WHAT IS CSR ?

• Corporate Social Responsibility.

• Like many other aspects of life and business,

• CSR too has its roots in vedas.

• Rgved: Role of the king (or accumulator of wealth) to take care of welfare the subjects (stakeholders) and in return the king will grow as SUN grows and shines at dawn after it rises.

• Atharva Ved: May we together shield each other and may we not be envious towards each other. Wealth is essentially a tool and its continuous flow must serve the welfare of the society to achieve the common goal of the society.

• Has explained the principles of rightness in management and politics and stated that it is the essence of Kingship.

• In the happiness of the people lies the Ruler’s Happiness• His mixed economy is an example for the current efforts

between public and private institutions to address wicked social problems.

• A King (Leader or CEO in Organization) should have no self interest, happiness or joy for himself, his satisfaction lies in the welfare (happiness) of the people (stakeholders)

Kautilya also known as Chankya or Vishnugupt (350-275 BC)An Student of NALANDA and Professor at TAKSHSHILLA Univ

World’s First Management Guru and Strategist

Key Stakeholders in CSR initiatives

CSR initiatives can help companies in achieving key strategic goals

•Shared values(business-Institutions and communities)•Promotes competitiveness and innovation•Promotes a sustainable business model•Integrates business into community•Develops Human Capital(key in developing countries)•Incorporated into the business strategies

ValuePurpose Impact Benefits

CSR as value creation

CSR as risk management

CSR as corporate philanthropy

Where should big corporations be spending their CSR resources?

Innovative and promotes sustainable business model

Fundamental strategic and operational impact

•Mitigates Operational impact•Mitigates operational risks•Supports external relationship

Compliance Medium to high strategic and operational impact

Providing funding and skills

Little strategic and operational impact

•Corporate philanthropy and sponsorships•Short term benefits /not always sustainable •Limited funds available•Impact diluted because limited budget is allocated to many charities•Corporate competencies and other business assets not fully utilized•Misalignment between business and social responsibility strategies and functions•Result in minimal social and business impact of social programs

WBCSD Montreux 2013 Liaison Delegate meeting highlights 3 opener.

CSR Law in INDIA• The Companies Bill, 2009 (the Bill), as passed by the Rajya Sabha on 8 August

2013 will introduce the concept of ‘Corporate Social Responsibility’ (CSR) into Indian company law.

• Definition of CSR:• The World Business Council for Sustainable Development defines the concept of

CSR as a “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”.

• Who does the new CSR provisions apply to under the Bill?• Applicable to companies with: A net worth of Rs. 500 crore or more; a turnover

of Rs 1,000 crore or more; and a net profit of Rs 5 crore or more during any financial year.

• What does the Bill require a company to do?• Companies qualifying are required to form a CSR Committee with at least one

independent director. The CSR spend of a company which meets the aforementioned threshold is required to be 2% of the average net profits for the preceding three financial years.

CSR Law in INDIA …contd

• What can my company use the CSR Spend for?• CSR activities recognised under the Bill include: Eradicating extreme hunger and poverty;

Promotion of education; Promoting gender equality and empowering women; Reducing child mortality and improving maternal health; Combating HIV, AIDS, Malaria and other diseases; Ensuring environmental sustainability; Imparting employment enhancing vocational skills; Social business projects; and Contribution to certain funds. The company is to give preference to local areas when formulating its CSR policy.

• Is there anything other than the Bill which we are required to comply with?• Yes, the Bill provides for rules to be prescribed in relation to CSR provisions. The rules are

currently in the process of being drafted.• How is the CSR spend to be accounted for?• The draft CSR Rules presently require a company to report their CSR spend in a form provided

therein and it is likely that such reporting requirements will be included in the final rules as well.• What are the consequences of not complying with the CSR aspects of the Bill?• The Bill only provides that sufficient reasons need to be provided for not making the requisite CSR

spend. While no specific penalties are contemplated in the Bill with respect to CSR, Chapter XXIX of the Bill (Sections 450 and 451) provide for general penalties for contravention and repeat offences.

The New Financial Tool India Inc Can Look at for CSR

• Social impact bonds should interest Indian companies looking to meet their 2% CSR commitment. They allow the private sector to participate in welfare programmes and are strongly linked to social outcomes, reports Naren Karunakaran

• SIROHI DISTRICT IN Rajasthan is unkind to girls. Going up the school ranks, the proportion of girls to boys keeps dropping, placing Sirohi among the bottom of the heap in gender-gap districts in India for girls’ education. Safeena Husain of the NGO Educate Girls is looking to change that. She has had an envious track record in neighbouring Pali and Jalore districts, where 48,000 girls have been bought back to school since 2010. Sirohi will be different at least in one way.

• Here, Educate Girls has embarked on a novel payment-by-results initiative across 200 government schools, which has the potential to overturn the manner in which social programmes are designed, financed and delivered. “The Sirohi pilot has the potential to change service delivery and implementation standards across the social sector in India,” says Husain, executive director of Educate Girls.

• India Inc—which, starting this year, will have to mandatorily direct at least 2% of its net profit to corporate social responsibility (CSR) activities—would do well to watch this pilot. It’s not just about just bringing back girls to school, enrolment or retention, or how many individuals have gone through a programme; it’s not about inputs or mere activities, as is the existing norm in the social sector.

