Corporate Social Responsibility

(CSR) and Sustainability

-Chetan Khairnar
 Introduction
• What is Corporate?
• A Company or a Business Group.
• What is Social?
• Something related to Society.
• What is responsibility?
• Accountability, Commitment, Answerability,
Duty, etc.
• What is Sustainability?
• Carry on, Survive, Continue.
 Introduction
• Your Business doesn't exist in isolation, simply as a way
of making money.
• Your employees depend on your business.
• Your customers, suppliers and the local community are
all get affected by your Business and what you do.
• Corporate social responsibility (CSR) takes all this into
account and can help you create and maintain effective
relationships with your stakeholders.
• It means taking a responsible attitude, going beyond
the minimum legal requirements and follow the
straightforward principles.
 Definition
In broad terms, CSR relates to responsibilities Corporate have towards society within
which they are based and operate.

CSR is comprehended differently by different people.

Philip Kotler and Nancy Lee:

“A commitment to improve community well being through discretionary business
practices and contributions of corporate resources”

MallenBaker:
“A way companies manage the business processes to produce an overall positive
impact on society.”

World Business Council for Sustainable Development

“Corporate Social Responsibility is the continuing commitment by business to
behave ethically and contribute to economic development while improving the quality of
life of the workforce and their families as well as of the local community and society at
large”.
Understanding CSR
Understanding CSR
 Understanding CSR
CSR ensures that companies conduct their business in
ethical way. Taking into account their social, economic
and environmental impact and consideration of human
rights.
There are two different types of corporate social
responsibility. The first one consists of corporations
providing funding and resources for worthwhile social
causes, such as donating money or employee time to
charities. Another type of CSR involves putting together a
real plan to produce products or provide services that are
in the best interests of society. These include things like
using safe materials in design and manufacture, corporate
environmental initiatives, and other factors such as job
creation and economic development.
CSR Approaches
 CSR Approaches

A more common approach to CSR is corporate

philanthropy. This includes monetary donations and aid
given to nonprofit organizations and communities.
Donations are made in areas such as the arts, education,
housing, health, social welfare and the environment,
among others, but excluding political contributions and
commercial event sponsorship.
Another approach to CSR is to incorporate the CSR
strategy directly into operations.
 CSR Approaches
Creating shared value or CSV is based on the idea
that corporate success and social welfare are
interdependent.
A business needs a healthy, educated workforce,
sustainable resources and adept government to
compete effectively. For society to thrive, profitable
and competitive businesses must be developed and
supported to create income, wealth, tax revenues
and philanthropy.
 CSR Approaches
The traditional approach is to fulfill an obligation.
The new approach is supporting corporate
objectives as well.
•More companies are picking a few strategic areas of
focus that fit with corporate values;
•Selecting initiatives that support business goals;
Choosing issues related to core products and core
markets;
•Supporting issues that provide opportunities to
meet marketing objectives, such as increased market
share, market penetration, or building a desired
brand identity.
Why CSR
 Why CSR
Importance of CSR- Why do good?
Increased sales and market share.
Strengthened brand positioning
Enhanced corporate image
Increased Ability to attract, motivate and retain
employees
Decreased operating costs
Increased appeal to investors and financial
analysts
 Why CSR
Increased sales and market share
Surveys and Research has proved that-
•People are more likely to buy a product
associated with a cause they cared about.
•People are more likely to switch brands to
support a cause they cared about.
Example- P & G Case
 Why CSR
Strengthened brand positioning and Enhanced corporate image

Cause-Brand Campaigns:

Tata Tea’s ‘Jaago Re!’ – The campaign began in the year 2007-08; the year of
Loksabha election with the tagline ‘Har sub ab sirf utho math. Jaago re!’ (Don't
just get up every morning. Wake up!) in partnership with Janaagraha, a non -
governmental organisation. The campaign undertook a pertinent issue of
‘Right to Vote’ and drove Indian youth towards voting booths. The
advertisements struck a chord with population at large and gathered more
than one lakh registrations on their dedicated website (www.jaagore.com).
The website complemented the main objective of the campaign that is to
stimulate people to the need for change and casting vote as a means to bring
about the change. Over the years, Tata Tea has integrated it’sub -brands like
Tata Tea Premium, Tata Tea Gold, Tata Tea Agni and Tata Tea Life under the
umbrella brand advertisement and has used various social issues like
corruption, bribing, equal women rights in their advertising messages.
Although volume and sales growth is joint effort of many factors, Tata Tea has
recognized the role of ‘Jaago Re!’ campaign in their growth and brand
positioning. The campaign has been widely recognised and has won many
awards as well.
 Why CSR
Increased Ability to attract, motivate and retain
employees

