running of equipped ambulances for evacuation of pregnant mothers and accident victims from rural areas to dependent Community Health Centre, Basic Emergency & Obestretics Centre or District Hospital.
5. Control of Communicable diseases - Vaccination programs by permanent mobile teams in rural areas. Spray of insecticides for control of mosquitoes and flies
6. Safe drinking water- Digging of tube wells and making available safe drinking water in villages, schools & even in urban rural areas.
7. Nutrition of mother and child-Employment of Dieticians and Nutrition Colleges trainees for visits and lectures at Block levels and rural schools and colleges. Logistics and finances to be catered by Corporate houses.
8. Hygiene and Sanitation - Lectures, demonstration sessions on personal and environmental hygiene at regular intervals by organised teams. Hand hygiene, personal hygiene for adolescent girls, water cleanliness etc awareness can be brought on permanent basis by conduct of regular courses for rural school teachers and parents of school children by running regular course with the help of State Education Dept on PPP basis ie administrative responsibility of state to make program to run and companies to bear expenses and run the program on ground. Fabrication and supply of improvised toilets in villages and training of population to use and maintain such facility to avoid open defecation.
9. Sustainable & Social Development - Measures to improve live stock of rural and semi rural population, help in setting up of poultry forms, animal healthcare in collaboration with Veterinary Colleges, breeding centres for high yield milk producing cows and buffalos as was done earlier in Punjab by the government. Establishment of supply chain for crops for better return of profits to grass root producer and cut down on middle and profits.
10. Economic Growth - providing industry related technical training for various job levels and providing suitable jobs to displaced or dependent and neighbouring below poverty line population. Economically & logistically helping to establish shops, transport business, other suitable employments to empower them and be self sustainable with opportunities for further growth and development.
11. Vocational Training - There is severe shortage of some categories of quantity & quality technical personnel in all states and the country as a whole. Corporates can open state of art institutions and produce such manpower. A task which has remained only at planning and discussion stage in government of India, skill development corporation and CII skill development cell.
12. Turning differently able manpower into a force multiplier - Instead of being a economic burden for the family and the country, this large population of millions in the country can be given specially designed training to be an asset to companies and population at large.
13. Senior Citizens & Geriatric Care - India is going to have a very large force of young population into a old senior citizen force. There is an opportunity to harness this experienced and vulnerable population. Corporates can create suitable places for their stay and provide healthcare facilities and utilize their talent.
14. Talent Export Program - Corporates can create large facilities for training of Nurses, Allied Healthcare Professionals (paramedical manpower) from rural India for deployment globally on fixed term basis, which can be very good source of foreign exchange earnings at the same time create job opportunities for millions of educated unemployed youth and bring overall economic and social well being. IT can be replicated in health and allied industry sector.
Association of Healthcare Providers (India) (AHPI), an organization which has assumed the leadership & mentoring role in healthcare and allied industry in India, has started the innovative customized quality training programs for capacity building, holistic improvement of delivery of healthcare, create better employment opportunities for young professionals and serve the social cause of community at large. It has embarked on designing customized program for discharging Corporate Social Responsibility (CSR) by Companies. AHPI is going to play a leading role in project management of CSR related plans and projects. AHPI seeks to play a bigger role in not only project planning, social consultancy, but also acting as interphase with central and state governments for necessary MIS, monitoring, evaluation and perform as resource centre of CSR.
- Winner of appreciation award for promoting SMEs in India.
- 1st ever Indian magazine to penetrate tier II, III cities & the rural belt.
- Industry Partnerships include CII, FICCI, ASSOCHAM, PHDCC, AIMA, ITPO, SME Network, Federation of Indian Micro Small Enterprises (FISME)
- Official Magazine Partners for several national & international MSME events.
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