Going beyond profits
Going Beyond Profits. The Companies Act, 2013, under Section 135 and Schedule VII read with the Companies (Corporate Social Responsibility Policy)...
With plenty of funds available under the CSR, companies can help in crafting a sustainable community
The Companies Act, 2013, under Section 135 and Schedule VII read with the Companies (Corporate Social Responsibility Policy) Rules, 2014, mandates every company, private limited or public limited, which has a networth of Rs 500 crore or a turnover of Rs 1,000 crore or a net profit of Rs 5 crore, to spend at least two per cent of its average net profit for the immediately preceding three financial years on corporate social responsibility activities. The normal course of business or contribution to any political party is not considered to be a CSR activity.
The magnitude of funds available under CSR in 2015 is about Rs 14,000 crore, as reflected in the Rajya Sabha unstarred question to the Ministry of Corporate Affairs in December 2014. The CSR provisions of the Companies Act 2013 and the rules framed there under, came into effect in April 2014. This year is the first year of the implementation of CSR by companies under the Act. The funds spent under CSR would be reported headwise in the prescribed format with break-up including funds allocated for ‘Swachch Bharat Abhiyan' and ‘Clean Ganga Mission'.
Schedule VII of the Act, lists 10 specific items for funds allocation including eradicating poverty, preventive health care, sanitation and safe drinking water. CSR policy directs to promote employment enhancing vocation skills, gender equality and empowerment of women, setting up old age homes. It emphasises ensuring environmental sustainability, promotion of traditional arts and handicrafts, welfare of the underprivileged sections of the society and rural development projects.
In 2015, therefore, there are plenty of opportunities for companies to help building sustainable community development. Increasingly, smart devices help effective timely implementation and monitoring and exchange of creative ideas, interesting findings, information and knowledge to unite people and derive solutions for development concerns intertwined with complex social, economic and environmental problems. The boards of directors with multiple diverse relevant expertise and backgrounds can provide the result – focussed direction. CSR multi-stakeholder initiatives need to address gender inequality issues and help economic empowerment and all round development of women by using education, technology access programs to job skills and supply chain management. More than 3.5 million LinkedIn members have signalled on their profile, that they want to serve on a non-profit board or use their skills to volunteer.
In today's information-savvy, media sensitive environment, no corporate can remain less focussed on CSR and sustainability concerns. Globally, the trend is that CSR is becoming one of the core Chief Executive Officer and board agenda items. 2015 is bound to be a formative landmark in India's corporate CSR drive targeting to touch the lives of every stakeholder including employees, investors, community, society at large and customer.
Of course, a company can undertake its CSR activities through a registered trust or society, a company established by its holding, subsidiary or associate company or otherwise, provided that the company has specified the activities to be undertaken, the modalities for utilisation of funds as well as the reporting and monitoring mechanism. If the entity through which the CSR activities are being undertaken is not established by the company or its holding, subsidiary or associate company, such entity would need to have an established track record of three years. Companies can also collaborate with each other for jointly.
Independent director who is a member of CSR committee, audit committee and board of directors are required to discharge their duly assigned responsibilities to realise the objectives of CSR policy. Internal audit and external audit including Comptroller and Auditor General's audit in respect of public sector enterprises need to appreciate CSR policy, expenditure there under with physical measurable targets and achievement besides qualitative parameters to evaluate outcome and impact. The external audits, vigilance, inspection and internal audit, supervision all can become powerful instruments, if used effectively, by the board to deter and prevent outsourced non-governmental organisations or agencies from diverting CSR funds. Let India Inc shine in the new year!
(The writer is former Director General, Office of the Comptroller and Auditor-General of India) (www.dailypioneer.com)