• In the new scheme of things, the government or donor pays up only on the improvement in learning the programme achieves; for instance, in terms of reading and math skills among girls. “The model ties funding to social outcomes as closely as one can ever imagine,” says Michael Belinsky, founding partner, Instiglio, a Harvardincubated financial consultancy that is designing the Sirohi framework.

• The rigour on outcomes, not outputs, makes the model stand out. At its heart lies a concept called ‘social impact bonds’. This complex and innovative financial instrument comes to India without much of a time lag as it’s still in the pilot stage even in the US, where it is being championed by investment bank Goldman Sachs, the UK and elsewhere.

• Emphasis On Performance: SIBs are actually a misnomer. They are not bonds or debt instruments in the true sense of the term, but an alluring appellation for multi-stakeholder partnerships in which philanthropic funders or commercial investors—not governments—take on the financial risk of expanding social programmes. The model has three principal actors: the government, donors or investors, and service providers (NGOs or social enterprises).

• A fourth player, a financial intermediary or consultancy, designs the framework, identifies and brings all the parties together, and oversees the project through its lifetime.

• Take the first SIB, launched in 2010 and being implemented in UK’s

Peterborough prison, with the objective of reducing short-term prisoners from committing a crime again. Social Finance UK, the intermediary, raised £5 million from philanthropic sources to help rehabilitate 3,000 short-term prisoners to be released over a period of six years.

• Under the contract, four NGOs are working with the prisoners on skills, education and confidence building, during and after confinement. At the end of six years, the re-offending rates of Peterborough prisoners will be measured against a control group of prisoners from other jails not receiving these services.

• If the re-offending rates among Peterborough prisoners is 7.5% lower than that for a comparison group, the UK government pays the investors (the philanthropists) 7.5% on their investment; this can go up to 13.5% depending on better results. However, if the outcome, of 7.5% reduction is not met, investors lose all their money (See graphic). The key here is: taxpayer money is not wasted on failed programmes; the risk is transferred to investors in the private sector. Commercial investors in SIBs do expect financial returns. “The expectation of returns band from 7-13%,” says Belinsky.

• Fit For India Inc:• Theoretically, the outcome payer can be anyone: corporations, multilateral

organisations, or large philanthropic foundations. “The World Bank, keen on cobbling partnerships with private sector involvement, can possibly be an outcome payer too,” says Husain.

• Philanthropies or individual donors who invest, may not want financial returns, and may be happy with the social returns; but would like to get their money back for ploughing back into other projects. In the pilots being put together globally, a host of philanthropic foundations are being involved in the process to seed and promote the concept, even in the US.

• In India, the timing seems right. The new Companies Bill, passed by Parliament last week, mandates companies spend at least 2% of their average net profit in the last three years on nine broad CSR areas. This applies to all companies with a net worth of Rs 500 crore or more, or a turnover of Rs 1,000 crore or more, or a net profit of Rs 5 crore or more during any financial year.

• It is estimated that this could result in about $2 billion (Rs 12,000 crore) of corporate money flowing into the social sector. A lot of stakeholders, under the circumstances, would want to know what is the impact happening with all the money spent. SIBs seem apt under the circumstances.

• SIB is still a work-in-progress as negotiations are still on to identify and finalise the outcome payer. Impact investors with expectations of financial returns have yet to warm up to SIBs in India. “This is an ideal model for an organisation going to scale; ones that are tackling large societal issues,” says Belinsky. Educate Girls is confident the initiative has the potential to reach out to over 30,000 schools and 3 million children within five years in Rajasthan alone.

• Maya Vengurlekar, senior director, marketing and investor outreach at Crisil, a leading credit ratings and analytical agency, is also enthused about the scalability inherent in SIBs. But, she concedes, cobbling together many stakeholders, aligning their interests, and putting together a SIB ecosystem, makes the whole endeavour expensive. “It will therefore need projects done on a particular scale,” she explains. “The model allows for multiple investors to come together, pool resources, and achieve scale that may not be possible singly.”

• New Capital, New Rules• The question, however, being asked is: will SIBs work in India? “When you

implement a new idea, there is no guarantee that it will work,” concedes Belinsky, “The SIBs pilots in the UK and the US are progressing well and our attempts to adapt the model here should succeed.”

• The excitement around the new instrument is quite palpable, but it is also being recognised that

• not all societal challenges can be addressed by market mechanisms. Only where results are clear, measurable and tangible can SIBs be meaningful. This also brings to the fore the critical nature of impact measurements and possibilities of things going wrong. Since payments are tied to outcomes, if disputes on performance audits happen, it can jeopardise faith in the new model itself. “Ability to identify what will be achieved, and the right metrics, is going to be very critical,” warns Uberoi.

• “If there is fuzziness here, then you will lose the plot.” • The other challenge is the quality and capacity of the NGOs or social enterprises

implementing projects. • “There are over 3 million NGOs in India and where is the impact?” asks Husain.

“Nonperformers should be out of business.”

Lets Begin

IN NEW FRAME