Cone/Roper studies indicate that a company’s

participation in social activities can have a
positive impact on prospective and current
employees, as well as citizens and executives.
 Why CSR
Decreased operating costs

•Several business functions cited decrease in operating

costs and increase in revenue from grants and incentives
as a result of the implementation of corporate social
initiatives.
•The companies who adopt environmental initiatives to
reduce waste, reuse materials, recycle and conserve
water and electricity has noted increase in revenue and
decrease in operating cost.
•Another area for potential reduced costs is in
advertising expenditures, especially as a result of
increased publicity due to corporate social initiatives.
 Why CSR
Increased appeal to investors and financial
analysts

•Involvement in corporate social initiatives can

increase stock value of the organization.
•Business for Social Responsibility noted that
companies that address ethical, social and
environmental responsibilities have rapidly
growing access to capital.
 Challenges to Do CSR
Choosing a Social Issue

•How does this support our business goals?

•How big of a social problem is this?
•Isn’t the government or someone else handling this?
•What stockholders will think of about the issue?
•Is this something our employees can get excited about?
•Will this cause backfire on us and create a scandal?
•Is this something our competitors are involved in
already?
 Challenges to Do CSR
Developing and Implementing Program Plans

Key challenges at this point include –

•Whether to partner with others and if so with
whom
•Determining Key Strategies
•Determining communication and distribution
channels
•Assigning roles and responsibilities
•Developing timetables
•Determining budget allocation and funding source
 CSR Policy
Government of India has recently notified the
Section 135 of the Companies Act, 2013 along
with Companies (Corporate Social Responsibility
Policy) Rules, 2014 referred as CSR Rules.

CSR Rules makes it mandatory (with effect from

1st April, 2014) for certain companies who fulfill
the criteria as mentioned under Sub Section 1 of
Section 135 to comply with the provisions
relevant to Corporate Social Responsibility.
 CSR Policy
For Whom it’s applicable?

As per the Sub Section 1 of Section 135 of the

Companies Act, 2013, the companies having Net
worth of INR 500 crore or more; or Turnover of INR
1000 crore or more; or Net Profit of INR 5 crore or
more during any financial year shall be required to
constitute a Corporate Social Responsibility
Committee of the Board "hereinafter CSR
Committee" with effect from 1st April, 2014.
 CSR Policy
For Whom it’s applicable?

The pictorial representation below gives the representation of Section 135 (1).
 CSR Policy
WHAT TO DO WHEN CSR IS APPLICABLE?

The companies shall be required to Constitute Corporate

Social Responsibility Committee of the Board, called as CSR
Committee.
The CSR Committee shall be comprised of 3 or more directors,
out of which at least one director shall be an independent
director.
The Board's report shall disclose the compositions of the CSR
Committee.
All such companies shall spend, in every financial year, at least
two per cent of the average net profits of the company made
during the three immediately preceding financial years, in
pursuance of its Corporate Social Responsibility Policy.
 CSR Policy
REPORTING FOR CSR:

Rule 8 of the CSR Rules provides that the companies, shall be required to
incorporate in its Board's report an annual report on CSR containing the
following particulars:
 A brief outline of the company's CSR Policy, including overview of
projects or programs proposed to be undertaken and a reference to the
web-link to the CSR policy and projects or programs;
 The composition of the CSR Committee;
 Average net profit of the company for last three financial years;
 Prescribed CSR Expenditure (2% of the amount of the net profit for
the last 3 financial years);
 Details of CSR Spent during the financial year;
 In case the company has failed to spend the 2% of the average net
profit of the last three financial year, reasons thereof;
 CSR Policy
Objectives of the Policy:

 Establishing a guideline for compliance with the

provisions of Regulations to dedicate a percentage of
Company‘s profits for social projects.
 Ensuring the implementation of CSR initiatives in
letter and spirit through appropriate procedures and
reporting
 Creating opportunities for employees to
participate in socially responsible initiatives.
 CSR Policy
CSR Activities:

Eradicating hunger, poverty & malnutrition, promoting preventive

health care & sanitation & making available safe drinking water;
Promoting education, including special education & employment
enhancing vocation skills especially among children, women, elderly &
the differently unable & livelihood enhancement projects;
Promoting gender equality, empowering women, setting up homes &
hostels for women & orphans, setting up old age homes, day care
centers & such other facilities for senior citizens & measures for reducing
inequalities faced by socially & economically backward groups;
Providing with hospital and dispensary facilities with more focus on
clean and good sanitation so as to combat human immunodeficiency
virus, acquired immune deficiency syndrome, malaria and other
diseases;
 Challenges to Do CSR
Evaluation

