India’s CSR Policy & the NVGs Lekhan Thakkar Director Indian Institute of Corporate Affairs Ministry of Corporate affairs India

CONTENTS SETTING THE CONTEXT GOVERNMENT INITIATIVES NVGs WAY FORWARD 2

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

CSR as Strategic Philanthropy: Historical Background The beginning of industrialization ( ) 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

Why CSR--Poverty in India 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. 5

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

Context setting 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 drivers with different 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 7

Role of the Government 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 , 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 8

Companies Bill 2009 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 9

Companies Bill No. 121 of 2011 Clause 135—This new 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. 10

National Voluntary Guidelines (NVGs) on Social, Environmental and Economic Responsibilities of Business 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. 11

Structure of the Guidelines 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 12

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

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

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

Disclosure Framework : Guidelines for drafting 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 16

Disclosure Framework: Objectives 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 17

Disclosure Framework : Basic Structure 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 18

Key Developments 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 19

Way forward 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 20

THANK YOU 21