India’s CSR Policy & the NVGs

1. India’s CSR Policy & theNVGs Lekhan Thakkar Director Indian Institute of Corporate Affairs Ministry of Corporate affairs India

2. SETTING THE CONTEXT • GOVERNMENT INITIATIVES • NVGs • WAY FORWARD CONTENTS

3. As water collected in a tank gets pure by filtration, so accumulated wealth is preserved by being employed in charity. CHANAKYA, Vridda-Chanakya

4. The beginning of industrialization (1800-1914) marks the transition from merchant charity to industrial philanthropy in India; • Between 1914 and 1960, business philanthropy was rich and varied; • Many of India’s leading businessmen came under the spell of Mahatma Gandhi and his Theory of Trusteeship of Wealth; • In 1965 and 1966 two consecutive seminars were held on the subject of Corporate Social Responsibility in New Delhi and Kolkata respectively; • Another landmark event in the field of CSR in India occurred when a leading business house undertook the first ever social audit in 1979. CSR as Strategic Philanthropy: Historical Background

5. Despite the growth and development of the Indian Economy during the last couple of decades, poverty is, increasing in absolute terms. • The bare fact is that nearly 27.5% of India’s population still lives below poverty line, and 75% of this, lives in rural areas. • 77% of Indian live on a daily income of Rs. 20/- only. Why CSR--Poverty in India

6. How effectively has economic growth translated into poverty reduction? What factors have affected these results? • What factorscan lead to high-quality results in sectors that deliver services to the poor? • What measurescan help raise the accountability ofinstitutions responsible for delivering and sustaining results? • What is happening to Aid Flows and Aid Coordination? Core Questions on Development Effectiveness and Poverty Reduction

7. Business as engine of growth – challenges of sustainable & inclusive development • Corporate Social Responsibility (CSR): One word – Many meanings (Strategic philanthropy – Risk Management – Responsible Business/Competitiveness) • Simultaneity of approaches (companies – countries – regions) • Multiple driverswithdifferent levels of engagement • Cross-cutting topic – multiple entry points (financial sector, consumers, communities) • From “buzzword” to “core business” – scaling up and impact remains a challenge Context setting

8. Government is playing the role of facilitator for Public and private sector enterprises to undertake CSR as an integrated endeavor • Few landmarks: • PM’s Ten Point Social Charter • Voluntary Guidelines on CSR, 2009 • From the year 2010-11, the Department of Public Enterprises, India has substantially incentivised Sustainable Development & CSR for Public Sector Enterprises (PSEs); • National Voluntary Guidelines on Social, Environmental and Economic Responsibilities 2011 (NVGs: the revised, elaborated version of 2009 CSR Guidelines ) • Planning Commission and Task Force on Business Regulation Role of the Government

9. Proposal by the Parliamentary Standing Committee on Finance (August 2010) • Every company having a net worth of € 70 million or more, turnover of € 140 million or more, or a net profit of € 0,7 million or more, during a year, shall be required to spend every year at least 2% of the company’s average net profit during the three immediately preceding financial years, on CSR activities of the company’s choosing Companies Bill 2009

10. Clause 135—Thisnew clause seeks to provide that every company having specified net worth or turnover or net profit during any financial year shall constitute the Corporate Social Responsibility Committee of the Board. • The composition of the committee shall be included in the Board’s Report. • The clause further provides that the Board shall endeavour to ensure that at least two per cent of average net profits of the company made during three immediately preceding financial years shall be spent on such policy every year. • If the company fails to spend such amount the Board shall give in its report the reasons for not spending. Companies Bill No. 121 of 2011

11. In July 2011 the Indian Ministry of Corporate Affairs released the National Voluntary Guidelines on Social, Environmental & Economic responsibilities (NVGs) for India; • NVGs look at Business Responsibility as a holistic concept integrated with core business and inherit in themselves the concept of CSR also • NVGs are aligned with international frameworks and instruments, and respond to the unique Indian context at the same time • Applicable to big and small businesses, also to Indian companies operating abroad , product of multi stakeholder consensus building process over two years • Both OECD and NVGs guidelines support enterprises, how to contribute to society and environment in a responsible manner; • Many aspects of the Indian Guidelines are similar to the OECD Guidelines. National Voluntary Guidelines (NVGs) on Social, Environmental and Economic Responsibilities of Business

12. 9 Principles, covering the Triad and Ethics • Brief Description • Core Elements • Implementation Guidance on the 9 Principles • Indicators (metrics) to enable self-monitoring by businesses • Specific inputs for MSMEs • Case lets to aid comprehension of best practices in each Principle • Business Case Matrix • Mapping of principles against prevailing acts and policies • Glossary of Terms used Structure of the Guidelines

13. Principle 1: Ethics, Transparency and Accountability • Principle 2: Providing Goods and Services that are Sustainable over entire Life Cycle • Principle 3: Well-being of Employees • Principle 4: Being Responsive towards Stakeholders, especially the disadvantaged • Principle 5:Respecting and Promoting Human Rights • Principle 6:Protecting and Restoring the Environment • Principle 7: Responsible Policy Advocacy that enhances Public Good • Principle 8:Supporting Inclusive Growth and Development • Principle 9: Providing Value to Customers responsibly Principles of Business Responsibility

14. Six Steps for Building A Strategy for Responsible Business (RB)

15. Advocacy and capacity building of multipliers (various ministries/government agencies, financial sector, business associations, consumers etc) • Sector specific guidelines/guidance • Disclosure Framework • Audit/Assurance NVGs: Next Steps

16. Should be conforming to the NVGs • Should suit the requirements of the Companies Bill 2011 • Should be designed in the form of an electronic form to be filed under MCA 21 • Should take into account the frameworks already being used Disclosure Framework : Guidelines for drafting

17. Help companies to understand the ethos of NVG in context of implementation • Help companies establish internal processes as well as identify deficiencies • Assist in providing aggregated data on corporate social responsibility performance to aid policy formulation/research • Assist the stakeholders to review/assess CSR performance Disclosure Framework: Objectives

18. Section A: General Information about the Company • Section B: Financial Details of the Company • Section C: Other Details • Section D: Business Responsibility Information • Section E: NVG Principle-wise performance Disclosure Framework: Basic Structure

19. Securities and Exchange Board of India (SEBI) mandates top 100 companies by market capitalization to submit Annual Business Responsibility Reports based on the NVGs as part of Annual Reports • Ministry of Environment and Forests (MoEF) draft on Corporate Environmental Responsibility takes into account the NVGs • The Planning Commission of India includes NVGs as the common framework for Business Responsibility in its manufacturing Plan for the next Plan Period • GRI to draw complementariness between the NVGs and GRI Reporting Framework Key Developments

20. National Foundation for Corporate Social Responsibility (NFCSR) • IICA-GIZ partnership focused on adoption and capacity development of multipliers for NVGs • Building synergies among diverse stakeholders and instruments to mainstream responsible business practices through an integrated approach • The CSR agenda has five elements: • Create a new narrative for corporate philanthropy as an investment in society • Develop an inclusive “operating system” for philanthropic investment • Professionalize the field • Improve collaboration, communication, and knowledge sharing • Mobilize “field level” leadership behind this agenda Way forward

21. THANK YOU