To set a mechanism to monitor and measure

the CSR activities.
 CSR Policy
CSR Activities: Continued…

Ensuring environmental sustainability, ecological balance,

protection of flora & fauna, animal welfare, agro forestry,
conservation of natural resources & maintaining quality of
soil, air & water;
Employment enhancing vocational skills
Protection of national heritage, art & culture including
restoration of buildings & sites of historical importance &
works of art; setting up public libraries; promotion &
development of traditional arts & handicrafts;
Measures for the benefit of armed forces veterans, war
widows & their dependents;
 CSR Policy
CSR Activities: Continued…

Training to promote rural sports, nationally recognized sports, sports &

Olympic sports;
Contribution to the Prime Minister‘s National Relief Fund or any other
fund set up by the Central Government for socio-economic development
& relief & welfare of the Scheduled Castes, the Scheduled Tribes, other
backward classes, minorities & women;
Contributions or funds provided to technology incubators located
within academic institutions, which are approved by the Central
Government;
Reducing child mortality and improving maternal health by providing
good hospital facilities and low cost medicines;
Rural development projects, etc
Slum area development.
 CSR Policy
CSR Activities: Continued…

All activities done under the CSR activities

should be environment friendly and socially
acceptable to the local people and Society.
Contribution towards C.M relief fund shall be a
part of CSR activities other than the activities
mentioned above.
 CSR Policy
The Geographic Reach:

The Act provides that the Company shall give

preference to the local area and areas around it
where it operates, for spending the amount
earmarked for Corporate Social Responsibility.
However, the CSR Committee may identify such
areas other than stated above, as it may deem fit,
and recommend it to the Board for undertaking
CSR activities.
 CSR Policy
Annual Spends/Allocation of Funds:

 As per the regulations, the company shall set aside, for annual CSR
activities, an amount equal to 2% of the average net profits of the
Company made during the three immediately preceding financial years.
Any unutilized CSR allocation fund of a particular year, will be carried
forward to the next financial year i.e. the CSR budget will be non
lapsable in nature.
The tax treatment of CSR spent will be in accordance with the Income
Tax Act, 1961 as may be notified by the central board of Direct taxes
 The Company may build CSR capacities of its personnel and/or those
of its implementing agencies through Institutions with established track
records of at least three financial years but such expenditure shall not
exceed five percent of total CSR expenditure of the Company in one
financial year.
 CSR Policy
CSR Committee:

The CSR Committee will consist of four Directors.

Committee shall meet at least twice in a year to
discuss and review the CSR activities and policy.
For the quorum- Two members are required to be
present for the proceeding to take place.
The committee shall recommend a formal CSR
Policy, CSR activities, set forth a budget, describe
how the company will implement the project, and
establish a transparent means to monitor progress.
 CSR Policy
Administration of CSR Projects:

The organization can meet its CSR obligations by

funneling its activities on its own or through a third party,
such as a society, trust, foundation or Section 8 company
(i.e., a company with charitable purposes) that has an
established record of at least five years in CSR-like
activities.
Companies may also collaborate and pool their
resources, which could be especially useful for small and
medium-sized enterprises.
Managing Director will have the power to sanction any
project for CSR up to a limit of 7.5 lakhs, above which
Board‘s approval will be required to sanction the amount.
 CSR Policy
Administration of CSR Projects:

The organization can meet its CSR obligations by

funneling its activities on its own or through a third party,
such as a society, trust, foundation or Section 8 company
(i.e., a company with charitable purposes) that has an
established record of at least five years in CSR-like
activities.
Companies may also collaborate and pool their
resources, which could be especially useful for small and
medium-sized enterprises.
Managing Director will have the power to sanction any
project for CSR up to a limit of 7.5 lakhs, above which
Board‘s approval will be required to sanction the amount.
 CSR Policy
Amendments to the Policy:

The Board of Directors on its own and/or on the

recommendation of CSR committee can amend
its policy as and when required deemed fit.
Any or all provisions of CSR Policy would be
subjected to revision/amendment in accordance
with the regulations on the subject as may be
issued from relevant statutory authorities, from
time to time.
 Assignment 1
Q1. What do you understand by the term
‘Corporate Social Responsibility’? Justify your
Answer. - 10 Marks

Q2. Why is CSR considered an important

management concept today? – 10 Marks
 Tangible And Intangible
Benefits From CSR
Tangible Benefits:
Attract Better Employees
Reduced Turnover Rate
Efficiency
Reduced Operating Cost
Intangible Benefits:
Reputation - Firms with higher involvement in CSR have
better reputations than firms with little or no involvement.
Commitment
Learning
 Corporate Citizenship
Corporate Citizenship involves the social
responsibility of businesses and the extent to
which they meet legal, ethical and economic
responsibilities.
Corporate Citizenship is a contribution a
company makes to society and the
environment in which it conducts business.
Corporate Citizenship