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    CSR Policy 2014

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    Ankush Rawat
    The document discusses India's new corporate social responsibility (CSR) legislation that takes effect in April 2014. Key points: - The new rules require certain large companies to spend at least 2% of their net profits from the previous three years on CSR activities. - Eligible CSR activities include eradicating poverty, promoting education and gender equality, and ensuring environmental sustainability. - While the law mandates CSR spending, companies can technically spend nothing by providing explanations in their annual reports. However, this may damage their reputations. - The new rules aim to encourage more strategic CSR spending that benefits communities and enhances companies' brand values. However, their actual impact on spending levels remains to be seen

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    CSR Policy 2014

    Uploaded by

    Ankush Rawat
    67 views3 pages
    The document discusses India's new corporate social responsibility (CSR) legislation that takes effect in April 2014. Key points: - The new rules require certain large companies to spend at least 2% of their net profits from the previous three years on CSR activities. - Eligible CSR activities include eradicating poverty, promoting education and gender equality, and ensuring environmental sustainability. - While the law mandates CSR spending, companies can technically spend nothing by providing explanations in their annual reports. However, this may damage their reputations. - The new rules aim to encourage more strategic CSR spending that benefits communities and enhances companies' brand values. However, their actual impact on spending levels remains to be seen

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    The document discusses India's new corporate social responsibility (CSR) legislation that takes effect in April 2014. Key points: - The new rules require certain large companies to spend at least 2% of their net profits from the previous three years on CSR activities. - Eligible CSR activities include eradicating poverty, promoting education and gender equality, and ensuring environmental sustainability. - While the law mandates CSR spending, companies can technically spend nothing by providing explanations in their annual reports. However, this may damage their reputations. - The new rules aim to encourage more strategic CSR spending that benefits communities and enhances companies' brand values. However, their actual impact on spending levels remains to be seen

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    67 views3 pages

    CSR Policy 2014

    Uploaded by

    Ankush Rawat
    The document discusses India's new corporate social responsibility (CSR) legislation that takes effect in April 2014. Key points: - The new rules require certain large companies to spend at least 2% of their net profits from the previous three years on CSR activities. - Eligible CSR activities include eradicating poverty, promoting education and gender equality, and ensuring environmental sustainability. - While the law mandates CSR spending, companies can technically spend nothing by providing explanations in their annual reports. However, this may damage their reputations. - The new rules aim to encourage more strategic CSR spending that benefits communities and enhances companies' brand values. However, their actual impact on spending levels remains to be seen

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    ABSTRACT

    The changes that the new CSR bill can bring in the companies and its implications

    Ankush Rawat
    PGDM 03 /A5

    CSR POLICY 2014


    3/3/14

    The provisions of the Companies Act, 2013 and the rules thereon pertaining to corporate social responsibility (CSR) have been notified on January 2014. They will take effect from April 1, 2014. As for the specific CSR activities, Schedule VII of the Companies Act containing the list of permitted activities has been amended. It appears that the rules are fairly prescriptive as to the nature of CSR activities that companies can carry out. Moreover, it has been explicitly stated that political funding by corporates it outside the purview of CSR, and understandably so. Some of the other issues discussed previously continue in the new version as well, including the fact that employee benefits will not be encompassed within CSR. April 1 this year would mark a new era in corporate law and governance in India with companies being required to comply with the quasi-mandatory obligations regarding CSR, an approach that is fairly unique in the global context. Considered first of its kind, the new legislation requires certain class of companies to spend at least 2% of their three-year average annual net profit towards CSR activities. Companies having net worth of at least Rs500 crore or having minimum turnover of Rs1,000 crore or those with at least net profit of Rs5 crore, have to make CSR spend. In case the firms are unable to spend the money, they have to provide reasons and disclose the same. The regulation makes it mandatory for the Directors of the company to supervise these spends and to set up a CSR committee to plan, strategize, implement, document and disclose the activities. Failure to comply could lead to consequences but the implications have not yet been outlined. From April 1, all 16,245 registered companies have to nominate three members for their CSR committee from their board. Companies cannot do whatever they want and claim it as a CSR activity according to the new law. Under the new rules coming into effect, anything done for employees is not CSR, it is a human resource activity. Compliance with any rule or regulation is not CSR. Companies should take up this role and voluntarily do it beyond the rule Under the new rules coming into effect, anything done the employees is not CSR, it is a human resource activity. Compliance with any rule or regulation is not CSR. Companies should take up this role and voluntarily do it beyond the rule. Under the new Companies Act, mid and large companies have to spend 2% of their three-year annual average net profit on CSR activities. The government expects a significant step up in spending on CSR projects by companies. The activities which can be included by companies in their CSR policies include: eradicating hunger, poverty, malnutrition and promoting preventive healthcare, promoting sanitation and availability of safe drinking water, promoting education, promoting gender equality, ensuring environmental sustainability, protection of national heritage. Those spending for the benefit of armed forces veterans, war widows and their dependents would be eligible to cover the expenses under CSR spending rules.

    Under gender equality activities related to empowering women, setting up homes and hostels for women and orphans, setting up old age homes, day-care centers and similar facilities for senior citizens and projects on reducing inequalities faced by socially and economically backward groups have been included. Spending on training to promote rural and nationally recognized para-Olympic and Olympic sports would also qualify for credit under the CSR rules. Rural development projects and contributions

    or funds to technology incubators located within academic institutions and approved by the government would also be approved under this category. Companies have no shortage of CSR opportunities or issues areas to address as the needs in India are immense. A 2011 study by the Oxford Poverty and Human Development Initiative estimated that approximately 650 million people, or fifty-three percent of Indias population, live in poverty. In 2010, the World Bank estimated that about 400 million people in India live on less than U.S. $1.25 a day. Poverty is also intertwined with illiteracy, gender inequality, and disease. Vast environmental issues confront India, such as deforestation, illegal wildlife trading, loss of biodiversity, water pollution, air pollution, and the particular vulnerability of Indian populations to natural disasters, among other issues. Crucially, companies should not view the CSR Clause as an onerous reporting requirement i.e., a necessary cost of doing business in India. Instead, they should utilize the two percent amount of the CSR Clause as an opportunity to effect positive impact in the communities where they work and in the communities they affect. These concerns are not mutually exclusive to enhancing a companys brand value and market equity through CRS activities. Indeed, some companies feel CSR is simply the right thing to do and already give beyond the tentative requirements of the CSR Clause. Regardless of a companys given ethos, if done strategically, spending under the CSR clause can develop business goodwill with the shareholders, consumers, the Indian government, Indian citizens and the international public at large. While the Companies Bill promulgates strong language for CSR, companies can, in practice, spend nothing on CSR. The CSR Clause is a type or regulation commonly referred to as a comply or explain clause. Therefore, as long as an explanation for not spending the required amount is contained in the annual board report, a targeted company has thereby performed its statutory duty under the CSR Clause. Such a policy makes sense if the company is facing decits or downsizing, and the CSR Clause foresees and accommodates such situations. However, hazarding ethics and reputational perceptions from the public, boards of directors can include explanatory statements in their report simply because they do not want to engage in CSR. More appropriately, board of directors may feel it is in the companys best interest to spend the money elsewhere. As the Companies Bill does not provide a denition of what constitutes a valid explanatory statement, such explanations could plausibly contain reasoning that the money was better spent on research and development, information technology infrastructure, or acquisitions, among many other valid reasons. There are several behaviors we expect companies to exhibit following the law s passage. Some companies will make the structural changes to their board to avoid fines, only to explain in their board report why they are unable to spend on CSR. Others will allocate an additional portion of their budget to meeting the reporting requirements and/or use the board report as an opportunity to showcase their CSR activities. Many companies are likely to re-categorize current quasi-CSR activities so as to fall within the scope of the new law. This is not altogether contrary to the spirit of the CSR Clause, so long as actual benefits inure in the forms listed in schedule VII. Whether the CSR Clause actually encourages more CSR spending or not, it will certainly enforce companies to contemplate social responsibility or risk becoming a conspicuous non-spender among peers who spend heavily in it.

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